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Shahjalal Islami Bank: Annual Report 2020

IM Insights
By IM Insights
3 months ago
Shahjalal Islami Bank: Annual Report 2020

Ijara, Islam, Islamic banking, Mudaraba, Mufti, Murabaha, Riba, Shariah, Shariah compliant, Sukuk, Takaful, Waqf, Zakat, Credit Risk, Al-falah, Islamic Credit Card, Net Assets, Participation, Provision, Receivables, Reserves, Sales, Specific Provision


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  1. MESSAGES FROM THE HOLY QUR ’AN Those who take Riba (usury) will not stand (on the day of Resurrection) except like the standing of a person beaten by Shaitan (Satan) leading him to insanity. That is because they say: “Trading is only like Riba (usury),” whereas Allah has permitted trading and forbidden Riba (usury). So, whosoever receives an admonition from his Lord and stops eating Riba (usury) shall not be punished for the past; his case is for Allah (to judge); but, whoever returns [to Riba (usury)], such are the dwellers of the Fire they will abide therein forever. Surah Al-Baqarah, Verse-275 Allah will destroy Riba (usury) and will give increase for Sadaqaat (deeds of charity, alms, etc.) And Allah likes not the disbelievers, sinners. Surah Al-Baqarah, Verse-276 O you who believe! Be afraid of Allah and give up what remains (due to you) from Riba [(usury) (from now onward)], if you are (really) believers. Surah Al-Baqarah, Verse-278 And if you do not do it then take a notice of war from Allah and His Messenger; but if you repent, you shall have your capital sums. Deal not unjustly (by asking more than your capital sums), and you shall not be dealt with unjustly (by receiving less than your capital sums). Surah Al-Baqarah, Verse-279
  2. ADVANCING IN ADVERSITIES The world witnessed an unprecedented calamity in the year 2020 . Almost a century after, another pandemic Covid-19 wreaked havoc on our economy, millions died around the world; most governments declared a lock-down for a prolonged period. The calamity inflicted a colossal loss to business and posed a formidable challenge to recover from the effect. Inspired by our motto ‘Committed to Cordial Service’ we moved in with our clients, corporates and stakeholders in their endeavors to win over the adversities. At SJIBL, we reshape and redraw our strategy whenever under duress to keep us afloat. We are reshaping our financial models to allow us to rally dynamically in the face of the critical financial environment. We are implementing uniquely engineered strategies and financial solutions to build an unshakable core while ensuring sustainable growth with our cordial services. We shall commit ourselves in the journey to march forward along with the banking sector’s transformation which is being undertaken to counter the pandemic’s onslaught.
  3. INTRODUCTION Letter of Transmittal Notice Awards and Recognition Key Financial and Non Financial Highlights Vision Mission Motto Our Core Values Our Strategy Code of Conducts Profile of the Bank Corporate structure Milestone Forward Looking Statement Outlook of SJIBL 2021 Board of Directors Committees of the Board of Directors Brief Profile of the Board of Directors Key Events 2020 Media Highlights 49 DIRECTORS ’ REPORT Chairman's Message Review from the Desk of Managing Director & CEO Report of the Board of Directors 78 50 54 59 MANAGEMENT REVIEW AND ANALYSIS Senior Management Committees of Management Organogram Products and Services Overview of Divisions Review of SJIBL Subsidiary Initiatives of Management in 2020 112 6 7 8 10 12 12 12 13 14 15 16 17 18 20 21 22 23 26 37 46 79 80 88 90 92 109 111 SUSTAINABILITY REPORTING Message from the Managing Director & CEO on Sustainability About Sustainability Reporting Corporate Social Responsibility Environment Related Initiatives Environment and Social Obligations 113 115 119 125 135
  4. 144 INTEGRATED REPORTING Our Approach to Integrated Report Business Model Stakeholder Analysis Our Material Topics Business Environment Analysis SWOT Analysis PESTEL Analysis Industry Forces Analysis Strategic Focus Areas Strategy for Key Business Line Key Strategic Focus Area for 2021 Value Added Statement Economic Value Added Statement Market Value Added Statement 163 RISK MANAGEMENT Report of the Board Risk Management Committee From the Desk of Chief Risk Officer Risk Management Framework Risk Mitigation Methodology Disclosure of Risk Reporting Disclosure of Risk Based Capital (BASEL-III) Management of Non-performing Investments 216 145 146 153 154 155 155 157 158 159 160 160 161 161 162 164 167 170 177 186 196 213 STAKEHOLDERS’ INFORMATION Shareholding Structure Shareholding by Directors Redressal of Investors' Complaints Financial calendar Evaluation of Quarterly Performance Stock Performance-2020 Profitability and Business Ratio Five Years Financial Summary Graphical Presentation Horizontal & Vertical Analysis Segment Analysis DuPont Analysis Credit Rating Report Dividend Distribution policy 217 218 219 220 221 222 223 224 226 230 234 235 236 237 239 CORPORATE GOVERNANCE Report on the activities of the Audit Committee Statement of the Board of Directors on the Responsibility to Establish an Appropriate System of Internal Control Statement of the Board of Directors on the Soundness of Internal Control System Corporate Governance Report Declaration by CEO and CFO Compliance Certificate on Corporate Governance Code Compliance Status on BSEC Notification on Corporate Governance Compliance Status on Bangladesh Bank’s Guidelines on Corporate Governance Annual Report of Shariah Supervisory Committee - 2020 From the Desk of CFO 288 244 245 266 267 268 276 283 285 FINANCIAL STATEMENTS Auditor's Report to the Shareholders Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Balance Sheet Profit and Loss Account Cash Flow Statement Statement of Changes in Equity Liquidity Statement Notes to the Consolidated and Separate Financial Statements Financial Statements of Offshore Banking Unit Financial Statements of Shahjalal Islami Bank Securities Limited 408 240 243 289 294 296 298 299 300 302 304 305 306 307 372 379 OTHER INFORMATION Branch Network ATM Network Proxy Form & Attendance Slip 409 416 419
  5. 6 LETTER OF TRANSMITTAL All Shareholders , Shahjalal Islami Bank Limited Bangladesh Bank Bangladesh Securities & Exchange Commission Registrar of Joint Stock Companies & Firms Dhaka Stock Exchange Limited Chittagong Stock Exchange Limited National Board of Revenue & other Stakeholders Dear Sir(s)/Madam(s), Subject: Annual Report of Shahjalal Islami Bank Limited for the year - 2020 We are pleased to enclose a copy of the Annual Report 2020 of Shahjalal Islami Bank Limited including Audit Report and Audited Financial Statements for the year ended 31 December 2020 along with Notes thereon for your kind information and record. Thank you, Yours Truly, Sd/Md. Abul Bashar EVP & Company Secretary ANNUAL REPORT 2020
  6. 7 Shahjalal Islami Bank Limited Registered Office : Shahjalal Islami Bank Tower Plot No.-4, Block- CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212 NOTICE OF THE 20TH ANNUAL GENERAL MEETING Notice is hereby given to all shareholders of Shahjalal Islami Bank Limited that the 20th Annual General Meeting of the Company will be held on Wednesday, the 28th April 2021 at 11.00 a.m. using Digital Platform to transact the following business: AGENDA Ordinary Business: 1. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended 31 December 2020 along with the Report of the Auditor’s and the Directors’ thereon. 2. To approve Dividend for the year ended 31 December 2020 as recommended by the Board of Directors. 3. To appoint Statutory Auditors for the year 2021 and to fix their remuneration. 4. To appoint Compliance Auditors for compliance certification on Corporate Governance Code for the year 2021 and to fix their remuneration. 5. To elect/re-elect Directors. Special Business: 6. To consider and, if thought fit, pass the following resolution as a Special Resolution: Resolved that “the issuance of Contingent-Convertible, BASEL III compliant SJIBL Mudaraba Perpetual Bond of Tk. 500.00 Crore (Taka Five Hundred Crore) only with the feature of conditional conversion to Common Equity if the bank’s consolidated CET-1 falls below Bangladesh Bank’s requirement (presently 4.50%) and stays below that level for three (03) consecutive quarters be and is hereby approved subject to permission from regulatory authorities.” Members of the Company are requested to make it convenient to attend the meeting. Dhaka 31 March 2021 By order of the Board of Directors Sd/Md. Abul Bashar EVP & Company Secretary Notes: ●● The Record Date has been fixed on Sunday, the 04th April 2021. The shareholders whose name would appear in the Register of Members and/ or Depository Register of the Bank on the Record Date will be eligible to attend the AGM and entitled to the dividend. The Board of Directors has recommended 12% Dividend in the form of 5% Stock and 7% Cash for the year ended on 31 December 2020. ●● The AGM would be conducted through Digital Platform. Link for joining in the AGM will be notified to the respective Member’s through email and by SMS. Login/Participation process for the Digital Platform will also be available in the Bank’s website: www.sjiblbd.com. ●● The soft copy of the Annual Report 2020 along with Notice of the AGM and Proxy Form will be duly sent to the Members respective email addresses available in their BO Accounts maintained with Depository Participants (DP). Soft copy of the same will also be available in the Bank’s Website: www.sjiblbd.com. ●● A Member eligible to attend and vote at the AGM may appoint a proxy to attend and vote on his/her behalf either for or against each of the Agenda or Resolution. The copy of the instrument appointing a proxy duly signed by the Member with revenue stamped of Tk.20.00 (Taka Twenty) must be submitted to the Registered Office of the Bank at least 48 (Forty Eight) hours before the AGM. ●● Members are requested to update E-mail, Contact Number and details of Bank Account with 12 Digit Taxpayer’s Identification Number (e-TIN) through their respective Depository Participants before the Record Date. If any Member fails to update e-TIN before the Record Date, Income Tax at source will be deducted from Cash Dividend @15% (fifteen percent) instead of @10% (ten percent) as per amended Section 54 of Income Tax Ordinance 1984. ●● The Cash Dividend will be paid to the entitled shareholders through EFTN to the respective Bank Account. The Stock Brokers are requested to provide “Consolidated Customers’ Bank Account (CCBA)” and the Merchant Bankers & the Portfolio Managers of Margin Shareholder are requested to provide “Separate Bank Account” along with their clients list having shares on “Record Date” to pay off the Cash Dividend. They are also requested to mail the same at [email protected] (in PDF & MS Excel format) within 22nd April 2021. In case of non-submission of such option within the stipulated time, the dividend will be paid off as deemed appropriate by the Bank. Shahjalal Islami Bank Limited
  7. 8 AWARDS AND RECOGNITION South Asian Federation of Accountants (SAFA) Award 2019 Institute of Chartered Accountants of Bangladesh (ICAB) 20th National Award 2019 ICMAB Best Corporate Award 2019 Institute of Chartered Secretaries of Bangladesh (ICSB) National Award 2019 Institute of Chartered Secretaries of Bangladesh (ICSB) National Award 2019
  8. 9 Business Excellence Award 2019 ICMAB Best Corporate Award 2019 Leed Green Building Rating System Certification 2019 International Finance Award 2020 Islamic Finance Awards 2019 3G Green Champion Award 2020 International Finance Award 2020 3G Excellence in Sustainable Practices 2020
  9. 10 KEY FINANCIAL HIGHLIGHTS 2020 2020 2020 Tk . 293,518m TOTAL ASSETS 2019: Tk. 265,993m 2018: Tk. 243,660m Tk. 27,828m TOTAL CAPITAL 2020 2020 Tk. 218,443m TOTAL DEPOSIT 2019: Tk. 203,273m 2018: Tk. 176,862m Tk. 196,513m TOTAL INVESTMENT 2020 2019: Tk. 157,060m 2018: Tk. 140,382m Tk. 133,580m EXPORT BUSINESS 2020 2019: 8.42% 2018: 8.31% Tk.244,232m PROFIT EARNING ASSETS 2020 2019: 4.91% 2018: 6.84% 14.19% CAPITAL TO RISK WEIGHTED ASSET RATIO 2020 2019: Tk. 5,865m 2018: Tk. 4,576m Tk. 1,908m PROFIT AFTER TAX 2020 ANNUAL REPORT 2020 2019: Tk. 1.75 2018: Tk. 1.58 2019: Tk. 1,718m 2018: Tk. 1,471m 2020 Tk. 1.95 EARNINGS PER SHARE (EPS) 2019: 15.82% 2018: 14.50% 2020 Tk. 4,095m OPERATING PROFIT 2019: Tk. 219,818m 2018: Tk. 202,397m 2020 4.57% CLASSIFIED INVESTMENT 2019: Tk. 147,050m 2018: Tk. 125,402m 2020 7.39% COST OF FUND 2019: Tk. 197,286m 2018: Tk. 186,090m 2020 Tk. 148,469m IMPORT BUSINESS 2019: Tk. 28,477m 2018: Tk. 25,106m Tk. 18.31 NET ASSETS VALUE PER SHARE 2019: Tk. 16.84 2018: Tk. 15.84
  10. 11 NON FINANCIAL HIGHLIGHTS 2020 NUMBER OF DELIVERY POINTS NUMBER OF AGENT BANKING OUTLET 2020 : 132 2019: 132 2020: 53 2019: 15 NUMBER OF ATMS STAFF STRENGTH 2020: 110 2019: 106 2020: 2,657 2019: 2,652 CONTRIBUTION TO NATIONAL EXCHEQUER CORPORATE SOCIAL RESPONSIBILITY (CSR) 2020: 4,779 m 2019: 4,603 m 2020: 230m 2019: 220m NUMBER OF CLIENTS NUMBER OF FOREIGN CORRESPONDENT 2020: 1,024,455 2019: 940,026 2020: 412 2019: 416 NUMBER OF DRAWING ARRANGEMENT NUMBER OF AD BRANCHES 2020: 14 2019: 14 2020: 19 2019: 19 Shahjalal Islami Bank Limited
  11. 12 OUR VISION Where we want to be … Most admirable brand of shariah banking & investment in Bangladesh ensuring sustainable value for all our stakeholders embodied with human development based on morality and ethics. OUR MOTTO Ethical bondage to aim… Cordial Service and welfare banking. OUR MISSION What we want to achieve… Uncompromised quality service and customer care Setting high standards of integrity Inclusive and innovative banking Sustainable value for all stakeholders Continuous development of professionals and system up gradation to face the challenges and drive for excellence System Automation and digitization adopting the state-of-art technology with full proof security to ensure fast and accurate customer service Human Resources Development based on morality and ethics ANNUAL REPORT 2020
  12. 13 OUR CORE VALUES UNIQUE BANK Our Banking Products are the Benchmark Our commitment is to contribute in building and expanding Islamic banking industry DYNAMIC Progressive and Innovative We are constantly moving ahead as we offer new and technologically advanced products and services PROFESSIONAL Fast , Efficient and Responsive Service Our constant strive is to equip the team of professionals to face the challenges and drive for excellence CARING Approachable and Supportive Partner We are always attentive to customers’ needs & satisfactions TRUSTWORTHY Dependable and Reliable We believe in both way communications and always care and share the views and knowledge with all stakeholders Shahjalal Islami Bank Limited
  13. 14 OUR STRATEGY Our strategy is to perform towards sustainable growth achievement Our strategic intent Strict Observance of Shariah To be the unique shariah based Bank in Bangladesh We believe and are committed to provide banking service that is purely based on Shariah . A very caring bank to: Diversified deposit and investment product: ●● Facilitate trade across the markets ●● Enable customers of all walks of life to conduct business transactions happily ●● Provide easy solution of complex business situation We operate as a Bank in diversified areas of banking and always focus on both Wholesale Banking and Retail Banking. ●● Capture the unbanked population of the country Client relationship rather than a product driven approach Our brand promises Emphasis both Wholesale banking and Retail banking. We focus our capabilities around customers’ needs, rather than seeking a rapid return on products or building product silos. Distinctive culture and values Our unique culture and values are the source of significant advantage. DYNAMIC PROFESSIONAL Conservative and disciplined on risk, capital and liquidity We regard balance sheet quality as a cornerstone of our business model & strategy. We are more cautious about capital adequacy, liquidity & risk mitigation rather than running after profit only. Organic growth, the primary driver of our strategy and value creation CARING TRUSTWORTHY Our commitment to three core pillars: ●● PEOPLE – we believe in long-last relationships and possess great value for the customers and people around us ●● PROGRESS – the way we conduct ourselves ●● PROSPERITY – our passion for sustainable value addition to our all stakeholders How we deliver our Strategic Pillars Our presence We have modest presence across the country and want to have an unequivocal focus all over the country with deep local relationships. We are trying to expand our horizon and service network by opening more branches especially in unbanked areas of the country. ANNUAL REPORT 2020 We believe that organic growth drives the greatest value creation for our shareholders. Where we cannot grow organically, or cannot do so within a reasonable time frame, we will explore acquisitions that will reinforce our core strategy. Our delivery We are committed to Cordial Service and with this commitment we constantly try to pull on sustainable business practices, upholding high standards of corporate governance, social responsibility, environmental protection and human resource development.
  14. 15 CODE OF CONDUCT Ethical Principles of SJIBL The Bank has achieved a remarkable reputation since its inception . This reputation is our most important asset, source of inspiration & pride. The Bank’s continued success depends heavily on all member staffs of SJIBL family doing their best to maintain and enhance our tradition of honesty, integrity, fairness, excellence, respect and concern for others. The ethical conduct of SJIBL is followed by its directors, officials and all the member staffs from their respective positions. The ethical conduct includes, but not limited to, the following: Adhering to the Shariah and implemen�ng its principles Maintain honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional rela�onships Provide customers with informa�on that is accurate, complete, objec�ve, relevant, �mely, and understandable Comply with all applicable rules and regula�ons of the country Act in good faith, responsibly, with due care, competence and diligence, without misrepresen�ng material facts or allowing one’s independent judgment to be subordinated Respect the confiden�ality of informa�on acquired in the course of one’s work except when authorized or otherwise legally obligated to disclose. Confiden�al informa�on acquired in the course of one’s work will not be used for personal advantage. Code of Conduct Share knowledge and maintain skills important and relevant to customer’s needs Proac�vely promote ethical behavior as a responsible partner among peers, in the work environment and the community Achieve responsible use of and control over all assets and resources employed or entrusted Any viola�on of this Code is strictly dealt with appropriate administra�ve measures. Shahjalal Islami Bank Limited
  15. 16 PROFILE OF THE BANK Name of the Company : Shahjalal Islami Bank Limited Legal Form : A public limited company incorporated in Bangladesh on 1st April 2001 under the companies Act 1994 and listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Commencement of Business : 10th May 2001 Registered Office : Shahjalal Islami Bank Tower Plot No.-04, Block-CWN(C), Gulshan Avenue, Dhaka-1212 Telephone No. : +88-02-222283457 (Hunting) Fax No. : +88-02-222297607 Website : www.sjiblbd.com SWIFT : SJBLBDDH E-mail : [email protected] Chairman : Mr. Md. Sanaullah Shahid Managing Director : Mr. M Shahidul Islam : M/s. ACNABIN, Chartered Accountants BDBL Bhaban (Level- 13 & 14) 12 Kawran Bazar Commercial Area, Dhaka-1215 Phone: +880 2-41020030-35 : M/s. K.M Hasan & Co., Chartered Accountants 87, New Eskaton Road, Dhaka. Phone: +88-02-9351457, 9351564 Credit Rating Agency : Emerging Credit Rating Ltd. SHAMS Rangs, 104 Park Road, Flat- A1 & A2, Baridhara, Dhaka-1212 Phone :+ 880 2 986 0911, + 880 2 986 0897 No. of Branches : 132 No. of ATM Booth : 110 Subsidiary Company : Shahjalal Islami Bank Securities Limited Jiban Bima Bhaban (4th Floor), 10 Dilkusha C/A, Dhaka 1000 Off-Shore banking Unit : 1 No. of Employees : 2,657 Authorized Capital : Tk. 15,000 million Paid up Capital : Tk. 9,801 million Auditors Tax Advisor ANNUAL REPORT 2020
  16. 17 CORPORATE STRUCTURE SHAHJALAL ISLAMI BANK LIMITED Branch Banking Subsidiary Company Branchless Banking Main Opera �on Shahjalal Islami Bank Securi�es Limited Agent Banking Offshore Banking Shahjalal Islami Bank Limited
  17. 18 MILESTONE Incorpora Ɵon of the Company Obtained License from Bangladesh Bank Formal launchingg & Commencement of Banking Business 2001 Opening of Off-shore Banking Unit Started operaƟon of p Shahjalal Islami Bank SecuriƟes Limited ConstrucƟon of Head Office Buiding on own plot started 2008 2011 2014 2007 2010 2013 IniƟal Public Offerings (IPO) IncorporaƟon of Subsidiary Company, Shahjalal Islami Bank SecuriƟes Limited Full-fledged operaƟon with BankUlƟmus, the Core Banking SoluaƟon Enlisted with Dhaka Stock Exchange Limited & ChiƩagong Stock Exchange Limited First trading of shares on Dhaka Stock Exchange Limited & ChiƩagong Stock Exchange Limited Launching of 1st ATM
  18. 19 Bank ’s Head Office shiŌed to permanent address at “Shahjalal Islami Bank Tower” (the iconic building of the country) Implemented Layer-7 security in our ICT management system & infrastructure to combat cyber threats Issued 7 years’ redeemable 1st Mudaraba Subordinated Bond of BDT4,000 million o Establishment of full-fledged g Shahjalal j Islami Bank Training Academy Introduce unique dress code for all execuƟves/officers in order to maintain the sense of proper aƫre and posiƟve appearance Opening of first Sub-Branch at Bokshirhat 2015 2017 2019 2016 o 100th Branch Opened at Hat Gopalpur, Jhenaidah • Launching of Shariah compliant Credit Card 2018 2020 ‘Shahjalal Islami Bank Tower’ Corporate Head Office of Shahjalal Islami Bank Limited has fulfilled the requirements of the LEED Green Building RaƟng System CerƟficaƟon established by the US Green Building Council and verified by Green Business CerƟficaƟon Inc. InauguraƟon of Agent Banking operaƟon by opening of 15 Agent Banking outlet all over Bangladesh Issued 7 years’ redeemable 2nd Mudaraba Subordinated Bond of BDT6,000 million Launching Mobile Apps Based Banking SoluƟon-SJIBL NET Commencement of Call Center 16302 for 24/7 Securing South Asian FederaƟon of Accountants (SAFA) internaƟonal Award for Annual Report 2019
  19. 20 FORWARD LOOKING STATEMENT Industry Forward-looking statements are usually based on hypothesis as well as certain conditions and changes that might impact on business . Our forward-looking statement of Annual Report 2021 has involved numerous assumptions, inherent risks and uncertainties, both general and specific as well as predictions. These factors include, but are not limited to, volatility of profit rates, capital markets instability, changes for CRR and SLR norm, changes in corporate taxation, changes in national political and socio-economic conditions, changes in government policies and unpredictable COVID-19 situation etc. Hence forwardlooking statements may not prove to be always true in course of time. Hence forward-looking statements may not prove to be always true in course of time. Readers are cautioned, not to consider our forward looking statement as something universal or unalterable since any change of national and global scenario is beyond our control. The bank will not stand accountable to update the amended information in the Annual Report once it is already published. OUTLOOK OF BANKING INDUSTRY FOR 2021 Though many critically important macroeconomic indicators evince signs of a turnaround, both private and public investment-related indicators had remained subdued. Indeed, the economy may need more time to recover fully. Bangladesh’s economic recovery is expected to be driven by Government’s stimulus package the varying speed of implementation of the various liquidity support packages has created an unequal turnaround as bigger firms have rebounded more strongly, owing to quick access to liquidity packages, while smaller firms have been left behind. Excess liquidity in the banking sector has nearly doubled from February 2020 to February 2021 and it led to fall in the profit/interest rates. Excess liquidity is also a sign that the demand for loans/investments is low, which is likely since the real economy is still experiencing the repercussions of the Covid-19 shock. Lower appetite of loan/investment may reduce spread/margin further. As the second wave of COVID-19 in Europe and North America is still on, bleak performance of country’s foreign trade business would continue and it hit banks profitability as it is the key source of banks’ fee, commission & exchange gain business. Investment/loan defaulters access to two of the largest liquidity support packages may lead to a rise in NPLs/NPIs in the post-Covid-19 period. Due to the year-long moratorium on loan/Investment classification in 2020, NPLs/NPIs may lead to a rise in coming quarter. Digitalization in retail banking service has become imperative particularly for the emergence of Covid-19 time. Future of banking industry largely has to depend on Tech based banking. ANNUAL REPORT 2020
  20. 21 OUTLOOK OF SJIBL 2021 Increasing investment portfolio cautiously without compromising on the quality to avert risk . Optimizing Bank’s capital structure through injection of additional Tier-1 capital for sustainable growth and maximization of value of shareholder’s equity. Ensuring prudent management ahead of credit risk to offset risk arising from COVID-19 and concurrent environment. Focusing to recovery of NPI & none degradation of existing asset quality. Managing balance sheet prudently to tap the prevailing opportunity and offset market risk. Analyzing business process continuously in order to find new business avenue. Willing to expand its footprint and to tap un-banked people through subbranches, booth banking, agent banking and digital banking platform. Ensuring health and safety for all of our staff and customers under the current health crisis. Deploying technology to increase customer base, improve efficiencies, fight financial crimes and enhance service excellence. Reengineering business process for increase dynamism and efficiency in service. Accelerating of digital on board for different operational procedure and customer service. Intensifying cost rationalization in line with the spirit of efficient operations. Revisiting and reviewing Islamic banking practice in our all operation. Shahjalal Islami Bank Limited
  21. 22 BOARD OF DIRECTORS CHAIRMAN Mr . Md. Sanaullah Shahid (Rep. of Electra International Ltd.) VICE CHAIRMEN Mr. Md. Harun Miah (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Mr. Md. Abdul Barek DIRECTORS Dr. Anwer Hossain Khan Mr. Abdul Halim Mr. Mohiuddin Ahmed Mr. Akkas Uddin Mollah Mr. Khandaker Sakib Ahmed Engr. Md. Towhidur Rahman Mr. A.K. Azad Mr. Mohammed Younus Mr. Fakir Akhtaruzzaman Mr. Mohammed Golam Quddus (Rep. of Anwer Khan Modern Hospital Ltd.) Mr. Md. Moshiur Rahman Chamak (Rep. of Fresh Export Import Ltd.) Mrs. Tahera Faruque (Mr. Md. Masud Represented as Alternative Director) Mrs. Jabun Nahar (Rep. of Daffodils Trading International) Mr. Fakir Mashrikuzzaman (Rep. of Fakir Knitwears Ltd.) INDEPENDENT DIRECTORS Mr. Ekramul Hoque Mr. K.A.M. Majedur Rahman Mr. Nasir Uddin Ahmed FCA, FCS MANAGING DIRECTOR Mr. M Shahidul Islam ANNUAL REPORT 2020
  22. 23 COMMITTEES OF THE BOARD OF DIRECTORS Executive Committee Dr . Anwer Hossain Khan Chairman Mr. Fakir Akhtaruzzaman Vice Chairman Mr. Mohiuddin Ahmed Member Mr. Akkas Uddin Mollah Member Mr. Khandaker Sakib Ahmed Member Engr. Md. Towhidur Rahman Member Mr. Mohammed Younus Member Audit Committee Mr. Ekramul Hoque Chairman Mr. Abdul Halim Member Mr. Mohammed Golam Quddus Member Mr. KAM Majedur Rahman Member Mr. Nasir Uddin Ahmed FCA, FCS Member Risk Management Committee Mr. Mohammed Younus Chairman Dr. Anwer Hossain Khan Member Mr. Md. Abdul Barek Member Mr. Md. Mohiuddin Ahmed Member Mr. KAM Majedur Rahman Member Shariah Supervisory Committee Mufti Abdul Halim Bukharee Chairman Mufti Shahed Rahmani Member Prof. Dr. Muhammad Abdur Rashid Member Maulana Mohammad Sadequl Islam Member Prof. Hamidur Rahman Member Barrister Md. Arifur Rahman Member Mr. M. Kamaluddin Chowdhury Member Mr. Sanaullah Shahid Ex-Officio Member Mr. M Shahidul Islam Ex-Officio Member Mr. Md. Farid Uddin Member Secretary Shahjalal Islami Bank Limited
  23. 24 BOARD OF DIRECTORS Sitting from left to right ●● Mr. Mohammed Younus ●● Mr. Md. Abdul Barek ●● Mr. Abdul Halim ●● Dr. Anwer Hossain Khan ANNUAL REPORT 2020 Standing from left to right ●● Mr. Fakir Akhtaruzzaman ●● Mr. Mohammed Golam Quddus ●● Mr. K.A.M Majedur Rahman
  24. 25 Sitting from left to right ●● Mr. M. Sanaullah Shahid ●● Mr. Akkas Uddin Mollah ●● Mr. Mohiuddin Ahmed ●● Engr. Md. Towhidur Rahman Standing from left to right ●● Mr. M Shahidul Islam ●● Mr. Khandaker Sakib Ahmed ●● Mr. Ekramul Hoque ●● Mr. Md. Moshiur Rahman Chamak Shahjalal Islami Bank Limited
  25. 26 BRIEF PROFILE OF THE BOARD OF DIRECTORS Md . Sanaullah Shahid (Representative of Electra International Limited) is one of the Sponsors of Shahjalal Islami Bank Limited. Presently, he is the Chairman of the Board of Directors of the Bank. He has started business after completion of Bachelor Degree. He is also the Director of Shahjalal Islami Bank Securities Limited. Mr. Sanaullah has long and creditable business experience for more than two decades. He is an icon of electronic home appliance business in the country. He is the Chairman of Electra International Limited, Director of Electra Consumer Electronics Industries Limited, Electra Mobile Ltd. and Federal Securities & Investment Limited. He is also a Partner of Kashmir Chemical Company, Sazawa Brothers and Electra Furniture. Mr. Sanaullah is a man of pleasant personality and amiable disposition. He has traveled different parts of the world in connection with business. Mr. Md. Sanaullah Shahid Chairman Md. Harun Miah, Rep. of Shamsuddin Khan & Harun Miah Limited was born in the year 1961 in a respectable Muslim family and started business after completion of Bachelor Degree. Mr. Miah is the Vice Chairman of the Board of Directors of the Bank. He has long and outstanding business experience for more than 25 years in the UK. He has been living in the UK for long and he established Kushiara Travels Limited in the UK and representing as Managing Director. He is the Vice Chairman of Holiday Planet, a luxurious guest house situated in Dhaka and Hotel Pritom. He is also the Managing Director of Samsuddin Khan & Harun Miah Limited (UK) and Sponsor of Shahjalal Islami Bank Securities Limited. Mr. Md. Harun Miah Vice Chairman ANNUAL REPORT 2020
  26. 27 Mr . Md. Abdul Barek is one of the sponsors of Shahjalal Islami Bank Limited, was born in the year 1953 in a respectable Muslim family and started business after completion of his education. Mr. Barek is the Vice Chairman of the Board of Directors of the Bank. He has long and creditable business experience for more than three decades. He is the Proprietor of Arju Electronics, Jony Electronics and Rony Electronics. Mr. Barek is the Sponsor of the Shahjalal Islami Bank Securities Limited. He is also a member of FBCCI. He is a man of pleasant personality and amiable disposition. He has traveled different parts of the world in connection with business. Mr. Md. Abdul Barek Vice Chairman Mr. Anwer Hossain Khan, one of the sponsors and former Chairman of Shahjalal Islami Bank Limited, is a Member of Parliament from Laxmipur-1 constituency. Presently, he is the Chairman of the Executive Committee of the Board of Directors of the Bank. He started business after completion of M.Com. Degree. He has a long and outstanding business experience for more than two decades and emerged himself as a prominent figure in Medical/Health care business. Mr. Khan is also the Chairman and Managing Director of Anwer Khan Modern Medical College & Hospital Limited, Modern Diagnostic Centre Limited, Anwer Khan Modern Nursing College, Hazi Sakawat Anwara Modern Eye Hospital Limited, Modern Diabetic Center Limited, Chairman of Takaful Islamic Insurance Limited, Director of Shahjalal Islami Bank Securities Limited and a Sponsor of Fareast Stocks & Bonds Limited. In addition to his success in trade and business, Mr. Khan is highly reputed for his contribution to the fields of education, social welfare and health care services. He is the Chairman of the Governing Body of Anwar Khan Modern University. His Anwer Khan Modern Medical College & Hospital was nominated by the government for treatment of COVID-19 patients at the earlier stage of pandemic which brought his contribution to health care into lime light. Dr. Anwer Hossain Khan Director Shahjalal Islami Bank Limited
  27. 28 Mr . Abdul Halim was born in the year 1948 in a respectable Muslim family and started business after completion of his education. Mr. Halim is one of the sponsors and Director of the Bank and he is also a sponsor of Shahjalal Islami Bank Securities Limited. He has long and successful business experience for more than three decades. Mr. Halim is also the Chairman of Halim Group, Excellent Ceramic Industries Limited, Excellent Motors Limited and Excellent Tiles Limited. He is also the Proprietor of Abdul Halim & Brothers and one of the sponsors of Islami Insurance Bangladesh Limited. He is a man of pleasant personality and amiable disposition. He has traveled different parts of the world in connection with business. Mr. Abdul Halim Director Mr. Mohiuddin Ahmed was born in the year 1955 in a respectable Muslim family and started business after completion of his education. Mr. Ahmed is one of the Sponsors and Director of Shahjalal Islami Bank Limited. He has long and successful business experience for more than two decades. He is the proprietor of Rupsha Trading Corporation, Mohiuddin Auto House & Pacific Automobile and he is the Vice Chairman of Shahjalal Islami Bank Securities Limited. He is also a Director of Bangladesh Chamber of Industries (BCI). He is a man of pleasant personality and amiable disposition. He has traveled different parts of the world in connection with business. Mr. Mohiuddin Ahmed Director ANNUAL REPORT 2020
  28. 29 Mr . Akkas Uddin Mollah is one of the Sponsors of Shahjalal Islami Bank Limited. He is the immediate past Chairman of the Board of Directors of the Bank. He has long and creditable business experience for more than three decades and established himself as a prominent figure of RMG Manufacturing & exporting sector. Mr. Mollah is the Chairman and Managing Director of Russel Spinning Mills Limited, PNR Industries Limited, Tania Cotton Mills Limited, Russel Garments, Russel Apperals, Russel Washing Plant, Ekram Sweaters Limited, Nurul Islam Spinning Mills Limited, Helal Textile Industries Limited, Tofaz Dresses Limited and Goodman Pharmaceuticals Limited. He is also the Vice Chairman of Shahjalal Islami Bank Securities Limited. In addition to his success in trade and business, Mr. Mollah is immensely reputed for his contribution to the field of education and health care services. He is the Founder of Osmania Madrasa and Osmania Memorial Hospital. Mr. Mollah has also affiliation with different trade bodies and social organizations. Presently he is the member of BGMEA and BTMEA. He is also a member of Narayangonj Club. His pleasant personality and amiable disposition is commendable. Mr. Akkas Uddin Mollah Director Mr. Khandaker Sakib Ahmed is one of the Sponsors and Director of Shahjalal Islami Bank Limited. He started business after completion of his MBA Degree. He has long and creditable business experience for more than one decade. Mr. Sakib is the Chairman of Own The World Company Limited. He is also one of the Directors of Acqua Consultants & Associates Ltd., Intech Limited, Millennium Information Solutions Limited & Al-Arafah Islami Bank Securities Limited and sponsors of Shahjalal Islami Bank Securities Limited. By dint of his talent, diligent and amiable personality he is emerging as an eminent business figure. He has traveled different parts of the world in connection with business. Mr. Khandaker Sakib Ahmed Director Shahjalal Islami Bank Limited
  29. 30 Engr . Md. Towhidur Rahman, one of the sponsors of Shahjalal Islami Bank Limited, started business after completion of B.Sc. Engineering Degree from Europe. Mr. Rahman, Former Chairman of the Bank, has long and outstanding business experience for more than three decades and established himself as an icon of Sea Food business. He is the Chairman and Managing Director of Fresh Foods Limited (one of the largest sea food exporters of the country), Sea Fresh Limited, Libas Textiles Limited, Fresh Knitwear Limited, Fresh Export Import Limited, Moshiur Infrastructure Ltd and Hettich Bangladesh Limited (a joint venture company with Germany). He is also the Chairman of Shahjalal Islami Bank Foundation and Vice Chairman of Shahjalal Islami Bank Securities Limited. Mr. Rahman has been awarded with National Export Trophy (Gold, Silver) several times and also selected as C.I.P. by the Government of Bangladesh for the last 15 years for his contribution to national economy. In addition to his success in trade and business, he is immensely reputed for his contribution to the field of education. He is the member of Governing Body of Prime University and South Asian Scholars School & College. He is also the founder Chairman of Alhaj Jalaluddin College and Chairman of Dhulasar High School. Mr. Rahman has also been awarded with Mother Terresa Gold Medal and other awards for his contribution in social activities of the country. Engr. Md. Towhidur Rahman Director Mr. A. K. Azad, one of the sponsors and former Chairman of Shahjalal Islami Bank Ltd., completed his B.Sc. Honors in Applied Physics from University of Dhaka. After completion of graduation he got involved with business. He is one of those who have been playing a pivotal role to make an industrialized Bangladesh. A very energetic and sincere industrialist, Mr. Azad is the Managing Director of Ha-Meem Group of Companies, one of the leading business conglomerates of the country. Under the dynamic leadership of Mr. A.K. Azad, this group has been contributing significantly in a bid to expand RMG sector to a great extent. This Group has a vast contribution behind the economic growth of Bangladesh. He is also one of the sponsors of Shahjalal Islami Bank Securities Limited. Mr. Azad has affiliation with different trade bodies and social organizations. He is the Former President of FBCCI & Bangladesh Chamber of Industries (BCI). At present, he is the President of Dhaka University Alumni Association and the Vice President of International Chamber of Commerce, Bangladesh. Alongside trade, commerce and industry, Mr. Azad is also involved in print & electronic media. He is the founder and publisher of the Daily Samakal, a leading Bengali daily newspaper of the country. He is also founder of Channel 24, a popular TV Channel of the country. His contribution in education sector is also commendable. Mr. Azad is a man of pleasant personality and amiable disposition. He has been honored by many socio-cultural organizations for his philanthropic activities and outstanding contributions to the growth of the national economy of the country. Mr. A. K. Azad Director ANNUAL REPORT 2020
  30. 31 Mr . Mohammed Younus is one of the sponsors and Chairman of the Risk Management Committee of Shahjalal Islami Bank Limited. He is also the Chairman of Shahjalal Islami Bank Securities Limited. He started business after completion of his education. Mr. Younus has long and creditable business experience for about three decades. He is the Managing Director of Younus Group which is a well-known and fast growing conglomerate in the industrial arena of Bangladesh. The group has been operating at present with 45 business units. He is also engaged in a online newspaper Sonalinews.com. He is a sponsor of Express Insurance Limited. In addition to his success in trade and business, Mr. Younus is immensely reputed for his contribution to the field of education. He is a member of the board of Trustee of Fareast International University and Wordbridge School. He is the Managing Director of Galaxy Flying Academy Limited. He is a man of pleasant personality and amiable disposition. He has also traveled different parts of the world in connection with business. Mr. Mohammed Younus Director Mr. Fakir Akhtaruzzaman was born in the year 1956 in a respectable Muslim family and started business after completion of his education. Mr. Akhtaruzzaman is a Director and Vice Chairman of the Executive Committee of the Board of Directors of Shahjalal Islami Bank Ltd. He has long and creditable business experience for more than three decades and established himself as an icon of Knit Garments industries. He is the Managing Director of Fakir Knitwear’s Limited which is an export oriented Knit Composite Factory, Fakir Eco Knitwear’s Limited and FKL Spinning Ltd. He has been awarded with National Export Trophy (Gold, Silver) several times and also selected as C.I.P. by the Government of Bangladesh for his contribution to national economy. In addition to the success in trade and business, Mr. Akhtaruzzaman is immensely reputed for his contribution to the field of education and health. He is the Founder of Shaheb Ali High School, Begum Anowara College and Madrasa Darul Hadih Salafih at Araihazar of the Narayanganj District and Director of Central Hospital Limited. Mr. Akhtaruzzaman has also affiliation with different trade bodies and social organizations. Presently he is the member of BGMEA and BTMEA. He is also a member of Narayangonj Club. He has also traveled different parts of the world in connection with business. Mr. Fakir Akhtaruzzaman Director Shahjalal Islami Bank Limited
  31. 32 Mr . Mohammed Golam Quddus is the Representative Director of Anwer Khan Modern Hospital Limited. He has completed Masters in Economics from the University of Dhaka. Mr. Quddus started his career as Assistant Commissioner at the Ministry of Public Administration of the Government of People’s Republic of Bangladesh in 1983 and has extensive contribution to the administration sector of our country. He served as Secretary to the Government under the various Ministries and as a Member at Privatization Commission from 25 January 2011 to 31 December 2014. Moreover, he worked as Joint Secretary, Additional Secretary, Additional Divisional Commissioner and Additional Deputy Commissioner etc. He retired from his service on 01January 2015. Mr. Quddus is widely experienced in general administration, office management, hospital management, field management & crisis management etc. Mr. Mohammed Golam Quddus Director Mr. Md. Moshiur Rahman Chamak, Representative of Fresh Export Import Limited, was born in the year 1989 in a respectable Muslim family and started business after completion of his MBA Degree. Mr. Chamak is a very young and energetic business entrepreneur of the country. He is the Managing Director of Fresh Export Import Limited and Director of Libas Textile Limited, Fresh Knitwear Limited, Moshiur Infrastructure Limited and Sponsor of Takaful Islami Insurance Limited. By dint of his talent, diligent and affable personality he is emerging as an eminent business figure. He has also traveled different parts of the world in connection with business. Mr. Md. Moshiur Rahman Chamak Director ANNUAL REPORT 2020
  32. 33 Mrs . Tahera Faruque was born in the year 1960 in a respectable Muslim family and started business after completion of her education. Mrs. Faruque is the Director of the Bank and she has long and successful business experience for more than 15 years in the UK. She is the Director of Star of India Restaurant and Partner of F&T Property Management Company of the UK. She is also one of the Sponsors of Shahjalal Islami Bank Securities Limited. Mrs. Tahera Faruque Director Mrs. JabunNahar, representative of Daffodils Trading International, was born in the year 1981 in a respectable Muslim family. She is the owner of Daffodils Trading International. Mrs. Nahar is also working as an Executive Director of Anwer Khan Modern Hospital Ltd. She is a member of Trustee of Anwer Khan Modern University. She is an excellent person with good communication and time management skills. Mrs. Jabun Nahar Director Shahjalal Islami Bank Limited
  33. 34 Mr . Fakir Mashrikuzzaman, Representative of Fakir Knitwear’s Limited was born in the year 1984 in a respectable Muslim family and started business after completion of his education. Mr. Mashrikuzzaman is a very young and energetic business entrepreneur of the country. He is the Director of Fakir Knitwear’s Limited which is an export oriented Knit Composite Factory. He is also the Director of Fakir Eco Knitwear’s Limited and FKL Spinning Limited. By dint of his talent, diligent and pleasant personality, he is emerging as an eminent business figure. Mr. Fakir Mashrikuzzaman Director Mr. Ekramul Hoque, having brilliant academic and banking background, has joined in our bank as Independent Director. He hails from a respectable muslim family of Noakhali and got MA degree in Economics from the University of Dhaka. He also got DAIBB degree from IBB and won Rupali Bank’s prize for standing First in Finance of Foreign Trade and Foreign Exchange subject. He was a guest speaker at BIBM for consecutive 03 years. Mr. Ekram has contributed a lot for the banking sector and economy of our beloved country. At the final stage of his 43 years professional career, he was the Managing Director of Al-Arafah Islami Bank Ltd. from 2010 to 2013 and he succeeded to bring out AIBL from the problem Bank area to normal banking channel in 2012 by providing most dynamic leadership there. He had golden touch in Uttara Bank Limited, National Bank Limited and Export Import Bank of Bangladesh Limited. After attainment of 65 years age he retired from banking services. Mr. Ekramul Hoque Independent Director ANNUAL REPORT 2020
  34. 35 Mr . K.A.M Majedur Rahman is one of the Independent Directors of Shahjalal Islami Bank Limited. Mr. Rahman is a seasoned professional in financial consulting, banking and capital market management with successful leadership experience over 38 years. Rahman served as the Managing Director of Dhaka Stock Exchange Limited, Premier Bank Limited and was first Country Head of Bank Alfalah Limited in Bangladesh. He had served in key positions at ANZ Grindlays Bank, Mashreq Bank, Standard Chartered Bank, Dhaka Bank, IPDC of Bangladesh Limited, and AB Bank Limited. He has valuable experience in Risk management, Business Process Reengineering and Information Technology in the financial sector. Presently, he is engaged in financial services advisory. He had also served as Independent Director of Lanka Bangla Finance Limited. Mr. Rahman attended Senior Management Development programs at Said Business School, Oxford; London Business School, Securities Institute at the US Securities and Exchange Commission and special training on Risk Management at the Institute of Risk Management, UK. Mr. K.A.M Majedur Rahman Independent Director Mr. Nasir Uddin Ahmed was born in a respectable Muslim family in the year 1961 and obtained B. Com ( Hons) degree with first class and M. Com, both in Accounting from the University of Dhaka. An ICAB Medal awardee, he became a Chartered Accountant in February 1987. He is an Independent Director of Shahjalal Islami Bank Limited since 18 March, 2020. He is a veteran Chartered Accountant with successful leadership experience over 34 years. He is currently Senior Partner of MABS & J Partners, Chartered Accountants. He is a fellow member of Institute of Chartered Accountants of Bangladesh (ICAB) and has been a Council Member since 2001. He was the President of ICAB in 2009. He is also a fellow member of the Institute of Chartered Secretaries of Bangladesh (ICSB). He acquired membership of the Institute of Chartered Accountants in England and Wales (ICAEW) and Chartered Institute of Management Accountants (CIMA, UK) in 2017. He was a Board Member of South Asian Federation of Accountants (SAFA). Currently he is representing Bangladesh in the Board of Directors of Confederation of Asian & Pacific Accountants (CAPA), Malaysia. He was Director in many companies and organization namely, Bangladesh Commerce Bank Ltd., Dhaka Stock Exchange Ltd., BTCL, Leads Corporation Ltd., Popular Pharmaceuticals Ltd., Bangladesh Submarine Cable Co. Ltd., Color City Ltd. etc. He also worked as a member of Expert Panel and Jury Board of Dhaka Stock Exchange Ltd. He was General Secretary of Dhaka University Accounting Alumni and served for a term of two years. Mr. Nasir worked for more than two decades in two British MNCs, British American Tobacco Bangladesh and Coats Bangladesh. He left corporate jobs in 2010, as Finance Director of Coats Bangladesh. He attended Management Development Programs at various business schools including Cranfield School of Management, Asian Institute of Management, IIM- Ahmedabad, Singapore Institute of Management etc. Mr. Nasir Uddin Ahmed FCA, FCS Independent Director Shahjalal Islami Bank Limited
  35. 36 Mr . M Shahidul Islam is serving as Managing Director and Chief Executive Officer of Shahjalal Islami Bank Limited (SJIBL) with effect from 1st October 2018. He is seasoned professional with over 37 years of diverse banking experience. Prior to his new assignment, he worked as Additional Managing Director and Chief Business Officer of the Bank. Before joining SJIBL, Mr. Islam served United Commercial Bank Limited as Additional Managing Director and provided the Bank with the strategic leadership and was instrumental in strengthening and building the Bank into leading market players. A post graduate in Management from Chittagong University, Mr. Shahidul Islam started his banking career with National Bank Limited as Probationary Officer in 1984. After serving National Bank Limited for 14 years in different capacities, he joined at Prime Bank Limited in 1997 and served there 11 years in different senior management positions including Branch Manager & Head of CRM with his strong leadership and dignity. He joined United Commercial Bank Limited as Deputy Managing Director in 2008 and elevated to the rank of Additional Managing Director on 01st March 2011. During his long 37 years of experience, he has gathered vast experience in almost every key areas of banking like Corporate, SME, Foreign Trade, Consumer Banking, Credit Risk Management, Syndicated Finance, Foreign Investment, Finance as well as Treasury. He has participated in various capacity building training courses, seminars and workshops on different areas of banking both at home and abroad. Mr. Islam has been honoured with the prestigious “Islamic Finance Personality of 2020” Award conferred by renowned UK-based financial think-tank Cambridge IFA. This Award recognizes achievements and efforts exhibited by institutions and individuals to promote and sustain the Islamic finance industry in the local and global sphere. M Shahidul Islam Managing Director & CEO ANNUAL REPORT 2020
  36. 37 KEY EVENTS 2020 CONFERENCE AND MEETINGS 19 th AGM & 13th EGM of SJIBL Shahjalal Islami Bank Limited held its 19th AGM & 13th EGM on Digital Platform on Wednesday, the 12th August 2020 Annual Business Conference-2020 “Strategic Business Meeting” held on 14th February 2020 at the Grand Sultan Tea Resort & Golf in Sreemangal. The Chairman of the Board of Directors of the Bank Mr. Md. Sanaullah Shahid was present as Chief Guest . Shahjalal Islami Bank Ltd. organized Annual Business Conference-2020 on 18th January 2020 at a Hotel. The ceremony of the conference was presided over by Managing Director & CEO of the Bank Mr. M. Shahidul Islam while the Chairman of the Board of Directors Mr.Md. Sanaullah Shahid was present as Chief Guest. Strategic Business Meeting Shahjalal Islami Bank Limited
  37. 38 Half-Yearly Business Conference-2020 “BAMLCO Conference-2020” through Digital Platform Meeting of SJIBL AD Forum ANNUAL REPORT 2020 Shahjalal Islami Bank Ltd. organized “Half-Yearly Business Conference-2020” on 25th July 2020 through a Digital Platform. BAMLCO Conference-2020 9th meeting of SJIBL AD Forum held at Bank’s Corporate Head Office
  38. 39 LAUNCHING NEW PRODUCTS & SERVICES Launching SJIBL-NET Shahjalal Islami Bank Limited introduced Mobile App based digital wallet SJIBL Net to cater growing customer demand which carry out all the banking transactions like intra-bank through EFT & RTGS and inter-bank fund transfers, utility bill payments, Credit Card payments, cheque requisition from mobile application. The Chairman of the Bank Mr. Md. Sanaullah Shahid inaugurated the internet banking service-SJIBL NET. SJIBL AGENT BANKING Shahjalal Islami Bank Limited started Agent Banking operation to provide banking services at the doorsteps of all people under financial inclusive activities on 2nd January 2020. The Bank started it’s Agent Banking Operation with 15 outlets in first step at 5 divisions in the country. Inauguration of SJIBL Agent Banking on 2nd January 2020 at Corporate Head Office Inauguration of Agent Banking Outlet at Tashulla Bangla Bazar, Nawabganj in Dhaka Inauguration of Agent Banking Outlet at South Zamsha, Singiar Upazila in Manikganj Shahjalal Islami Bank Limited
  39. 40 AGREEMENTS Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Electra International An agreement has been signed between Shahjalal Islami Bank Limited and Agora enabling Debit & Credit Card Holders of the bank to enjoy discounts while shopping. Shahjalal Islami Bank Limited signed a Memorandum of Understanding with NOVO Air ANNUAL REPORT 2020 Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Electra International to avail all the Credit Card Holders of the bank, while purchasing different types of electronics products @ 0% profit rate for different tenure. Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Agora Shahjalal Islami Bank Limited signed a Memorandum of Understanding with NOVO Air to facilitate the Credit Card Holders of the bank for purchasing Air Ticket on EMI basis @0% profit rate.
  40. 41 Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Anwer Khan Modern Hospital Ltd . A Memorandum of Understanding has been signed between Shahjalal Islami Bank Limited and Hajj Agencies Association of Bangladesh (HAAB). Under the MoU, all Ballottee & Non- Ballottee Hajj & Umrah Pilgrims can deposit their Hajj & Umrah Registration Fee through all Branches and Subbranches of the Bank from all over the country. Shahjalal Islami Bank Limited signed a Memorandum of Understanding with HAAB Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Own the World Company Ltd. Shahjalal Islami Bank Limited signed a Memorandum of Understanding with UKbased trade finance provider PrimaDollar Operations Ltd. at Bank’s Corporate Head Office. Under this agreement the Bank will be able to offer fintech based factoring solution to the local exporters to obtain their deferred receivables on a sight basis in a secured, faster and shortened cash cycle in collaboration with PrimaDollar. Shahjalal Islami Bank Limited signed a Memorandum of Understanding (MoU) with Anwer Khan Modern Hospital Ltd. for enabling all Debit and Credit Card Holders of the Bank to receive up to 25% medical discount and EMI Facilities for different tenure @ 0% profit rate . Shahjalal Islami Bank Limited signed a Memorandum of Understanding with Own the World Company Ltd., a leading well-reputed Tours & Travels Company. This MoU enables all Debit and Credit Card Holders of the Bank to receive EMI Facilities on Tour Package and purchasing air tickets for different tenure @ 0% profit rate. Shahjalal Islami Bank Limited signed a Memorandum of Understanding with UK-based trade finance provider PrimaDollar Operations Ltd. Shahjalal Islami Bank Limited
  41. 42 AWARDS ICAB award for Best Presented Annual Report-2019 Shahjalal Islami Bank received South Asian Federation of Accountants (SAFA) award Joint First Runner Up in the category of Private Sector Banks for Best Presented Annual Report 2019. The Deputy Managing Director of Shahjalal Islami Bank Ltd. Mian Quamrul Hasan Chowdhury and the CFO Mr. Md. Jafar Sadeq, FCA received the SAFA award from the Vice-President of South Asian Federation of Accountants (SAFA) Mr. AKM Delwer Hossain, FCMA. ICMAB award for Best Presented Annual Report-2019 Shahjalal Islami Bank secured Silver Award in the ICSB National Award -2019 for Corporate Governance Excellence in the category of Islami Banking Sector. The Additional Managing Director of the Bank. Mr. S.M. Mainuddin Chowdhury and the CFO Mr. Md. Jafar Sadeq, FCA received the award from Mr. Tipu Munshi, MP, Minister, Commerce Ministry, Peoples Republic of Bangladesh. ANNUAL REPORT 2020 Shahjalal Islami Bank Ltd. secured 2nd Position for Best Presented Annual Report-2019 from The Institute of Chartered Accountants of Bangladesh (ICAB). MD & CEO of Shahjalal Islami Bank Ltd. Mr. Mohammad Shahidul Islam received the award from Mr. Tipu Munshi, MP, Minister, Commerce Ministry, Peoples Republic of Bangladesh. SAFA award for Best Presented Annual Report 2019 Shahjalal Islami Bank has been awarded ICMAB Best Corporate Award 2019, Silver Award by The Institute of Cost and Management Accountants of Bangladesh (ICMAB) in the Private Commercial Bank (Islamic Operation) Category. Commerce Minister Tipu Munshi handed over the award to Mr. Abdul Aziz, the Additional Managing Director of the Bank ICSB National Award -2019 for Corporate Governance Excellence
  42. 43 CONTRIBUTION TO SOCIETY Shahjalal Islami Bank Ltd . donated Blankets to the Hon’ble Prime Minister’s Relief Fund for distributing among winter affected poor People at Prime Minister’s Office. The Prime Minister took part in the ceremony through Digital Platform. The Director & Chairman of Executive Committee of Shahjalal Islami Bank Ltd. Dr. Anwer Hossain Khan, MP handed over the Sample of Blanket to the Principal Secretary of Hon’ble Prime Minister Dr. Ahmad Kaikaus. Ambulance Donated to Shomman Sahabi Shahjalal Islami Bank Ltd. sets up free Medical Camp at Bishwa Ijtema. Scholarship award giving ceremony 2020 Shahjalal Islami Bank Ltd. donated an ambulance to Shomman Sahabi, a renowned Elderly Rehabilitation and Institution of Technical Education for Youth. Free Medical Camp at Bishwa Ijtema Shahjalal Islami Bank Limited awarded scholarship to poor meritorious students at Corporate Head Office of the Bank. The Chairman of Board the Directors of the Bank Mr. Md. Sanaullah Shahid was present as a Chief Guest and the Chairman of Bank Foundation Engineer Md. Towhidur Rahman was present as Special Guest. The Managing Director & CEO of the Bank Mr. M. Shahidul Islam presided over the ceremony. Shahjalal Islami Bank Limited
  43. 44 CELEBRATION OF MUJIB BORSHO One hundred years ago , the undisputed king of Bangladesh Sheikh Mujibur Rahman was born on 17 March 1920 in a remote village of Tungipara, Gopalganj District. He showed the potential of leadership since his school life. From a very tender age, Mujib strived to work for issues that mattered to him, hankering one cause after another. He was crowned with the title of “Bangabandhu” and remembered as a dedicated man of the people. The most popular word Mujib is synonymous with the national identity of Bangladesh. Sheikh Mujibur Rahman was always well-governed and this made him uniquely qualified to govern others, even when compared with the intellectual luminaries of that intellectually luminous generation. So, with that in mind, and in honor of the Founding Father, SJIBL as a patriotic corporate entity of Bangladesh celebrated his100th birth anniversary in full festive mood in the year 2020. 100 Birth Year Celebration of “Mujib Borsho” Father of the Nation of Bangladesh, Bangabandhu Sheik Mujibur Rahman was celebrated with due respect through year long various programs nationally and internationally. The countdown for the celebration’s opening had started on January 10, 2020 coinciding with Bangabandhu’s homecoming in 1972 from a Pakistan jail after the 1971 Liberation War. The whole Bangladesh celebrated 100 Birth Year of “Mujib Borsho” Father of the Nation of Bangladesh, Bangabandhu Sheikh Mujibur Rahman. As a responsible bank, we always love to contribute to make the memorable event so blissful. As a token of love for our Father of the Nation of Bangladesh, we have put a small effort donating BDT 100 million to Bangabandhu Memorial Trust, to be a part of this grand celebration. Besides, SJIBL organized road show in front of our all branches of SJIBL on 17th March, 2020 which was covered by different media. A cake cutting program was also part of celebration of different SJIBL branches to memorize the day with dignity. SJIBL prepared t-shirts and placards and demonstrated the same in a formal rally. In order to tribute highest love to the Father of the Nation, Bangabandhu Sheikh Mujibur Rahman, SJIBL launched three ‘Bangabandhu Corner’ at three parts of the country, one of its Corporate Head Office, Gulshan Avenue, Dhaka, another two has set up at Ramganj branch in Laxmipur district and the rest one is at Chuadanga Branch of the Bank. ANNUAL REPORT 2020
  44. 45 Mujib Corner , Chuadanga Mujib Corner, Ramgonj Mujib Corner, Head Office These initiatives were taken to celebrate the birth centenary of the Father of the Nation, Bangabandhu Sheikh Mujibur Rahman. The corners are enriched with the collection of books, pictures, documents and videos encompassing the life, work and ideals of the Father of the Nation, Bangabandhu Sheikh Mujibur Rahman, about whom customers and bank officials alike can learn a lot. Roadshow to celebrate Mujib Borsho in 2020 Celebration of Mujib Borsho at SJIBL Corporate Head Office premise in 2020 Shahjalal Islami Bank Limited
  45. 46 MEDIA HIGHLIGHTS ANNUAL REPORT 2020
  46. 47 Shahjalal Islami Bank Limited
  47. 48 ANNUAL REPORT 2020
  48. 49 DIRECTORS ' REPORT Shahjalal Islami Bank Limited
  49. 50 CHAIRMAN ’S MESSAGE Md. Sanaullah Shahid Chairman We must strive to create opportunities out of challenging conditions. We are promise bound to strengthen our position in the industry regarding asset quality, innovative banking products, and services, profitability, and compliance. We will explore all our activities through ensuring better risk management, develop the quality of human resources, and improve the corporate governance system. ANNUAL REPORT 2020
  50. 51 Bismillahir Rahmanir Rahim Dear shareholders , Assalamu Alaikum Wa Rahmatullah Wa Barakatuhu. It is a great pleasure and honor to welcome you to the 20th Annual General Meeting of Shahjalal Islami Bank Limited. On behalf of the Board of Directors and myself, I would like to express sincere thanks and gratitude for your ongoing trust in the Bank as we navigate difficult times. We hope you and your families are staying healthy and safe. The economy is in a slump, but there are signs of improvement and reasons to be optimistic We have seen a global pandemic and the worst economic downturn since the 1930s’ Great Depression. The world’s major economies were severely jolted. The pandemic continues to have a profound impact around the world. The previous year has been a difficult one for Bangladesh as well. However, it has fared better than most other countries in dealing with health and economic challenges. Indeed, the year 2020 ended with a slowdown in economic growth, a significant shortfall in revenue mobilization, a disruption in the pace of implementation of public investment projects, an escalation of the budget deficit, a slowdown in private sector credit growth, and a sharp drop in trade. The impact of Covid-19 was particularly evident during the last quarter (April-June) of FY2020 when the economic activities were severely disrupted in the backdrop of the lock-down declared by the government. However, many key macroeconomic indicators have recently shown signs of improvement. Production of manufacturing industries and electricity has posted a rise and VAT collection has registered a positive growth rate. Domestic demand has resisted the recovery much better than private and public investment indicators, which have remained subdued. Indeed, the economy may require additional time to fully recover. Banking Sector makes the way Banks have a crucial role to play in implementing Covid-19related stimulus packages announced by the government since the major portion of these packages is in the form of liquidity support through the commercial banks. This is indeed a huge responsibility on the banks. It was feared that the banking sector would face a doublewhammy, stemming from Covid-19 and lending rate cap. But at the end of 2020, it shows a different picture with two major performance indicators – profitability and loan/Investment recovery – being far better than expected. Though the decline in NPL/NPI was driven by the loan moratorium and the prohibition on banks downgrading loans until December 2020, which delayed the recognition of NPLs. Non-performing loans will rise in the coming quarters as the credit moratorium period expires and borrowers’ repayment capacity weakens as a result of the coronavirus shock. The real challenge will be this year as the payment holiday has been lifted. The depressed private sector credit growth is another big challenge because banks could not lend even at 5% as businessmen have cash in hand due to one-year payment deferral. The safety of our employees and the well-being of our clients Throughout our COVID-19 response, our priority was the health and safety of our people; all staff, our valued clients, and the communities that keep our operations running smoothly. The steadfast commitment of our people has helped to keep our operations running safely and continue to contribute to the economy. We recorded no fatalities at our operations during the year. When the pandemic struck, we had the financial strength and agility to implement our emergency plans and make the rapid changes required to keep our people safe and healthy while keeping our operations running. Despite working through some of history’s most difficult periods, Shahjalal Islami Bank has demonstrated that our strong persona of resilience, robustness, and agility is the key to staying one step ahead of customer expectations. Financial performance: Exhibit resilience SJIBL’s strong balance sheet and unwavering focus on key areas position us to weather downturns and unforeseen problems like the COVID-19 outbreak while also delivering strong financial results in 2020. It was an arduous task for the Board and Management of the Bank to steer it in the right direction towards stability. By the grace of almighty Allah, we have been maintaining sustainability in all areas of business and maintained a sustainable position in terms of liquidity, capital adequacy, asset quality, earnings, and profitability. The bank has been able to secure an indispensable position in the banking sector of the country because of its commitment and customer-focused cordial services. There has been tremendous support from our valued customers, prudent guidance, and bold leadership from the Board of Directors, and tireless efforts of the Management team which helped to accomplish our journey. In order to protect asset quality, the bank also followed prudent policies regarding non-performing investments. All these measures resulted in our year-end performance being below the originally envisaged target. However, it is encouraging that our actual results achieved for the financial year are more than the revised forecast as was projected by the management during the early days of lock-downs. However, the backdrop of profit rate cap on investment and COVID-19 induced effects on economic activities and the pressure on Net Profit Margins had an inevitable negative impact on the Bank’s financial results for the year 2020. But Shahjalal Islami Bank exhibits resilience at its bottom line profit performance. Though our operating profit declined by 30.18% to Tk. 4,095 million, but Net Profit After Tax increased by 11.06% to Tk.1,908 million for the year ended 31st December 2020. Similarly, the Bank’s Return on Average Equity (ROE) increased from 10.98% as of 31st December 2019 to 11.08% as of 31st December 2020, while our Return on Average Assets (ROA) increased to 0.68% during the same period, from 0.67% as at the end of 2019. Net asset value (NAV) stood at Tk. 17,949 million in 2020, whereas it was Tk.16,507 million in 2019. In 2020, our earnings per share (EPS) stood at Tk. 1.95 whereas it was Tk. 1.75 during the previous year. However, there is no room for complacency and we must continue to strive for exceptional safety and performance every day. Shahjalal Islami Bank Limited
  51. 52 Digital onboarding TOTAL ASSETS (Taka in million) 293,518 265,993 243,660 2018 2019 NET PROFIT AFTER TAXATION 1,718 2020 (Taka in million) 1,908 1,471 The digitalization of banking services has become critical, especially with the emergence of Covid-19. The future of the banking industry must rely heavily on technology-based banking. We are on track to digitize our business to meet clients’ needs as digital technologies grow in sophistication and become further embedded across the banking and financial services industry. We at Shahjalal Islami Bank have taken a series of initiatives to cater to the growing customer demand for different digital banking services. In 2020, we launched “SJIBL Net,” a full-featured appbased mobile banking service that allows customers to conduct safe banking at any time and from any place. We Uphold Our Promises Regardless of the challenges encountered and difficulties faced, we at Shahjalal Islami Bank have always upheld our responsibilities to our shareholders. The dramatic change in the business environment arising from the pandemic will not hinder us from keeping our promise to you, our shareholder, and it is with a sense of pride I report that Shahjalal Islami Bank did not forego any obligations to any stakeholder, least of all, our valued customers and the Team, who are the lifeblood of the Bank. Based on the reactions and feedback received from our customers – corporates, SMEs and retails – we are confident that Shahjalal Islami Bank responded effectively and promptly to customer needs during this time of crisis. Despite being compelled to continue operations under extremely stressful conditions. 2018 2019 EARNINGS PER SHARE (EPS) 1.75 2020 (Taka in million) 1.95 1.58 2018 2019 MARKET CAPITALIZATION 2020 (Taka in million) 23,420 22,444 21,842 2018 ANNUAL REPORT 2020 2019 2020 Shahjalal Islami Bank is always committed to serve the causes of the humanities. We stand beside the distressed people affected by natural and other calamities across the country and extend financial support. We also promote different events of games & sports under our CSR activities. The bank also awards Scholarships regularly to meritorious poor students to pursue their higher studies. The poor meritorious students are selected based on their outstanding results in Secondary School Certificate (SSC) and Higher Secondary Certificate (HSC) Examinations. We also undertake various philanthropic activities/efforts throughout the year on an ongoing basis. We are committed to remaining responsible for carrying out our CSR activities within the organization, society, and across the country. Each year we increase the volume of investment in CSR over a year before as a socially responsible organization to stakeholders. In 2020, total CSR was Tk.323 Million that is a 46.82% growth in philanthropy compared to last year. Appreciations In 2020, Shahjalal Islami Bank received a number of awards and recognitions from prestigious international and domestic organizations for its outstanding performance. Global and regional recognitions for our best work, accountability, transparency, and good governance have come from GIFA International, International Finance Magazine, South Asian Federation of Accountants (SAFA), and local bodies such as Bangladesh Bank, ICAB, ICSB, and ICMAB, to name a few. Our vision is to be a premier Islamic banking institution in the country and to contribute significantly to the national economy; it was adopted with remarkable foresightedness at the time of the inception of the Bank. We strive to achieve further excellence in our culture of corporate governance and compliance of all statutory bodies as well as promote professionalism in our workforce; we believe these are the foundations of sustainable
  52. 53 development of our institution . Transparency and Accountability Corporate governance is important for an organization’s longterm sustainability. Transparency and accountability have been built into all aspects of Shahjalal Islami Bank Limited’s operations. The duties and responsibilities are appropriately segregated between the Board and the management to provide sufficient check and balance and flexibility for smooth business operations. The Board provides policy guidelines and directions to the management, approves strategic and major policy decisions, and oversees the management to attain business goals. The audit committee reviews the internal control & compliance process, the internal audit reports and related compliances of Bangladesh Bank, while the Risk Management Committee reviews the risk areas and overall risk management process/systems of the Bank. The Statutory Auditors were given absolute freedom in the process of audit and verification of the compliance, risk management and Financial Statements prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). As a result, we are committed to being a role model in the corporate industry by adhering to the best practices of Corporate Governance in our bank. The Bank has also emphasized the importance of adhering to all rules, regulations, and guidelines issued by the Bangladesh Securities and Exchange Commission (BSEC), Bangladesh Bank, and other regulatory bodies. Future Outlook There exists a significant degree of uncertainty in terms of how the COVID-19 pandemic will progress and is dependent upon the efforts to contain the virus and its longer-term effects. The economic growth in the year 2021, and perhaps even in 2022, will depend on the evolution of the pandemic in Bangladesh and the rest of the world. The future outlook for the banking industry will also be determined by the same. A key takeaway from among the numerous lessons the banking industry as a whole learned during the pandemic is that banking as we know it may not be the norm for the foreseeable future. A large part of our strategy moving forward will focus on the lessons learned during 2020 and will be formulated with particular emphasis on growth, costs and risks. We must strive to create opportunities out of challenging conditions. We are promise bound to strengthen our position in the industry regarding asset quality, innovative banking products, and services, profitability, and compliance. We will explore all our activities by ensuring better risk management, developing the quality of human resources, and improving the corporate governance system. Insha-Allah we will maximize the value for all stakeholders in the coming days. Acknowledgment Honorable Shareholders are the source of inspiration for the bank. I would like to express my heartfelt gratitude to all shareholders and valued customers of Shahjalal Islami Bank Limited. I also express thanks and gratitude to the Ministry of Finance, Bangladesh Bank, Bangladesh Securities & Exchange Commission (BSEC), Dhaka Stock Exchange Limited, Chittagong Stock Exchange Limited, Registrar of Joint Stock Companies & Firms and National Board of Revenue for their very effective guidance and continued support. We hope all our stakeholders will continue the same support and cooperation in the future as well. May Almighty Allah bestow His unbound favors upon all of us. Allah Hafez With warmest regards, Md. Sanaullah Shahid Chairman Shahjalal Islami Bank Limited
  53. 54 REVIEW FROM THE DESK OF MANAGING DIRECTOR & CEO M Shahidul Islam Managing Director & CEO Digital innovations are transforming economies and financial ecosystems worldwide. Customers are demanding banking that is simple, functional, reliable, and seamless. Hence, SJIBL has continued its operations towards digitization in terms of automation and system security adopting new technology across the Bank. ANNUAL REPORT 2020
  54. 55 Bismillahir Rahmanir Rahim , It’s a great privilege to present to you the performance of Shahjalal Islami Bank Limited for the year 2020. I would normally address our accomplishments of the preceding year, which were many in 2020. We stepped into the year 2020 with high hopes and deep aspirations for a better year, but witnessed an unusual situation due to the heavy blow from the sudden COVID-19 outbreak, since March of the last calendar year. This pandemic has spread in every corner of the world and hindered habitual life completely. Productivity, trade operation, movements of capital, industrial inputs & outputs remained completely stagnant, and the economy was facing mounting downward pressure. The coronavirus was first identified in Wuhan, China in December 2019, and it has since spread worldwide leading to an ongoing pandemic. In this situation, the government of Bangladesh declared a “lock-down” throughout the nation from 26 March to 30 May 2020 to protect the people from this contagious disease. During the nationwide lock-down, millions lost jobs, the income of the majority of the population contracted and the businesses folded up. The banking sector was also affected. It is observed that due to economic slowdown domestically and globally, demand for both short and long term financing declined substantially. Export hits rock bottom as the importing countries themselves were finding it difficult to keep the economies afloat. To protect the people and the economy, the government rolled out a massive Tk.124,000 crore stimulus package representing 4.30% of total GDP. The robust inflow of remittance lifted the country’s foreign exchange reserves to record highs and put the country on a firm footing. Initially, the sector has successfully met the cash flow challenges in the economy during the lock-down period with some regulatory relaxation in policy rates, i.e., CRR, IDR. Due to the decline of investment appetite and the flow of deposits, deposit rates have been sharply reduced to meet the pressure of surplus deposits. The rate of Bond, Treasury Bill, Call Money and Repo has been reduced substantially, which makes it difficult for treasury operations of the Bank. Government borrowing from the banking sector during 2020 was reduced dramatically. The banking sector is the key player in the economic activities of a country. At the moment, the sector is fighting the situation caused by COVID-19 and supporting the government efforts for handling the crisis. During the strict lock-down, the period when operations in almost all sectors had come to a standstill, banks and other financial institutions continued their operations to ensure the flow of money in the economy. The banking sector has also played a crucial role in distributing the government’s various fiscal stimulus packages. The reopening of the economy in June 2020 was a very bold move and proved to be a judicious one, as the COVID-19 outbreak did not go out of control. The food production, remittance, the stimulus package, the reopening, and the quick uptick in domestic demand and exports put the country on the path of recovery. A surplus in the balance of payment, one of the major indicators of the economy, has been steadily increasing during the pandemic. The big surplus was triggered by the rise in remittance inflow and a dip in import costs. Bangladesh’s GDP growth, which has averaged around 8 percent during the past few years, has been disrupted hugely by the outbreak of COVID-19. However, Bangladesh is set to post the third-highest growth in the world and the highest in Asia in 2020, according to the IMF despite the pandemic. The economy is recovering, but it is not yet back on track to faster and sustainable growth with investments still depressed and external demand wavering. The country’s export is far away from the pre COVID-19 level as the country’s most important markets such as the US and Europe are under threat. In fiscal 2019-20, the import costs dropped 8.56 percent from the previous year. It came down further in the first quarter of 2020-21 due to the corona pandemic. Despite numerous challenges faced in 2020 due to the pandemic, SJIBL achieved planned growth in business and operations during 2020. We have produced impressive results in 2019 and also in the first quarter of 2020. During the period under review, the Bank had been instructed to fix a maximum 9 percent ceiling on the lending rate by Bangladesh Bank which came into force on April 1, 2020. The implementation of the rate adversely affected operating profit in the year 2020. Income from both profit and non-profit sources had a sharp fall due to reduced international trade, foreign exchange dealing and transaction services. Furthermore, excess liquidity and lower appetite along with slow disbursement also affected operational profit in the year 2020. However, considering the capping of the profit rate and the consequence of corona virus in the economy, management revised the profit target for the year 2020. Despite all odds, uncertainties and challenges, we achieved our revised targets by utilizing our strong network, commitment from the employees and operational efficiency. During 2020, we have focused our activities and strategies to become a more resilient, more reliable and customer-oriented institution while keeping abreast of positive growth attaining our well-devised targets in key business areas. SJIBL earned operating profit Tk. 4,095 million which is 9% higher than the revised target and 30% lower than the previous year’s target. The investment portfolio stood at Tk. 196,513 million at the end of 2020. During the year, every effort has been taken to reduce the cost of deposit and at the end of the year the cost of deposit stood at 4.98%. During the year 2020, the performance of the import and export business of the Bank was satisfactory, taking into account the adverse effects of the pandemic. In 2020 import business stood at Tk. 148,469 million as compared to the volume of Tk. 157,060 million in 2019 which decreased by 5.47%. Export business amounted to Tk. 133,580 million as against Tk. 147,052 million in the preceding year, which decreased by 9.16%. Our position regarding fee-based income during the year is satisfactory. During the lock-down, all our AD branches were functional and served our valued RMG client to cater to their export business. As of December 31, 2020, the total assets of the Bank stood at Tk. 293,518 million registering an increase of 10.35% over December 31, 2019. Return on Assets (ROA) and Return on Equity (ROE) were 0.68% and 11.08% respectively as of year-end 2020. The Capital Adequacy Ratio of the Bank was calculated at 14.19%, which was above the regulatory requirements. Shahjalal Islami Bank Limited
  55. 56 TOTAL DEPOSIT 176 ,862 2018 (Taka in million) 203,273 2019 INVESTMENT 218,443 2020 (Taka in million) 197,286 196,513 186,090 2018 2019 2020 NON-PERFORMING INVESTMENT (Taka in million) 12,723 9,687 2018 2019 TOTAL OPERATING INCOME 10,506 8,653 2018 ANNUAL REPORT 2020 2019 8,973 2020 (Taka in million) 8,805 2020 SJIBL continued with the cautious and selective approach while taking investment exposures and remained focused on risk management. We have built a strong relationship with the better-rated corporate business house and continue to focus on gaining a higher share of the working capital business. In the SME segment, we have been cautious and focused on building relationships with highly rated SME customers. We want to diversify our portfolio with quality investment against hard collaterals. During the year, we further strengthened our systems and processes to ensure that we respond quickly to early warning signals in our portfolio. During the year 2020, special attention has been paid in effort to increase SME and Retail investment portfolios to a considerable amount within the next two/three years. SJIBL strongly believes that the SME sector is one of the main driving forces of economic growth, having huge potential for socio-economic development. Furthermore, consumer banking also plays an important role in the economic activities of the country. The outstanding SME investment as of 31 December 2020 stood at Tk. 72,573 million and retail investment stood at Tk. 8,999 million. One of the all-time top priorities of the Bank is to curb NPIs by maintaining quality assets and recovery of default investments. Investment monitoring and relationship management were streamlined further to regularize and reduce non-performing investments. Early Warning System (EWS) has been emphasized so that precautionary action can be taken against vulnerable assets. In this respect, the Investment Monitoring Department has been established. Above all, proper monitoring and a strong recovery drive from the branches and the Special Asset Management Division of the corporate office have been intensified to maintain the quality of the assets. As a result of collective efforts, NPI of the Bank reduced to Tk. 8,973 million from Tk. 9,687 million representing 4.57% of investment portfolio which was 4.91% in the previous year. Risk management is an integral ingredient of internal governance involving all areas of operations of the Bank. It is an essential part of helping the Bank to grow and promote sustainability and resilience. Hence, SJIBL has developed a sound Risk Management Framework (RMF) so that the multifaceted risks assumed by the Bank are properly projected, assessed, monitored and addressed incessantly. Under the RMF and in accordance with the guidelines of Bangladesh Bank, the Risk Management Division (RMD) of the Bank monitors total activities in this regard. Based on observations and suggestions of RMD to the Senior Management, the Bank takes necessary measures and actions to restrict and reduce risk exposures, to absorb any unusual shock and financial stress towards the Bank. Digital innovations are transforming economies and financial ecosystems worldwide. Customers are demanding banking that is simple, functional, reliable, and seamless. Hence, SJIBL has continued its operations towards digitization in terms of automation and system security adopting new technology across the Bank. Since its inception, the Bank has been providing online, real-time any-branch service. Our Head Office, all branches and sub-branches of the Bank are supported by a fully integrated, centralized system; all the components of the system are interconnected through an Application Programming Interface (API).
  56. 57 COVID-19 has changed customer behavior and a gamechanger for digital payment in Bangladesh due to the need for contactless payment . Although the pandemic has decreased trade and commerce throughout the country, the rise in digital payments indicates that more and more people have shifted to digital payment services for their business and day-to-day activities. There has been a considerable growth in the number of customers in both mobile financial services and internet banking. Digital financial services have penetrated the rural population too. The Bank has been agile and responsive to the ever-changing situation. We have made good progress on our Digital Banking initiative started last year. SJIBL has already introduced appbased internet banking, ‘SJIBL Net’ to ensure customer services anytime-anywhere. It is expected that within a short span of time our valued customers will be able to open an account from anywhere using our ‘e-Account’ platform. All the technological and operational infrastructures have been put in place for this service to go live. New opportunities for digitalization abound as do new risks to data security and compliance. To safeguard the Bank’s IT assets from cyber-attacks and fraudulent activities, we are taking all necessary precautionary measures to tackle the situation. We are also working on upgrading the current core banking solution to enhance our operational efficiency which will lead to a better customer experience. The Bank has given the emphasis on alternate delivery channels to facilitate our customers round the clock transactions. In addition to 10,000 plus shared ATMs, the bank installed 110 own ATMs across the country, and the number is growing gradually. In 2019, following the concept of Wakalah, launched Shariahbased EMV Complied-Chip based Secured Dual Currency Credit Card to provide convenient and flexible banking services to the clients. Each cardholder can conduct anytime, anywhere cashless transaction through the credit card without any hassle. This unique card has discounts of various rates and EMI Facilities with a 0% Profit rate at selective merchants as well. Our Credit Card is attracting customers increasingly for its convenience and shariah compliance. In 2020, to serve our valued customers round the clock, we have launched a 24x7 ‘Call Centre’ which is reachable at 16302. Through the Call Centre, we answer queries, listen to complaints and suggestions, fix immediate problems, provide product information round the clock. Compliance and discipline have been injected into the core of the Bank’s operations and value system, that are instrumental in creating the image of the Bank. The matter of compliance is looked after by our Internal Control & Compliance and Shariah Inspection Division. They are playing a pivotal role in ensuring regulatory and shariah compliance through their routine inspections. In 2020, all the branches were audited by both divisions. These audits do not only cover the assessment of financial transactions and operational activities of the branches but also minimized the cases of Shariah non-compliance, and consequently the doubtful income. SJIBL is not only profit oriented, rather it believes in 3P philosophy, i.e., “People – Planet – Profit”. With that understanding, SJIBL, through its Foundation, always extends cooperation and generously comes forward for serving humanity through different welfare activities giving due emphasis on health, habitat and education. Being a socially responsible corporate body, SJIBL continued its CSR activities throughout the year. During the year 2020, the Bank spent an amount of Tk, 323.48 million as CSR which covers involvement in charities, scholarship programs and different events for the overall betterment of the nation. Many more welfare activities and institutional development programs will be drawn in the future, Insha-Allah to the cause of serving the communities and the whole country. During the lock-down phase implemented by the government, our branches were operational across the country. I am immensely proud of those who worked during the lock-down fearlessly from the branch and served the customers in their most difficult times. We have taken the health and safety measures for our employees and our customers very seriously. Since early March 2020, we have been preparing our response to COVID-19 which accelerated after receiving Bangladesh Bank instruction. Our “Quick Response Team” has taken adequate measures from time to time following the guidelines of the Director General of Health Department and World Health Organization. We have provided face masks, face shields, protective dresses for front desk officers and also adequate hand sanitizer for both employees and customers. We have disinfected the branch quickly whenever any employee of that branch is found infected. SJIBL has published guidelines on Corona Virus for its employees. Considering the safety of the employees, the Bank also arranged Oxygen cylinders to meet emergency purposes. Our Medical Officer provided medical advice round the clock during the high time of COVID-19. The senior management team maintained regular contact with the employees to boost morale in case of infection. Health insurance proves to be immensely helpful during the difficult period of COVID-19. The Bank achieved several prestigious awards from national and international reputed organizations during 2020. Among the awards, GIFA international awards are the most prestigious global awards in the field of Islamic banking. Global Good Governance (3G) Excellence in Sustainable Practices Award-2020 and Global Good Governance (3G) Green Champion Award-2020 have been conferred by GIFA to Shahjalal Islami Bank Limited. SJIBL was also recognized as the best Islamic Bank, Bangladesh for 2018 & 2019 by World Finance. International Finance Magazine, UK has awarded SJIBL for Best Islamic Card-Bangladesh 2020. The Bank was also awarded the Joint First Runner Up prize by SAFA for “Best Presented Annual Report 2019” under Private Sector Banks where all commercial Banks from the SARRC region competed. CEO of the Bank has been awarded Islamic Finance Personality of 2020 by GIFA. In Bangladesh, SJIBL was awarded the joint 2nd prize in 20th ICAB National Award for Best Presented Annual Report 2019 Shahjalal Islami Bank Limited
  57. 58 under the category ‘Private Sector Banks’ and also awarded the Silver (2nd) prize in 7th ICSB National Award for Corporate Governance Excellence, 2019. The Bank was also awarded the Silver (2nd) prize in ICMAB Best Corporate Award-2019 under ‘Private Commercial Bank (Islamic Operation)’ Category. The Bank also received SME award from Bangladesh Bank, the central Bank of the country. Acknowledgement The awards achieved by SJIBL locally and internationally are a testament to the strong management, sound business model, shariah compliance, transparency in reporting, service excellence, risk management, and approach to modern banking. We are deeply honored to be recognized for our efforts towards driving the growth of Islamic Finance in Bangladesh. This recognition is very meaningful to every one of our employees. I would like to take this opportunity to thank the shareholders for the trust they have reposed in the Bank. I am also grateful to Bangladesh Bank and Securities and Exchange Commission for their continued support and guidance on policy and operational matters which enhanced the professional capabilities of the Bank. The loyalty of the customers has been very encouraging during the lock-down and uncertainty caused by Covid-19. I thank them for the confidence they continue to place in us. I would like to thank all my colleagues for their spirit and determination they have shown during the difficult times of COVID-19. We know our goals and roles; we have our innate strengths, watchful eyes, team spirit and dedication to reach the pinnacle of progress in the banking sector keeping the Bank’s vision and mission in mind. I do appreciate the continued support of our stakeholders and assure them that management will take all the necessary steps and put in efforts not only to meet but also to exceed their aspirations. We are passionately committed to making the Bank the best it can be. Throughout the year, we have maintained the highest quality standards for our customers. We have an experienced professional team that can respond to challenges. We have the talent, the vision and the conviction to rise to the occasion of the Bank. ANNUAL REPORT 2020 My sincere appreciation to the Board of Directors for their unstinted cooperation over the year. They have taken a keen interest in the affairs of the Bank and formulation of policies and had been an immense source of support and guidance to me during the year. I thank them for their unmatched guidance and counsel extended to me throughout the recent adversity. In the end, on behalf of the senior management team, I most humbly submit to the greatness of almighty Allah soliciting His mercy to pave the journey towards a glorious success of the Bank in the days to come. M Shahidul Islam Managing Director & CEO
  58. 59 REPORT OF THE BOARD OF DIRECTORS In the name of Allah The Most Gracious , the Most Merciful Dear Shareholders, Assalamu Alaikum Wa Rahmatullah Wa Barakatuhu. The Board of Directors is pleased to welcome you all to the 20th Annual General Meeting (AGM) of Shahjalal Islami Bank Limited. We are delighted to present before you the Directors’ Report and Audited Financial Statements together with Auditors’ Report of the Bank for the year ended on 31 December 2020. We have also provided a brief description of the performance and financial position of the Bank for the same year as well as various aspects of the world economy and Bangladesh economy. World Economy COVID-19 caused a global recession whose depth was surpassed only by the two World Wars and the Great Depression in the past century and a half. Although global economic activity is growing again, it is not likely to return to business as usual in the foreseeable future. The pandemic has caused a severe loss of life, is tipping millions into extreme poverty, and is expected to inflict lasting scars that push activity and income well below their pre-pandemic trend for a prolonged period. The incipient recovery was supported by a partial easing of stringent lock-downs. Various restrictive measures have been reintroduced, however, as COVID-19 has continued to spread around the world. Some areas have experienced a sharp resurgence of infections, and daily new cases remain high. That said, there has been substantial progress in the development of effective vaccines, and inoculation has begun in some countries. A more general rollout in advanced economies and major emerging market and developing economies (EMDEs) is expected to proceed early this year. Most other EMDEs, however, face greater constraints in vaccine procurement and distribution. Until vaccines are widely distributed, effective containment strategies to limit the spread of COVID-19 remain critical. In all, the global economy is estimated to have contracted 4.3 percent in 2020 In advanced economies, the initial contraction was less severe than anticipated, but the ensuing recovery has been dampened by a substantial resurgence of 2.9 2.0 2014 3.8 2.9 2.3 2015 4.2 2.6 1.7 2016 3.2 4.5 2.4 2017 3.0 4.3 2.2 2.4 2018 3.5 1.6 2020 2019 -2.5 4.2 4.6 3.8 4.2 3.5 3.9 2021 2022 -5.2 -7.0 World Prospects for the global economy are uncertain, and several growth outcomes are possible. In the baseline forecast, global GDP is expected to expand 4 percent in 2021, predicated on proper pandemic management and effective vaccination limiting the community spread of COVID-19 in many countries, as well as continued monetary policy accommodation accompanied by diminishing fiscal support. Global Trade Global trade collapsed last year as border closures and supply disruptions interrupted the international provision of goods and services. Goods trade fell more rapidly and recovered more swiftly than during the global financial crisis, while services trade remains depressed. Relative strength in manufacturing, alongside persistent weakness in services, reflects the unusual nature of the recession, which has shifted consumption patterns toward goods and away from services requiring face-to-face interactions. The recovery in global merchandise trade has also benefited from the resilience of global value chains to supply disruptions. Global Trade Devia�on 2.7 0.3 -0.2 -2.6 -5.3 -13.4 -15.7 -13.9 -23.3 -25.4 -24.8 -23.0 -20.6 -39.7 -55.7 -54.5 -56.4 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Services -17.6 -46.6 -53.7 -51.7 -48.8 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Manufacturing Source: World Bank Global Commodity Market Global Growth 4.5 COVID-19 cases. Meanwhile, output in China is estimated to have rebounded last year at a faster-than-expected clip, with particular support from infrastructure spending. China’s strength was an exception, however, and disruptions from the pandemic in the majority of other EMDEs were more severe than previously envisioned, resulting in deeper recessions and slower recoveries, especially in countries with recent large COVID-19 outbreaks. Advanced economies EMDEs Source: World Bank Most commodity prices rebounded in the second half of last year; however, the pickup in oil prices lagged the broader recovery in commodity prices due to the prolonged impact of the pandemic on global oil demand. Crude oil prices averaged $41/bbl in 2020, a 34 percent fall from 2019. Oil demand fell 9 percent last year—the steepest one-year decline on record—as a result of pandemic-control measures and the associated plunge in global demand, Oil prices are forecast to remain close to current levels and average $44/ bbl in 2021 before rising to $50/bbl in 2022. Base metal prices were, on net, broadly flat in 2020, Prices are expected to increase 5 percent in 2021 alongside the expected rebound Shahjalal Islami Bank Limited
  59. 60 in global demand . Agricultural prices rose 4 percent in 2020, largely driven by supply shortfalls and stronger-than-expected demand in edible oils and meals. Agricultural prices are forecast to see a further modest increase in 2021. Commodity price Indexes Index, 100=2010 100.0 90.0 80.0 70.0 60.0 50.0 Risks to the Outlook Although global activity is projected to recover as the pandemic is gradually brought under control, it is not expected to return to its pre-crisis trend. The baseline forecast is subject to several risks. The spread of the pandemic could accelerate, particularly if the vaccination process is delayed, and economic weakness and impaired banking systems may lead to financial crises. In the medium term, the crisis may lower global potential output as a result of lasting damage to health, education, and balance sheets. Bangladesh Economy 40.0 30.0 Agriculture Oct-20 Nov-20 Sep-20 Jul-20 Aug-20 Jun-20 Apr-20 May-20 Mar-20 Jan-20 Feb-20 Dec-19 Oct-19 Nov-19 Sep-19 Jul-19 Energy Aug-19 Jun-19 Apr-19 May-19 Mar-19 Jan-19 Feb-19 20.0 Metals Source: World Bank Global Financial Market Aggressive policy actions by central banks kept the global financial system from falling into crisis last year. Financial conditions are generally loose, as suggested by low borrowing costs, abundant credit issuance, and a recovery in equity market valuations amid positive news about vaccine development. This masks rising underlying vulnerabilities, however, including rising debt levels and weakening bank balance sheets. Banks’ capital buffers are under pressure due to falling profitability and asset quality deterioration. Defaults have already surged in the hardest-hit sectors and countries, and rising credit downgrades point to further strains in the future. Global Foreign Direct Investment Global foreign direct investment (FDI) collapsed in 2020, falling 42% from $1.5 trillion in 2019 to an estimated $859 billion, according to UNCTAD. Such a low level was last seen in the 1990s and is more than 30% below the investment trough that followed the 2008-2009 global financial crisis. Despite projections for the global economy to recover in 2021 – albeit hesitant and uneven – UNCTAD expects FDI flows to remain weak due to uncertainty over the evolution of the COVID-19 pandemic. The organization had projected a 5-10% FDI slide in 2021 in last year’s World Investment Report. $13B -77% $229B -69% $859B -42% Develoved Economics $616B -12% Transi�on Economics Source: UNCTAD ANNUAL REPORT 2020 Bangladesh economy faced Covid-19 pandemic-induced challenges in every economic sector. In this backdrop , the government of Bangladesh and Bangladesh Bank took a series of timely and appropriate initiatives such as stimulus packages of more than BDT 1.21 trillion, policy relaxations, low cost refinance schemes, etc., among others, to support weaker segments of the economy and to ensure sufficient liquidity in the banking system. Due to government efforts combined with the hard work of the people, the Bangladesh economy has been less affected compared to other countries during the pandemic. Aided by those prompt policy initiatives, the economic recovery of Bangladesh remained at the forefront among the neighboring South Asian economies and attained a 5.2 percent growth rate. Agricultural Sector Global FDI in 2020 Developing Economics Bangladesh - just like the rest of the world has and more so as an emerging economy - faced tough challenges - often having to choose between saving lives and preserving livelihoods. Prior to the outbreak of the pandemic in 2020, the Bangladesh economy was somewhat under stress due to the weak performance of a few economic indicators such as exports, imports, private investment, foreign direct investment, and revenue mobilization. Like all other economies, Bangladesh has experienced pressure due to the disruption in economic activities during the pandemic. Both domestic and global demand contracted. As our economy is now integrated with the global economy, a downward trend was observed in case of exports, outflow of Bangladeshi migrants for work, and foreign investment. On the domestic front, depressed domestic demand has been reflected through low investment. Credit flow to the private sector and import of capital machinery had been low. Job losses by a large number of people had also reduced demand. All these had an impact on growth which was on an increasing trend during the last decade. Thus, in fiscal year 2020, the growth of gross domestic product (GDP) was 5.2 percent as opposed to 8.2 percent, which the government projected originally. Several studies have indicated that low growth and slower economic activities had a knock-on effect on poverty, unemployment, education, inequality and many social aspects. The agriculture sector maintained solid growth even amid the COVID period on the back of the healthy production of most of the cereal and non-cereal crops aided by the timely availability of inputs, favorable weather conditions at the time of cultivation and harvesting. Out of the three main sectors of the economy, agriculture emerged as the least affected. With few cases of the virus outbreak in rural areas, activities in agriculture and related sub-sectors (livestock, fisheries etc.,) remained, more or less, uninterrupted. A problem arose at the time of harvest of Boro crops for lack of labors and impending flood. Timely availability of inputs, benign weather conditions during cultivation and harvesting periods favoured satisfactory
  60. 61 crop production . Meanwhile, the stimulus packages announced by the government to disburse credit at low cost among the affected farmers for mitigating the repercussion of the pandemic would likely to cushion the agriculture sector from further spillover effects. Sector wise GDP Contribu�on in % 54.0 29.6 16.5 FY-14 53.1 53.6 30.4 31.5 16.0 15.4 FY-15 FY-16 Agriculture 52.9 32.4 14.7 FY-17 52.1 33.7 14.2 FY-18 Industry 51.3 35.0 13.6 FY-19 51.3 35.4 In rural areas price was down in December at 5.28 per cent where Food inflation dropped to 5.60 per cent, and non-food inflation rose to 4.67 per cent. Urban inflation declined to 5.31 per cent, led by fall in food inflation, which stood at 4.77 per cent where non-food inflation in the urban areas rose to 5.93 per cent in December. The government has set a 5.4 per cent inflation target in the current fiscal year. Twelve Months Average Infla�on Rate In % 6.02 5.44 4.58 7.17 5.7 3.5 13.4 7.1 5.8 6.2 3.7 5.5 4.5 Jun'18 Dec'18 5.4 5.5 5.5 5.6 5.6 5.6 5.85 5.52 5.65 Jun'19 Dec'19 Jun'20 5.77 5.69 5.56 FY-20 Service Source: Bangladesh Bank Industrial Sector While the industry sector had been contributing to GDP with double-digit growth rates since FY16, the growth rate in this sector sharply came down to 6.48 percent in FY20. The industry sector decelerated to low but positive growth rates during the first three quarters of FY20, while the growth of the industry sector fell to a negative territory reflected in the growth of Quantum Index of Industrial Production (-14.98 percent) during Q4FY20. Mostly manufacturing sector led by wearing apparel, textile, pharmaceuticals, non-metallic mineral product, leather and related products and chemical production spurred the QIIP. Besides, service sector related activities also climbed out from their pandemic depths. Cargo handled through Chattogram port started increasing sharply after May 2020 and came back to the pre-pandemic level in November 2020 . Private sector credit growth in trade and commerce and consumer finance increased significantly during the first quarter of FY21. Service Sector The service sector, which also impacted by the pandemic but grew by 5.32 percent in FY20 against 6.78 percent in FY19 as most of the leading sub-sector activities such as wholesale and retail trade activities, transport, storage and communication, financial intermediation, education, real estate, renting and business activities waned due to lock-down measures. Inflation CPI inflation became some sort of unstable after the detection of the first COVID patient in Bangladesh in March 2020 and gradually increased to 6.44 percent in October 2020, but then started to decrease to 5.52 percent in November 2020 which came down further to 5.29 percent in December 2020 though average inflation rose to a three-year high of 5.69 per cent in the concluded calendar year. The recent increase in inflation until October 2020 was mainly driven by an increase in food inflation. On the other hand, non-food inflation remained low during the coronavirus pandemic due mainly to subdued domestic demand. Jun'17 Dec'17 Food Noon Food Dec'20 General Source: Bangladesh Bank Money Supply and Credit Growth To accommodate the government’s supportive policies and implement stimulus packages in view of cushioning the economy against the adversities of COVD-19 pandemic, Bangladesh Bank (BB) set an expansionary monetary policy for FY21. BB made the policy relaxations through slashing the policy rates including repo rate, reverse repo rate, cash reserve ratio (CRR), and bank rate to ensure adequate finance at a lower cost to the priority and productive sectors, particularly in agriculture; cottage, micro, small and medium enterprises (CMSMEs), and manufacturing industries, among others, without impairing price stability. The expansionary policy stance set broad money (M2) growth target at 14.00 and 15.60 percent for December 2020 and June 2021, respectively . Broad money (M2) grew by 13.99 percent (y/y) at the end of November 2020, supported by a strong pickup in the net foreign asset (NFA) Amid the COVID-19 pandemic induced by global economic slowdown, net foreign asset (NFA) registered 27.75 percent growth (y/y) in Nov’20, aided mostly by a strong surge of inflows of remittance by 48.54 percent and foreign loans by 53.72 percent. Despite a high growth of credit to the public sector, the slower growth of credit to the private credit pulled down the growth of net domestic asset (NDA) to 10.56 percent at the end of November 2020 from 14.02 percent at the end of June 2020. On the back of a large inflow of foreign loans and a rise in the borrowing through selling of national saving certificates, the growth of credit to the public sector moderated somewhat; nonetheless it remained as high as 18.58 percent at the end of December, 2020, reflecting government’s lower than expected revenue collection in the pandemic period. Although the growth of credit to the private sector started picking up with BB’s policy supports and implementing government’s stimulus package aimed at faster growth recovery of the economy, it still remained as low as 8.37 percent at the end of December, 2020 against the target of 11.50 percent and 14.80 percent for December 2020 and June 2021, respectively . In the period ahead, the growth path of credit to the private sector will recover with an expectation that intensity of the effects COVID-19 would be lesser in the second wave and the vaccine would be available to a larger coverage. Shahjalal Islami Bank Limited
  61. 62 3 .53% Oct'20 Nov'20 Dec'20 3.53% -4.08% 0.76% ANNUAL REPORT 2020 -4.08% -6.11% -6.11% Source: Bangladesh Bank Remittance Bangladesh is the world’s 6th largest manpower exporting country but it ranks 9th in terms of receiving remittances. Officially recorded inflows classified under worker’s remittances have increased by more than 38 per cent in the first half of FY21 which is the highest ever in Bangladesh’s history. The remarkable growth in remittance inflows mostly came from the Gulf region which accounted for 57 percent share of total inflows. This has happened at a time when the number of workers going abroad has declined by almost 75 per cent. New workers going out of Bangladesh for work abroad has stopped after February 2020 and has not reopened as of now. At the same time, because of the collapse in petroleum prices and the pandemic induced recession, most oil exporting gulf countries and some others have sent back 300,000-400,000 workers from those countries. Various government policy measures such as relaxation of conditions for incentives including an extension of document submission time from 15 days to 2 months and a pandemic-induced slump in transactions through informal channels supported to strong remittance growth. 21.22% 28.05% 33.66% 35.94% 45.65% Dec'20 Oct'20 Nov'20 Sep'20 Jul'20 29.59% Aug'19 2.39% 21.20% -1.17% Jul'19 Jun'19 16.16% May'19 12.23% 7.73% Mar'19 Apr'19 15.76% 14.68% Jan'19 Feb'19 62.62% Remi�ance Growth Rate in % Export For many, 2020 has been a year of despair. The unprecedented effects of Covid-19 have jolted economies and supply chains worldwide with Bangladesh being no exception. In the financial year 2019-20, there was a very high negative growth in exports (17 percent) which was unprecedented in the recent history of Bangladesh and as a major player in the garments sector, Bangladesh has been severely affected by the coronavirus fallout. Primarily, the supply of raw materials to local garment factories 0.76% 4.32% Sep'20 4.32% Aug'20 The fiscal position markedly slipped from its normal trend during Q4FY20 owing to COVID-19 related economic slowdown triggered by a government declared lock-down for two months that shut down economic activities across all sectors of the economy. The weak revenue collection and additional expenditure for health and cash transfer for coping with COVID-19 pandemic increased fiscal deficit. About 70 percent of deficit financing was met from domestic sources. During FY20, total revenue collection decreased by 2.4 percent (y/y) to BDT 2512.0 billion (9.0 percent of GDP) and 72.2 percent of annual revised budget target for FY20. Budget deficit, as percent of GDP, rose to 4.9 percent in FY20 from 4.5 percent in FY19 because of slower revenue collection against higher expenditure, below the revised budget target of 5.5 percent of GDP. In FY20, total expenditure rose by 4.3 percent (y/y) to BDT 3876.4 billion (13.9 percent of GDP) and 77.3 percent of the annual revised budget target for FY20. In FY20, about 60 percent deficit financing was met from domestic sources which mostly came from the banking sector. Aug'20 33.94% Fiscal Management Jul'20 0.59% Jan'20 -13.93% FDI through equity or fresh capital injection declined by around 22 per cent during the first nine months of 2020. At the same time, FDI through intra-company loans recorded a big drop of 74 percent. Feb'20 Mar'20 Apr'20 May'20 Jun'20 Series1 -1.70% -1.80% -18.21% -82.86% -61.57% -2.50% Jun'20 Bangladesh Bank statistics, however, showed that the net inflow of FDI in the country declined by 19.50 per cent in the first nine months (January-September) of 2020 and stood at around $1.74 billion. The amount was $2.15 billion in the same period of 2019. The annual net inflow of FDI in 2019 in Bangladesh was recorded at $2.87 billion, which was 20.46 per cent lower than $3.61 billion in 2018. FDI in Bangladesh is mostly domestic marketoriented like telecommunications, energy and financial services. The export-oriented investment is also there, but that declined due to slump in global demand. Export Growth in % May'20 Foreign Direct Investment 0.59% Source: Bangladesh Bank -23.80% FY21 Credit to Private Sector -12.51% Q4 Apr'20 Q1 Mar'20 FY20 Q4 -2.50% Q3 2.58% FY19 Credit to govt. (net) Q2 10.20% Q1 Jan'20 Q4 Feb'20 Domes�c credit Q3 -61.57% Q2 40.17% Q1 31.75% FY 18 Q4 -17.4 Dec'19 Q3 Nov'19 -16.9 Q2 -11.5 14.7 -82.86% 32 19.4 32.39% Q1 17 Oct'19 24 18.58 14.4 14.8 12.2 13.7 12.7 13.2 13.7 12.4 9.91 12.8 14.5 14.1 14.7 13.2 12.5 12.4 11.3 10.7 9.8 8.9 8.6 9.5 8.37 -2.5 1.3 17.8 18.1 18 -18.21% 13.4 40.6 Sep'19 50.3 47.1 was disrupted when China—Bangladesh’s main source for such goods—halted all shipments between March and April due to the coronavirus outbreak. Overall, Earnings from the apparel shipment, which typically contributes 84 per cent to the national exports, witnessed an unprecedented 16.94 per cent year-onyear decline in 2020. Earnings from the shipment of leather and leather products, the second-largest foreign currency earning sector, slid 6.24 per cent to $446.13 million in H1FY21. Jute and jute goods fetched 30.56 per cent higher at $668.11 million. Export of home textile, bicycle, agricultural products and pharmaceuticals grew in the first half of the fiscal year. Frozen and live fish export declined by 3.71 per cent to $279.72 million. -1.80% 59.8 -1.70% Growth of Credit in % Source: Bangladesh Bank
  62. 63 Import Fx Reserve of BB & Import Coverage Foreign Exchange Reserve Due to the ongoing surge in the officially measured inflow of workers’ remittances and the decline in import payments associated with economic slowdown, the external current account of the balance of payments (BOP) recorded large surpluses and foreign exchange reserves of BB increased by more than $11 billion to more than $43 billion by end-December 2020. The current foreign exchange reserves (less ACU liability) is sufficient to pay import liability of 9 months; considering the average of the previous 12 months import payments. 43.17 41.27 Dec'20 41.01 Nov'20 39.31 Oct'20 Sep'20 37.29 39.04 Aug'20 36.04 33.41 Jul'20 Jun'20 33.11 May'20 32.57 Feb'20 Apr'20 32.99 Jan'20 Mar'20 32.69 32.38 Dec'19 32.44 31.73 Nov'19 31.83 Oct'19 32.78 Sep'19 32.09 Jul'19 Aug'19 Banking Sector: Digital services in the financial sector are slowly expanding. The Covid-19 pandemic has added momentum to them. Private banks have scaled up their digital services during the pandemic. As part of digitization, each bank has to launch e-KYC system by December 2021. The first three quarters of 2020 saw U$ 65 Bn+ transaction with 72% of the market dominated by mobile banking. With 96Mn Registered users and U$ 202Mn daily MFS transactions, digital transactions will unlock the digital commerce industry’s potentials. These policy relaxations had a significant impact on liquidity in the banking system. The ratio of total liquid asset to total demand and time liabilities (TDTL) increased to 27.52 percent in Q1FY21 as compared to 23.5 percent Q3FY20 . Similarly, liquid asset excess of SLR to TDTL rose to 12.55 percent from 6.9 percent at the same period. Deposit Advances & NSC Outstanding 2017 2018 Deposit 3.23 The trade deficit shrank heavily in the first half of the ongoing fiscal year because of dwindling imports amid the economic slowdown, in a sign of depressed demand and consumption. Between July and December, the trade deficit, which occurs when imports outweigh exports, stood at $6.46 billion, down 21.37 per cent year-on-year. During the period, imports declined 6.8 per cent from that a year earlier to $25.22 billion, eclipsing a 0.44 per cent fall in exports to $18.76 billion. Current account balance, one of the major indicators of the balance of payments (BoP), stood at $4.32 billion in the July-December period in contrast to a deficit of $1.66 billion a year ago. The lower imports and an increase in remittances have widened the current account. The overall balance was $6.15 billion in the first six months of the fiscal year in comparison to $27 million a year earlier. The stronger current account balance and the loans from multilateral lenders helped boost the overall balance of the BoP. Reserve Covers Month of Import (Months) 11.45 Balance of Payments 9.60 9.00 9.44 12.9 Source: Bangladesh Bank 8.60 2.91 FY 19-20 Foreign Exchange Reserves ($B) 7.78 8.00 8.10 8.50 10.58 FY 20-21 7.39 11.37 Trade Deficit 6.56 6.91 7.04 6.97 9.6 (6,465) (8,223) 7.34 2.63 4,322 Current Account (1,667) 6.38 10.1 6,155 27 7.35 2.15 Overall Balanc (USD in Million) 7.02 8.44 Balance of Payments 8.41 9.26 The Covid-19 induced economic crisis has affected the export and import of Bangladesh by large margins. The economic crisis has been exacerbated by the closure or limited operation of businesses during the lock-down at home and abroad. From July to December of FY 2020-2021 imports declined 6.8 per cent from that a year earlier to $25.22 billion. The economic meltdown brought on by the coronavirus pandemic has adversely affected the domestic demand, bringing down import payments. The falling import of capital machinery and industrial raw materials indicated that investment in the private sector is feeble. Capital machinery import stood at $ 1.5 billion in the first half of 202021, down 29.17 per cent from a year ago. This means businesses are reluctant to set up new plants or expand their existing ones. Import of intermediate goods, including industrial raw materials, dipped 8.8 per cent to $15.33 billion, in a sign of lower production than the pre-pandemic period. 2019 Loans & Adva. 2020 NSC Source: Bangladesh Bank Bank Deposit, Advances & NSC Growth 32.31% 22.18% 18.42% 13.74% 12.57% 9.05% 10.65% 10.21% 10.22% 2017 2018 Deposit 13.46% 11.00% 8.22% 2019 Loans & Adva. 2020 NSC Shahjalal Islami Bank Limited
  63. 64 The central bank initiated the stimulus package of Tk 20 ,000 crore in April, 2020 dedicated to the cottage, micro, small and medium enterprise (CMSME) sector. Forty-six per cent of the fund was given out as of December 2020. A large number of CMSMEs are unable to provide documents to banks where as much as 92 per cent of the Tk 33,000-crore package for the large industries and the service sectors was approved by lenders as of December. The businesses in the agriculture sector have not managed adequate loans from the stimulus fund as well. As of December 15, 2020 banks disbursed 56 per cent of Tk 5,000-crore stimulus package for the farming sector. The implementation of the Export Development Fund has got momentum as Tk 9,248 crore has been distributed against the package amount of Tk 12,750 crore as of December 22,2020, Large industries usually get credit support from the facility. Mar'20 Jun'20 Sep'20 Total Source: Bangladesh Bank Banking Sector Liquidity Condition The policy relaxations by Bangladesh Bank and low-cost refinancing lines of credit along with the government’s big stimulus packages to support economic activities had already injected a big liquidity in the economy where High foreign currency inflow through remittances amid low import expenditures mainly shot up excess liquidity. The central bank purchased $5 billion, worth Tk 46,563 crore, in the first six months of the current fiscal year – which was nearly seven times higher than its purchases in the entirety of Fiscal Year 2019-2020. The government, for the first time, allowed the investment of black money in the banks to ease liquidity pressure, help implement the stimulus package and support high bank borrowing. Excess Liquidity Trend in Banking Sector Large Borrowers CMSME EDF 46% 73% 9212 9248 54% 2723 5000 2% 101 Pre-Shipment Credit 5000 36% 1079 Marginal Business 3000 105689 103915 113735 195166 169569 140749 111914 89937 Dec'19 Jan'20 Feb'20 Mar'20 Apr'20 May'20 Jun'20 Jul'20 Aug'20 Sep'20 Oct'20 Nov'20 In crore taka Package Amount Non-performing Loans (NPLs) Status Default loans went down in 2020 on the back of a general forbearance on loan payments. The overall NPL ratio of the banking industry reduced to 7.66 percent as of December,2020 from 9.16 percent in December,2019, mainly attributed to the loan moratorium facility continued by the Bangladesh Bank. Nonperforming loans (NPLs) stood at Tk 88,734 crore as of December, down 5.93 per cent year-on-year, showed data from Bangladesh Bank. The central bank unveiled a moratorium facility for 2020 to insulate borrowers from the economic hardship caused by the coronavirus pandemic, in a move that reined in the escalation of defaulted loans and brought them down. The gross NPL ratio for SCBs dropped to 19.16 percent in Dec,2020 from 22.73 percent in Dec, 2019. Similarly, the gross NPL ratio for PCBs stood at 5.56 percent in Q1FY21, declined by 0.30 percentage points from the preceding quarter. ANNUAL REPORT 2020 139578 12750 Farm Disbursed Funds 160968 103394 20000 Figure in crore taka 183001 As of Dec-2020 30359 33000 22.50 Dec'19 PCB Implementa�on of Major S�mulus Package Run By BB 92% 22.73 22.80 5.56 8.88 Sep'19 SOCB 5.86 9.16 Jun'19 5.60 9.00 7.43 11.99 Mar'19 5.80 9.30 7.13 11.69 23.90 31.50 31.58 32.20 Dec'18 7.08 11.87 Businesses are experiencing an uneven recovery from the pandemic-induced slowdown as larger firms are bouncing back strongly thanks to the easy access to the stimulus packages while the smaller ones are still mired in the crisis. The large industrial and service sectors have made as much as 80-90 per cent recovery compared to the pre-pandemic level. It is only 30-40 per cent for small and medium enterprises. 29.96 Since March, the government has unveiled 21 stimulus packages involving more than Tk 120,000 crore, which is about 4.5 per cent of the GDP of Bangladesh. NPL Movement in % 5.54 10.30 Government Stimulus Package Implementations Interest (Profit) Rate Outlook While sufficient liquidity in the banking system to be aligned with the government’s effort of implementing stimulus packages to revive the economy from the COVID-19 fallout is critical, the BB cut its cash reserve ratio (CRR) by 150 basis points from 5.50 to 4.00 percent in two steps during March – April 2020. Moreover, BB reduced the bank rate from 5.00 to 4.00 percent in July 2020, which had been remained unchanged at 5.00 percent since 2003, rationalizing it with the current interest rate regime. The BB also slashed its repo from 6.00 to 4.75 percent in three steps during March - July 2020, aiming at easy access for the banks to lend more credit to the priority sectors during the pandemic period. Consequently, the interest rate in the call money market and interbank repo rate continued to decline from 5.14 and 5.96 percent in March 2020 to 2.00 and 0.70 percent respectively in November 2020. Weighted average interest rates in the retail market also witnessed a significant decline both in lending and depositing, following the ceiling of 9.0 percent lending rate cap effective from 1 April 2020. Weighted average lending and deposit rates
  64. 65 decreased from 5 .51 and 9.58 percent in March 2020 to 4.64 and 7.62 percent in November 2020, respectively. The rise in the liquidity in the banking system, amid COVID-19 driven by a weak credit demand, led to a sharper fall in the interest rates on lending, which, in turn, induced to lower the cost of funds by the way of lowering the interest rate on deposit. Weighted Deposit, Advance & Spread rate in % 12.46 7.25 11.18 9.56 9.49 9.68 5.22 4.84 5.26 5.70 4.84 4.71 4.72 4.23 3.98 2015 2016 2017 2018 2019 6.34 5.21 2014 9.93 Deposit Rate Lending Rate 8.02 4.89 3.13 Q3,2020 Spread Banks Profitability Total operating profits in the banking sector declined by only 7.16% last year from the previous year when industry insiders had assumed that the 9% lending rate cap will erode profits significantly. In 2019, the operating profit growth was 7%. Although operating profits declined, net profits in 2020 were expected to surge significantly because of lower provision requirements, thanks to the loan classification suspension facility offered for January-December of the year considering the pandemic situation. High returns from investment in government treasury bills and bonds largely contributed to earnings when the private sector credit growth was depressed throughout the year, hovering between 8% and 9%. Banks had to spend only Tk.2,500 crore in an additional provision as a cost for payment deferral of borrowers. Return on asset in % 0.9 0.8 0.8 0.6 0.7 0.2 0.3 0.4 0.42 0 -1.3 SOCB PCB 2017 2018 All Banks 2019 2020(E) Source: Bangladesh Bank Reurn on Equity in % 12.011.011.2 8.5 9.6 0.8 3.9 6.8 6.7 -13.7 -29.6 SOCB PCB 2017 It was feared that the banking sector would face a doublewhammy, stemming from Covid-19 and lending rate cap. But what the end of 2020 shows is different picture with two major performance indicators – profitability and loan recovery – being far better than expected. Though NPL’s decline was driven by the loan moratorium and the prohibition on banks downgrading loans until December 2020, which delayed the recognition of NPL. Non-performing loans would increase in the coming quarters because of the expiration of credit moratorium period and weakening of the repayment capacity of borrowers as a result of the coronavirus shock. Low private sector credit growth and high investment in government bills and bonds took excess liquidity in the banking sector to above Tk 2 lakh crore in December last year, the highest in the history. The real challenge will be this year as payment holiday has been lifted. The depressed private sector credit growth is another big challenge because banks could not lend even at 5% as businessmen have cash in hand due to one-year payment deferral. The COVID-19 pandemic has ironically brought about a revolution in digital banking as banks are quickly adopting technology-based products, thereby allowing customers to access banking services remotely. Use of both credit and debit cards hit an all-time high in December as people continued to fulfill their demand using the digital means. Digital loan(Investment) is one such product that will give customers a first-time experience in the country of processing loans through their bKash app, reflecting how technology has been taking over the banking industry. In 2020 Bangladeshi banking sector has experienced first block chain-based crossborder remittance service, the pandemic has given a further push to cashless transaction as people from all walks of life are increasingly embracing the different digital financial payment tools to avoid cash in order to keep the coronavirus at bay. Bangladesh Economic Outlook 2021 -0.6 3.5 Banking Sector Outlook 2018 2019 All Banks 2020(E) Source: Bangladesh Bank Even in the corona crisis, the Bangladesh economy is growing much faster than in other parts of the region. It presents itself to international entrepreneurs as the best in its class: The International Monetary Fund (IMF) expects an economic growth of 3.8% in Bangladesh for the crisis year 2020 – by far the highest value in the whole of Asia. Looking forward, the government has set a 7.4 percent real GDP growth target for FY21 weighing on the rebound in the economic situation aided by continued policy initiatives such as stimulus packages, low cost refinance schemes, and policy relaxations, among others. Bangladesh economy has recovered faster as reflected in sector-wise performance for the first quarter of FY21 amid a dreadful situation as the pandemic continues. The growth targets indicate that growth will recover at a faster pace in FY21 and will increase gradually . The economy is likely to maintain the targeted growth path with an expectation that a second wave of the pandemic would not harm the economy seriously. Besides, an advanced stage of vaccine development would have a positive impact on the global as well as domestic economy. Shahjalal Islami Bank Limited
  65. 66 We hope Bangladesh Bank will continue with expansionary monetary policy stance during the year 2021 . The government has already cut its GDP growth projection at 7.40 per cent from its earlier projection of 8.20 per cent for the FY’21 mainly due to the ongoing Covid-19 pandemic. We predict credit to the public sector particularly the government borrowing from the banking sector is likely to decline in the year 2021 while the private sector credit growth is expected to pick up in the coming months as the launch of coronavirus vaccination is set to contain the spread of deadly virus in the country, thus boosting the peoples’ confidence in economic activities. Opera�ng Profit Against all the odds 2021 ushers in with a lot of expectations. The Covid-19 pandemic which engulfed our economic and social lives in every possible manner in 2020 is expected to be brought under control as hopes are high with the approval of vaccinations developed by a number of companies. A summary of operating result of the bank as on 31 December 2020 and 31 December 2019 is shown below: Despite huge challenges faced by the Banking sector, Shahjalal Islami Bank Limited passed another year of consolidation and compliance. The operating profit stood at Tk.4,094.81 million, net profit after tax reached to Tk. 1,908.20 million, return on average equity was 11.08 percent, Earnings per Share (EPS) stood at Tk.1.95. Non- performing investments (NPI) ratio was 4.57 percent. Capital to Risk-Weighted Assets Ratio of the Bank was 14.19 percent. The total deposit was Tk. 218,442.95 million and the bank invested Tk. 196,512.65 million as of 31 December 2020. Export was Tk.133,580.11 million and import was Tk.148,469.29 million during the year under review. 2016 2017 2018 ANNUAL REPORT 2020 2020 2020 2019 Total Income 20,223.92 23,618.31 Less: Total Expenditure 16,129.11 17,753.18 Net Profit before Provision & Taxation 4,094.81 5,865.13 Less: Provision for Investment, Off Balance Sheets Items, Shares & others 451.39 1,970.98 Net profit before Taxation 3,643.42 3,894.15 Less: Provision for Taxation 1,735.22 2,175.85 Net Profit after Tax 1,908.20 1,718.30 The operating result of last five years is shown in the diagram below: Opera�ng Result 2016 2017 Income 2018 Expenditure 2019 4,095 20,224 16,129 23,618 17,753 5,865 4,576 19,948 15,372 (Taka in million) 2020 Opera�ng Profit Investment Income: Total Investment Income of the Bank stood at Tk. 17,033.75 million as on 31 December 2020 as against Tk. 20,290.69 million of 2019. Investment income decreased by Tk.3,256.94 million due to 9% profit rate cap introduced by Bangladesh Bank and negative growth of investment due to COVID 19 pandemic throughout the year 2020. The amount of Investment Income represents 84.23% of the total income of the year 2020 as against 85.91% of the year 2019. The trend of investment income is given below: Investment Income (Taka in million) 20,291 17,122 Operating Profit The operating profit of the Bank has reduced during the year 2020 due to the outbreak of COVID 19 pandemic and profit (interest) rate cap introduced by Bangladesh Bank. Operating profit decreased by 30.18% from Taka 5,865.13 million to Taka 4,094.81 million in 2020 and net profit after tax increased by 11.05% from Taka 1,718.30 million to Taka 1,908.20 million in 2020. 2019 Taka in million Particulars 3,328 Due to the outbreak of COVID 19 pandemic private sector credit growth reduced significantly to 8.37% in 2020 from 10.23% of 2019. The realization of loan reduced substantially. Moreover, interest rate cap introduced by Bangladesh Bank also impacted heavily the interest income of banking sector of Bangladesh. Accordingly, the Banks are obliged to reduce interest rate of deposit products. The indicators of the banking sector exhibited a mixed performance at the end of FY20, as reflected by the rising non-performing loans (NPLs), decreasing interest income, and the improvement of liquidity conditions, stable capital adequacy, and moderate provision maintenance. 2,979 4,095 3,328 15,289 11,961 After remaining buoyant in the FY19, economic activities drastically suffered, in FY20, particularly in the industry and service sectors, disrupted by an unprecedented lockdown measures to limit the outbreak of COVID-19 pandemic. During this FY20, industrial production dropped significantly, driven mostly by an abrupt fall in manufacturing output, while the service sector activities were held up by the partial and often complete shutdown of transportation, trade, and hospitality industries. The agriculture sector however maintained firm growth during this period, aided by supportive government initiatives. Nonetheless, the real GDP growth slided to 5.24 percent in FY20 from 8.15 percent in FY19. 5,865 4,576 12,965 9,985 2,979 A GENERAL REVIEW OF THE PERFORMANCE OF SHAHJALAL ISLAMI BANK LIMITED (Taka in million) 11,154 2016 17,034 12,996 2017 2018 2019 2020
  66. 67 Income from Investment in Shares & Securities Operating Expenses Income from investment in Shares & securities increased to Tk.625.32 million in 2020 from Tk. 478.76 million in 2019 showing a growth of 30.61% over last year. Surplus liquidity used in Investment of Bangladesh Government Islami Investment Bond (BGIIB) as a result income from investment in Shares and securities increased during the year under review. The progress of Income from investment in Shares & securities is given below: Total operating expenses for the year 2020 was Tk. 4,710.68 million whereas it was Tk. 4,640.85 million for the year 2019. Total operating expenses was 29.21% of the total expenditure for the year 2020 as against 26.14% of 2019. The overall operating expenses reduced other than depreciation and salary. Depreciation expense increased due to change of depreciation method from reducing balance to straight line and salary expense increased due to regular increment and recruitment of new employees. Graphical presentation of operating expenses is given below: Income from Shares & Securi�es (Taka in million) 625 Opera�ng Expenses 479 374 299 3,542 2,999 (Taka in million) 4,076 4,640 4,711 2019 2020 136 2016 2017 2018 2019 2020 2016 2017 2018 Commission, Exchange and Brokerage Total Assets Commission, Exchange and Brokerage income decreased to Tk.1,752.50 million in 2020 from Tk. 2057.86 million in 2019 exhibiting a negative growth of 14.84% over the previous year. The worldwide lockdown due to COVID 19 Pandemic is the key reason for the decrease in this income. In Bangladesh particularly, in April & May Export and Import reduced significantly as such related income also reduced in the same way. The position of Commission, Exchange and Brokerage income of last five years is given below: Bank’s total asset as on 31 December 2020 stood at Tk. 293,517.85 million which was Tk. 265,992.54 million as of 31 December 2019. Major impact on this growth was the increase in Balance with other Banks and Financial Institutions, Placement with other Banks & Financial Institutions, Investments in Shares & Securities as well as Other Assets. Surplus liquidity and negative credit growth are the key reasons for increase in Bank balance and Investment in Shares and Securities. The growth of total assets is shown below: Commission Exchange & Brokerage 1,851 1,223 2016 (Taka in million) 2,058 167,245 2017 2018 2019 2020 Bank distributed Profit of Tk. 11,418.43 million among the Mudaraba Depositors in the year 2020 against Tk. 13,112.33 million in the year 2019 which being 92.56% of the distributable investment income earned from the deployment of Mudaraba Fund and 70.79% of the total expenditure of 2020. Improvements of Deposit Mix as well as reduction of profit rate of deposits time to time are the key reasons for reduction of profit paid on deposits. Profit Paid on Deposits for last five years is given below: Profit Paid on Deposits (Taka in million) 11,295 2016 13,112 11,418 2016 2019 2020 2017 2018 265,993 2019 293,518 2020 Total investment of the Bank stood at Tk. 196,512.65 million as of 31 December 2020 as against Tk. 197,285.68 million as on 31 December 2019 registering a decrease of Tk. 773.03 million. Due to the outbreak of COVID 19, there was low appetite of investment and SJIBL was more cautious to disburse the investment as a result the overall investment growth became negative. To manage the situation, government had declared various stimulus packages which were implemented through commercial banks. SJIBL had participated in all the packages and disbursed a significant amount of investment under those packages. The trend of investment portfolio for last five years is given below: Investments 122,998 2018 207,886 243,660 Investment 8,419 2017 (Taka in million) 1,753 1,478 Profit Paid on Deposits 6,986 Total Assets 2016 (Taka in million) 158,668 2017 186,090 197,286 196,513 2018 2019 2020 Shahjalal Islami Bank Limited
  67. 68 As part of the Bank ’s diversification strategy, the bank has been developing a balanced portfolio of corporate, retail, and SME investments. SJIBL placed focus on Retail & SME segments of businesses as not only these segments are becoming more important for the growth of the economy but also the competition in Corporate Banking is becoming ever more intense. The segment wise investment as on 31 December 2020 is given below: Total Liabili�es 194,569 (Taka in million) 228,871 249,485 275,569 154,388 Taka in million Particulars Total Mix 114,940.24 58.49% SME 72,573.14 36.93% Retail 8,999.27 4.58% Total 196,512.65 100.00% Corporate Investment Mix 4.58% Corporate 36.93% 58.49% SME Retail 2016 2017 2018 2019 Deposit Total deposit of Shahjalal Islami Bank Limited stood at Tk. 218,442.95 million as on 31 December 2020 which was Tk. 203,272.98 million as of 31 December 2019 resulting a growth of Tk.15,169.97 million. Though the deposit rate was reduced over the year 2020, deposit increased due to improved overall financial strength of SJIBL and increased customer confidence upon the bank. Bank puts the utmost importance in the mobilization of deposit introducing popular and innovative products. The mobilized deposits are plowed back in economic activities through profitable and safe investments. The growth of deposit is shown below: Deposits (Taka in million) 203,273 Non-performing Investments(NPI) Non-performing investment of the banking sector of Bangladesh stood at 7.77% as on 31 December 2020 whereas; nonperforming investment of SJIBL was 4.57% at the same period which is significantly lower than the country position. NPI of SJIBL decreased to Tk.8,973.48 million as on 31 December 2020 from Tk. 9,687.32 million as on 31 December 2019. The Bank has strengthened lending discipline and streamlined the recovery process to reduce the NPIs to an acceptable level. The Bank has taken various initiatives to control NPI, as a result NPI came down to 4.57% from 4.91% of the previous year. Bangladesh Bank had issued Circulars regarding extension of investment moratorium period up to December, 2020, otherwise recovery from classified investment would be better and NPI Ratio would be better. However, the bank is taking more and more initiatives to realize and regularize non-performing investments and reducing it further. 218,443 176,862 124,410 146,348 2016 2017 2018 2019 2020 Deposit Mix Substandard We have placed utmost emphasis on the optimum deposit mix, as a result, low cost no cost deposit increased to Tk.82,280.57 million in 2020 from Tk. 67,974.15 million in 2019 exhibiting a growth of 21.05% during the year. The percentage of low cost no cost deposit increased to 37.67% of total deposit during the year 2020 from 33.44% in 2019. SJIBL renewed its focus on rebalancing the deposit base to increase the portion of the lowcost transaction-based deposit portfolio. As a result, the bank succeeded in trimming down a high-cost deposit base from 66.56% in 2019 to 62.33% in 2020, thereby consolidating the deposit mix in a beneficial preferred way. Doub�ul The Deposit-mix of the Bank as on 31 December 2020 Non-performing Investment 4% 5% Bad & Loss Taka in million Taka in million 34,433.46 Percentage of Total Deposit 15.76% Mudaraba Savings Deposit 30,316.57 13.88% Mudaraba Short Notice Deposit 13,641.48 6.24% Mudaraba Term Deposit 81,508.51 37.31% Mudaraba Schemes Deposit 54,653.87 25.02% Nature of Deposit 91% Total Liabilities Total liabilities stood at Tk. 275,569.10 million at the end of 2020 from Tk. 249,485.27 million of 2019 which was 10.46% higher than that of the previous year. Total liabilities increased mainly due to an increase in deposits and other liabilities. Liability growth of last five years is shown below: ANNUAL REPORT 2020 2020 Al-Wadia Current Deposit Other Deposits Total 3,889.06 1.78% 218,442.95 100.00%
  68. 69 Mix of deposit as on 31 December 2020 The Regulatory Capital and Risk-Weighted Asset of the bank is shown in the table below : Deposit Mix 2% Al-Wadia Current Deposit 16% 6% 37% 25% Mudaraba Short No�ce Deposit Mudaraba Schemes Deposit 2. Tier-2 (Gone-Concern Capital) Mudaraba Savings Deposit Mudaraba Term Deposit Total Risk Weighted Assets (RWA) Placements from other Banks and Financial Institutions Total Placements from other Banks and Financial Institutions stood at Tk.19,730.96 million as on 31 December 2020 which was Tk. 11,382.60 million as on 31 December 2019 resulting a growth of Tk.8,348.37 million. 17,948.76 16,507.27 9,879.50 11,970.10 27,828.26 28,477.37 14.19% 15.58% Tier-I Capital to RWA 9.15% 9.03% Tier-II Capital to RWA 5.04% 6.55% 19,615.50 18,277.57 Minimum Capital Requirement (MCR) Five years trend of regulatory capital is given below: Regulatory Capital (Taka in million) 28,477 25,106 27,828 19,376 14,386 2016 2017 2018 2019 2020 Net Asset Value (NAV) Per Share Shareholders Equity 1,188 6,960 2019 196,154.99 182,775.69 Capital to Risk Weighted Assets Ratio (CRAR) Shareholders Equity Total Shareholders Equity stood at Tk. 17,948.76 million at the end of 2020 from Tk.16,507.27 million of 2019 which is 8.73% higher than that of the previous year. Shareholders Equity increased mainly due to the increase of Paid-up Capital and Statutory Reserve. Paid up Capital increased due to payment of 5% stock dividend for the year 2019. Composition of Shareholders’ Equity as on 31 December 2020 is given below: 2020 Regulatory Capital: 1. Tier-1 (Going-Concern Capital) Total Regulatory Capital (1+2) Other Deposits 14% Taka in million Nature of Deposit Paid-up Capital Statutory Reserve Retained Earnings The Net Asset Value per Share of Shahjalal Islami Bank Limited is Tk.18.31, much higher than the face value of its share. This indicates that the bank has created more value for its shareholders. As a result, the investor’s confidence is increasing day by day and they are investing more in the Bank’s share. The trend of NAV for the last five years is given below: Year 9,801 Regulatory Capital As part of risk management strategy, it is the policy of SJIBL to maintain strong capital to risk-weighted assets ratio to have sufficient cushion to absorb any unforeseen shock arising from any potential risk. Strong capital base is maintained to ensure long-term solvency of the Bank and to help sustainable business growth of the Bank that can maximize value of stakeholders. Total Regulatory Capital of the Bank stood at Tk. 27,828.26 million as on 31 December 2020 which was Tk. 28,477.37 million as on 31 December 2019 with a negative growth of 2.28%. The regulatory capital reduced due to regulatory deduction and starting of repayment of SJIBL 1st & 2nd Mudaraba Subordinated Bond of Tk.4,000 million and 6,000 million respectively. The bank maintained sound regulatory capital throughout the year 2020. The regulatory capital maintained was 14.19%, much higher than the required capital of 10%. The bank will keep focusing on retention of profit by issuing bonus share and raising Tier-I capital by issuing Mudaraba Perpetual Bond to strengthen its capital adequacy position. Net Asset Value (NAV) 2020 18.31 2019 16.84 2018 15.84 2017 15.69 2016 16.67 Dividend The Board of Directors of the Bank has recommended dividend @ 12% of which 7% cash and 5% stock for the year 2020. Over the past years, the Board of Directors declared dividends out of profit to shareholders at attractive rates. The rates of dividend declared by the Bank since 2016 are shown below: Year Dividend (%) 2020 (Proposed) 12 (7 Cash & 5 Stock) 2019 10 (5 Cash & 5 Stock) 2018 10 Stock 2017 10 Stock 2016 15 (10 Cash & 5 Stock) Shahjalal Islami Bank Limited
  69. 70 Foreign Exchange Business Total Foreign Exchange Business handled during the year 2020 was Tk . 289,804 million as against Tk. 311,959 million of 2019 registering a decrease of Tk. 22,155 million, i.e. 7.10% negative growth. Due to COVID 19 pandemic Foreign Exchange Business was severely disrupted during the first half of the year 2020. The particulars of Foreign Exchange Business are given below: Particulars Amount in Million Taka Composition statement, mobile recharge, and cash withdrawal from bkash. A significant amount of cash transactions of Shahjalal Islami Bank Limited have been done through its 110 own ATMs and 2,565 shared ATMs all over the country. The bank is planning to invest continuously to increase and widen its ATM network significantly. Area wise ATM Booths are shown in the graph below: ATM Network 27 18 Import 148,469 51.23% Export 133,580 46.09% Dhaka City 7,755 2.68% 289,804 100.00% Cha�ogram Foreign Remittance Total Other Places Mix of Foreign Exchange Business of 2020 Foreign Exchange Business (Taka in million) Correspondent Relationship 7,755 133,580 Import Export Remi�ance 148,469 Branch Network The Bank has been operating with a network of 132 branches around the country. In the year 2020, the Bank has not opened any new branch due to the COVID 19 pandemic throughout the year, rather, it has reevaluated and strengthen the existing branch operation. The bank is focusing on reduction of loss making branches as a result the number of loss making branches reduced during the year. The growth of the branch network in last five years is given below: Branch Network 103 2016 113 2017 122 2018 132 2019 132 2020 Automated Teller Machine (ATM) Network At present, the bank has been rendering services through 110 own ATM Booths and 2,565 shared ATM Booths which was 107 own ATM Booths and 2,270 shared ATM Booths in 2019. Through our ATM, customers can access cash withdrawal, balance inquiry, mini ANNUAL REPORT 2020 65 Shahjalal Islami Bank has established a correspondent relationship across the world with major foreign banks. The number of correspondent banks stood at 412 as of 31 December 2020 across 58 countries. The Bank is successfully maintaining such relationships around the world to facilitate international trade transactions. The bank maintains 34 Nostro accounts in 9 major currencies with reputed international banks around the world in all of the important global financial centers. The Bank is also enjoying sufficient credit lines from correspondent banks to add confirmation to the Letter of Credits to facilitate international trade. REVIEW OF PERFORMANCE OF VARIOUS SEGMENTS Corporate Banking Corporate banking is the custom made financing services for corporate houses. It is a major source of profit earning for our Bank. Corporate & Large investment have been made in almost all major corporate business sectors that are of large scale nature such as food and beverage, construction, power plants, transports, trade services, housing, utility, etc. To cater to the dynamic corporate business needs and also to come up with tailor-made services, Corporate & Large Investment have been shaped according to the need of our corporate customers. Usually, the corporate clients avail commercial investment, export finance, project finance, finance against work order, etc. Total outstanding corporate investment stood at Tk. 114,940.24 million as of 31 December 2020 from Tk. 116,010 million of 2019 resulting a decrease of Tk. 1,069.76 million. The pandemic put significant strain on our corporate clients and their supply chains. As such investment demand became slowdown and corporate investment decreased during the year under review. However, the bank participated in government declared stimulus packages for corporate sector and disbursed Tk. 8,322 million among its corporate customers. The corporate investment of last three years is given below:
  70. 71 Corporate Investment (Taka in million) 116,010 114,940 106,712 2018 2019 2020 SME Banking Small and Medium Enterprises (SMEs) play a significant role in the economy in terms of balanced and sustainable growth, employment generation, development of entrepreneurial skills and contribution to GDP. SJIBL strongly believes that SME sector is one of the main driving forces of economic growth and there is a market with huge potential. In order to facilitate the SMEs of our country, the Bank has been financing the SME sectors since its inception. SME Division has been strengthened to further reinforce SME financing to bring the grass-root entrepreneurs into the main stream of economic growth. A number of need based SME products are offered to our SME clients. SME investment stood at Tk. 72,573.14 million in 2020 which was Tk. 72,516.50 million in 2019. Due to COVID-19 outbreak, the overall business activities and investment demand became slower. As a result the growth of SME was sluggish during the year under review. During the year 2020, the bank disbursed the total SME investment of Tk. 47,040 million. Out of total outstanding Tk. 43,153.6 million outstanding in the Manufacturing Sector, Tk. 12,789.9 million outstanding in Trading Sector and Tk. 16,629.7.6 million outstanding in Service Sector. The bank places the utmost importance to create women entrepreneurs as such disbursed Tk. 1,310.66 million to the women entrepreneurs during the year 2020 and present outstanding from women entrepreneurs is Tk. 2,778.5 million. Besides, we have participated government announced stimulus packages for SME sector and disbursed Tk. 5,380 million among our SME clients. Sector-wise outstanding of SME investment is given below: SME Investment (Taka in million) renovation of a building, Household Durables Investment for purchasing household goods, Education Investment for higher study, Marriage Investment for financial assistance during the marriage, Car Investment for vehicle purchase and various other specialized investment products. Besides, we have Semi-pacca Housing Investment to respond to the special arrangements for ensuring the provision of housing for middle and lower-income class people of the society. The retail Investment portfolio of the bank increased to Tk. 8,999.27 million in 2020 from Tk. 8,758.81 million in 2019 with a growth of 2.75%. The bank will continue its efforts to increase the retail portfolio for the betterment of middle and lower-middle-class people of Bangladesh. The position of retail investment of last five years is given in the diagram below: Retail Investment 6,641.20 2016 (Taka in million) 8,957.60 8,781.10 8,999.27 2018 2019 2020 7,537.20 2017 Offshore Banking Unit Offshore Banking Unit (OBU) is a separate business unit of Shahjalal Islami Bank Limited, governed under the Rules and Guidelines of Bangladesh Bank. The unit is located at Shahjalal Islami Bank Tower, Plot # 4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. The total investment of the Off-shore Banking Unit stood at Tk. 12,096.47 million as of 31 December 2020 as against Tk. 11,563.90 million as on 31 December 2019 registering an increase of Tk. 532.57 million, i.e. 4.61% growth. The trend of the investment portfolio of OBU is given below: Investments of Off Shore Banking Unit (Taka in million) 11,563.90 12,096.47 6,812.24 7,559.69 7,049.79 16,629.7 12,789.9 Manufacturing Sector Trading Sector Service Sector 43,153.6 Retail Banking Shahjalal Islami Bank Limited is working relentlessly for the improvement of the living standard of the people as well as the society from various class & profession and to meet consumer demand in the fastest speed through its Retail Investment Department having various attractive investment products. It has been investing in the private sectors- including House Building Investment for purchasing new flat, construction and 2016 2017 2018 2019 2020 Agent Banking Agent Banking is a new dimension in the history of banking industry of Bangladesh. Through this new approach the bank will be able to extend its Banking Channel throughout the country offering its customers wider range of products and services, hence win their confidence in choosing Shahjalal Islami Bank Agent Banking as their preferred Banking Solution. Shahjalal Islami Bank made Agent Banking Structure with secured technology and real time banking for customers. Agent Banking customer can enjoy real time transaction and the Agent Banking System is integrated with the Core Banking System. Customer get instant SMS notification and system generated money receipt for each transaction. Shahjalal Islami Bank Limited
  71. 72 This service started eradicating difference of time and distance . It is facilitating customers with full-fledged banking services at their doorsteps, and making convenient channeling of remittance, deposit and withdrawal of cash and supporting small investments for cottage micro and small enterprises and also for agricultural farmers at a reasonable cost. Now people in many remote corners of the country are able to receive structured banking facilities with comfort, ease and security. At present the bank is providing agent banking services through its 53 Agent Banking outlets. The Bank opened 4,512 accounts of different categories and total deposit balance was Tk. 105.91 million as on 31 December 2020. FUND TRANSFER ACCOUNT OPENING CASH DEPOSIT & WITHDRAWAL UTILITY BILL PAYMENT SJIBL AGENT BANKING REMITTANCE DELIVERY OF ATM, CREDIT CARD MTDR, MDPS INVESTMENT Shahjalal Islami Bank Securities Limited Risk Management Shahjalal Islami Bank Securities Limited (SJIBSL) is a subsidiary company of Shahjalal Islami Bank Limited incorporated as a public limited company under the Companies Act 1994 and commenced its operation on 25 May 2011. The main objective of the company is to carry on the business of stock broker/dealers, shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the Company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Shahjalal Islami Bank Limited holds 91.79% shares of Shahjalal Islami Bank Securities Limited. The total Operating income of SJIBSL stood at BDT 332.39 million for the year 2020 from Tk.329.99 million of 2019. Margin investment outstanding stood at BDT4,635.67 million in December 2020, which was BDT4,796.47 million in December 2019. The margin investment of last five years is given below: The Risk Management Division (RMD) of SJIBL was established to oversee, monitor and report all risks in line with the risk appetite set by the Risk Management Committee (RMC) of the Board. The RMC of the Board reviews and monitors the overall risk management system of the Bank and updates to the Board from time to time. Risk management functions are subject to continuous scrutiny of the Internal Control & Compliance Division (IC & CD) to ensure appropriateness and integrity of the risk management practices. The risk management system of SJIBL has been described in “Risk Management” section of this report. Also the roles and responsibilities of RMC and major areas focused by RMC in 2020 have been presented in “Report of the Risk Management Committee of the Board” section of this report. Margin Investment 3,755.50 3,267.91 2016 ANNUAL REPORT 2020 2017 (Taka in million) 4,796.47 4,635.67 3,451.07 2018 2019 2020 Risk management functions of the bank are embedded in such a manner that all the material risks are recognized and measured to exercise appropriate control mechanism. The objective of Bank’s risk management is to secure the assets and its reputation and to ensure continued financial and organizational sustainability. Hence, we have developed a strong, disciplined and inclusive risk management culture where risk management is a responsibility shared by all the employees of the Bank. a) Investment (Credit) Risk Management Investment (Credit) risk can be defined as the risk of failure of the customer/counterparty of the bank to meet financial obligations. The Management of specific investment risk is developed according to associated risk with individual business
  72. 73 units . The investment risk management function ensures that appropriate policies are established and ensures compliance with the related sanction, monitoring procedures, and controls at the business unit level. Investment exposures are aggregated from individual business units and are monitored regularly. Effective management of investment risk requires the establishment of an appropriate investment risk culture. Board of Directors, either directly or through the Risk Management Committee of the Board, reviews and approves the Bank’s investment risk appetite annually and investment policy manual time to time. The concerned staffs follow a pragmatic program of regular monitoring and follow-up of investment risk. b) Foreign Exchange Risk Management The Foreign Exchange Risk arises from transactions involved in foreign currency. To ensure effective Foreign Exchange Risk Management, the Bank has wide scope in establishing organizational structure and formulating Foreign Exchange Risk Management Policy as per Guidelines of Bangladesh Bank. Bank maintains various NOSTRO accounts to conduct operations in different currencies including BDT. The management of the Bank has set limits for handling NOSTRO accounts transactions that include time and amount limits. As per the guidelines of Bangladesh Bank, the Foreign Exchange business should be audited internally to review the key control issues such as various limits, compliance requirements, and statutory management. The Bank has been complying with all the applicable laws, regulations, and guidelines applicable to the management of Foreign Exchange Risk. c) Asset Liability Risk Management Asset Liability Management is a process of addressing liquidity risk and profit rate risk which may arise due to maturity mismatch between assets and liabilities as a consequence of changes in profit rates or liquidity. The Asset Liability Management Committee (ALCO) that is formed with the senior executives headed by Managing Director is mainly responsible for managing Asset Liability Risk. The key agenda of Asset Liability Management Risk is liquidity position, pricing, risk related to the Balance Sheet, maintaining CRR & SLR, Economic outlook & Market Status, and rate of profit (interest). For managing Balance Sheet risk properly, the Bank has already prepared a policy of The Asset Liability Management according to the guidelines of Bangladesh Bank. The Bank has been complying with all the applicable rules, regulations, and guidelines regarding Asset Liability Risk Management. d) Money Laundering Risk Management Money laundering risk is defined as the loss of reputation and expenses incurred as a penalty for being negligent in the prevention of money laundering. Shahjalal Islami Bank Limited has been taking preventive measures against money laundering and terrorist financing in line with the amended Money Laundering Prevention Act 2012, amended Anti Terrorism Act 2013, and guidelines issued by the Bangladesh Bank from time to time. Shahjalal Islami Bank applies risk-sensitive customer due-diligence measures, monitors business relationships and records in line with regulations. The Bank regularly collects the correct and full documentation of Know Your Customer (KYC) which enables the prudential prevention of money laundering. Shahjalal Islami Bank has formed a committee of Anti Money Laundering headed by the Deputy Managing Director as Chief Anti-Money Laundering Compliance Officer & the committee regularly monitors and ensures the compliance of issues relating to Money Laundering through the trained personnel of head office & branches. e) Internal Control & Compliance Risk Management Internal control and compliance is a process introduced by the bank’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with applicable laws and regulations. The banking industry has a diversified and complex financial activity, which involves high risk in different modes. Consequently, the issues of the internal control system have become most significant in Banking industry through which Bank identifies its weakness and takes appropriate measures to overcome the same. In order to have an efficient and effective internal control system, Shahjalal Islami Bank Limited has strengthened and segregated its Internal Control and Compliance Division into three separate units i.e. Audit, Monitoring and Compliance based on the relative guidelines framed by Bangladesh Bank. f) Information and Communication Technology Security Risk Management Information and Communication Technology Security (ICT) Risk is a function of the likelihood of a given threat exercising a particular potential vulnerability and the resulting impact of that adverse event on the Bank. ICT risk is business risk specifically the business risk associated with the use, ownership, operation, involvement, influence, and adoption of information and communication technology within the Bank. It consists of IT-related events that could potentially cause a negative impact to the banking business. It might occur with both uncertain frequency and magnitude and might create challenges in meeting strategic goals and objectives. Managing ICT risk is therefore an element of sustaining a secure environment, a detailed process of identifying factors that could damage or disclose data, evaluating those factors in light of data value and countermeasure cost, and implementing cost-effective solutions for mitigating or reducing risk. For effective management of Information Communication Technology risk, the Bank has already formulated a Policy Guideline. Moreover, the Bank has been arranging internal IT audits and training on IT operations regularly. g) Liquidity Risk Management Liquidity risk is the risk that the Bank may not be able to meet its financial obligations as they become due. Liquidity risks also include the Bank’s inability to liquidate any asset at a reasonable price on time. The policy of the Bank is to maintain enough liquid assets to meet its short-term, medium-term and longterm obligations. The Bank has set various limits for its liquidity management such as Liquidity Coverage Ratio, investment deposit ratio, maturity mismatch, commitment limit, wholesale borrowing limit, etc. SJIBL maintains a diversified and stable funding base comprising of retail, corporate and institutional deposits. The principal responsibility of the liquidity risk management of the bank rests with Treasury Division which maintains liquidity based on historical requirements, current liquidity position, anticipated future funding requirement, sources of fund, options for reducing funding needs, present and anticipated asset quality, present and future earning capacity, present and planned capital position. Future Prospect/Outlook Considering the overall macroeconomic and geopolitical outlook, significant pressure is expected on banking sector margins in the wake of low benchmark rates and limited financing opportunities due to COVID 19 pandemic and interest rate cap. Accordingly, Shahjalal Islami Bank Limited
  73. 74 our Bank intends to focus on building and maintaining a quality investment portfolio , enhancing its focus on customer service quality and cost rationalization initiatives through continuous improvement in automation and product innovations. Similarly, our Bank intends to focus on a low-cost core deposit mix by effectively utilizing our extensive branch network, Subbranch, and Agent Banking operations. Our Bank is confident that the above initiatives will enable it to maintain a stable performance trend going forward. From the Bank’s perspective, the focus will be given to valueadded services via operational expansion and technological improvements. Effectiveness of the Bank’s risk management systems, capitalization on low-cost liability, disciplined expense growth, expansion of our capital base, and strengthened corporate culture are primary factors in depicting continued strong financial soundness. Effective leadership with a clear vision is the key element of long-term sustainability leading to the highest levels of employee satisfaction and we aim to build cohesive teams and strong ethical standards. We will strive to enhance our domestic as well as global image to take the Bank from strong to stronger. Our major steps towards managing upcoming challenges: ●● Reduction of classification and strengthen recovery process in the post COVID phase and turnaround economic condition. ●● Utilization of surplus liquidity through prudent fund management. ●● Investment growth in right track to optimize changing market dynamics. ●● Adoption of the latest technology to survive in a competitive market. ●● Emphasis on employee productivity along with profitability and compliance. ●● Continuous analysis of the business process to reduce cost and improve profitability. ●● Continue to strengthen presence in SME and retail banking, the digital leadership race. ●● Research and innovation of products to face cutting-edge marketing competition in existing and new markets. ●● Diversification of corporate banking in line with the changing demand of customers. ●● Promoting Green Finance and social integration through CSR & Financial Inclusion to achieve SDG goals of UNO. Responsibilities Towards Staff Health and safety of employees A healthy, talented, committed, skilled and fully motivated team of human resources is the main driving force for providing better, faster, and coordinated services to the clients and for contributing at the highest level to the organization. Considering the fact, SJIBL is giving high priority to the health and safety of its employees. The bank has taken several steps for ensuring sound health and safety of its employees. The steps are given below: ●● The bank is paying a medical allowance to its employees at a certain percentage of their basic salary. ●● The bank has an agreement with Delta Life Insurance Company Limited. Under this agreement the insurance company will bear the medical expenses of bank’s ANNUAL REPORT 2020 employees, their spouse and children in case of hospitalization. ●● Female employees will get six months of maternity leave with medical allowance for the first two issues. ●● In order to provide a highly sophisticated and encouraging working environment, all the offices of SJIBL including head office and branches are equipped with modern facilities with air-conditioning and generator for power back up. ●● All SJIBL offices including head office and branches are equipped with fire fighting material and have multiple exit points for emergency exit. ●● Corporate Head Office is Leed Certified Green Building. ●● Free distribution of musk, gloves, hand sanitizer and COVID manual among all SJIBL employees during COVID 19 pandemic. ●● Reimbursement of COVID test and treatment bill of the employees. ●● Full time doctor was recruited to support all employees. Staff Welfare The Bank’s strategy is to attract, retain, and motivate the most talented people and providing them with a healthy, safe, and progressive working environment and competitive compensation package. The Bank’s policy is to look after people who want to make a long-term career with the Bank because trust and relationship are built over time; as such the bank offers its employees the following long term benefits: i) Provident Fund (Defined Contribution Plan) A “Defined Contribution Plan” is a post-employment benefit plan under which an entity pays fixed contribution into a separate entity and will have no legal or constructive obligation to pay further amounts. Provident fund benefit is given to the eligible staff of the Bank under the rules of the provident fund duly recognized by the National Board of Revenue of Bangladesh. The Fund is administered by the Board of Trustees and is funded by fixed contributions equally from the employees and the bank. The fund is managed separately from the bank’s assets, as per rules of the fund & section 399 of the Companies Act 1994. ii) Gratuity Fund (Defined Benefit Plan) Gratuity benefits are given to the staff of the Bank following the bank’s approved Gratuity Fund Rules. National Board of Revenue has approved the fund as a recognized gratuity fund and the fund is operated by a separate Board of Trustees. Employees are entitled to get the benefit after completion of a minimum of 5 (five) years of service in the Bank. The gratuity is calculated based on the last basic pay of every employee in service as per IAS-19 “Employee Benefits”. Gratuity fund is a “Defined Benefit Plan” and payable as per the modalities of the rules. Gratuity is calculated and transferred to the fund and charged to the expenses of the Bank. iii) Superannuation Fund “Shahjalal Islami Bank Limited Employees’ Social SecuritySuperannuation Fund” commenced with effect from 1 January 2008. The purpose of the fund is to provide medical and death cum survival benefits in place of group insurance (death cum endowment). The fund shall be subscribed by the employees every month and with the contribution of the Bank.
  74. 75 iv ) Benevolent Fund The Benevolent Fund for the regular and confirmed employees of Shahjalal Islami Bank Limited was established in the year 2007. This fund is mainly used for payment of scholarship to the meritorious students of the children of SJIBL’s officers and sub-staffs, to allow short-term quard/grant for the unexpected and certain needs of the staff of SJIBL and their family like an accident, clinical treatment, marriage ceremony, etc. bank thinks that customers’ perception & satisfaction ultimately determines the success or failure of an organization. Such the bank is always protecting its customers’ rights in all of its business activities. During pandemic most of our branches were opened. Moreover, the bank arranged sufficient hexasol, sanitizer etc. for customers in all branches and ATM Booths. v) Incentive Bonus To retain high quality and competent human resources and to increase the productivity of employees the Bank usually paid an incentive bonus to its employees every year. This bonus amount is distributed among the employees as per the bank’s rule. The Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank have issued notifications /circulars on corporate governance for listed companies/banks from time to time. Shahjalal Islami Bank Limited has established a set of good corporate governance practices in line with industry best practices and regulatory requirements of The Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank. The bank is ensuring transparency, accountability, and good governance at every step of its operations. The detail of Corporate Governance Report is given in this Annual Report. vi) Career prospect and training program A resourceful training program can develop the efficiency and productivity of employees. The bank arranges various training and development programs in its training center all over the year. Furthermore, the bank arranges training for its employees in renowned training institutions at home and abroad. The bank arranged online training program through Zoom platform during COVID 19 pandemic. Contribution to the National Exchequer Being a responsible and tax abiding corporate citizen, SJIBL regularly pays corporate tax on time, sometimes even before it falls due as withheld tax and VAT to govt. exchequer. The Bank has made provision of Tk. 1,735.22 million for corporate tax in 2020 against 2,175.85 million in 2019. The bank has also contributed to the economy by generating employment of 2,657 full-time officials. In the year 2020, Bank has paid Tk. 4,779 million to Government exchequer as source tax, salary tax, VAT, excise duty and other tax & VAT realized against various services. In the intermediation process, the Bank mobilized resources of Tk. 218,442.95 million from the surplus economic unit and deployed Tk. 196,512.65 million. The Bank has generated direct and indirect employment for a large number of people over the years. With the payment of taxes and the investment in the network, the Bank is making a significant contribution to the development and growth of the nation. Corporate Governance Corporate Social Responsibility (CSR) Shahjalal Islami Bank Limited has been expending a substantial amount from its annual profit each year to conduct its CSR activities in different areas such as education, health care, disaster management, environment, empowerment, human resources development, etc. to develop the backward sectors of Bangladesh and ensure its sustainable development. The bank has been paying respect to social and public welfare, rather than profit maximization strategy. During the year 2020, significant amount of money was spent for distribution of food and sanitizer to the poor people of different COVID infected areas of Bangladesh. The CSR expenses were Tk. 323.49 million in 2020 which was Tk. 220.19 million in 2019. Sector-wise CSR contribution is given below: CSR 153.75 (Taka in million) 39.05 Customer Right Shahjalal Islami Bank Limited considers its customers’ rights with high priority. The bank does not judge its performance by looking at its profit figures; rather, the bank considers that it is the right of customers to get high-quality modern services. The Healthcare 67.14 Brand Positioning Shahjalal Islami Bank Limited was established on 01 April 2001 under Companies Act 1994 as Islamic Shariah based commercial bank. SJIBL has established itself as a different shariah based Islami bank from all other banks by providing unique customer services, introducing innovative products and services complying shariah guidelines, creating shareholders’ value, extending help to the underprivileged people by CSR, and Zakat. From the very beginning of its operation, the bank differentiated itself as one of the best banks among the third generation Islami banks for its asset quality, shariah compliance, social welfare, CSR activities, and technology-based automated banking solutions. With its 20 years of going forward the bank has established 132 branches, 110 ATMs, introduced several unique and innovative products and services, thus, the bank created itself a unique brand in the banking industry. Educa�on 7.46 Environment & Disaster Blanket Distribu�on 56.08 Others Zakat Shahjalal Islami Bank Limited as a shariah based Islami Bank is paying zakat as per the rules of Islami Shariah. Zakat is one of the five pillars of Islam and it purifies our wealth from evil. The main purpose of zakat is to discourage the accumulation of wealth by a group of people in society and impair the tendency of uneven distribution of wealth in society. Islam has made a system for helping poor people and an effective method to maintain a balance between luxury and poverty. Zakat is paid by the bank at a rate of 2.58% of the closing balance of the Statutory Reserve, General Reserve, and Retained earnings of previous year. Zakat is charged in the Profit & Loss Account of the Bank as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09 November 2009. Zakat is paid to underprivileged people as per shariah principle. During the year 2020, the bank paid Tk.160.98 million as Zakat which was Tk.140.73 million in 2019. Zakat expenses of last five years is given below: Shahjalal Islami Bank Limited
  75. 76 Zakat Expenses (Taka in million) 160.98 101.97 113.72 2016 2017 124.67 2018 140.73 2019 2020 Green Banking Shahjalal Islami Bank Limited has set examples by pioneering Green Banking initiatives while the Bank has been proactively taking steps for diverse sustainable banking initiatives. In such aspect, green banking initiatives of the bank broadly categorized into formulation of policy, Green Finance, Environmental & Social Risk Management (ESRM), Online Banking and Energy Efficiency. Besides, the Head Office building of Shahjalal Islami Bank Limited is a LEED Certified Green Building which is a pioneering step toward environment friendly business not only for the banking industry but also for the entire corporate sector of Bangladesh. A total amount of Tk.400 million was disbursed during the year 2020 by the bank in green finance. The total amount of outstanding Green Finance as of 31 December 2020 was Tk.979.9 million. The Bank has been gradually increasing its Green financing year on year basis. Financial Inclusion Financial inclusion emerges as one of the most effective tools among policymakers around the globe to ensure inclusive and sustainable economic development. Realizing the importance of financial inclusion, SJIBL has been exploring and promoting innovative and successful initiatives to bring the financially excluded people under the umbrella of financial inclusion. It has been working rigorously to ensure formal banking services to the poor and the under-privileged portion of the society through low cost digital financial services. SJIBL has been opening No-Frill Accounts (NFAs) for farmers, readymade garment workers, workers of small footwear & leather product industries, and physically challenged persons. We have school banking facilities to the students up to 18 years of age. They can open a school banking account through parents or legal guardians by depositing minimum BDT 100. Moreover, the bank is working with banking for Street Urchin, Working Children, Lactating & Working Mother etc. SJIBL has started Agent banking Operations in 2020 targeting the vision to serve the unbanked community of the country. Agent banking, among various initiatives of Shahjalal Islami Bank Limited, will be an emerging financial inclusion tool that will provide unhindered access to the tailor-made financial products to the underprivileged, underserved and poor segment of the population especially from geographically remote locations. It will facilitate meeting their financial needs at an affordable cost within their vicinity. Agents will offer some banking services, including cash deposit and withdrawal, fund transfer, utility bill payment, and disbursement of salaries. ANNUAL REPORT 2020 Preparation of Financial Statements The financial statements of the Bank prepared by the management present fairly its state of affairs, the result of its operations, cash flows and changes in equity under the historical cost convention and following the First Schedule (Section-38) of the Bank Companies Act 1991 (as amended), related Bangladesh Bank circulars, International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs), the Companies Act 1994, the listing regulations of the Stock Exchanges, the Securities and Exchange Rules 1987, Financial Reporting Act 2015 and other laws and rules applicable in Bangladesh. The financial statements of 2020 have been reviewed by the Audit Committee of the Bank and then referred to the Board of Directors for its consideration. The external auditor, M/s. ACNABIN, Chartered Accountants appointed by the shareholders, have certified the fairness of the financial statements for the year ended 31 December 2020. Maintaining Proper Books of Account Shahjalal Islamic Bank Limited maintained proper books of account for its financial transactions that occurred during 2020. The books of account have also been reviewed by the external auditor, M/s. ACNABIN, Chartered Accountants with an opinion that proper books of account as required by the law have been properly maintained. Appropriate Accounting Policies Appropriate accounting policies have been selected and applied consistently in preparation of financial statements and the accounting estimates are made based on reasonable and prudent judgment. Bank records the financial transaction on an accrual basis with required disclosures and also prepares the financial statements accordingly. Internal Control and Compliance Internal Control refers to the tools that provide reasonable assurance regarding the achievement of the Bank’s goal concerning effectiveness and efficiency of operation, safeguarding the assets of the bank, Compliance of applicable laws and regulations, policy & procedures issued by both Bank and the regulators. The above issues show the significance of effective internal control of a bank in the light of traditional activities. But in the context of residual risk under SRP, internal control has now become much more significant. Keeping such significance in view, Shahjalal Islami Bank Limited has strengthened and segregated its Internal Control and Compliance Division into three separate units based on the relative guidelines framed by Bangladesh Bank. Shahjalal Islami Bank Limited has formulated an Internal Control and Compliance Manual which has been updated from time to time. This manual contains Risk Assessment Methodology which has been designed to conduct Risk Based Internal Audit among some other significant issues. Statement of Directors’ Responsibility to establish an appropriate system of internal control The Directors acknowledge their overall responsibilities for the Bank’s system of internal control for establishing efficiency, effectiveness, reliability, timeliness, completeness, and
  76. 77 compliance with applicable laws and regulations . This process involved a conformation that a system of internal control in accordance with the best financial reporting practice was in place throughout the year. Going Concern After reviewing the Bank’s present and potential business growth, annual budget, performance, liquidity position, financing arrangement, the Directors are satisfied that the Bank has adequate resources to continue to operate in the foreseeable future and confirm that there is no material issue threatening to the going concern of the Bank. For this reason, Directors continue to adopt the going concern basis in preparing these financial statements. There are no significant doubts about the Bank’s ability to continue as a going concern. Credit Rating Emerging Credit Rating Limited (ECRL) has made a rating on Shahjalal Islami Bank Limited. The report was issued on 25 March 2021. They rated the Bank as “AA” for the long term and “ST-2” for the short term. An institution rated in Long Term “AA” has very strong capacity to meet its financial commitments. These institutions typically posses a good track record and have no readily apparent weaknesses. An institution rated in Short Term “ST-2” has a strong capacity to meet its financial commitments in a timely manner. ECRL performed the rating surveillance based on the audited financial statement of 31 December 2020 and other relevant information. Auditor’s Report The Board of Directors reviewed the Auditors Report issued by the Bank’s auditor M/s ACNABIN, Chartered Accountants based on their audit of financial statements for the year ended 31 December 2020. The auditor issued an unqualified audit report which means no material misstatements exist in the financial Statements or no disagreement with management regarding the selection and application of accounting policies. The Board also reviewed the auditors’ suggestion which they provided through a separate management report and gives the strategic guidelines to the management for improvement. (Listing) Regulation, 2015 dated 30 June 2015, an auditor of a listed company cannot be appointed for more than three consecutive years. M/s ACNABIN, Chartered Accountants was the auditor of the Bank for the year 2020. As 2020 was the second year of the audit so the firm is eligible for reappointment and they have also expressed their willingness to be reappointment for the year 2021. Section 210 of the Companies Act, 1994 gives authority to the shareholders to appoint the auditor and fix their remuneration. Hence, the board recommends appointing M/s ACNABIN, Chartered Accountants as the auditor of the bank for the year 2021 subject to the approval of the shareholders in the upcoming Annual General Meeting. Vote of Thanks The Board of Directors expresses its profound gratitude to Almighty Allah (SWT) for enabling the Bank to achieve growth in operation during the year 2020. The Board extends thanks to the Ministry of Finance, Bangladesh Bank, Bangladesh Securities & Exchange Commission, and the Government Agencies for providing assistance, guidance, support, and cooperation at various stages of operation of the Bank. The Board appreciates the support and cooperation received from foreign correspondents of the Bank all over the world. The members of the Board of Shahjalal Islami Bank Limited take this opportunity to express gratitude and extend sincere thanks to its valued shareholders, customers, depositors, investment clients, and well-wishers for their valuable support and confidence on the Bank. Finally, and more importantly, the Board would like to express its great appreciation and thanks to all officials of the Bank for rendering untiring efforts. May Allah grant us courage, dedication, patience, and fortitude to run the bank to the best of our abilities. Ameen. On behalf of the Board of Directors Appointment of Auditors As per BSEC notification no. BSEC / CMRRCD / 2006-158 / 208 / Admin / 81 dated 20 June 2018 and as per Dhaka Stock Exchange Md. Sanaullah Shahid Chairman Shahjalal Islami Bank Limited
  77. 78 MANAGEMENT REVIEW AND ANALYSIS ANNUAL REPORT 2020
  78. 79 SENIOR MANAGEMENT MANAGING DIRECTOR & CEO M Shahidul Islam ADDITIONAL MANAGING DIRECTORS Abdul Aziz SM Mainuddin Chowdhury DEPUTY MANAGING DIRECTORS Md. Shahjahan Shiraj M Akhter Hossain Mian Quamrul Hasan Chowdhury Imtiaz Uddin Ahmed Nasim Sekander SENIOR EXECUTIVE VICE PRESIDENTS Md. Mahmudul Haque Md. Nasir Uddin Khondkar Rafiq-Uz-Zaman Md. Monzurul Alam Chowdhury Rashed Sarwar Ahad-Uz-Zaman EXECUTIVE VICE PRESIDENTS Mahmud Hussain Md. Saidur Rahman Mohammed Ashfaqul Hoque FCA, FCS Md. Habibul Islam Mahmudul Shamim Talukder F. M. Nawaz Ali Md. Shamsuddoha Rumana Kutubuddin Tariqul Islam S.M. Rashedul Karim Md. Abul Bashar Md. Enamul Haque Md. Jafar Sadeq FCA Ashraful Azim FCA SENIOR VICE PRESIDENTS Md. Tufael Yakub Md. Bahar Mahmud Md. Naquibul Islam M. Imam Hossain Gazi Md. Khalid Hussain Fazle Kader Ahmed Jahangir Javed Md. Nawshad Abbas Mohammed Eskander Alam Chowdhury Golam Rahman Md. Wahidur Rahman Mohammad Towfiqul Islam A. T. M. Qumruddin Chowdhury Md. Asadul Islam Khan Md. Marufur Rahman Khan Md. Firoz Kabir A.K.M. Iquebal Mohammed Abu Shayem Shaikh Wahidul Hossain Engr. Md. Zahidul Islam Md. Soyeb Islam Chowdhury Mosleh Uddin Ahmed Md. Mazharul Haque Md. Iftekhar Shahid Md. Abdul Khaleque Md. Arifur Rahman Nazir Ahammed Mohammad Hasib Uddin VICE PRESIDENTS Abul Bashar Md. Zafry Amir Uddin Chowdhury Md. Abdur Rahim Ms. Sultana Parvin Md. Abdulla Al Mahmud Siddiqui Md. Mokter Hossain Muhammad Asiful Haque Md. Moshiur Rahman Md. Noor-A-Alam Hossain Mohammad Nuruddin Chowdhury Firoz Hasan Mohammad Shajedul Alam Mohammed Sahab Uddin Md. Masudur Rahman Jyotirmaya Goswami Shamsul Arifin Ferdose Md. Abdul Quddus Tofayal Ahmed A.H.M. Shahrier Abu Naser Ahmed Mohammad Mahbubur Rahman Md. Masum Basunia Md. Khurshid Alam Md. Humayun Kabir Mia Md. Aktaruzzaman Sarker Mohammad Abdul Majid A.K.M. Ashraful Islam Mohammed Nizam Uddin A.K.M. Hasan Rahim Md. Tazuddin Mollah Mohammad Fokhrul Islam Md. Saidur Rahman Pankaj Kumar Debnath Sheikh Azmul Islam Md. Ziaur Rahman Munzer Rahman Md. Jaynal Abedin Khan Safari Mohammad Shariful Haider Sultana Husnoon Nada Mokammel Hossain G. M. Quamruzzaman Iftekhar Husain Md. Wahidul Islam Sabeth Bin Zamir Mizanur Rahman Shahjalal Islami Bank Limited
  79. 80 COMMITTEES OF MANAGEMENT Senior Management Team (SMT) Name of the Employee Designation Mr. M. Shahidul Islam Managing Director & CEO Mr. Abdul Aziz Additional Managing Director Mr. S. M. Mainuddin Chowdhury Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Nasim Sekander Deputy Managing Director Mr. Md. Mahmudul Haque Senior Executive Vice President Mr. Md. Nasir Uddin Senior Executive Vice President Mr. Khondokar Rafiq-uzzaman Senior Executive Vice President Mr. Md. Monzurul Alam Chowdhury Senior Executive Vice President Mr. Mohammed Ashfaqul Hoque FCA, FCS Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President Mr. Md. Naquibul Islam Senior Vice President Asset Liability Management Committee (ALCO) Name of the Employee Designation Mr. M. Shahidul Islam Managing Director & CEO Mr. Abdul Aziz Additional Managing Director Mr. S. M. Mainuddin Chowdhury Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Mohammed Ashfaqul Hoque FCA, FCS Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President Mr. Bahar Mahmud Senior Vice President Mr. Jahangir Javed Senior Vice President Mr. Abdur Rahim Vice President Mr. Mohammad Nuruddin Vice President Mr. Md. Chaliqur Rahman Assistant Vice President ANNUAL REPORT 2020
  80. 81 Risk Management Committee (RMC) Name Designation Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Md. Nasir Uddin Senior Executive Vice President Mr. Md. Monzurul Alam Chowdhury Senior Executive Vice President Mr. Mohammed Ashfaqul Hoque FCA, FCS Executive Vice President Ms. Rumana Kutubuddin Executive Vice President Mr. Tariqul Islam Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President Mr. Md. Bahar Mahmud Senior Vice President Mr. Md. Naquibul Islam Senior Vice President Mr. Md. Khalid Hussain Senior Vice President Mr. Jahangir Javed Senior Vice President Mr. Md. Abdur Rahim Vice President Mr. Mohammad Nuruddin Vice President Mr. Mohammad Abdul Majid Vice President Mr. Zahid Hasan Senior Assistant Vice President Supervisory Review Process (SRP) Committee Name Designation Mr. M Shahidul Islam Managing Director & CEO Mr. Abdul Aziz Additional Managing Director Mr. S.M. Mainuddin Chowdhury Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Md. Monzurul Alam Chowdhury Senior Executive Vice President Mr. Mohammed Ashfaqul Hoque FCA, FCS Executive Vice President Mr. Tariqul Islam Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President Mr. Md. Bahar Mahmud Senior Vice President Mr. Md. Naquibul Islam Senior Vice President Mr. Jahangir Javed Senior Vice President Mr. Md. Abdur Rahim Vice President Mr. Mohammad Nuruddin Vice President Mr. Mohammad Abdul Majid Vice President Shahjalal Islami Bank Limited
  81. 82 Sustainable Finance Committee (SFC) Name of the Employee Designation Mr. Abdul Aziz Additional Managing Director Mr. S.M. Mainuddin Chowdhury Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. Md. Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Md. Mahmudul Haque Senior Executive Vice President Mr. Md. Monzurul Alam Chowdhury Senior Executive Vice President Mr. Mohammed Ashfaqul Hoque FCA Executive Vice President Ms. Rumana Kutubuddin Executive Vice President Mr. Tariqul Islam Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President Mr. Md. Bahar Mahmud Senior Vice President Mr. Md. Marufur Rahman Khan Senior Vice President Mr. Abul Bashar Md. Zafry Vice President Mr. Mohammad Nuruddin Vice President Mr. Mohammad Abdul Majid Vice President Central Compliance Committee (CCC) Name of the Employee Designation Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz U Ahmed Deputy Managing Director Mr. Mohammad Ashfaqul Hoque FCA Executive Vice President Mr. Md. Khalid Hussain Senior Vice President Mr. Md. Naquibul Islam Senior Vice President Mr. Md. Firoz Kabir Senior Vice President Mr. Mr. Md. Marufur Rahman Khan Senior Vice President Mr. Abdur Rahim Vice President Mr. Mohammad Abdul Majid Vice President Mr. Zahid Hasan Senior Assistant Vice President Procurement Committee (PC) Name of the Employee Designation Mr. S. M. Mainuddin Chowdhury Additional Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Imtiaz U Ahmed Deputy Managing Director Mr. Md. Mahmudul Haque Senior Executive Vice President Mr. Md. Jafar Sadeq FCA Executive Vice President ANNUAL REPORT 2020
  82. 83 Investment Committee (IC) Name of the Employee Designation Mr. Abdul Aziz Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. Md. Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz U Ahmed Deputy Managing Director Mr. Mohammed Ashfaqul Hoque, FCA Executive Vice President Ms. Rumana Kutubuddin Executive Vice President Mr. Mohammed Abu Shayem Senior Vice President Shariah Inspections’ and Report Review Committee (SIRRC) Name of the Employee Designation Mr. M. Shahidul Islam Managing Director& CEO Mr. Abdul Aziz Additional Managing Director Mr. Md. Shahjahan Shiraj Deputy Managing Director Mr. M Akhter Hossain Deputy Managing Director Mr. Mian Quamrul Hasan Chowdhury Deputy Managing Director Mr. Imtiaz Uddin Ahmed Deputy Managing Director Mr. Farid Uddin Assistant Vice President & Member Secretary Shahjalal Islami Bank Limited
  83. 84 SENIOR MANAGEMENT TEAM (SMT) Sitting from left to right ●● Mr. Nasim Sekander ●● Mr. Imtiaz Uddin Ahmed ●● Mr. Mian Quamrul Hasan Chowdhury ●● Mr. S. M. Mainuddin Chowdhury ANNUAL REPORT 2020 Standing from left to right ●● Mr. Md. Naquibul Islam ●● Mr. Md. Mahmudul Haque ●● Mr. Md. Monzurul Alam Chowdhury
  84. 85 Sitting from left to right ●● Mr. M Shahidul Islam ●● Mr. Abdul Aziz ●● Mr. M Akhter Hossain ●● Mr. Md. Shahjahan Shiraj Standing from left to right ●● Mr. Md. Nasir Uddin ●● Mr. Md. Jafar Sadeq FCA ●● Mr. Mohammed Ashfaqul Hoque FCA Shahjalal Islami Bank Limited
  85. 86 ASSET LIABILITY MANAGEMENT COMMITTEE (ALCO) Standing from left to right ●● Mr. Mohammed Ashfaqul Hoque FCA ●● Mr. S. M. Mainuddin Chowdhury ●● Mr. Md. Chaliqur Rahaman ●● Mr. Md. Shahjahan Shiraj ●● Mr. Jahangir Javed ●● Mr. Mian Quamrul Hasan Chowdhury ●● Mr. Imtiaz Uddin Ahmed ●● Mr. Md. Jafar Sadeq FCA ●● Mr. M Akhter Hossain ●● Mr. Md. Bahar Mahmud ●● Mr. Abdul Aziz ●● Mr. Mohammad Nuruddin ●● Mr. M Shahidul Islam ●● Mr. Abdur Rahim ANNUAL REPORT 2020
  86. 87 Shahjalal Islami Bank Limited
  87. 88 ORGANOGRAM Board of Directors Executive Committee of Board of Directors Audit Committee of Board of Directors Risk Management Committee of Board of Directors Board Audit Cell Managing Director MD ’s Secretariat Buss. Dev. & Marketing Shariah Ins. & Comp. Div IC & CD Audit & Inspection HRD Liability Mark. & Cash Mgt. Br. Manager Mid Office Anti Money Laundering Division Agent Banking Division Alternate Delivery Channel Front Office ANNUAL REPORT 2020 IT Div. Card Division Card Operation Asset Mark. (SME, Retail, Agri Large Inv, Syndication etc.) CSD Treasury Division Compliance Monitoring Offshore Banking Division FAD Back Office
  88. 89 Shariah Supervisory Committee Board Secretariat Board Affairs Banking Operations Division Share SJIBL Foundation Public Relations Dept . International Division Inv. Risk Mgt. Div. Training Institute Branding & Product Development Department Investment Adm. Department Export Investment Division Risk Mgt. Division Investment Monitoring Department Research & Development Department Special Asset Management Department Legal Recovery Branches Control & Audit Compliance Payment & Settlement Department Br. Deputy Managers Central Processing Centre Shahjalal Islami Bank Limited
  89. 90 PRODUCTS AND SERVICES DEPOSIT SCHEMES DEPOSIT ACCOUNTS Al-Wadiah Current Deposit Mudaraba Savings Deposit Mudaraba Special No Ɵce Deposit Mudaraba Term Deposit Receipt Mudaraba Foreign Currency Deposit Mudaraba SJIBL School Banking Mudaraba Money Spinning Mudaraba Savings Payroll Account SJIBL CARDS VISA Debit Card VISA Prepaid Card (Local) VISA Prepaid Card (InternaƟonal) VISA Prepaid Card (Dual) VISA Souvenir Card (GiŌ Card - Local) OTHER BANKING SERVICES ATM Services SJIBL Student File RemiƩance Services Evening Banking Services Locker Services Internet Banking Services Online Banking UƟlity Bill Payment Services SMS Push-Pull Priority Banking Services SWIFT e-GP Services REUTERS ANNUAL REPORT 2020
  90. 91 CORPORATE INVESTMENT PRODUCTS Murabaha Bai-Muazzal Hire Purchase under Shirkatul Meelk Ijara Bai-Salam Quard-e-Hasana RETAIL INVESTMENT PRODUCTS Household Durable Scheme Housing Investment Program Car Investment Scheme Semi Pucca Housing Investment Scheme Investment for Self-employment Investment Scheme for Execu Ɵves Investment Scheme for Doctors Investment Scheme for Marriage Investment Scheme for Overseas Employment Investment Scheme for EducaƟon SME INVESTMENT PRODUCTS CoƩage & Micro Enterprise Investment Program Small Business Investment Program Medium Enterprise Investment Program Women Entrepreneur Investment Program AGRI INVESTMENT PROGRAM Own Network & NGO linkage SUSTAINABLE INVESTMENT PRODUCTS ETP/Waste Treatment Plant Solar Panel/Solar IrrigaƟon Pump Bio Gas/Bio FerƟlizer/Vermicompost Green factory/Green office Waste paper/plasƟc recycle plant Compressed Block Brick/HHK/Tunnel Kiln LED bulb manufacturing/assembly plant PET BoƩle/PlasƟc Waste Recycling Plant Shahjalal Islami Bank Limited
  91. 92 OVERVIEW OF DIVISIONS Navigating the investment portfolio through the pandemic Across our business network , an unprecedented slowdown in economic activity as a result of the pandemic put significant strain on our corporate & SME clients and their supply chains. But SJIBL’s Investment portfolio in 2020 was stable and continued to be resilient despite the volatility and uncertainty caused by the COVID-19 pandemic. SJIBL has successfully disbursed all Government and Bangladesh Bank stimulus package to different COVID-19 affected business segment as per Bangladesh Bank time schedule. This was due to the underlying quality and commitment of our client base to meet their obligations. Investment Por�olio Growth 12299 15866 18609 (Taka in million) 19728 Investment Mix in 2020 5% Corporate 68% Retail 87% Investment Sector Mix in 2020 19651 2% 4% 2%2% 12% 62% 16% 2016 2017 2018 2019 SME Agri, Fishing & Forestry Industry Trade & Commerce Construc�on Transport Consumer Financing Investments to Fls 2020 CORPORATE FINANCE NAVANA LPG project financed by SJIBL Healthcare Pharmaceutical financed by SJIBL SJIBL’s corporate Banking remains committed to the strategy of becoming one of the best professional Corporate Bank in Bangladesh. The Corporate Finance provides customized solutions to corporate clients by analyzing their specific business and financial needs. It provides an array of financial solutions for working capital finance, project finance, export finance, trade finance, Work order finance etc. The Corporate Finance comprises of several units focused on specific branches to facilitate effective and customized investment offerings. In the difficult economic environment during 2020, we focused on achieving the goal through greater capital efficiency, tighter control on the cost of fund, and a strong investment monitoring procedure. Despite an adverse investment environment, the Bank managed to maintain investment revenue to a commendable stage. The Corporate Finance function develops new corporate relationships and enhances the existing ones through continuous engagements. The relationship officers collaborate with relevant departments within the Bank to address specific needs of clients. ANNUAL REPORT 2020 Quattro Fashion (Fortis Group) financed by SJIBL
  92. 93 Our strong track record in financing and advising corporates on their financing requirement , cash management and global trade services focusing more on industry segmentation based on industry specialization, enabling us to develop a robust customer centric and analytic culture within the Corporate Banking function. EXPORT FINANCE CONTRACTOR FINANCE CORPORATE FINANCE WORKING CAPITAL FINANCE PROJECT FINANCE TRADE FINANCE Trade & Export Finance The Bank offers a complete suite of products and solutions for trade finance and foreign exchange business through its designated authorized dealer branches and rest of the branches spread across the country supported by two Centralized Processing Center (CPC) in Dhaka and Chottogram. SJIBL’s strategy for trade finance continues to be focused on three pillars which include providing end-to-end solutions for the Trade Finance requirements of its customers; leveraging growing foreign Trade between Bangladesh and the rest of the world; and establishing Shahjalal Islami Bank as the preferred bank for Trade Finance among Corporate clients of the Country. Financial Highlights of 2020: ●● Bank appointed 10 in-hand RMG experienced commercial personnel to monitor and assess the finance requirement of RMG customer properly ●● As of December 31, 2020, total RMG investment was Tk. 3,5917.80 million which was 18.28% of total investment portfolio of the bank, registering a growth of 16.64% compared to Tk. 30,794.70 million in 2019. ●● Total cotton & textiles investment was Tk. 14,204.89 million in 2020 registering a negative growth of 6.86% compared to Tk.15,250.30 million in 2019. ●● SJIBL disbursed its portion of stimulus fund for readymade garment factories to pay wages to their workers in very promptly in very tough time. Energypack Fashion Limited financed by SJIBL In addition to the services offered through the branch network, Bank also leverages its tie-ups with reputed correspondent banks across the world to offer optimal Trade Finance services to its customers. LIZ Fashion Industries financed by SJIBL Energy Auditor Certified Green Machinery imported by a client of Jessore Branch SJIBL Shahjalal Islami Bank Limited
  93. 94 Project Finance A challenging operating environment caused by COVID-19 pandemic led to a slowdown in new project commitments and implementation . During 2020, the Government undertook a series of stimulus and policy initiatives to help revive different sectors. The infrastructure and core sector developments are critical to Bangladesh’s growth and the Bank’s sectoral expertise ensures tapping opportunities to invest judiciously for the long-term. Moreover, as financing partner, we provide innovative financing solutions and access to capital, to meet all the financing requirements irrespective of the size being large or complexity of the projects. Nourish Poultry & Hatchery Limited a project financed by SJIBL Syndication Finance The Syndication financing works in synergy with our corporate finance functions. It works in the investment syndication for working capital and project finance transactions. It leverages strong relationships with market participants like banks, non-bank financial institutions (NBFIs), and other financial entities. Work Order Finance The Syndication financing works in synergy with our corporate finance functions. It works in the investment syndication for working capital and project finance transactions. It leverages strong Max Infrastructure Limited a project financed by SJIBL ANNUAL REPORT 2020 relationships with market participants like banks, non-bank financial institutions (NBFIs), and other financial entities.
  94. 95 CMSME , WOMEN ENTREPRENEUR AND AGRICULTURE FINANCING CMSME Financing The development of CMSME is considered as a vital instrument for poverty alleviation and ensures the rapid industrialization in Bangladesh. About 95% private sector enterprises are CMSMEs, major portion of non-agricultural workforce is working in this sector and providing a livelihood for 31.2 million in total of this country. But MSME is one of the hardest hit by COVID-19 pandemic and MSMEs already has become vulnerable due to dependence on a shorter cash cycle, supply chain disruption, and loss of sales. CMSME por�olio in 2020 1% 5% Co�age Micro Small Medium Million BDT Co�age 383 Micro 3591 Small 26171 Medium 42428 36% 58% Exposure in SME in dec 2020 20.06% 36.39% Industry SJIBL Cottage, Micro, small and medium enterprises (CMSMEs) are playing a very important role in employment generation, resource utilization and income generation to a large segment of the society. In a labour surplus country like Bangladesh, the sector accounts for 25 percent of Bangladesh GDP and employed 87% of civilian population. Appealing the significant contribution of CMSME in the economic condition of cross section of population, Shahjalal Islami Bank Limited (SJIBL) has accorded added priority to this sector in its pursuit of expansion of investing portfolio. Facing COVID-19 Challenges SME financing is now at the central point of the Banking sector for its momentous role in socio-economic development. But Covid-19 laid bare and exacerbated weaknesses that existed beforehand. 2020s allocation of Tk.20,000 crore at 9 percent interest rate – 4 percent to be paid by the borrower and 5 percent interest by the government as subsidy to provide working capital loan to the micro, cottage, and small and medium enterprises is a praiseworthy step from Bangladesh government. But CMSMEs are facing numerous challenges in accessing the stimulus package. The main challenge is the disbursement of the credit to the selected firms through our channel in the form of subsidized advances. As the banking sector is already under tremendous pressure due to the high non-performing advance. The bank wants to be a proud partner of implementation of the nation’s dream by subsidizing the CMSMEs at their early stage and remaining a trusted partner throughout their graduation to national level. SJIBL SME Investment Division under Investment Risk Management Division (IRMD) has taken strategies in its business and operations in triangulation of international, national and regulatory visions to provide a comprehensive array of Investment products and solutions to CMSMEs across the country. Nahar Dairy Farm, Mirsharai Chattogram financed by SJIBL Shahjalal Islami Bank Limited
  95. 96 Strategic Focus ●● In 2020, we strongly focused on cottage & micro enterprise financing, cluster financing, new entrepreneurship development financing, promoting rural people as well as rural women entrepreneurship, creating business network for CMSE entrepreneurs and financing in untapped areas to the unbanked new entrepreneurs. Develop products to cater suppliers of different accessories and raw materials for existing corporate clients of SJIBL with their recommendation. ●● Arranged 8 training /seminar sessions and provided training to 403 entrepreneurs on capacity building, business development and monitoring. SME Pro�olio ●● Organized 05 training sessions and provided training to 246 officers of the bank through online Training program. (Taka in million) 72,517 72,573 1st time Borrowers: Persuading towards financial inclusion, SJIBL always tries reach those who have not yet been financed but require financing. As on December, 2020, SJIBL has maintained Tk. 94,38 million of fresh or first time ever borrower through 2,482 clients. 70,399 2018 2019 2020 As we are listing down our initiatives in the year 2020, SJIBL continued close association with different MSME activities like ●● Activation of our 9 (Nine) clusters i.e. Light Engineering, Chatal/Mill, Poultry Feed, Karuponno, Garments Accessories, Handloom/ Power loom & tantshilpo, Stone Crusher, Dry Fish, Shoes and Medical & Surgical Equipments to whip out better results from the cluster concept. ●● CMSME Investment exposure has increased up to BDT 750.00 million, which is instrumental in extending the portfolio Special Achievement SJIBL is one of the top ranked Banks of the country appreciated for its strong sound track in SME Financing. Bangladesh Bank has awarded Shahjalal Islmai Bank First Prize for its outstanding contribution to finance in the Cottage, Micro, Small and Medium Enterprise (CMSME) under financial inclusion activities. Mr. Fazle Kabir, Honorable Governor, Bangladesh Bank handed over the crest of First prize to M. Shahidul Islam, Managing Director of Shahjalal Islmai Bank at the closing ceremony of “Banker-SME Women Entrepreneur Conference and Product Fair-2020”. Special Agri investment among small ethnic group of Tangail & Haluaghat area. ●● The Cottage, Micro and Small Enterprise portfolio stood at Tk. 30,145 million compared to previous year’s Tk. 29,908 million with a growth of 0.80%. ●● Medium Enterprise Portfolio stood at Tk. 42,828 million compared to previous year’s Tk. 42,609 million with a growth of 0.50%. ●● 2,482 new CMSE borrowers were added to the CMSE portfolio in 2020 with a volume of Tk. 9,438 million with 132 new customers on boarded in Mid Segment SME Disbursement Financial Highlights of 2020 ●● CMSME Portfolio stood at Tk. 72,573 million compared to previous year’s Tk. 72,515 million with a growth of .08%. ●● In 2020 total Tk. 47,040 million disbursed to different CMSME client which it was Tk. 46,362 million in 2019 with a growth of 1.46% . ANNUAL REPORT 2020 (Taka in million) 46,362 47,040 2019 2020 36,558 2018
  96. 97 CMSME Women Entrepreneurs ●● Empowering women through SME financing is an added remarkable inspiration in the development of women entrepreneurs. In the special framework of CMSME, Shahjalal Islami Bank Ltd is giving top priority in developing and inspiring women entrepreneurs. The Bank is working with women entrepreneurs to make them capable of earning by connecting with country’s economic activities. SJIBL gives priority to women entrepreneurs to invest on various productive sectors. Apart from collateral secured investment, collateral security free investment is also considered for Woman Entrepreneur. ●● For the improvement of entrepreneurship skill, the Bank arranges day long workshops for SME Women Entrepreneurs to listen to their opinion, requirements and to give them a way out. Strategic Focus ●● Shahjalal Islami Bank has an exclusive branch for women which is helping to thrive women entrepreneurship. We know that major challenges faced by women entrepreneurs are inadequate access to credit facilities and lack of accounting and managerial skill. Women entrepreneurs need to be skilled in digitalization in order to avail the advantages of modern technology so that they can give a boost to their businesses. At SJIBL, we finance women considering their business ideas since financial inclusion has a direct impact on empowering women. We also try to facilitate for participation in the supply chain, enhancing skills and capacity building are necessary for women to bounce back in achieving financial resolution. Por�olio in women Enterprenuse 2,830 (Taka in million) 2,779 2,443 Initiative for development of Women Entrepreneur ●● ●● ●● For broadening the facility from metropolitan to the root level, the Bank has already established a separate cell named “Women Entrepreneurs Development Cell” at Head Office of the Bank. The Bank has a separate “Woman Entrepreneur Dedicated Help Desk” which under each Branch of the Bank works to facilitate the Women Entrepreneurs and to ensure their easy access to bank finance. The Bank has a dedicated product named “Prottasha” for women entrepreneurs. To encourage women, the Bank provides Investment to the women entrepreneurs at much easier terms & conditions including low profit, relaxed collateral requirement etc. 2018 2019 Disbursement to women Enterprenuse 2020 (Taka in million) 1,311 1,039 2018 852 2019 2020 AGRICULTURAL INVESTMENT Although the Agriculture sector experienced declining trend towards GDP contribution but still about 40.62 percent of the labor force are directly or indirectly dependent on this sector. Realizing the importance of Agricultural finance in creating self – employment opportunities, ensuring food security and Socioeconomic development of the country, Shahjalal Islami Bank Limited has been providing agriculture investment through own network and Micro Finance Institute linkage. Khan Agro Complex at Manikgonj, an agri project financed by SJIBL Shahjalal Islami Bank Limited
  97. 98 Retail Investment The year 2020 was a very tough time for retail investment segment in whole banking industry- most of the banks ’ growth was negative or stagnant. The Retail investment sector experienced double-edged sword –from demand side: customer appetite trimmed due to COVID-19 effect and from supply side: bankers were reluctant due to regulatory cap on profit(interest) against exposure. With rising income levels, Bangladesh economy is becoming an increasingly attractive market for retail financial products. Though the industry has experienced some turbulence, SJIBL exerts its prudence and efforts to carry out its tempo and commitment in retail investment. Retail Investment Pro�olio (Taka in million) 8,999 8,957 8,754 2018 2019 2020 At SJIBL we have designed various retail banking products to meet different needs of all customer. At present SJIBL are offering following retail investment products to our customers: Financial Highlights of 2020 Modern Agro Farm at Jhenaidah, financed by SJIBL Target Vs Achievement of Shahjalal Islami Bank in disbursement of Agricultural & Rural Investment of some previous financial year. BB Target Vs Achievement of SJIBL in Agri Investment Educa�on Investment 3,415 3,330 Car Purchase Investment 3,215 3,030 2018-19 2017-18 231 Achievement Agri Investment 11% 10% 11% 12% 2% No.of 1% Client 9% (inside) 3% 2,975 Housing Investment Disbursement Target 74% ANNUAL REPORT 2020 Fisheries % of Por�olio (outside) Poverty Allevia�on Others Marriage Investment RETAIL INVESTMENT PRODUCTS Household Durables Investment Investment Scheme for Professionals Overseas Employment Investment ●● At the end of 2020, the outstanding of House Building Investment was tk. 8501 million with 10.81% growth which was tk. 4,062 million in 2019. ●● In 2020 Credit Card investment outstanding was Tk. 176 million where it was tk. 81 million in 2019 with a growth of 116%. 67% Livestock Retail investment Portfolio stood at Tk. 8,899 million compared to previous year’s Tk. 8,754 million with a growth of 2.81% though pandemic stand still all disbursement made for 3 months. (Taka in million) 2019-20 Crops ●●
  98. 99 Strategy for 2021 Though stress in retail investment may increase in coming months due to a slowdown in income growth and slower pace of job creation in the service sector , we have a solid plan to navigate this time with caution. Our key focus is on 2 particular segments namely 1) House Building Investment Scheme: as low profit rate creates scope for salaried/ sustainable income personnel 2) Credit Card segment: as our comparatively new Credit Card would cater a niche of customers who seek shariah compliant credit card. We thought these 2 segments would be key growth drivers of retail investment in coming days. INVESTMENT RISK MANAGEMENT DIVISION As a response to the COVID-19 outbreak, we made necessary adjustment to our investment procedures for specific sectors and increased our governance and frequency of oversight on our investment clients. Everywhere, the pandemic-induced lock-downs and changing customer behaviors put the business position and revenuegenerating capabilities of some of our clients under pressure. Particularly affected were the travel, hospitality and retail sectors, while some of the sectors continued with little less disruption. We worked tirelessly to accommodate to the new realities of our customers. Throughout 2020, we took proactive steps to ensure an adequate service infrastructure for our clients, while at the same time taking necessary pre-cautionary measures for providing a safe environment for our employees. This allowed us to seamlessly manage client relationships during the pandemic. Bangladesh government and Bangladesh Bank, through its stimulus and support packages, ensured stability and continuity. This enabled us to launch a series of supportive actions to help our clients navigate through the pandemic. Bank’s continued changes and reengineering of Investment Risk Management process during the year, together with its sharper segment focus and a more assertive business development approach, Investment Banking activities posted a resilient performance in 2020 despite of all the odds caused by COVID-19 pandemic. The Bank managed to retain high asset quality withstanding the unprecedented challenges faced by financial sector and economy as a whole due to pandemic. Furthermore, we had oversight for prudent control around the utilization of uncommitted facilities considering the extent of impact of pandemic on specific clients. Our further strengthened TREASURY OPERATIONS Key challenges in 2020 were managing excess liquidity-both in money market and in forex market, managing spread as regulator imposed profit rate (interest) cap, de-growth of advance. Though market was flooded with excess liquidity, Treasury was able to utilize the excess funds which were raised on time during the year to maximize returns until such time these funds were be utilized by the relevant business units. Usually Treasury is exposed to risk due to the uncertainty prevailing in the dynamic business world. With the ever increasing investment monitoring team provided us with the means to monitor our investment exposure on a regular basis across industries and client segments. In most of our investment portfolio jurisdictions, our business benefitted from regulatory forbearance, which saw a relaxation of investment classification requirements until the end of 2020. These measures successfully assisted our customers to better weather the impact of the pandemic. As a result of the rigorous controls we have put in place to manage our investment risk, our high-quality diversified portfolio and proactive measures taken throughout the year, we were able to maintain our NPI ratio at a minimum level. Strategy for 2021 While the future remains unclear and dependent on the scale and speed of the COVID-19 evolution and the timing of an economic recovery, we are confident that our prudent approach to investment extension provides us with a strong framework to protect the interests of all our stakeholders. We are aware the enormity of the challenges but we are ready to face it with resolve and concerted efforts. pace of changes in technology, regulation and compliance within the banking industry, Treasury has been considered as a nerve center of a bank. One of the major functions of a Treasury department is managing and controlling the bank’s liquidity as well as making sure that all parts of the bank can readily have access to the fund required for continuing their operations. In Islamic Treasury environment, it is important to note that for any product or process, Shariah Supervisory Committee approvals are required, before any other processes, so that the pureness of the Islamic banking remains intact. Shahjalal Islami Bank Limited
  99. 100 Shahjalal Islami followings : Bank Treasury primarily focuses on the ●● Utilizing different market opportunities within all risk and regulatory limits. ●● Strengthening ALM operations ●● Creating a diversified fund management channel ●● Enhancing profitability ●● Minimizing market, liquidity and profit (interest) rate risks etc. Therefore, in the process, Shahjalal Islami Bank Treasury has the following desks which operate through the integrated efforts of Money, FX, and ALM to achieve the desired goal. TREASURY DIVISION Money Market Desk ALM Desk In 2020 Corporate FX Desk handled a total volume of USD 211 million compared to USD 152 million in 2019. ALM Desk Stewardship of the bank’s balance sheet is given typically to the Asset-Liability Committee (ALCO). The key function of Asset Liability Management desk is to give insight to ALCO on Bank’s balance sheet & off-balance sheet movement and key insight regarding market and industry trend on liquidity, Interest rate movement. Over the time, the scope of treasury operations has significantly expanded and asset-liability management appeared as the heart of treasury function. In banking business, movement or transformation of the components in the balance sheet is an ongoing process which has a resultant effect on the profitability and overall strength of the Bank. SJIBL ALM plays an important role by identifying and measuring those risks and minimizing or hedging those risks using various financial tools for stabilizing the balance sheet and maximizing profit for bank. From onset of the COVID-19 pressure on markets and the subsequent “lock-down” policy response from the government has created a genuine stress on the economy. Our ALM desk timely analyzed and suggested how best should the Bank address the need to ensure flexibility and rapid decision-making, while maintaining balance sheet robustness during that time. Forex Desk Money Market Desk The Money market desk ensures that the bank remains sufficiently liquid, meeting all its financial commitments and obligations to its customers besides meeting the CRR & SLR and all ALM ratios requirement at minimum risk and cost to the bank. In 2020 Money market dealers were mostly busy in managing and blotting of excess liquidity which surfaced from Bangladesh Bank expansionary monetary policy, de-growth of credit, sale proceed of foreign currency, low appetite of new credit. They had also faced some criticality from a few stressed counter parties particularly NBFI’s for their own fund crisis. Foreign Exchange Desk We have a separate Foreign Exchange (FX) desk where experienced dealers are engaged in foreign currency transactions. In order to settle the transactions of different foreign currencies throughout the year the desk closely monitored the exchange rate movement of USD and other currencies against BDT and accordingly set the exchange rates of major foreign currencies. The interbank foreign market was quite stable throughout the year where market was flooded with liquidity, USD depreciated against BDT and stood at 84.80 as of 30th December’20 which was 84.90 at the very beginning of 2020. ANNUAL REPORT 2020 The Bank’s FX Desk was able to forecast the situation very early and as such handled the situation pragmatically. At the same time FX Desk’ was very active in the interbank Forex market and also dealing with corporate clients, focusing on meeting corporate needs. In 2020, changes in market liquidity and interest (profit) rates might expose banks to the risk of losing money. The Coronavirus crisis and lock-down response to the spread of COVID-19 has demonstrated, among a number of things, the importance of a bank being able to react quickly and decisively to market-wide stressed events. Throughout the year, ALCO proactively control the business in line with firm objectives, focusing on the entire balance sheet. In brief throughout the year 2020, SJIBL’s ALCO managed its balance sheet movement in right track to optimize changing market dynamics. Future Strategy In the coming year, both local and global markets are predicted to be more volatile. Excess liquidity management for both local currency and foreign currency will be the main challenge for the banking sector in the upcoming year as government expansionary monetary policy may continue up to 2nd half of the year 2021 as private sector may remain shy and sluggish to new investment and inflow of foreign currency will be surpassing outflow in next couple of months. In the regime of single digit interest (Profit) rate on advances, SJIBL treasury would take its cautious position on balance sheet growth. Further, the SJIBL Treasury would introduce measures to manage declining trend of spread stemming from the said developments. Amidst this environment, the focus of the Treasury would be to: ●● Continue to improve market responsiveness in order to strengthen core business activities ●● Introduce new customer-centric products, adding value to the Treasury portfolio.
  100. 101 OBU Business Trend 7 148 The COVID-19 induced economic crisis has affected the export and import of Bangladesh by large margins . As OBU business directly correlated with foreign trade business, Offshore Banking also experienced difficulty throughout the year of 2020. But our OBU showed tremendous resilience in their business operations as well as profit performance in 2020 despite of all odds caused by COVID-19 pandemic, mainly due to firm commitment, excellent service quality , expertise in trade business. In 2019 the Offshore Banking business faced major shifting in regulatory perspective and some of its continued in 2020 too. To minimize COVID-19 pandemic related disruption, Bangladesh Bank gave some regulation relaxation which played the vital role to maintain our commitments to overseas correspondences on due courses in the COVID-19 pandemic period. 22 2 36 17 1 2018 Import Bills Discoun�ng Export Bills Discoun�ng 2019 197 Offshore banking acts as a unique solution for banks across the globe to carry out international banking business through foreign currency by borrowing, depositing and placing such currency. The bank established its offshore banking unit (OBU) to catering to such opportunities. (Taka in million) 200 OFFSHORE BANKING 2020 Long Term Financing OBU Investment Outstanding (Taka in million) 12,097 11,564 Financial Highlights of 2020 ●● ●● In the pandemic year 2020, OBU has been able to maintain consistent growth trend in investment and profit which are 4.61% and 16.81% respectively from earlier year. Outstanding investment of OBU is USD142.65 Million (BDT12,096.47 Million) at the end of 2020 which was 6.56% of overall investment portfolio of the Bank. 7,050 OBU has advised 274 L/Cs and certified 240 EXPs. It has made export of USD1.25 million against 245 bills and Import of USD1.33 million against 17 L/Cs/contracts. Future Strategy ●● OBU has discounted 2471 Import Bills for USD197.33 million and 923 Export Bills for USD16.77 million ●● OBU has deployed USD239.00 million from domestic source and USD23.53 million from different overseas sources. 2018 2019 2020 ●● Plan to diversify the borrowing sources to avoid concentration risk, ●● Achieve cost competitiveness, ●● Enhance the business with wholly foreign owned enterprise in EPZs, PEPZs, and EZs & Hi-tech parks. CARD DIVISION Key Business Performance in 2020 Digital transaction vis-à-vis card business is one of the few sectors that has become a blessing for COVID-19 pandemic. Its growth in the country’s financial sector has advanced by at least five years amid the pandemic as dependency on digital means has increased significantly. Shahjalal Islami Bank card division has tried to take full advantage of this opportunity and has been largely successful. Now a day the popularity of Islamic Credit Card in Bangladesh has gone in the mainstream. To meet the expectation of customers, Shahjalal Islami Bank has launched its’ long cherished “Shariah Compliant Credit Card” in 2019 and become popular very quickly. The financial and operational performance indicators have shown in bellow through graphical presentation: Number of Card Issue (Taka in million) The Shariah base of SJIBL Islamic Credit Card Shahjalal Islami Bank is following the “Wakalah” mode to operate the Credit Card operations. “Wakalah” is a process where the Bank will apply advocacy fee/commission on every card transaction from the cardholder. In this process, Bank will provide a Quard facility to a Cardholder and he/she will preserve that amount to the Bank as “Amanat”. As and when required, the cardholder will charge his/her card for cash withdrawal or purchase goods and services. As requested by the cardholder, Bank will pay the transacted amount to the respective providers and take some fees from cardholders named as ‘Ujrat of Wakalah’. 40,996 41,719 Debit Card Credit Card 4,171 2,171 2020 2019 Shahjalal Islami Bank Limited
  101. 102 Amount of Card Transac �on (Taka in million) Credit Card to feel secured and convenient. Card Division has taken series of initiative to cater growing customer demand of different digital banking service. Debit Card 12,319 10,091 ●● To provide 24/7 smooth and convenient service to the valued customers for Card, ATM, Internet Banking and Agent Banking services, “SJIBL Call Center” is equipped with dedicated and professionally skilled Support Executives for 365 days. For convenient customer service, the bank has introduced Call Center Short Code of which is 16302 for its’ valued customers. ●● To attract the cardholders and extend a wide range of facilities, we have already made a good number of discount and EMI Partners in the country and more partners are going to be on-boarded. Credit Card 510 190 2020 2019 Credit Card Investment Outstanding (Taka in million) 2020 176 Special Achievement 2019 81 Number of Card Transac�on (Taka in million) SJIBL Card Products DEBIT CARD 1,536,682 1,371,082 Debit Card Credit Card Shahjalal Islami Bank Limited received “International Finance Banking Award 2020” in the category of “Best Islamic Card in Bangladesh” from UK based International Finance Publications Limited. PLATINUM CREDIT CARD 51,602 24,227 2020 PREPAID CARD CARD PRODUCTS 2019 Key Initiative in 2020 To accept as ‘First Choice to a Customer’, we are working dedicatedly to cover every accepted sector through Islamic GOLD CREDIT CARD SILVER CREDIT CARD INTERNATIONAL DIVISION International division covers supervision of Trade Service Shahjalal Islami Bank’s foreign trade related transactions, facilitate trade payment settlement, mitigate various risks related to foreign trade, maintain and improve of correspondent relations internationally and locally. Interna�onal Division Currently, International Trade Service is provided from 19 AD Branches, 2 Central Processing Centre, 1 Off-shore Banking Units (OBU) under the supervision of International Division. International Division coordinates, supervises and supports International Trade Transactions of AD branches through following units- ANNUAL REPORT 2020 Financial Ins�tu�ons NRB Remi�ance Service
  102. 103 International Business Performance Strategy /plan for 2021 The COVID-19 pandemic has had an immediate and negative impact on foreign Trade Business and Shahjalal Islami Bank is not out of that. The particulars of Foreign Exchange Business are given below: - ●● To provide more facilities to our importers in International trade, we will try to enhance our credit line facilities to USD 550 million in 2021 by effective negotiation with our foreign counterparts. ●● For better FC fund management, we will try to establish a nostro account in Singapore Dollar in 2021 as well as we will try to meet up any rational demand from our business and operational line for nostro accounts establishment. Total Foreign Trade Business handled during the year 2020 was Tk 285,131 million as against Tk 307,826 million in 2019 registering a decrease of Tk. 22,695 million, i.e. 7.37% negative growth. Which is far better than industry average. The individual section growth of Import, Export business were -5.26%, -9.18% respectively in 2020 compared to 2019. Trade Service Total 267,802 304,855 283,206 Through Import trade service sub unit and export trade service sub unit we are providing better service to our AD branch/OBU/ CPCs and replying regulatory queries timely with full compliance. To identify any wrong reporting “miss reporting” and/or violation of regulations in trade service we have introduced strong monitoring. Export Business 125,402 146,121 132,713 To communicate the latest update and sharing knowledge among members of SJIBL AD Forum, we have conducted two SJIBL AD forum meeting in 2020 out of which one was in digital platform. Import Business 140,382 156,715 148,473 Foreign Trade Business 2018 (Taka in million) 2019 2020 Strategy for 2021 ●● To communicate the latest update and sharing knowledge among the SJIBL AD forum members, we will try to conduct at least one meeting in each quarter in 2021. ●● To update the skill and addressing changing issues related to software, system, regulation & procedure in trade, we will conduct minimum 3 workshop/seminar for trade personnel. Financial Institutions Shahjalal Islami Bank has established correspondent relationship across the world with major foreign banks. The number of correspondent banks stood at 412 as on December 31, 2020 across 58 countries. The Bank has been successfully maintaining such relationships around the world to facilitate international trade transactions. The bank maintains 34 Nostro accounts in 9 major currencies with reputed international banks around the world in all of the important global financial centres. The Bank has also been enjoying sufficient credit lines from correspondent banks for add-confirmation to Letter of Credits to facilitate international trade. NRB Remittance Service Inward Foreign Remi�ance (Taka in million) 6,924 4,990 3,945 Major Highlights of 2020 ●● ●● By effective negotiation with our foreign counterpart, we have been able to enhance our credit line facilities from USD 480 million to above USD 500 million in 2020 to smooth progress of our international trade. For better FC fund management, we have established five Nostro accounts three with JPMorgan Chase Bank, one with HDFC Bank and another one with Emirates Islamic Bank in 2020. ●● In this tough situation, we were able to establish new relationships with 24 world renowned banks in 2020. ●● To facilitate international trade through export factoring, we have executed MOU with Prima Dollar Operations Ltd. and Trade wind GmbH as they will launch fin-tech based factoring solution to the exporters where local exporters will be able to obtain their deferred receivables on sight basis. This solution is secure, faster and will help to shorten the cash cycle of the exporters. 2018 2019 2020 To enhance wage earner Remittance through us, we have made new agency arrangement in 2020 with the below 3 renowned exchange companies as well as we are maintaining effective relationship with 14 exchange houses: 1. First Security Islami Exchange Limited , Italy 2. Progoti Exchange Company, UAE 3. Aftab Currency Exchange Limited, UK Strategy for 2021 ●● To facilitate the foreign Remittance inflow from any nonresidence Bangladeshi, we will try to enhance at least five agency arrangement with exchange houses abroad in 2021. ●● To facilitate smooth foreign Remittance inflow, we will onboard fin-tech in 2021. Shahjalal Islami Bank Limited
  103. 104 IT DIVISION COVID-19 Provides Opportunity for Digital Transformation Financial institutions around the world are under considerable stress because of the pervasiveness of COVID-19 . Since the start of the coronavirus, consumer demand for digital banking has never been greater and Financial industry is experiencing a major shift in service delivery across the globe and SJIBL is also not an exception. Key Initiative in 2020 were presented through digital means through in-house developed software. ●● HRM module: Upgraded Bank HRM module now become fully automated where all relevant data to human resources, leave applications, performance appraisals, etc. are recorded and processed. ●● Automated E-GP: The Bank has introduced Robotic Process Automation for automating the e-GP (Electronic Government Procurement) module for better customer service and speedy processing. ●● Develop centralized Agent Banking Software: SJIBL has implemented a fault-tolerant technology infrastructure for agent banking operations which enabled customers seamless experience. In 2020, SJIBL IT division has taken a series of initiatives which will help the Bank to improve customer experience in the coming days. ●● ●● ●● Home office: With proper tools and connectivity, the Bank established the IT infrastructure to support work from home particularly for back office staff which enable to remain productive and efficiently conduct most of the work from home and it continued for a considerable period in 2020. Mobile App: The Bank introduced mobile wallet SJIBL Net to cater growing customer demand which carry out all the banking transactions like utility bill payments, tuition payments, intra-bank and inter-bank fund transfers, from their mobile application. Reduction of physical paper flow or Green Initiatives in banking operation: SJIBL has introduced the paperless process in certain areas of banking operations. During the pandemic, the Board of Directors meetings were held digitally over the zoom. Memos and other documents Beside all above, in 2020 It upgraded its CBS for providing efficient and better customer service as well as handle high volume data base. Future Plans for 2021 ●● Digital Account Opening: During 2020 Bank initiated a project to digitalize the opening of accounts from a place of customer convenience. The project is expected to go live within the first quarter of 2021. ●● DR Upgradation: The Bank has taken a project to further enhance the DR (Data safety and availability/capabilities which is expected to be completed by 2021. BANKING OPERATIONS DIVISION Banking Operations Division is primarily mandated to ensure smooth branch operations of the Branches/Sub-Branches by providing continuous guidelines & supports in collaboration with other Departments/Units at Corporate Head Office. In COVID-19 scenario, BOD was always in close touches with the Branches for ensuring Banking Operations at branches with minimum manpower for keeping infections level at minimum in the Bank by arranging all necessary approvals from the competent authority of the Bank for any sorts of policy exceptions/special issues related to product lines/customer services etc. Key Highlights in 2020 ●● For disbursement of cash Incentive to COVID-19 affected 50 lac families in Mujibborsho, BOD has designed a tailored Mudaraba Savings Deposit (MSD) Account for aforesaid purpose. ●● Successfully implemented Bank’s new Account Opening Form with new KYC profile as per directive of Bangladesh Bank. ●● Automated Cheque Processing Unit (ACPU) has successfully Integrated Bangladesh Electronic Fund Transfer Network (BEFTN) with Core Banking System (CBS). Additionally, ACPU ensures entire tasks related to RTGS Operations in the Bank. ●● Introducing Web Based Solutions of Central Circular Management System in the Bank which ensures digital Archiving of all Instruction/ Information Circular issued by all divisions of Head Office. ●● Fraud Detection and Prevention Policy has been reviewed and updated. Future Plans for 2021 ●● Starting “Centralized Account Opening Management” to reduce Operational Risks at branch level as well as rationalize the related volume of man hour incurred. ●● Introduction of digital Account opening platform ●● Implementation of live operation of FC Cheque/FC DD and BEFTN Operations in different foreign currencies through BACH-II . ●● Establishment of full-fledged Disaster Recovery Site (DRS) for ACP (BACH) Unit. FINANCIAL ADMINISTRATION DIVISION (FAD) Financial Administration Division (FAD) has been carrying out the responsibilities of strategic planning as well as organizing, directing, supervising and controlling the financial undertakings of the bank in order to support the Bank’s commitment to the stakeholders through financial accountability. The responsibility includes applying management principles to the financial assets and liabilities of the bank, while also playing an important role in fiscal management. The goals of the Division are to support the Bank in its vision by ensuring financial stability. ANNUAL REPORT 2020 Financial Administration Division ensures ●● Effective compliance and control in line with ever increasing regulatory developments ●● Business supports at a strategic and operational level at minimum Turnaround Time (TAT) ●● Business improvement initiatives in order to add value to the company ●● Providing accurate data for effective decision making
  104. 105 ●● Three Es (Effectiveness, Efficiency and Economy) in every amount expensed ●● Develop operational & analytical query tools ●● Standardize accounting & reconciliation of transactions of the bank ●● Highest Combination of People, Process & Technology. Leadership Policy and Process Development Review of systems, processes and policies to facilitate consistent delivery across the entire spectrum PLANNING & STRATEGY Financial Control Financial Administra�on Division LEADERSHIP Budget and Business Plan Opera�on Budgeting and business planning through forecasting with necessary inputs Capital planning and issue management Appropriate direction for changes in business and finance strategy for business improvement initiatives Key Initiative in 2020 Planning & Strategy 2020 FINANCIAL CONTROL COVID-19 along with implementation of single digit profit rate has created unprecedented challenges. To manage through these challenges and position the Bank for recovery, Financial Administration Division (FAD) drives for operational improvements necessary to navigate the sharp downturn by strategically positioning and utilizing assets. FAD has taken a series of initiative which help the Bank to improve operational efficiency and retain profitability as under: ●● Established austerity measures to rationalize operating cost in order to ensure the highest value for money in every types of expenditure. ●● Strengthen Internal Control Systems over GL in order to find out the loophole while ensuring maximum utilization of Bank’s assets. ●● Conducted Virtual Business Review Meeting with Branches at regular intervals in order boost up profitability. ●● Accumulated/amended comprehensive list on Schedule of Charges ●● Develop accounting process on Bangladesh Government Policy Support during Covid 19 ●● Review the original budget of 2020 in the backdrop of COVID 19 outbreak and implementation of single digit profit rate in order to boost up the morale of Branches ●● Capital planning for 10 years and process has been started for issuance of BDT 5,000 million Mudaraba Perpetual Bond as part of Additional Tier-1 Capital in order to strengthen the long term capital base of the Bank. Pre-Audit Bills processed: 47189 nos. Amount: Tk. 16,929 Million Payment Processing and Book Keeping No. of Bills/Vouchers: 46245 Nos No. of Transactions: 91638 Nos Voucher Maintenance Reconciliation Reconciliation of General Account Reconciliation of Bangladesh Bank Taka and FC clearing Account. Reconciliation of 68 nos. accounts with other Banks. Special Achievement OPERATION Reporting Monthly Reports: 17 Nos Quarterly Reports: 10 Nos Half Yearly Reports: 7 Nos Yearly Reports: 9 Nos. Supportive Role Provide continuous guidelines & support to the branches. Provide required MIS to the Management. The Bank has received a number of Awards on Annual Report 2019 from different prestigious bodies around the globe as recognitions of its best work, accountability, transparency and good governance. 1. SAFA International Award- Joint First Runner Up 2. 20th ICAB National Award- Joint 2nd 3. 7th ICSB National Award- Silver (2nd) 4. ICMAB Best Corporate Award-2019- Silver (2nd) Future Strategy The Division is playing an important role in helping the Bank successfully manage through the pandemic, be proactive and flexible in decision-making, and remain focused on the long term. The Division strives to further streamline existing business processes wherever possible on ongoing basis. Shahjalal Islami Bank Limited
  105. 106 CENTRAL PROCESSING CENTRE (CPC) One of the core activities of the Bank is to facilitate international Key Initiative in 2021 trade. With an aim to deliver Foreign Trade Services to the in January 1, 2013. Since its inception, CPC is working as a service “Central Processing Centre - Chattogram (CPCCTG)” has been set up with effect from September 1, 2020 aiming to facilitate the Non-AD branches of the Chattogram Zone. Day by day CPC has reached to all the Non-AD branches with its all-out quality trade services and became a comfort zone of the Non-AD branches. center of the Non-AD Branches of the bank for trade services. Future Plan in 2021 During the year the foreign trade business of Non-AD branches ●● Comprehensive Software for Centralization. have recorded a significant growth. ●● Full centralization of Trade Services (Both AD & Non-AD). ●● Facilitated and restructured the Cash WAQF deposit product. ●● Arranged 3 meetings of Shariah Supervisory Committee and one meeting of Shariah Sub-committee to review and confer decision on the issues referred by the board of directors and management of the bank. ●● Reviewed Shariah compliance status of the branches and divisions of the bank convening five meetings of Shariah Inspection Report Review Committee in presence of and chaired by the Managing Director. ●● The division arranged 3 trainings in different locations across the country before pandemic situation and 2 virtual trainings for enhancing Shariah knowledge and awareness of the employees throughout the year where 1180 employees have been trained on different aspects of Islamic finance, operations and documentations. doorstep of our clients of Non-AD branches, the Bank has formed Central Processing Centre (CPC-Dhaka) at Corporate Head Office SHARIAH INSPECTION AND COMPLIANCE DIVISION Islami banking developed to escape the economy from the grip of interest based financial system. Islami Banking expressly states its commitment to the principles of Islami Sharaih and avoids Riba (interest) from all of its operations. As an independent division of Shahjalal Islami Bank Limited, Shariah Inspection & Compliance Division with a pool of Muraquibs whose are well conversant in Fiqhul Muamalat and Islamic Jurisprudence observes and ensures the Shariah compliance of the Bank and guides the Bank to the straight and practical ways to implement Shariah principles as prescribed by the Shariah Supervisory Committee and the directives of Bangladesh Bank Guidelines in all of its banking operations. The Division generally performs the following functions: ●● Conducting regular Shariah Audit and Inspection at the branches and divisions. ●● Providing Islami banking trainings to the new and existing officials. ●● Refining existing products and services. ●● Coordinating with the Supervisory Committee. Management Plan for the year 2021 and Shariah Muraquibs are conduct Shariah Audit functions round the year. The objective of Shariah audit is to ensure proper execution of transactions as per Sharaih, evaluation and assessment of Shariah control systems that are in place. If an audit observation is raised on transactions of particular investment deal, then the income treated as doubtful and transferred to the Compensation Realized Account. To ensure maximum level of Shariah compliance in all operational dimensions of the bank, the division have made a calculated plan for the future. The highlighted points of the plan for the year 2021 are given below: ●● Publishing “Shahjalal Islami Bank Shariah Guidelines”. ●● Introducing the integrated software of Shariah documentation for facilitating the functions of Shariah compliance. ●● Introducing E-doc software for better monitoring of Shariah documentation status of the branches. ●● Taking necessary steps to obtain membership of AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions), IFSB (Islamic Financial Services Board) and CIBAFI (Council for Islamic Banks and Financial Institutions). ●● The performance Deposit Mobilization Campaign “Dream it Achieve it” in the last quarter of 2019 with target achievement of 132.26% maintaining CASA proportion of 51.64%. Overview on 2020 Despite the challenge of coronavirus (COVID-19) pandemic, the division completed the year successfully by taking a number of initiatives. Few of them are mentioned below: ●● Introduced Off-site Shariah inspection for continuing regular Audit and inspection activities coping with coronavirus pandemic and completed Shariah audit of all 132 branches of the bank. AGENT BANKING Agent Banking has been a catalyst in financial inclusion in Bangladesh. Agent Banking is defined as the banking services provided outside of regular bank branches by engaged agents under a valid agency agreement. The aim is to provide financial services to the underserved and poor segments of the population, especially those from the geographically dispersed locations. Shahjalal Islami Bank Limited (SJIBL) realized the ANNUAL REPORT 2020 potential to increase customer reach by offering Agent Banking services through agents for the customer of remote areas where they do not have access to formal banking system. SJIBL started its agent banking segment from December 2019 by setting up its first SJIBL Agent Banking Centre in Cumilla and its operations have grown rapidly.
  106. 107 Agent Banking Deposit Performance in 2020 3 ,469 SJIBL Agent Banking Products & Services 33.78 33.00 29.92 9.21 729 233 Mudaraba Savings Deposit Mudaraba Term Deposit Mudaraba Scheme Deposit 76 Al Wadiah Current Deposit Providing financial services that are convenient, affordable and reliable, SJIBL aims to widen the network of financial inclusion through Agent Banking. SJIBL wants to provide a complete banking financial service solution to increase access to a broader range of financial products & services for every citizen of Bangladesh and promote sustainable banking solution to achieve the ultimate goal of financial inclusion. Geographical Coverage 2020 01 Rangpur Deposit amount BDT million No. of Accounts Shahjalal Islami Bank made Agent Banking Structure with secured technology and real time banking for customers. Agent Banking customer can enjoy transaction are on real time basis and the Agent Banking System is integrated with the Core Banking System. Customer get instant SMS notification and system generated money receipt for each transaction. 02 Mymensingh 02 Sylhet 13 Rajshahi 17 Dhaka Agent Banking Transac�on Performance in 2020 03 Khulna 10 Chittagong 04 Barisal 28,034 215 200 100 5,678 2,250 Branch Deposit 98 758 Withdrawal Fund Transfer amount BDT million No. of Transac�on SJIBL Agent Banking outlet will offer the below mentioning products and services Mudarba Savings Deposit Cash Deposit & Withdrawal Fund Transfer EFTN & RTGS ATM Card Al-Wadiah Current Deposit Balance Inquiry Account Statement Mudaraba Term Deposit Receipt Balance Inquiry Account Statement Scheme Deposits U�lity Bill Payment Salary Disbursement Solu�on Cheque Book Transac�on from core Banking Branch Remi�ance Shahjalal Islami Bank Limited
  107. 108 BRANDING AND PRODUCT DEVELOPMENT (BPD) DEPARTMENT all its customers. BPD is responsible for building, protecting and enhancing the Bank’s reputation as a trusted provider of worldclass financial services. To build and deliver a brand, it is vital that the brand is effectively communicated both internally and externally. Brands are not things; rather brands are a representation of a highly valued idea that resides in the minds of consumers and stakeholders alike. Brands represent a set of unifying principles that guide an organization’s behavior and its manner of delivering experiences customers highly value above the available alternatives in the marketplace. To attract new customers and retain existing customers SJIBL branding department always devises ways to reach the mass people for connecting emotionally through its brand value and identity. At present, 60 plus banks are operating in our small economy. Hence to survive in the financial marketplace; strong brand promise gives customer more comfort and security. The bank has developed a brand strategy to build one of the finest and strongest Islamic financial brands in Bangladesh. Our branding initiatives are targeted at leveraging on existing brand strength while refreshing and evolving the brand to appeal to the Islamic finance minded people. Initiatives in 2020 The major activities done by BPD in 2020 are enumerated below: Thus, carefully selecting a brand position could provide the bank with marketplace advantages help in translating the existing position to a strong and consistent brand identity. Including the intuitive brand architecture backed up with a strong name, icon, and tagline that concisely reinforces brand promise. Today, the customers are more educated and well informed. The customer mindset is changing rapidly so the brands have to be in accordance with the customer’s taste and preferences. When it comes to the key of success in branding there are two main keys: The first one being a combination of execution of the model and strong customer service, and secondly to ensure that the new service is allowed to build its own brand position in customers’ minds so that it may eventually survive and thrive on its own, differentiating itself from direct competitors and from the parent brand of complementary services. When both these are combined with a balanced marketing mix and clear marketing message will ensure the success of branding. SJIBL believes that differentiation begins with its service and trust. The initiative at SJIBL is to provide a delightful banking experience to ANNUAL REPORT 2020 ●● BPD supervised ‘Annual Report-2019’ taking account aesthetic look, attractive layout, graphical presentation, infographics which has been praised by the stakeholders. ●● For the 2021 calendar, an innovative idea was executed. The theme of the calendar was old script of “Al Quran” preserved in different countries that made this year’s calendar unique. ●● BPD introduced E-Card for Eid as a part of green banking initiatives. ●● As a customer-oriented bank, new year greetings cards were designed upholding Islamic value blended with modern concept that differentiate with other Islamic banking institutions. ●● To create awareness and comply the Government instructions regarding Covid-19, stickers & leaflets were designed and distributed across the Bank. ●● BPD designed numerous Card promotional campaign throughout the year.
  108. 109 and Cambridge IFA during 2020 . BPD took the opportunity to communicate the recognition through social media platform in order to enhance the image of the Bank. ●● ●● To create enhanced digital footprint, concept, background work, process-flow of the Bank’s internet banking App ‘SJIBL Net’, missed call alert service, 24x7 Call center has been accomplished. ●● Social platform like Facebook, an essential piece of digital marketing, helps to connect with potential customers, increase awareness about brand, and boost lead generations. Considering the significance, SJIBL launched official FB page which is regularly maintained with due attention highlighting corporate events and important news of the bank’s achievements. SJIBL has been awarded multiple prestigious awards from local and international body such as SAFA, ICAB, ICSB, IFC REVIEW OF SJIBL SUBSIDIARY Operating environment vibe while investors were left bewildered by the continuous fall of the index as a consequence of the outbreak of coronavirus in the country. Regulators took initiatives to restrict the free fall of the stock price ahead of nationwide lockdown. Afterwards, the market resumed on 31st May and the new BSEC commission took charge with the aim of restoring investors’ confidence in the market during the unprecedented time. BSEC under new leadership has worked relentlessly and introduced numerous investor-friendly directives markedly speedy IPO approvals, mandatory shareholding directives & board restructuring for failure to do so, strict stance against irregularities, 3-day trade settlement for Z category issues, bond trading, listing of renowned companies which in turn restored much needed investors’ confidence in the market. Though economic turmoil had hit badly first half of last calendar year, bourses of the country rebounded lately in last year and generated one of the highest return globally i.e. 21.31% even after the Covid-19 led shutdown placed the equity market in halt for 66 days. The broad-based index DSEX, charged up by 949.13 points to end at 5,402.07 points at the end of the year and market P/E was 14.5 times. However, index return was 49.85% from the bottom point i.e. 3,603.95 during March 18th, 2020. The market capitalization of the prime bourse stood at the highest position at BDT 4,482.30 billion(bn) with a rise of 32.01% as against the previous year mainly due to the upsurge in stock prices, listing of ROBI, the biggest ever IPO, and WALTONHIL, the second largest company by market capitalization of the country. Besides, the regulator permitted capital raising of BDT 95.0bn through IPO, right and bond issuance during this pandemic year in effort to improve depth market and establish a vibrant market. Moreover, the ratio of market capitalization to GDP stood at 16.03% at the end of December 30th, 2020. Besides, the daily average turnover has been recorded on a satisfactory level of BDT 6,489.48 mn this year which is 35.10% higher than that of the corresponding year. Earlier, the capital market observed prolonged bearish Key factors ●● While the successful vaccine rollout in the country ushering beacon of hope for the national economy ●● Banks have been facing excess liquidity due to low credit demand and the expansionary monetary policy ●● Regulatory tussle and unsatisfactory performance of several large capital companies Particulars 2016 2017 2018 2019 2020 Market Cap(BDT in Billion) 3,412 4,229 3,873 3,396 4,482 DSEX Index 5,036 6,245 5,386 4,453 5,402 Avg. Daily Turnover(BDT in million) 4,944 8,748 5,510 4,803 6,489 Market P/E (Times) 14.3 17.3 14.6 11.9 14.5 Market outlook for 2021 vibrant capital market in the country. Moreover, a number of Bullish trend to be prevalent on bourses and 2021 will be a for listing State Owen Enterprise, Multi-National Companies year of opportunities for the capital market owing to rising are in the process which will enhance market depth besides market confidence, monetary easing by the central bank and additional BDT 100.0bn funds is likely to be raised from the far-reaching policies by the securities regulator to establish a market in this year. Market development and reform initiatives renowned companies are in the listing pipelines and initiatives Shahjalal Islami Bank Limited
  109. 110 by BSEC will continue which in turn is expected to translate in notable turnaround of the stock market in the following year . Furthermore, Inflation-adjusted return i.e. real return in the money market is negative which will lead savers’ fund to channel in the capital market. Meanwhile, prime index i.e. DSEX may cross psychological threshold of 6,000 to 6,500 points this year. Bangladesh has shown a strong economic turnaround from the crisis last year due to global pandemic. However, Economic outlook of global observers estimated shinning performance of Bangladesh while comparing with peer countries. Beside, continuation of economic growth in the year of Golden Jubilee of independence is likely to usher in a stock market surge and investors on the stock market is expected to remain optimistic during the year. In addition, news on Covid-19 vaccines rollouts will eventually revitalize different economic sectors to outperform. Key Drivers ●● Still attractive market valuation in many sectors. ●● Impressive economic recovery from COVID-19 pandemic fallout and shining growth prospect of Bangladesh ●● Investors’ participation remained high due to the lower return on bank deposits, increased market confidence and limitations on National Saving Certificate investment. ●● Regulatory reforms have win back investors’ confidence and bring more institutional and foreign investment SJIBSL Securities Ltd. (SBLSL) is one of the top 20 brokerage houses in Bangladesh and a fully owned subsidiary of Shahjalal Islami Bank Limited . (SJIBSL) is a TREC-holder of both Dhaka Stock Exchange Ltd.- DSE (TREC #233) and Chittagong Stock Exchange Ltd. - CSE (TREC # 134) and holds both broker & dealer licenses. SJIBSL Products & Services Brokerage Services: CDBL Services: Full Service DP Research Services Daily Electronic Notification Error free & compliant trade execution and margin trading BO account opening & maintenance, share transfer and transmission through CDBL Equity valuation, industry & macroeconomic review, daily & weekly market updates Daily portfolio statement, trade confirmation & research reports through email & SMS Foreign Trade Margin Investment Facilities Panel Brokerage Trade with Ease Trading for foreign investors & NRBs Competitive rates and easy processing Special trading services/terminals for institutional investors Trade instruction through DSE Mobile & Desktop App, Telephone, Email and Fax Strategy for 2021 Key financials Particulars 2019 2020 Margin Investment outstanding 3,186 3,098 Operating income 311 320 Operating profit (32) 27 Net profit (loss) (60) 6 Operating profit margin (%) -1% 1% ANNUAL REPORT 2020 ●● Increasing online and offline reach by opening up new branches at key locations, conducting customer outreach programs and connecting customers through online media. ●● Ensuring service excellence throughout the organization by engaging all employees in product and service innovation process, and offering customers new-to-the-industry products and services. ●● Enhancing capacity of research team and increasing its equity and industry coverage to attract more institutional individual clients.
  110. 111 INITIATIVES OF MANAGEMENT IN 2020 Customer Service Excellence ●● ●● Launching Mobile app: App based digital wallet SJIBL Netto cater growing customer demand which carry out all the banking transactions like intra-bank through EFT & RTGS and inter-bank fund transfers, utility bill payments, tuition payments, cheque requisition from their mobile application. Setting Call Center: To provide 24/7 smooth and convenient service to the valued customers for card, ATM, Internet Banking and Agent Banking services, “SJIBL Call Center” with short code16302 is equipped with dedicated and professionally skilled Support Executives for 365 days. ●● DR Upgradation: The Bank has taken a project to further enhance the DR/Data safety and availability/capabilities which is expected to be completed by 2021. ●● Automated E-GP: The Bank has introduced Robotic Process Automation for automating the e-GP (Electronic Government Procurement) module for better customer service and speedy processing. ●● ●● Develop centralized Agent Banking Software: SJIBL has implemented a fault-tolerant technology infrastructure for agent banking operations which enabled customers seamless experience. CBS Upgradation: In 2020 SJIBL upgraded its CBS for providing efficient and better customer service as well as handle high volume data base. Operational Efficiency ●● Reduction of physical paper flow or green Initiatives in banking operation: SJIBL has introduced the paperless process in certain areas of banking operations. During the pandemic, the Board of Directors meetings were held digitally over the zoom. Memos and other documents were presented through digital means through an in-house developed software. ●● Home office: With proper tools and connectivity, the Bank established the IT infrastructure to support work from home particularly for back office staff which enable to remain productive and efficiently conduct most of the work from home and it continued for a considerable period in 2020. ●● HRM module: Upgraded Bank HRM module which become fully automated where all relevant data to human resources, leave applications, performance appraisals, etc. are recorded and processed. ●● Leveraging Digital platform maximum: Very immediate after of COVID-19 breakout , Bank has been conducting numerous digital platform through zoom-based workshop and training which can incorporate 1000 employees per training or workshop. Patronizing ethical and respectful banking ●● Ensuring women friendly environment: In 2020 SJIBL develop a Female Anti-Harassment Policy. ●● Showing humanitarian attitude to women: Bank shows relaxation in work to female employees during severe COVID-19 period in 2020. ●● No penalty for late payment: No penalty was imposed for late installment payment of all deposit schemes as well as credit card payment in whole COVID-19 period. ●● Giving Integrity Award: Integrity awards was given to employees having good ethics to motivate other employees. Ensuring Health and Hygiene in all operational aspect ●● Bearing COVID-19 treatment cost: Bear all cost of COVID-19 medical and test expenses of all affected employees. ●● Allowed quarantine leave: Allowed quarantine leave for containing COVID-19 to the employees, when and where required. ●● Safety kit distribution: Free distribution of mask and sanitizer among all employees. ●● Disinfection kiosk: Bank setting up disinfection kiosk and non-contact thermometer to scan and trace COVID-19 suspect in its Head Office and branches premise. Employee Motivation ●● Intact salary package: In spite of COVID-19 induced financial challenges,unlike many other banks, SJIBL gave annual increment and did not cut any salary or did not down size employees. ●● Attractive bonus for all employees: Irrespective of ACR or Annual Appraisal, minimum yearly cash incentive was given to all employees on the basis of performance of 2020 though Bank’s operating profit shrink. ●● Disburse risk allowance: During lock down period of 2020, SJIBL was run with minimum employees while salary and bonuses were given to all as well as disburse COVID-19 risk allowance. ●● Recruited Doctor: Bank recruited a full time doctor for healthcare of all employees. The doctor provided support to all employees during COVID-19 pandemic. Shahjalal Islami Bank Limited
  111. 112 SUSTAINABILITY REPORTING ANNUAL REPORT 2020
  112. 113 MESSAGE FROM THE MANAGING DIRECTOR & CEO ON SUSTAINABILITY In 2020, the global Covid-19 pandemic wrought social and economic disruption on an unprecedented scale. The pandemic is so extensive that it has affected most of the organization’s essential sustainability issues during the year. In the earliest days of the crisis, we implemented preventive measures as our first line of response in line with the guidelines from the Directorate General of Health Services and the World Health Organization. We worked quickly on the procurement of the necessary protective equipment that includes face masks, face shields, gowns, sanitizers and also instituted temperature checks for employees, customers and visitors to our head office and branches. As an essential service provider, we continue to operate as per the guidelines of Bangladesh Bank, the central bank of the country, with the utmost care towards the safety of our customers and employees, and without disruption of our services. For employees in need of the most urgent assistance, a Quick Response Team (QRT) was also formed. In the post-COVID-19 period, the world will be more dependent on sustainable banking, especially for survival. We are committed to create sustainable progress and as a responsible bank, Shahjalal Islami Bank Limited firmly believes that it has a strong role to play in promoting Corporate Social Responsibility (CSR), Green Banking, Financial Inclusion and Sustainable Development activities to ensure resilient banking growth. We believe that including sustainability in all aspects of our business is fundamental in creating lasting value for all our stakeholders. Corporate Social Responsibility SJIBL believes in making CSR not just an initiative and therefore has instituted the SJIBL Foundation to carry out CSR activities on behalf of the Bank. As a socially responsible organization, SJIBL recognizes that we are part of the community at large, and there is a strong need to contribute to society and support those in need. The Foundation works towards improvement in socioeconomic development and has been supporting education, health, charities, treatment of poor people, donations, sponsoring sports and natural disaster efforts to promote sustainable communities and the environment in Bangladesh. Due to COVID-19, the year 2020 was different for CSR activities. Yet, SJIBL, as a responsible bank, came forward to support the poor and the people who lost their jobs due to Covid-19 generously and distributed substantial relief across the country. The bank also provided face masks and sanitizers to the people as primary protection. SJIBL understands the importance of education among the poor and underprivileged communities for the progress of the country. In this context, SJIBL provides a stipend to meritorious poor students irrespective of gender from HSC to post-graduate to complete their studies. Apart from the stipend, the bank also provided financial assistance to financially weak students. SJIBL also extended support to construct schools and madrasas across the country, and it provides furniture for schoolrooms. It also donated computers and printers to the schools situated in rural areas. SJIBL spent a substantial amount on healthcare management during 2020. Medical equipment was provided to a hospital and an ambulance was also donated to a charitable organization. The Foundation also generously supported poor people in critical health treatment on a case-to-case basis. In 2020, 45 semi-pucca buildings were constructed by SJIBL Foundation for those who have lost their homes due to natural disasters across the country. Furthermore, blankets were distributed among the poor during winter to save their lives from extreme cold and freezing. The bank also donated a fund to arrange sports and cultural programs. SJIBL also donated Tk. 5.00 crore to the Prime Minister’s Relief Fund to support government initiatives in different development activities. Green Banking We always believe in growing responsibly by maintaining an ecofriendly environment across the organization. For that purpose, the Bank circulated the Green Banking Policy Guideline, SJIBL Green Office Guide as well as SJIBL Environmental & Social Risk Management (ESRM) Guideline to all the employees to raise awareness regarding conservation of energy, water and saving paper, etc. We highly encourage our customers to use E-Statement, SMS banking, SMS Alert, and e-mail correspondence to reduce the use of paper. The Bank has developed a number of green banking instruments through which customers can save their valuable time and unnecessary paperwork as well. During the year, SJIBL introduced the Centralized Circular Management System (CCMS) which streamlined banks’ internal circular databases digitally. Our latest updates for paperless banking are internet banking, digital wallet and e-KYC, which have opened up banking opportunities for customers using the latest technology without visiting a branch. The bank is also upgrading its technology to meet the growing demand for digital banking. Green banking is eco-friendly financing. To get a sustainable positive impact from business, green banking is essential. Due to Covid-19, the situation for new investment was not favorable during 2020. As such, Green Finance appetite naturally decreased. Still, we continued financing green projects to keep up with the growth of green finance at all costs. As a result, we achieved the yearly regulatory target of green finance disbursement which was more than 5% of yearly Term Investment disbursed (Tk. 514.32 Million) in the year 2020. Besides, SJIBL successfully implemented environmental risk rating and social risk rating introduced by Bangladesh Bank during appraising investment proposals. Sustainable Development The Bank is committed to observe the Sustainable Banking Guidelines of Bangladesh Bank. It has demonstrated such commitment duly considering the environment, social and governance risks and pertinent impacts when underwriting investment as well as providing investments directly to support the country to move toward sustainable development goals. Recently, the Sustainable Finance Department of Bangladesh Shahjalal Islami Bank Limited
  113. 114 Bank has issued a new circular which has been considered by all concerned as a regulatory paradigm shift from Green Product Financing into Sustainable Financing . As per the new circular, green finance, sustainable agro-finance, sustainable SME Finance, cottage industry finance and socially responsible finance altogether will be considered sustainable finance. For the first time since the inception of the Green Banking movement in the banking sector of Bangladesh, financing Jute (once the golden fiber of Bangladesh), cane and cottage industry trading have been decided to be included as sustainable finance by the regulatory body. The environment and natural resources are fundamental to the well-being of people, sustainable business conduct and longterm national development. The Bank believes that businesses should play an important role in alleviating climate change, striving to reduce adverse effects of its operations on the environment and promote conservation of natural resources. The Bank is fully aware that climate change and global warming have widespread effects on all sectors, including the Bank and its customers. The Government of Bangladesh has planned infrastructure development projects that will create investment opportunities, especially the mega projects such as Padma Multipurpose Bridge, Matarbari Seaport, Payra Deep Sea Port, Dhaka Metro rail, Dhaka Elevated Expressway, new Railway project, Karnaphully Tunnel, expansion of Highway, new terminal of Hazrat Shahjalal International Airport. These large-scale projects will stimulate investment and further economic development. The projects will also help drive and elevate the financial sector towards the desired sustainable development of the country. As a responsible financial institution, Shahjalal Islami Bank Limited intends to support such development by seeking to offer a variety of financial products that meet sustainability principles and thereby help facilitate the country’s sustainable growth plan. Customer Relationship Management The Bank is committed to providing service excellence, acting responsibly, treating customers fairly and honestly, observing industry standards. The quality of the service we deliver to the customers is critical to the long-term success of the company. Today, commercial banks in Bangladesh are facing intense competition to retain customers. Accordingly, the Bank is determined to build and maintain good relationships with customers while improving the quality of its products and services. To enhance the satisfaction of existing customers and attract new customers, the Bank constantly improves its service delivery systems to ensure that they are fast and convenient to meet the customer’s expectations. We constantly seek to enhance the quality of our service and regularly create opportunities to share feedback on their experience with us. In this respect, the Bank conducts a customer satisfaction survey periodically to promote customer engagement, to listen to their views and to understand situations or problems, so it can improve service quality to be in line with customer’s needs. This is to ensure quality professional services that can respond to the needs of all customer groups so that the ANNUAL REPORT 2020 bank impresses customers and becomes their bank of choice. The findings of the survey help identify key areas for service improvement and development to provide better service and satisfy customers. Human Resource The Bank recognizes employees as invaluable resources and believes that delivering the best possible service begins with building and supporting the best possible team. We work to attract and sustain a diverse, engaged, agile and capable workforce, creating values for our employees and rewarding their contribution. We are committed to creating an engaging, inclusive and sustainable workplace in which we maintain a safe and healthy working environment. Learning and developing continuously and keeping a healthy growth is essential to ensure our workforce remains capable and relevant in the face of change. We continue to deploy best-in-class learning and development programs to nurture our employees at all levels. Employees are encouraged to take personal ownership of their development by upgrading their skills and taking assignments of higher responsibility for career development. Furthermore, the bank has introduced the policy regarding the “Prevention of Sexual Harassment Policy” to ensure the safety and wellbeing of the employees. Conclusion Our responsibility to provide resilient and sustainable financial solutions for our customers and society also guides our initiatives to support the businesses of our clients during the financial hardship and uncertainty caused by COVID-19. A number of our corporate clients have faced unprecedented challenges as orders were cancelled, revenues slumped and supply chains were interrupted. In some cases, clients experienced a shortfall in liquidity. SJIBL, as a strong financial institution, has supported its clients during 2020 on its own and through the government stimulus package. The COVID-19 pandemic deeply affected the entire planet, changing everyone’s priorities. There is, however, one priority that remains unchanged for us, to keep our focus on personnel, on our customers and on the society where we operate. We will continue to improve our responsible business practices and exercise prudence to transform our businesses and our economies towards a greener and more sustainable future. These are goals that not only correspond to SJIBL principles and objectives but also set the foundation for generating value for our personnel and our shareholders. Finally, I would like to extend my sincere gratitude to all stakeholders for the trust, support and confidence given to us in the past year on our sustainability path. M Shahidul Islam Managing Director & CEO
  114. 115 ABOUT SUSTAINABILITY REPORTING This report illustrates how we bring our sustainability commitment to life through our activities ; it provides information about our economic, social, environmental and governance activities and commitments up to December 31, 2020. We have focused our reporting on issues which are of greatest importance to our stakeholders. We have identified Materiality and disclosed clearly in this report. A comprehensive overview of our impact and engagement is covered in the different parts of this report, highlighting our activities and the main operation. We have used all information and data of Shahjalal Islami Bank Limited in line with our reporting policies. In this report, we have also included an in-depth reporting showing the bank’s response to the Sustainable Development Goals (SDGs). Scope of this Report This report covers all significant economic, social and environmental impacts resulting from SJIBL’s activities in the financial year 2020. There is no significant change regarding scope, boundary or measurement methods and explanation of the effect of any restatement of information comparing to the previous report of the year 2019. Content and Boundary of this Report SJIBL defines content and boundaries of the report based on internal and external factors related to business operations as well as its essence and benefits. ●● Content comprises stakeholder inclusiveness, sustainability context, materiality, and completeness; ●● Quality comprises accuracy, balance, clarity, comparability, reliability, and timeliness. Material Issues for this Report Material issues are those that reflect our organization’s most significant environmental, social and governance impacts, or those that influence the assessments and decisions of our internal and external stakeholders. SJIBL’s identification process of materiality follows a sequence: IDENTIFY MATERIAL ASPECTS PRIORITIZE MATERIAL ASPECTS VALIDATE MATERIAL ASPECTS REVIEW To understand the current and emerging issues that matter most to our stakeholders and that will have the most material impact on our business, we conduct regular comprehensive assessment of the bank’s material issues. SJIBL ensures following material issues: Materiality Scope of internal impacts Scope of external impacts Good Governance Executives and Staffs of all business units All stakeholders Sustainable Financing Executives and Staffs of all business units Customers, shareholders, communities and society Inclusive Growth Executives and Staffs of all business units Shareholders, customers, communities and society Digital Transformation Executives and Staffs of all business units All stakeholders Cyber Security Executives and Staffs of all business units All stakeholders Risk management and crisis management Executives and Staffs of all business units Customers, shareholders, vendors, creditors In-House Environmental Management Executives and Staffs of all business units Shareholders, communities and society Sustainable Human Resource Development Executives and Staffs of all business units Investors and customers Corporate Social Responsibility Management and SJIBL Foundation Communities and society Stakeholders Engagement Management All stakeholders Shahjalal Islami Bank Limited
  115. 116 Sustainability Strategy of SJIBL Our sustainability strategy is illustrated through our sustainability framework . It is built on our values that underpin our foundation of stable and principle based banking practices. It revolves around integrating sustainability concept into our core business operations. This sustainability strategy helps us to adopt effective and immediate actions for contributing positively to the community and create value for our stakeholders. This strategy helps us to address the growing socio-economic and environmental challenges of today and tomorrow. Quality Approach Consequently, we have identified our sustainability advantage in respect of social and environmental aspects, in addition to the economic and ethical perspectives within our business strategy and daily operations. This represents our sustainability focus areas including responsible financing, employee empowerment, transparent reporting, system optimization and community cooperation. For each of the sustainability focus areas, a clear strategic objective was established to drive our sustainability effort in this respective area. This strategy has been optimizing our economic, environmental and social impacts and aligning the business conduct with our sustainability strategic approach. Ci�zenship Trust Commitment System Op�miza�on Team Work Empowerment Community Investment Transparency Transparent Repor�ng Our approach to Sustainability Community Coopera�on Responsible Financing Governance & Accountability Risk Management Sustainability Service Excellence Focus Areas Our Founda�on Our Values Customer Focus SJIBL and the Sustainable Development Goals Shahjalal Islami Bank Limited has a significant role to play in contributing to the Sustainable Development Goals (SDGs). We have been connecting our reporting to the SDGs, a 17 global goals set by the United Nations General Assembly in 2015 and a core part of the 2030 agenda for sustainable development. In this report, we outline in more details how our activities and sustainability approach relates and contributes to the SDGs. While our work covers almost all of the SDGs, we directly reference only those Goals where we have direct contribution. Engaging Our Stakeholders We are committed to engage regularly with our stakeholders as a way to understand their needs and ambitions that are core to our sustainability objectives. This enables us to respond to their expectations and priorities and use it as a cornerstone to our strategy. To better understand our stakeholders’ expectations, we regularly map their needs to capture our methods of engagement, identify priority issues for both the bank and the stakeholders, and track our response to these issues. ANNUAL REPORT 2020 SJIBL covers almost all SDGs in terms of its func�ons either directly or indirectly
  116. 117 Key Highlights – 2020 on Sustainable Banking Operations TOTAL CSR TK. 323.48 MILLION TAKA 4,779.20 MILLION TOTAL TAX PAID TO NATIONAL EXCHEQUER NUMBER OF TOTAL SCHOOL BANKING ACCOUNT 26,080 TAKA 752.58 MILLION TOTAL GREEN FINANCE OUTSTANDING TAKA 72,573 MILLION TOTAL SME FINANCE OUTSTANDING TOTAL 53 (RURAL & URBAN) AGENT BANKING BOOTH INTERNATIONAL AWARD FROM UK ON SUSTAINABLE BANKING PRACTICE NO INVESTMENT ON TANNERY& CONVENTIONAL BRICK FIELD WORKSHOP ON GENDER EQUALITY & SUSTAINABILITY HEAD OFFICE IN LEED CERTIFIED GREEN BUILDING BEARING COVID TEST & HOSPITALIZATION EXPENDITURE OF ALL INFECTED EMPLOYEES BY THE BANK MEETINGS AND TRAININGS IN DIGITAL PLATFORM THROUGH ZOOM FOR COVID 19 Sustainability in SJIBL Sustainable development has been recognized as a potential roadway to build resilient societies, reduce poverty and safeguard the natural environment. This represents a demand for greater social and environmental responsibility as well as a new landscape of business opportunity for the private sector. Shahjalal Islami Bank Limited (SJIBL) has made sustainability as an integral part of day-to-day work, and is continuously improving the environmental and social performance of operations - which we commonly refer to as our corporate footprint. At SJIBL we believe that any growth should meet the requirement of today’s generation, without hampering future generations’ ability to meet their own necessities. We are committed to ensure ethical, social and environmental criteria that are diligently followed while conducting business and making business decisions. The bank has been working ardently to fulfill Sustainable Development Goals (SDGs) of the United Nations which include inclusive growth, poverty reduction, Gender Equality, Climate Action, Sustainable Cities and Communities, Good Health and Well-Being for People and Quality Education. CSR, Green Banking and Financial Inclusion are the three major banking tools to address Sustainable Development Goals (SDGs) for which SJIBL is very caring of all three of them. CSR & Zakat Opening No-Frill Accounts for unbanked people Digitaliza�on for Paperless & fastest Banking Contribu�on to Na�onal Exchequer (TAX & VAT) SJIBLS SUSTAINABILITY AT A GLANCE Agent Banking for financial inclusion Sustainable Finance Health & Safety like taking COVID precau�on in all 132 branches and Head Office Shahjalal Islami Bank Limited
  117. 118 Environmental Sustainability To achieve long-term sustainable development , we must responsibly manage environmental and social (E&S) risks. Rapid urbanization and industrialization help to improve the livelihood of the human beings. Simultaneously, it creates strain on natural resources, such as energy, water and food supplies. Our planet’s ability to meet the growing demand of natural resources may be depleted if we don’t become environment-conscious. We introduced certain procedures and templates to assess our Environmental & Social (E&S) Risk which has been further improved every year. As a continuous process, E&S structure being updated to cope with different advancements and get the best output in terms of good investments. ●● Environmental & Social risks are considered in all of our investment proposals, where appropriate. ●● All investment proposals are taking into account of local laws and regulations and internationally acceptable environmental and social standards where these are more stringent. ●● Risks associated with both environmental and social issues are being properly recognized, evaluated and where appropriate mitigated. ●● Appropriate procedures are designed to meet these policy requirements e.g. project finance proposals are assessed in accordance with international best practices. Power, water and other resources consumption management SJIBL believes that every small ‘GREEN’ step taken today would go a long way in building a greener future and that each one of us can work towards a better global environment. Through proper planning and management, SJIBL has ensured minimal wastage of natural resource. We finance business that invests in renewable energy or simply suggests our employees switch their lights off after office hours, use daylight instead of electrical lights, turn of all air-conditioned after 6 pm, going towards paperless office work and so on. Climate change & carbon footprint Climate change has become a global concern as it has direct impact on biodiversity, agriculture, forestry, water resources and human health. People across the world now admit that Bangladesh is one of the major victims of climate change. Banks, like all other companies, produce greenhouse gases (GHG) directly or indirectly (through financing of clients and projects that generate GHG gases) from their activities. As a corporate citizen and environmentally-responsible financier, SJIBL has introduced green banking not only to help to save the environment but also for a sustainable economic growth. developed fast and user friendly digital services for customers such as SJIBL Net (Internet Banking App), introduction of e-Account Opening, 24/7 Call Center, etc. Financial system of the entire world is changing very quickly. This is also true for Bangladesh’s banking industry as most of the financial transactions will take place digitally in near future. SJIBL is ready for the transformation. Service excellence & customer satisfaction SJIBL is improving its customer relationship model every year with the aim of offering the finest products and services as and when required. SJIBL treats every customer very important and provides him/her customized and personalized services according to their need. Thus the Bank has become the centre of trust and happiness for its customers among the Islamic Banks of Bangladesh. Employees Quality of working relationships, healthy work-life balance, recognition of the performers, and continuous investment in people differentiates SJIBL as a Superior Employer. If employees feel proud of belonging to SJIBL and are more committed, they will be able to earn the lasting loyalty of our customers. Diversity and equal opportunity are the key driving force in terms of employment in SJIBL. People with diversified knowledge help the bank to do sustainable banking and create an atmosphere which promotes innovation. Green Banking training is mandatory for all newly joined staffs in SJIBL. For our employees to have in-depth understanding on Green Finance, we have introduced ‘Sustainable Finance Training’. In 2020 a total of 500 staffs have attended in Sustainable Finance Training. We have a comprehensive remuneration platform based on our HR policy. It combines a fixed salary that reflects the individual’s role and level of responsibility along with other benefits. In addition, the bank also offers provident fund, gratuity, benevolent fund, superannuation fund, house building safety net scheme, incentive bonus and medical benefits for employees and dependents. SJIBL strictly follows the labor laws for the country in terms of remuneration, working environment, employee benefits, working hours etc. Economic Sustainability ●● Investment outstanding in SME Tk. 72,573 million ●● Employee benefit paid Tk. 3,001.85 million ●● Dividend paid to shareholders Tk. 1,176.11million ●● Tax, VAT, and Excise Duty paid Tk. 4,779.20 million ●● CSR Activities Tk. 323.48 million Social Sustainability ●● Zakat paid Tk. 160.98 million Community investment SJIBL also contributes to economic and social development through initiatives and programs that support the community. At SJIBL, we believe that the most rewarding investment is investing for the society. We believe in creating long-lasting value for our customers, shareholders, and employees and above all for the community we operate in. A detailed report on CSR has been presented separately in the annual report. Disbursement in Sustainable Finance Green Finance Digital transformation In Bangladesh, SJIBL is one of the leading Islamic Bank that provides digital banking services to its customers. The Bank has started its digital services through internet banking. We have VAT ANNUAL REPORT 2020 Year 2020 Tk. 514.32 Million Sustainable Agriculture Finance Tk. 4,996.30 Million Sustainable SME Finance Tk. 4,317.99 Million Total Sustainable Finance Tk. 9,828.61 Million Contribution to National Exchequer Income Tax Other Duties and Taxes Total Contribution to National Exchequer Year 2020 Tk. 4,151.57 Million Tk. 309.35 Million Tk. 318.29 Million Tk. 4779.20 Million
  118. 119 CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility (CSR) refers to self-regulatory mechanism whereby a bank ensures its active compliance with the spirit of the law, ethical standards and national or international norms. As an institution that has embraced a holistic approach to sustainability, it follows the ‘3P’ concept of ‘people, planet and profit’ under the ambit of its CSR aspirations and goals. On the other hand, CSR cycle follows four steps ranging from defining objectives & strategy to implement and subsequent review: Triple Bo�om Line Planet People Profit CSR Implement & Review CSR Assessment CSR Cycle CSR Objec�ves CSR Strategy CSR is mainly about the awareness of and actions in support of environmentally sustainable social development. SJIBL’s CSR activities have been targeted at integrating economic, environmental and social aspects. CSR is a voluntary process of activities by businesses. It essentially reflects one of the core values and commitments to social, environmental and community objectives. As such, CSR is now widely recognized and appreciated as a positive tool to help promote sustainable development. In both developed and developing countries, the businesses are, therefore, now found to be pro-active about embracing CSR in their operational activities. There are new conceptual variants of CSR in the present times. New phrases like ethical business, socially responsible behavior, sustainability, triple-bottom line, social innovation, benefit corporations, social business etc., have been put into practice. SJIBL has its own guiding principles for CSR. GUIDING PRINCIPLES FOR CSR ACTIVITIES OF SHAHJALAL ISLAMI BANK LIMITED The income divide is deep and further deepening in the world. In some countries, the collective wealth of the billionaires is more than the country’s budget. In Bangladesh too, the income divide is stark and the national per capita GDP does not truly reflective the living standards of the vast swathes of the poor in the country. To address this discrimination, SJIBL run its CSR activities with special emphasis upon povertystricken rural areas. SJIBL is continuously pursuing its Corporate Social Responsibility (CSR) activities with utmost importance. We have espoused and embarked upon diverse activities particularly in the areas of education, poverty alleviation, healthcare, national and sponsoring environment friendly initiatives for the greater benefit of present and future generations. CSR for environmental cause As part of going green SJIBL emphasizes upon quantification of in-house facilities and energy consumption to promote paperless office and enhance energy efficiency. Greater emphasis on green banking projects is being given for quantification of in-house facilities and energy consumption to promote paperless office and enhance energy efficiency. We recognize that the policies and practices we adopt today will shape not only our lives but also those of future generations. Due to COVID 19 no tree plantation program was arranged in the year 2020 but workshop on Green Banking and Environmental awareness was organized using digital platform. Strategic CSR/CSR within business CSR influences the corporate culture and employees’ behavior. The influence of corporate culture on employee behavior results in the development of better-working environment and employees’ Shahjalal Islami Bank Limited
  119. 120 commitment . Apart from direct effect of CSR, Shahjalal Islami Bank also promotes strategic CSR which has indirect effect where projects are promoted not for profit but mainly for social benefit. SJIBL promotes inclusive growth where profit is sacrificed in many cases by giving free service. The objective behind SJIBL’s promotion of 10 taka, 100 taka no-frill accounts as well as school banking accounts is financial inclusion instead of earning profit. SJIBL runs free financial literacy campaign not for profit but to promote financially educated society. Though free financial literacy campaign was suspended due to COVID 19, no-frill account opening continued throughout the year 2020. In-House CSR Activities Community Growth The Bank is providing medical support to the father, mother, Community Investing (CI) for growth is a subcategory of socially responsible investing, and it aims to earn returns for investors while contributing to noble causes. Shahjalal Islami Bank makes community investments. SJIBL donates for education, sports, culture and economic growth in different areas of Bangladesh. In 2020, SJIBL has donation of Tk 323.48 million for CSR activities of the Bank. Bank. SJIBL education scholarship includes employee’s children Sustainable Finance Department of Bangladesh Bank has issued circular latter no.06 dated 31 December 2020 which has mentioned following activities as In-House CSR activities: ●● Scholarship for employees’ children ●● Medical facilities for employees’ dependents ●● Safety measures in the workplace/office. spouse and children of each permanent employees of the apart from general people. This scholarship is given from superannuation fund. SJIBL ensures safe and secure working environment in all of its premises. Moreover, Head Office of SJIBL is a LEED certified green building. Objectives of SJIBL Foundation Shahjalal Islami Bank Limited believes that CSR is not only a charity but also an instrumental investment to achieve sustainable & inclusive growth. The objective of SJIBL Foundation is to benefit all stakeholders rationally so that welfare can be ensured in a balanced way. CSR of SJIBL mainly comply with following SDG Goals: NO POVERTY ZERO HUNGER Since inception in the year 2006, SJIBL Foundation has been working for improving the living standards of under-privileged segment of the society. The Bank’s branch networks dispersed across the country engages with their respective communities by being an active partner in the social and trade related activities in the localities while responding with empathy at times of crisis Develop Customer Loyalty Increase media coverage CLIMATE ACTION caused by natural disaster, weather phenomena, etc. SJIBL Foundation also dedicates funding and support towards worthy and charitable causes throughout the year guided by the Bank’s CSR policy which determines the parameters for Corporate Social Responsibility (CSR) activities of the Bank. Promote healthy corporate culture Why SJIBL invest in CSR Improve rela�on with all stakeholders ANNUAL REPORT 2020 QUALITY EDUCATION GOOD HEALTH AND WELL-BEING Value addi�on with brand image
  120. 121 For SJIBL , CSR is seen as a long-term investment – in people, the community and society as a whole. To achieve greater scalability, this organization endeavor to streamline its CSR programs in line with the United Nations SDGs. The main objectives of SJIBL foundation are as follows: ●● To implement Sustainable Development Goals (SDGs) of United Nations. ●● Contribute towards establishment of human rights in the society. ●● To extend support towards conservation, promotion and protection of environment and natural resources. To provide financial support for establishing religious institutions of the country. ●● To provide health-care to poor and distressed people. ●● To provide education support to meritorious but poor students through scholarship. ●● ●● To provide financial assistance to flood, cyclone or disaster affected people. Sectors for CSR ●● To support humanitarian causes like blanket distribution. ●● To provide financial assistance for development of culture, sports of the country. ●● To participate in social and environmental activities to promote green economy. Particulars of CSR by SJIBL Considering the corona virus pandemic, Bangladesh Bank has modified its CSR circular and instructed all scheduled banks to spend 60% out of total CSR yearly budget on Healthcare sector, 30% in Education and 10% on Environment purpose for the year 2020. Banks are also encouraged by regulatory body to help healthcare sector by buying PCR machine, ventilator machine and oxygen cylinder for corona patients’ treatment. As per Bangladesh Bank circular SJIBL made CSR in the following sectors: Year-2020 (in million) Year-2019 (in million) SDG Relevance Education 39.05 52.40 GOAL 4: Quality Education Healthcare 7.46 5.69 GOAL 3: Good Health and Well-being Environment & Disaster Management 67.14 10.81 GOAL 13: Climate Action Blanket Distribution 56.08 127.34 GOAL 13: Climate Action Others Including PMs Relief Fund 153.75 23.93 GOAL 1: No Poverty Total 323.48 220.17 Education It is said that education is the passport to the future and future belongs to those who are prepared for it. Education is also considered the most powerful weapon to change the world. Keeping this view in mind, Shahjalal Islami Bank Limited has long been awarding scholarship to meritorious students, helping development of educational infrastructure and providing essential educational equipment etc. In order to maintain social distancing amidst COVID 19, SJIBL foundation organized scholarship awarding ceremony in November 2020 in a very limited scale by inviting only 10 students, however scholarships were given as usual to 500 number of poor and meritorious students through their bank accounts. SJIBL has been making education related CSR to poor and meritorious students gradually till completion of their study. This is more effective being helpful for students to end their full course of study. Moreover, the Bank has also made education related CSR to the educational institutions for development of their infrastructure. Healthcare Healthcare is not a privilege, it’s a fundamental right just like other civil rights. Health is one of the prime parameters to achieve Sustainable Development Goal (SDG). The need for health care is increasing everyday due to rapid growth of population. SJIBL has Virtual workshop on CSR and Gender Equality Shahjalal Islami Bank Limited
  121. 122 been donating to different health care institutions to facilitate health care for poor people . SJIBL makes two types of healthcare related CSR: ●● For curative healthcare like donation for COVID patients. ●● For preventive healthcare like funding for disease prevention. Due to COVID 19 pandemic, the government prioritized healthcare over anyother activities and SJIBL emphasized curative healthcare over preventive healthcare in 2020 since COVID vaccine was marketed in 2021 worldwide. Environment & Disaster Management It is our individual and collective responsibility to preserve the earth where we live. Economic growth should not be allowed to achieve at the cost of environment. In line with that, CSR from SJIBL is given for the purpose of environmental protection or to Healthcare CSR Educa�on Environment & Other Purposes During the year 2020 the bank spent CSR of Tk.7.46 million for healthcare purpose which is far greater than last years spending on healthcare CSR. build green economy. Besides, disaster management for cyclone or flood affected area is also considered under Environment related CSR. Regarding environment and disaster management two types of CSR are common: ●● Tree Plantation ●● Blanket Distribution Tree Plantation by SJIBL Pabna Branch Rice distribution During COVID-19 in greater Faridpur area During winter season, blanket distribution programs are usually arranged while tree plantation programs are organized from May to July of each year. In the year 2020 the bank has incurred CSR of Tk. 67.14 million for Environment & Disaster Management purpose. Blanket distribution among poor people of Noakhali by Managing Director of SJIBL ANNUAL REPORT 2020
  122. 123 CSR in the year 2020 and 2019 ●● Donation for national issue and to address any national disaster. ●● Donation for international issue through PMs relief fund. CSR Preference of SJIBL Educa�on Healthcare Environment Blanket & Disaster Distribu�on Management Year 2019 153.75 56.08 10.81 7.46 5.69 67.14 127.34 39.05 52.4 As a responsible organization of the society, Shahjalal Islami Bank Limited believes that what is happening inside the company is felt outside by customers and other stake holders. SJIBL has been contributing for the development of sports, arts and culture in Bangladesh by giving donation to different cultural & sports institutions, promoting cultural activities etc. It has also contributed for women empowerment. SJIBL gives CSR as Humanitarian Assistance under two major consideration: (Taka in million) Year 2020 23.93 Other Aspects of CSR Others including PM’s Relief Fund CSR and its End use monitoring SJIBL Foundation has been monitoring proper utilization of the CSR assistances for the intended purposes. End use monitoring is done by the bank in the following manner: Educa�on Scholarship for poor but meritorious students Climate Risk Related CSR in the form of Tree Planta�on and Blanket Distribu�on ●● In case of CSR assistances to institutions/organizations, the SJIBL Foundation of SJIBL checks Memorandums of Understanding (MOUs) of the assistance recipient organization for confirmation of end use. ●● In case of assistance to individuals, the Foundation collects and files reports/documents to ascertain proper end use and withhold the assistance in unsatisfactory cases. ●● The Board of Directors of Shahjalal Islami Bank Limited reviews reports of CSR allocation and end use monitoring annually before approving fresh CSR allocations for subsequent years; and all end use monitoring records are kept available for inspection by internal and external audit as well as by Bangladesh Bank officials. Healthcare related CSR to Government Hospitals CSR in different areas instead of area biasness Beneficiary of CSR SJIBL distribute CSR both to organizations/institutions and individuals. In case of donation to organizations/institutions, it is not always possible to track the exact number of beneficiary. Like other organizations, SJIBL CSR considers two issues simultaneously: CSR through PMs Fund CSR to under privileged ●● Number of beneficiary of CSR ●● Amount contributed as CSR/Donation The number of individuals and institutions/organizations that have been benefited from the CSR of SJIBL in 2020 are as follows: Sector of CSR Number of Individual Beneficiary Number of Institution/Organization as Beneficiary Education 1,443 12 Healthcare 27 4 Environment 13 - Blanket Distribution 1,63,488 - Others 229,333 16 Total 230,816 32 Shahjalal Islami Bank Limited
  123. 124 CSR EXPENDITURE OF THE BANK Educa �on Tk. 39.05 Million Others Including Pms Relief Fund Tk. 153.75 Million Health Care Tk. 7.46 Million TOTAL CSR OF 2020 TK.323.48 MILLION Environment & Disaster Management Tk. 67.14 Million Educa�on TK. 52.4 Million Others Including Pms Relief Fund TK. 23.93 Million Blanket Distribu�on Tk. 56.08 Million Healthcare Tk. 5.6 Million TOTAL CSR OF 2019 TK.220.17 MILLION Environment & Disaster Management TK. 10.81 Million Blanket Distribu�on Tk. 127.34 Million CSR related Case Study MBBS student of Dhaka Medical College with SJIBL’s educational CSR Sakib Al Hasan’s village home is at Basati, Thana-Fulpur, Dist- Mymensingh. Sakib’s father is a small farmer with very small earnings. After completion of HSC from Syed Nazrul Islam College, Mymensigh he was selected in a competitive exam to get enrolled into Dhaka Medical College as MBBS student. His father was unable to carry out the expenses of his higher education. He came to know the scholarship of SJIBL and he applied for the scholarship to complete his MBBS degree. Considering his merit as well as family hardship, SJIBL Foundation decided to award him scholarship to run his MBBS degree in Dhaka Medical College in 2016. He is now a third year student who has been studying smoothly under SJIBL Scholarship Scheme. SJIBL Scholarship makes one’s dream of studying from University of Dhaka come true Apart from scholarship for medical and engineering students, education CSR of SJIBL also covers students of general education. One such example is Sharmin Akter who was born in a poverty striken family in Charbhodrason, Faridpur. Sharmin has been passionate about her studies and had dreams of studying from University of Dhaka, Oxford of the East. Her father, Md. Shahid Munshi has to maintain a family of five members with a small amount of Tk.60000 yearly income. Through competitive varsity admission exam she got the opportunity to study in the University of Dhaka. As such, she needed additional financial support since her fathers financial back up was not enough to continue her study at all. One of her relatives referred her to the country’s reputed scholarship program that supports students - from college to post-graduation. SJIBL’s stipend proved game changer for Sharmins life. Today, Sharmin has been on her way to complete graduation from Dhaka University and stipend money of SJIBL works as true back-up to bear her educational expenditure. She opined: “Without SJIBL stipend I would have to do private tuition heavily to manage the additional money which could have disturbed my study.” ANNUAL REPORT 2020
  124. 125 ENVIRONMENT RELATED INITIATIVES THE FOLLOWING SDG GOALS OF UNITED NATIONS HAVE BEEN COMPLIED BY SJIBL ’S ENVIRONMENTAL INITIATIVES AFFORDABLE AND CLEAN ENERGY INDUSTRY, INNOVATION AND INFRASTRUCTURE RESPONSIBLE CONSUMPTION AND PRODUCTION Shahjalal Islami Bank Limited believes that every small ‘GREEN’ step taken today would go a long way in building a greener future. In line with SFD Circular No. 02 dated: 01 December 2016 of Bangladesh Bank, the Sustainable Finance Unit (SFU) of Shahjalal Islami Bank Limited has been formed which is responsible for ensuring the integration of Environmental and Social Risk Management (ESRM) into Investment Risk Management as SUSTAINABLE CITIES AND COMMUNITIES CLIMATE ACTION part of core risk of the Bank. The operational responsibility lies with the Head of Sustainable Finance Unit nominated by the Managing Director. SFU is supposed to ensure environmental compliance both inside and outside of SJIBL in all its activities. The work process of Sustainable Finance of SJIBL mainly divided into 03 parts: STEP-1 STEP-2 STEP-3 SJIBL Sustainable Finance Unit (SFU) SJIBL Sustainable Finance Committee (SFC) SJIBL Risk Management Committee (RMC) SJIBL is creating sustainable business by integrating sustainability into all products and services. SJIBL has designed its products and services ensuring the environmental benefit in the economy and society. The products, services and investment of the bank play an important role in the lives of individuals, business and communities. Our Bank extends investment facility to clients whose business activities lessen ecological damage, endorse energy efficiency and support communities who are vulnerable to climate change. By doing so, we ensure that we constantly meet our stakeholders’ business needs and maintain customers’ trust and business continuity. As such, the bank also contributes for socio-economic development of Bangladesh. The following initiatives have been taken by the bank for sustainable business environment. Shahjalal Islami Bank Limited
  125. 126 Refusal to do business with clients who are damaging environment Regulatory paradigm shift from Green Product financing in to Sustainable Financing Selection of good borrower in respect of compliance & sustainability Sustainable Finance including Green Finance Reduction of unnecessary energy consumption (Electricity, fuel, water) Green Finance only Reuse of paper, different printing stationary items Usage of renewable energy in branches and Head Office Digitalization of banking operation so that customers can do banking from home Refining processes to increase efficiency Compliance of Department of Environment (DOE) Environmental & Social Risk Rating (ESRR) of Bangladesh Bank Environmental and climate change risk refers to the uncertainty or probability of losses that originates from any adverse environmental or climate change events (natural or manmade) and/or the non- compliance of the prevailing national environmental regulations. This is a facilitating element of investment risk arising from environmental issues. These can be due to environmental impacts caused by the prevailing environmental conditions. If un-addressed, environmental and climate change risk can hamper the business stability of the investment client in respect of both- i) profitability and ii) reputation. As such, Shahjalal Islami Bank Limited deals environmental and social risk issues mainly in two major parameters: 1) DOE (Department of Environment) Categorization for Business ●● Green ●● Orange-A ●● Orange-B ●● Red business. 2) Environmental and Social Risk (ESR) Rating Criteria of Bangladesh Bank for investment ●● Low Risk ●● Moderate Risk ●● High Risk SJIBL always monitor the business of its investment clients and inspire them to shift from High Risk business to Low Risk business by complying all the requirements of Bangladesh Bank and Department of Environment. ANNUAL REPORT 2020 Previously Bangladesh Bank determined 52 green products for all scheduled banks and only financing there was considered as green finance. These 52 green products fall under following criteria: ●● Renewable Energy ●● Energy Efficiency ●● Alternative Energy ●● Waste Management ●● Green Brick Manufacturing ●● Green Establishment ●● Ensuring Work Environment & security of Workers. ●● Vermicompost, Palm Oil Plant etc. Sustainable Finance Department of Bangladesh Bank has issued a new circular letter no.06 dated 31 December 2020, which has specified following sustainable products from 2021 and onward: Jute made products Cane made products Biodegradable Waste Bag, Biodegradable Garden Pots, Biodegradable Toilet Towels, Biodegradable Tissue and Biodegradable Female Hygiene Reusable Grocery Bags, Reusable Coffee Filters, Reusable Non-Plastic meal Preparation Container, Reusable Coffee Cups Recyclable Goods, Recyclable Floor Mats, Rechargeable Batteries etc.
  126. 127 Besides , a new concept of Socially Responsible Finance has been introduced by this circular that included followings: ●● Community investment to address climate resilience ●● Financing in Green/ Clean Transport Projects (Cycles or vehicles run on solar, electricity etc.) ●● Financing in climate vulnerable zone ●● Financing in government approved eco-tourism project ●● Financing in MFI/NGO linkage mode for employment generation or self-employment ●● Financing in Orphanage/ Child Rehabilitation Center/Old Home The above expansion of green products category is a paradigm shift of regulatory body from previous 52 green product category into the comprehensive aspect of sustainable finance which will embrace green finance, sustainable agro-finance, sustainable SME Finance, financing cottage industry and Socially responsible finance altogether. From 2021 and onward instead of merely green finance, sustainable finance will be center of focus from all policy making to report and comply regulatory requirement of Bangladesh Bank. Sustainable Finance (As per new circular of Bangladesh Bank) Green Finance Sustainable SME Finance Sustainable Agro-Finance Financing Co�age Industry Socially Responsible Finance As per Guidelines of Bangladesh Bank, Shahjalal Islami Bank Limited has green finance in following sectors: Solar Home System Solar Irriga�on Pump LED Bulb/ Tube light Assembly Plant Biological Effluent Treatment Plant (ETP) Biological & Chemical Technology Combined Effluent Treatment Plant (ETP) Plas�c Waste Recycling Plant Assembly Plant Waste Paper Recycling Plant Modern Zigzag Brick Field Green Industry or Green Factory Vermicompost or Bio- Fer�lizer Fire Ex�nguisher, Fire Door & other Fire Equipment Shahjalal Islami Bank Limited
  127. 128 From 2021 SJIBL , however, will calculate green finance as well as sustainable finance as per new circular requirement of Bangladesh Bank. In that case, cottage industry finance, a substantial portion of SME Finance, Agriculture finance and all socially responsible finances as specified by Bangladesh Bank under the umbrella term “sustainable” will be considered in future. Green Finance Status of SJIBL in 2020 As per revised SFD circular No.05 dated 09 September 2020 of Bangladesh Bank, each scheduled bank has to disburse 5% Funded Green Finance out of total Term Loan/ Term Investment disbursement each year. In light of this new Bangladesh Bank circular, progress in investment of Green finance of SJIBL in the year 2020 is as follows: BDT in Million Particulars Term Investment-Disbursement Green Finance- Disbursement Green Finance Disbursement as % of total Term Investment Disbursement Mar, 2020 June, 2020 Sept, 2020 Dec, 2020 Total in the year 2020 1,953.62 2,705.19 2,480.70 1971.65 9111.16 198.36 57.38 110.80 147.78 514.32 10.15% 2.12% 4.47% 7.5% 5.64% In Green Finance reporting we considered fifty two (52) green products as specified by Bangladesh Bank’s earlier circular. SJIBL monitors and evaluates Green Finance Growth from three (03) main perspectives: ●● Growth of Green Finance in Disbursement ●● Growth of Green Finance in Outstanding (Cumulative) ●● Growth of Green Finance in Client Number Yearly Growth of Green Finance Disbursement (Taka in million) 514.2 402.1 2019 Cumula�ve Oustanding of Green Finance Apart from usual investment/ credit risk rating, scheduled banks are supposed to do environmental and social risk rating (ESR) as per regulatory requirement of Bangladesh Bank for the following sectors/cases: 2020 (Taka in million) 1005.85 752.58 2019 Number of Client of Green Finance The downward move of Green Finance (as shown above) in terms of outstanding from the year 2019 to 2020 is the result of lesser investment demand due to COVID 19 pandemic that impacted banking industry severely since March 2020 and onward. As investment in all other sectors experienced declining trend, so was green finance. However, Sustainable Finance Unit (SFU) of the Bank tried to retain existing green finance that were given on revolving basis so that achievement against green finance target could be maintained to fulfill regulatory requirement. As a result, disbursement and client number of green finance increased compared to last year. However, SJIBL achieved target of green finance disbursement in 2020. 2020 (Taka in million) 33 ●● Agriculture activities involving farming and crop production. ●● Small sector like washing, dying, re-rolling mills, brick kilns, pesticides, chemical, rubber, batteries and plastic product manufacturing ●● All Medium sector ●● All Corporate and Project Finance As such, Shahjalal Islami Bank Limited started Environmental & Social Risk Rating (ESRR) through ESRR Checklist in its investment proposals where applicable since 2012. In 2020, number of clients whose ESRR were made (as mentioned in below chart) were lesser than last year due to the overall downward growth of investment. Number of Investment Projects where Environmental & Social Risk Ra�ng (ERR/ESRR) is doen 222 181 31 2019 ANNUAL REPORT 2020 2020 2019 2020
  128. 129 Optimistically enough , among 181 investment accounts/ projects whose environmental and social risk rating was done prior to disbursement of investment in the year 2020, no high risk rated project was found. Again, the Bank has been working to develop MIS on environmental & social risk management so A dairy firm of a SME client financed by Rajshahi Branch of SJIBL after Environmental & Social Risk Rating was found low. Ethnic minority financing under SJIBL CMSME Investment Scheme In House Sustainability Sustainable Finance (SF) Status Of SJIBL Due to restriction by regulatory bodies banks cannot purchase buildings and other fixed assets above the limit set by Bangladesh Bank. As such, it is not allowed in most of the times to build up rain water harvesting system and waste management system in rented building used as banks branches. However, SJIBL authority has established rain water harvesting system and waste management system at the branch located in banks Head Office building. At present, SJIBL has 19 solar powered branches. In addition, SJIBL Training center has organized training and workshop on Green Banking as well as environmental awareness on routine basis. Due to COVID 19 pandemic, SJIBL employees attended trainings and workshops in digital platforms like zoom in BIBM, BBTA and banks own training academy. SF & CSR-QUALITATIVE & QUANTITATIVE Year Number of Workshop Organized on Green Number of Banking by SJIBL Training Academy Participants 2018 12 360 2019 12 360 2020 01 500 Though number of training was only 01 in the year 2020 for COVID 19, maximum 500 trainees participated in zoom –based training held on December 2020 which was organized by SJIBL Training Academy and conducted by Bangladesh Bank. According to new circular letter no.06 dated 31 December 2020 issued by Sustainable Finance Department of Bangladesh Bank, Sustainability Rating will be done like CAMELS Rating to judge banks on some subjective and objective criteria from 2021 & onward and as such different sustainability criteria will be measured some of which are as follows: that any risk arising from environmental and social issues can be detected and addressed immediately. BDT & Million SUSTAINABLE FINANCE-QUANTITATIVE Green Finance 31 Sustainable Agriculture 244 Sustainable SME 108 Socially Responsible Finance Total No of borrowers in Sustainable Finance (SF) Green Finance Sustainable Agriculture 383 1 20 Sustainable SME 7 Socially Responsible Finance - Total No of Women borrowers in Sustainable Finance (SF) Green Finance 28 514.32 Sustainable Agriculture 4,996.30 Sustainable SME 4,317.99 Shahjalal Islami Bank Limited
  129. 130 SF & CSR-QUALITATIVE & QUANTITATIVE Socially Responsible Finance Total Disbursement in Sustainable Finance (SF) Green Finance Sustainable Agriculture Sustainable SME Socially Responsible Finance Total NPI in Sustainable Finance (SF) BDT & Million SJIBL Status - Any decision taken by the Board/ SMT in SF? No 9,828.61 Any decision taken by the Board/ SMT in GF? No 0.49 83.48 83.97 Sustainable Finance (SF) as % of Total Loan Disbursed 8% Number of Borrowers with SF as % of Total Borrowers 2% NPLs in SF as % of Total NPLs 1% IN HOUSE GREEN BANKING PRACTICES Electricity Consumption in 2020 per employee (in million Taka) 0.03 Water Consumption in 2020 per employee (in million Taka) 0.001 Paper Usage in 2020 per employee (in million Taka) 0.002 Transport expenses for official purpose in 2020 per employee (in million Taka) 0.01 Electricity Consumption in 2019 per employee (in million Taka) 0.03 Water Consumption in 2019 per employee (in million Taka) 0.001 Paper Usage in 2019 per employee (in million Taka) 0.002 Transport expenses for official purpose in 2019 per employee (in million Taka) 0.004 Any decision taken by the Board/ SMT in Green Banking activities other than GF? Any decision taken by the Risk Management Committee of Board/ SMT in SF? Green Investment (in million Taka) N/A Total Investments (in million Taka) N/A Green Equity (in million Taka) N/A Shareholders’ Equity (in million Taka) N/A No No MIS for SF? No MIS for CRF? No Review the SF policies/strategies as per ICC guidelines of BB? No Steps taken for capacity building of employee? Yes Steps taken for awareness building of customers? Does the institution’s website contain a specific section separated for Sustainable Finance/ Banking related issue? Does the institution’s annual report contain a specific section separated for Sustainable Finance/Banking related issue? SJIBL CSR Status Due Diligence check list for CSR project? IN HOUSE GREEN BANKING PRACTICES ANNUAL REPORT 2020 SUSTAINABLE FINANCE-QUALITATIVE Any undue intervention by the BoD for CSR approval? Penalty imposed for non-compliance of CSR issues? Minimum (20%) women employees in the work place? Separate transportation facilities for women employees? Harassment policy in the work place, reviewed or not? Participation in Daycare Center; Own/ Combined? Minimum (25%) of CSR Expenditure in rural areas? Yes Yes Yes SJIBL Status Yes No No Yes No Yes No Yes CSR Activities Disclosed in Annual Report? Yes CSR Activities Disclosed in Print/Electronic Media? Yes Scholarship for employee’s children? Yes Medical facilities for employee’s dependents? Yes Safety measures in the work place? Yes
  130. 131 Green Office Guide of Shahjalal Islami Bank Limited Shahjalal Islami Bank Limited has formulated Green Office Guide in 2015 which is meticulously complied by all branches . The Green Office Guide of SJIBL comprises following instructions to ensure reuse, reduce and recycle resources for cost minimization: Online communica�on for office management Double-side prin�ng to save paper Eco-font in prin�ng to reduce use of ink Use scrap paper as notepads Avoid disposable cups/glasses Energy efficient electronic equipment for office Installa�on of 'Power save Mode' in Computer Switching-off fans, lights, air coolers etc. during office exit Energy efficient electronic equipment for office Lesser Corporate Business Travel to save energy Encouraging employees to use rickshaw or walking for short distance Maximum u�liza�on of day-light for office Minimum u�liza�on of electric bulb in day �me Minimum use of AC during the rainy season and winter Keeping AC temperature at 24 degree in summer Encourage customers for e-statement and email communica�on Encourage the clients to use ATM cards instead of cheque books Adver�sing through electronic media avoiding the print media Tele conference and video conference to avoid travelling Reduce wastage of water Reduce usage of �ssue papers Leave the office in due �me Introduc�on of e-filing Use email instead preserving hard copies Develop corporate culture to check emails everyday among employees Start sending mee�ng invita�on, presenta�on and mee�ng minutes etc. in e-form instead of printed form Climate change has become a global concern since it has direct impact on biodiversity, agriculture, forestry, water resources and human health. People across the world now admit that Bangladesh is one of the major victims of climate change. Banks, like all other companies, produce greenhouse gases (GHG) directly or indirectly (through financing of clients and projects that generate GHG gases) from their activities. As a corporate citizen and environmentally-responsible financier, SJIBL has introduced green banking not only to help to save the environment but also to a sustainable economic growth. Shahjalal Islami Bank Limited
  131. 132 Major in-house environment related initiatives Reduction of GHG Emission and Resource Consumption of SJIBL in 2020 Energy Items Electricity Fuel for Generator Fuel for Car (Office) Per Unit Cost Tk.7.13each kilowatt hour 1 liter=.264 gallon & 90 taka=1 liter 1 liter=.264 gallon & 90 taka=1 liter  Total   Total Consumption in BDT in 2020 SJIBL has been running vehicles, generator by consuming fuel which causes Greenhouse Gas (GHG) emissions directly. Besides, the bank also accounts for indirect GHG emissions produced as a result of consuming electricity from the Bangladesh national grid. Measurement Scale Green House Gas Emission in Metricton Per Employee Green House Gas Emission in Metricton 69,331,848.49 9,723,961.92 kilowatt 6875 2.59 3,856,532.51 11,312.50 gallon 101 0.04 4,529,028.46 13,285.15 gallon 118 0.04 7094 2.67  77,717,409.46  https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator Bangladesh Bank has issued the following circulars from 2011 to 2020 for directing the Banks to minimize resource consumption and also to reduce GHG emission per employee: Year 2011 Circular for Environmental Risk Ra�ng for banks by Bangladesh Bank Particulars Number of total SJIBL ATM Card punched through SJIBL ATM Booth in 2020 Number of total SJIBL Credit Card punched in 2020 EFTN Quantity Consumption saved 737,826 Tk.3.32 million 42,663 Tk.0.19 million 1,361,166 Tk.6.13 million On the basis of cost of per page of MICR cheque book Tk.4.50 Year 2017 Circular for Social Risk Ra�ng along with Environmental Risk Ra�ng for banks by Bangladesh Bank Number of total Transaction Notification sent to customers through SMS in the year 2020 Number of total promotional SMS sent to customers in 2020 Email Delivered E-Statement of Credit Card 5,921,651 Tk.4.73 million 8,810,713 Tk.7.04 million 69,886,500 Tk.55.90 million 21,167 Tk.0.02 million On the basis of cost of per page of computer paper Tk.0.80 Total Consumption Saved=Tk.72.61 million Year 2020 Circular for Sustainability Ra�ng (like CAMEL Ra�ng) by Bangladesh Bank for all banks and FIs Eco-Friendly Operations The Bank has updated its governance structure in regard to sustainability by accommodating Bangladesh Bank’s latest directives to foster green governance. As part of constant commitment of SJIBL to adopt a quality approach, the bank continues to focus on reining its management systems across the business to include sustainability considerations. Consumption saved Tk.72.61 Million only through SJIBLs eco-friendly operations To keep pace with the fastest changing banking technology, we have been focusing on efficient use of technology and innovation. SJIBL has been moving for paperless banking with a view to reduce resource consumption: ANNUAL REPORT 2020 Solar panels at Bank premises Till date the Bank has installed solar panels at 19 branches as part of its commitment to the usage of renewable energy resources. Automated Teller Machine (ATM) In addition to the Bank’s own 110 ATMs, the Bank has joined National Payment Switch Bangladesh (NPSB) network which enabled the cardholders of the Bank to enjoy cash withdrawal facility from other ATMs under NPSB and Visa Network which are more than 2,485 ATMs. This network enables to save time and fuel consumption of our customers and paper consumption of our Bank. Internet Banking Service SJIBL Net With SJIBL Net, internet banking facility of SJIBL, customers of our bank can perform activities like: real-time fund transfers between own accounts of SJIBL, real-time fund transfer to third party beneficiary accounts of SJIBL, interbank fund transfer to other banks, credit card bill payment, utility bill payment, realtime balance enquiry, real-time account statement download, instant recharge of prepaid/postpaid mobile account of any local telecom operator etc.
  132. 133 E-Account Opening National Identity Card (NID) Verification System The Bank has been implementing E-Account Opening system by which customers will be able to open account from home. This valuable service will save huge time and fuel of our customers as well as papers and stationery of our Bank. National Identity Card (NID) verification service has enabled the option to verify the NID card of customers online. As prior to opening of any account NID verification is mandatory. Thus by using this service our Bank has reduced the possibility of fraudforgery and improved the banking service. 24/7 Call Center SJIBL Call Center has been providing sustainable quality services to its valuable customers via phone, email and live chat round the clock. Contract Number of Call Center is 16302. Now it has become the most popular service wing for Bank’s customers to meet their day to day banking needs. Real Time Gross Settlement (RTGS) SJIBL is one of those banks which have 100% coverage of RTGS through all of its 132 branches. Video Conferencing Video conferencing has been introduced among Head Office and other premises of the Bank in order to save business travel time and fuel by holding virtual meeting. Central Circular Management System SJIBL has also introduced Central Circular Management System for digitally disseminate and preserve all internal circulars of the bank which is a milestone in reduction of paper consumption. SJIBL Central Circular Management System LEED Certified Environment Friendly Head Office Recognition for Technological innovation Our head office is located in a LEED certified Green Building with utmost efficient utility, energy and resources systems. This LEED certified building exemplified our corporate identities and commitment towards environment through energy efficiency and water conservation. In terms of energy consumption, the building system significantly reduces cost incurred for energy. To maximize energy performance and reduce the impact on the environment from excessive energy the building has daylight harvesting, occupant sensing lighting control and energy efficient lighting. As a result, total energy consumption has been reduced by a significant level. Moreover, to maximize indoor water efficiency, the building utilizes water efficient fixtures. As a result, water consumption has been reduced significantly Reputed UK based International Finance Publications Limited awarded Shahjalal Islami Bank Limited for “International Finance Banking Award-2020” in “Best Islamic Card” category. International Finance awarded this prestigious award to banks and financial institutions around the world based on their overall performance, product popularity and satisfactory progress of their other indicators. Islamic Credit Card of Shahjalal Islami Bank Limited was awarded “Best Islamic Card” by International Finance for its high security and application of state of the art technology in the year 2020. Environmental & Social (E&S) Risk Management Capacity Building Due to COVID 19 pandemic in 2020, SJIBL organized only one (01) dedicated training on Environmental & Social (E&S) Risk Management through digital platform but total 500 of its employees have been participated in order to familiarize concept related to Environmental & Social Risk Management. Shahjalal Islami Bank Limited
  133. 134 Case Study of SJIBL Green Finance in ETP Mr . Md. Rayhan Uddin, Md. Monjurul Islam, Md. Musa, Md. Lutfur Rahman Khan commenced their partnership business in the name of Blue Jeans Washing Plant in 2013. Blue Jeans Washing Plant washes denim, canvas, knit, cord and twill of leading garments factories. Blue Jeans Washing Plant started their business in 2013. They work with different garments factories and buyer. Later their business was expanded, business volume had increased, and consequently, working capital and term investment was needed to construct ETP to fulfill regulatory requirement. The client informed our Tongi branch that, if they could install Effluent Treatment Plant (ETP) in this factory they would become a factory with full compliance and they would be able to book more orders at more competitive price. As a result, they are expecting that both quantity of production and return on sales will maximize. As such, they approached to Tongi branch of Shahjalal Islami Bank which allowed them HPSM-Machinery of Tk.3.00 million to install ETP at capacity of 10m3/hr for washing factory. Besides, Bai-Muajjal Commercial TR-Revolving (Working Capital) of Tk.2.00 million was approved for purchase raw materials for denim washing plant. Now Blue Jeans Washing is considered a compliant factory by regulatory bodies of Bangladesh. The ETP is fully functional and working well. Blue Jeans Washing Plant, anETP financed client by SJIBL, Tongi Branch Case Study of SJIBL Green Finance in Solar Panel by a Female Entrepreneur M/s. Masrur Trading Corporation is a client of our Bangshal branch whose business is located at Nawabpur Road. She is a successful woman entrepreneur, an importer and whole sale traders of solar panel and other solar instruments. She commenced her business from 1997. Mrs. Monowara Hossain (Joly), proprietress of the business concern approached SJIBL in 2014 for revolving Murabaha LC limit of Tk.40.00 million to import solar panel and different solar instruments from countries like China, Germany etc. This women entrepreneur also applied for Mudaraba Post Import TR (MPITR) of Tk.15.00 million on revolving basis to retire her LCs. Considering her track record as a sound female entrepreneur as well as to promote the growth of green economy of the country, the competent authority of the bank approved to disburse investment in her business. Since they were all approved as revolving facilities, this female business woman still has been running her solar business with finance from Bangsal Branch of SJIBL smoothly. In a word, M/s. Masrur Trading Corporation is an example of successful green financing as well as women empowerment by Shahjalal Islami Bank Limited. ANNUAL REPORT 2020 M/s. Masrur Trading Corporation, a solar panel equipment importer and trader run by a female entrepreneur of SJIBL, Bangshal Branch.
  134. 135 ENVIRONMENT AND SOCIAL OBLIGATIONS Converting paddy fields into industrial land , filling of water bodies for construction purpose, encroaching into forest lands to turn it into agricultural lands are some of the un-responded silent crimes for which social issue was raised side by side with environmental issue in the world. As SDG goals of UNO are mainly directed for environmental conservation and social protection, credit/investment operations of banks and FIs are supposed to be conducted addressing environmental and social risk issues adequately. As such, SJIBL investment personnel always consider such sensitive factors before investment client selection. While human beings suffered the worst since the outbreak of COVID 19 pandemic, nature and other natural creatures enjoyed the air of freedom in a care free mode. In a roundabout way, COVID 19 taught us how cruel nature can be, if human beings do not act more responsibly. In this new context, human obligations towards environment and society have become most talkedabout issue than ever before. ●● Implementation of Green Office Guide ●● Corporate Social Responsibility (CSR) with special emphasis upon healthcare ●● Green Strategic Planning to reduce carbon footprint in SJIBL ●● Ensure Gender Equality through female recruitment and empowerment Environmental & Social Risk Management ●● Replacement of child labor by adult labor ●● Setting up Green Branches ●● Preparation of Sustainability Reporting for stakeholders ●● Implementation of SDG Goals with special emphasis upon job creation and SME & Micro Finance to overcome economic impact of COVID 19 ●● Retention of existing Green Finance clients by renewal of investment facility ●● Awareness creation for COVID 19 ●● Popularizing home office instead of physical presence to ensure social distancing SJIBL always streamlines its efforts to look beyond short-term quantitative gains and concentrates on issues that make the institution socially responsible. Customer experience over the last couple of years has become the key competitive differentiator in banking. With a view to keep up with the changing customer expectations, SJIBL embraced emerging technologies and accordingly adopted evolving business models. However, due to COVID 19 following changes took place in 2020: ●● E-Attendance instead of Biometric Attendance. ●● Emphasis upon internet Banking and SMS Banking. ●● Email-Statement instead of hard copy of statements. ●● Video Conferencing instead of physical visit. At present, some social issues which Shahjalal Islami Bank limited has been addressing for all its stakeholders including itself to comply with ESRM Guideline of Bangladesh Bank as well as for all its vendors/ suppliers are as follows: ●● Zoom meeting instead of physical presence in meeting. ●● Training via Zoom. ●● Emphasis upon card-based transaction & transaction through digital wallet. Particulars SJIBL address Child Labor ●● Continuation of 24/7 days IT Support. Gender Inequality SDG Relevance GOAL 16: Peace and Justice Strong Institutions GOAL 5: Gender Equality ●● Introduction of home office by connecting through internet and mobile. Minimum Wage GOAL 10: Reduced Inequality Environmental & Social Agenda Maintaining an environmentally and socially clean portfolio naturally has impact in CAMELS rating, liquidity, capital requirements, credit growth and brand image. As such, Environmental & Social Agenda of Shahjalal Islami Bank limited in 2020 in light of COVID perspectives were as follows: Decent & Safe Work GOAL 8: Decent Work and Environment Economic Growth Protection of Indigenous People GOAL 15: Life on Land Manusher Jonno Foundation (MJF), a renowned local NGO conducted a national survey on violence against women during Covid-19. From May to July of 2020, women and adolescents faced the most violence and child marriage rates rose. The rise in child marriage shows a huge implication. Adolescents are the Shahjalal Islami Bank Limited
  135. 136 most vulnerable , and yet we have no system to support them through this difficult time. In this backdrop SJIBL organized workshop on Gender Equality which was participated by banks 500 employees. Besides, in 2020, no incident of gender discrimination and violation involving rights of indigenous people and child labor has been recorded in SJIBL. Moreover, our bank does not make collaboration with any stake holder that compromises with the compliance issues like gender right, minimum wage, safe work environment etc. The bank’s green banking initiatives include online and paperless banking, reduction of greenhouse gas emissions, efficient energy use, financing environment friendly projects, plant nursery, horticulture projects etc. Issues like gender equity, child & force labor, minimum salary structure and protection of the interest of indigenous people etc. are being addressed in every possible way so that the organization can have the title of truly sustainable from all stake holders of the society. Bank’s previous record confirms the followings: ●● Decline of investment in conventional brick field. ●● Monitoring issue of minimum wage & bonus to bank’s outsourced cleaners by concerned companies. ●● Nomination of banks suppliers on the basis of merit. ●● Enlistment of investment surveyors on the basis of market reputation. ●● Meeting with customers on issues related to social awareness. ●● License obtaining by each SJIBL branch separately to comply with Bangladesh Labor Law 2006 and Bangladesh Labor Rules 2015. ●● Observing factory work environment of different clients by our RMs on routine basis. Financial Inclusion through No-Frill Accounts Promoting financial inclusion in line with SDG Goal No. 9 namely “Industry, Innovation and Infrastructure” and SDG Goal No. 10 namely “Reduced Inequality” through providing access to affordable funding is central to the Bank’s economic objectives. Financial inclusion is facilitated through the Bank’s extensive network of customer contact points (Branches, ATM Booths & Agent Banking Booths) and Collateral free SME & Agriculture financing facilities targeted at the country’s most underserved segments and ongoing investments in financial literacy and capacity building programs. ANNUAL REPORT 2020 According to the World Bank, “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs— transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way.” Bangladesh Bank and the government have been extensively working to expand financial services for disadvantaged groups for the past few years, but it has been challenging to implement. This is due to low literacy amongst rural dwellers, lack of interest to open bank account and unavailability of bank branch in rural area. With a view to ensure mass peoples participation in formal economy Shahjalal Islami Bank Limited opens no-frill accounts with minimum balance ranging from 10 to 100 taka. Being No Frill accounts, no service charge is deducted from such accounts. In order to ensure inclusive growth of the society as per Sustainable Development Goals (SDGs) of the United Nations Organization (UNO), our Bank is also committed to include common people into banking network. At present SJIBL has following categories of No frill (10 & 100 Taka) Account: Mudaraba Street Urchin and Working Children Account Mudaraba Savings Leather Employee Account Mudaraba Savings School Banking Account No Frill Account (AC with 10 and 100 Taka opening balance) Mudaraba Savings Lacta�ng & Working mother Account Mudaraba Savings Garments Employee Account Mudaraba Savings Farmer's Deposit Account The objective of opening such no frill account is to bring entire population of Bangladesh under formal financial network gradually. Since SJIBL is committed to ensure mass peoples participation in formal economy, it emphasized on opening such 10 Taka & 100 Taka accounts regardless of any cost-benefit analysis: Number of 10 Taka & 100 Taka Accounts (Cumula�ve) 2051 1557 857 Mudarabaha Garments Employee AC Mudarabaha Farmer’s Deposit AC Mudarabaha Lacta�ng & Working Mothers AC Number of Accounts (Cumula�ve)
  136. 137 In addition , SJIBL has opened account for a remarkable number of garment workers as per instruction of Bangladesh Bank to disburse government benefit and workers’ salary through bank account at the earlier stage of pandemic. Ironically thus COVID 19 became blessing for financial inclusion of the country. Post COVID period will encourage bankers to open many such accounts which they were reluctant to open previously. In order to address present challenges for opening no-frill accounts and financial inclusion, SJIBL emphasized upon Agent Banking booth establishment so that people of under-banked areas can open no-frill accounts as well as normal saving accounts. SJIBL has arrangement with Bkash for fund transfer. The newly introduced SJIBL App-based service also has been helping to ensure inclusive growth since it enables customers to make transactions sitting at home. Financial Inclusion through School Banking Bangladesh Bank directed all the scheduled banks to start a financial inclusion policy for school-going students under the name of School Banking through BRPD circular number 12 on November 2, 2010. Slowly but steadily, many banks initiated the service for students. In this backdrop, SJIBL started to open School Banking Account in different educational institutions on regular basis. To popularize school banking, central bank introduced lead bank concept. So, Shahjalal Islami Bank Limited organized School Banking Conference as Lead Bank in different districts of the country: School Banking Conference Brahmanbaria Year-2017, Lead Bank-Shahjalal Islami Bank Limited Brahmonbaria Branch School Banking Conference Laxmipur, Year-2018, Lead Bank-Shahjalal Islami Bank Limited Laxmipur Branch School Banking Conference Pabna, Year2019, Lead Bank-Shahjalal Islami Bank, Pabna Branch However, School Banking Conference 2020 in different districts was cancelled all across Bangladesh by the decision of Bangladesh Bank to avoid social contact due to pandemic. As such, Shahjalal Islami Bank also canceled its scheduled School Banking Conference 2020 in Patuakhali district for COVID 19 in the year 2020. Instead, branches of SJIBL were instructed to continue opening school banking accounts. The upward trend of School Banking Account opening ensures SJIBL’s commitment for inclusive economy of the country by inclusion of all minor student accounts: School Banking AC in Number In the end of December 2020 cumulative outstanding amount in school banking account stood at Tk.138.20 million. SJIBL has been planning to promote school banking with fresh campaigns in post COVID phase so that huge number of school banking accounts can be opened and targeted financial literacy can be achieved. Ensuring Inclusive Growth as Social Commitment of SJIBL In Bangladesh, Poverty levels are yet very high, and access to products and services are unacceptably low. In SJIBL, we have designed and developed inclusive growth strategy that allows us to cost-effectively extend our reach into smaller markets that exist well beyond the large cities. Taking vital financial products and services closer to the mass people will aid in reducing the cost of living for the poorest of the poor. Inclusive growth is a concept that advances equitable opportunities for economic participants during economic growth with benefits incurred by every section of society. The definition of inclusive growth implies direct links between the macroeconomic and microeconomic determinants and economic growth. Bangladesh has embraced a wide range of financial inclusion since 2010 by allowing a vast population to open an account with an initial deposit of Tk. 10 to Tk. 100 as the government looked to bring the unbanked under the umbrella of the banking sector. In addition, there was a requirement of digital financial inclusion to address the pandemic-stricken economy. Such financial system also helped people maintain social distancing to avoid the deadly pathogen. In promoting inclusive growth Shahjalal Islami Bank has been setting new agent banking booths in different unbanked areas by avoiding risk of COVID 19. Amidst challenges of COVID 19 SJIBL agent banking booths are working with commitment and sincerity that has been helping to expand banking in under penetrated areas. Financial Inclusion Avenues Tradi�onal Banking Digital Banking Agent Banking 26,080 17,110 12,457 Branches SMS & Internet Banking ATM Digital Wallet 7,470 2017 2018 2019 2020 Shahjalal Islami Bank Limited
  137. 138 Another successful attempt of SJIBL is launching internet banking for customers . Realizing the importance of digital platform, internet banking was launched amidst COVID 19 which inspired many existing customers of SJIBL for choosing it as preferable organization. From the same realization of the growing importance of digital platform, SJIBL launched SJIBL Net or app based banking which is the latest technology in banking industry of Bangladesh. Many potential customers who were not ready to take SJIBL service are now responding quite positively which will help in more traffic of customers into SJIBL. CSR is another strong weapon for SJIBL to contribute into financial inclusion. In 2020, healthcare sector was more emphasized for CSR which was also a regulatory requirement. Medical equipments were distributed to the hospitals and clinics that were dealing with COVID patients. Year 2020 exclusively emphasized upon health so that healthcare of financially marginalized people could also be ensured. Apart from the above issues, social obligation also appears with investment clients in which case following factors are considered by SJIBL management: Social Obligation in investment of SJIBL As part of social obligation, Shahjalal Islami Bank Limited addresses following four (04) mandatory social issues for all its investment proposals to comply with regulatory requirement: Occupa�onal Health & Safety (OHS) Risk Labor and Working Condi�ons Community Health, Safety and Security Community consulta�on with key stakeholders including Indigenous people ANNUAL REPORT 2020 ●● Customer reputation/ image as perceived by all its stakeholders. ●● Negative media report ●● Serious accident or incident ●● Workers unrest, riots, demonstration in the road etc. ●● Any past record of non-compliance related fine or penalties by regulatory bodies. Patronization to different Social, Cultural & Sports programs as a socially responsible organization COVID-19 is considered a game changer for sponsorship and patronization. Many events have already been cancelled, and many more are likely to be cancelled, postponed or converted into digitalized form. As such, SJIBL renegotiated all sponsorships in light of practical scenario as a socially and ethically responsible business organization. SJIBL sponsored many programs in digital platforms in the year 2020 to maintain social distancing.
  138. 139 The concept of “sponsor” is also considered a kind of social responsibility. Corporate organizations give sponsor not always for branding but also to promote a certain sector or project. Apart from branding many national and international programs, small social, cultural and sports programs are patronized locally under the banner of “branding” only to help for greater community development. Sponsorship We have donated a substantial amount of money to BIBM in the year of 2020 to promote education, training and research on banking and finance of Bangladesh. All types of national and international cultural and sports programs were suspended from March, 2020 and onward due to lock down for COVID 19. However, awareness and public relation were continued using digital platforms. SJIBL sponsored many health awareness programs on corona virus in different private televisions. Mentionable that prior to the spread of COVID 19, SJIBL sponsored “2nd Palli Kabi Premier League 2020” organized by Kabi Jasim Uddin Hall Student Union of the University of Dhaka in January 2020. Community Development Sustainable Finance Department of Bangladesh Bank has issued circular latter no.06 dated 31 December, 2020 to do Sustainability Rating like CAMELS Rating from 2021 and onward on different sustainability criteria of banks and FIs, some of which are directly related to community development: ●● Minimum 20% female employees in the workforce ●● Minimum 25% CSR expenditure on rural areas Sustainability Rating being new in banking sector’s rating, banks and FIs are supposed to comply the above from 2021 and onward. However, SJIBL has already a remarkable number of female work forces and SJIBL CSR is channeled through rural and urban branches simultaneously. Community development is a holistic approach grounded in principles of empowerment, human rights, financial inclusion, social justice, self-determination and collective action. Community development considers community members to be experts in their lives and communities, and values community knowledge and wisdom. It has an explicit focus on the redistribution of power to address the causes of inequality and disadvantage. There are actually two approaches of SJIBLs community development: 1) Contribution to welfare economy and 2) Contribution to Sustainable Investment/Finance. Contribu�on to Sustainable Investment or Finance Contribu�on to Welfare Economy CSR & Zakat Digital Banking Tax & VAT Shahjalal Islami Bank Limited is committed to serve the society through employment creation, support community projects etc. and be a responsible corporate citizen. Every year many new employees are recruited in this organization. As a socially responsible organization, SJIBL recognizes that there is a strong need to contribute to the society and support the community on financial or non-financial basis with a view to pay back to the society. Financial literacy campaign is one of such steps. SJIBL run financial literacy campaign through all its branches. Due to COVID 19 financial literacy campaign was run on digital platform during 2020. SJIBL pays direct and indirect tax to government treasury and thus contribute to national growth. Besides, as an Islamic bank it always pays a substantial amount of Zakat and facilitates Hajj service to a remarkable number of pilgrims every year. Refinance at lower rate Green Finance Agriculture & SME Investment In spite of agreement signed with HAAB, no step can be taken since Hajj program was cancelled by Saudi Arabian government in 2020 for COVID 19. If COVID can be controlled, SJIBL will facilitate Hajj for pilgrims in 2021. SJIBL has paid an appreciable amount of Zakat in the year 2020 which was Tk. 160.98 million. The proceeds were distributed among different eligible beneficiaries as per Islamic Shariah. As a shariah compliant bank, SJIBL gives zakat on its statutory reserve and retained earnings each year and the zakat fund is utilized for greater public welfare as per regulations of Islamic Shariah. In the year 2020 an amount of Tk. 160.98 has been distributed as zakat which is Tk. 140.73 million in 2019. Shahjalal Islami Bank Limited
  139. 140 SME Investment As per Bangladesh Bank SMESPD circular No-02 dated 05 September 2020 , every year SME Loan/Investment will have to be increased by 1% (in disbursement) and by year 2030 it will have to be increased to 50% of the total disbursement target of each scheduled bank. SJIBL SME team has been moving with the objective to fulfill the target. There is also separate women entrepreneurship desk in the bank. The main objective of SJIBL SME investment is growth of entrepreneurship which in turn ensures growth of the community. SJIBL do not allow investment where interest of the minority or indigenous people might be jeopardized. The growth of SME investment is satisfactory in SJIBL. Manufacturing sector mainly dominates SJIBL SME which is Tk.42,550 million. Side by side with medium and small sector, SJIBL has been giving investment for micro and cottage industry. Total SME investment of SJIBL was Tk. 72,573 million in 2020. The specialty of SJIBL CMSME investment is shown in the diagram below: Quicker Approval process Lesser Documenta�on SJIBL CMSME Banking Collateral Free Investment Dedicated CMSME Personnel If the owner of proprietorship Business is women or if 51% of the total shares in either partnership business or private limited company owned by the women, it is treated as “Women Entrepreneur” by SJIBL women entrepreneurship desk. SJIBL financed women entrepreneurs to promote female entrepreneurship and disbursed Tk. 1310.66 million in 2020 for women entrepreneurs. Onion financing under SJIBL Agriculture Investment Scheme Shahjalal Islami Bank Limited received Shommanona Sharok at Banker & SME Women Entrepreneur Conference and Product exhibition Fair-2020 Agriculture Investment surrogate promotes agriculture through different refinance schemes. Recently Bangladesh Bank offered refinance at only 4% profit rate through its COVID-led Agriculture Refinance Scheme to recover affected agro businesses. Another priority sector of government is agriculture and there is a large demand of pulses, oil seeds, maize and spices in the country. But due to insufficient production, we have to import them. Apart from crops and fisheries, live stocks are dominant agricultural product in Bangladesh. Shahjalal Islami Bank Limited disburses agriculture investment every year on crops, fisheries and live stocks. In the year 2020 the bank disbursed Tk.4,996 million as Agri Investment out of which Tk.570 million was in the form of refinance at lower rate. Bangladesh Bank as governments ANNUAL REPORT 2020 In this backdrop, Shahjalal Islami Bank Limited gave agriculture investment only @ 4 percent profit rate for cultivating pluses, oilseeds, spices and maize. In 13 January 2020 with a ceremony Shahjalal Islami Bank gave Tk.1.50 Million Agri investments to Ethnic People of Tangail and Mymansing District which is a step towards financial inclusion of the Bank.
  140. 141 Other issues SJIBL focused on dispensing digital banking services to its customers located in rural areas through its Agent Banking platform . Through this platform that truly helps achieve our objective of democratizing access to formal banking, we were able to offer cost-effective, secure and faster banking services, facilitated by simplified processes and automated systems. In a dynamic business environment, SJIBL is also reinforcing this platform with a plethora of world-class security features as well as scalability that will ensure that the platform is able to serve evolving business and regulatory requirements. 40% of Branch customers traffic lifted-off/diverted to SJIBL ADC (ATM, Internet Banking, Credit Card etc.) in 2020 SJIBL contribute in all three aspects of sustainability. Social contribution is made through CSR and different sponsor to ensure equitable society, environmental contribution is made in the form of green finance and in-house environmental management to make climate change bearable. On the other hand, economic contribution is made by giving direct and indirect tax to the government treasury to make the economy viable. In order to comply with regulatory requirement, SJIBL has dedicated and special desks in different branches with officers assigned with adequate training and experience. SJIBL Women Entrepreneurship Desk SJIBL SME Desk SJIBL Sustainable Finance Desk Steps taken to address COVID 19 Besides, SJIBL offer refinance to its clients as per agreement with different national and international authorities. At present, SJIBL offer refinance scheme of Bangladesh Bank, JICA and World Bank which ensure finance to SJIBL customers under different category in reduced profit rate: Refinance under COVID survival package Corporate Refinance SME Refinance Agriculture Refinance It can be mentioned that SJIBL has been emphasizing for growth of urban and rural Bangladesh simultaneously and as such apart from considerable number of branches we have made following improvements: ATM Booth (own) Urban=62 | Rural=48 Agent Banking Outlet Urban=20 | Rural=33 SME Investment Client Urban=4,599 | Rural=1,880 Green Finance Client Urban=26 | Rural=10 No one could predict the extremes of the COVID-19 pandemic that shook the entire world including Bangladesh. From the business perspective, SJIBL embraced a ‘digital first’ mindset and played an important role in bringing about a behavioral shift in the day-to-day banking conducted by customers during the COVID-19 pandemic. Meeting of senior Management during COVID 19 by maintaining social distance Masks Distribution among the employees Shahjalal Islami Bank Limited
  141. 142 “No mask, No service” is the Government Slogan for COVID 19 which SJIBL has been implementing meticulously for any customer service point since the advent of COVID in the form of pandemic. SJIBL has taken comprehensive measures considering COVID 19 as regulatory and social obligation some of which are as follows: Free distribu�on of musk and gloves among all SJIBL employees Roaster based duty for bank employees Online trainings and workshops instead of physical presence Ensure social distancing during office �me Arranging sufficient hexasol, sani�zer etc. for customers in all branches Purchase of oxygen cylinder for employees Circula�ng SJIBL COVID Manual in line with WHO Guide to all employees Reimbursement of the bill of COVID test and treatment to the employees Ensure sani�zer 24/7 in all SJIBL’s ATM Booths for ATM users Zoom mee�ng with customers instead of physical visit Time extension for MDPS payment without any penalty during COVID Time extension for Credit Card Bill payment without any penalty during COVID Distribu�on of food items to the poor in rural and urban areas Dona�on to Prime Minister’s Fund for addressing COVID stricken disaster Case Study of M/s. Masum Bakery, SME client of SJIBL M/s. Masum Bakery is a Proprietorship business firm owned by Md. Abul Kashem. His factory is located at Nayonpur, Sadar, Dinajpur. The client supplies bakery food mainly to the different parts of Bangladesh such as Takurgoan, Panchagarh, Saidpur, Nilphamary, Rangpur, Bogra, Sirajgong, etc. Volumes of business had been increasing rapidly day by day. More than 200 workers were working in this factory and on the average fifty buyers took their items regularly. Prior to COVID 19, they were enjoying an investment facility of Tk. 15.00 million Bai Muajjal Com (Revolving) and 2.80 million HPSM Equipment investment facility with Shahjalal Islami Bank Limited, Dinajpur Branch in the name of M/s. Masum Bakery. The performance of this SME firm had been found satisfactory. But due to Covid-19 sales fell drastically and the client was facing working capital shortage. As a result, he had applied for an additional investment limit of Tk. 5.00 million under government’s stimulus package for COVID 19. The facility was approved to them as a COVIID affected SME business. Profit rate was decided as 9.00% p.a. to be charged at quarterly basis. The client would pay @ 4.00% p.a. and remaining 5.00% p.a. will be paid by Government as subsidy to recover from the effect of COVID 19 pandemic. The client has recovered to substantial extent with this further investment as COVID recovery package and started to run the business smoothly with newly received working capital. ANNUAL REPORT 2020 Masum Bakery, Dinajpur, SME client of the bank
  142. 143 Case Study of M /S. New Agro Farms, SME client of SJIBL M/s. Masum Bakery is a Proprietorship business firm owned by Md. Abul Kashem. His factory is located at Nayonpur, Sadar, Dinajpur. The client supplies bakery food mainly to the different parts of Bangladesh such as Takurgoan, Panchagarh, Saidpur, Nilphamary, Rangpur, Bogra, Sirajgong, etc. Volumes of business had been increasing rapidly day by day. More than 200 workers were working in this factory and on the average fifty buyers took their items regularly. Prior to COVID 19, they were enjoying an investment facility of Tk. 15.00 million Bai Muajjal Com (Revolving) and 2.80 million HPSM Equipment investment facility with Shahjalal Islami Bank Limited, Dinajpur Branch in the name of M/s. Masum Bakery. The performance of this SME firm had been found satisfactory. But due to Covid-19 sales fell drastically and the client was facing working capital shortage. As a result, he had applied for an additional investment limit of Tk. 5.00 million under government’s stimulus package for COVID 19. Mr. Md. Saluddin, proprietor of M/S. New Agro Farms is a valuable SME client of Joydevpur Chowrasta Branch of Shahjalal Islami Bank Limited. He has been involved in fishing business since 2010 with good market reputation. 3600 Decimal of lands has been covered as farm site including 3 big bills & ponds. Recently he desired to cultivate 700,000 pcs (3,00,000 pcs pangas, 2,50,000 pcs tilapia and 1,50,000 pcs silver carp) new fishes of different types. The client informed SJIBL that his cultivation capacity already had been increased and he would cultivate more fishes in 2020. As such, the client had approached for Tk.30.00 million Bai Muajjal Com (Revolving) to meet up his working capital requirement. After physical inspection of his fishery site, SJIBL investment officials were convinced that the client would require a fresh amount of Tk.44.75 million out of which he would be able to contribute 33% (Tk.14.75 million) as equity participation and remaining 67% (Tk. 30.00 million) would be required to approve by SJIBL as banks finance. Considering business potentiality, client’s reputation and future prospect the client was approved the above facility. His business is doing well and he is grateful to SJIBL for this financial aid in due time. His repayment behavior is also satisfactory. In spite of COVID 19 he has been marketing efficiently to survive the pandemic. M/S. New Agro Farms, a SME client f SJIBL As a responsible stakeholder of the community SJIBL branches contribute for community development like as follows: Paying monthly subscrip�on to local bankers club Paying dona�on for awareness crea�on on social issues like an�-drug concert Contribu�on for tree planta�on and natural beau�fica�on Contribu�on to the welfare of 3rd gender, au�s�c children etc Shahjalal Islami Bank Limited
  143. 144 INTEGRATED REPORTING ANNUAL REPORT 2020
  144. 145 OUR APPROACH TO INTEGRATED REPORT An integrated report is a concise communication about how an organization ’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term. The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. However, an integrated report benefits all stakeholders interested in an organization’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policymakers. An integrated report aims to provide insight about the resources and relationships used and affected by an organization- collectively referred to as ‘the capitals’. It seeks to explain how the organization interacts with the external environment and the capitals to create value over the short, medium and long term. The capitals are categorized in the international framework as financial, manufactured, intellectual, human, social & relationship and natural capital. External Assurance Standards and Principles We have taken external assurance from the following audit firms/ organizations for maintaining proper transparency: ●● Financial Assurance ●● Financial Statements of SJIBL Financial Statements of SJIBL Securities Provident Fund Gratuity Fund Given By ACNABIN, Chartered Accountants K.M. Hasan & Co., Chartered Accountants K.M. Hasan & Co., Chartered Accountants K.M. Hasan & Co., Chartered Accountants Credit Rating Emerging Credit Rating Ltd (ECRL) Mudaraba Subordinated Bond Rating Credit Rating Agency of Bangladesh Ltd. (CRAB) SREP Bangladesh Bank Scope of Integrated Reporting Operations, financial performance and financial information of Shahjalal Islami Bank Limited (SJIBL) during the timeline from 1 January to 31 December, 2020 has been considered. The report has also covered the impact of COVID 19 in 2020 on business environment in general and on SJIBL in particular. The integrated report, incorporated in this annual report has been prepared in line with the key guidelines of the International Integrated Reporting Council (IIRC) as well as other relevant local and international standard. Integrated Reporting ●● ●● ●● International Framework of the International Integrated Reporting Council (IIRC) Governance, Risk management and operations Bank Companies Act (Amendment) 2018 BSEC Ordinance 1969 Corporate Governance Code by BSEC in 2018 Bangladesh Bank’s guideline DSE & CSE Listing Rules Financial Reporting International Financial Reporting Standards International Accounting Standards Generally Accepted Accounting Principle Sustainability Reporting In accordance with the GRI Standards United Nations Sustainable Development Goals Additional Reporting International Standards on Auditing (ISAs) The Income Tax Ordinance 1984 The Income Tax Rules 1984 Relevant rules and regulations of Bangladesh Bank (The Central Bank) Vat Act 2012 by NBR Other applicable rules and regulations of the land Shahjalal Islami Bank Limited
  145. 146 BUSINESS MODEL Resilient capitalism needs financial stability and sustainability in order to succeed and Integrated Reporting is intended to underpin both of these issues through communicating to providers of all capitals . Therefore, a report of mere financial data is no longer sufficient, but has to be extended with information about our exchanges with all capitals- financial, manufactured, intellectual, human, social & relationship and natural. Just as money is not natural, but a 7,000 year old cultural invention that became meaningful with financial value, same with capitals. All these capitals work as input on business activities that result in output for the same in the form of value creation as depicted in below Business Model: Our Capitals Financial Capital Social & Rela�onship Capital Human Capital Manufactured Capital Intellectual Capital Natural Capital ANNUAL REPORT 2020 What We Do COMMERCIAL BANKING We invest money to customers to support their growth aspira�ons and working capital needs in shariah compliant manner. We mobilize deposits for inves�ng ac�vi�es and customers are paid profit on their savings. We facilitate our clients trade through a network of correspondent banks. Fees and commission are charged for the services provided. SUBSIDIARY OPERATION We invest in SJIBL Securi�es and our return include dividends, consolidated earnings and apprecia�on in the value of investments. VALUE ENABLERS Value crea�on is supported by performance and risk management, regulatory compliance etc. How We Do Corporate Banking (Page no. 70-71, 92-94) SME Banking (Page no. 71, 95-97) Retail Banking (Page no. 71, 98-99) Corporate Governance Page no. 239-287) Human Capital (Page no. 260-263) Financial Statement (Page no. 294-407)
  146. 147 RISK Value Created For Customers Investment Risk Opera �onal Risk Cyber Risk Group Risk Corporate Investment Tk.114,940.24 million SME Investment Tk. 72,573.14 million Retail Investment Tk. 8,999.27 million Profit Paid for Deposit Tk.11,418.43 million Export Volume Tk.1,33,580 million Import Volume Tk. 1,48,470 million Total 43 Number of Training Conducted for capacity buildup Total tk.19 million incurred for employees health and sa�y CSR Tk. 323.49 million Free distribu�on of mask, gloves and sani�zers for COVID For Employees Total Tk.3002 Million as salary & allowance For Communi�es Strategic Risk Zakat Tk.160.98 million Shahjalal Islami Bank Limited
  147. 148 INPUT FOR VALUE CREATION WITH ASSOCIATED RISK For details of risk , see Risk Management Report in page no. 163-215 of this Annual Report Financial Capital Shareholders’ funds Deposits from customers Market Capitaliza�on Price Earnings Ra�o Liquidity Risk Manufactured Capital Branch Network Number of ATMs Number of Agent Banking Booth IT Infrastructure Opera�onal & IT Risk Intellectual Capital Value of intangible assets Number of training courses Credit ra�ng (Long & Short Term) Strategic Risk Human Capital Number of employees Reten�on ra�o Profit per employee Compliance Risk Social & Rela�onship Capital Ethical investment Contribu�on to Na�onal Exchequer CSR Investment Risk Natural Capital Energy consump�on Number of Solar panel installed Branch Green Finance ANNUAL REPORT 2020 Environmental Risk
  148. 149 OUTPUT FOR VALUE CREATION Financial Capital For details of Financial Capital , see Financial Highlights in Page no. 10 of this Annual Report Tk. 17,949 million Shareholders’ funds Tk. 218,443 million Deposits from customers Market Capitaliza�on-Tk. 22,444 million Price Earnings Ra�o-11.74 For details of Manufactured Capital, see Branch & ATM Network in page no. 409-418 of this Annual Report For details of Intellectual Capital, see Corporate Governance part in page no. 239-282 of this Annual Report For details of Human Capital, see HR Accoun�ng & HR Capital in Page no. 260-263 of this Annual Report For details of Social & Rela�onship Capital, see Environment and Social obliga�ons in Page no. 135-143 of this Annual Report For details of Natural Capital, see Environment related ini�a�ves in Page no 125-134 of this Annual Report Manufactured Capital 132 number of Branches 110 number of own ATMs 53 number of Agent Banking Booth IT Infrastructure-Digital Wallet, Internet Banking, Call Center Intellectual Capital Tk. 22 million value of intangible assets 03 Independent & qualified Directors to ensure good governance Training expenses Tk. 2.25 million AA & ST-2 Credit ra�ng for Long & Short Term respec�vely Human Capital 2,657 number of staffs of which more than 18% female staffs 100:100 reten�on ra�o Tk. 1.54 million Profit per employee Tk. 22,625.81 million value of Human Capital Social & Rela�onship Capital Tk. 196,513 million investment/Financing including SME & Agriculture Tk. 4,779 million contributed to Na�onal Exchequer Tk. 323.48 million CSR fund donated including educa�on & Healthcare Natural Capital Tk. 77.71 million energy (electricity & fuel) consumed 19 number of Solar panel installed Branch Tk. 752.58 million Green Finance outstanding Shahjalal Islami Bank Limited
  149. 150 HOW WE CREATE VALUE - Income - Expenses = Net Profit = Impairment - Taxes To Government INCOME Net Profit = Dividend To Share Holders Retained For Reinvestment EXPENSES PROFIT INCOME PROFIT EXPENDITURE Lending enables individual customers to create wealth and generate income Funding provides our depositors and lenders with returns. INCOME FROM INVESTMENT IMPAIRMENT CHARGES Investment in Govt. securi�es, FDRs, and trading investment in primary and secondary market create group’s investment asset and generate revenue in the form of investment income It refers to our general and specific provisions against financing and also diminishing value of our investment FEES & COMMISSION OPERATIONAL COST From Non-Funded facili�es we receive fees and commission Although our investment in technology for opera�onal efficiency is currently reducing our return on equity (ROE), it will ensure future income-enhancing opportuni�es as well as access to new markets, thereby suppor�ng our growth and sustainability. ANNUAL REPORT 2020
  150. 151 DELIVERING VALUE THROUGH OUR BUSINESS Opera �onal Overview GROUP SJIBL SJIBL Securi�es Uncompromised and well diversified array of financial services, brokerage services Country’s leading provider of shariah compliant financial services. It has a fully phased research unit which is engaged in both macroeconomic and microeconomic research 2734 STAFF 100% TOTAL ASSET 100% REVENUE 2657 STAFF 97.51% TOTAL ASSET 99.7% 77 STAFF 2.49% TOTAL ASSET 0.30% REVENUE REVENUE GROUP SJIBL SJIBL Securi�es Diversifying Por�olio Sustainable Brand & Prudent Balance Sheet Management Compliant Banking Strong liability management Client centricity Centralized Opera�ons Upda�ng client with best informa�on and research possible to take the best investment decision 0.68% 0.68% Strategic Focus Area RETURN ON ASSETS (ROA) 10.95% RETURN ON EQUITY (ROE) RETURN ON ASSETS (ROA) 11.08% RETURN ON EQUITY (ROE) 0.08% RETURN ON ASSETS (ROA) 0.21% RETURN ON EQUITY (ROE) Shahjalal Islami Bank Limited
  151. 152 Key Resources of SJIBL & their interconnec�on Manufactured & Intellectual Capital While Human Capital recommends investment on Human produc�vity & opera�onal skill, Financial Capital deals with all such opera�onal expenditure While investment in Manufactured Capital promotes physical infrastructure, Intellectual Capital deals with In House So�ware Financial & Human Capital While Social & Rela�onship Capital promotes inclusive growth, Natural Capital promotes green economy Natural and Social & Relationship Capital Key Resources Growth Policy Manufactured Capital grew in terms of SJIBLs growth of touch points Intellectuual Capital grew in terms of growth of SJIBLs knowledge base Natural Capital grew in terms of inhouse-environmental management and green financing SJIBLs Social & Rela�onship Capital grew interms of inclusiveness Financial Capital grew in terms of efficient fund management by SJIBL Human Capital grew in terms of SJIBLs employee produc�vity ANNUAL REPORT 2020
  152. 153 STAKEHOLDER ANALYSIS Identification of stakeholders is the key to understanding their expectations out of the bank and , as such, helps pave the way towards fulfilling those expectations and delivering consistent value. Our stakeholder ecosystem can be broadly divided into two major categories: Core stakeholder group comprising shareholders, customers, suppliers and employees, while other stakeholders include regulators, local communities, NGO and civil society. Suppliers/Service providers Customers Regulator STAKEHOLDER ANALYSIS Employees Community Investors The following information provides an overview of stakeholder’s engagements at Shahjalal Islami Bank Limited: Stakeholders Importance of Stakeholder ●● To deliver relevant and timely information to existing and potential shareholders ●● To keep shareholders informed that our shares are traded. ●● To ensure that the image of the Bank and the trust placed by our valuable shareholders continues to improve, thereby minimizing the potential for reputational risks. Employees ●● To ensure that we remain an employer of choice by providing a safe , positive and inspiring working environment ●● To understand and respond the needs and concerns of our staff members. ●● Empowering our employees to make use of their full potential. Customers ●● Securing customer interests. ●● To understand the growing financial services needs of our customers. ●● To provide better solution and advice to our customers financial requirements. Suppliers / Service ●● Adhere to proper procurement regulations while maintaining a good business relationship with service providers. providers Regulator ●● To maintain open, honest and transparent relationships with regulator. ●● To ensure meticulous compliance with legal and regulatory requirements. ●● Develop legislation and policies that impact the environment in which we operate. Community ●● To have best collaboration with our community for delivering our social responsibilities. ●● To obtain input from communities regarding key focus areas. ●● To create awareness of our integrated sustainability commitments and initiatives Investors Influence of Stakeholder on SJIBL SJIBLs Influence on Stakeholder High High High High Medium High Low Medium High Low Low Low Shahjalal Islami Bank Limited
  153. 154 How we delivering Value to Stakeholders The ways in which we engage with our stakeholders , and the frequency with which we do so, varies according to each stakeholder group. We use a decentralized stakeholder engagement model in which individual business units undertake stakeholder engagement appropriate to their areas and are responsible for identifying stakeholder concerns and taking appropriate action. Stakeholders Investors Employees Customers Engagement Method Frequency of Engagement Key topics related to stakeholders Financial Performance, Cost Efficiency, Corporate Governance Professionalism Expectation of Stakeholder Value maximization Fair play SJIBL upholds a strict performance based culture SJIBLs Response ●● Board meeting ●● Monthly ●● Financial Statements ●● Quarterly ●● AGM ●● Yearly ●● Annual Report ●● Yearly ●● Management Meeting ●● Regularly ●● Performance Appraisal ●● Yearly ●● Written Communication ●● Branch Network Regularly Business Transaction Optimum satisfaction from offered products and services Custom tailored product development As & when Required Supply chain Fair dealing Reliability, ethics & governance As & when Required Regularly Regulation & compliance Social Business entity Thorough compliance Ensure corporate governance Sustainable Business ●● Marketing Campaign ●● Website Try to meet expectation ●● Social Media ●● Newspaper Suppliers / Advertisement Service providers ●● Group meeting Regulator Community Monitoring regulatory compliance ●● Branch Network ●● Social media ●● CSR Responsible & Sustainable Organization OUR MATERIAL TOPICS SJIBL proactively responses to the competitive and material forces identified during its normal course of business. The banking industry in Bangladesh is continuously exposed to several risks, both internally and externally. Some of these risks are too challenging to mitigate without the appropriate expertise and precautionary measures. SJIBL has adopted a risk identification and mitigation framework. This not only protects Material Issue Customer Satisfaction Brand & reputation Relevant Capital the bank from adverse conditions but also helps to enhance its operational viability and sustainability. SJIBL is one of the top banks which gained a positive public relation image through its sensible business approach. A detailed analysis of the competitive intensity and challenging environment along with our responses to minimize the impact is as follows: Strategic Context GRI principles Social & Relationship Capital As we aspire to be recognized as the most customer centric bank, this is a high priority. GRI 102, 416-419, 410 Intellectual Capital Our brand and reputation is critical as we need the trust of our customers and other stakeholders to grow. GRI 102, 413, 416419, 410 Talent attraction, development and retention Human Capital Dedicated human resources propel our productivity. Technological Transformation Manufactured Capital Enabling digitalization to facilitate scalability and cost efficiency GRI 404 Inclusive Growth Financial Capital We are seeking to bring both unbanked and under banked population under banking network. GRI 201, 203 Financial Stability Financial Capital We try to retain our capital adequacy ratio at expected level. GRI 201, 203 Ethics, governance & compliance Intellectual Capital Sound corporate governance, legal and regulatory compliance shape our organization culture. Business innovation Intellectual Capital Product and service innovation provide a key competitive advantage as we strive to cater to changing customer demand. Natural Capital We ensure all regulatory environmental and social obligations through green & other sustainable finance as well as in-house environmental management. Sustainable banking practice ANNUAL REPORT 2020 GRI 205-206, 419, 417, 102 GRI 201, 305, 308
  154. 155 BUSINESS ENVIRONMENT ANALYSIS SWOT ANALYSIS STRENGTH OPPORTUNITY SWOT WEAKNESS THREAT Dispelling the pre-conceived beliefs and grey areas , we are embracing a realistic, fact based, & data driven framework to move our way forward. After analyzing our business structure, operating framework, micro environment analysis, our position in the industry, we finally embark the SWOT analysis. Following SWOT analysis will facilitate our investors and readers a full awareness of all the factors involved in retaining our existing strength, convert weaknesses into strengths, capitalize on opportunities and reduce threats: Sl. Key Strengths 1 Strong adherence to corporate governance 2 Strong Compliant Culture 3 Expertise on RMG sector 4 Market reputation as Shariah Compliant bank 5 Comfortable Liquidity Position 6 Good market share in foreign trade business Sl. Key Weaknesses 1 Higher trend of cost to income ratio 2 Limited exposure in fast growing retail investment 3 Major investment concentration in Dhaka zone 4 Over dependence on corporate segments Outlook on Key Strengths SJIBL conduct all EC,RMC and Board meetings routine basis and with presence of most of the members to properly monitor governance of the bank. SJIBL makes no compromise to ensure compliance which helps to ensure better corporate governance Major investment of SJIBL lies on RMG sector. Apart from that a substantial refinance under COVID 19 packages were disbursed in favor of RMG investment clients in 2020. SJIBL is considered as one of the sophisticated banks both in Shariah and modern banking. Short term liquidity and long term liquidity are maintained to address short term and long term fund requirement consistently and fund is prudently managed. SJIBL make satisfactory export and import trade each year and SJIBL has a number of loyal foreign trade clients. Outlook on Key Weaknesses Due to tough market competition spread has decreased which results in higher cost to income ratio. Compared to corporate investment portfolio, SJIBs retail portfolio is weaker and need more attention. More than 70% of finance of SJIBL is concentrated in Dhaka region and mainly in urban areas which is a threat for balanced growth and breeds more risk for banks. Still Corporate finance dominate investment portfolio of SJIBL. A number of corporate clients are occupying a substantial amount of SJIBL investment. 5 Shrinking margin/yield due Due to excess liquidity in banks, financing a client has become to heavy price competition often competitive for which it is not possible for SJIBL to get an adequate margin/yield from investment in many cases. Key actions taken to build on Strengths BSEC and Bangladesh Bank guidelines are being strictly followed regarding compliance on corporate governance. More emphasis upon external and internal audit activities. Increase of manpower of Export Division of SJIBL to facilitate RMG clients. SJIBL has strengthened its Shriah Division with knowledgeable manpower to make shariah audit for ensuring best possible shariah compliance. SJIBL always maintains additional liquidity so that situation like sudden fund crisis may be well addressed. To attracting import LC is opened at nil margin. Key actions taken to counter Weaknesses For cost minimization, bank has been working to curtail expenditure, where possible. Management is working to focus retail products through more marketing. SJIBL has been working to diversify into finance portfolio into other regions except Dhaka. Rural branches are working to increase rural finance. Management is addressing the issue by increasing finance on SME and Retail segments gradually. SJIBL top management personnel has been working dedicatedly to address the issue. Shahjalal Islami Bank Limited
  155. 156 Sl . Key Opportunities 1 Massive Digitalization 2 3 4 5 Key actions taken to build on Opportunities Taking this as opportunity SJIBL has been running towards digitalization at faster pace. Increasing interest for SJIBL has been strengthening its social Islamic banking relationship with the prospective customers who are showing their interest in Islamic Banking with different products explaining Shariah compliance. Growing middle income With increase of disposable income along with graduation To tap this rising middle income population group of Bangladesh from least developed nation, people are SJIBL has been introducing different innovative more eager to purchase goods and services. So, businesses products and services. are expanding. Government is The Government is implementing a number of mega SJIBL has analyzed the role of all stakeholders implementing mega projects like Padma Bridge, Metro Rail, Deep Sea Port and in these projects and devised its strategy to be projects Big Highways etc. which create huge resource mobilization financial partner of credit worthy customers. in the country. Impressive economic In spite of COVID impact Bangladesh received huge foreign SJIBL remittance personnel are working recovery from COVID 19 remittance. Besides, the nation has record amount of dedicatedly to attract more remittance through fallout foreign currency reserve right now. this bank. Sl. Key Threats 1 COVID-induced economic fallout in western economies 2 Challenge of Investment Recovery & Asset Quality in Post-COVID phase 3 Cyber Threat Outlook on Key Opportunities Due to social distancing need for COVID 19 digitalization became faster than ever before all across the world. People all across Bangladesh are showing more interest to get involve in Islamic banking. Outlook on Key Threats Suffering of export destinations like UK, USA may prolong sufferings in export market for Bangladesh Investment recovery would certainly become challenge in post-COVID stage due to traffic of huge unrecovered finance on the ground of regulatory moratorium. Deterioration in asset quality may be noticed. Ironically digital platform has become popular for COVID 19 which has given much space for cyber hackers to do more fraud than ever before. Organization with less security may fall easy victim to this hackers. 4 Intensity of market In spite of COVID 19 new banks and FIs are coming into competition existence which may increase cut-throat marketing competition in post-COVID phase. 5 Absence of adequate Like conventional banks, Islamic banks cannot invest on all financial instruments for instruments. Again, number of shriah compliant products Islamic Bank are still very few. 6 Lower investment Large investors are hesitating for big venture due to COVIDappetite led uncertainty for which investment scope is shrinking for banks. ANNUAL REPORT 2020 Key actions taken to counter Threats SJIBL allowed refinance at lower profit rate to Corporate, SME and agriculture clients so that they could survive the pandemic. SJIBL has plan to introduce third party for investment recovery, if required for large scale recovery. SJIBL has been investing on IT Security day by day with a view to ensure a secured platform for transaction. SJIBL has been continuously modifying marketing strategy to survive cutting edge competition. SJIBL has been working to introduce shriah products like Sukuk, Cash Waqf in near future. SJIBL cautiously move in solid corporate venture as well as genuine SME clients.
  156. 157 PESTEL ANALYSIS PESTEL analysis is a framework or tool used to analyze and monitor the macro-environmental (external environment) factors that have an impact on an organization. Any business organization operates within the context of an environment. The environment of a business organization impacts and influences the business operation in a number of ways. That is why an analysis of the environment is a very essential component of any business organization and at any level of its business life cycle. The environment of an organization is categorized into two main environments: Internal and External environment. External environment consists of the “PESTEL” Factors-Political, Economic, Social, Technological, Environmental and Legal factors. Such kind of an analysis is crucial from the point of view of Stakeholders particularly shareholders , as it informs them how key external factors can influence an organization’s performance or ability to create value over the long-term. P E S T E L Poli�cal Economic Social Technological Environmental Legal -Tex & Trade policy -Poli�cal Stability -Monetary policy, Govt. Investment borrowing policy, policy incen�ve -Macro Economic Trend -Export Import situa�on -Infla�on -Exchange Rate,Domes�c and foreign asset growth Popula�on Growth, Age Distribu�on, Social value change in life style, Tech adpta�on, Educa�onal standard, Religious Belief Sustainable Finance Regula�on, Carbon foot print limit, Green ini�a�ve, Climate change Equal Opportunity, Stringent regula�on, Legal atmosphare, Resolve �me, ADR prac�ce HIGH HIGH LOW MODERATE LOW -Emerging Technoligy -Cyber Security, Internet penetra�on, Technological desrup�on MODERATE Degree of Impact on SJIBL Business Shahjalal Islami Bank Limited
  157. 158 INDUSTRY FORCES ANALYSIS STAKEHOLDER INFLUENCING FACTOR Customer Relationship Brand Loyalty INFLUENCE ON SJIBL ●● Effect on customer relationships thereby impacting long term revenue. Strategic emphasis on serving particular customer segments (Retail and SME). ●● Impacts on profit rate Offering competitive profit on deposits CUSTOMERS Supply of funds (deposits and borrowings) Supply of materials SJIBL’S APPROACH ●● Operational efficiency Upholding and strengthening SJIBL brand to avoid switching. Prudent selection of vendors SUPPLIERS Focus/Differentiation/Cost leadership ●● Impact on the market share Give emphasis on innovative value creation ideas to outplay the competitors Availability of substitute products like bKash, Nagod etc. ●● Loss of revenue to substitute products Adopt appropriate relationship management techniques to retain the company’s profitable customers. Emergence of new Banks and NBFIs in the industry licensing through Bangladesh Bank ●● Threat on market share Enhance the brand value of SJIBL Frequency of changing laws and regulations. ●● Regulations affecting operations- source of funds and channelling of funds. COMPETITOR SUBSTITUTE ●● Employee poaching NEW ENTRANT GOVERNMENT ANNUAL REPORT 2020 Maintain a sound and healthy employee friendly environment within the organization Thorough compliance of laws and regulations as per Bangladesh Bank and other Government Bodies.
  158. 159 STRATEGIC FOCUS AREAS On rapidly changing the financial landscape , any corporate entity’s strategic focus areas are supposed to be determined on the basis of challenges and future prospects or potentialities which the organization may face. To protect investors’ interest and interest of all other stake-holders, SJIBL constantly pursues strategies in light of present challenges and opportunities available. We revisit strategy in consultation with all our stake holders considering our growth aspirations, industry evolution, risk management process and a thorough evaluation of our macro environment. Strategic focus areas of SJIBL have been determined as follows: Strategic Focus Areas Diversifying Por�olio with Sustainable Innova�on Crea�ng Convenience for our Customer Create Sustainable Brand Value Triple Bottom Line Any form of financial service that integrates environmental, social and governance (ESG) criteria into business or investment decisions is sustainable finance that include triple bottom line approach. The most significant contribution which we can make to tackling climate change through triple bottom line approach is contributing the transition to net zero emission. People (related to Social Sustainability): SJIBL always participates in contributing financial support to the society all over the fiscal year and it will be a continuous process. To work with different kind of customers, regulators and suppliers, SJIBL works with transparency and fairness to create trust among all stakeholders which also create values. Key Indicator Year 2020 Incidents of Discrimination Nil Incidents of Child Labor Nil Human Rights violation incidents Nil Prudent Balance Sheet Management Turning Human Resource into Human Capital Planet (related to Environmental Sustainability): We encourage our branches to invest in ecofriendly projects which will be helpful in the long run. We also comply in-house Green Office Guide of the bank to minimize unnecessary resource consumption. Key Indicator Consumption saved through Eco-Friendly Operations Number of imposed fines/penalty by Department of Environment (DOE) Number of environmental grievances Year 2020 Tk.72.61 million Nil Nil Profit (related to Financial Sustainability): SJIBL generate profit each year and profit growth shows usually upward trend. However, the organization believes in sustainable profit generation. Key Indicator Return on Equity Year 2019 Year 2020 Growth 10.98 11.08 0.91% Net Profit After Tax (Core Tk.) 172 191 11.05% Earnings Per Share 1.75 1.95 11.43% Shahjalal Islami Bank Limited
  159. 160 STRATEGY FOR KEY BUSINESS LINE Deposit Strategy CASA Campaign for reducing cost of Deposit Digital on Board for market penetra �on & customer convenience Scheme Deposit for sustainability No Frill account opening for Financial Inclusion Corporate Deposit collec�on for value proposi�on Cross Selling for value maximiza�on Emphasis on SME & consumer finance for be�er margin Trade Finance for value maximiza�on Emphasis of Green Finance for sustainable growth Focus of non-funded business for achieving bo�om-line target Bring innova�on in investment for differn�a�on Investment Diversifica�on to mi�gate risk Investment Strategy KEY STRATEGIC FOCUS AREA FOR 2021 Sustainable Growth ●● Increasing investment portfolio cautiously without compromising on the quality to avert risk. Operational excellence and best in class customer services ●● Optimizing Bank’s capital structure through injection of additional Tier-1 capital for sustainable growth and maximization of value of shareholder’s equity. Ensuring health and safety for all of our staff and customers under the current health crisis. ●● Ensuring prudent management ahead of credit risk to offset risk arising from COVID-19 and concurrent environment. Deploying technology to increase customer base, improve efficiencies, fight financial crimes and enhance service excellence. ●● Re-engineering business process dynamism and efficiency in service. ●● Focusing to recovery of NPI & none degradation of existing asset quality . ●● Accelerating of digital on board for different operational procedure and customer service. ●● Managing balance sheet prudently to tap the prevailing opportunity and offset market risk. ●● ●● Analyzing business process continuously in order to find new business avenue . Intensifying cost rationalization in line with the spirit of Revisiting and reviewing Islamic banking practice in our all operation ●● Willing to expand its footprint and to tap un-banked people through sub-branches, booth banking, agent banking and digital banking platform. ●● ●● ANNUAL REPORT 2020 for increase
  160. 161 VALUE ADDED STATEMENT The value added statement for the Bank shows how the value is created and distributed among different stakeholders of the Bank . Value Added Statement for the year ended 31 December 2020 Amount in Taka Particulars 2020 % 2019 Income From Banking Services 20,223,921,381 23,618,314,463 Less: Cost of services & supplies 12,758,085,314 14,552,521,957 7,465,836,068 9,065,792,506 Value added by the Banking services Non-banking income - - Loan & Other Provisions (451,394,000) (1,970,980,000) Total value added 7,014,442,068 7,094,812,506 % Distribution of added value To Employess as salaries & allowances 3,001,854,417 42.79% 2,931,336,476 41.31% To Government as Income Tax 1,735,221,410 24.74% 2,175,848,213 30.67% 728,684,000 10.39% 778,829,989 10.98% To Expansion & growth 1,548,682,240 22.08% 1,208,797,829 17.04% Dividend & Retained earnings 1,179,514,587 939,471,743 369,167,653 269,326,085 To Statutory Reserve Depreciation 7,014,442,068 100% 7,094,812,506 100% Distribution of Added Value FY 2020 FY 2019 17.04% 22.08% 42.79% 41.31% 10.98% 10.39% 30.67% 24.74% Employees Salaries & allowances Statutory Reserve Government as Income Tax Expansion & Growth Employees Salaries & allowances Statutory Reserve Government as Income Tax Expansion & Growth ECONOMIC VALUE ADDED STATEMENT Economic Value Addition (EVA) indicates the true economic profit of the company. EVA is an estimate of the amount by which earnings exceed or fall short of required minimum return for shareholders at comparable risks.. Economic Value Added Statement for the year ended 31 December 2020 Particulars Taka in Million 2020 2019 Total Revenue 20,223.92 23,618.31 Expenses 16,129.11 17,753.18 1,735.22 2,056.51 2,175.85 2,465.15 303.08 1,224.13 Corporate Tax Capital Charges Economic Value Added Shahjalal Islami Bank Limited
  161. 162 Economic Value Addition FY 2020 FY 2019 10 .17% 10.44% 1.50% 5.18% 9.21% 8.58% 79.75% Expenses Capital Charges 75.17% Corporate Tax Economic Value Added Expenses Capital Charges Corporate Tax Economic Value Added MARKET VALUE ADDED STATEMENT Market Value Added Statement reflects the company’s performance evaluated by the market through the share price. This amount is derived from the difference between market capitalization and book value of the shares outstanding. It signifies the enhancement of financial solvency as perceived by the market. Market Value Added Statement for the year ended 31 December 2020 Particulars 2020 2019 Face value per share (Tk.) 10.00 10.00 Market Value per Share (Tk.) 22.90 23.40 980,092,335 933,421,272 Total market capitalization 22,444.11 21,842.06 Book value of paid up capital 9,800.92 9,334.21 12,643.19 12,507.85 Number of Shares outstanding Market Value Addition Market Value of Share Outstanding 2020 Market Value of Share Outstanding ANNUAL REPORT 2020 12507.85 9334.21 12643.19 9800.92 22444.11 21842.06 (Taka in million) 2019 Book Value of Share Outstanding Market Value Added
  162. 163 RISK MANAGEMENT Shahjalal Islami Bank Limited
  163. 164 REPORT OF THE BOARD RISK MANAGEMENT COMMITTEE Committed to lead sound risk management system Mohammed Younus Chairman , Board Risk Management Committee The Covid-19 pandemic has been affecting the whole world since the first quarter of 2020. This resulted in countries announcing lock-downs and quarantine measures that sharply stalled economic activity. The Government of Bangladesh initiated a nation-wide lock-down from March 26, 2020 for three weeks which was extended to May 30, 2020 in three phases. Several countries took unprecedented fiscal and monetary actions to alleviate the impact of the crisis. The Central Bank of Bangladesh has announced several measures to ease stress in the financial system, including enhancing system liquidity, a moratorium on investment repayments for borrowers, asset classification standstill benefit to overdue accounts where a moratorium has been granted and relaxation in liquidity coverage requirement, among others. Taking this into consideration, SJIBL is closely monitoring the scenario and reinforcing its operational position to handle any uprising situation. Risk is inescapable in the banking business, as such risk management is an integral part of the culture across the bank. Since risk is an inherent component in the banking business, SJIBL treats the risk as an opportunity as well. The Bank manages risk-taking limits by formulating risk appetite whilst keeping its own business goal of absorbing the level of risk on an annual ANNUAL REPORT 2020 basis. Ensuring that the Bank is committed to lead a sound risk management system in place for developing its business and achieving its objectives. In this era of uncertainty, a sound risk management system has become an essential part of helping the Bank to grow and promote sustainability and resilience. The Board Risk Management Committee (BRMC) has been established by the Bank’s Board of Directors, in compliance with the Section of 15Kha(3) of Bank Company Act, 1991 (as amended up to 2018) and subsequent BRPD circular no.11 dated October 27, 2013, issued by Bangladesh Bank. This BRMC is established to play an effective role in mitigating impending risks arising out from strategies and policies formulated by the Board and to carry out the assigned roles and responsibilities efficiently. The committee assists the Board of Directors in fulfilling its responsibilities for overseeing the Bank’s risk management system and activities, including the review of major risk exposures and the step taken to monitor and control those exposures about the myriad of risks faced by the Bank in its business operation. All key risks such as Investment, Market, Operational, Liquidity, Information and Communication Technology, Strategic, etc. are measured by the BRMC regularly through a set of defined risk indicators.
  164. 165 The committee works very closely with the Key Management Personnel and the Board in fulfilling its statutory , fiduciary and regulatory responsibilities for sound risk management. The risk profile of the Bank is communicated to the Board of Directors periodically through the different reports of risk submitted to the Board following each BRMC meeting. SL Name 1 2 Composition and Status of the Committee The BRMC of Shahjalal Islami Bank Limited consists of One (01) Chairman and Four (04) Members who have been solely nominated by The Board of Directors. Details of composition and status are stated as follows: Status with the Bank Committee Meeting Attendance Mr. Mohammed Younus Director Chairman 7/7 Dr. Anwer Hossain Khan, MP Director Member 4/7 3 Mr. Md. Abdul Barek Director Member 3/7 4 Mr. Mohiuddin Ahmed Director Member 6/7 5 Mr. K.A.M. Majedur Rahman Independent Director Member 6/7 5 Members 5 Members 26 FEBRUARY 18 MARCH 38th Mee�ng 6 Members 39th Mee�ng 40th Mee�ng 2020 29 JANUARY APRIL MAY 10 JUNE 5 Members 37th Mee�ng Mee�ng of BRMC 3 Members 7 Members 41st Mee�ng 29 JULY 42nd Mee�ng AUGUST SEPTEMBER The Company Secretary acts as Secretary of the Board Risk Management Committee (BRMC). Key Roles and Responsibilities of the Committee The Committee plays significant roles and responsibilities in proper functioning of the Bank, some of which are formulating and reviewing (at least annually) risk management policies and strategies for sound risk management, monitoring and implementation of risk management policies & processes. Besides, the Committee also ensures effective prevention and control measures, construction of an adequate organizational structure for managing risks, supervising the activities of the Executive Risk Management Committee (ERMC), compliance with BB instructions regarding implementation of core risk management. 14 OCTOBER 7 Members 43rd Mee�ng 18 NOVEMBER DECEMBER Moreover, the Committee is also responsible for formulating and reviewing of risk appetite, limits and recommending these to the Board of Directors for their review and approval, approving adequate record-keeping and reporting system and ensuring its proper usage. However, It is also engaged in analyzing all existing and probable risk issues in the meeting, taking appropriate decisions for risk mitigation, incorporating the same in the meeting minutes and ensuring follow-up of the decisions for proper implementation, submitting proposal, suggestions & summary of BRMC meetings to the Board of Directors at least on a quarterly basis, complying with instructions issued from time to time by the regulatory body, ensuring sufficient & efficient staff resources for Risk Management Division, establishing standards of ethics and integrity for staff and enforcing those standards, assessing the overall effectiveness of risk management functions on an annual basis. Shahjalal Islami Bank Limited
  165. 166 Meetings Host by the Committee during 2020 During the year BRMC organized seven meetings as part of its roles and responsibilities where the bank ’s probable risk exposure, risk monitoring and supervision system were clearly spoken. The seven meetings were carried out on the belowmentioned dates : SL. No Meetings 01. 37th Meeting January 29, 2020 02. 38th Meeting February 26, 2020 03. 39th Meeting March 18, 2020 04. 40 Meeting June 10, 2020 05. 41st Meeting July 29, 2020 06. 42nd Meeting October 14, 2020 07. 43rd Meeting November 18, 2020 th Date of meetings held Activities of BRMC during 2020 In 2020, the BRMC conducted seven (07) scheduled meetings and forty-nine (49) memos were placed before the committee. In discharging the responsibilities assigned to the BRMC, the Committee reviewed significant issues comprising of different risk categories during the year. Some key discussions accentuated in different meetings are stated below : Risk Management & Control Strategies: The BRMC has assessed the bank’s existing and potential risk exposures and recommended necessary risk control and mitigation strategies while keeping a close eye on emerging risks that may pose a serious threat in the future. An overview of Risk Appetite Statement: The BRMC has thoroughly reviewed the bank’s Risk Appetite Statement and determined whether the bank’s own strategy is consistent with the previously agreed-upon risk appetite and tolerance. Exploring Opportunistic Portfolio: The BRMC has carefully observed and identified potential industries in order to investigate unique growth prospects that will aid in the discovery of uncharted investment areas. Management of Liquidity: The BRMC examined the bank’s current liquidity situation and advised it to meet its clients’ financial obligations by maintaining sufficient liquidity, as instructed by Bangladesh Bank. BASEL III Implementation: The committee has reviewed the key accords and compliance of BASEL III thoroughly and advised to connect strategic decisions with the bank’s capital planning. Review the Quality of Assets: A sophisticated discussion on asset quality was held, which identified low-performing assets and suggested actions to improve the asset base’s quality. Stress Testing: The committee has assessed stress testing reports from the quarter ending March 2020 to the quarter ending December 2020 and advised to adopt financial flexibility to respond to severe but plausible scenarios. Scrutinize Risk Management Reports and Outcomes: The committee has scrutinized rigorously versatile risk management reports like Monthly Risk Management Report (MRMR), HalfYearly Comprehensive Risk Management Report (CRMR), Quarterly School Banking Statement, Quarterly Green Banking Report, Yearly Internal Capital Adequacy Assessment Process (ICAPP) during the year and recommended to comply the requirements of the regulatory authority on time. ANNUAL REPORT 2020 Capital Management Propositions: The committee advised the bank to keep and maintain a satisfactory Capital to Risk-Weighted Asset Ratio ( CRAR) and to strengthen long-term capital plans that can align with the bank’s goals while meeting regulatory requirements. An Overview of Risk Management Policies and Effectiveness of Risk Management Functions: The committee has reviewed Risk Management Policies and Effectiveness of Risk Management Functions for the year 2020 and approved the same with appropriate Management Action Trigger ( MAT). Diversification of Portfolio: The committee deeply scrutinized the bank’s overall investment position for identifying and pointing out vulnerable ones to confirm risk mitigation at an optimum level. Review of Regulatory Changes and Affairs: The Committee scrutinized and reviewed regulatory changes and affairs undertaken by Bangladesh Bank to handle the pandemic situation. Capacity Building: The BRMC raised the issue of capacity building, skill enhancement and knowledge gathering among team members by arranging appropriate aptitude & expertise development trainings and workshops. Development of Accountability Framework: The BRMC advised to form and design a precise “ Accountability Framework” to initiate a risk control mechanism across the bank. Cash Recovery and Written-off Position: The BRMC analyzed and discussed Cash Recovery Position of Classified Investments and the total position of Written-off Investments incurred during the year. Audit findings and Compliance: The BRMC discussed thoroughly the findings and observations of audits conducted by Bangladesh Bank and advised accordingly to take necessary action to comply with audit inspection. Top Borrowers and Defaulters: A brief discussion was carried out by BRMC on the exposure of Top-20 Borrowers and exposure of Top-20 Defaulters and the status thereof. Reporting to the Board The proceedings of BRMC meetings containing various suggestions and recommendations to the management were regularly reported to the Board of Directors for reviewing and approving the same as placed. During the year 2020, the Board Risk Management Committee (BRMC) supported the execution of the overall business strategy within a set of prudent risk parameters which are reinforced by a sound risk management system. Acknowledgment The members of the Board Risk Management Committee (BRMC) convey their heartiest gratitude and thanks to the Board of Directors, Management and Risk Management Team of the Bank for their continuous and wholeheartedly support, assistance and cooperation while committing to perform further its duties and responsibilities in a more resilient way. Mohammed Younus Chairman Board Risk Management Committee
  166. 167 FROM THE DESK OF CHIEF RISK OFFICER (CRO) Keeping Enough Strength in Challenging Moment Mohammed Ashfaqul Hoque, FCA, FCS Chief Risk Officer The whole world is going through one of the most turbulent situations with challenges which are unprecedented due to the outbreak of the Covid-19 Pandemic. Economic activity had almost come to a standstill as we lived through a period of intense uncertainties and the impact is sweeping across every segment of society. However, amidst these challenges, it is evident that these events have only accelerated the pace of change and these will perpetuate a revolutionary change in the field of new technological paradigms which are difficult to envisage at present. Considering the ongoing situation, it’s expected that 2021 is going to be a turning point. But the good news is that the introduction of the Covid-19 vaccination has come up with a ray of hope by giving us a signal that turmoil situation is going to be minimized. Since the beginning of my journey as Chief Risk Officer (CRO), I have deeply observed that Shahjalal Islami Bank Limited (SJIBL) has demonstrated strength in steering through challenging circumstances. The businesses of the Bank have been driven with a focus on risk-calibrated profitable growth. The financial statements of the Bank have been strengthened substantially as well as risk management practices have focused on generating sustainable and stable growth in business. The steps taken have enabled the Bank to emerge more dynamic and this reflects at the performance of the Bank in the year 2020. Sound Risk Management Framework The Shahjalal Islami Bank Limited (SJIBL) is constantly scanning the risk background for new areas of potential concern and taking informed risk decisions while engaging with customers, granting investment, entering into treasury dealings and providing other services. In this regard, the Bank employs a comprehensive approach to risk management so that it may mitigate the risks it faces with a sound Risk Management Framework (RMF) without obviating its appetite for risk. The RMF is evaluated yearly by the Board Risk Management Committee (BRMC). The Bank is continuing to invest extensively in technology in order to develop and expand its risk management capabilities. Bank’s Risk Profile and Performance in 2020 In 2020, the Bank has remained resilient, with its asset quality remaining broadly stable, as well as its capital and liquidity metrics, continuing to be at healthy levels. The comparative analysis of key risk profile indicators are outlined below in the table: Shahjalal Islami Bank Limited
  167. 168 Risk Category and Parameter Investment Risk : Quality of Investments Portfolio 31.12.2020 <5% 4.57% 4.91% Net NPI Ratio <3.50% 2.82% 3.26% Provision Maintenance Ratio ≥100% 100.16% 100.00% Gross NPI Ratio Rated Investments of Total Eligible Investments portfolio 90.05% 83.68% ≤92% 79.62% 87.47% Liquidity Coverage Ratio (LCR) ≥100% 390.52% 204.10% Net Stable Funding Ratio (NSFR) >100% 130.31% 150.47% 5.94% Cash Reserve Ratio (CRR) Strategic Risk 31.12.2019 80% - 100% Investment Deposit Ratio (IDR) Liquidity Risk Actual Position Policy Parameter Key Risk Indicator ≥4% 4.74% Statutory Liquidity Requirement (SLR) ≥5.50% 11.50% 7.43% Minimum Capital Ratio (CRAR) Plus Capital Consurvation Buffer ≥12.50% 14.19% 15.58% Tier-I Capital Plus Conservation Buffer ≥8.50% 9.15% 9.03% Tier-II Capital (Gone Concern Capital)* ≤4% 5.04% 6.55% Leverage Ratio ≥3% 5.29% 5.38% AA2(ST-2) AA2(ST-2) AA2(ST-2) Surveillance Rating-CRAB *Tier-II capital is admissible above 4% of RWAs up to 88.89% of excess CET-1 capital ratio over 7%. The above table proves that the quality of investments, liquidity and capital position of the Bank is strong enough to continue its operation smoothly. However, The Bank remains vigilant against existing and emerging risks that may impact its business and utilize portfolio reviews and stress testing to assess the risk landscape. In 2020, the Bank has focused on dealing with these existing and emerging risks by taking into consideration on: ●● Increasing the status of ratings of eligible investment clients for minimizing Risk Weighted Assets (RWA) as well as the capital requirement of the Bank. ●● Building a robust risk management culture across the Bank. ●● Raising awareness on risk management by providing adequate training. Bank’s Risk Management Approach The Bank Management has embedded the Risk Management Framework (RMF) across the Bank including branches and subsidiaries. It allows the Bank to identify and manage risks holistically as well as strengthening the Bank’s capabilities to understand, articulate and control the nature and level of the risks the Bank Management takes while still serving its clients soundly. In 2020, the Executive Risk Management Committee (ERMC) reviewed the RMF. During this process, the ERMC analyzed Core Risks and made improvements to the Bank’s approach to the Core Risks Management Committee (CRMC) in order to mitigate the risks more smoothly. The Bank will consider whether any of the other existing or emerging risks should be treated as material risks over time. The table below provides an overview of the bank’s Core Risks and risk management process. Type of Core Risks Investment Risk Managing Process The Bank has a robust investment risk policy framework embedded with prudent investment guidelines to minimize investment defaults and losses and manages its investment exposures following the principle of diversification across products, geographical area, client segments and industry sectors. Asset and Liability Risk The Asset Liability Committee (ALCO) of the Bank has analyzed the market liquidity and investment position as well as profit rate of deposit and investment while reviewing and offering deposit profit rate with attractive deposit products of Bank in line with industry and holds an adequate buffer of HQLA to survive extreme but plausible liquidity stress scenarios for at least 30 days without recourse to extraordinary central bank support. Foreign Exchange Risk The Bank maintains its FX holdings as per the need faced by the clients and manages Foreign Exchange Risk within the approved Risk Appetite. The Bank is also conscious of managing FX positions so that any FX losses don’t cause material damage to its regular FX operation. Internal Control and The Bank has effective guidelines to maintain strong internal control systems through which regular and special inspections are conducted by the team of IC&CD and report accordingly to the higher management of the Bank. Compliance Risk Money Laundering Risk The Bank has formulated “Guidelines on Prevention of Money Laundering and Terrorist Financing” and applies, measures and monitors risk-based Customer Due Diligence (CDD), business relationship and transaction pursuant to national regulations and international standards. ICT Risk The Bank continuously enriches its technology risk management capabilities by adopting a strong “Information & Communication Technology (ICT) Security policy” and reviews its system fluctuations and penetration testing and a dedicated IT audit team carries out its functions to ensure findings which are sufficiently addressed to a higher authority. Apart from dealing with these Core Risks, SJIBL as a practitioner of Shariah Based Islami Banking also faces Shariah Non-Compliance Type of Risks Shariah NonCompliance Risk ANNUAL REPORT 2020 Risk and takes action to manage the same risk more efficiently by taking this into consideration as follows: Managing Process The Bank has established Shariah Supervisory Board (SSB) and Shariah Inspections and Report Review Committee (SIRRC) in order to monitor and review Shariah Compliance in the Islamic Banking Business. Shariah-related policies and procedures have been formulated for running all Islamic Banking business and operations in compliance with Shariah Based Islamic Banking while establishing tactful Risk Management Tools to facilitate its business.
  168. 169 a refreshed approach on the enhancement of operating model to clarify accountabilities between the first and second lines of defense ; increased training and awareness alongside crisis management exercises to ensure business responses with a focus on clients and critical services which has facilitated greater insights into the Bank’s risk position. In addition to the Core Risk Types that the bank manages through risk type frameworks, policies, and risk appetite, the bank also keeps an inventory of Emerging Risks. Focus on Key Risk Priorities In view of the challenging risk environment, it is essential that the Bank continues to optimize the way of risk is managed within the Bank. Innovation is the prime agenda of Shahjalal Islami Bank Limited and the Bank is making progress on the risk priorities set out on a need basis: ●● ●● ●● Strengthen the Bank’s Risk Culture: The Bank’s Risk Management Framework (RMF) has been embedded and rolled out to all concerns of the Bank. In 2020, internal messaging from senior management promotes a healthy risk culture by valuing risk-based thinking across each line of defense, encouraging risk awareness, challenging the present position and creating a transparent, safe and open environment for employees to communicate risk concerns. Emphasize on Client’s Credit Rating: SJIBL always remains vigilant about the rating status of the clients and monitors the rating status of the investment clients on a regular basis as SJIBL presumes that credit rating is an effective tactic to manage and mitigate investment risk. The bank provides noticeable attention to the branch level so that the branch also remains watchful about increasing the number of credit rating clients. A significant improvement in the rating status of the clients is made in this year as the percentage of rated clients stood at 90.05% in 2020 which was 83.68% in the previous year. Enhance Information and Cyber Security (ICS): A new strategy of Bank’s ICS has been developed to align with the overall corporate strategy and drive cohesion across the Bank on managing ICS Risk. In 2020, the Bank embedded Type of Emerging Risks Climate-related transition Risk Regulatory Changes, Regulatory reviews, investigations and legal proceedings New technologies and digitalization, including business disruption risk and obsolescence risk Risk trend since 2019* ●● Managing Climate Change Risk: Climate change remains one of the greatest challenges facing the world today, given its widespread and proven impacts on the environment and human life. The Bank recognizes the need to manage both its contribution through direct and financed emissions and the financial and non-financial risks arising from climate change. The Bank is responding responsibly and has committed to measure, manage and ultimately reduce the emissions linked to its financing in line with the Guidelines of regulatory authorities. ●● Manage Financial Crime Risks: The Bank remains committed to be leading in the fight against financial crime. The Bank reclassified the Fraud Risk sub-type from Operational Risk to Financial Crime Risk, thus providing new insights and a more holistic view of Financial Crime threats. The Bank is demonstrating delivery against its mission through its Correspondent Banking Channels, its ongoing deployment of upgraded systems for AML, sanctions, fraud and customer due diligence. Bank’s Insightful View towards Emerging Risks Emerging Risks refer to unpredictable and uncontrollable outcomes from certain events and circumstances which are on the radar but not yet fully measurable may have the potential to impact our business materially. The following table summarizes the Emerging Risks that the Bank may face and its managing process: Managing Process ●● The Bank is developing a Climate Risk framework to deliver a consistent approach to climate risk management. ●● The Bank is actively collaborating with clients, regulators, investors to solve the collective challenges in the approach to managing climate-related risks. ●● The Bank continues to train and educate its human resources on relevant issues including conduct, conflicts of interest, information security and financial crime compliance in order to reduce its exposure to legal and regulatory proceedings. ●● The Bank repeatedly monitors emerging trends, opportunities and risks in the technology space which may have implications on its core banking operations. ●● The Bank continues to make headway in harnessing new technologies, actively targeting the reduction of obsolescent/end of support technology and ensuring operational resilience. ●● The Bank has an integrated strategy to leverage technology to manage new technological risk and combat cyber-enabled financial crime. Risk Heightened in 2020 Risk reduced in Risk remained consistent with 2019 levels * The risk trend refers to the overall risk score trend which is a combination of potential impact, likelihood and rate of change. Final Words Risk is an area that provides both challenges and opportunities. The sound Risk Management Framework will act as a catalyst of key elements to the ultimate success of the Bank. The bank was hit by an outbreak of the novel coronavirus in early 2020. But the Bank continues its vigilant focus on its risk management capabilities that will help the Bank to navigate these headwinds, to ensure a sustainable, innovative, resilient and more convenient client-oriented Bank. The awareness of the Bank’s such precaution and vigilance is being treated as key to the optimum success of the Bank and helps the Bank to look forward to walking in the journey of uncertainty and taking challenges and exploring new opportunities full of thrilling and excitement. Mohammed Ashfaqul Hoque FCA, FCS Chief Risk Officer Shahjalal Islami Bank Limited
  169. 170 RISK MANAGEMENT FRAMEWORK Sound risk management is essential in delivering consistent and sustainable performance for all of stakeholders and is therefore a central part of the financial and operational management of the Bank . The Bank adds value to clients and the communities in which they operate by taking and managing appropriate levels of risk, which in turn generates returns for shareholders. The Bangladesh economy would be impacted by the Covid-19 pandemic with contraction in industrial and services output across small and large businesses. The banking system is expected to be impacted by lower growth of investment and income in the short to medium term and an increase in operational costs. The effect of the Covid-19 pandemic on the Bank’s output is still unclear, as it depends on the spread of the virus, additional government and central bank measures to alleviate economic distress, Bank actions and the time it takes for economic activity to return to normal levels. It is presumed that the inventory and subsequently introduction of vaccines against Covid-19 has fetched a ray of new hope across the whole world as the wheel of the world economy will move on in its own way soon. Bangladesh’s economy is also trying to come back at its own rhythm because Bangladesh Bank and the government have been extensively introducing effective financial initiatives to come out of this situation. Taking this into consideration, the bank is closely monitoring the scenario and reinforcing its operational position to handle any uprising situation. 1.0 Risk Management Overview Risk management is a discipline at the core of every banking company and encompasses all activities that affect its risk profile. A bank should attach considerable importance to improve the ability to identify, measure, monitor and control the overall risks assumed. Shahjalal Islami Bank Limited (SJIBL) embraces risk management as an integral part of its business, operations and decisionmaking processes. In ensuring that SJIBL achieves optimum returns whilst operating within a sound business environment, the risk management teams are involved at the early stage of the risk-taking process by providing independent inputs, including relevant valuations, investment evaluations, new product assessments and quantification of capital requirements. These inputs enable the business units to assess the risk-vs-reward of its propositions, thus enabling risk to be priced appropriately in relation to the return. Generally, the objectives of Bank’s risk management activities are to: ●● Promote better risk culture ●● Develop the standards for risk management practices ●● Ensure that risk-taking activities are consistent with risk policies and the aggregated risk positions are within the risk appetite as approved by the Board ANNUAL REPORT 2020 ●● Improve internal financial soundness and stability ●● Adopt and implement a sound risk management framework and ●● Introduce important risk management tools and techniques for assessment and necessary treatment of different risks 2.0 Bank’s Risk Management Policy It is important not only to fulfill regulatory requirements but also to improve the financial and operational performance of the Bank. The risk management policy has progressed as a key part of the organizational structure. Indeed, it is now more vital for the stability of banks in the long run. Shahjalal Islami Bank Limited has an all-inclusive outlook on risk management. As a result, all of the activities related to risk management are being driven by the bank’s risk management policy, delineating a clear vision for our entire enterprise. SJIBL risk management policy covers detailed guidelines for sound risk management. We also adhere to the industry’s best practices at the national and international levels. To illustrate this, SJIBL risk management policy includes, but is not limited to, the following aspects: ●● An outline of the dimensions of risk management ●● An inclusive risk management framework ●● A rigorous process for sound risk management ●● Emphasis on capital management for sound risk management ●● Application of disclosure requirements of risk reporting 3.0 Bank’s Risk Management Framework Shahjalal Islami Bank Limited has developed a Risk Management Framework (RMF) as a standardized approach to effectively manage its risks and opportunities. The Bank’s Risk Management Framework provides its Board and Management with tools to anticipate and manage both the existing and potential risks, taking into consideration changing risk profiles as dictated by changes in business strategies, the external environment and/or the regulatory environment. The key components of the Bank’s Risk Management Framework are represented in the diagram below:
  170. 171 R I S K G O V E R N A N C E & O R G A N I S AT I O N R I S K S T R AT E G Y & R I S K A P P E T I T E Risk Culture RISK MANAGEMENT PROCESS Communicate and Consult Establish the Context Risk Policies, Procedures, Process, Standards and Limits Iden�fy the Risks Analyze the Risks Pillar 1 & 2 under Basel III and Stress Tes�ng Evaluate the Risks Risk Register Treat the Risks Monitor the Risks Measurement, Monitoring and Repor�ng RISK MANAGEMENT TOOLS AND MODELS The design of the Bank’s Risk Management Framework incorporates a complementary ‘top-down strategic’ and ‘bottom-up tactical’ risk management approach. 3.1 Risk Profile Risk profile is the amount or type of risk a bank is exposed to. Forward risk profile is a forward-looking view of how the risk profile may change both under expected and stressed economic conditions. To determine the overall risk position, Bank generally considers diversification benefits across risk types. The diagram shows Bank’s overall risk, as measured by the economic capital usage calculated under Guidelines on RiskBased Capital Adequacy (Basel III). Investment Risk Market Risk Liquidity Risk Opera�onal Risk Internal Contro & Compliance Risk Money Laundering Risk RISK PROFILE ICT Risk Repula�onal Risk Strategic Risk Environmental and Social Change Risk Other Material Risk Shahjalal Islami Bank Limited
  171. 172 3 .2 Risk Culture Bank’s risk management philosophy is embodied in the Three Risk culture is about understanding risks, the Bank faces and how they are managed. The Bank embraces risk management as a key element of its culture and decision-making processes. The Lines of Defense approach, whereby risks are managed at the point of risk-taking activity. There is clear accountability of risk ownership across the Bank. THREE LINES OF DEFENSE APPROACH FIRST DEFENSE 1st Line of defense Business and Opera�on Unit Have in place effec�ve process to iden�fy, assess measure, monitor, mi�gate and report on their risks. Operates in accordance wvith the risk policies and delegated mandates. Responsible for having skills, opera�ng procedures, systems and controls. 2nd Line of defense Risk Management Division SECOND DEFENSE To put appropriate Internal Control framework for effec�ve and efficient opera�ons. Responsible for recommending and monitoring the Bank's risk appe�te and policies. 3rd Line of defense Follow-up and report on Bank's risk related issues. Internal Audit Unit THIRD DEFENSE To perform independent periodic reviews of first and second lines defense. To provide assurance and informs strength and poten�al weaknesses of first and second lines defense. 3.3 Risk Governance & Organisation Risk governance refers to the structure, rules, processes and mechanisms by which decisions about risks are taken and implemented. A strong governance structure is important to ensure effective and consistent implementation of the Bank’s Risk Management Framework. The Board is ultimately responsible for the Bank’s strategic direction which is supported by the risk appetite and relevant risk management frameworks, policies and procedures. The Board is assisted by different risk ANNUAL REPORT 2020 committees and control functions in ensuring that the Bank’s Risk Management Framework is effectively maintained. 3.3.1 Risk Management Structure Risk Management procedures are approved, monitored and mitigated at different stages of the bank with a combination of the Board and its Committee, Management Level Committee, Risk Management Division and Basel Implementation Unit (BIU). The risk management structure with its three layers is as follows:
  172. 173 Risk Management Structure and Its Three Layers Board of Directors STRATEGIC LEVEL Board Risk Management Commi �ee (BRMC) (Headed by MD/CEO) Supervisory Review Process (SRP) Team MANAGEMENT LEVEL MD/CEO (Headed by Divisional Head) Core Risk Management Commi�ee (CRMC) (Headed by CRO) Execu�ve Risk Management Commi�ee (ERMC) OPERATIONAL LEVEL Risk Management Division (RMD) Investment Risk Desk Market Risk Desk Liquidity Risk Desk Opera�onal Risk Desk 3.3.2 Board Risk Management Committee (BRMC) Board Risk Management Committee plays a vital role in the following aspects. ●● Formulate and review the risk management strategies and policies at least annually; ●● Monitor and implement the risk management policy & process; ●● Ensure the construction of adequate organizational structure; ●● Supervising the activities of ERMC, SRP Team and CRMC; ●● Ensuring formulate, review and recommend risk appetite, limit and tolerance level; ●● Ensuring compliance of BB instructions regarding core risk management; Risk Research & Policy Development Desk Basel Implementa�on Unit (BIU) ●● Holding at least four (4) meetings in a year; ●● Submit proposals, suggestions & summary of BRMC meetings to the Board of Directors at least quarterly; ●● Ensure sufficient & efficient staff resources for RMD; ●● Assess the overall effectiveness of risk management functions on yearly basis. 3.3.3 Supervisory Review Process (SRP) Team SJIBL has an SRP Team headed by Managing Director as the Chairman. The following responsibilities are performed by the SRP Team. ●● Ensuring that the Bank has implemented the Pillar 2 of RBCA framework according to Bangladesh Bank instructions; Shahjalal Islami Bank Limited
  173. 174 ●● Developing an internal process document called Internal Capital Adequacy Assessment Process (ICAAP) for assessing Bank’s overall risk profile; ●● Ensuring that the Bank has overall capital adequacy in relation to its risk profile and followed a strategy for maintaining its capital at an adequate level; ●● Timely reporting the Bank’s quantitative information regarding ICAAP along with the supplementary documents to BRMC, Board and Bangladesh Bank. ●● Coordinating with business units to prepare functional specifications; Preparing and forwarding risk reports; and Assisting in the implementation of all aspects of the risk functions RMD has a close relationship with BIU for better communication. 3.3.4 Core Risk Management Committee (CRMC) 3.3.7 Basel Implementation Unit (BIU) ●● Adoption of in-house core risk assessment methodology; ●● Performing periodic assessment of each Core Risk Guidelines and implementation status; ●● Reviewing and approval of core risk rating and recommendation for improvement ●● Extend supervisory support for the implementation of committee’s meeting minutes; Basel-III reforms are the response of the Basel Committee on Banking Supervision (BCBS) to improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. The Committee has issued Basel-III, “A global regulatory framework for more resilient banks and banking systems” in December 2010. ●● Submit proposals, suggestions & summary of CRMC meetings to RMD and BRMC. 3.3.5 Executive Risk Management Committee (ERMC) SJIBL has formed ERMC comprising of Chief Risk Officer (as the Chairman), Head of ICC, IRM/IAD, Treasury, AML, ICT, ID, Operation, Business, Finance, Recovery and other Division related to risk. The following responsibilities are performed by the ERMC. According to Bangladesh Bank’s “Guidelines on Risk-Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III)” issued in December 2014, Shahjalal Islami Bank Limited has developed and strengthened the Basel Unit which is responsible for the implementation of regulatory requirements and supervisory standards of the following areas: ●● Raise the quality and level of capital to ensure banks are better able to absorb losses on both a going concern and a gone concern basis ●● Increase the risk coverage of the capital framework ●● Identify, measure and manage the Bank’s existing and potential risks; ●● Introduce leverage ratio to serve as a backstop to the riskbased capital measure ●● Holding at least one (1) meeting in a month based on the findings of the risk report; ●● Raise the standards for the supervisory review process (Pillar 2) and ●● Ensuring incorporation of all the decisions in the meeting minutes; ●● Public disclosures (Pillar 3) etc. ●● Controlling risks through proper implementation of the decisions of ERMC, BRMC and Board meetings; ●● Submit proposals, suggestions & summary of ERMC meetings to CEO and BRMC; ●● Assessing requirement of adequate capital and ensuring maintenance of the same; ●● Determine the risk appetite, limits in line with strategic planning; ●● Contributing to the formulation of risk policies for business units; ●● Following up reviews and reports from Bangladesh Bank (BB) and informing BRMC the issues affecting the Bank’s operations. 3.3.6 Risk Management Division (RMD) ●● Bank has an independent full-fledged Risk Management Division (RMD) which headed by the Chief Risk Officer (CRO); ●● Bank has separate desks within the RMD to oversee each key risk area; ●● RMD deals with the following major functions: Managing the process for developing risk policies and procedures; ANNUAL REPORT 2020 BIU of SJIBL meets the regulatory requirements more appropriately and assists the Bank to follow the instructions of Bangladesh Bank more efficiently for smooth implementation of the Basel III framework in the Bank. 3.4 Risk Strategy and Risk Appetite A Bank’s strategy details the long-term and in some cases, short-term goals and objectives, as well as how progress towards their achievement is measured. The Board of Directors set the strategies and the senior management is responsible for implementing those strategies and communicating them throughout the Bank. Risk Appetite is defined as the amount and type of risks that the Bank is able and willing to accept in pursuit of its strategic and business objectives. SJIBL sets risk appetite including tolerance and limit every year to ensure appropriate alignment between strategy, growth aspirations, operating plans, capital and risk. Bank’s Risk Appetite Framework consists of risk capacity, risk appetite statement and key risk appetite measurement. Application of the risk appetite statement and monitoring of the key risk appetite measurement help to ensure the Bank stays within appropriate risk boundaries. Risk appetite statement plays an important role in cascading the risk strategy down through the Bank. As per instruction of the central bank, the Bank sends a board-approved copy of the same appetite to the Bangladesh Bank within the prescribed time each year.
  174. 175 3 .5 Risk Management Process Risk Management Process is the systematic application of management policies, procedures and practices to the assessment, treatment, controlling and monitoring of risk. It is an iterative process that, with each cycle, can contribute progressively to organizational improvement by providing management with a greater insight into risks and their impact. Risk assessment is the process of risk identification, analysis and evaluation. It is a series of multi-steps that, when undertaken in sequence, enable continual improvement in decision-making. Shahjalal Islami Bank Limited adopts the following steps of the Risk Management Process: ●● Communicate and Consult: This is a preparatory step that aims to identify the responsible persons involved in risk assessment and also the persons engaged in the treatment, monitoring and review of risk. ●● Establish the Context: This is another preparatory stage that closes to starting the formal risk management process. ●● Identify the Risks: The next step is to identify possible risks that may affect, either negatively or positively, the objectives of the business and the activity under analysis. ●● Analyze the Risks: The risk analysis step assists in determining which risks have a greater consequence or impact than others. ●● Evaluate the Risks: Risk evaluation involves comparing the level of risk found during the analysis process with previously established risk criteria and deciding whether these risks require treatment. ●● Treat the Risks: Risk treatment is about considering options for treating risks, evaluating those options, preparing the risk treatment plans and implementing those plans to achieve the desired outcome. ●● Monitor the Risks: Risks need to be monitored periodically to cope up with changing circumstances. The risk management process needs to be regularly repeated so that new risks are captured in the process and effectively managed. 3.6 Risk Management Tools and Models In managing investment, market, liquidity, and operational risks, Bank follows the latest six (6) Core Risk Management Guidelines, Stress Testing Guidelines and related circulars issued by Bangladesh Bank. Sound risk management includes different tools and models which are guided by the Bank’s risk appetite framework and integrated with the Bank’s strategies and business planning process. 3.6.1 Risk Policies, Procedures, Process, Standards and Limits Policies and Procedures The Board of Directors and Senior Management have formulated risk management policies and procedures to deal with various risks that arise from the bank’s business and operational activities. The bank’s policies and more detailed procedures provide guidance for the day-to-day implementation of broad risk strategies and limits designed to protect the bank from imprudent and unwarranted risks. These policies and procedures include not only those relevant to specific risk areas like Investment Policy, Liquidity Management Policy and Operational Risk Management Policy but also those related to the overall risk management. The management reviews risk policies, procedures and limits every year and update them when necessary. Policies are guided by the Bank’s risk appetite that sets the limits and controls within which the bank can operate. ●● Key risk policies are approved by the Board of Directors. ●● Management level risk policies manuals associated with processes such as Investment Policy Manual and new products initiation are approved by senior executive management and/or key risk committees. Process The activities are associated with identifying, evaluating, documenting, reporting and controlling risk. Standards Standards are developed covering the whole enterprise and documented in a series of policies, manuals, and handbooks under the purview of the Risk Management Division. Limits Control risk-taking activities within the tolerance level established by the board and senior management. Limits also establish accountability for key tasks in the risk-taking process and establish the level or conditions under which transactions may be approved or executed. 3.6.2 Pillar 1 & 2 under Basel III and Stress Testing Pillar 1 & 2 under Basel III and Stress testing programs at the enterprise level allow the Bank to estimate the potential impact on income, capital and liquidity of significant changes in market conditions, investment environment, operational condition, liquidity demands or other risk factors. The development, approval and on-going review of the Bank’s pillars 1 & 2 under Basel III and stress testing programs are subject to Bangladesh Bank’s updated guidelines and instructions. Pillar 1 under Basel III and Stress testing reports are prepared every quarter and Pillar 2 under Basel III is prepared on yearly basis and presented to the ERMC, BRMC and Board. 3.6.3 Risk Register The risk register is one of the effective tools for comprehensive risk management that maintained by the Bank to identify the key business and financial risks, to define and implement respective controls/mitigating factors to reduce the risks faced by the Bank. RMD reviews the risk register based on the reports provided by the Business line managers, suggests the mitigation measures to concerned units and also submits the effectiveness of the mitigation measures to BRMC quarterly. Minimum components of the risk register are as follows: Shahjalal Islami Bank Limited
  175. 176 Risk Register 1 Date Identification Date A Target Date B Completion Date C 2 Risk Number Unique identifying number D 3 Risk Description Brief Description (Causes and impact) E 4 Existing Controls Brief description of the controls (currently in place for the risk F 5 Consequence Using Scales (e.g. 1-5 with 5 being most severe) G 6 Likelihood Using Scales (e.g. 1-5 with 5 being most likely) H 7 Overall risk score Determined by multiplying likelihood times consequence for a scale ranging from 1-25 8 Risk Ranking Priority List J 9 Trigger Indicates that a risk is about to occur or has already occurred K I=G*H 10 Management Action Action is to be taken if the risk found adverse L 11 Risk Owners M Mainly Business Line personnel 3.6.4 Measurement, Monitoring and Reporting Risk Measurement The Bank uses models for different purposes including estimating the value of transactions, measuring risk exposures, determining investment risk ratings and parameters, and calculating economic and regulatory capital. The use of quantitative risk methodologies and models is balanced by a strong governance framework and includes the application of sound and experienced judgment. Regular Monitoring Ensures that business activities are within approved limits or guidelines, and are aligned with the bank’s strategies and risk appetite. Breaches, if any of these limits or guidelines are reported to senior management, risk committees and/or the Board depending on the limit of the guideline. Risk Reports Aggregate measures of risks, across products and businesses, are used in compliance with policies, limits, and guidelines. They also provide a clear statement of the amounts, types and sensitivities of the different risks in the Bank’s portfolios. Senior management and the Board use this information to comprehend the bank’s risk profile as well as the performance of the portfolio. ANNUAL REPORT 2020 3.7 Meeting of Executive Risk Management Committee (ERMC) For practicing sound risk management in the Bank, SJIBL followed the prescribed formats of Monthly Risk Management Report (MRMR) and Comprehensive Risk Management Report (CRMR) provided by the Bangladesh Bank as per DOS Circular letter no. 04 dated 08 October 2018 for preparing on a monthly and half-yearly basis and regularly placed to the Executive Risk Management Committee of the Bank. SJIBL has formed a well-designed Executive Risk Management Committee (ERMC) comprising 18 (eighteen) members. The ERMC invites the top management (CEO, AMD or senior-most executives) to attend the meetings so that they are well aware of the risk management process. The CRO acts as the chairman of the committee. It arranges a monthly meeting on regular basis to discuss the identified risk issues and risk management status of the Bank as per guidelines of Bangladesh Bank. The Risk Management Division (RMD) under the supervision of CRO coordinated different risk management activities of the Bank and provided guidelines to concerned divisions in this respect. The activities, observations and recommendations of the Executive Risk Management Committee (ERMC) are being regularly reported to the Board Risk Management Committee, Board of Directors and Bangladesh Bank.
  176. 177 RISK MITIGATION METHODOLOGY Shahjalal Islami Bank Limited develops and implements its own guidelines and different types of risk management tools inconsistent with the complexity , size and nature of the business, risk strategy and Bangladesh Bank guidelines to sound risk management and risk mitigation. The Bank considers capital adequacy, the expected level of profitability, market reputation, experienced personnel, logistic support, macro and microeconomic scenario, risk management practices, etc to determine its risk strategy. Bank’s reputation and achievement depend on the ability to identify, assess and mitigate risks at all levels. The Risk Management strategy is therefore fundamentally based on maintaining adequate capital, liquidity and operational control at all times in order to safeguard the interest of depositors, borrowers, shareholders and other stakeholders. 1.0 Risk Mitigation Approach NPI levels was assessed using a range of additional stress tests. In addition, the Bank reviewed the risk of elevated industries in the context of the COVID-19 pandemic. Notable action was also taken to mitigate Cyber risk by introducing several security measures. The Bank has adopted a Sound Risk Mitigation Approach (RMA) to ensure risk exposures within the Bank. Risks of the Bank are mitigated consistently in line with the Board-approved risk appetite that supports the Bank’s strategy. The RMA sets standardized practices to promote accountability and necessary oversight for the effective management of all these risk types. 2.0 Risk Management and Mitigation Tactics Risk mitigation tactics need to be dynamic to successfully establish sound risk management. However, there are certain types of risks which are more likely to occur and impede business goals. Hence, effective policy or action plans need to be in place to ensure highly effective risk management. In the banking business, the risk is inherent. As a result, risk management can have a significant impact on financials. As a part of regulatory and global benchmarking, the Bank has developed risk mitigation tactics based upon six (6) core risks guidelines of Bangladesh Bank and Basel framework. The acknowledged risks which the Bank are currently mitigating or intends to mitigate in the future are represented in the below diagram: Taking into consideration of COVID-19 pandemic situation and to alleviate the risks, the Bank has taken several fruitful steps in response to the COVID-19 pandemic including; work from home arrangements for staff, strict adherence to safety instructions issued by Health Authorities to ensure staff health and safety, and strengthening the Disaster Recovery sites as part of the Business Continuity Plan. Further, the Bank continued to provide uninterrupted customer service through ATMs at branches that were closed due to the lock-down and also ensured 24/7 accessibility via Bank’s digital channels. The impact of the COVID-19 lock-down and moratorium measures on the Bank’s RISK MANAGEMENT & MITIGATION TACTICS Iden�fied Risk, Mi�ga�on & Capital Alloca�on Core Risk Pillar i Pillar ii Investment Risk Investment Risk Residual Risk Foreign Exchange Risk Market Risk Concentra�on Risk Asset Liability Risk Opera�onal Risk Profit Rate Risk in the Banking Book Money Laundering Risk Liquidity Risk Internal Control & Compliance Risk Reputa�on Risk ICT Risk Strategic Risk Se�lement Risk Environmental and Climate Change Risk Other Material Risk Shahjalal Islami Bank Limited
  177. 178 In view of core risk guidelines , the Bank has established different divisions to address specific risks, e.g. Investment Risk Management Division (IRMD), Investment Administration Division (IAD), Special Asset Management Division (SAMD), Internal Control and Compliance Division (IC&CD), Anti-Money Laundering Division(ALMD), etc. Further, to manage the overall risks of the Bank in line with Basel-III, the Bank has formed a dedicated Risk Management Division. Besides, the Bank has different high-powered committees to monitor and ensure smooth risk management activities. For example, Senior Management Team (SMT), Asset Liability Committee (ALCO), Executive Risk Management Committee (ERMC), Supervisory Review Process(SRP) Team, Central Compliance Committee (CCC), Investment Committee (IC), Shariah Inspections’ and Report Review Committee (SIRRC) etc. 2.1 Investment (Credit) Risk Investment (Credit) risk arises from the potential that the bank’s borrower will fail to meet its obligations in accordance with agreed terms, resulting in a negative effect on the profitability and capital of the Bank. Major investment portfolio risks come from the bank’s investment with corporate (industrial), small and medium-sized enterprises (SMEs), retail and consumer financing, household clients, transport, construction, real estate, and financial institutions. Investment portfolio risk could stem from both onBalance Sheet exposures and Off-Balance Sheet Items. Like most of the banking institutions in Bangladesh, investments are the largest and most obvious sources of investment risk for SJIBL. 2.1.1 Approach to Managing Investment Risk Shahjalal Islami Bank Limited adopts a holistic approach towards Investment Risk Management (IRM). In this regards, the Bank maintains the following functions of IRM: ●● Ensure timely processing of investment proposal received from applicant through Corporate Banking/Branch/ Relationship officer after primary level of examination with recommendations. ●● Examine investment proposals in detailed vis-a-vis ascertain investment risks of a customer through CIB Report, Risk Grading Score and divisional observations for acceptance/rejection and / or forward the same as per delegation for decision. ●● Set out specific terms of investment to be approved, based on the merit of the proposal upon satisfactory screening process. ●● Assure all investment facilities are properly approved in-favor of the qualified/known customers and documented on time. ●● Ensure approved investment facilities are structured & designed appropriately in line with the need of the customer/applicant and their repayment capacity. ●● Ensure compliance with investment policy guidelines and related strategies of the bank before approval of any investment facility to any customer. ●● Make sure that investment facilities allowed to the same or affiliated customers are properly identified and calculated for determining compliance to one customer/group exposure as per guidelines of Bangladesh Bank for largeinvestment facilities. ●● Affirm customer’s investment information is updated periodically and review from time to time. ●● Ensure approval of exceptions like waiver/amendments of sanction terms by the competent authority. ●● Ensure a prudent level of investment portfolio diversification as per policy guidelines of the Bank. ●● Confirm compliance to specific regulatory requirements and decisions resolved by the Board in respect of the issues related to the division. ●● Ensure delivery of annual investment plans and goals and promote strong asset quality. ●● Make sure that all risk within the Investment Division is minimized and systems are in place to monitor and as appropriate, eliminate risk in all areas of the business. ●● Ensure support to attain the highest standard of corporate governance. 2.1.2 Investment Management Process Board of Directors or Execu�ve Commi�ee Declined MD & CEO Approved Addi�onal Managing Director (Head of Investment Commi�ee) Deputy Manging Directors (Head of IRM) Head of Divisions/Unit (Corporate, SME, Agri., Retail, Export Finance & Card) Disbursement Unit Head of Investment Administra�on Division Legal Unit Branch Incumbent Branch of Investment Commi�ee Branch’s Rela�onship Manager/Officer ANNUAL REPORT 2020 Monitoring & Recovery Unit Bangladesh Bank Returns
  178. 179 2 .1.3 Investment Risk Mitigation Measurement Shahjalal Islami Bank Limited uses several tools and programs to control and mitigate perfectly its investment risk at the operational level to which it is exposed to. The control and mitigation tools of the Bank are mentioned below: Key Risk Portfolio Analysis Tools and Programs Reason for Growth Measured In CRMR, ICAAP Investment Concentration HHI, Gini, SEI, SI CRMR, ICAAP OBS Exposure Analysis Reason for Growth, CCF CRMR, Leverage Ratio Security/Collateral/Margin Status Asset Quality, Categorization & Classification Credit Rating Status of Clients Reason for Growth, CRMR, Stress Testing Coverage Assessment Transaction Matrix, Reason CRMR, Stress Testing for Classification Reason for Growth CRMR, MCR Unplanned Conversion & Undrawn Regulatory Adherence Separate product and Management Format periodic Review Single Borrower Limit, Env. Regulatory Format Risk Rating 2.2 Market Risk Market risk is the risk of losses in positions arising from movements in market prices of financial assets, liabilities and off-balance sheet positions arising from adverse movements in market rates or prices. Market Risk of the Bank arises from deposits received from the depositors and granting investment as well as from trading activities. The primary objective of Market Risk Management is to ensure that Bank’s activities which are exposed to different market risks are granting optimum return and downside risks are in control and within the limit of the agreed appetite. Frequency Half-yearly, Yearly Mitigation Process Management Action Trigger, Investment Limit Half-yearly, Yearly Sectoral Investment Cap, Capital Allocation Half-yearly, Quarterly Risk Tolerance Cap Half-yearly, Quarterly Management Action Trigger Half-yearly, Quarterly Management Action Trigger, Special Program Half-yearly, Quarterly Continuous follow-up, Capital Allocation Management Management Strategy & required Capital Allocation Regulatory Required Risk Tolerance Cap Commodity Risk Commodity Risk is the risk of loss due to changes in spot and forward prices and the volatility of precious and base metals and energy products. A commodity is defined as a physical product that is or can be traded on a secondary market, e.g. agricultural products, minerals and precious metals. In the year ended 2019, Bank has no Risk-Weighted Assets for Commodity Risk. 2.2.1 Approach to Managing Market Risk Shahjalal Islami Bank Limited develops an extraordinary approach to managing market risk. In this regards, the Bank maintains the following major functions: Profit (Interest) Rate Risk Profit Rate Risk is the risk to earnings or capital of a bank arising from the movement of profit rates. It arises from differences between the timing of rate changes and the timing of cash flows (Re-pricing Risk), from changing rate relationships among yields curves that affect Bank activities, from changing rate relationships across the range of maturities (Yield curve Risk) and profit-rate-related options embedded in bank’s products. ●● Ensure compliance with and the integrity of the market risk policies and procedures. ●● Ensure effective management controls over profit rate position, equity price position, foreign exchange position and commodity price position. ●● By calculating Rate Sensitive Assets, Rate Sensitive Liabilities, Duration Gap Analysis and VaR. Equity Price Risk Equity Price Risk is defined as losses due to changes in the market price of equity held by the Bank. To measure and identify the risk, mark to market valuations of the share investment portfolios are done. Mark to market valuation is done against a predetermined limit. ●● Verify the adequacy and accuracy of the management information report. ●● Governing the management of securities portfolio. ●● Maintaining Net Open Position (NOP) within the limit set by the regulatory body. ●● By setting counterparty limit which includes forward, placement for foreign exchange transactions. ●● By setting limits for the foreign exchange dealers. ●● By reconciling Nostro accounts periodically as per the instruction of the regulatory body. Trading in foreign currencies through the spot, forward and options transactions as a market maker or position taker, including the unheeded positions arising from customerdriven foreign exchange transactions; ●● Randomly test all aspects of market risk management activities. ●● Holding foreign currency positions in the banking book; or ●● Engaging in derivative transactions which are denominated in foreign currency for trading or hedging purposes. Shahjalal Islami Bank Limited deals with the following mitigation tools and programs to control and mitigate perfectly its market risk at the operational level to which it is exposed to. Foreign Exchange Risk Foreign Exchange Risk is the current or prospective risk to earnings and capital arising from adverse movements in currency exchange rates. The foreign exchange position arises from the following activities: ●● 2.2.2 Market Risk Mitigation Measurement Shahjalal Islami Bank Limited
  179. 180 Key Risk Tools and Programs Measured In Frequency Mitigation Process Market Sensitivity VaR (FX & Equity), Sensitivity, CRMR Stress Profit Rate Risk, Duration Testing Gap, Portfolio Analysis Investment Limit Risk Appetite Half-yearly, Quarterly Management Action Trigger, Management Strategy, Stop Loss Cap, Counterparty Cap, Capital Allocation Management Action Trigger, Management Strategy Management Strategy Regulatory Compliance Macro-Economic Review Industry Outlook Yearly CRMR 2.3 Liquidity Risk Liquidity risk is the risk that a bank may be unable to meet short-term financial demands. This usually occurs due to the inability to convert a security or hard asset to cash without a loss of capital or income in the process. Managing liquidity and the balance sheet is crucial to the ongoing existence of a bank. It is also essential in terms of the profitable and sustainable growth of the balance sheet. Half-yearly Below are the liquidity risk indicators used to monitor the status of a bank’s liquidity position: Liquidity Risk Indicators (LRI) ●● Investment-Deposit Ratio ●● Maximum Cumulative Outflow (MCO) ●● Net Stable Funding Ratio (NSFR) ●● Liquid Asset to Short-term Deposit ●● Cash Reserve Requirement (CRR) Shahjalal Islami Bank limited where off-balance sheet exposure is significant or has a strong dependency on corporate deposit is exposed to high liquidity risk. Liquidity risk should not be seen in isolation, because the financial risk is not mutually exclusive and liquidity risk is often triggered by consequences of other financial risks such as Investment risk, Profit rate risk, Foreign exchange risk, etc. Following are the two types of liquidity risks: ●● Wholesale Borrowing Limit Utilization ●● Liquidity Coverage Ratio (LCR) ●● Structural Liquidity Profile (SLP) Analysis ●● Liquid Asset to Short-term Liabilities ●● Statutory Liquidity Ratio (SLR) a) Funding Liquidity Risk: risk generates when a bank is unable to meet its current and future cash flow and collateral needs without affecting its daily operations or its financial condition. 2.3.2 Liquidity Risk Mitigation Measurement 2.3.1 Approach to Managing Liquidity Risk b) Market Liquidity Risk: risk generates when a bank can not easily offset or sell a position without incurring a loss because of inadequate depth in the market. The Asset Liability Committee (ALCO) manages the overall balance sheet (Asset Liability) risk. The Treasury Division is accountable for managing the balance sheet as per recommendations of the ALCO to minimize risk and maximize returns. ALCO arranges a meeting at least once a month to set and review ALM strategies. Shahjalal Islami Bank Limited uses the following monitoring tools and programs to mitigate perfectly its market risk at the operational level: ●● Wholesale Borrowing and Funding Guidelines, ●● Liquidity Contingency plan (LCP), ●● Management Action Trigger (MAT) Computation of capital charge against Regulatory Liquidity Indicators, Shahjalal Islami Bank Limited maintained additional capital. Key Risk Tools and Programs Measured In Frequency Sensitivity RSA, RSL, LCR, NSFR Stress Testing, ICAAP Quarterly Yearly Liquidity Ratio CRR, SLR, MCO, ID ICAAP Yearly Maturity Mismatch Duration Gap, SLP Stress Testing, ICAAP Quarterly Yearly Mitigation Process Management Action Trigger, Escalation to Senior Management, ALCO, Capital Allocation 2.4 Operational Risk 2.4.1 Approach to Managing Operational Risk Operational Risk refers to the risk resulting from inadequate Shahjalal Islami Bank Limited follows an effective approach to managing operational risk. In this regards, the Bank manages operational risk in the following manner: or failed internal processes, people and systems or external events. This definition includes legal risk but excludes strategic and reputational risk. Within the bank, Operational risk may arise from negligence and dishonesty of the employees, lack of management supervision, inadequate operational control, lack ●● Ensure compliance with operational risk policy guidelines and procedures. ●● Establish an effective operational risk management framework that adequately covers all of these categories of operational risk. ●● Define the organizational structure with roles and responsibilities for all aspects of operational risk management. of physical security, poor technology, lack of automation, noncompliance of regularity requirements, internal and external fraud, etc. ANNUAL REPORT 2020
  180. 181 ●● Establish an appropriate process for the identification, assessment, mitigation, monitoring and reporting of operational risk. ●● Establish tolerance level and set strategic direction in relation to operational risk. ●● Divisional Control Function Check List (DCFCL) is in place for evaluation of control. ●● Provide senior management with clear guidance and direction regarding the principles underlying the framework. ●● Review the operational risk management framework regularly to ensure that the Bank is managing the operational risks. ●● Assess the appropriateness of the management oversight process in light of the risks inherent in a business unit’s policy. ●● Ensuring the maintenance of the bank’s Business Continuity Plan (BCP). There are two methods for calculating operational risk capital charges such as: a) the Basic Indicator Approach; and b) the Standardized Approach. Shahjalal Islami Bank Limited follows Basic Indicator Approach (BIA) for calculating Operational Risk. Under the BIA, the capital charge for operational risk is a fixed percentage (denoted by alpha, α) of the average positive annual gross income of the bank over the past three years. Figures for any year in which annual gross income is negative or zero should be excluded from both the numerator and denominator when calculating the average. 2.4.2 Operational Risk Mitigating Measurement Some significant operational risks have low probabilities but potentially considerable financial impact. Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the operational risk at the operational level. Key Risk Tools and Programs Manpower by age-group, Executive on contract, Manpower movement, Manpower by gender, Training & developments No. of Complaint received from customers/through Bangladesh Bank, No. of complaint settled % of Complaint settled Decisions are taken by the board risk management committee for sound risk management purpose, Risk issues submitted to the board by the board-level risk management committee, Implementation status of the decisions given by the Board Total amount of cash in hand/vault of branches, ATMs, Fast Tracks, etc. Control Lapses in Operational Process Human Resources Status Fraud & all other Operational Risks Measured In Frequency CRMR Half-yearly CRMR, ICAAP Half-yearly, Yearly Board Performance Status CRMR Half-yearly Insurance Coverage Status CRMR Half-yearly Attachment, Risk Control Self-Assessment Incident Reporting, Internal Audit, KRI ICAAP Yearly Stress Testing, ICAAP Quarterly, Yearly Customer Satisfaction Status 2.5 Internal Control and Compliance Risk Internal control and compliance risk is the current or prospective risk to earnings and capital arising from violations or noncompliance with laws, rules, regulations, agreements, prescribed practices, or ethical standards as well as from the possibility of incorrect interpretation of effective laws or regulations. Mitigation Process Management Action Trigger, Escalation to Senior Management, Capital Allocation 2.5.1 Approach to Managing Internal Control and Compliance Risk Shahjalal Islami Bank Limited has a robust organizational structure to enable the prudent management of Internal Control & Compliance risk. It has also a structured Internal Control & Compliance Division (IC&CD) with three following distinct units headed by a senior-level executive. AUDIT AND INSPECTION UNIT INTERNAL CONTROL & COMPLIANCE DIVISION COMPLIANCE UNIT MONITORING UNIT Shahjalal Islami Bank Limited
  181. 182 Internal control and compliance is a management process designed to achieve effectiveness and efficiency of operations , reliable financial reporting, and compliance with laws, regulations and internal policies. A sound internal control function plays an important role in contributing to the effectiveness of the internal control system. The Bank maintains the following approaches and functions to managing internal control and compliance risk: ●● Ensure compliance with internal control and compliance risk policy guidelines and procedures. ●● Assess the effectiveness of controls for mitigating fraud and risks to reputation. ●● Determine that senior management takes appropriate corrective actions when compliance failures are identified. ●● Ensure that the scope and frequency of the audit plan/ program is appropriate to the risk exposures. ●● Determine the level of senior management compliance with central bank directives. ●● Monitor internal control and compliance risk profiles on an on-going basis. ●● Analyze the timeliness and accuracy of internal control and compliance risk reports to senior management and board of directors. 2.5.2 Internal Control and Compliance Risk Mitigation Measurement Shahjalal Islami Bank Limited develops the following tools and programs to mitigate and control the internal control and compliance risk at the operational level. Key Risk Tools and Programs Measured In Frequency No. of branches audited, major irregularities found and officers involved. whether it is placed to audit committee, Action taken against the accused, No. of non-compliance No. of major irregularities found, compliant issues and non-compliant issues. Action taken for regularizing the non-compliant issues Internal Control and Compliance Status of Internal Audit Report, Risk Control Self-Assessment CRMR, ICAAP Half-yearly, Yearly Internal Control and Compliance Status of all inspection reports of Bangladesh Bank, Risk Control Self-Assessment 2.6 Money Laundering Risk Money laundering is the process of transforming the proceeds of crime into legitimate money or other assets. The prevention of laundering the proceeds of crime has become a priority for all jurisdictions from which financial activities are carried out. Both money laundering and terrorist financing can weaken individual financial institution and they are also threats to a country’s overall financial sector reputation. SJIBL is committed to preventing money laundering and combating the financing of terrorism at all stages of our banking activities. 2.6.1 Approach to Managing Money Laundering Risk Shahjalal Islami Bank Limited treats the Money Laundering and Terrorist Financing issues as a vital part of its Core Risk Management strategies. The Bank complies meticulously with the Money Laundering Prevention (Amendment) Act, 2015, Anti Terrorism (Amendment) Act, 2013 and related circulars of BFIU, Bangladesh Bank to prevent money laundering and combating terrorism financing. Management Action Trigger, Presented to Senior Management and Board of Directors The Bank takes the following approach to manage the Money Laundering Risk as well as regulatory compliance. ●● A Central Compliance Committee (CCC) has been formed which is headed by a DMD who is the Chief Anti Money Laundering Compliance Officer (CAMLCO). ●● “Guidelines on Prevention of Money Laundering and Terrorist Financing” has been reviewed & updated and disseminated to all branches of the Bank in the year 2019 which was duly approved by the Board of Directors of the Bank. ●● Applies risk-based customer due diligence (CDD) measures, monitors business relationships, and transaction pursuant to national regulations and international standards. 2.6.2 Money Laundering Risk Mitigation Measurement Shahjalal Islami Bank Limited develops the following tools and programs to mitigate and control the money laundering risk at the operational level. Key Risk Tools and Programs Measured In Frequency Excessive cash movement Reviews TP ECMR, CRMR Daily Half-yearly Transaction volume exceeds the transaction limits Reviews TP and KYC Profile Exception Report Monthly Cash transactions that breach certain limit set by Bangladesh Bank Review the Cash Transaction and Check List CTR, STR CRMR Monthly Half-yearly Violation relating to Money Laundering Risk Control Self-Assessment ICAAP, CRMR ANNUAL REPORT 2020 Mitigation Process Half-yearly, Yearly Mitigation Process Management Action Trigger, Escalation to Senior Management and Board of Directors
  182. 183 2 .7 Information and Communication Technology (ICT) Risk Now, Banks have become more dependent on information and communication technology such as the internet, computer and other electronic data to run their daily operations. There are certain risks involved in the use of information and communication technology. This risk may arise from malfunction of the system, failure of the network, lack of knowledge about the use of technology, virus attack, hacking, cyber-attacks, etc. 2.7.1 Approach to Managing ICT Risk Shahjalal Islami Bank Limited manages ICT risk in the following approach: ●● Up-to-date ICT security policy that is aligned with the latest Bangladesh Bank ICT guidelines as well as international standards. ●● IT Assets inventory is adequately maintained and review periodically. ●● Work on determining acceptable risk levels for the Bank and ensuring IT environments are adequately protected from potential risks and threats. ●● Provides a framework for best practice followed by all employees while ensuring overall data and information assurance for the organization according to the ICT policy. It outlines the responsibilities and requirements of Shahjalal Islami Bank Limited and its employees regarding its IT resources. security in every possible way as a continuous process. In practice, a handful of initiatives including firewalls, perimeter security, vulnerability testing and intrusionprevention are in place to check and strengthen the preventive measures against cyber-attacks. ●● 2.8 Residual Risk Risk-Based Capital Adequacy (RBCA) framework and other supervisory regulations issued by Bangladesh Bank on investment risk management allow Banks to offset credit or counterparty risk with collateral along with the legal and financial documents. While the Bank uses different techniques to reduce its investment risk, improper application of these techniques gives rise to additional risks that may render the overall risk management less effective. Accordingly, these additional risks (e.g. documentation risk, valuation risk) are termed as Residual Risk. Residual Risk is a risk that arises mainly out of the following situations: ●● Error in Documentation: The Bank collects and preserves documents against investment to have legal protection in case of adverse events like the default of investment. ●● Error in Valuation of Collateral: The Bank requires appropriate valuation of collateral (both physical* and financial) and guarantees (Bank guarantee and personal guarantee) against investments and for mitigation of default probability. 2.7.2 ICT Risk Mitigation Measurement Shahjalal Islami Bank Limited has adopted global standards of information security. For ICT risk mitigation, the Bank has also embraced different core technological improvement initiatives including: ●● Core banking system version upgrade. ●● E-commerce system upgrades with real-time DR setup. ●● SMS alerts for all ADC transactions. ●● Version update of internet banking. ●● Introduction of home banking and desk to desk back-up solution. ●● Server health monitoring system. ●● CIB automation and call center system upgrade. ●● Cyber Security Management- Constant change, unpredictability and uncertainty have made cybersecurity everyone’s responsibilities. Therefore, a continuous awareness program for everyone, employees and clients about cybersecurity goes round the years in Shahjalal Islami Bank Limited. The Bank reminds the employees about Key Risk Tools and Programs Credit Rating Status of Clients Reason for Growth Documentation Lapses Audit Report Review IT Audit Team- An IT Audit Team has been formed as per the Central Bank’s guidelines. The Team members audit the Branches and related Divisions. They follow the prescribed guideline, solve the unsettled issue and also suggests to the higher Management for needful action. 2.8.1 Approach to Managing Residual Risk Shahjalal Islami Bank Limited manages residual risk in the following approach: ●● Establish a policy or plan for reducing documentation lapses and valuation errors. ●● Establish a Residual Risk Review Committee (RRC). ●● Prepare a Material Documents Checklist and its risk weight. ●● Monitoring and control performance of residual risk regularly. ●● Review the client-wise related audit report and Credit Rating Status of Clients. 2.8.2 Residual Risk Mitigation Measurement Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the residual risk at operational level. Measured In Frequency Mitigation Process CRMR, MCR Half-yearly, Quarterly Continuous follow-up, Capital Allocation ICAAP Yearly Continuous follow-up, Capital Allocation 2.9 Concentration Risk Concentration risk arises when any Bank invests most or all of the assets to single or few individuals or entities or sectors or instruments. That means when any Bank fails to diversify its investment and investment portfolios, concentration risk emerges. In the context of Pillar-2, concentration risk can be of following two types: ●● Investment Concentration Risk arises when the investment portfolio of the Bank is concentrated within a few individuals or entities or sectors. ●● Market Concentration Risk arises when the investment portfolio of the Bank is concentrated within a few instruments or any instrument of few companies or any instrument of few sectors. Shahjalal Islami Bank Limited
  183. 184 2 .9.1 Approach to Managing Concentration Risk Shahjalal Islami Bank Limited develops an extraordinary approach to managing concentration risk. In this regards, the Bank maintains the following major functions: ●● Ensure compliance with and the integrity of the concentration risk policies and procedures. ●● Monitor the Sector-wise exposure, Division wise exposure, Group-wise exposure, Single borrower-wise exposure and Top borrower-wise exposure on regular basis to measure the investment concentration risk. Key Risk ●● Monitor the Instrument (financial securities) wise investment, Sector-wise investment in listed instruments and Currency wise investment of foreign exchange portfolio on regular basis to measure the market concentration risk. ●● Randomly test all aspects of concentration risk management activities. 2.9.2 Concentration Risk Mitigation Measurement Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the concentration risk at the operational level. Tools and Programs Measured In Frequency Mitigation Process Investment Concentration HHI, Gini, SEI, SI CRMR, ICAAP Half-yearly, Yearly Sectoral Investment Cap, Capital Allocation Market Concentration HHI, Gini, SEI, SI ICAAP Yearly Market Risk Cap, Capital Allocation 2.10 Reputation Risk ●● Negative media report. Reputation Risk may arise from the possibility that negative publicity regarding the Bank and its business practices, in the territory or elsewhere through related entities and whether accurate or not, will adversely impact the operations and position of the Bank. ●● Penalty. ●● Violation of laws, regulations. ●● Non-payment of cheques and accepted bills. Reputational Risk arises from the failure to meet stakeholders’ reasonable expectations of an organization’s performance and behavior. Reputational risk is a subset of operational risk that can adversely affect the capital base if the driving forces of the risk turn worse. ●● Technological disruption. ●● Fake notes in the ATM machine. ●● Insufficient funds in the ATM machine etc. 2.10.1 Approach to Managing Reputational Risk Shahjalal Islami Bank Limited always remain vigilant and conscious about the following events to manage and control the reputational risk : Key Risk No. of a negative media report published, Types of Report No. of penalties imposed by the regulatory body, No. of cases of violation of laws, regulations with the amount No. of non-payment cheques and accepted bills with the amount Credit Rating Position of Bank (If falls below 2 of BB rating grade) No. of internal fraud and external fraud with a total value in taka No. of ATM Machine where the fund was Insufficient, No. of customer’s complaint, Quality of customer service. Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the reputational risk at the operational level. Tools and Programs Measured In Frequency Electronic and Print Media CRMR Half-yearly Letter of Regulatory Body, Review the Statement CRMR Half-yearly CRMR, ICAAP Half-yearly, Yearly Review the Statement Credit Rating Report Conducted ICAAP by ECAIs Audit Report, Statement of ICAAP Fraud and Forgeries Customer’s Complaint Documents, Customer Service CRMR, ICAAP Evaluation Statement 2.11 Strategic Risk Strategic risk is the current or prospective risk to earnings and capital arising from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment both internal and external. 2.11.1 Approach to Managing Strategic Risk Shahjalal Islami Bank Limited manages strategic risk in the following approach: ●● Review performance of senior management against set goals at least annually. ●● Monitor market changes and advancements in technology to determine new services or products. ANNUAL REPORT 2020 2.10.2 Reputational Risk Mitigation Measurement Yearly Mitigation Process Management Action Trigger, Escalation to Senior Management and Board of Directors, Capital Allocation Yearly Half-yearly, Yearly ●● Establish a strategic policy or plan for management succession. ●● Monitoring and control performance of outsourcing arrangements. ●● Set compensation guidelines and methods for management and employees. ●● Set a training plan and adequately budget for training. 2.11.2 Strategic Risk Mitigation Measurement Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the strategic risk at the operational level.
  184. 185 Key Risk Tools and Programs Measured In Frequency CAMELS Rating Position of Bank (If falls below 2 of BB Letter of Regulatory rating grade) Body Operating expenses, Classified investments ratio, Recovery of classified investments, Written-off investments, Profit Review the different waiver, Rescheduling of investments that breach certain Statement limit/times set by Bangladesh Bank ICAAP Yearly ICAAP Yearly Mitigation Process Management Action Trigger, Escalation to Senior Management and Board of Directors, Capital Allocation 2.12 Settlement Risk ●● Settlement Risk arises when an executed transaction is not settled as the standard settlement system suggests or within a predetermined method. Reducing the number and size of payments requiring settlement. ●● Establish a settlement policy or plan for management succession. 2.12.1 Approach to Managing Settlement Risk 2.12.2 Settlement Risk Mitigation Measurement Shahjalal Islami Bank Limited manages settlement risk in the following approach: ●● Eliminating the delay between the two legs of a transaction Key Risk Tools and Programs Non-receiving or delayed receiving of receivable bills (foreign & domestic) Review the different Statement, Online monitoring system of Regulatory Body Shahjalal Islami Bank Limited uses the following tools and programs to mitigate and control the settlement risk at the operational level. Measured In Frequency ICAAP Yearly Mitigation Process Management Action Trigger, Escalation to Senior Management and Board of Directors, Capital Allocation 2.13 Environmental & Social Risk (ESR) ●● Environmental and Social change risk refers to the uncertainty or probability of losses that originates from any adverse environmental or climate change events (natural or manmade) and/or the non-compliance with the prevailing national environmental regulations. Recognize the balancing of non-financial factors such as environmental and social issues. ●● Protect the natural systems upon which all life depends while lifting people out of poverty and advancing economic development. ●● Train relevant employees to take responsibility for and implementation of these policies. ●● Define the terms “environment” to include both ecological aspects and related social aspects. ●● Assess the environmental & social aspects of all investment applications. ●● Prioritize and actively seeks to finance projects with direct or indirect environmental benefits. 2.13.1 Approach to Managing Environmental & Social Risk Shahjalal Islami Bank Limited develops an effective approach to managing environmental & social risk. In this regards, the Bank manages environmental & social risk in the following manner: ●● Adopt a comprehensive environmental & social risk management policy. ●● Implement Sector Environmental and Social Due Diligence (ESDD) Check List according to Bangladesh Bank directives. ●● Make a positive contribution to environmental and social concerns by enacting policies. Key Risk Tools and Programs Environmental Risk Rating Position of Investment (If consider “High” rating grade) Assess the Sectors specified as high risky in the related guidelines, ESDD Check List 2.14 Other Material Risk These are risks which are not directly covered by core risk guidelines of Bangladesh Bank, more precisely additional risk under pillar II of Basel III. The Risk Management Division is primarily responsible for assessing and developing controls for mitigating these risks. In order to do so the RMD of the Bank is performing various exercises like the assessment of quality Risk-Weighted Assets of the Bank, Stress Testing to assess the 2.13.2 Environmental & Social Risk Mitigation Measurement Shahjalal Islami Bank Limited uses the following tool and programs to mitigate and control the environmental & social risk at the operational level. Measured Frequency Mitigation Process Activities regarding Green Banking Report, ICAAP Quarterly Yearly Presented to Senior Management and Board of Directors, Capital Allocation sensitivity of the Bank against adverse scenarios is performed, additional capital (on top of MCR under Pillar-II) will be assessed using a model namely Internal Capital Adequacy Assessment Process (ICAAP), perform the capital reporting model, etc. On top of assessment, the RMD of The Bank is reporting these risks to senior management (through BRMC); which are ultimately aiding the Bank to allocate adequate capital line with Basel III requirement and at the same time implant active strategies to precisely manage all potential risks of the Bank. Shahjalal Islami Bank Limited
  185. 186 DISCLOSURE OF RISK REPORTING In the banking business , the risk is inherent. Risk needs to be minimized to achieve the organizational goal. Risk management has a significant impact on financials. Bangladesh Bank has identified 6 (six) key risks for Banks and issued policy guidelines for sound management of these core risks which are central to the functioning of risk management activities in the banking industry. As per Bangladesh Bank’s directive, Shahjalal Islami Bank Limited formulates its own strategies to manage particular risks i.e. Investment Risk, Market Risk, Operational Risk, Liquidity Risk, etc. and prepares risk management report monthly, quarterly, half-yearly and yearly basis in a comprehensive nature. 1.0 Risk Management Principles SJIBL is continuously following the international standards for managing risks as specified by the Bank for International Settlements (BIS) in its core principles of effective banking supervision which, along with others, are: PRINCIPLE 15 PRINCIPLE 16 PRINCIPLE 17 PRINCIPLE 18 PRINCIPLE 19 PRINCIPLE 20 Risk Management Process Capital adequacy Investment (Credit) risk Problem assets, provisions and reserves Concentra�on risk and large exposure limits Transac�ons with related par�es PRINCIPLE 21 PRINCIPLE 22 PRINCIPLE 23 PRINCIPLE 24 PRINCIPLE 25 Country and transfer risks Market risks Interest rate risk in the banking book Liquidity risk Opera�onal risk 2.0 Risk Profile & Risk Management Process Risk profile of a bank is measured by the economic capital usage calculated for investment, market and operational risk. Shahjalal Islami Bank Limited determines the overall risk positions by calculating total Risk-Weighted Assets (RWAs) of investment, market and operational risk at each quarter-end and allocated capital against them. The risk profile of Shahjalal Islami Bank Limited as measured by economic capital allocation by risk types are as follows:  Amount in Million Particulars Investment Risk Weighted Assets Market Risk-Weighted Assets Operational Risk Weighted Assets 2020 2019 175,181 164,316 4,136 4,077 16,838 14,383 As per the risk profile, Investment Risk was accounted for 89% of total Risk-Weighted Assets (RWA) where the Market Risk and Operational Risk were 2% and 9% respectively at the end of December-2020. 3.0 Capital Adequacy Capital adequacy is the measure of the financial strength and sustainability of a bank. Bank’s capital is the “cushion” for potential losses which protects the bank’s depositors or other borrowers. Thus, capital management is considered as an integral part of the risk management of Shahjalal Islami Bank Limited. The Bank has a capital management process in place to measure, deploy and monitor its available capital as per the guidelines on the Risk-Based Capital Adequacy Framework in line with the Basel III issued by Bangladesh Bank. 196,155 182,776 Minimum Capital Requirement 19,615 18,278 Capital to Risk Weighted Assets Ratio (CRAR)  Amount in Million Total Regulatory Capital 27,828 28,477 Particulars Total Risk-Weighted Assets Investment Risk Market Risk Opera�onal Risk ANNUAL REPORT 2020 2019 27,828 28,477 Total Risk Weighted Assets 196,155 182,776 CRAR 14.19% 15.58% Total Regulatory Capital Risk Profile (RAWs)-2020 2 9 89 2020 At the end of 2020 and 2019 Capital to Risk-Weighted Assets Ratio (CRAR) of Shahjalal Islami Bank Limited stood at 14.19% and 15.58% respectively which indicates that Bank is far above the Basel-III implementation road map of Bangladesh Bank to maintain targeted CRAR of 12.50% with buffer.
  186. 187 3 .1 Minimum Capital Requirement (MCR) under Pillar-1 of Basel III As per Basel III Road Map, Minimum Capital Requirement (MCR) for the banks in Bangladesh is currently 10.00% of its total RWA with the addition of Capital Conservation Buffer of 2.50% of total RWA from the year 2019.  Particulars Tier 1 Capital Tier 2 Capital Amount in Million 2020 2019 17,949 16,507 9,880 11,970 Total Regulatory Capital 27,828 28,477 Minimum Capital Required @ 10% of RWAs 19,615 18,278 Buffuer @ 2.50% of RWAs 4,904 4,569 Excess /Shortfall 3,309 5,630 At the end of 2020 and 2019, the total Regulatory Capital of Shahjalal Islami Bank Limited was BDT.27,828 million and BDT.28,477 million respectively. The Bank has maintained BDT.3,309 million and 5,630 million excess capital after deducting minimum requirement of 12.50% of RWAs plus buffer in 2020 and 2019 respectively. 3.2 Adequate Capital Requirement under ICAAP of Basel-III (Pillar-2) The Supervisory Review Process (Pillar-II of Basel-III) of the risk-based capital adequacy framework aims to ensure that banks have sufficient capital in place to mitigate all risks. It encourages banks to take action in creating and making proper use of sophisticated risk management techniques in terms of monitoring and managing the risks. Shahjalal Islami Bank Limited is maintaining an adequate level of capital each year as per Bangladesh Bank’s SREP review and the Bank has perfectly minimized the capital charge under residual risk year to year through rigorous oversight of the Bank’s SRP Team. 3.3 Market Disclosure: Pillar-III of Basel-III Market discipline has established transparency and discipline in the financial markets. Stakeholders can judge a bank’s position concerning assets held. It also allows them to take note of the risks relating to these assets and the adequacy of capital available to handle any likely losses. Thus, SJIBL has created a set of disclosure principles as per guidelines of Bangladesh Bank which includes information on assets, risk exposure, risk assessment processes, and capital adequacy to meet risk. The disclosure has been reported in another section of this annual report. 4.0 Stress Testing Report The underlying tool is used to assess the bank’s vulnerability to unexpected but presumable changes in various related factors (e.g. increase in NPI, change in the profit rate, fall of security value, etc.). The impact of this model is expressed through the change in the overall CRAR of the Bank. Central Bank has advised all banks to perform stress testing quarterly. The outcome of stress testing needs to be submitted to Bangladesh Bank upon review of senior management and Board. Stress Testing Result: Particulars Performing investment directly downgraded to B/L: Sectoral Concent. 1 Performing investment directly downgraded to B/L: Sectoral Concent. 2 Increase in NPIs due to default of top large investment( loan) borrowers Negative shift in NPIs categories Decrease in the FSV of collateral Increase in NPIs Profit(Interest) Rate FEX: Currency Appreciation Equity price Combined Shock CRAR after Combined Shock 5.0 Investment Risk Investment Risk arises from the potential when a bank’s borrower will fail to meet its obligations under agreed terms and results in a negative effect on the profitability and capital of the bank. Measuring the investment risk of an entire bank is a complicated assessment, involving many quantitative and qualitative factors. In the context of Shahjalal Islami Bank Limited, the most important of which are summarized below: 5.1 Investment Concentration: When the investment portfolio of a bank is concentrated within a few individuals or entities or sectors, investment concentration risk arises. Investment risk is increased from Investment concentration like portfolio, geographic, sector, group concentration, funded and non-funded, etc. To avoid concentration, the principle of investment diversification is followed as per the Risk Appetite Statement (RAS) and IRM policy guidelines. 2020 Minor Moderate (0.12) (0.37) (0.20) (0.60) (3.92) (5.84) (0.33) (1.37) (0.28) (0.57) (1.01) (3.56) 0.00 0.00 (0.02) (0.04) (0.23) (0.47) (1.87) (6.01) 12.31 8.18 Major (0.62) (1.00) (7.20) (1.96) (1.15) (7.80) 0.00 (0.07) (0.94) (11.92) 2.27 2019 Minor Moderate (0.16) (0.47) (0.11) (0.32) (3.92) (6.03) (0.36) (1.63) (0.32) (0.63) (1.03) (3.67) 0.00 0.00 (0.05) (0.10) (0.14) (0.28) (1.89) (6.31) 14.13 9.71 Major (0.78) (0.53) (8.13) (2.30) (1.28) (8.12) 0.00 (0.14) (0.57) (12.42) 3.60 Por�olio Concentra�on-2020 15.9% 12.3% 2.0% 3.1% 2.5% 0.3% 2.3% 61.8% Agri, Fishing & Forestry Industry Terade & Commerce Construc�on Transport Consumer financing Investment to Financial Ins�tu�ons Miscellaneous Industry Concentra�on-2020 0 10,569 35,918 35,876 14,205 6,158 118 546 3,055 1,186 11,587 2,316 RMG Tex�le Food & Allied Pharmaceu�cals Chemical, Fer�lizer, etc. Cement & Ceramics Ship Building Ship Breaking Power & Gas Other Manufacturing Service Others Shahjalal Islami Bank Limited
  187. 188 Area Concentra �on-2020 3% 1% At the end of December-2020, Standard Investment including SMA of SJIBL stood at 95.43% of total Investment while NPI stood at only 4.57% which indicates that the Bank has quality assets in its portfolio. 1% 0% 1% 3% 5.3 Credit Rating of Investment clients 17% 74% Dhaka Rajshahi Cha�ogram Sylhet Khulna Barishal Rangpur Mymensingh Top-20 Borrowers Concentra�on 77.90% 76.37% 22.10% 23.63% 2020 2019 Top-20 Borrowers Shahjalal Islami Bank Limited always emphasis on client’s credit rating. A good rating of the borrowers implies the identification of the quality borrowers that improve the quality of the asset and also require less capital. The client’s credit rating is considered the most important tool to manage investment risks as per the Standardized Approach of Risk-Based Capital Adequacy (RBCA) guidelines of Basel-III by Bangladesh Bank. The Bank gives more attention to its branches to increase the rated investment clients for reducing Risk-Weighted Assets (RWA). The rating growth is graphically presented here. Rest Borrowers 5.2 Assets Quality Quality of assets is the paramount importance and how well the banks manage it to remain with high quality of assets dictates the success of the Bank. One of the major parameters of measuring banks’ performance is the quality of assets. It draws attention to the quality of investment that provides earnings to the bank. This shows the stability of the bank when faced with particular risks. Investment Classifica�on-2020 5.4 Non Performing Investment (NPI) Non-Performing Investment (NPI) has severely spread into the country’s banking sector that impedes the overall economy to grow and deprives honest borrowers to collect required funds at a reasonable price and, for the rise of default culture, banks are losing out revenues and need to make provisioning against the bad investment from income. Non Performing Investment (NPI) 0.23% 2.90% 4.16% 0.18% 12,723 Standard SMA 9,687 Substandard Doub�ul (Taka in million) 5,782 6,301 8,973 Bad/Loss 93% Unrated 2016 2017 Past Due 21% ANNUAL REPORT 2020 Not Eligible for ra�ng 2018 3,258 3,258 2019 6.52 Ra�ng Grade-3 4,032 2,445 Ra�ng Grade-2 2020 (Taka in million) 6.14 35% 2019 2020 (1,587) 14% 1,425 1,425 0.20 Ra�ng Grade-1 7% 00 7% 2018 Provision Maintenance FO (0% Risk) 1,425 1,431 8% 8% 2017 3,434 3,434 2016 Assets Quality as per ECAIs Required provision Provision maintained Surplus/deficit
  188. 189 Shahjalal Islami Bank Limited has able to downsize the NPI by BDT .714 million from BDT. 9,687 million in 2019 to BDT. 8,973 million in 2020. NPI ratio was 4.57% and 4.91% in 2020 and 2019 respectively. The Bank management prudently reduces the NPI showing Bank’s commitment to its stakeholders. The Bank has also shown expertise in maintaining the provision against its Non-Performing Investment that stood at 100.19% at the end of 2020 which was 100% in 2019.  5.5 Concentration of NPI Despite having pandemic of Covid-19 and economic slow down due to countrywide lock-down, Shahjalal Islami Bank Limited has recovered Cash an amount of BDT. 1,335 million and regularized BDT 3,676 million from Non Performing Investment clients during the year of 2020 which is 41% of total NPIs. 6,311 Cash Recovery to NPI 14.9% 15.9% Total Recovery & regularization to NPI 41.0% 65.2% 5.7 Exposures Limit SJIBL has its investment cap for a different types of investment such as sectors, industries and geographic locations. Investment cap is generally reviewed once a year in order to remain reasonably aligned with the business needs. The bank does not exceed the Single Borrower Exposure Limit set by Bangladesh Bank. Por�olio Limit VS Outstanding-2020 SJIBL also follows the diversification rules and makes-cap narrowed to the risky sectors. At the end of the year-2020, Trade & Commerce, Industry and Construction cover mostly NPIs of Investment portfolio at the rate of 41%, 35% and 20% respectively. On the other hand, RMG, Textiles and Service sectors of the industry have mostly NPIs. 5.6 Cash Recovery against NPI The special asset management team of the Bank played a contributory role to get the below-stated handsome figure with their all-out effort for the recovery of investment. Proper followup and monitoring through frequent customer visits are the keys to an efficient and effective recovery system. (Taka in million) Investment Consumer financing 548 2,000 4,885 8,900 6,009 10,500 3,853 6,200 24,077 32,000 42,750 31,180 Trade & Construc�on Transport Commerce Investment Miscellaneous to Financial Ins�tu�ons Limit Area Limit Vs Outstanding-2020 Amount in Million 1,588 2,260 1,965 836 Sylhet 2,122 3,930 Rajshahi 5,981 9,826 24% RMG Tex�le Food & Allied Pharmaceu�cals Chemical, Fer�lizer, etc. Cement & Ceramics Ship Building Ship Breaking Power & Gas Other Manufacturing Service Others Industry 1,983 5,895 33% 9% 4% 0% 0% 9% 4,773 3,676 33,387 39,303 0% 10% 2,341 Total Recovery & regularization Agri Fishing & Forestry Industry Wise NPI-2020 11% Regularization 4,775 7,861 41.40% 1,538 138,000 34.73% 19.54% Agri, Fishing & Forestry Industry Trade & Commerce Construc�on Transport Consumer financing Investment to Financial Ins�tu�ons Miscellaneous 1,335 121,533 0.59% 2019 Cash Recovery 145,841 147,385 Por�olio NPI-2020 3.42% 0.00% 0.17% 0.16% 2020 4,428 4,000 Bank provides investment in short-term and long-term finance to various clients expecting to get back the money with profit as per the repayment schedules. Due to many reasons, banks are unable to get back some of their money in time from many clients. It creates significant problems in running banking operations. Bank always tries to diversify its investment portfolio in various sectors to avoid the concentration risk and avoid risky sectors to reduce the investment risk. Amount in Million Particulars Dhaka Cha�ogram Investment Khulna Rangpur Barishal Mymensing Risk Tolerance Single Borrower Exposure Limit-2020  Particulars Amount in Million 2020 2019 27,828 28,477 Funded Limit @15% of Regulatory Capital 4,174 4,272 Non Funded Limit @20% of Regulatory Capital 5,566 5,695 Total Limit (Other than Exporter) 9,740 9,967 Non Funded Limit @35% of Regulatory Capital 9,740 9,967 13,914 14,239 Total Regulatory Capital Total Limit (Exporter) Shahjalal Islami Bank Limited
  189. 190 6 .2 Equity Price Risk Top-10 Borrower Exposure -2020  Amount in Million Smart Group 2,530 5,318 7,848 Mir Akter Group 3,134 3,068 6,202 Impress Group 2,075 3,374 5,449 Shahjalal Islami Bank Limited uses the mark-to-market valuation method against a predetermined limit. From an accounting perspective, the cost or market value of share whichever is lower should be considered. If market value falls below the cost, Bank is required to maintain provision against unrealized losses. T.K Group 1,558 3,779 5,337  Nassa Group 3,808 1,380 5,188 Particulars 2020 2019 Dhaly Constructions Ltd. 3,441 1,339 4,780 Market Value of Capital Market Exposure 3,691 2,949 Anwar Group 2,902 1,135 4,037 Provision Maintained Capital Market Exposure to Audited Capital Borrowers Funded Non-Funded Total Abdul Monem Group 1,671 2,359 4,030 Energypac Group 1,961 1,830 3,791 651 3,137 3,788 Palmal Group 5.8 Collateral against Investment Where a transaction is secured by eligible financial collateral (cash, gold, rated securities, debt securities, equities, transferable securities and mutual funds) and meets the eligibility criteria minimize the capital requirements and Bank is allowed to reduce its investment exposure by taking into account the risk-mitigating effect of the collateral for the calculation of capital charge.  Amount in Million Particulars 2020 2019 Total Investment 196,513 197,286 Collateral (FSV) 121,008 125,270 62% 63% Collateral Coverage Ratio SJIBL focuses on collateral-based investment to secure its quality of investment. At the end of December-2020, Collateral coverage Ratio was 62% which was 63% in 2019. 6.0 Market Risk Market risk is the risk that any changes in market price, such as profit rates and capital market condition will affect the Bank’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters. The major components of Market Risk and the position of Shahjalal Islami Bank Limited are as follows: 6.1 Profit (Interest) Rate Risk Shahjalal Islami Bank Limited computes an estimate of changes in Bank’s net profit (interest) income (NII) given changes in profit rates. To evaluate the impact on earnings, Profit Rate Sensitive Liabilities (RSL) in each time bucket are subtracted from the corresponding Profit Rate Sensitive Assets (RSA) to produce a repricing “gap” for that time bucket.  Amount in Million Particulars RSA ≤ 1 Year RSL ≤ 1 Year Net Gap Impact on NII (Rate Change by @1%) 134.13% 100.21% 20.66% 17.86% SJIBL has maintained sufficient provisions against its investment in the share market for un-realized losses and the limits of capital market exposures are also maintained as per Bangladesh Bank instruction. 6.3 Foreign Exchange Risk The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying commitments and other remittance requirements. The impact of the Foreign Exchange transaction risk is identified by providing exchange rate shocks to the net open position of the Bank.  Amount in Million Particulars 2020 2019 Net Open Position Limit 2,956 2,960 Net Open Position Net Open Position to Capital No. of position breached during the period 998 2,092 5.59% 12.67% Nil Nil At the end of 2020, Bank’s open position was BDT.998 million against its limit equivalent to BDT. 2,956 million as determined by Bangladesh Bank and there was no case of breaching the FEX holding limit as per Bangladesh Bank instruction during the year 2020. 7.0 Liquidity Risk The Bank’s approach to managing liquidity (cash and cash equivalents) is to ensure, as far as possible, that it will always have sufficient liquid assets to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or taking risk of damage to the Bank’s reputation. Liquidity Risk Indicators (LRI) Amount in Million Ratios 2020 2019 4.74% 5.94% 2019 Change Cash Reserve Requirment (CRR) 241,308 215,626 25,682 Statutory Liquidity Requirment (SLR) 11.50% 7.43% 16,084 Investment to Deposit Ratio (IDR) 79.62% 87.47% 2020 161,677 145,593 79,631 70,033 9,598 796 700 96 The probable impact on net profit (interest) income of SJIBL at the end of December-2020 was measured BDT 796 million which was BDT 700 million in 2019. ANNUAL REPORT 2020 Amount in Million Liquidity Coverage Ratio (LCR) 390.52% 204.10% Net Stable Funding Ratio (NSFR) 130.31% 150.47% Commitment to HQLA Ratio 214.47% 271.60% Typically, the Bank ensures that it has sufficient cash and cash equivalents to meet expected operational expenses through the preparation of the cash flow forecast, prepared based on timeline
  190. 191 payment of the financial obligation and accordingly arrange for sufficient liquidity /fund to make the expected payment within the due date. 8.0 Operational Risk SJIBL through Internal Control and Compliance Division controls the operational procedure of the Bank. Internal Control and Compliance Division undertakes a periodic and special audit of the branches and departments at the Head Office for review of the operation and compliance of statutory requirements. Particulars 2020 2019 No. of Branches Audited 132 122 No. of Major Non-Compliances 167 170 Whether it is placed to the audit committee Yes Yes SJIBL has continued to develop technological-risk management capabilities and is ready to handle ICT security incidents and system failures and to conduct IT Audits on regular basis. 9.0 Money Laundering Risk The Bank complies meticulously with the Money Laundering Prevention (Amendment) Act, 2015, Anti Terrorism (Amendment) Act, 2013 and related circulars of BFIU, Bangladesh Bank to prevent money laundering and combating terrorism financing. A Central Compliance Committee (CCC) has been formed headed by a DMD who is the Chief Anti Money Laundering Compliance Officer (CAMLCO). Particulars Amount 11.0 Residual Risk Residual Risk is a risk that arises mainly out of errors in documentation and errors in the valuation of Collateral. The bank always tries to make documentation appropriately and conduct a valuation of collateral both physically and financially at the market rate. Residual Risk of the Bank has been measured and reported to the ICAAP-2019 submitted to Bangladesh Bank in 2020 where an investment of BDT. 2,796.20 million was assessed against residual risk. The base for the capital charge was BDT. 1,684.30 million and an amount of 168.40 million Capital has been kept. The ICAAP Report-2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank and the Bank is expecting to lower the residual risk. 12.0 Concentration Risk Investment Concentration Risk arises when the investment portfolio of the Bank is concentrated within a few individuals or entities or sectors. As there are no unanimously agreed on tools to measure the concentration risk, some indicators are applied such as : a) Herfindahl Hirschman Index (HHI), b) Simpson’s Equitability Index (SEI), c) Shannon’s Index (SI), Amount in Million d) Gini Coefficients (GC) Concentration Risk of the Bank has been measured and reported in the ICAAP-2019 submitted to Bangladesh Bank in 2020 where the capital charge was BDT.182.80 million. The ICAAP Report-2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. CTR STR 245,813 2 29,3370.4 10.4 No of Accounts unsettled issue and also suggests to the higher Management for needful action. The concerned branch officials examine all transaction alerts raised in TP for Suspicious Transactions. Bank has already screened all of our existing customers through Sanction Screening Software (S3 Compliance) against an updated list of Special Designated Nationals/Entities/Jurisdictions. The Bank founds no violation relating to Money Laundering activities. 10.0 ICT Risk Shahjalal Islami Bank Limited has adopted global standards of information security. For ICT risk mitigation, the Bank has also embraced different core technological improvement initiatives including: ●● Core banking system version upgrade. ●● E-commerce system upgrades with real-time DR setup. ●● SMS alerts for all ADC transactions. ●● Version update of internet banking. ●● Introduction of home banking and desk to desk back-up solution. ●● Server health monitoring system. ●● CIB automation and call center system upgrade. ●● Cyber Security Management An IT Audit Team has been formed as per the Central Bank’s guidelines. The Team members regularly audit the Branches and related Divisions. They follow the prescribed guideline, solve the 13.0 Reputation Risk Reputation Risk may arise from the possibility that negative publicity regarding the Bank and its business practices, in the territory or elsewhere through related entities and whether accurate or not, will adversely impact the operations and position of the Bank. Reputational risk of the Bank has been measured and reported in the ICAAP-2019 submitted to Bangladesh Bank in 2020 where there was no incidence like negative media report, non-payment of cheques and accepted bills, penalty, technological disruption, violation of laws, regulations, etc. during 2020. ICAAP Report-2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. 14.0 Strategic risk Strategic risk is the current or prospective risk to earnings and capital arising from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment both internal and external. Strategic risk of the Bank has been measured and reported to the ICAAP-2019 submitted to Bangladesh Bank in 2020 where BTD.182.8 million was charged and it was adjusted from the capital kept under Operational Risk in Pillar-1 (MCR) of Basel-III. As result, no Addition Capital was required under the Strategic risk of the Bank. ICAAP Report-2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. Shahjalal Islami Bank Limited
  191. 192 15 .0 Settlement risk 17.0 Other Material Risk Settlement Risk arises when an executed transaction is not settled as the standard settlement system suggests or within the predetermined method. Settlement Risk of the Bank has been measured and reported in the ICAAP-2019 submitted to Bangladesh Bank in 2020 where no capital was charged due to outstanding amount of Non receiving and payment amount was below 5% of total Investment. ICAAP Report -2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. These are risks which are not directly covered by core risk guidelines of Bangladesh Bank, more precisely additional risks under pillar II of Basel III are measured under this risk. Other Material Risk has been reported in the ICAAP-2019 and submitted to Bangladesh Bank in 2020 where no capital was charged. ICAAP Report -2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. 16.0 Environmental & Social Risk Shahjalal Islami Bank Limited has developed an effective approach to managing environmental & social risk. In this regard, the Bank measured environmental & social risk and reported in the ICAAP-2019 and submitted it to Bangladesh Bank in 2020 where no capital was charged. ICAAP Report -2020 also will be submitted in 2021 as per the time frame of Bangladesh Bank. RISK MANAGEMENT GUIDELINES: 18.0 Policy Development SJIBL has made significant improvement in migration to uniform operation instead of practice based operation. As part of that policy/operation procedure development/review remain a top priority of the Bank. In parallel to development/review of direct risk related policy/procedure, RMD has simultaneously focused on ensuring development and review of cross divisional policy(s)/ procedure(s). In reference to policy related issues bank has developed a number of policies for the year 2020 as follows: RISK MANAGEMENT POLICIES: Risk Management Guidelines Risk Appe�tes Statement (RAS) Investment Risk Management Guidelines Management Ac�on Triggers (MAT) ALM Guidelines Self Assessment of 6 (six) Core Risks Foreign Exchange Guidelines Methodology for Customer Services & Evalua�on Process ICC Risk Guidelines Collateral Valua�on Guidelines AML Guidelines Surveyors Enlistment Policy ICT Guidelines Fraud Detec�on & Preven�on Valua�on Methodology Wholesale Borrowing 19.0 Meeting & Implementation of Minutes 20.0 Reporting & Compliance SJIBL arranged meetings of different risk-related committees as per the direction of Bangladesh Bank. During 2020, Bank has arranged the following meetings and discussions and review sessions with the risk management activities regarding their findings, observations and recommendations on various issues of interest and concern. Aggregate measures of risks, across products and businesses, are used in compliance with policies, limits, and guidelines. They also provide a clear statement of the amounts, types and sensitivities of the different risks in the Bank’s portfolios. Senior management and the Board use this information to comprehend the bank’s risk profile as well as the performance of the portfolio. The Bank submitted the following risk reports during the year 2020. Meeting Status: 2020 ERMC 18 Meeting Nos. 09 SRP Team 17 06 Basel Unit 10 04 06 04 Calculation Accuracy 05 07 All Risks Meeting Basel Working Team BRMC ANNUAL REPORT 2020 Members Agenda All Risks Capital Adequacy (ICAAP) Basel Implementation (Basel-III)
  192. 193 Compliance of Reporting : 2020 Sl Name of the Reports/Papers A. Risk Management Reporting Frequency Submitted to Compliance Status 1. Monthly Risk Management Reporting (MRMR) Quarterly ERMC/BRMC/BB Complied 2. Minutes of the Monthly Risk Management Committee Meeting Quarterly ERMC/BRMC/BB Complied 3. Implementation Report of RMC Meeting Minutes Quarterly ERMC/BRMC/BB Complied 4. Comprehensive Risk Management Report (CRMR) Half Yearly ERMC/BRMC/BB Complied 5. Compliance Report on Risk Rating Half Yearly ERMC/BRMC/BB Complied Annually ERMC/BRMC/BB Complied 7. Risk-Based Capital Adequacy Reporting (Pillar-1) Quarterly ERMC/BRMC/BB Complied 8. ICAAP Report (Pillar-2) Annually ERMC/BRMC/BB Complied 9. Disclosure on Risk-Based Capital: Market Discipline (Pillar-3) Annually Uploading Bank’s website/BB Complied C. Stress Testing Report Quarterly ERMC/BRMC/BB Complied 6. Risk Appetite Statements B. Basel - III Reporting and Capital Management 21.0 Bulding Risk Culture & Awarness 22.0 Capital Planning In 2020, the following training programs on risk management have been provided to officials of the Bank both online and offline to create awareness on risk management and building a robust risk management culture across the Bank. Sl Subject 1 Asset Liability Risk Management No. of Total Courses Participants 04 100 mechanism to incorporate changes in a bank’s strategic focus, risk tolerance levels, business plans, operating environment, or other factors that materially affect capital adequacy. Capital planning assists the bank’s Board of Directors and senior management to: 2 Investment Risk Management 21 944 3 Foreign Exchange Risk Management Internal Control and Compliance Risk 4 Management 5 Money Laundering Risk Management 15 136 4 104 10 1004 6 ICT Risk Management 9 2,360 7 Comprehensive Risk Management 5 10 8 Basel Accord 2 91 9 Overview on Stress Testing 1 90 10 Others - - 71 4,839 Total Bank’s capital planning is a dynamic, ongoing and forward-looking ●● Identify risks, improve bank’s understanding of overall risks, set risk tolerance levels, and assess strategic choices in longer-term planning. ●● Identify vulnerabilities i.e. concentrations and assess their impact on capital, ●● Integrate business strategy, risk management, capital and liquidity planning decisions. Capital Plan for 5 Years: Particulars Amount in Million 2020 (Actual) 2021 2022 2023 2024 2025 Tier 1 Capital 17,949 24,605 26,525 28,683 31,156 40,012 Tier 2 Capital 9,880 7,349 11,906 11,203 10,143 8,918 Total Eligible Regulatory Capital 27,828 31,954 38,431 39,886 41,299 48,930 Total Risk Weighted Assets 196,155 225,681 251,685 283,719 316,430 353,900 CRAR 14.19% 14.16% 15.27% 14.06% 13.05% 13.83% In devising capital planning both short-term and long-term capital needs have been considered and the bank’s overall strategy and business growth have been coordinated usually with a forecast horizon of five years. 22.1 Raising Tier II capital SJIBL is always keen to maintain a sufficient capital base against doing business to support the healthy growth of business and ensure compliance with the Basel III capital accord in line with the Bangladesh Bank roadmap. Bank’s CRAR (Capital to Riskweighted Asset Ratio) reached 14.19% as of December 31, 2020, against the required 12.50% with buffer. To keep the adequate capital base bank-issued floating rate non-convertible 1 Mudaraba subordinated bond amounting Tk.4,000 million for 7 years on June 15, 2017, and subsequently, 2nd Mudaraba subordinated bond amounting Tk. 6,000 million had been issued on December 19, 2018, through private placement after obtaining required approvals from Bangladesh Securities and Exchange Commission and Bangladesh Bank. st 22.2 Raising Additional Tier I capital To strengthen the Tier-1 capital and also keep the adequate capital base according to the Capital plan of the Bank, SJIBL has planned to issue Mudarab Perpetual Bond at a floating rate of Tk. 5,000 million within the year 2021. The features of Mudarab Perpetual Bond are as follows: Shahjalal Islami Bank Limited
  193. 194 Instrument Name SJIBL Mudaraba Perpetual Bond Issue Type Fund Size Unsecured , Contingent-Convertible, Fully paid up, Non-Cumulative, BASEL III compliant, Perpetual Debt instrument for inclusion in Additional Tier I Capital Tk. 5,000 million (Taka Five thousand million) Value per Unit Tk. 1 million ( Taka One Million) Bonds per lot/ Minimum Subscription 01 Loss Absorption Conversion to common shares at the Conversion Strike Price, at the pre-specified trigger point, by such amount not exceeding the amount which would be required to bring the consolidated Common Equity Tier 1 (CET 1) ratio to 4.5% of RWA. Private Placement Mode of Issue Listing Status The Bonds will be, subject to the consent of the Bangladesh Securities and Exchange Commission (BSEC), be listed as per rules and regulations. 23.0 Key Initiatives Achievement-2020 ●● Internal Investment Risk Rating System (IIRRS) implementation: The bank has fully adopted the IIRRS in line with Bangladesh Bank’s BRPD circular letter no. 14 dated February 23, 2021. Along with regulatory compliance, the implementation of IIRRS has further strengthened the risk assessment process against allowing credit facilities. The CRO is evaluating and viewed the risk profile of the clients with greater investment values than ever. ●● Deferral Documentation Review Project: As advised by the Management, RMD conducted a review on the Investment clients who are availing investment facility keeping deferral of documentation based on the position of 31.07.2020. The report contains the observations and recommendations along with the risk associated with the pending deferral of the documentation. Exiting meetings were held with related Branch Managers who were physically visited, prior to finalizing the Report that helped to reduce documentation lapses of the Bank. ●● Reduced Documentation Lapses: Bank is maintaining its additional capital requirement for documentation lapses for funded credit portfolio. During the year 2020, a strong monitoring process helps the Bank to reduce the capital charge against the documentation lapses. Risk Management Division of the Bank worked with the Audit Report of the Bank and screened the errors of documentation. Good numbers of lapses have been rectified through strong persuasions of RMD. As a result, the capital charge against Residual Risk has been reduced and the capital requirement under Residual Risk was at BDT. 168.40 million under ICAAP-2019 submitted in the last year-2020. ●● Maintaing HQLA: Bank is required to maintain adequate High-Quality Liquid Assets (HQLA) against Bank’s Commitments and the commitment would not be more than 250% of HQLA. Risk Management Division is pursuing continuously to bring the Commitment within the limit of 250% of HQLA. In the year 2020, Bank has maintained BDT. 42,087.94 million HQLA and reached the Ratio of Commitment to HQLA at 214.47% which is below the trigger point of 250% of HQLA. ●● Sectoral Lending Cap: Investment portfolio of the Banking Industry is concentrated in few sectors, areas or some large groups and SJIBL is no exception to the industry. To avoid the concentration risk, the Bank has duly adopted the lending cap for 2020 and throughout the year the Bank has regularly monitored the changes in the investment portfolio in line with the approved lending cap. Based on observations, various strategies have been formulated to During the year 2020, the Risk Management Division (RMD) of the bank took different initiatives to strengthen the overall risk management functions of the bank. Followings are the major initiatives taken by RMD for the year 2020: ●● ●● ●● ●● Reached at the Land Mark of Borrowers Credit Rating: Credit rating quantifies or assesses the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. Credit rating plays a pivotal role to reduce the RWA and helps to maintain the minimum capital at an adequate level. SJIBL has conducted numerous initiatives to take the challenge of achieving 90% credit rating of its rateable clients set by the Bank management and has achieved this milestone successfully at a percentage of 90.05 at the end of 31st December 2020. Improved Bank Risk Profile: Bank exposures both in the On & Off-Balance Sheet have been increased from year to year. Contrary, the Risk-Weighted Asserts (RWA) of Bank has been increased at a decreasing rate. Risk Management Division of the Bank has taken various initiatives to reduce the risk weight of the Assets of the Banks that results, the ratio of RWAs to Total Exposures (On & Off-Balance Sheet) stands at 58% at the end of 31st December 2020. Improved Capital Management: Risk Management Division always provides the necessary recommendations to the Board of Directors and the Senior Management of the bank to select the investment clients having creditworthiness, sound SME clients keeping adequate financial collaterals. It helped to reduce the capital requirement of the Bank. As a result, at the end of the year 2020, Bank has able to maintain an adequate CRAR of 14.19% against requirement of 12.50% and more specifically, Tier-1 Capital with Buffer at 9.15% as against 8.50% which is 0.65% higher than the standard. Appointed CRO with Specific Roles: It was a major regulatory compliance issue regarding segregation of duties of CRO as well as CRO and head of RMD to be the same person as per Risk Management Guidelines-2018 issued by Bangladesh Bank. For better risk management of the Bank, Risk Management Division has raised the issue and submitted a paper to Board to specify the roles and responsibilities and the reporting line of CRO. In the year 2020, the Board has appointed a new CRO of the Bank specifying the terms of reference and approved separate roles and responsibilities for the CRO. It has brought a dynamic movement in the activities of the Risk Management Division of the Bank. ANNUAL REPORT 2020
  194. 195 maintain sector-wise exposures . Similar to last year, the bank has initiated the formulation process of lending cap 2021. ●● ●● Review of Top-20 Borrowers & Defaulters: Top 20 Borrowers are reviewed periodically on their latest performance with the help of IRMD and a new initiative has been taken to review the Top 20 borrower’s Funding Structure, Uses, Credit rating, Repayment performance and other metrics. On the other hand, To evaluate the latest status of Top-20 Defaulters, a joint collaboration between the members of RMD and Special Asset Management Division (SAMD) has been started to review the Top NPI files. were already taken. The report contains the observations and recommendations along with risks associated with the pending cases of the Bank. Management has able to know the total numbers of pending cases, outstanding, aging, stay orders, settlement and latest position of these accounts. ●● Review Pending Court Cases: In the year 2020, RMD conducted a review on the NPI against which legal initiatives Arrange Annual Risk Conference (ARC-2020): Bank has organized a day-long Annual Risk Conference (ARC-2020) with the participation of all the branch managers and deputy branch managers including the officials related to risk issues at the very beginning of the year 2020. Risk Profile of the Bank, Framework of Risk Management and Mitigation process of risks have been presented before the participants that have been enriched the Branch people and the Head Office Official to combat against the Risk. AT A GLANCE: ACHIEVEMENT-2020 1 Borrowers Credit Ra�ng Achieved 90.05% Credit Ra�ng of Bank’s eligible investments 2 Improved Risk Profile Bank’s RWAs to total Exposures downsized to 58% 3 Improved Capital Management CRAR stood at 14.19%, Tier-1 at 9.15% and formulated 5 years Capital Plan 4 Reduced Documenta�on Lapses Capital requirements against Residual Risk brought down to BDT 168.40 millions 5 Appointed CRO with specific roles Established sound risk management and implementa�on of IIRRS 6 Arranged Annual Risk Conference (ARC-2020) A day long Annual Risk Conference was held for the branch people 7 Maintaing Adequate HQLA Commitment to HQLA reached at 214.47% which is below the trigger point of 250% 23.0 Future Plan-2021 ●● To strengthen the Tier-1 capital according to the Capital plan of the Bank, SJIBL has planned to issue Mudaraba Perpetual Bond at a floating rate of Tk. 5,000 million within the year 2021. ●● To keep the adequate capital base bank has planned to issue a floating rate non-convertible 3rd Mudaraba subordinated bond for 7 years of Tk.5,000 million during the year 20212022 as per the Capital plan. ●● In parallel to the generic audit function, the necessity of adoption of Risk-Based audit will be conducted to validate that the internal control environment is functioning as planned. ●● Increased Credit rating with percentage and quality grading to the investment portfolio. ●● Arrange Annual Risk Conference with the participation of all the Branch managers and Deputy branch managers. ●● Interim review of Risk Appetite and the status of risk exposures against thereof. ●● Establishing sophisticated risk management infrastructure with a sufficiently robust data-base, data architecture and information technology. ●● Prepare Comparative Analysis Report (CAR) on bank’s gain/ loss due to/lack of proper risk management activities. Shahjalal Islami Bank Limited has tuned the existing risk management practices to align with global best practices. The risk management activities are running with the motto that, 2020 was the year of risk management awareness and 2021 will be the year of strengthening risk management structure. Being an active part of country’s banking industry, SJIBL always undertakes an active approach to risk management and remained consistent in forming a best-in-class capability. The core mottos of risk management practice at SJIBL are a solid understanding of the material risks of the bank and continuous formulation of effective strategies for active risk mitigation. Shahjalal Islami Bank Limited
  195. 196 DISCLOSURE OF RISK BASED CAPITAL (BASEL-III) Background and Purpose Basel III is an internationally agreed new set of capital and liquidity standards developed by the Basel Committee on Banking Supervision in response to the financial crisis of 200709. The objective of the reforms was to manage the use of excessive on and off-balance sheet leverage, the gradual erosion of level and quality of the capital base, insufficient liquidity buffer, pro-cyclicality and excessive interconnectedness among systematically important institutions. These factors are identified for reasons of bank failure. Through its reform package, BCBS also aims to improve risk management and governance as well as strengthen banks’ transparency and disclosures. To cope up with the international best practices and to make the bank’s capital shock absorbent, Bangladesh Bank issued ‘Guidelines on Risk-Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III) in December 2014 with the instructions to maintain the minimum capital requirement under pillar-1, an additional capital requirement under Pillar-2 and market disclosure requirement under Pillar-3. Shahjalal Islami Bank has also adopted the Basel-III framework as part of its capital management strategy in line with the revised guideline. As part of Basel-III compliance, Market Discipline (pillar 3) is formulated to establish a more transparent and more disciplined financial market so that stakeholders can assess the position of a bank regarding holding of assets and to identify the risks relating to the assets and capital adequacy to meet probable loss of assets. For the said purpose, Shahjalal Islami Bank Limited has developed a set of disclosure frameworks containing the key pieces of information on the assets, risk exposures, risk assessment processes, and hence the capital adequacy to meet the risks. Components of Disclosure Framework As per Bangladesh Bank’s guidelines, the following components are the disclosure requirements under Pillar-3 of the Basel framework: 1. Scope of Application 2. Capital Structure 3. Capital Adequacy 4. Investment (Credit) Risk 5. Equities: Disclosures for Banking Book Positions 6. Profit (Interest) Rate Risk in the Banking Book (PRRBB) 7. Market Risk 8. Operational Risk 9. Liquidity Ratio 10. Leverage Ratio 11. Remuneration. Consistency and Validation The quantitative disclosures on Risk-Based Capital (Basel-III) are made based on audited consolidated financial statements of Shahjalal Islami Bank Limited (SJIBL) and its subsidiaries for the year ended December 31, 2020, and prepared under the historical cost convention under International Financial Reporting Standards (IFRSs) and as per provisions of the “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated November 09, 2009, regarding the provisions of the Bank Companies Act, 1991 (as amended) and other circulars/instructions of Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987 and Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as a member of that organization. Therefore, the information presented in the ‘Quantitative Disclosures’ section can easily be verified and validated with corresponding information presented in the audited consolidated financial statements-2020 of SJIBL and its subsidiary. The disclosure is prepared once a year and available on the bank’s website (www.sjiblbd.com). 1. Scope of Application Qualitative Disclosures a) The name of the top corporate entity in the group to which this guideline applies: b) An outline of differences in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities within the group: i. which are fully consolidated; ii. which are given a deduction treatment; and iii. (c) which are neither consolidated nor deducted (e.g. where the investment is risk-weighted). ANNUAL REPORT 2020 Shahjalal Islami Bank Limited (SJIBL) The Consolidated Financial Statements of the Bank include the financial statements of (i) Shahjalal Islami Bank Limited including Off-Shore Banking Unit (OBU) and (ii) Shahjalal Islami Bank Securities Limited. Shahjalal Islami Bank Limited holds 91.79% shares of Shahjalal Islami Bank Securities Limited. A brief description of the Bank including OBU and its subsidiary are given below:
  196. 197 Shahjalal Islami Bank Limited Shahjalal Islami Bank Limited (hereinafter called ‘the Bank’ or ‘SJIBL’) was established as a Public Limited Company (Banking Company) as on April 01, 2001, under the Companies Act 1994 as an interest-free Islamic Shari’ah based commercial Bank and commenced its operation on May 10, 2001, with the permission of Bangladesh Bank. Presently the Bank is operating its business through Head Office having 132 branches, Central Processing Center (CPC), Off-shore Banking Unit (OBU), 110 ATM booths, 52 agent banking outlets and 2,657 employees all over Bangladesh. The Bank is listed with both the Stock Exchanges of the country, i.e. Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The Bank offers all kinds of Islamic Shari’ah-based Commercial Banking Services to its customers through its branches following the provisions of the Banking Companies Act 1991 (as amended up to 2018), Bangladesh Bank’s Directives and directives of other regulatory authorities and the principles of the Islamic Shari’ah. The registered office of the Bank is located at Shahjalal Islami Bank Tower, Plot-4, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Offshore Banking Unit (OBU) Offshore Banking Unit is a separate business unit of Shahjalal Islami Bank Limited, governed under the rules and guidelines of Bangladesh Bank. The Bank commenced the operation of its Off-shore Banking Unit on December 21, 2008, with permission from Bangladesh Bank vide letter no. BRPD (P-3)744(99)/2008-2800 dated July 24, 2008. The unit is located at Shahjalal Islami Bank Tower (Level-6), Plot-4, BlockCWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Agent Banking Shahjalal Islami Bank Limited obtained permission from Bangladesh Bank on October 16, 2019, vide reference no. BRPD (P-3)745(54)/2019-8354 to commence Agent Banking services and subsequently started commercial operations on January 02, 2020. Till December 31, 2020, there were 52 Agent Banking Outlets in 31 districts across the country. Shahjalal Islami Bank Securities Limited(SJIBSL) Shahjalal Islami Bank Securities Limited is a subsidiary company of Shahjalal Islami Bank Limited incorporated as a public limited company under the Companies Act 1994 vide certificate of incorporation no. C - 86917/10 dated September 06, 2010, and commenced its operation on May 25, 2011. Presently the company is operating its business through Head Office with 01 extension office and 08 branches with 77 employees all over Bangladesh. The main objective of the company is to carry on the business of stock brokers/dealers concerning shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the Company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Its corporate Head office and principal place of business are at DSL Building (3rd floor), 1/C, DIT Avenue, Dainik Bangla Mor, Motijheel, Dhaka-1000. c) Any restrictions, or other major impediments, on the The rules and regulations of BRPD of Bangladesh Bank that govern ‘Single Borrower transfer of funds or regulatory capital within the group Exposure Limit’ for the customers are equally applicable for the Bank in financing its own subsidiaries. The bank is following the latest Bangladesh Bank circular in determining the maximum amount of finance to the subsidiaries of the Bank. Quantitative Disclosures d) The aggregate amount of capital deficiencies in all Not Applicable subsidiaries not included in the consolidation i.e. which are deducted and name(s) of such subsidiaries. 2. Capital Structure Qualitative Disclosures a) Summary information on the terms and conditions of As per Guidelines on Risk-Based Capital Adequacy of Bangladesh Bank, the the main features of all capital instruments, especially in regulatory capital of the Bank is classified into two `tiers which will consist of some the case of capital instruments eligible for inclusion in of the following categories: Common Equity Tier-1, Additional Tier-1 or Tier -2. 1. Tier-1 Capital (going-concern capital) divided into two categories which are: Common Equity Tier-1 Tier-1 Capital Addi�onal Tier-1 Shahjalal Islami Bank Limited
  197. 198 a ) Common Equity Tier-1 capital of SJIBL consists of Paid-up Capital, Statutory Reserve, Retained Earnings and Minority Interest in Subsidiaries. b) Additional Tier-1 capital (There are no such capital components in the capital portfolio of SJIBL since the Bank did not issue any instrument that meets the qualifying criteria for Additional Tier-1 Capital). 2. Tier-2 Capital (gone-concern capital) of SJIBL consists of General Provisions and Mudaraba Subordinated Bond/ Debt issued by the Bank meets the qualifying criteria for Tier-2 Capital. Quantitative Disclosures Particulars Solo CET1/Tier1 Capital (Core Capital) Taka in Million Consolidated i. Fully paid-up capital 9,800.92 9,800.92 ii. Statutory reserve 6,959.87 6,959.87 iii. General reserve iv. Retained earnings - 2.88 1,187.96 1,206.06 v. Minority interest in subsidiaries - 226.88 vi. Regulatory Adjustments: Shortfall in provisions required against investment in shares - (329.80) 17,948.75 17,866.81 b) Total CET1/Tier 1 Capital (i to vi) Tier 2 Capital (Supplementary Capital) vii. General provision against unclassified investments/loans and off-balance sheet exposures (including OBU) 3,159.50 3,207.47 viii. Subordinated debt/instruments issued by the Banks that meet the qualifying criteria for Tier 2 capital 6,720.00 6,720.00 c) Total Tier 2 Capital (vii to viii) d) Total Regulatory/Eligible Capital (b+c) 9,927.47 27,794.28 Composi�on of Capital Tier 1 Components (Solo Basis) 38.78% 9,879.50 27,828.25 6.62% 64.50% 64.28% 35.50% Retained earnings 35.72% Fully paid-up capital Statutory reserve 54.60% Solo Conso 3. Capital Adequacy Qualitative Disclosures a) A summary discussion of the Bank’s approach to Shahjalal Islami Bank Limited with its focused strategy on risk management has assessing the adequacy of its capital to support current always been consistent in maintaining the Capital to Risk-Weighted Assets Ratio and future activities. above the regulatory requirements. The Bank has been successfully managing the incremental growth of Risk-Weighted Assets (RWA) by ensuring diversification of the portfolio in SME, Agriculture, Retail and Corporate segments. However, RWA is also managed by taking collaterals against investments. The Bank Management strives to ensure external credit rating is duly done by the investment clients. The Bank has adopted the Standardized Approach (SA) to calculate the RWA for Investment Risk and to calculate the capital charge for market risk. On the other hand, Basic Indicator Approach (BIA) is adopted to calculate the capital charge for operational risk. Assessment of capital adequacy is made against the total RWA under the said three (03) approaches. Standardized Approach for Investment Risk MCR Standardized Approach for Market Risk Basic Indicator Approach for Opera�onal Risk ANNUAL REPORT 2020
  198. 199 The Bank has maintained Capital to Risk-Weighted Assets Ratio (CRAR) of 13.72% & 14.19% based on “Consolidated” and “Solo” respectively against the minimum regulatory requirement of 12.50% (MCR 10% + Conservation Buffer 2.50%). The Bank’s policy is to manage and maintain adequate capital that is sufficient to absorb all material risks associated with the Bank and to comply with regulatory requirements and satisfy the external rating agencies and all other stakeholders including depositors. The main objective of the capital management process in the Bank is to ensure that Bank has adequate capital to meet up its losses. Quantitative Disclosures Taka in Million Particulars Solo 17,518.10 b) Capital requirements for Investment (Credit) Risk c) Capital requirements for Market Risk d) Capital requirements for Operational Risk Minimum Capital Requirement (b+c+d) Total Regulatory Capital Total Risk Weighted Assets (RWA) e) Capital to Risk-weighted AssetRatio(CRAR) (iii to iv) i. CET 1 capital ratio ii. AT 1 capital ratio Consolidated 17,865.53 413.57 588.40 1,683.83 1,808.09 19,615.50 20,262.02 27,828.25 27,794.28 196,154.99 202,620.25 14.19% 13.72% 9.15% 8.82% - - iii. Total Tier 1 capital ratio (i to ii) 9.15% 8.82% iv. Tier-2 capital ratio 5.04% 4.90% f) Capital Conservation Buffer (2.50%) 3.15% 2.82% 3,308.88 2,466.75 Solo Consolidated g) Available Capital under Pillar 2 Requirement* *After deduction of Minimum Capital Requirement and Capital Conservation Buffer from Total Regulatory Capital. Capial Requirement Under Pillar-I 89.31% 88.17% 2.11% 2.91% Investment Risk Market Risk 8.58% 8.92% Opera�onal Risk 4. Investment (Credit) Risk Qualitative Disclosures a)The general qualitative disclosure requirement concerning investment (credit) risk, including: i) Definitions of past due and impaired (for accounting purposes) Past Due: As per Bangladesh Bank guidelines, any Investment if not repaid within the fixed expiry date will be treated as Past Due. Impaired: An Investment where profit and/or installment of principal remain for more than 90 days in respect of a Continuous Investment, Demand Investment or a Term Investment, etc. except Term Investment below Tk.1 million will be treated as Impaired (NPI). Bangladesh Bank issued Circulars from time to time for strengthening Investment (Credit) discipline and brings provisioning. All Investments/Loans & Advances will be grouped into four (4) categories for classification, namely (a) Continuous Investment (Loan): The Investment accounts in which transactions may be made within a certain limit and have an expiry date for full adjustment will be treated as Continuous Investment. Examples are Cash Credit, Overdraft, etc. (b) Demand Investment (Loan): The Investments that become repayable on demand by the Bank will be treated as Demand Investments. If any contingent or any other liabilities are turned to forced investment (i.e. without any prior approval as a regular investment) those too will be treated as Demand Investment. Such as Forced Investment against Imported Merchandise, Payment against Document, FBP and IBP, etc. Shahjalal Islami Bank Limited
  199. 200 (c) Fixed Term Investment (Loan): The Investments, which are repayable within a specific time under a specific repayment schedule, will be treated as Fixed Term investments. (d) Short Term Agricultural & Micro Investment (Loan): Short-term Agricultural Investment will include the short-term investments as listed under the Annual Credit Programme issued by the Agricultural Credit and Financial Inclusion Department (ACFID) of Bangladesh Bank. Investments in the agricultural sector repayable within 12 (twelve) months will also be included herein. Short-term Micro-Credit will include any micro-credit not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time and repayable within 12 (twelve) months, be those termed in any names such as Non-agricultural credit, Self-reliant Credit, Weaver’s Credit or Bank’s individual project credit. The above Investments (Loans) are classified as follows: Investment (Loan) Classification Types of Facility Sub Standard (SS) Overdue Period Continuous Investment & Demand Investment Fixed Term Investment More than Tk.1 million Up to Tk.1 million Short-term Agricultural & Micro Credit 3 Months or more but less than 6 months 3 Months or more but less than 6 months 6 Months or more but less than 9 months 12 Months or more but less than 36 months Doubtful (DF) Overdue Period 6 Months or more but less than 9 months 6 Months or more but less than 9 months 9 Months or more but less than 12 months 36 Months or more but less than 60 months Bad & Loss (BL) Overdue Period 9 Months or more 9 Months or more 12 Months or more 60 Months or more A Continuous Investment, Demand or a Term Investment which will remain overdue for 02 (two) months or more will be put into the “Special Mention Account (SMA)”. Every business line, as well as the overall economic activities, got severely affected and influenced by Covid-19. Taking this into consideration, Bangladesh Bank issued BRPD circular # 17 dated September 28, 2020, instructed to facilitate deferral facilities to the borrowers without applying the above frame of Investment (Loan) classification dated from January 01, 2020, to December 31, 2020. ii) Description of approaches followed for specific and Provision for Investments is created for covering the Bank from possible investment general allowances and statistical methods; losses in the future. General provision is made on the outstanding amount of investments without considering the classified status following the prescribed rate of Bangladesh Bank. Classified investments of the Bank are categorized as Sub-standard, Doubtful and Bad & Loss as per Bangladesh Bank circulars. For investments which are classified, a specific provision is created netting off eligible security value and profit suspense from the outstanding amount. Provision for off-balance sheet items is made as per BRPD circular no. 14 dated September 23, 2012, for covering the Bank for possible losses in the future. Profit accrued on Substandard, Doubtful and Bad & Loss investments are transferred to profit suspense account and not consider as profit income. This profit is recognized as profit income when it is realized in cash by the Bank as per the latest circular of Bangladesh Bank. Investment is written off to the extent that (i) there is no realistic prospect of recovery, and (ii) against which legal cases are filled and classified as bad & loss as per BRPD circular no. 01 dated January 13, 2003, and 13 dated November 07, 2013. However, these write off will not undermine/affect the claim amount against the client of Investments. Detailed memorandum records for all such write-off accounts are meticulously maintained and followed up. The Bank is required to maintain the following general and specific provisions in respect of unclassified and classified investments based on Bangladesh Bank guidelines issued from time to time. Rates of provision are noted below: Types of Investments Cottage, Micro & Small Investments Under CMSME Medium Enterprise Financing under SMEF Consumer Investment to Professional Financing Investment for House Building Other than House Building & Professional Short-term Agricultural Credit and Micro Credit Investment to Stock Dealers & Stock Broker Credit Card All Other Credit Staff Investment Off Balance Sheet Exposures Special General Provision for COVID-19 ANNUAL REPORT 2020 Rates of Provision Un-classified (UC) Classified STD SMA SS DF BL 0.25% 0.25% 5% 20% 100% 0.25% 0.25% 20% 50% 100% 2% 2% 20% 50% 100% 1% 1% 20% 50% 100% 2% 2% 20% 50% 100% 1% 1% 5% 5% 100% 2% 2% 20% 50% 100% 2% 2% 20% 50% 100% 1% 1% 20% 50% 100% 0% 0% 20% 50% 100% 1% N/A N/A N/A N/A 1% BRPD Circular letter no. 56, Date: December 10, 2020
  200. 201 iii ) Discussion of the Bank’s investment risk management The Board of SJIBL approves the Investment Risk Manual (IRM) keeping in view policy relevant Bangladesh Bank guidelines to ensure best practices in investment risk management and maintain quality of assets. Authorities are properly delegated ensuring check and balance in investment operation at every stage i.e. screening, assessing, identification, management and mitigation of investment risk as well as monitoring, supervision and recovery of investments with provision for Early Warning System (EWS). Screening Assessing Investment Risk Management Iden�fica�on Management Mi�ga�on Investment Monitoring Investment Administra�on Supervision Recovery There is a separate Investment Risk Management (IRM) under the Chief Risk Officer (CRO) for mitigation of investment risk, a separate Investment Administration Division (IAD) for ensuring perfection of securities and a Recovery Unit for monitoring and recovery of irregular investments. Internal Control & Compliance Division (IC&CD) independently assesses the quality of investments and compliance status of investments during their audit at least once a year. Adequate provision is maintained against classified investments as per Bangladesh Bank Guidelines. Status of investments is reported periodically to the Board Risk Management Committee (BRMC)/Board by the concerned Division. Qualitative Disclosures a) Total gross investment risk exposures are broken down a) Total gross investment risk exposures are broken down by major types of by major types of investment exposures. investment exposures. Particulars Murabaha Bi-Muazzal Hire Purchase Shirkatul Meelk Bi-Salam Investment for EDF General Investment, Ijara and Others Bills Purchased and Discounted Total Taka in Million 10,003.24 94,632.52 49,623.76 7,567.63 13,920.35 5,723.83 15,041.32 196,512.65 Type of Ivestments 7.65% 5.10% 2.91% 7.08% 3.85% 25.25% 48.16% Murabaha Investment for EDF Bi-Muazzal General Investment, Ijara and Others Hire Purchase Shirkatul Meelk Bills Purchased and Discounted Bi-Salam Shahjalal Islami Bank Limited
  201. 202 b ) Geographical distribution of exposures, broken down in Geographical distribution of exposures, broken down in significant areas by major significant areas by major types of investment exposure. types of investment exposure of the Bank are as under: Particulars Urban Rural Outside Bangladesh Total (Area-wise) Dhaka Chattogram Sylhet Rajshahi Khulna Barishal Rangpur Mymensingh Total (Division-wise) Taka in Million 186,764.19 9,748.46 0.00 196,512.65 146,146.59 33,081.72 1,983.39 5,526.21 5,980.81 835.57 1,370.44 1,587.92 196,512.65 Geographical Distribu�on of Exposures (Division-Wise) 74.37% 16.83% Dhaka Cha�ogram 1.01% 2.81% 3.04% Sylhhet Rajshahi Khulna 0.43% 0.70% 0.81% Barishal Rangpur Mymensingh c) Industry or counterparty type distribution of exposures, Industry or counterparty type distribution of exposures, broken down by major broken down by major types of investment exposure. types of investment exposure of the Bank are as under: Particulars i. Industry-wise: Agriculture & Fishing Cotton & Textile Garments Cement Pharmaceuticals & Chemicals Real Estate Transport Information Technology Non Banking Financial Institutions Steel & Engineering Food Processing & Beverage Power & Energy Paper & Paper Products Plastic & Plastic Products Electronics Services Industries Trading Constructions Share business Staff Investment Others Total ii. Counterparty-wise: Investments to allied concern of Directors Investments to Executive/Officers Investments to Customer Groups Industrial Investment Others Total ANNUAL REPORT 2020 Taka in Million 4,428.10 14,204.89 35,917.80 2,909.12 3,502.37 6,823.34 3,852.96 1,049.99 1,547.54 10,718.89 11,586.73 6,157.62 2,220.72 5,605.90 5,629.38 6,660.89 31,252.43 20,620.94 2,256.51 1,881.19 17,685.34 196,512.65 2,422.67 1,881.19 81,360.65 110,845.96 2.18 196,512.65
  202. 203 d ) Residual contractual maturity breakdown of the whole Residual contractual maturity break down of the whole portfolios, broken down by portfolio, broken down by major types of investment major types of investment exposure of the Bank are as under: exposure. Particulars Taka in Million Repayable on Demand 27,708.28 Over 1 month but not more than 3 months 65,006.39 Over 3 month but not more than 1 year 73,751.20 Over 1 year but not more than 5 years 25,271.52 Over 5 years 4,775.26 Total 196,512.65 Residual Contractual Maturity Breakdown of the Whole Por�olion 33.08% 37.53% Repayable of Demand Over 1 month but not more than 3 months Over 3 month but not more than 1 year 14.10% 12.86% Over 1 year but not more than 5 years 2.43% e) By major industry or counterparty type: Over 5 years i. Amount of impaired investments and if available, past due investments provided separately Particulars Past Due Special Mention Account (SMA) Sub Standard Doubtful Bad & Loss Total Taka in Million 5,696.06 355.17 444.10 8,174.20 14,669.53 38.83% 55.72% SMA Sub Standard Doub�ul Bad & Loss 3.03% 2.42% ii. Specific and general provisions Unclassified Investment Classified Investment Off-Balance Sheet Exposure Total iii. Charges for specific allowances during the period Provision on Unclassified Investment Provision on Classified Investment Provision on Off-Balance Sheet Exposure Total f) Gross Non-Performing Assets (NPAs) i. Non-Performing Assets (NPAs) to outstanding Investments ii. Movement of Non-Performing Assets (NPAs) Particulars Opening Balance Additions Reductions Closing Balance 2,224.30 3,440.06 935.20 6,599.56 323.50 181.65 65.90 571.05 4.57% Taka in Million 9,687.32 0.00 (713.85) 8,973.47 Shahjalal Islami Bank Limited
  203. 204 ii . Movement of Non-Performing Assets (NPAs) Opening Balance Recovery amount previously written-off Provisions made during the period Fully provided Investment write-off Adjustment and Provision transferred Closing Balance 3,258.41 24.66 156.99 3,440.06 5. Equities: Disclosures for Banking Book Position Qualitative Disclosures a)The general qualitative disclosures requirement concerning equity risk, including: Differentiation between holdings on which capital gains Investment in equity securities are broadly categorized into two parts: are expected and those taken under other objectives i) Quoted Securities which are traded in the secondary market (Trading Book including for relationship and strategic reasons; and Assets). ii) Unquoted securities are categorized as Banking book equity exposures which are further sub-divided into two groups: unquoted securities which are invested without any expectation that these will be quoted in near future i.e. Held to Maturity (HTM). And securities which are acquired under private placement or IPO and are going to be traded in the secondary market after completing required formalities. Unquoted securities are valued at cost. Discussion of important policies covering the valuation The primary objective is to invest in equity securities for capital gain by selling and accounting of equity holdings in the Banking Book. them in the future or held for dividend income. Dividends received from these This includes the accounting techniques and valuation equity securities are accounted for as and when received and right to receive methodologies used, including key assumptions and when established. Both Quoted and Un-Quoted equity securities are valued at cost practices affecting valuation as well as significant changes and necessary provisions are maintained from time to time as per instruction of in these practices Bangladesh Bank if the prices fall below the cost price. Qualitative Disclosures Solo Consolidated Value disclosed in the balance sheet of investments, as well as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially different from fair value. c) The cumulative realized gains (losses) arising from sales and liquidations in the reporting period. 1,568.73 Taka in Million 2,442.89 36.24 100.14 d) Total un-realised gains (losses) (658.24) (985.12) - - - - Particulars Total latent revaluation gains (losses) Any amounts of the above are included in Tier-2 capital. e) Capital requirements are broken down by appropriate equity groupings, consistent with the Bank’s methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatory capital requirements. Solo Consolidated Particulars Taka in Million • Specific Market Risk 1,568.73 2,442.89 • General Market Risk 1,568.73 2,442.89 (Taka in million) 2,442.89 Specific Market Risk 1,568.73 2,442.89 General Market Risk 1,568.73 Consolidated ANNUAL REPORT 2020 Solo
  204. 205 6 . Profit (Interest) Rate Risk in the Banking Book (PRRBB) Qualitative Disclosures a) The general qualitative disclosure requirement including the nature of PRRBB and key assumptions, including assumptions regarding investment prepayments and behavior of non-maturity deposits, and frequency of PRRBB measurement. Profit rate risk is the risk where changes in market profit rates might adversely affect Bank’s financial condition. Changes in profit rates have the following two types of effect: i. Earning Perspective (Current Earnings): It affects a Bank’s earnings by changing its net profit income and the level of other profit (interest) sensitive income and operating expenses. The short-term impact of changes in profit rates is on the Bank’s Net Profit (Interest) Income (NII). ii. Economic Value Perspective (Net Worth of the Bank): The economic value of future cash flows changes when the profit rate changes. In the longer-term, changes in profit rates impact the cash flows on the assets, liabilities and offbalance sheet items, giving rise to a risk to the net worth of the Bank arising out of all re-pricing mismatches and other profit rates sensitive position. In Shahjalal Islami Bank Limited, the Treasury Division under the supervision of the Asset & Liability Committee (ALCO) is responsible for managing market risk arising from Banking book activities of the Bank. Techniques of Addressing PRRBB: Shahjalal Islami Bank Limited are applied the following techniques to manage the Profit Rate Risk in the Banking Book. Re-pricing Schedules Gap Analysis i. Dura�on ii. Quarterly Stress Tes�ng Re-pricing Schedules: It is the simplest techniques for measuring a Bank’s profit rate risk exposure and that is generating a maturity/re-pricing schedule that distributes profit sensitive assets, liabilities, and OBS positions into a certain number of predefined time bands according to their maturity (if fixed-rate) or time remaining to their next re-pricing (if floating-rate). Those assets and liabilities lacking definitive re-pricing intervals (e.g. sight deposits or savings accounts) or actual maturities that could fluctuate from contractual maturities are assigned to re-pricing time bands according to judgment and past experience of the Bank. Gap Analysis: It helps to assess the profit rate risk of current earnings. To evaluate earnings exposure, profit rate-sensitive liabilities in each time band are subtracted from the corresponding profit rate-sensitive assets to produce a re-pricing “gap” for that time band. This gap is then multiplied by an assumed changed in profit rates to yield an approximation of the change in net profit income that would result from such a profit rate movement. i. Duration: A maturity/re-pricing schedule is also used to evaluate the effects of changing profit rates on a Bank’s economic value by applying sensitivity weights to each time band. Typically, such weights are based on estimates of the duration of assets and liabilities that fall into each time band. ii. Quarterly Stress Testing: It is conducted quarterly as per the directives of Bangladesh Bank to gain better insight into the vulnerable issue of PRRBB. Shahjalal Islami Bank Limited
  205. 206 Qualitative Disclosures b ) The increase (decrease) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to management’s method for measuring PRRBB, broken down by currency (as relevant). Particulars Market Value of Assets Market Value of Liabilities Weighted Average of Duration of Assets (DA) Weighted Average of Duration of Liabilities (DL) Duration GAP (DA-DL) Yield to Maturity (YTM-Assets) Yield to Maturity (YTM-Liability) Magnitude of Profit Rate Change Change in Market Value of Equity due to an Increased in Profit Rate Stress Testing Regulatory Capital (After Shock) RWA (After Shock) CRAR (After Shock) 1% 650.44 Minor 27,177.80 196,137.30 13.86% Taka in Million 293,131.60 275,379.90 0.66% 0.95% -0.24% 5.92% 4.00% 3% 1,951.33 Major 25,876.90 196,137.30 13.19% 2% 1,300.88 Moderate 26,527.40 196,137.30 13.52% 7. Market risk Qualitative Disclosures a) i) Views of BOD on trading/investment activities ii) Methods used to measure market risk iii) Market Risk Management system iv) Policies and processes for mitigating market risk The Board approves all policies related to market risk, limits and review on Core Risk compliance on a regular basis. The objective is to provide cost-effective funding to finance asset growth and trade-related transactions. Standardized approach has been used to measure the market risk. The total capital requirement in respect of market risk is the aggregate capital requirement calculated for each of the risk sub-categories. For each risk category, the minimum capital requirement is measured in terms of two separately calculated capital charges for “specific risk” and “general market risk”. The Treasury Division manages market risk covering liquidity, profit rate and foreign exchange risks with oversight from the Asset-Liability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. ALCO meets at least once a month. There are approved limits for Investment (credit) to deposit ratio, liquid assets to total assets ratio, maturity mismatch, commitments for both on-balance sheet and off-balance sheet items and borrowing from money market and foreign exchange position. The limits are monitored and enforced on a regular basis to protect the loss against market risks. The exchange rate of the Bank is monitored regularly and the Bank reviews the prevailing market condition, exchange rate, foreign exchange position and transactions to mitigate foreign exchange risks. Qualitative Disclosures b)The capital requirements for Taka in Million Particulars Profit rate risk Equity position risk Foreign Exchange risk and Solo - Consolidated - 313.75 488.58 99.82 99.82 Commodity risk Total Capital Requirement - - 413.57 588.40 (Taka in million) 488.58 313.75 99.82 0 0 Profit Rate Risk ANNUAL REPORT 2020 99.82 0 Equity Posi�on Risk Foreign Exchange Risk 0 Commodity Risk
  206. 207 8 . Operational Risk Qualitative Disclosures a) i) Views of BOD on the system to reduce Operational Operational risk is the risk of loss resulting from inadequate or failed internal processes, Risk people and systems or external events. The Board of Directors is always focused on the deployment of Capable Human Resources, Systems, etc. to carry out a large number of transactions effectively and accurately while complying with applicable laws and regulations constitute operational risk management activities of the Bank. ii) Performance gap of executives and staffs iii) Potential external events iv) Policies and processes for mitigating operational risk The policy for operational risks including internal control & compliance risk is duly approved by the Board taking into account relevant guidelines of Bangladesh Bank. Audit Committee of the Board directly oversees the activities of Internal Control & Compliance to protect against all operational risks. Senior Management is always committed to the implementation of the Operational Risk Management framework as approved by the Board. Management also ensures regular review and active participation in monitoring the effectiveness of Risk Management. Both the Board of Directors & Management of Shahjalal Islami Bank Ltd. believe that efficient management of Operational Risk always contributes to earnings and development of bank and preserve the interest of all stakeholders. Employee performance is the most important factor to achieve organizational goals. Bank maintains a technology-based yearly performance monitoring system for each employee to monitor productivity based on the allotted budget. Employees can easily check his/her performance growth as well as a set strategy for achieving a yearly budget. Rewards and recognition decisions of employees are made on the basis of individual performances. Bank has a special focus on: ●● Ensuring a balanced diversity ●● Increase employee ownership to the Bank ●● Improving productivity of an employee ●● Providing competitive compensation and benefits ●● Protecting human rights ●● Ensuring a healthy and safe workplace ●● Ensuring equal opportunity. SJIBL’s strong brand image also plays an important role in employee motivation. SJIBL arranges internal and external training, workshops, webinars, Seminar, symposiums and Participation in Fare, etc. to develop employee skills. By its nature, Operational Risk cannot be eliminated. Like other Banks, SJIBL also operates its business with few potential external events that may significantly affect the Bank into operational risks are as follows: ●● General business and political condition ●● Inflation ●● Changes in taxation rules ●● The risk of the litigation process ●● Changes in the credit quality of borrowers ●● Damage of physical asset ●● Volatility in the equity market ●● Information security ●● External fraud, Vendor Risk, etc. ●● Business disruption and system failure etc. ●● Directives from Regulatory Authorities ●● Changes in Environment, Climate, etc. To mitigate the day-to-day Operations Manual including Internal Control & Compliance, Risk Manual is approved by the Board taking into account the relevant guidelines of Bangladesh Bank. Senior Management Team (SMT), Executive Committee, Risk Management Division (RMD) & Banking Operations Division (BOD) regularly analyzed different outlook of Operational Risks and go up the findings to appropriate authority and Internal Control & Compliance Division (IC & CD) formulate appropriate policies to alleviate Operational Risk of the Bank. Apart from that, there is adequate check & balance at every stage of operation through Department Control Function Check List (DCFCL), Quarterly Operations Report (QOR), Key Risk Indicator (KRI), Internal Audit, etc. v) Approach for calculating the capital charge for Basic Indicator Approach (BIA) was used for calculating the capital charge for operational operational risk risk as per Guidelines on Risk-Based Capital Adequacy of Bangladesh Bank. Under BIA, the capital charge for operational risk is a fixed percentage, denoted by α (alpha) of the average positive annual gross income of the Bank over the past three years and multiply the average income by 15% to determine capital charges. Figures for any year in which annual gross income is negative or Zero should be excluded from both the numerator and denominator when calculating the average. Shahjalal Islami Bank Limited
  207. 208 Quantitative Disclosures Particulars Taka in Million Solo Consolidated 1 ,683.83 1,808.09 b) The capital requirements for : Operational risk 9. Liquidity Ratio Qualitative Disclosures i) Liquidity Risk Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit) or when a Bank is unable to fulfill its commitments in time when payment falls due. Thus, liquidity risk can be of two types: (i) Funding liquidity risk and (ii) Market liquidity risk. ii) Views of Board of Directors on system to reduce The Bank’s Board of Directors already approved the strategy and significant policies liquidity risk related to the management of liquidity. According to the strategy and policies, SJIBL maintains a diversified and stable funding base comprising of core retail, corporate and institutional deposits to manage liquidity risk. The responsibility of managing the liquidity risk of the Bank lies with Treasury Front Office. Different key ratios including LCR and NSFR are regularly discussed in the monthly meeting of ALCO. The committee meets at least once a month to review the Asset-Liability and Liquidity position of the Bank. Treasury Division maintains liquidity based on current liquidity position, anticipated future funding requirement, sources of fund, options for reducing funding needs and ALCO monitors present and anticipated asset quality, present and future earning capacity, present and planned capital position, etc. iii) Methods used to measure liquidity risk A sound liquidity risk management employed in measuring, monitoring and controlling liquidity risk is critical to the viability of the Bank. The measurement tools which are used to assess liquidity risks are: i. Cash Reserve Requirement (CRR); ii. Statutory Liquidity Ratio (SLR); iii. Investment to Deposit Ratio (IDR); iv. Structural Liquidity Profile (SLP); v. Maximum Cumulative Outflow (MCO); vi. Liquidity Coverage Ratio (LCR); vii. Net Stable Funding Ratio (NSFR) etc. iv) Liquidity risk management system The Asset Liability Committee (ALCO) meets at least once a month to discuss and monitor the overall position of the Bank including liquidity. Treasury Division closely monitors liquidity requirements on daily basis by appropriate coordination among funding activities. Besides, monthly fund flow projection is reviewed in ALCO meetings regularly in order to manage the liquidity risk of the Bank. v) Policies and processes for mitigating liquidity risk In order to develop a comprehensive liquidity risk management framework, the Bank has a Board-approved Contingency Funding Plan (CFP), a set of policies and procedures that serves as a blueprint for the Bank, to meet its funding needs in a planned manner at a reasonable cost. Thus, CFP is an extension of ongoing liquidity management that formalizes the objectives of liquidity management by ensuring: a) Reasonable liquid assets being maintained; b) Measurement and projection of funding requirements during various scenarios; and c) Management of access to sources of funds. Maturity ladder of cash inflows and outflows is an effective tool to determine the Bank’s cash position. A maturity ladder estimates a Bank’s cash inflows and outflows and thus net deficit or surplus (GAP) on a day to day basis in different time buckets (e.g. call, 2-7 days, 1 month, 1-3 months, 3-12 months, 1-5 years, over 5 years). Quantitative Disclosures Particulars Percentage (%) Standard ≥4.00% Maintained 4.74% ≥5.50% 11.50% ≤92% 79.62% Liquidity Coverage Ratio (LCR) ≥100% 390.52% Net Stable Funding Ratio (NSFR) >100% 130.31% Cash Reserve Requirement (CRR) Statutory Liquidity Ratio (SLR) Investment to Deposit Ratio (IDR) ANNUAL REPORT 2020
  208. 209 10 . Leverage Ratio Qualitative Disclosures a) i) Views of Board of Directors on system to reduce The responsibility of monitoring the excessive leverage of the Bank lies with the excessive leverage concerned divisions under the guidance of the Board of Directors of the Bank. The Board delivers policies and processes from time to time for managing the Bank’s leverage ratio up to the mark. ii) Policies and processes for managing excessive on and The leverage ratio was introduced into the Basel-III framework as a non-risk-based off-balance sheet leverage backstop limit, to supplement risk-based capital requirements. In order to avoid building-up excessive on and off-balance sheet leverage in the Banking system, a simple, transparent, non-risk-based leverage ratio has been introduced by the Bangladesh Bank. The leverage ratio is calibrated to act as a credible supplementary measure to the risk-based capital requirements. The leverage ratio is intended to achieve the following objectives: ●● iii) Approaches for calculating exposure Constrain the build-up of leverage in the Banking sector for the broader financial system and the economy; and ●● Reinforce the risk-based requirements with an easy-to-understand and nonrisk-based measure. The exposure measure for the leverage ratio generally follows the accounting measure of exposure. In order to measure the exposure consistently with financial accounts, the following approaches are applied by the Bank: i. On-balance sheet, non-derivative exposures are being netted of specific provisions and valuation adjustments (e.g. surplus/ deficit on Available for Sale (AFS)/ Held-for-Trading (HFT) positions). ii. Physical or financial collateral, guarantee or investment risk mitigation purchased is not allowed to reduce on-balance sheet exposure. iii. Netting of investments and deposits is not allowed. The Bank has calculated the regulatory leverage ratio as per the guideline of BaselIII. The numerator, the capital measure is calculated using the new definition of Common Equity Tier 1 capital applicable from January 01, 2015. Quantitative Disclosures b) Leverage Ratio A minimum Tier 1 leverage ratio of 3% is being prescribed by Bangladesh Bank on both a solo and consolidated basis. The Bank measures and maintains a leverage ratio on a quarterly basis. The status of the leverage ratio at the end of each calendar quarter is submitted to Bangladesh Bank. The formula of Leverage Ratio is as under: Leverage Ratio = Particulars Common Equity Tier 1 Capital (A)* Exposure Measure: On Balance Sheet Exposure* Off-Balance Sheet Exposure* Less: Regulatory adjustment made to Tier 1 Capital Total Exposure (B) Leverage Ratio (A/B) Tier 1 Capital (after related deductions) Total Exposure (after related deductions) Solo 17,948.76 Taka in Million Consolidated 17,866.82 290,077.80 49,287.60 0.00 339,365.40 5.29% 292,039.10 49,287.60 0.00 341,326.70 5.23% *Considering all regulatory adjustments 11. Remuneration Qualitative Disclosures a) Information relating to the bodies that oversee remuneration. i. Name, composition and mandate of the main body Human Resources Division of the Bank deals with the remuneration related issues of employees with the assistance of the Financial Administration Division as per specific overseeing remuneration. provisions laid down in the Employees’ Service Rules of the Bank and Pay structure duly approved by the Board of Directors, while the same is governed and oversight by the Managing Director, Management Committee and Head of Human Resources Division. The Bank has a well-defined Employees’ Service Rules approved by the Board of Directors, which includes remuneration/compensation packages, retirement benefits of regular employees and incentive schemes, etc. The Board has also approved a very competitive and rewarding scale of pay for the Employees. The Service Rules and Remuneration policies/Pay Structure is reviewed and revised from time to time by the management constituting high powered committee and got approved by the Board. While reshuffling the pay structure/compensation packages, the inflation & price hike of commodities, industry best practices and peer Banks’ status, etc. are taken into consideration. Shahjalal Islami Bank Limited
  209. 210 ii . External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process. iii. A description of the scope of the Bank’s remuneration policy (e.g. by regions, business lines) including the extent to which it is applicable to foreign subsidiaries and branches. Bank does not seek advice from any external consultant in any step of the remuneration process and therefore, no commission is paid to this effect. SJIBL follows the uniform remuneration policy. However, management ensures extremely fair and performance-based compensation to all employees. Further, the remuneration of higher management, consultants and contractual appointments are determined and oversight by the Board of Directors on case to case basis and as per requirement. As of December 31, 2020, the Bank had no foreign subsidiaries and branches outside Bangladesh. iv. A description of the types of employees considered as The Bank has not categorized any group or grade of employees as material riskmaterial risk takers and as senior managers, including the takers. The risks in different operational events of the Bank are borne by the number of employees in each group concerned employees of those particular areas as a team. However, the members of senior management, senior-most branch managers and Head of the functional division at Head Office are considered as senior managers. As such, a number of 102 Executives of the Bank up to the rank of Vice President as on December 31, 2020, has been considered as senior managers as follows: Designation Managing Director Additional Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice President Total Number 1 2 5 5 13 28 48 102 b) Information relating to the design and structure of the remuneration process. i. An overview of the key features and objectives of The Bank has a well-structured, competitive and rewarding scale of pay for the remuneration policy. regular employees of the Bank duly approved by the Board of Directors. The pay package of all employees other than the Managing Director and Contractual Employees is determined by the management in accordance with the approved scale of pay. The compensation package of the Managing Director is determined by the Board of Directors and subject to the subsequent approval of the Central Bank, i.e. Bangladesh Bank. Remuneration Package of Contractual Employees, as and when required, are determined and approved by the Board of Directors on case to case basis prior to appointment. The annual increment and incentive bonuses for the eligible employees are paid on the basis of performances under the purview of Board-approved policies in this regard. The main objective of the remuneration policy of the Bank is to retain the existing human resources, attract/hire talented & experienced professionals and motivate the workforce to put their best efforts for sustainable growth of the Bank. The components of remuneration are mentioned in the diagram: Remunera�on Basic Pay House Rent Medical Allowance Conveyance Allowance Fes�val Bonus Others The basic pay & other allowances like house rent, medical allowance are increased at a fixed rate annually subject to satisfactory performance of the past year. The employees are also rewarded by way of a special promotion, increment for their outstanding performance. Other than monthly remuneration Bank offers a number of facilities/benefits like Leave Fare Assistance (LFA); Executive Car Facility; Corporate Mobile Phone facility, Maternity benefits for female employees; Employees’ House Building Investment Facility; Employees’ House Building Safety Scheme; House Furnishing Allowance, Super Annulation & Disability & Death benefits, etc. Besides, a very attractive retirement/separation benefit is paid in the form of Gratuity; Contributory Provident Fund; Leave encashment, Social Security fund, etc. ANNUAL REPORT 2020
  210. 211 The employees are paid two festival bonuses and boishaki bonus per year . An incentive bonus is also paid on the basis of the annual business performance of the Bank. ii. Whether the remuneration committee reviewed the The remuneration policy and pay structure for the employees of the Bank is reviewed firm’s remuneration policy during the past year, and if so, and revised/reshuffled from time to time by management and subsequently got an overview of any changes that were made. approved by the Board of Directors. iii. A discussion of how the Bank ensures that risk and The officials working in the Risk and Compliance areas have got their specific job compliance employees are remunerated independently descriptions & job allocations like professionals of other functional areas and of the businesses they oversee. performing their responsibilities independently as per standing guidelines of the regulators as well as the Bank management. Their service and remuneration are governed under the approved Employees’ Service Rules of the Bank and pay structure of the Bank. c) Description of the ways in which current and future risks are taken into account in the remuneration process. i. An overview of the key risks that the Bank takes into The remuneration is measured taking into consideration of the following two risk account when implementing remuneration measures. factors: ii. An overview of the nature and type of the key measures used to take account of these risks including risks difficult to measure. iii. A discussion of the ways in which these measures affect remuneration. ●● Financial risks and ●● Compliance risk. If the financial losses are made for non-compliance with any of that rules & regulations by any employee the bonus, increment, etc. are held. SJIBL follows the financial capacity of the Bank to measure remuneration packages. Besides, it considers operational impacts, cost of living adjustments, relevant compliances, industry-competitive remuneration in relation to the market reputation and other effective risk-adjusted measures in determining remuneration. SJIBL approaches the employee’s remuneration arrangements, especially periodic fixed remuneration enhancements and variable compensation through an integrated risk, finance, compensation and performance management framework. Annual salary increment and potential variable benefits are rewarded at the end of each year. The realistic grounds have been considered by the Bank’s management to revise and measure the remuneration arrangement from time to time in order to ensure risk-adjusted business operations and employee satisfaction simultaneously. iv. A discussion of how the nature and type of these measures have changed over the past year and reasons for the change, as well as the impact of changes on remuneration. d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration. i. An overview of main performance metrics for Bank, ●● Net Profit (Income) Margin (NIM) top-level business lines and individuals. ●● Return on Investment (ROI) ●● Return on Assets (ROA) ●● Return on Equity (ROE) ●● RAROC (Risk-adjusted Return on Capital) ●● Classified Investment Ratio ●● Earning Per Share (EPS) ●● Capital to Risk-weighted Asset Ratio (CRAR) ●● Operating Efficiency (cost control) ii. A discussion of how amounts of individual remuneration Annual performance bonuses, salary increments and promotions are directly linked are linked to Bank-wide and individual performance. with employee’s individual performance. iii. A discussion of the measures the Bank will in general Not Applicable implement to adjust remuneration in the event that performance metrics are weak. e) Description of the ways in which the Bank seeks to adjust remuneration to take account of longer-term performance. i. A discussion of the Bank’s policy on deferral and vesting Currently, SJIBL does not offer any variable remuneration that may be deferred or of variable remuneration and, if the fraction of variable vested either in the form of cash, shares or share-linked instruments. However, remuneration that is deferred differs across employees employees are eligible for variable remuneration arrangements in the form of or groups of employees, a description of the factors that Incentive Bonus (non-deferred cash awards), applicable to their positions. determine the fraction and their relative importance. ii. A discussion of the Bank’s policy and criteria for Not Applicable adjusting deferred remuneration before vesting and (if permitted by national law) after vesting through clawback arrangements. f) Description of the different forms of variable remuneration that the Bank utilizes and the rationale for using these different forms. i. An overview of the forms of variable remuneration The structure of remuneration arrangements for all employees primarily consists of offered (i.e. cash, share and share-linked instrument and a fixed remuneration component, which is made up of basic salary, allowances and other forms). other benefits. Employees are also eligible for variable remuneration arrangements applicable to their position. Variable remuneration consists of Incentive Bonus (cash awards) for most of SJIBL’s employees. Shahjalal Islami Bank Limited
  211. 212 ii . A discussion of the use of the different forms of variable remuneration and, if the mix of different forms of variable remuneration differs across employees or groups of employees), a description the factors that dermine the mix and their relative importance. Quantitative Disclosures g) Number of meetings held by the main body overseeing remuneration during the financial year and remuneration paid to its member. h) i.Number of employees who have received a variable remuneration award during the financial year. h) ii.Number and the total amount of guaranteed bonuses awarded during the financial year. The following variable remunerations are provided by the Bank on the basis of employee’s individual performance. h) iii.Number and the total amount of sign-on awards made during the financial year. h) iv.Number and the total amount of severance payments made during the financial year. i) i.Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms. i) ii.Total amount of deferred remuneration paid out in the financial year. j) Breakdown of amount of remuneration awards for the financial year to show: Not Applicable i. Fixed and variable; ii. Deferred and non-deferred; ●● Annual performance bonus and ●● Salary increment. Not Applicable Not Applicable No. of Guaranteed Bonus 3 festival bonuses Not Applicable Not Applicable Not Applicable Sl. i. ii. iii. Particulars Fixed and variable Deferred and non-deferred Different forms used iii. Different forms are used (cash, shares and share linked instruments, other forms). k) i.Total amount of outstanding deferred remuneration Not Applicable and retained remuneration exposed to ex-post explicit and/or implicit adjustments. k) ii.Total amount of reductions during the financial year Not Applicable due to ex-post explicit adjustments. k) iii.Total amount of reductions during the financial Not Applicable year due to ex-post implicit adjustments. ANNUAL REPORT 2020 Total Amount (Tk. in Million) 226.85 Total Amount (Tk. in Million) 2,767.87 Nil Cash
  212. 213 MANAGEMENT OF NON PERFORMING INVESTMENTS (NPI) Resolution Strategies for Non performing Investments of SJIBL prevention and resolution. With regard to preventive measures, emphasis needs to be placed on Investment screening, investment surveillance and investment review functionaries. Therefore, some following challenges/measures has been highlighted for improving the NPI recovery environment and solving the NPI problems of SJIBL as-well : Management of NPIs must be multi-pronged, with different strategies pursued at the different stages through which an Investment Facility passes. Measures should be in place for both Low economic growth High risk premium Loss of current revenue Fall of Growth Economic and financial implica�ons of NPIs High Investment loss Provision Erosion of Bank's capital Financial crisis Measures Adopted to Address Nonperforming Investment for reduction of NPIs: Ins�tute sufficient measure to address the flow problem of bad investments effec�vely Predefined strategies for the risk based assets FIXING TARGET Fixing target on preven�ng down-turn of bad Investments Fixing target on rescheduling and cash recovery Con�nuour drive on rescheduling and cash recovery and follow-up Combined effort by both HO and Branch management CONSISTENT COMBINED EFFORT Incen�ve package for cash recovery Emphasize on the ethical standards in the banking profession from all the concerns to make the environment trustworthy and vibrant. U�lizing Investment Collec�on Unit/special task force effec�vely and efficiently U�lizing the legal measures i.e. improving the efficiency of u�lizing legal and the judicial system SETTLEMENT ARRANGEMENT Developing and deploying out of the court se�lement measures like compromise se�lement scheme e,g, profit waiver. Zonal based recovery unit/team to be incorporated soon. Shahjalal Islami Bank Limited
  213. 214 Perpetual Activities ●● Arrange meeting with the clients both at Head Office and Branch to discuss on recovery issues across the table ●● Deployment of Special Task Force/Collection Unit and efficient and target oriented effective utilization of them through-out the year ●● Rescheduling/restructure proposal is placed and get approved towards regularization of classified liabilities ●● Timely litigation procedure and appropriate usage of jurisdiction to recover willful defaulters ●● Out of court settlement and execution of Solenama Agreement is always a priority ●● Compromise with the client in terms of waiver having prior approval of the Board of Directors is always a measure of recovery. ●● Building-up a team with the objective of recovery drive combining the efforts both by Head Office and Branch representatives and the list goes on till adjustment of the classified liabilities Trend of Nonperforming Investment in SJIBL: Complying the above mentioned strategies and measures, SJIBL Management has been able to curb the classified liabilities despite facing the challenges of COVID-19 driven Global Pandemic. And the progress is highlighted here-in below : Trend of NPI inSJIBL (Taka in million) 2017 Sub Standard ANNUAL REPORT 2020 2018 Doub�ul Bad/loss 2020 Total CI% 2018 Regulariza�on 2019 2020 Total Recovery/Regulariza�on Litigation Implications Litigation procedure is the last avenue after exhausting all possible ways of recovery drive. Legal Unit attached with SAM Division arrange approval from competent authority to file suit under NI ACT and Artha Rin Adalat Ain towards recovery of Nonperforming Investments. All the cases are followed-up by the Branches under direct supervision of Legal Unit at Head Office. Court cases are constantly monitored through the panel lawyers of the Bank and Legal unit remains very much watchful in this regard for early disposal of the cases. At times, if needed senior lawyers are appointed for large amount of NPIs and whenever it is needed, the legal officers/executives working at Head Office, who are very much knowledgeable and experienced, engage themselves directly for each and every single cases of Branches and guide the Branch Officials for prudent handling of the suits. Wise and proactive personnel of legal unit are acting as major influencers for many early settlement issues and they play an active positive role in out of court settlement arrangement of NPIs. The far-sighted activities of Legal Unit resulted in the positive out-comes as illustrated herein below that benefited the bank in financial gain: ●● As at the close of 2020, the Legal Unit of SJIBL has got 210 nos. of Arthorin Suits under trial at different courts of Bangladesh. SJIBL has got total Tk.1410.00 crore of claimed amount against those suits. ●● Apart from those above, the unit is supervising 547 nos. of suit filed under NI Act at different courts of Bangladesh. ●● In 2020, cash recovery was Tk.40.72 crore form NPIs against the suits under trial. ●● Final settlement/adjustment of entire classified liabilities of 17 Nos. of Investment Client against whom, the Bank has been conducting suit file and thus reduced NPI 286 444 2019 2017 Cash Recovery 4.57% 7,961 8,874 8,517 9,687 648 523 797 533 550 212 246 273 2016 4.91% 5,539 6,301 3.97% 5,263 5,782 4.70% 11,393 12,723 6.84% 2016 3,676 Recovery Job is allocated specifically to the personnel of SAM and progress is reviewed time to time and reported to the higher management 1,335 2,341 ●● 6,311 Periodic direct correspondence is made with the clients as well through the Branches (Taka in million) 4,773 ●● SJIBL Recovery/Regulariza�on Trend 1,538 Different strategies are implemented account-wise on case to case basis depending upon gravity of the situation 1,034 1,811 2,844 ●● Maintenance of Asset Quality and turning the non performing investment into income generating assets is one of the foremost vital area of focusing by SJIBL Management. 1,964 Branch-wise target is fixed in the beginning of the year for regular follow-up. Total NPI Tk. 8,973 million Classification 4.57% 1,228 ●● In 2020, 1,290 976 2,266 To emphasize NPI Management prudently, SJIBL management established and strengthened a separate division named “Special Asset Management (SAM) Division” and enriched the division with experienced and knowledgeable personnel to achieve the division’s ultimate goal. In addition to adopting the above mentioned strategies of NPI Management, following perpetual activities are continued from day one of the year:
  214. 215 ●● ●● 60 Nos of Classified Investment Account against which the bank was running trial, were brought under Reschedule/ Special Reschedule/One Time Exit arrangement and thus regularized NPI. SJIBL got favourable verdict against 11 Nos. of suit-files and achieved ownership of mortgaged properties of total value Tk.46.59 crore. Future Strategies To deal with NPIs in Pandemic stroke dull economy and develop a robust financial discipline in NPI Management of SJIBL, following strategic planning will be considered to face the challenge of 2021: Effec�vely communicated predefined account-wise recovery plan Fixing target for recovery of wri�en-off NPIs Different strategies to be pursued at different stages of NPI More a�rac�ve Incen�ve for recovery drive in both Head Office and Branch level Ins�tute zonal based recovery unit Encourage compromise or amicable se�lement arrangements which is more reality oriented Establish zonal based legal unit to expedite court cases Periodic follow-up of recovery targets in regular intervals U�lize recovery agents in cases of need Assume factoring services and asset securi�za�on techniques in required cases Introduce recovery unit in NPI prone Branches Finally, it must be reiterated that, in recent past, SJIBL Management has been able to manage its NPI portfolio prudently with wide foresee-ness and adaptability with changing scenario and the management is ready with highest level of enthusiasm for smart NPI management in near future to down-turn the classification rate at minimum level. Shahjalal Islami Bank Limited
  215. 216 STAKEHOLDERS ' INFORMATION ANNUAL REPORT 2020
  216. 217 SHAREHOLDING STRUCTURE Shareholding structure as on 31 December 2020 SL . No. Type of Owner No. of shares Value of shares BDT % of holding 1 Sponsor & Directors 477,992,172 4,779,921,720 48.77% 2 Institutes 128,592,952 1,285,929,520 13.12% 3 General Public 371,994,125 3,719,941,250 37.96% 4 Foreigners 1,513,086 15,130,860 0.15% 980,092,335 9,800,923,350 100.00% Total Shareholding Structure as on 31 December 2020 0.15% Sponsor & Directors 37.96% 48.77% Ins�tutes General Public Foreigners 13.12% Shahjalal Islami Bank Limited
  217. 218 SHAREHOLDING BY DIRECTORS Name of Directors and their shareholdings as at 31 December 2020 SL Name of Directors Position No of Shares held Amount Taka % of Share 1 Mr. Md. Sanaullah Shahid Chairman 25,081,556 250,815,560 2.56% 2 Mr. Md. Harun Miah Vice-Chairman 19,601,911 196,019,110 2.00% 3 Mr. Md. Abdul Barek Vice-Chairman 19,601,997 196,019,970 2.00% 4 Mr. Anwer Hossain Khan, MP Director 29,298,293 292,982,930 2.99% 5 Mr. Abdul Halim Director 23,841,881 238,418,810 2.43% 6 Mr. Mohiuddin Ahmed Director 19,612,167 196,121,670 2.00% 7 Mr. Akkas Uddin Mollah Director 38,753,165 387,531,650 3.95% 8 Mr. Khandaker Sakib Ahmed Director 19,602,703 196,027,030 2.00% 9 Engr. Md. Towhidur Rahman Director 22,023,291 220,232,910 2.25% 10 Mr. A.K. Azad Director 37,365,165 373,651,650 3.81% 11 Mr. Mohammed Younus Director 24,230,698 242,306,980 2.47% 12 Mr. Fakir Akhtaruzzaman Director 19,601,846 196,018,460 2.00% 13 Mr. Mohammed Golam Quddus Director 19,652,324 196,523,240 2.01% 14 Mr. Md. Moshiur Raman Chamak Director 19,788,343 197,883,430 2.02% 15 Mrs. Tahera Faruque Director 30,349,141 303,491,410 3.10% 16 Mrs. Jabun Nahar Director 20,082,793 200,827,930 2.05% 17 Mr. Fakir Mashrikuzzaman Director 35,742,305 357,423,050 3.65% 18 Mr. Ekramul Hoque Independent Director - - - 19 Mr. KAM Majedur Rahman Independent Director - - - 20 Mr. Nasir Uddin Ahmed FCA, FCS Independent Director - - - 424,229,579 4,242,295,790 43.29% Total ANNUAL REPORT 2020
  218. 219 REDRESSAL OF INVESTORS ’ COMPLAINTS Complaint received throughout the year, related to shares, not receiving of Annual Reports and dividends timely is resolved lawfully in time. ●● Equal opportunity for all type of investors; ●● Resolution of investors’ complaints in time; The proxy form is affixed with the annual report in order to nominate proxy to attend and vote on behalf of shareholders who are unable to attend the shareholders’ meeting. ●● Investors’ are informed about the resolution of their complaints; ●● Investors’ are dealing with Friendliness; The shareholders’ meetings proceed in accordance with the order of agenda to give shareholders the opportunity to study the information on the given agenda before the poll. Communication to Shareholders The bank have maintained regular communication with the shareholders through periodic updates of performance and at any other time when it believes it needs to be done in the best interest of shareholders. ●● By Publishing Price Sensitive Information (PSI) in National dailies and in Online News Portal; ●● By releasing PSI via website of DSE and CSE and also in Bank website: www.sjiblbd.com ●● By publishing Press Release about Bank’s important events in the newspapers; ●● By issuing notices to the Shareholders for holding Annual General Meeting every year and Extra-Ordinary General Meeting (as and when necessary); ●● By sending the Annual Reports of the Bank every year; ●● By sending the Right Offer Document (ROD) as and when required; ●● By publishing Financial Statements in the newspapers; ●● By holding General Meetings of Shareholders; ●● Electronic and other means of communications with Shareholders: Annual Report of each year, quarterly financial statements and other important information may be viewed on SJIBL’s website www.sjiblbd.com Investors’ inquiries related to transfer of shares, changes of name and address and payment of dividend should be sent to the following address: Throughout the year we communicate with Shareholders in the following ways: Share Department Shahjalal Islami Bank Limited Shahjalal Islami Bank Tower Plot - 4, Block - CWN(C ), Gulshan Avenue, Gulshan, Dhaka - 1212 SJIBL follows the following principles in dealing with the Investors: ●● Protection of investors’ interest; ●● Fair treatment to all investors; Shahjalal Islami Bank Limited
  219. 220 FINANCIAL CALENDAR 2020 1st Quarter Results issued on : 10th June 2020 2nd Quarter Results issued on : 29th July 2020 3rd Quarter Results issued on : 28th October 2020 Annual Results issued on : 10th March 2021 20th Annual General Meeting : 28th April 2021 1st Quarter Results issued on : 14th May 2019 2nd Quarter Results issued on : 25th July 2019 3rd Quarter Results issued on : 30th October 2019 Annual Results issued on : 10th June 2020 19th Annual General Meeting : 12th August 2020 Dividend Rate : 5% (Stock) and 5% (Cash) Declaration Date : 10th June 2020 Record Date : 02nd July 2020 AGM Date : 12th August 2020 Distribution Date : Stock- 19th August 2020 2019 Dividend Information Distribution of Dividend- 2019 Cash- 24th August 2020 (General Shareholder) Cash- 01st October 2020 (Sponsor, Institution & Margin Investor) ANNUAL REPORT 2020
  220. 221 EVALUATION OF QUARTERLY PERFORMANCE Evaluation of Quarterly Financials by the Audit Committee and Board Every listed company is required to prepare and publish quarterly financial statements for the first quarter (Q-1), half-year (Q-2) and third quarter (Q-3) as per requirement of Bangladesh Securities and Exchange Commission (BSEC). SJIBL prepares quarterly financial statements as per requirement of Bangladesh Securities and Exchange Commission (BSEC) and in accordance with International Accounting Standard (IAS)-34: “Interim Financial Reporting”. Key highlights of interim results of the bank is stated below: (Amount in million) Balance Sheet 31 Dec 20 31 Dec 19 30 Sep 20 30 Sep 19 30 Jun 20 30 Jun 19 31 Mar 20 31 Mar 19 Placement with other Banks & FI’s 23,646.67 12,361.48 22,267.17 16,961.48 17,050.87 14,061.48 12,231.12 12,561.48 Inv in Shares & Securities 27,609.76 15,639.42 22,962.52 14,142.06 15,925.13 13,583.38 17,624.25 12,443.68 Investment 196,512.65 197,285.68 200,071.36 193,090.54 199,903.05 194,526.37 192,813.57 188,940.94 Placement from other Banks & FI’s Deposit & Other accounts 19,730.96 11,382.60 21,843.14 15,635.66 17,299.27 21,340.78 12,174.46 20,937.98 218,442.95 203,272.98 216,381.78 201,762.51 207,799.35 193,388.45 200,388.58 186,897.47 Paid up Capital Total Shareholder’s equity 9,800.92 9,334.21 9,800.92 9,334.21 9,334.21 8,485.65 9,334.21 8,485.65 17,948.76 16,507.27 17,583.32 16,154.31 17,581.26 15,846.95 17,117.86 15,235.35 Total Assets 293,517.85 265,992.54 292,474.88 266,458.59 278,677.02 262,028.99 266,194.86 253,265.79 Off Balance Items 120,035.04 113,090.49 117,964.81 107,476.94 111,406.76 108,023.11 124,483.29 110,461.70 Profit and Loss Account 01 Jan 20 to 01 Jan 19 to 01 Jan 20 to 01 Jan 19 to 01 Jan 20 to 01 Jan 19 to 01 Jan 20 to 01 Jan 19 to 31 Dec 20 31 Dec 19 30 Sep 20 30 Sep 19 30 Jun 20 30 Jun 19 31 Mar 20 31 Mar 19 Net Investment Income 5,615.32 7,178.36 4,859.35 5,605.80 3,347.01 3,722.79 1,956.23 1,792.81 Non Investment Income 3,190.17 3,327.62 2,044.96 2,486.46 1,358.80 1,793.22 772.17 727.39 Operating Expenses 4,710.68 4,640.85 3,557.03 3,270.22 2,248.72 2,258.25 957.79 1,012.96 Operating Profit 4,094.81 5,865.13 3,347.28 4,822.04 2,457.09 3,257.76 1,770.61 1,507.24 Net Profit After Taxation 1,908.20 1,718.30 1,542.77 1,365.34 1,074.00 1,057.99 610.60 446.38 Earnings per share(EPS) 1.95 1.75 1.57 1.39 1.15 1.13 0.65 0.48 31 Dec 20 31 Dec 19 30 Sep 20 30 Sep 19 30 Jun 20 30 Jun 19 31 Mar 20 31 Mar 19 Net Asset Value (NAV) per share 18.31 16.84 17.94 16.48 18.84 16.98 18.34 16.32 NOCFPS 16.96 9.09 13.47 9.63 5.15 7.21 4.57 5.84 Other Information The interim result is reviewed by the Audit Committee of the Board before publishing and then referred it to the Board of Directors for its approval. After being approved by the Board of Directors, the interim financial statements are submitted to the Bangladesh Securities and Exchange Commission (BSEC), Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) and then published in two daily newspapers (Bangla and English). The report is also available in the Bank’s official website at www.sjiblbd.com. Shahjalal Islami Bank Limited
  221. 222 STOCK PERFORMANCE 2020 Trade Price of Shares of Shahjalal Islami Bank Limited during the year 2020 on Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited are given below : DSE Month CSE Total Volume on DSE & CSE Volume 57,350 7,602,149 High Taka 24.40 Low Taka 20.00 Volume 7,544,799 High Taka 24.80 Low Taka 19.40 February 23.80 22.60 2,280,913 24.00 22.60 68,921 2,349,834 March 22.90 18.50 1,554,480 23.10 18.40 44,620 1,599,100 May 19.50 19.50 56,951 19.50 19.50 3,800 60,751 June 19.20 19.20 720,502 19.60 19.10 14,993,079 15,713,581 July 19.20 19.20 1,197,695 19.40 19.10 87,704 1,285,399 August 22.90 19.20 6,490,485 22.50 19.10 67,870 6,558,355 September 22.20 21.00 6,033,438 22.00 20.70 103,505 6,136,943 October 21.80 20.00 2,830,614 21.50 19.80 37,771 2,868,385 November 21.80 20.00 5,327,192 21.50 20.10 109,730 5,436,922 December 23.00 21.60 4,563,097 22.70 21.00 184,172 4,747,269 January DSE Market Price -2020 DSE High 24.40 20.00 January 23.80 22.60 22.90 22.90 22.20 21.80 21.80 23.00 19.20 19.20 21.00 20.00 20.00 21.60 July August 19.50 19.20 19.20 18.50 19.50 19.20 March May June February DSE Low September October November December CSE Market Price -2020 24.80 19.40 January DSE High 24.00 22.60 February 23.10 19.50 18.40 19.50 March May 19.60 19.10 19.40 22.50 19.10 19.10 July August June DSE Low 22.00 21.50 21.50 22.70 20.70 19.80 20.10 21.00 September October November December Total Volume on DSE & CSE-2020 15,713,581 7,602,149 6,558,355 6,136,943 1,599,100 2,349,834 January February 60,751 March May June 1,285,399 July August 4,747,269 2,868,385 September Total Volume on DSE & CSE ANNUAL REPORT 2020 5,436,922 October November December
  222. 223 PROFITABILITY AND BUSINESS RATIO Profitability /Dividends/Performance and Liquidity Ratios SL Items 2020 2019 2018 2017 2016 9.44 7.28 7.38 7.82 12.01 2.42 3.40 3.08 2.93 3.38 2.01 2.82 2.58 2.44 2.73 A) Net Investment Income Ratio 1 Net Income Ratio (%) 2 Net Profit (Interest) Income Ratio (%) Net Profit (Interest) Income as a percentage of Working 3 Funds (%) B) Profit Before Provisions and Tax 1 Profit Before Provisions and Tax (in million) 4,095 5,865 4,576 3,328 2,979 2 Cost/Income ratio (%) 53.50 44.17 47.11 51.56 50.17 11.76 13.35 17.51 21.29 7.43 9.15 9.03 7.45 8.38 10.31 C) Price Earnings Ratio 1 Price Earning Ratio D) Capital Adequacy Ratio 1 Tier I Capital Ratio (%) 2 Tier II Capital Ratio (%) 3 Total Capital Adequacy Ratio (Basel-III/II) (%) 5.04 6.55 7.05 3.81 1.23 14.19 15.58 14.50 12.19 11.54 D) Return on Capital Employed 1 Return on Capital Employed (ROCE) (%) 2 Return on Equity (%) 3 Return on Assets (ROA) (%) 7.11 6.70 6.99 7.93 12.40 11.08 10.98 10.47 9.14 12.40 0.68 0.67 0.65 0.64 1.02 15.35 15.11 15.48 14.61 12.01 E) Debt Equity Ratio 1 Debt Equity Ratio (Times) 2 Investment to Total Deposit Ratio (%) 79.62 87.47 90.32 90.17 85.98 3 Net Asset Value per Share (Taka) 18.31 16.84 15.84 15.69 16.67 Business Ratio/Information SL Items 2020 2019 2018 2017 2016 1 Statutory Liquidity Ratio (SLR) 11.50 7.43 7.21 8.23 6.43 2 Net profit income as a percentage of working funds/ Operating cost-efficiency ratio Return on Average Asset (%) 2.01 2.82 2.58 2.44 2.73 0.68 0.67 0.65 0.64 1.02 3 4 Cost/Income ratio 53.50 44.17 47.11 51.56 50.17 5 Net Asset Value per Share (In Taka) 18.31 16.84 15.84 15.69 16.67 6 Profit per Employee (in million) 1.54 2.21 1.91 1.39 1.36 14.19 16.02 14.50 12.19 11.54 7.39 8.42 8.31 7.83 8.08 7 Capital to Risk Weighted Assets/Capital Adequacy Ratio 8 Cost of Fund (%) 9 Operating profit as a percentage of working funds 1.46 2.30 2.03 1.77 1.95 10 Cash Reserve Ratio/Liquid Asset Ratio 4.74 5.94 6.92 8.09 6.81 11 Dividend Coverage Ratio 1.63 1.84 1.73 1.55 1.41 12 Gross Non-Performing Assets to Gross Investment (Advances)/Non-Performing Investment (Advances) (Assets) to Total Investment (Advances) (Assets) (%) 4.57 4.91 6.84 3.97 4.70 Shahjalal Islami Bank Limited
  223. 224 FIVE YEARS ’ FINANCIAL SUMMARY Figures in million Taka unless otherwise specified SL Items 2020 2019 2018 2017 2016 15,000 10,000 10,000 10,000 10,000 A. Financial Position 1 Authorized Capital 2 Paid up Capital 9,801 9,334 8,486 7,714 7,347 3 Reserve and Surplus 8,148 7,173 6,303 5,604 5,510 4 Total Shareholders’ Equity 17,949 16,507 14,789 13,318 12,857 5 Total Deposits 218,443 203,273 176,862 146,348 124,410 6 Total Investment 196,513 197,286 186,090 158,668 122,998 7 Investment in Share and Securities 27,610 15,639 12,321 10,526 7,593 8 Fixed Assets 4,741 4,504 3,995 3,957 3,433 9 Total Assets (excluding off-balance sheet items) 293,518 265,993 243,660 207,886 167,245 10 Total Contingent Liabilities and Commitment 120,035 113,090 100,787 89,226 63,326 11 Profit Earning Assets 244,232 219,818 202,397 173,187 138,949 12 Non-profit Earning Assets 49,286 46,175 41,263 34,699 28,296 B. Operating Result 1 Investment Income 17,034 20,291 17,122 12,996 11,154 2 Profit Paid on Deposit 11,418 13,112 11,295 8,419 6,986 3 Net Investment Income 5,615 7,178 5,827 4,577 4,168 4 Total Income 202,24 23,618 19,948 15,289 12,965 5 Total Expenditure 16,129 17,753 15,372 11,961 9,985 6 Operating Profit 4,095 5,865 4,576 3,328 2,979 7 Profit before Tax 3,643 3,894 3,165 2,079 2,306 8 Profit after Tax 1,908 1,718 1,471 1,196 1,557 C. Capital Adequacy 1 Risk Weighted Assets 196,155 182,776 173,161 158,937 124,704 2 Capital Requirement 19,615 18,278 17,316 15,894 12,470 3 Tier I Capital 17,949 16,507 12,893 13,318 12,857 4 Tier II Capital 9,880 11,970 12,213 6,058 1,529 5 Total Equity (Tier I & Tier II) 27,828 28,477 25,106 19,376 14,386 6 Capital Surplus 8,213 10,200 7,790 3,482 1,916 7 Tier I Capital Ratio (%) 9.15 9.03 7.45 8.38 10.31 8 Tier II Capital Ratio (%) 5.04 6.55 7.05 3.81 1.23 9 Total Capital Adequacy Ratio (Basel-III) (%) 14.19 15.58 14.50 12.19 11.54 D. Investment Quality 1 Volume of Non-performing Investment 8,973 9,687 12,723 6,301 5,782 2 Amount of Provision against classified Investment 3,440 3,258 2,445 1,415 1,431 3 Amount of Provision against unclassified Investment 2,224 1,901 1,375 1,166 896 4 Amount of Provision against Off Balance Sheets Exposures 935 869 837 892 633 5 Classified Investment as % of Total Investment 4.57 4.91 6.84 3.97 4.70 ANNUAL REPORT 2020
  224. 225 SL Items 2020 2019 2018 2017 2016 E . Foreign Exchange Business 1 Import Business 148,469 157,060 140,382 129,244 100,419 2 Export Business 133,580 147,052 125,402 97,437 84,769 3 Inward Foreign Remittance 7,755 7,849 6,129 3,576 3,361 F. Profitability, Performance and Liquidity Ratio 1 Net Asset Value per Share (Taka) 18.31 16.84 15.84 15.69 16.67 2 Investment to Total Deposit Ratio (%) 79.62 87.47 90.32 90.17 85.98 3 Debt Equity Ratio (Times) 15.35 15.11 15.48 14.61 12.01 4 Return on Equity (%) 11.08 10.98 10.47 9.14 12.40 5 Return on Assets (ROA) (%) 0.68 0.67 0.65 0.64 1.02 6 Cost/Income ratio (%) 53.50 44.17 47.11 51.56 50.17 7 Net Profit (Interest) Income Ratio (%) 2.42 3.40 3.08 2.93 3.38 8 Operating Income Ratio (%) 20.25 24.83 22.94 21.77 22.98 9 Gross Income Ratio (%) 43.54 44.48 43.38 44.93 46.11 10 Net Profit (Interest) Income as a percentage of Working Funds (%) 2.01 2.82 2.58 2.44 2.73 11 Net Income Ratio (%) 9.44 7.28 7.38 7.82 12.01 12 Cost of Deposit (%) 4.98 6.05 6.05 5.60 5.78 13 Cost of Fund (%) 7.39 8.42 8.31 7.83 8.08 14 Return on General Investment (%) 8.34 10.07 9.81 9.12 10.06 15 Net operating Cash flow per Share (Taka) 16.96 9.09 (3.07) 2.50 5.02 16 Profit Per Employee 1.54 2.21 1.91 1.39 1.36 G. Dividend 1 Cash Dividend 7%* 5% - - 10% 2 Bonus Dividend 5%* 5% 10% 10% 5% 3 Dividend Cover Ratio (Times) 1.63 1.84 1.73 1.55 1.41 4 Market Capitalization 22,444 21,842 23,420 25,457 11,020 *Proposed by the Board of Directors H. Shareholders Information 1 No. of Share Outstanding (million share) 980.09 933.42 848.56 771.42 734.69 2 Earnings Per Share (Taka) 1.95 1.75 1.58 1.41 2.02 3 Number of Shareholders 28,924 31,022 34,229 38,782 52,614 5 Market Value Per Share (Taka) 22.90 23.40 27.60 33.00 15.00 6 Price Earning Ratio 11.76 13.35 17.51 21.29 7.43 132 132 122 113 103 53 15 - - - 8 8 8 8 8 2,657 2,652 2,395 2,402 2,191 412 416 428 410 430 I. Other Information 1 Number of Branches 2 Number of Agent Banking Booth 3 Number of Brokerage House 4 Number of Employees Number of foreign Correspondents Shahjalal Islami Bank Limited
  225. 226 GRAPHICAL PRESENTATION Cash in hand & Balance with BB Investments (Taka in million) (Taka in million) 17,748 13,189 13,566 15,166 9,578 158,668 186,090 196,513 2019 2020 122,998 2016 2017 2018 2019 2020 Balance with other Banks and Financial Ins�tu�ons (Taka in million) 2016 2017 2018 Fixed Assets Including Premises (Taka in million) 7,735 3,433 2,416 1,000 2016 2017 1,749 2018 3,957 3,995 2017 2018 2019 2020 (Taka in million) 2016 4,741 11,513 12,361 2018 2019 2019 2020 Other Assets (Taka in million) 23,647 7,862 4,504 2,381 Placement with other Banks & Financial Ins�tu�ons 15,983 18,018 13,313 13,795 14,337 2016 2017 2018 2019 2020 89 89 89 89 2017 2018 2019 2020 6,662 2016 2017 2020 Investments in Shares & Securi�es Non Banking Assets (Taka in million) (Taka in million) 27,610 51 15,639 7,593 197,286 10,526 2016 ANNUAL REPORT 2020 2017 12,321 2018 2019 2020 2016
  226. 227 Total Assets Other Liabili �es (Taka in million) (Taka in million) 207,886 243,660 265,993 293,518 2017 2018 2019 2020 Placement from other Banks & Financial Ins�tu�ons (Taka in million) 13,647 14,461 2016 2017 2018 2019 (Taka in million) 259 23,466 16,236 2018 2019 2020 (Taka in million) 2017 2016 2017 2018 2019 2020 (Taka in million) 203,273 218,443 194,569 146,348 2016 142 Total Liabili�es Deposits and Other Accounts 176,862 138 95 11,383 124,410 188 19,731 2017 2020 Deferred Tax Liabili�es 29,622 2016 27,936 18,401 167,245 2016 24,642 228,871 249,485 275,569 154,388 2018 2019 2020 Mudaraba Subordinated Bond 2017 2018 2019 2020 9,334 9,801 2019 2020 Paid-up Capital (Taka in million) 10,000 2016 (Taka in million) 10,000 9,200 7,347 7,714 2016 2017 8,486 4,000 - 2016 2017 2018 2019 2020 2018 Shahjalal Islami Bank Limited
  227. 228 Statutory Reserve Investment Income (Taka in million) 4,819 4,404 (Taka in million) 5,452 6,231 6,960 20,291 17,122 11,154 2016 2017 2018 2019 2020 Retained Earnings 12,996 2016 2017 2018 1,188 2017 851 942 6,987 2018 2019 2020 2016 2017 14,789 2016 8,419 2017 2018 2019 2020 (Taka in million) 16,507 7,178 17,949 5,827 4,168 2018 11,418 Net Investment Income (Taka in million) 13,318 13,112 11,295 Total Shareholders' Equity 12,857 2020 (Taka in million) 1,106 2016 2019 Profit paid on Deposits (Taka in million) 784 17,034 2019 2020 2016 5,615 4,577 2017 2018 2019 2020 Income from Investment in Shares/securi�es Con�ngent Liabili�es (Taka in million) (Taka in million) 100,787 113,090 120,035 625 479 89,226 63,326 299 373 136 2016 ANNUAL REPORT 2020 2017 2018 2019 2020 2016 2017 2018 2019 2020
  228. 229 Commission , Exchange and Brokerage Return on Shareholders Fund (Taka in million) (Taka in million) 1,851 1,223 2016 12.4 2,058 1,752 1,478 10.47 10.98 11.08 2019 2020 9.14 2017 2018 2019 2020 2016 2017 2018 Net Profit a�er Taxa�on Other Opera�ng Income (Taka in million) (Taka in million) 791 812 1,557 601 1,471 1,718 1,908 1,196 515 452 2016 2017 2018 2019 2020 (Taka in million) 10,506 8,805 8,653 2016 2017 2018 2019 2020 1.84 1.58 1.41 2019 2020 1.95 3,542 2017 2016 2017 2018 2019 2020 Net Asset value per share (Taka in million) 2016 2018 6,870 Total Opera�ng Expenses 2,999 2017 Earnings Per Share (EPS) 2.02 Total Opera�ng Income 5,978 2016 4,076 2018 4,641 18.31 4,711 16.84 16.67 2019 2020 2016 15.69 15.84 2017 2018 2019 2020 Shahjalal Islami Bank Limited
  229. 230 HORIZONTAL & VERTICAL ANALYSIS Horizontal Analysis of Balance Sheet for the Last Five Years Particulars PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) 2020 2019 2018 2017 2016 158% 154% 159% 186% 197% 185% 142% 166% 138% 138% 130% 139% 100% 100% 100% Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh 320% 153% 1006% 99% 91% 129% 72% 71% 79% 41% 29% 90% 100% 100% 100% Placement with other Banks & Financial Institutions 301% 157% 146% 85% 100% Investments in Shares & Securities Government Others 364% 394% 283% 206% 214% 186% 162% 164% 159% 139% 131% 159% 100% 100% 100% Investments General Investment etc. Bills Purchased and Discounted 160% 161% 144% 160% 162% 139% 151% 155% 110% 129% 132% 98% 100% 100% 100% Fixed Assets Including Premises Other Assets Non Banking Assets Total Assets 138% 135% 174% 176% 131% 120% 174% 159% 116% 108% 174% 146% 115% 104% 174% 124% 100% 100% 100% 100% LIABILITIES AND CAPITAL Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable 122% 176% 164% 181% 153% 238% 227% 70% 163% 134% 184% 141% 199% 253% 145% 142% 112% 177% 115% 154% 166% 182% 118% 99% 143% 94% 133% 146% 100% 100% 100% 100% 100% 100% 100% 230% 205% 272% 178% 250% 181% 197% 162% 250% 135% 149% 148% 100% 106% 145% 126% 0% 100% 100% 100% 133% 158% 107% 140% 176% 127% 142% 85% 128% 159% 115% 124% 77% 115% 146% 105% 109% 71% 104% 124% 100% 100% 100% 100% 100% Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders' Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity Growth of each component of Balance Sheet of every year is calculated based on the amount of 2016 which is representing the value of 100%. The value above 100% means positive growth and below 100% means negative growth compared to base year 2016. Consistent growth of Assets, Liabilities and Shareholders’ Equity represents sustainable balance sheet growth of the bank as a whole. The growth of Investment become stagnant during the year 2020 for economic slowdown as a result of COVID 19 pandemic. As a strategy of bank’s fund management, the bank has increased placement with other banks and financial institutions. Mudaraba Subordinated Bond decreased due to repayment of 20% of 1st Mudaraba Subordinated Bond. ANNUAL REPORT 2020
  230. 231 Horizontal Analysis of Profit & Loss Account for the Last Five Years Particulars Investment Income 2020 153% 2019 182% 2018 154% 2017 117% 2016 100% Less: Profit paid on Deposits 163% 188% 162% 121% 100% Net Investment Income 135% 172% 140% 110% 100% Income from Investment in Shares/securities 460% 352% 274% 220% 100% Commission, Exchange and Brokerage 143% 168% 151% 121% 100% Other Operating Income 180% 175% 133% 114% 100% Total Operating Income 147% 176% 145% 115% 100% Salaries and Allowances 159% 155% 141% 118% 100% Rent, Taxes, Insurances, Electricity etc. 101% 108% 108% 107% 100% Legal Expenses 170% 157% 204% 198% 100% Postage, Stamps, Telecommunication etc. 128% 114% 121% 111% 100% Stationery, Printings, Advertisements etc. 105% 151% 131% 107% 100% Chief Executive's Salary & Fees 161% 149% 119% 106% 100% Directors' Fees & Expenses 108% 118% 100% 116% 100% Shariah Supervisory Committee's Fees & Expenses 53% 235% 93% 148% 100% Auditors' Fees 83% 83% 83% 75% 100% Depreciation & Repairs of Bank's Assets 281% 216% 141% 109% 100% Zakat Expenses 158% 138% 122% 112% 100% Other Expenses 184% 200% 152% 144% 100% Total Operating Expenses 157% 155% 136% 118% 100% Profit before Provision 137% 197% 154% 112% 100% Specific provision for Classified Investment 44% 326% 313% 186% 100% General Provision for Unclassified Investment 198% 456% 182% 234% 100% General Provision for Off-Balance Sheet Items 33% 16% 0% 131% 100% 0% 675% 232% 100% 0% Provision for diminution in value of Investments in Shares Provision for Other Assets Total Provision 0% 0% 0% 525% 100% 67% 293% 210% 186% 100% Profit before Provisions for Taxation 158% 169% 137% 90% 100% Deferred Tax Expenses -814% -521% -51% -486% 100% Current Tax Expenses 220% 281% 223% 111% 100% Net Profit after Taxation 123% 110% 94% 77% 100% Growth of each component of Profit and Loss Account of every year calculated based on the amount of 2016 which is representing the value of 100%. The value above 100% means positive growth and below 100% means negative growth compared to base year 2016. The Net Investment Income decreased due to profit rate cap and negative growth of investment due to COVID 19 pandemic. Non profit Income decreased due to slowdown of overall economic activities as a result of COVID 19 pandemic. Shahjalal Islami Bank Limited
  231. 232 HORIZONTAL & VERTICAL ANALYSIS Vertical Analysis of Balance Sheet for the Last Five Years Particulars PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (Including Foreign Currencies) 2020 2019 2018 2017 2016 5.17% 11.97% 88.03% 6.71% 12.99% 87.01% 5.57% 14.42% 85.58% 6.34% 11.60% 88.40% 5.73% 12.32% 87.68% Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh 2.64% 38.47% 61.53% 0.89% 74.46% 25.54% 0.72% 78.74% 21.26% 0.48% 57.28% 42.72% 1.44% 80.42% 19.58% Placement with other Banks & Financial Institutions 8.06% 4.65% 4.73% 3.20% 4.70% Investments in Shares & Securities Government Others 9.41% 78.58% 21.42% 5.88% 75.13% 24.87% 5.06% 73.05% 26.95% 5.06% 68.40% 31.60% 4.54% 72.43% 27.57% Investments General Investment etc. Bills Purchased and Discounted 66.95% 92.35% 7.65% 74.14% 92.59% 7.41% 76.37% 93.79% 6.21% 76.32% 93.51% 6.49% 73.54% 91.48% 8.52% Fixed Assets Including Premises Other Assets Non Banking Assets Total Assets 1.62% 6.14% 0.03% 100.00% 1.69% 6.01% 0.03% 100.00% 1.64% 5.88% 0.04% 100.00% 1.90% 6.64% 0.04% 100.00% 2.05% 7.96% 0.03% 100.00% 6.72% 74.42% 13.88% 37.31% 31.26% 15.76% 1.78% 4.28% 76.43% 12.17% 40.61% 30.95% 14.15% 2.13% 9.63% 72.59% 11.76% 44.90% 29.08% 12.65% 1.61% 14.25% 70.40% 12.49% 43.90% 28.75% 13.15% 1.70% 9.71% 74.39% 14.88% 36.11% 35.99% 11.65% 1.38% 3.13% 9.52% 0.09% 93.88% 3.76% 9.26% 0.07% 93.80% 4.10% 7.55% 0.06% 93.93% 1.92% 6.96% 0.07% 93.59% 0.00% 8.16% 0.06% 92.31% 54.61% 38.78% 6.62% 6.12% 100.00% 56.55% 37.75% 5.71% 6.20% 100.00% 57.38% 36.87% 5.75% 6.07% 100.00% 57.92% 36.19% 5.89% 6.41% 100.00% 57.14% 34.25% 8.60% 7.69% 100.00% LIABILITIES AND CAPITAL Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities Capital/Shareholders' Equity Paid-up Capital Statutory Reserve Retained Earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity The percentage (%) of each components of Balance Sheet refers to the weightage based on Total Assets over the periods. Investment to client comprises the maximum weight of Total Assets. In 2020 Investment comprise 66.95% of Total Assets. Customer Deposit comprises the maximum weight of Total Liabilities. In 2020 Customer Deposit comprise 74.42% of Total Liabilities. ANNUAL REPORT 2020
  232. 233 Vertical Analysis of Profit & Loss Account for the Last Five Years Particulars Investment Income 2020 84.23% 2019 85.91% 2018 85.83% 2017 85.00% 2016 86.04% Less: Profit paid on Deposits 56.46% 55.52% 56.62% 55.07% 53.89% Net Investment Income 27.77% 30.39% 29.21% 29.94% 32.15% Income from Investment in Shares/securities 3.09% 2.03% 1.87% 1.96% 1.05% Commission, Exchange and Brokerage 8.67% 8.71% 9.28% 9.67% 9.43% Other Operating Income 4.02% 3.35% 3.01% 3.37% 3.48% Total Operating Income 43.54% 44.48% 43.38% 44.93% 46.11% Salaries and Allowances 14.74% 12.33% 13.24% 14.47% 14.49% Rent, Taxes, Insurances, Electricity etc. 2.12% 1.94% 2.29% 2.97% 3.27% Legal Expenses 0.01% 0.00% 0.01% 0.01% 0.01% Postage, Stamps, Telecommunication etc. 0.22% 0.17% 0.21% 0.25% 0.27% Stationery, Printings, Advertisements etc. 0.41% 0.50% 0.52% 0.55% 0.61% Chief Executive's Salary & Fees 0.11% 0.08% 0.08% 0.09% 0.10% Directors' Fees & Expenses 0.03% 0.03% 0.03% 0.05% 0.05% Shariah Supervisory Committee's Fees & Expenses 0.00% 0.01% 0.00% 0.01% 0.00% Auditors' Fees 0.00% 0.00% 0.00% 0.00% 0.00% Depreciation & Repairs of Bank's Assets 1.93% 1.27% 0.98% 0.99% 1.07% Zakat Expenses 0.80% 0.60% 0.62% 0.74% 0.79% Other Expenses 2.93% 2.72% 2.45% 3.03% 2.48% Total Operating Expenses 23.29% 19.65% 20.44% 23.17% 23.13% Profit before Provision 20.25% 24.83% 22.94% 21.77% 22.98% Specific provision for Classified Investment 34.78% 58.89% 79.00% 53.21% 52.96% General Provision for Unclassified Investment 50.62% 26.66% 14.85% 21.59% 17.11% General Provision for Off-Balance Sheet Items 14.60% 1.63% 0.00% 20.73% 29.40% Provision for diminution in value of Investments in Shares 0.00% 12.82% 6.15% 2.99% 0.00% Provision for Other Assets 0.00% 0.00% 0.00% 1.48% 0.52% Total Provision 2.23% 8.35% 7.07% 8.17% 5.19% 18.02% 16.49% 15.87% 13.60% 17.79% Less: Income Tax Expenses 8.58% 9.21% 8.49% 5.77% 5.78% Deferred Tax Expenses 4.10% 2.10% 0.26% 4.82% -1.17% Current Tax Expenses 95.90% 97.90% 99.74% 95.18% 101.17% 9.44% 7.28% 7.38% 7.82% 12.01% Profit before Provisions for Taxation Net Profit after Taxation The percentage (%) of each component of Profit and Loss Account refers to the weightage based on total income over the periods. Investment Income comprises the maximum weight of total income. In 2020 Investment Income comprises 84.23% of total income. Profit paid on Deposits comprises the maximum weight of Total Expense. In 2020 Profit paid on Deposits comprise 56.46% of total income. Shahjalal Islami Bank Limited
  233. 234 SEGMENT ANALYSIS A Segment is a distinguishable component of the Bank that is engaged in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Bank’s primary format of reporting is based on business segments. CORPORATE BANKING This comprises of investments, deposits, project financing, trade financing, investment banking and other banking activities/ with Bank’s corporate and public sector customers. SME BANKING This segment primarily constitutes Small and Medium Enterprise financing activities with individual customers of the Bank. RETAIL BANKING This includes retail investments and deposits, banking services and card business. TREASURY This includes equity, foreign exchange, funding, own position securities and placement with/from others. Consolidated Opera�ng Income Profit Before Tax 5% 4% Total Assets 4% 3% 11% 1% 91% The Bank OBU Subsidiary 88% The Bank OBU Subsidiary 93% The Bank OBU Subsidiary Stand Alone Revenue Investments Deposit 25% 21% 18% 37% 64% 15% 58% 20% 5% NII Treasury ANNUAL REPORT 2020 Other SME Retail Corporate 37% Al-Wadiah & Others MSD MTDR Scheme
  234. 235 DuPont ANALYSIS DuPont analysis is an approach that consists of a detailed examination of Return on Equity (ROE) of a company which analyses Net Profit Margin, Asset Turnover, and Financial Leverage. DuPont Analysis gives a broader view of the Return the company in earnings on its Equity. This analysis, in turn, helps management to take various strategic and operational decisions. Return on Equity (ROE) Return on Assets Profit Margin Particulars Financial Leverage Total Asset Turnover 2020 2019 Net Profit Margin (PAT/Total Income) 9.44% 7.28% Total Asset Turnover (Total Income/Average Assets) 7.23% 9.27% Return on Asset (PAT/ Average Assets) 0.68% 0.67% Financial Leverage (Average Assets/Average Equity)(Times) 16.24 16.28 11.08% 10.98% Return on Equity (PAT/Average Equity) The higher the value of all components of DuPont analysis indicates the higher positive impact on Return on Equity. Main Highlights of DuPont analysis: 1. Net Profit Margin has been increased due to significant decrease in provision expense on investments and income tax expense. 2. Asset Turnover in terms of total income has been deteriorating due to re-pricing of Investments as high as 9% to comply the central bank caps. 3. Financial Leverage shows increasing trends due to higher growth of assets. 4. Return on Equity has been increased due to significant decrease in provision expense on investments and income tax expense. Shahjalal Islami Bank Limited
  235. 236 CREDIT RATING REPORT Long Term Short Term AA ST- 2 Initial Rating-2020 Outlook Stable Date of Rating 25 March 2021 Emerging Credit Rating Limited (ECRL) has assigned “AA” (pronounced Double A) rating in the long term and “ST-2” rating in the short term to Shahjalal Islami Bank Limited. ECRL performed the rating surveillance based on audited financial statements up to 31 December 2020 and other relevant information. An institution rated in Long Term “AA” has a very strong capacity to meet its financial commitments. These institutions typically possess a good track record and have no readily apparent weaknesses. An institution rated in Short Term “ST-2” has a strong capacity to meet its financial commitments in a timely manner. 2020 AA ANNUAL REPORT 2020 2019 ST-2 AA2 ST-2
  236. 237 DIVIDEND DISTRIBUTION POLICY This Policy is formulated in compliance with the Directive No . BSEC/CMRRCD/2021-386/3- dated, 14 January 2021 of Bangladesh Securities and Exchange Commission. This policy is effective from 31 March 2021 being the date of its approval by the Board of Directors of the Bank. Procedure of declaration/recommendation of dividend The Policy is aimed to lay down the criteria and parameters that are to be considered by the Bank while declaration and distribution of the dividend. Dividend is recommended by the Board after consideration and The Board of Directors may declare interim dividend/ recommend final dividend complying the Companies Act, 1994 and provisions of all Rules, Regulations, Notifications, Orders, Guidelines, etc. in force or to be enforced and issued or to be issued from time to time by Regulatory Authorities. Parameters to be considered for declaration of dividend In determining dividend payment, Shahjalal Islami Bank Limited takes into consideration of its operating results as well as longterm returns to shareholders. Dividend is paid out of the profit of the Bank. If there is a profit after its annual closing, the Bank first sets aside funds required for provision for investments & others as well as taxes before appropriating 20% of the profit before tax toward its statutory reserve. Dividend payable to the shareholders is recognized as a liability and deducted from the shareholders’ equity in the period in which the shareholders’ right to receive the dividend is established. The Board of Directors of the Bank will consider the following internal or external parameters while recommending/declaring dividend: Dividend is approved by the shareholders at an Annual General Meeting (AGM) on the basis of recommendation of the Board. approval of the financial statements which were considered by the Board Audit Committee before approval of the Board. All requisite approvals and clearances, where necessary as applicable, are obtained before the declaration of dividend. Entitlement to dividend Only the shareholders of the Bank whose names are appeared in the Register of Members and/or Depository Register of the Bank on the record date fixed by the Bank are entitled to the dividend. Payment of dividend Shahjalal Islami Bank Limited pays off the dividend to its shareholders within thirty days of approval. The Bank maintain detailed information of Beneficiary Owners (BO) account, bank account, mobile phone number, email and address of the shareholder as maintained with the Depository Participants (DP) for the purpose of proper distribution of dividend and also keep confidentiality of information. 1. Cash dividend In order to pay off the cash dividend in due time to the shareholders of the Bank, an amount equivalent to the declared cash dividend payable for the concerned year 1. Current & prospective financial performance including Bank’s NPI (NPL) ratio 2. Past dividend payouts 3. Current & prospective capital adequacy of the Bank (CRAR ratio) including future regulatory requirements for minimum CRAR BO account maintained with the DP or the bank account 4. Growth & investment opportunities at source. After disbursement of cash dividend intimation 5. Tax implication is sent through a short message service (SMS) to mobile 6. Macro & micro economic factors including regulatory requirements Circumstances under which shareholders may or may not expect dividend: The Board of Directors of the Bank may not recommend any dividend if the eligibility criteria for recommendation of dividend has not been met by the Bank, including any restriction imposed by the Regulatory Authorities. is kept in a separate bank account within 10 days of declaration. The Bank pays off cash dividend directly to the bank account of the entitled shareholder as available in the as provided by the shareholder through Electronic Transfer within thirty days of approval after deducting applicable tax number or email of the shareholders. In case of margin client having debit balance or margin loan of stock broker or merchant banker or portfolio manager, the Bank pays off cash dividend to the Consolidated Customers’ Bank Account (CCBA) of the stock broker or to the separate bank account of merchant banker or portfolio manager through Electronic Transfer in order to account for such dividend immediately in the individual client’s portfolio account. Shahjalal Islami Bank Limited
  237. 238 In case of non-availability of bank account information or not possible to distribute cash dividend through Electronic Transfer or any electronic payment system , the Bank issues cash dividend warrant and send it to the shareholder by post. The Bank pays off cash dividend to non-resident sponsor, director, shareholder through security custodian in compliance the rules or regulations in this regard. 2. Stock dividend In case of stock dividend, Shahjalal Islami Bank Limited credits stock dividend (Bonus Share) directly to the BO account within 30 days of approval subject to the clearance of the exchange(s) and CDBL complying rules and regulations in this regard. or unclaimed cash dividend including accrued interest (after adjustment of bank charge, if any) thereon, if remain, are transfer to a separate bank account named ‘Unclaimed Dividend Account’ within one year from the date of approval. In case of non credited stock dividend through Corporate Action due to closure of BO ID or any other reasons, the bonus shares are kept in ‘Dividend Suspense Account’. The Bank does not forfeit any unclaimed cash or stock dividend till the claim becomes barred by the law of land in force. Unclaimed dividend is paid off as per procedure set by the Bangladesh Securities and Exchange Commission and the Stock Exchanges. Review The policy would be reviewed on an annual basis or as and when the need arises. Amendments (if any) would be approved by the Board. Unpaid/Unclaimed dividend Disclosure Shahjalal Islami Bank Limited maintains detailed information of unpaid or unclaimed dividend and rationale thereof. Unpaid The policy will be available on the Bank’s website and will also be disclosed in the Bank’s Annual Report. ANNUAL REPORT 2020
  238. 239 CORPORATE GOVERNANCE Shahjalal Islami Bank Limited
  239. 240 REPORT ON THE ACTIVITIES OF THE AUDIT COMMITTEE EKRAMUL HOQUE CHAIRMAN Audit Committee of the Board ●● To review the financial reporting process and effectiveness of the internal control process. The Audit Committee (AC) was formed as a subcommittee of the Board of Directors to protect the interest of stakeholders. The AC possesses the principal responsibilities of engaging in systematic and continuous review, monitoring and assessment of organizational performance against evolving regulatory requirements. Its roles and responsibilities were defined in line with the Corporate Governance Circulars of Bangladesh Bank, the Notifications of Bangladesh Securities and Exchange Commission and Bank Companies Act 1991. ●● To assess the effectiveness of overall processes and procedures for monitoring compliance with laws and regulations, code of business conduct and to check the compliance status of the inspection report of Bangladesh Bank. Main objectives of Audit Committee ●● To assist the Board in fulfilling its oversight responsibilities including implementation of the objectives, strategies and overall business plans set by the Board. SL 1 Name of Directors Mr. Ekramul Hoque 2 Mr. Abdul Halim 3 Mr. Mohammed Golam Quddus 4 Mr. K.A.M. Majedur Rahman 5 Mr. Nasir Uddin Ahmed Independent Director ANNUAL REPORT 2020 Constitution and qualifications of the Audit Committee In compliance with BRPD Circular no.11 dated 27 October 2013 and Bangladesh Securities and Exchange Commission (BSEC) Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 dated 3 June 2018 on Corporate Governance; the Board of Directors of the Bank has reconstituted the Board Audit Committee in its Meeting no. 313 held on 06 January 2021 consisting of the following five members: Status with the Bank Independent Director Status with the Committee Chairman Educational Qualification Masters Director Member BA Director Member Masters Independent Director Member Masters Member FCA, FCS
  240. 241 Roles and responsibilities of the Audit Committee External audit The roles and responsibilities of the Audit Committee have been defined in line with the relevant provisions of Corporate Governance Guidelines issued by Bangladesh Bank , BSEC and other best practices of governance. Some important roles and responsibilities are highlighted below: ●● Make recommendations to the Board, to be put to shareholders for approval in the AGM, concerning the appointment, re-appointment and removal of the Bank’s external auditors. The Committee shall oversee the selection process of new auditors and shall investigate any issue that might have led auditors to resign. Internal control ●● Oversee the relationship with the external auditors including: ●● ●● Evaluate whether management is adhering to appropriate risk management, compliance, governance practices and have a clear understanding of their respective roles and responsibilities. Review whether arrangements made by the management for developing and maintaining a suitable Management Information System (MIS) are adequate. ●● Monitor whether suitable suggestions made by internal and external auditors to improve internal control practices have been duly implemented by the management. ●● Review the existing risk management policy and procedures to improve the health and efficiency of the investment portfolio. ●● Review the corrective measures taken by the management relating to fraud-forgery, deficiency in internal control or other similar issues detected by internal and external auditors and Bangladesh Bank and inform the Board regularly. Financial reporting ●● ●● Review, annual, half-yearly and quarterly financial statements before submission to the Board for approval, and determine whether they are complete and consistent with applicable accounting and other reporting standards set by regulatory authorities. ●● Evaluate whether internal audit functions are truly independent. ●● Review the activities, structure, and style of internal audit functions to ensure that no unjustified restrictions or limitations are imposed. ●● Review and assess the annual internal audit plan. ●● Review the efficiency and effectiveness of the internal audit function. ●● Review and ensure those appropriate recommendations made by internal auditors to remove irregularities, if any, are duly acted upon by concerned personnel in running the affairs of the Bank. ●● Meet the Head of Internal Control & Compliance and the Head of Internal Audit at least once a year, without management being present, to discuss their remit and any issues arising from internal audits carried out. Recommendation of their remuneration, i.e. fees for audit or non-audit services. Annually assessing their independence and objectivity, taking into account relevant professional and regulatory requirements. Ensuring that there are no relationships such as family, employment, investment, financial or business between the auditor and the bank with exception to circumstances under the ordinary course of business. ●● The Committee meets the external auditor at least once a year, without management being present; to discuss their remit and any issues arising from the audit. ●● Review the findings and recommendations made by the external auditors regarding irregularities, if any, detected are duly acted upon by the management. Compliance with existing laws and regulations Review whether the laws and regulations framed by the regulatory authorities (Central Bank, BSEC and other bodies) and internal circular/instructions/policy/regulations approved by the Board and management have been duly complied with. Miscellaneous ●● The Audit Committee submits a ‘Compliance Report’ on quarterly basis to the Board mentioning any errors and irregularities, fraud and forgery, and other anomalies pointed by Internal and External Auditor and Inspection Team from Bangladesh Bank. ●● The Audit Committee submits an evaluation report to the Board assessing the internal and external auditors of the Bank. Consult with management and external auditors to review annual financial statements or any other ad-hoc financial reports before their finalization. Internal audit Meeting of the Audit Committee Bangladesh Bank suggested banks hold at least 4 meetings of the Audit Committee in a year. The Committee held 6 (Six) meetings in 2020 and had detailed discussions and review sessions with the Head of Audit, Head of Internal Control & Compliance, External Auditors. The Committee advised the management to take necessary measures related to the findings and suggestions on various issues by the auditors. Major Activities of Audit Committee in 2020 ●● Reviewed annual financial statements of the Bank for the year 31 December 2020 as certified by the External Auditors before submission to the Board for consideration. ●● Reviewed unaudited quarterly (Q1, Q2 and Q3) financial statements of the Bank for the year 2020 before submission to the Board for consideration. Shahjalal Islami Bank Limited
  241. 242 Reviewed Management Report on the Bank for the year ended 31 December 2020 submitted by the External Auditors , ACNABIN, Chartered Accountants and, its subsequent compliance thereof. ●● Reviewed banks’ Non-Performing Investments (NPI) and allied issues. ●● Reviewed the overall effectiveness of the control system of SJIBL. ●● Reviewed the Comprehensive Inspection Report based on 31 December 2020, Special Inspection Report, Inspection Report on AML/CFT issued by Bangladesh Bank, and subsequent compliance by management thereof. The Minutes of the Audit Committee meetings containing various suggestions and recommendations to the management are duly placed to the Board for ratification regularly. ●● Reviewed and approved ‘Annual Audit Plan 2021’, ‘RiskBased Audit Plan 2021’ ●● ●● Reviewed the steps taken by the Management in reaction to fraudulent incidents to strengthen supervisory & internal controls for more effective Fraud Risk Management. ●● Reviewed the compliance status of core risks of Shahjalal Islami Bank Limited and related risk levels of branches, various departments, and subsidiaries. ●● Reviewed money laundering and terrorist financing risk management policy, asset-liability management (ALM) policy. ●● Reviewed the actions of the Information Technology (IT) Division on IT security issues and reviewed the Bank’s ICT Security Policy. ANNUAL REPORT 2020 Acknowledgment The members of the Audit Committee express their gratitude and thanks to the Board of Directors, Management and Auditors for their cooperation while performing its duties and responsibilities. On behalf of the Audit Committee Ekramul Hoque Chairman, Audit Committee
  242. 243 STATEMENT OF THE BOARD OF DIRECTORS ON THE RESPONSIBILITY TO ESTABLISH AN APPROPRIATE SYSTEM OF INTERNAL CONTROL The COVID-19 storm draws its disastrous footprint in the banking sector all over the world and Bangladesh is no exception to that . The year 2020 was marked by massive business closures, semi-bankruptcies, downsizing, and the return of countless Bangladeshi workers from many parts of the world. The banking sector is no exception to the adverse impact of the pandemic, exacerbated by the central bank’s cap on lending rates at 9%. Despite the challenging market, SJIBL has managed to maintain its integrity in compliance and adhere to all the rules and regulations. A proactive control system coupled with efficiency is the prerequisite of gaining long-term sustainable business growth. The Board is conscious of the internal control system of the Bank to retain and maintain a satisfactory qualitative standard of its investment portfolio. The Directors of Shahjalal Islami Bank Limited sincerely acknowledge their overall responsibility to establish an appropriate system of internal control. The Board of Directors and its committees comprising of Board members thoroughly assessed all principal risks including, but not limited to, investment risk, liquidity (Asset Liability Management) risk, Information Technology risk, Anti-money laundering risk, Foreign exchange risks through various reports and early warning indicators to ensure that the Bank has in place all the necessary policies, procedures, systems and controls to mitigate risks that may affect its business objectives, performance, financial viability and sustainability. The COVID-19 storm draws its disastrous footprint in the banking sector all over the world and Bangladesh is no exception to that. The year 2020 was marked by massive business closures, downsizing, and the return of countless Bangladeshi workers from many parts of the world. The banking sector is no exception to the adverse impact of the pandemic, exacerbated by the central bank’s cap on lending rates at 9%. Moreover, Bangladesh Bank has allowed time extension to the borrowers for repayment of their existing facilities and Banks are engaged with materialized the stimulus packages aiming the government desire to uphold the economic activities of the country. Despite the challenging market, SJIBL has managed to maintain its integrity in compliance and adhere to all the rules and regulations. On Behalf of the Board of Directors Md. Sanaullah Shahid Chairman Shahjalal Islami Bank Limited
  243. 244 STATEMENT OF THE BOARD OF DIRECTORS ON THE SOUNDNESS OF INTERNAL CONTROL SYSTEM The Board of Directors has established an internal control system to ensure compliance with all the conditions of the Bank Company Act 1991 , Company Act 1994, Guidelines/Circulars issued by Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC), and all other applicable laws and regulations. The principal activity of the Audit Committee is to review the soundness of the internal control system and manage the core risks of the Bank. The process for monitoring compliance and rectification initiatives regarding all types of deficiencies and reports have been reviewed and presented before the Board. The key functionalities that have been established in reviewing the adequacy and integrity of the system of internal control are as follows: ●● The internal audit division checks for discrepancies in compliance, policies, and procedures at regular intervals and reports observations and findings of non-compliance. ●● The findings of the Internal Audit, Inspection Team of Bangladesh Bank, External Auditors are reviewed by the audit committee to evaluate the adequacy and effectiveness of the risk management and internal control systems. ●● The Board of Directors holds meetings at suitable intervals with senior management, internal auditors, external auditors and the Audit Committee to evaluate the effectiveness of the internal control system. Different committees have been formed as sub-committee of the Board of Directors with expert knowledge on the subject matter to assist the Board in guiding the Bank’s operation in line with corporate vision, mission, and strategies. On behalf of the Board of Directors Md. Sanaullah Shahid Chairman ANNUAL REPORT 2020
  244. 245 CORPORATE GOVERNANCE REPORT Corporate governance is crucial for the proper functionality of the banking sector and the overall economy of a country . Banks play an important role in the economy by intermediating funds from depositors and advancing funds to their customers. Banks’ safety and soundness are key to the financial stability of a country. The primary objective of corporate governance, therefore, is to safeguard stakeholders’ interests on a sustainable basis. Good governance is manifested through adherence to ethical business norms, a firm commitment to values, and compliance with applicable laws and regulations while enhancing shareholders’ value. Since its inception, SJIBL has been pursuing responsible and ethical banking. We have initiated the best international corporate governance practices and adopted corporate culture to promote sustainable performance, client-centricity, innovation, and partnership. Our corporate governance report is a reflection of our strong adherence and commitment to best practices of corporate governance and our full compliance with the rules and regulations of various regulatory bodies including the Central Bank and Bangladesh Securities and Exchange Commission. ACCOUNTABILITY FAIRNESS TRANSPARENCY RESPONSIBILITY ENSURE THAT MANAGEMENT IS ACCOUNTABLE TO THE BOARD PROTECT SHAREHOLDERS RIGHT ENSURE TIMELY ACCURATE DISCLOSURE OF ALL FINANCIAL AND NON-FINANCIAL MATTERS RECOGNIZE ALL STAKEHOLDERS RIGHT The Board of Directors plays a pivotal role in shaping governance structure and practices through their choice of strategy and leadership to drive the Bank towards growth. The board is responsible for the design and implementation of governance mechanisms including selection and appointment of members of sub-committees. The risk management and overall support functions of the Bank have been designed and kept fully independent from the ordinary course of business to safeguard against any unforeseen events that may weaken the brand value of the Bank. The Governance Structure of the Bank is as follows: APPOINTS EXTERNAL AUDITORS APPOINTS AUDIT COMMITTEE CHAIRED BY AN INDEPENDENT DIRECTOR ELECT SHAREHOLDERS REPORT Governance structure of the Bank EXECUTIVE COMMITTEE APPOINTS RISK MANAGEMENT COMMITTEE BUSINESS APPOINTS CONTROLS APPOINTS BOARD OF DIRECTORS MANAGEMENT CONTROLS SUPPORT FUNCTIONS Shahjalal Islami Bank Limited
  245. 246 Guiding philosophy of governance practices Principles of good governance are embedded in the core values of SJIBL , the Bank that strongly believes in inclusive and sustainable growth. As a locally incorporated bank, the following Acts, regulatory bodies played a major role in shaping the governance structure and practices of the Bank. Sl. No. Particulars 1 The Companies Act, 1994 2 The Bank Company Act, 1991 3 Bangladesh Securities and Exchange Commission (BSEC) 4 Bangladesh Bank 5 Dhaka Stock Exchange and Chittagong Stock Exchange 6 Financial Reporting Council (FRC) 1. BOARD OF DIRECTORS, CHAIRMAN AND CEO The Board of Directors of SJIBL currently consists of twenty directors and all are Non-executive Directors, including the Chairman. The existing Board of Directors of the Bank includes three Independent Directors as prescribed in the Section 15 of Bank Company Act 1991. The Senior Management supervises and monitors the Bank’s Corporate Governance which is further reviewed by the Board of Directors. Any violation in Corporate Governance is treated seriously by the Board of Directors of the Bank. 1.1 Company’s Policy on appointment of Directors The Directors shall be appointed in accordance with the relevant provisions of the Companies Act 1994, the Bank Company Act 1991, the Corporate Governance Guidelines of the BSEC and the Bangladesh Bank and the Articles of Association of the Bank. The Board of Directors consists of renowned entrepreneurs and business professionals with experience and wisdom in a diverse range of businesses and operations. Together, they have enriched the Board with their knowledge and expertise in banking and insurance, IT, accounting, marketing, administration and engineering. The Directors are elected by the shareholders in the Annual General Meeting and all appointments of the Board members are made subject to the approval of Bangladesh Bank. In case of any nomination, removal and causal vacancy, the Bank adheres to all relevant rules and regulations. 1.1.1 Induction policy of the Directors Every new director is given appropriate induction when first appointed to the Board about the affairs of the Bank and laws and regulations applicable to the Bank. The induction program includes meetings with the Chairman, the Managing Director & CEO, the Board Committee Chairs and the Bank’s Executives. 1.1.2 Rotation, Retirement and Removal of Directors In accordance with the provisions of Section 91 of the Companies Act 1994, Section 79-87 of Schedule I of the Act, and Clauses 20.12 & 20.13 of Articles of Association of the Bank, one-third of the Directors shall retire from office in every subsequent year and shall be eligible for re-election upon retirement immediately. The Bank’s Articles of Association dictate that the election of Board members follow the resolution determined at shareholders’ meetings. Accordingly, the respective Directors of SJIBL will retire and be reappointed in the 20th Annual General Meeting. List of the Directors who appointed and re-appointed during 01-01-2020 to 31-12-2020 Designation Remarks Mrs. Jabun Nahar, (Rep. of Daffodils Trading International) Name of the Director Director Appointed Mr. Fakir Mashriquzzaman, (Rep. of Fakir Knit Wears Ltd.) Director Appointed Independent Director Appointed Director Appointed Mr. Nasir Uddin Ahmed, FCA, FCS Mr. Md. Harun Miah (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Mr. Abdul Halim Director Re-appointed Mr. Mohiuddin Ahmed Director Re-appointed Re-appointed Mr. Akkas Uddin Mollah Director Mr. Khandaker Sakib Ahmed Director Re-appointed Mrs. Tahera Faruque Director Re-appointed List of the Director who resigned during 01-01-2020 to 31-12-2020 SL Name of the Director 1 Designation Ms. Shahan Ara Begum Director 1.1.2 Directors’ Shareholding Status All sponsors/promoters and directors of the Bank shall perpetually hold a minimum of 30% (thirty percent) shares of the Bank. Each director other than independent director(s) of the Bank shall hold a minimum of 2% (two percent) shares of the paid-up capital of the Bank. In compliance with BSEC Notification No. BSEC/CMRRCD/2009-193/119/Admin on Corporate Governance dated 22 November 2011; all directors (other than independent directors) of SJIBL have complied accordingly. Shares held by the Directors: SL Name of Directors Position No of Shares % of Share 1 Mr. Md. Sanaullah Shahid Chairman 25,081,556 2.56% 2 Mr. Md. Harun Miah (Rep. of Shamsuddin Khan & Harun Miah Ltd.) Vice-Chairman 19,601,911 2.00% 3 Mr. Md. Abdul Barek Vice-Chairman 19,601,997 2.00% 4 Dr. Anwer Hossain Khan Director 29,298,293 2.99% 5 Mr. Abdul Halim Director 23,841,881 2.43% 6 Mr. Mohiuddin Ahmed Director 19,612,167 2.00% ANNUAL REPORT 2020
  246. 247 SL Name of Directors 7 Mr . Akkas Uddin Mollah 8 No of Shares % of Share Director 38,753,165 3.95% Mr. Khandaker Sakib Ahmed Director 19,602,703 2.00% 9 Engr. Md. Towhidur Rahman Director 22,023,291 2.25% 10 Mr. A.K. Azad Director 37,365,165 3.81% 11 Mr. Mohammed Younus Director 24,230,698 2.47% 12 Mr. Fakir Akhtaruzzaman Director 19,601,846 2.00% 13 Mr. Mohammed Golam Quddus (Rep. of Anwer Khan Modern Hospital Ltd.) Director 19,652,324 2.01% 14 Mr. Md. Moshiur Raman Chamak (Rep. of Fresh Export Import Ltd.) Director 19,788,343 2.02% 15 Mrs. Tahera Faruque Director 30,349,141 3.10% 16 Mrs. Jabun Nahar (Rep. of Daffodils Trading International) Director 20,082,793 2.05% 17 Mr. Fakir Mashrikuzzaman (Rep. of Fakir Knitwears Limited) Director 35,742,305 3.65% 18 Mr. Ekramul Hoque Independent Director Nil - 19 Mr. KAM Majedur Rahman Independent Director Nil - 20 Mr. Nasir Uddin Ahmed FCA, FCS Independent Director Nil - 21 Mr. M Shahidul Islam Managing Director Nil - 1.1.3 Appointment of Chief Financial Officer (CFO), Company Secretary (CS), and Head of Internal Control and Compliance (IC&CD) The Bank has appointed a Chief Financial Officer (CFO), a Head of Internal Control & Compliance (IC&CD) and a Company Secretary (CS) as per the policy of the Bank and other applicable laws and regulations. They are well-conversant in their respective field of financial, regulatory and corporate laws to carry out their assigned responsibilities. The Board clearly defined and approved the respective roles, responsibilities and duties of the Chief Financial Officer (CFO), Company Secretary (CS) and Head of Internal Control & Compliance. 1.2 Adequate representation of Non-Executive Directors Non-Executive Director refers to a Director who does not hold any position in the Bank except being a member of the Board and its Committees. All the Directors of SJIBL, including the Chairman, are Non-Executive Directors except the Managing Director. The Bank’s non-executive directors are independent of management and do not participate in day-to-day operations. Adequate representation of Non-Executive Directors ensures separation of management from the owners, which is an integral part of Corporate Governance. 1.2.1 Independence of Non-Executive Directors Non-Executive Directors enjoy full freedom to carry out their coveted responsibilities. They attend Board Meetings and are actively involved in the formulation of general strategies of the Bank and ensure confidentiality regarding the Bank’s affairs. 1.3 Independence of Independent Directors In compliance with relevant Corporate Governance Guidelines, the Board has appointed 3 (three) Independent Directors. The independent directors are proficient in the field of financial, regulatory and corporate law and enjoy full freedom to carry out their assigned responsibilities. Position Independent Directors exert an autonomic view on the policies and decisions of the Board in the best interest of the Bank. In order to comply with regulatory requirements, SJIBL’s Independent Directors do not hold any shares of the Bank. 1.3.1 Appointment & qualification of Independent Directors Independent Directors are critically evaluated before being appointed by the Board and approved by the shareholders in the AGM followed by the approval of Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC). While appointing Independent directors SJIBL emphasizes the mix of knowledge, skills, experience and perception. It is expected that Independent Directors will be such persons who will be able to exercise their knowledge and experience to guide the organization in the appropriate direction. One of our Independent Directors is a renowned Chartered Accountant and another two are former Managing Director & CEO of renowned private commercial banks. 1.4 Chairman to be independent of CEO In compliance with Bangladesh Bank BRPD Circular No. 11 and Circular Letter No. 18 dated 27 October 2013 and Clause 1(4) of BSEC Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 on Corporate Governance Code dated 3 June 2018, the functional responsibilities of the Chairman of the Board and the Managing Director & CEO are kept separated and independent of each other. The Board has appointed Mr. Sanaullah Shahid as the Chairman and Mr. M Shahidul Islam as the Managing Director & CEO of the Bank. The Chairman of the Board approves the agenda of the Board meetings. This consists of approving investment proposals beyond the CEO’s authority and aspects of the Bank’s corporate strategy, financial performance, core risks and credit policy, corporate governance, CSR and organizational structure, human resources policy, customer services strategies, procurement policy, etc. Shahjalal Islami Bank Limited
  247. 248 The CEO acts as the Head of the management team and is therefore accountable to the Board and its Committees . The role comprises running and managing the Bank following the prescribed policies, principles and strategies established by the Board and rules, regulations and guidelines of the Central Bank, BSEC and other regulatory authorities. 1.5 Responsibilities of the Chairman of the Board As per BRPD Circular No. 11 dated 27 October 2013 issued by Bangladesh Bank and Corporate Governance Code issued by BSEC on 3 June 2018, the Chairman of the Board of Directors broadly possess the following major responsibilities: ●● Ensure that the Board sets and implements the Bank’s direction and strategy effectively. ●● Organizing the business of the Board, ensuring its effectiveness and setting its agenda. ●● Ensure effective operations of the Board and its committees in conformance with the highest standards of corporate governance; ●● Ensuring discussion of all key issues by the Board of Directors in a timely and constructive manner. ●● Ensure non-intervention of any Director in the routine affairs of the Bank. ●● Signing the minutes of the Board meeting for formal confirmation. 1.6 Annual Appraisal of the Board’s performance Shareholders critically appraise the performance of the Board, evaluate the financial position and performance of the Bank, adequacy and effectiveness of the internal control system, and the overall governance mechanism at the AGM. The shareholders also ask questions and make queries to the Board during the AGM and the Chairman of the Board gives a patient hearing and responds to all their queries. The performance of the Board is appraised based on certain parameters such as shareholder return, share price, return on capital employed, earnings per share, etc. of the Bank. The attendance of Directors and their active participation in the meeting on various agendas is ensured in every Board meeting. The Board approves the annual budget and monitors the monetary variance quarterly to ensure the achievement of the target. The Board’s performance is greatly dependent on the achievement of the budgeted target. The performance reports of supporting committees of the Board are also placed in the Board meeting through which the performance of the Board members is regularly assessed. 1.7Annual Performance Evaluation of the Chief Executive Officer The Board of Directors of SJIBL has clearly defined and approved the roles, responsibilities and duties of the Managing Director/ CEO. The Board annually evaluates the CEO’s performance through various reports such as financial position and performance of the Bank. The parameters typically consist of: COMPLIANCE STATUS OF VARIOUS ASSIGNMENTS GIVEN BY THE BOARD VARIANCE ANALYSIS OF BUDGET VS. ACTUAL RESULT AND STEPS TAKEN GROWTH OF INVESTMENT & DEPOSIT SHAREHOLDERS’ RETURN ANNUAL EVALUATION OF PERFORMANCE OF THE CEO BY THE BOARD NPI RATIO CAPITAL TO RISK WEIGHTED ASSETS RECOVERY FROM NPI & WRITTEN OFF INVESTMENT COST TO INCOME RATIO In addition to the above, the competitive nature of the banking 1.7.1 Rules and Regulations for Appointing CEO industry makes it relevant to assess the marketing and customer The Board is responsible to appoint a Chief Executive Officer/ Managing Director in compliance with the relevant circulars and rules of Bangladesh Bank and BSEC’s Notification No. management skills of the MD/CEO. ANNUAL REPORT 2020
  248. 249 of finance and accounting . Two of our Directors are former Managing Director of different banks. They have tremendous expertise in banking, finance and accounting. One of our director is a Ph.D. holder, another director is an ex-President of the highest business forum FBCCI. Other directors are either successful entrepreneurs or seasoned professionals and are also well-conversant in the field of business, economics and administration. They provide guidance in matters applicable to accounting and audit-related issues to ensure compliance and reliable financial reporting. BSEC/CMRRCD/2006-158/207/Admin/80 dated 3 June 2018. The appointment of the Chief Executive Officer (CEO) is made final only after obtaining No Objection Certificate (NOC) from Bangladesh Bank. The following issues are considered before appointing a CEO: Moral Integrity: It is required to ensure that the concerned person has not been convicted by any Criminal Court of Law or is punished for violating a rule. Experience and Suitability: It is required to ensure that the concerned person has banking experience of at least 15 (fifteen) years as an active officer and at least 02 (two) years of experience in a post immediately below the Chief Executive Officer. A master’s degree from any recognized university is also required. 1.10 Number of meetings of the Board and Participation of each Director Transparency and Financial Integrity: It is required to ensure that the concerned person was not involved in any illegal activity while performing his duties and also is not a bank defaulter or adjudicated as insolvent. Meetings are generally conducted monthly, but more then one meetings may be called, if required. Management provides detailed information, references and discussion papers on each agenda to all Directors before the Board meeting. The Company Secretary, as per instruction of the Chairman of the Board, takes necessary steps to arrange regular Board Meetings throughout the year. The number of meetings held during 2020: 1.8 Policy on Training of Directors The Policy on Training of Directors incorporates among others, providing training and information on the latest update related to the banking business such as relevant laws, policy guidelines, circulars, rules and regulations issued by the regulatory authorities. This is done in such a way that they can discharge their responsibilities effectively. Sometimes special discussion sessions are arranged with the experts on highly technical and complex issues. They also participate in the programs and seminars organized by various professional bodies at home and abroad on business, economic, technical, professional and corporate governance issues. Particulars 1 Mr. Md. Sanaullah Shahid Chairman 19 Number of Audit Committee meeting Number of Risk Management Committee (RMC) meeting 6 Meeting Held 21 Remuneration (Per meeting) 8,000 Attended 2 Mr. Md. Harun Miah Vice-Chairman 12 8,000 3 Mr. Md. Abdul Barek Vice-Chairman 17 8,000 4 Dr. Anwer Hossain Khan Director 15 8,000 5 Mr. Abdul Halim Director 14 8,000 6 Mr. Mohiuddin Ahmed Director 21 8,000 7 Mr. Akkas Uddin Mollah Director 20 8,000 8 Mr. Khandaker Sakib Ahmed Director 21 8,000 9 Engr. Md. Towhidur Rahman Director 17 8,000 10 Mr. A.K. Azad Director 08 8,000 11 Mr. Mohammed Younus Director 17 8,000 12 Mr. Fakir Akhtaruzzaman Director 13 Mr. Mohammed Golam Quddus Director 21 18 8,000 21 8,000 14 Mr. Md. Moshiur Raman Chamak Director 18 8,000 15 Mrs. Tahera Faruque Mr. Masud as Alternative Director 16 Mrs. Jabun Nahar Director Alternative Director Director 02 06 14 8,000 8,000 8,000 Director 11 8,000 Independent Director 20 8,000 17 Mr. Fakir Mashrikuzzaman 18 Mr. Ekramul Hoque 7 The statement of Board meetings held during the year 2020 and the attendance of Directors from 01 January 2020 to 31 December 2020 are appended below: Mr. Nasir Uddin Ahmed, FCA, FCS, CGM, ACAM(UK), ACA(England & Wales) one of our Directors, has vast knowledge in the field Position 21 Number of Executive Committee (EC ) meeting 1.10.1 Board Meeting attendance and remuneration 1.9 Directors’ Knowledge and Expertise in Finance and Accounting SL Name of Directors No. of Meeting Number of Board meeting 19 Mr. K.A.M. Majedur Rahman Independent Director 16 8,000 20 Mr. Nasir Uddin Ahmed FCA, FCS Independent Director 14 8,000 Remarks Resides in UK Resides in UK Approved by BB as a Director on 24-03-2020 Approved by BB as a Director on 14-07-2020 Approved by BB as an Independent Director on 24-03-2020 Shahjalal Islami Bank Limited
  249. 250 1 .10.2 Board Committees and their responsibilities To ensure good governance in the management of banks, Bangladesh Bank issued a circular (BRPD Circular No. 11 dated 27 October 2013) allowing banks to form a maximum of three committees or sub-committees of the Board. To ensure proper accountability and transparency, SJIBL has an Executive Committee, Audit Committee and Risk Management Committee to oversee and direct the operations, performance and strategic direction of the Bank. The composition of said Committees is presented below: Executive Committee (EC) In Compliance with Section 15B (2) of Bank Company Act 1991 and BRPD Circular No. 11 dated 27 October 2013, the Board of SL Name of Directors Position 1 Dr. Anwer Hossain Khan 2 Mr. Fakir Akhtaruzzaman 3 Directors of SJIBL has formulated the Executive Committee (EC) with7 (Seven) members. The Company Secretary acts as the secretary of the committee. The EC usually acts as a proxy for the BoD, conducts meetings on short notice and performs activities to ensure the effective operation of banking affairs. However, any decision taken by the committee has to be subsequently ratified by the Board. During the year 2020, a total of 19 (Nineteen) meetings of EC were held. The meeting and attendance are shown in the table below: Executive Committee Meeting, attendance and remuneration The statement of Executive Committee Meetings, attendance and remuneration of members from 1 January 2020 to 31 December 2020 are appended below: Attended Remuneration (per meeting) Chairman 17 8,000 Vice Chairman 16 8,000 Mr. Mohiuddin Ahmed Member 19 8,000 4 Mr. Akkas Uddin Mollah Member 19 8,000 5 Mr. Khandaker Sakib Ahmed Member 19 8,000 6 Mr. Engr. Md. Towhidur Rahman Member 14 8,000 7 Mr. Mohammed Younus Member 13 8,000 Audit Committee (AC) The Audit Committee carries out its functions based on the Terms of Reference (ToR) approved by the Board. To make the quorum of the AC meeting, at least 01 (one) Independent Director has to be present. The Company Secretary acts as the secretary of the committee. In compliance with Bangladesh Bank BRPD Circular No.11 dated 27 October 2013, and BSEC’s Corporate Governance Code dated 3 June 2018, the Audit Committee (AC) has been reconstituted consisting of 5(five) members. Under the ToR, the Committee is required to review and oversee the company’s financial reporting, non-financial corporate disclosures, internal control systems and compliance from time to time. Risk Management Committee (RMC) In Compliance with BRPD Circular No. 11 dated 27 October 2013, the Board of Directors of SJIBL has formed a 5 (five) member Risk Management Committee (RMC). The RMC has been formed to minimize probable risks that arise during the implementation of Board-approved policies, procedures and strategies. The RMC is entrusted to examine and review whether management is properly working on identification; management and mitigation of risks that arise in the ordinary course of business. The criteria consist of credit risk, foreign exchange risk, internal control SL Name of Directors Position 1 Mr. Mohammed Yunus 2 Meeting Held 19 and compliance risk, money laundering risk, information and communication technology risk, operational risk, interest rate risk, liquidity risk and inadequate provision & capital risk. All five members of the RMC are Non–Executive Directors of the Board. Responsibilities of RMC It is the responsibility of RMC to identify and assess the risk of the bank and guide management to formulate action plans for mitigating risk. The committee reviews the risk management policy and amends it as required. The committee is required to conduct at least four meetings annually. The committee may invite the CEO, Chief Risk Officer (CRO), or any executive to attend the committee meeting. The RMC held 7 (seven) meetings during 2020 and had detailed discussions and review sessions with the CRO regarding their findings, observations and recommendations on issues of bank affairs. Risk Management Committee meeting, attendance and remuneration The statement of Risk Management Committee meeting, attendance and remuneration from 01 January 2020 to 31 December 2020 are appended below: Attended Remuneration (Per meeting) Chairman 07 8,000 Dr. Anwer Hossain Khan Member 04 8,000 3 Mr. Md. Abdul Barek Member 03 8,000 4 Mr. Mohiuddin Ahmed Member 06 8,000 5 Mr. KAM Majedur Rahman Member 06 8,000 ANNUAL REPORT 2020 Meeting Held 07
  250. 251 1 .11 Directors Report on Financial Statement and Corporate Governance The Companies Act 1994 requires the Directors to prepare financial statements for each accounting year. The Board maintains adequate records to safeguard the assets of the Company, prevents and detects fraud and irregularities, selects and applies suitable accounting policies, makes reasonable judgments and estimates where necessary. A separate statement of the Directors’ responsibility for financial reporting and corporate governance is given in this Annual Report. 1.12 Boards Accountability on Audit and Financial Reporting The Board diligently fulfills its responsibilities by preparing and presenting a balanced and comprehensive assessment of the Bank’s operations at the end of each financial year. The Annual Financial Statements and Annual Report are duly audited by the external auditor. All the financial statements and annual reports are available on the Bank’s website for stakeholders. 1.13 Competent Leadership For Competent leadership SJIBL prefers a process which provides a framework for leaders to listen, learn, and then lead. Management is willing to understand the problems employees and clients are facing before attempting to come up with ideas and solutions. For the development of products & services and approval by the Board, all steps go in the way to listen, learn, and then approve which also justify sustainable leadership both by the Board and the Management of the Bank. ●● Report such Related Party Transactions to Bangladesh Bank in prescribed format on a quarterly basis. ●● Reviews related party transactions by the Audit Committee to ensure compliance and keep the Board informed from time to time. ●● Approval by the Board of Directors’ for re-scheduling of investment given to any Director or his sister concern. ●● The Board approves all related party transactions and ensures that these transactions with the Company are undertaken on an arm’s length basis. ●● No extra preference is given to the Directors as well as vendors and suppliers owned by them. ●● All related party transactions are disclosed as per IAS 24 ‘Related Party Disclosures’ 1.16 Management Committees In an effective Corporate Governance structure, Bank management has a collective mandate under the leadership of the Managing Director to carry out daily operations in the best interest of its shareholders. Apart from the general segregation of functional departments, SJIBL formed several committees to support the management in carrying out banking operations smoothly. The Committees are shown in the diagram below: SMT ALCO 1.14 Succession Plan Succession planning is a pivotal part of corporate governance practices to meet the company’s long-term goals & objectives and to ensure that the knowledge, experience, and skills of its members would be well suited to meet the demands of the ever-changing financial industry. The Bank has a well-defined Succession Plan for senior management and directors. Employees are promoted to take up the position of higher management as per the rules and needs of the bank. The appointment of a new director SJIBL considers their knowledge, experience, and skills to perform their duties. 1.15 Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence. Related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged as per IAS 24 ‘Related Party Disclosures’, Bangladesh Bank & BSEC guidelines. Details of the related party transactions have been disclosed of this annual report. The Bank carries out business with related parties in the ordinary course of business on an arm’s length basis at commercial rates except for those transactions that the key management personnel have availed at concessionary rates which are applicable to all the eligible staff. The following process is followed by the bank for related party transactions. RMC COMMITTEES OF MANAGEMENT CCC SIRRC IC Integrity The Committees are: I) Senior Management Team (SMT) The Senior Management Team consists of all AMDs, DMDs, CFO, Head of RMD, Head of BOD who guide the Bank for the sound and prudent day-to-day management. The Managing Director is the chairman of the SMT decision-making process of SMT is transparent and designed to promote proactive management culture. ii) Supervisory Review Process (SRP) Team The SRP Team, headed by the Managing Director of the Bank, comprises the divisional heads of ID, IRMD, ICCD, Treasury, SAMD, FAD, RMD and AMLD. The main function of the team is to assess additional capital requirements to mitigate the risks in accordance with pillar II of BASEL- III. iii) Risk Management Committee (RMC) The RMC, headed by the Chief Risk Officer, comprises the divisional heads of IRMD, ICCD, AMLD, IT, Treasury and FAD. The Shahjalal Islami Bank Limited
  251. 252 function of RMC is to identify , measure and manage the bank’s existing and potential risks through a detailed risk analysis. a) To remain accountable for the achievement of financial, operational and other business targets. iv) Investment Committee (IC) The IC, headed by the Chief Business Officers (CBO), discusses all critical investment proposals that require formal review and approval. The investment proposals that need special attention from senior management prior to approval are discussed by the IC. b) To ensure compliance with the Bank Company Act, 1991 and other applicable laws and regulations. v) Asset-Liability Management Committee (ALCO) The ALCO consists of the Managing Director, Additional Managing Directors, Deputy Managing Directors and strategically important Divisional Heads. The Treasury Division manages market risk covering liquidity, interest rate and foreign exchange risks with the recommendation from ALCO. vi) Anti-Money Laundering (AML) Committee The AML Committee manages and monitors all issues relating to AML and CFT. The AML Committee ensures that all employees get training on Anti Money Laundering at least once a year. vii) Sustainable Finance Committee (SFC) The Sustainable Finance Committee ensures compliance with all Green Banking activities of the Bank. The Sustainable Finance Unit (SFU) of the Bank regularly updates the SFC on improvements of Green Banking. viii) Procurement Committee (PC) The Procurement Committee (PC) ensures that the purchase of all goods and services is done efficiently, economically and objectively. The main objective of this Committee is to ensure transparency in all tenders. SJIBL has already implemented an E-Tender system that assists in neutral judgment. ix) Shariah Inspections and Report Review Committee (SIRRC) The committee is headed by the Managing Director which has among others AMDs, DMDs and all Muraquibs of Shariah Division. The Shariah Inspections and Report Review Committee ensures Shariah compliance in each operation of the Bank. It traces and reports suspicious income of the bank that needs to be segregated from profit as per Islamic shariah. The beauty of Islamic banking lies in using overdue investment income, suspicious income into public welfare instead of crediting the same to profit. x) Central Compliance Committee (CCC) The Central Compliance Committee (CCC) directly reports to the Managing Director. As instructed by the regulatory authority, Central Compliance Committee (CCC) is responsible to ensure compliance with the policy and guidelines of the central bank and other regulatory bodies as well as all internal policy manuals of SJIBL. xi) Integrity Committee The Integrity Committee is responsible to nominate 5 officers and executives who excelled all others in terms of professional commitment and integrity. The reward for integrity is given each year as per the regulatory instruction of Bangladesh Bank. 1.17 CEO & Roles and Responsibilities of CEO At present Mr. Md. Shahidul Islam is the CEO and Managing Director of the bank. He is responsible for running the business efficiently and formulating and implementing appropriate business strategies. He is also responsible for the day-to-day business operation and is accountable to the Board for the financial and operational performance of the Bank. His major responsibilities as CEO are as follows: ANNUAL REPORT 2020 c) To facilitate the smooth operation of the Bank. d) To recruit and promote all the staff of the bank, except those in the two tiers below him (CEO). e) To give all types of approval within business delegation with full responsibility. Besides, the authority relating to the transfer and disciplinary measures against the staff, except those at two tiers below the CEO, shall rest upon him. 1.18 Role of Company Secretary The Company Secretary of the Bank provides advice and support to the Board and is accountable to the Board for all matters relating to the proper functionality of the Board and its Committees. The Company Secretary is responsible for advising the Board on governance matters and ensuring compliance with applicable laws and regulations. 1.19 Role of Chief Financial Officer (CFO) The Chief Financial Officer directs a company’s financial goals, objectives and budgets. He also advises the Board of Directors on the kind of actions to be adopted in upholding high standards of financial control and reporting. The CFO oversees all the financial operations of the organization including accounting, financial reporting, tax and regulatory reporting. 1.20 Role of Head of Internal Control & Compliance The Head of Internal Control & Compliance (IC&CD) is responsible for the Bank’s strategic risk-based internal audit plan and managing the internal audit function under the Bank’s internal audit charter. Responsibilities include providing reasonable assurance on the effectiveness of the organization’s risk management and internal controls. 1.21 Attendance of CEO, CFO, CS & Ho IC&CD in the Board Meeting Chief Financial Officer (CFO), Head of Internal Control & Compliance (IC&CD) and the Company Secretary (CS) of the Bank attend meetings of the Board of Directors. However, they do not attend meetings that involve consideration of an agenda item relating to their personal matters. 1.22 Governance of Board of Directors of Subsidiary Company Shahjalal Islami Bank Limited is the parent company while Shahjalal Islami Bank Securities, which is a subsidiary company of the bank. The board of the parent company is aware of the material risks and issues that might affect both the bank as a whole and its subsidiaries. It exercises adequate control over its subsidiary while respecting the independent legal and governance responsibilities that may apply to the Board of Directors of the subsidiary.
  252. 253 2 . VISION/MISSION AND STRATEGY 3.1 Appointment and Composition 2.1 Vision / Mission Statements of SJIBL In compliance with Bangladesh Bank BRPD Circular No.11 dated 27 October 2013 and BSEC’s Corporate Governance Code dated 3 June 2018, the Board Audit Committee has been re-constituted by the Board time to time to review and oversee the company’s financial reporting, non-financial corporate disclosures, internal control systems and compliance with applicable laws and regulations, etc. independently. The vision and mission statement of the Bank approved by the Board of Directors is presented in this Annual report. The said statements are also disclosed on the Bank’s website and other related publications. 2.2 Business Objectives and Areas of Business Focus Identification of business objectives and areas of business focus as well as strategies to achieve the business objectives have been incorporated in the chapter, Integrated Reporting in this Annual Report. Percentage of Independent & Other Directors in Audit Commi�ee 3 2.3 General description of Strategies to achieve the company’s business objectives Strategic priorities which are from time to time directed by the Board have been presented in this annual report. Our sector-wise business objectives, strategies, priorities and future business outlooks have been elaborately described in the “Management Discussion and Analysis” section of this report. SJIBL formulates strategies and different action plans at the beginning of the year which is aligned with the banks’ mission, vision and business objectives. 3. AUDIT COMMITTEE An audit committee is one of the major operating committees of a Bank’s board of directors. The Audit Committee carries out its functions based on the Terms of Reference (ToR) approved by the Board and is accountable to the Board of Directors. To make the quorum of the AC meeting at least 01 (one) Independent Director has to be present. The Company Secretary acts as the secretary of the committee. Independent director Other director 2 3.1.1 Chairman of the Audit Committee as an Independent & Non-Executive Director Mr. Ekramul Hoque, an Independent Director, is the Chairman of the Audit Committee of the Bank. He does not participate in the day-to-day operations of the Bank. He is a renowned exbanker and former Managing Director of a Bank. Furthermore, he is qualified enough to honor the post of Chairman of the Audit Committee. He completed his MA in Economics from the University of Dhaka. Mr. Ekram has made a great contribution to the banking sector and economy in Bangladesh. 3.1.2 Terms of Reference of Audit Committee TERMS OF REFERENCE COMPLIANCE WITH EXISTING REGULATIONS INTERNAL AUDIT INTERNAL CONTROL FINANCIAL STATEMENTS EXTERNAL AUDIT OTHER RELATED FUNCTIONS Shahjalal Islami Bank Limited
  253. 254 Audit committee is responsible for the supervision of the management and control of various risks resulting from banking operations . The committee strengthens the system of internal control and serves as a focal point for internal and external auditors to ensure disciplined banking operations. The role of the Audit Committee of the Board are as follows: ●● Oversee the financial reporting process. ●● Monitor accounting policies and principles. ●● Monitor Internal Audit & Compliance process. ●● Review hiring and performance of external auditors. ●● Holding meetings with external auditors, whenever required. ●● Review of quarterly and half-yearly Financial Statements. ●● Review the adequacy of the internal audit function. ●● Review statement of all related party transactions. ●● Review Management Letters issued by statutory auditors. ●● Oversee the determination of audit fees and evaluate the performance of external auditors. ●● Be accountable to the Board of Directors for all responsibilities as mentioned above. The Chairman of the Audit Committee of the Board is an Independent Director who performs his duties with full freedom while the Company Secretary acts as the secretary of the committee. 3.1.3 Composition of Audit Committee consisting of an Independent Director and Non-Executive Directors The Audit Committee of SJIBL consists of 5(five) members including,3(three) independent directors. All the members of the Audit Committee of SJIBL are Non – Executive Directors. No executive of the bank is eligible to become a member of the Audit Committee and the company secretary acts as the secretary of the Audit Committee. 3.1.4 All members of the Audit Committee are suitably qualified and expertise in Finance & Accounting Mr. K.A.M. Majedur Rahman is a member of the Audit Committee as an Independent Director of the Bank. He did his Master’s Degree from the University of Dhaka. He was Managing Director of Dhaka Stock Exchange Limited and Premier Bank Limited. Likewise, he was also Country Head of Bank Alfalah, an overseas bank in Bangladesh. Mr. Nasir Uddin Ahmed, FCA, FCS is a veteran professional in the financial, consulting & secretarial affairs with successful leadership experience over 34 years. He is the senior partner of the MABS & J partners, Chartered Accountants. He is a fellow member of ICAB & ICSB. He was a Board members of SAFA. The other members of the Audit Committee are Mr. Abdul Halim and Mr. Mohammed Golam Quddus, a former sectary of the Bangladesh Govt. Mr. Abdul Halim is the Chairman of Halim Group and many other business concerns. 3.1.5 Accessibility of Head of Internal Control and Compliance Division to Audit Committee The Head of Internal Control and Compliance Division is well empowered to have direct access to the Audit Committee as and when required. Besides, the AC meets the Head of ICC at least once a year, without management being present, to discuss any issues arising from the internal audits. He has the authority to raise concerns whenever it felt necessary. 3.1.6 Meeting & Attendance Requirement: The Audit Committee had six (6) meetings during 2020. The committee had extensive discussions and review sessions with the Head of ICC and External Auditors regarding their findings, observations and suggestions. Discussions also took place on corrective actions on related Bank business issues that need to be addressed. The Meeting Minutes of the Audit Committee containing various suggestions and recommendations are placed to the Board for ratification regularly. Key areas of focus for the AC in 2020 were presented in the ‘Audit Committee Report’ section of this Annual Report. Audit Committee meeting, attendance and remuneration The members of the Audit Committee are qualified, competent and have experience in the banking and financial sector. Statement of Audit Committee Meeting, attendance and remuneration from 01 January 2020 to 31 December 2020 are appended below: SL Name of Directors Position Meeting Held 06 1 Mr. Ekramul Hoque Chairman 06 Remuneration (Per meeting) 8,000 2 Mr. Abdul Halim Member 04 8,000 3 Mr. Mohammed Golam Quddus Member 05 8,000 4 Mr. KAM Majedur Rahman Independent Director 06 8,000 5 Mr. Nasir Uddin Ahmed, FCA, FCS Independent Director 04 8,000 3.1.7 Presence of the Chairman of the Audit Committee in the AGM The Chairman of the Audit Committee attends every AGM of SJIBL to ensure transparency at the AGM. 3.1.8 Information applied to the Board The Audit Committee reports its observations and findings to the Board of Directors. Observations such as a conflict of interest, ANNUAL REPORT 2020 Attended Remarks Approved by BB as an Independent Director on 24-03-2020 fraud, alleged or suspected irregularity, or alleged breach of law are reported. The Committee shall also inform the Board of any interference with its independence by an official of the bank, if any. 3.2 OBJECTIVE AND ACTIVITIES OF AUDIT COMMITTEE The AC regularly reviews the internal control systems of the Bank. They also review, with management, the Bank’s quarterly, semi-annual and annual financial statements before submission
  254. 255 to the Board for consideration . The objectives and activities of the AC are described in the “Audit Committee Report” on page no. 240-242 of this Annual Report. 3.2.1 Internal controls are well-conceived, properly administered and satisfactorily monitored The Audit Committee is of the view that the internal control and compliance procedures are well-conceived properly administered and satisfactorily monitored. This view is based on the review of activities of IC & CD in 2020. This was mentioned in detail in the Audit Committee Report, on page no. 240-242 of this Annual Report. corporate governance code, the statutory auditors did not perform any activities other than the statutory audit. During their tenure, IC & CD department has coordinated and reviewed their functions and reported to the Audit Committee. Before presenting the financial statement to the board, the committee reviewed their activities and discussed with the external auditors in this regard and the committee and the auditors both have expressed their satisfaction. Key Functions of Audit Committee relating to the review of the external audit function ●● Ensure effective coordination of external audit function ●● Ensure independence of external auditors ●● Review the external auditor’s findings to ensure actions being taken ●● Review appointment/ reappointment of the external auditor The effectiveness of internal controls is reviewed on an ongoing basis by the Audit Committee to ensure that they are operating adequately and effectively. The Committee reviews the actions taken on lapses identified in reports of ICCD. ●● Ensure that non-audit work was not assigned to the external auditor ●● Ensure that independence of the external auditor is not compromised 3.2.3 Audit Committee involvement in the review of the external audit function Services not provided by External Auditors 3.2.2 Statement to indicate audit committees role in ensuring compliance with Laws and Regulations Based on the proposal of the Audit Committee, the board recommended appointing ACNABIN, a Chartered Accountancy firm as statutory auditors of the company for 2020 to the shareholders in the 19th AGM. Accordingly, the shareholders have approved their appointment. In compliance with the BSEC In compliance with provision 7 of BSEC Notification No. BSEC/ CMRRCD/2006-158/207/Admin/80 dated 3 June 2018, M/S. ACNABIN, Chartered Accountants, involved in statutory audit of the Bank. M/S. ACNABIN, Chartered Accountants, was not engaged in any of the following services during 2020: Any other services that create conflict of interest Audit or cer�fica�on services on compliance of corporate governance Appraisal or valua�on services or fairness opinion Internal audit services or special audit services Financial informa�on system design and implementa�on Book keeping or other services related to accoun�ng records or financial statements Actuarial services Broker-dealer services 3.2.4 Selection of appropriate accounting policies The Audit Committee reviewed the financial statements of 2020. The Committee noted that the financial statements were prepared according to the appropriate accounting policies and applicable accounting standards adopted by the Institute of Chartered Accountants of Bangladesh (ICAB).The accounting methods were also verified by the statutory auditors and they expressed their satisfaction with the adequacy of the accounting methods as reflected in their report on page no. 289-293. 3.2.5 Review of annual and interim financial statements before presenting to the board for authentication In compliance with BSEC Notification No. BSEC / CMRRCD / 2006 - 158 / 207 / Admin / 80 dated 3 June 2018 Audit Committee along with management review the quarterly, half-yearly and annual financial statements before submission to the Board for approval. Shahjalal Islami Bank Limited
  255. 256 3 .2.6 Review of reliability of the management information used for such computation Effective Internal Control process prevents possible fraud and forgery. Based on internal audit throughout the year 2020, the Audit Committee expressed its satisfaction to the Board on the reliability of management information used for the preparation of Financial Statements. Based on the Internal Audit Function and Statutory Auditor’s observation Audit Committee review the reliability of information used for preparing such computation. 4. INTERNAL CONTROL & RISK MANAGEMENT Internal control is the process, designed to provide reasonable assurance regarding the achievement of objectives in the effectiveness and efficiency of operations, the reliability of financial reporting, compliance with applicable laws, regulations and internal policies. The internal control system of SJIBL oversights the whole process about the policies, processes, laws, regulations, tasks, behaviors and other aspects of the Bank. Internal Control & Risk Management facilitates the Bank’s effective and efficient operation by enabling it to respond appropriately to significant business, operational, financial, compliance and other risks to achieve its objectives. 4.1 Statement of director’s responsibility to establish an appropriate system of internal control The board is vigilant on the internal control system of the bank to attain and maintain a satisfactory qualitative standard of its investment portfolio. The board established such an internal control system so that the internal audit process can be conducted independently of the management. The Board reviewed the reports submitted by its audit committee at quarterly rests regarding the compliance of recommendations made in internal and external audit reports and the Bangladesh Bank inspection reports. 4.2Key features of Internal Control system and monitoring technique The Board of the Bank ensures the maintenance of a sound system of internal control to safeguard the bank’s assets. The Board through its Audit Committee conducts an annual review and evaluates the effectiveness of the system of Internal Control of the Bank. The Key features of the Internal Control system are as follows: internal control system is designed in such a way that the flow of responsibilities and transactions is diversified among staff as much as possible. Information and communication This is the exchange of information within our Bank. Clear lines of communication flow from management to employees, and from employees to management so that each member of the team can successfully carry out their responsibilities. Monitoring Monitoring is the process of assessing the internal control performance. The board regularly evaluates management and supervisory activities, the budget and all other financial documents. 4.3 Statement that the directors have reviewed the adequacy of the system of internal Controls Shahjalal Islami Bank Limited has a sound system of internal control to safeguard the stakeholder’s interests. To ensure an appropriate level of the internal control system, an Internal Control and Compliance Manual has been introduced in line with global practices and Regulatory Guidelines. The Board of Directors reviews the Internal Control System of the Bank from time to time and necessary guidelines are provided to improve the system. SJIBL has also strengthened and segregated its Internal Control and Compliance Division (IC&CD) into three separate units as mentioned below chart based on the relative guidelines framed by Bangladesh Bank. The division is independent and carries out its assignment independently with objectivity and impartiality. Audit and Inspec�on Unit Compliance Unit Control environment The Board of the Bank ensures integrity, ethical values, management philosophy, operating style, and assignment of authority & responsibility for establishing an appropriate control environment. Monitoring Unit Risk assessment The Board of the Bank established a process of risk assessment and management of the risks. The internal control system will identify and analyze these risks to prevent an adverse event. Based on the internal controls established and maintained by the Bank, work performed by internal and external auditors, reviews performed by management and various Board Committees as well as with CEO and CFO assurance, the Board believes that the Bank’s internal controls are adequate and effective as at 31 December 2020 to address financial, operational, compliance risks and information technology risks which the Bank considers relevant and material to its operations. Control activities Control activities are the policies and procedures of the Bank which includes top-level reviews, and segregation of duties. The ANNUAL REPORT 2020
  256. 257 4 .4 Disclosure of the identification of risk the company is exposed to both internally and externally SJIBL is fully aware of the paramount importance of being proactive and systematic in the management of risks that the Bank faces in daily operations. The Risk Management Division (RMD) of SJIBL is responsible for the management, integration and monitoring of all risks within the risk appetite set by the Risk Management Committee (RMC). The Risk Management Committee (RMC) of the Board reviews and monitors the overall risk management system of the Bank and updates the Board from time to time. The roles and responsibilities and major areas of focus of RMC in 2020 have been presented in the Risk Management Report of this annual report. a) Investment Risk Management The investment-related risks of SJIBL are primarily governed by the Investment Risk Management Guidelines approved by the Board of Directors. The Bank measures, monitors and manages investment risks at an individual borrower level and the portfolio level. The Bank has pursued a strategy of developing a diversified portfolio and investing in better-rated corporate customers. b) Foreign Exchange Risk Management Major foreign exchange-related transactions are carried out on behalf of the client thus the bank has minimal exposure to the captioned risk. It is mentionable that the bank does not involve in any speculative transactions. The treasury division independently conducts the transactions and the back office is responsible for verifying the deal and passes necessary accounting entries. f) ICT Risk Management The Bank’s Information Technology policy ensures that the information technology-related measures are aligned with the business strategy of the Bank. The Head of the ICT Security Unit periodically reviews current IT projects, major IT incidents, technology risk indicators and the state of regulatory compliance.The IT Security Unit continually assesses, monitors and manages IT-related risks in accordance with the Bank’s risk management policy. g) Liquidity Risk Management SJIBL not only sets limits on major liquidity risk management indicators but also has an early warning system to identify a potential liquidity risk arising in the financial market. Besides, potential liquidity issues are constantly monitored through the application of various liquidity stress scenarios, statistical analysis and capital amount simulations. Contingency plans are also in place for various types of liquidity crises. Risk Management Committee (RMC) of the Board Apart from the Executive Committee and Audit Committee of the Board, a Risk Management Committee (RMC) has been formed which is responsible for planning and guiding on overall risk management of the Bank.Detailed role and responsibilities of the Committee are available in the “Report of the Risk Management”. 4.5 Disclosure of the strategies adopted to manage and mitigate the risks c) Asset Liability Risk Management ALCO reviews liquidity requirements of the Bank, maturity of assets and liabilities, deposit and investment pricing strategy and the liquidity contingency plan. The Asset Liability Committee also monitors balance sheet risk and informs the same to the Board of Directors from time to time. RISK IDENTIFICATION RISK CONTROL RISK MEASUREMENT MONITORING & REPORTING d) Money Laundering Risk Management For mitigating the risks, the Bank has nominated a Chief Compliance Officer at Corporate Office and Branch Compliance Officers at branches, who independently review the accounting transactions to locate and verify suspicious transactions. Know Your Customer (KYC) policy and Transaction Profile (TP) format have been introduced. The regulatory requirements are being complied with and the guidelines in respect of KYC are being followed for the opening of new accounts. e) Internal Control & Compliance Risk Management The Bank has a well-designed policy on Internal Control & Compliance Risk Management by which Internal Control &compliance risks are identified and managed through all levels of the organization. The Board and management are accountable for the bank’s internal control & compliance, the compliance function has an important role in supporting corporate values, policies and processes that help ensure that the bank acts responsibly and fulfills all applicable obligations. SJIBL business Unit works as the first line of defense against banking risks as mentioned above. Risk Management Division works as the second line of defense while the third and last line of defense is the Board of Directors of the bank. The Board decides and instructs the ultimate risk-taking measures for the Management of the Bank. SJIBLs all core risk policy guidelines have been approved and are reviewed time-to-time by the Board of the Bank. Shahjalal Islami Bank Limited
  257. 258 SJIBL SJIBL INVESTMENT INVESTMENT RISKRISK MANAGEMENT MANAGEMENT POLICY POLICY SJIBL OPERATIONS POLICY & GUIDELINES SJIBL ICT SECURITY POLICY SJIBL FOREIGN EXCHANGE MANUAL 5. ETHICS AND COMPLIANCE As a shariah-compliant bank, the foundation and growth of SJIBL rest on ethics and compliance. Ethics are the decisions, choices, and actions (behaviors) we make that reflect and enact our values. Compliance is conforming or adapting one’s actions to another’s wishes, to a rule, or a necessity. The terms “ethical” and “compliance” are often used interchangeably when dealing with businesses that are doing the right thing. Ethics and Compliance in SJIBL Code of Conduct for Objective Client Safeguarding the interests of the customers and treating them fairly in all aspects of their dealings with the Bank. Shareholders Providing all shareholders with fair treatment along with protection of their assets. Employees Fair treatment of all employees and expects integrity in return. 5.1 Disclosure of statement of Ethics and values The bank has a separate Code of Conduct and Ethical Guidelines for the Board and employees of the Bank. The fundamental principle of the code of conduct is that every employee must place the bank above his or her personal interest. Highlights of our Code of Conduct and Ethical Guidelines are as follows: ●● Compliance with laws: All employees are to follow and comply with the laws of the land and internal rules and regulations of the Bank. ●● Integrity of records: All employees are expected to maintain books and records with integrity and ensure accuracy and timeliness of all transactions. They should shore up the privacy of the customers’ affairs. Moreover, employees are not expected to disclose confidential information without proper authorization. ●● ●● ●● ●● Misappropriation of assets: No employee shall convert any funds and properties which are not legitimately theirs to their own use and benefit, nor deliberately assist another person in such exploitation. Conflict of interest: Employees must not use their position in the Bank for personal emolument or obtain benefits for themselves or members of their families or friends. Honesty and integrity: Employees are expected to act honestly and with integrity at all times. They must be fair and equitable in their dealings with presents and prospective clients, the public in general and other employees of the Bank. Acceptance of gift: Employees are strongly discouraged from accepting gifts, benefits, or facilities from clients and ANNUAL REPORT 2020 SJIBL ISLAMIC CREDIT CARD POLICY their family members or persons with business interests with the Bank. If an employee is to receive such a thing to establish a mutually beneficial relationship, he or she must disclose it to his or her line manager with estimated value of the gift. 5.2 Dissemination of the statement of ethics and code of conduct All employees of SJIBL are required to sign a declaration confirming that they have read and understood the Code of Conduct. The Human Resources Department circulates the required declaration and ensures that all employees sign the declaration and submit to the relevant department. The Internal Control and Compliance Department (ICF)assesses if employees have violated the Code of Conduct through regular audits. 5.3 The Board’s commitment to establishing ethics and compliance within SJIBL The Board of Directors is committed to establishing a high standard of ethics and compliance amongst all Bank employees. The Board has consistently encouraging management to ensure that everyone maintains a high level of ethics at the Bank. The Board guides management in ethical and integrity policies. The bank has also implemented the Integrity Awards for the employees. 5.4 Establishing effective anti-fraud programs and controls, including effective protection of whistle blowers It is the responsibility of every employee of the bank to inform the management about any fraud or suspected fraud, which may cause financial loss or non-financial loss or be otherwise detrimental to the interest of the bank. SJIBL’s governance ensures that no employee as a whistle blower is at risk of dismissal, loss of promotion, harassment, discrimination or suffer any form of victimization as a result of raising a genuine or reasonably suspected fraud. Whistle blowers do not face any revenge in SJIBL which justifies good governance prevailing here. 5.5 Policy to encourage employee’s participation in Management To encourage employee participation in management, SJIBL organizes managers’ conferences, employees’ meetings where employees are free to give their opinion ranging from bank’s policies, operating procedure, product and service innovation, etc. 5.6 Knowing level of customer satisfaction To determine the level of client satisfaction, a client satisfaction survey is conducted on an annual basis. Furthermore, mystery shopping is done by assigning senior officials to be sure if
  258. 259 customers get satisfactory service or not . Given that client satisfaction is an evolving phenomenon, SJIBL’s Research Division is continuously working on it. 5.7 Payment to vendors on time SJIBL has enlisted vendors that are approved by the competent authority of the bank. Vendors’ payment is made regularly in accordance with Bank policy. 5.8 Payment of Taxes to the Government Authorities on time SJIBL pays income tax and VAT on income and expenses in accordance with the applicable rule. Moreover, the bank deducts and collects tax and VAT on behalf of the government taxes and VAT due from the bank are paid to the government exchequer on time. 5.9 Policy on Supply Chain management The Procurement Committee of SJIBL looks after the supply chain management of the Bank. No disruption is allowed in the supply chain process. Common Service Division is responsible for the maintenance of an uninterrupted supply Chain. However, the procurement committee of SJIBL oversees the supply chain management and gives necessary approval for the purchase of goods and services. 6. REMUNERATION COMMITTEE 6.1 Charter of Remuneration Committee By virtue of BRPD circular 11 dated 27 October,the Board of Directors of each Bank company must constitute three committees such as the Executive Committee, the Audit Committee and the Risk Management Committee. The Board of Directors is not allowed to form any other Committee or Sub Committee; therefore, SJIBL has not formed a Nomination and Remuneration Committee of its Board of Directors. However, the Board oversees the recruitment and remuneration process of the employees by reviewing various policies like HR policy, Recruitment & Promotion Policy, pay package policy, etc. 6.2 Composition of Remuneration Committee At the Management level Managing Director, Head of the Human Resources Division and Chief Financial Officer are charged with governance of compensation and remuneration. Usually, they make a proposition to the Board which is then reviewed and validated by the Board. After incorporating their recommendations the compensation/remuneration decisions are approved by the Board. The main work includes presenting recommendations to the Board regarding remuneration, compensation packages of Management, incentive schemes and retirement benefits. They also assist the Board of Directors to ensure that all employees are remunerated fairly and get performance-based compensation by ensuring an effective remuneration policy. 6.3 Key policies with regard to the remuneration of directors, senior management and employees As per BRPD Circular Letter No. 11 dated 04 October 2015 directors are only entitled to the remuneration for attending the meeting of the board and its sub-committee. For attending the Board Meeting, Executive Committee Meeting, Audit Committee Meeting, Risk Management Committee and the Directors receive an honorarium of Tk. 8,000.00 each. The remuneration of the Managing Director & CEO is recommended by the Board and approved by Bangladesh Bank. Moreover, the remuneration of senior management and employees are determined under the HR Policy of the Bank. 6.4 Number of meetings of the Remuneration Committee Though we have no Remuneration Committee as per regulation barrier of central bank, our Board meetings deal with this issue sincerely. During the year 2020,the issue of Employee Promotion, Increment, Performance Bonus etc. was discussed in several meetings of the Board. 6.5 Remuneration of directors, chairman, chief executive and senior executives SJIBL has a well-defined remuneration policy and the management always reviews and updates it from time to time. Remuneration for senior executives is market-based and competitive to attract, motivate and retain skilled and competent employees. Moreover, remuneration of directors, chairman and chief executive are set in compliance with BSEC notification and Bangladesh Bank circulars. 6.5.1 Remuneration of chairman & directors The remunerations of directors and chairman are paid during the year by following BRPD Circular Letter No. 11 dated 04 October 2015. Total directors fees paid during the year 2020 was Tk.4,714,000. The detail of directors’ fees and expenses is shown in note no. 34 of these financial statements. 6.5.2 Remuneration of chief executive officer The remuneration of the chief executive officer is proposed by the directors and approved by Bangladesh Bank at the time of his appointment. Total remuneration paid to the chief executive officer during the year 2020 was Tk.21,572,700. The detail of remuneration of the chief executive officer is shown in relevant note of these financial statements. 6.5.2 Remuneration of senior executives Remuneration for senior executives is market-based and competitive to attract, motivate and retain skilled and competent employees. The detail of salary and allowances paid to senior executives, executives and officers is shown in relevant note of these financial statements. Benefits provided to the Shareholders, Directors Managing Director/CEO In accordance with the guidelines of Bangladesh Bank, the following facilities can only be given to the Chairman, Directors, Managing Director and Shareholders: CHAIRMAN DIRECTORS MD SHAREHOLDERS Apart from Dividend , Mee�ng Fees, an office chamber, one Private Secretary, a telephone set, one mobile phone for use within the country and a full �me vehicle. Fees and other facili�es for a�ending each mee�ng of the Board or its any Commi�ee apart from Dividend. Only those benefits that are agreed upon in his contractual appointment and approved by Bangladesh Bank Dividend Shahjalal Islami Bank Limited
  259. 260 7 . Human Capital Shahjalal Islami Bank Limited always believes that a set of quality, balanced & motivated Human Resources is the key success factor for its business. Efficient and professionally skilled manpower can deliver highest standard of service and optimize the organizational values. The Bank has been working towards becoming and Employer of Choice by attracting, developing, retaining and caring for best quality resources and continually striving to build a dynamic and professionally competent workforce. Shahjalal Islami Bank has clear set of mission, vision and strategies and Human Resources Division tries to ensure finding such talented manpower having right attitude and place them in right positions to achieve the goal of the Bank. The Human Resources Division continuously evaluates its employees and regularly updates the HR policies, employee benefits, social security, undertakes career development programs to ensure that the employees are motivated, inspired and proactive for achieving the shared goals. 7.1 HR Policy 7.1.1 HR Planning & Succession The bank over the years has been observing a sustainable growth in business and expansion of business network & operation. To support the expansion and growth, HRD periodically forecasts bank’s HR requirements vis a vis supply of internal manpower and determines the employment gaps. Keeping in view of the expansion program necessary recruitments (experienced/ fresher) have been made well ahead of time and usually kept attached with the corporate branches in the regions aiming to acquaint with the banks shariah banking as well as to understand the business know how in the region. SJIBL focuses on identifying and growing talents to fill the key positions as well as to provide opportunities to explore the capabilities in future. The bank emphasizes to develop a set of potential internal candidates to ensure that required qualified officials are prepared to take over the new assignments with challenges, when the time comes. 7.1.2 Diversity at Workplace & Culture Work place diversity can create synergy for the organization. SJIBL pursues to uphold work place diversity in the operation in thoughts, style, race, ethnicity, culture, religion, gender and experience which makes the Bank stronger to serve the clients as well as to achieve the goals. SJIBL focuses on maintaining gender ratio to acceptable level and provides equal employment opportunities. At present 20% officials of the Bank are female and they have diverse ranks from Officer to EVP. The bank is committed to maintain a positive, friendly and respectful working environment where all employees are getting opportunities to show their talents. The employees are recognized and rewarded for good jobs done. Having an excellent corporate culture people working at SJIBL feels strongly connected having strong sense of belongingness to the organization. 7.1.3 Work life Balance The Bank strives to achieve work-life balance for the employees because work life balance can play a vital role to retain employees and maximize their performance and also strengthen the bondage with the organization. Human Resources Division ANNUAL REPORT 2020 always promotes to have a healthy work-life balance for the employees since it helps to boost morale, reduce absenteeism and also reduce the cost and affect the overall performance of the Bank. The Bank believes that a happy and well balanced employee will not only perform his daily operation with utmost care but will also be able to handle different complex issues tactfully. 7.1.4 Rewarding the Performers At SJIBL, we firmly believe that the principal source of our strength as an organization is our human resource base. In this regard, the Bank tries to recruit result driven professionals as they thrive and succeed in performance. The Bank believes that an efficient reward system is beneficial effect upon the performance for instilling a sense of ownership amongst the employees, facilitate long term focus with continuous improvement, promotes team work, minimizes employee dissatisfaction and enhanced employee performance of the Bank. As such attention has been focused on the need to continuously invest in people, provide them with the right incentives to perform better and to make merit and performance the criteria for professional and career development. To achieve a sustainable performance culture, our employees are being informed clearly what is expected of them and what the desired standards of delivery. Furthermore, employee is provided with opportunities for professional growth and is recognized and rewarded for the contribution made towards the growth of the Bank. 7.1.5 Employee Health Facilities SJIBL is always concerned to provide medical support to all employees along with their family members. The Bank in this regard has entered into a group health insurance agreement with Delta Life Insurance Company Limited and brought all employees of the bank under health insurance coverage at the cost of the Bank. The medical assistance benefits provide peace of mind to the employees and enable them to focus on their professional responsibilities without having to worry about financial crisis in the event of urgent medical needs. Furthermore, an experienced Medical Officer has been appointed at Corporate Head Office to provide immediate medical advice and support when needed across the Bank. 7.1.6 Role of HR during COVID-19 Shahjalal Islami Bank Ltd. has made continuous efforts to contain the risk of the spread of COVID 19 among the employees of the Bank and customers. In a bid to keep the employees motivated amid coronavirus outbreak, Shahjalal Islami Bank Limited has set up a Quick Response Team (QRT) as directed by Bangladesh Bank and also COVID-19 Coordination Committee to ensure safety of its employees. SJIBL has taken precautionary measures to ensure that its employees as well its customers and those visiting its branches and head offices remain safe and protected from COVID 19. All employees of the bank were advised to strictly adhere to the control procedures circulated to them time to time. Roster duty at Branch and Head Office level has been implemented and the bank has provided adequate sanitizers across the branches with thermal scanner, masks and gowns. Bank also allowed Work from Home through digital platform to selective division of Head office. HR also maintained close contact with the families of employees who were affected by COVID 19 and facilitate hospitalization in order to boost their morale.
  260. 261 7 .1.7 Human Resource Analysis iii. Age Group Wise Position i. Employee Type & Gender: Name of Position Employee Type Male Female Total-2020 Total-2019 Executive 254 16 270 272 Officer 1126 306 1432 1432 Cash Officer 347 119 466 457 Sub-Staff 488 1 489 491 Total 2215 442 2657 2652 Male Female Total-2020 Position-2019 Below 30 Years 313 71 384 448 30 to 40 Years 1081 250 1331 1367 40 to 50 Years 623 115 738 657 50 to 60 Years 195 6 201 176 3 0 3 4 2215 442 2657 2652 Above 60 Years Total Age Group Wise Distribu�on of Male/Female 2020 ii. Employee Distribution 1081 a. Division wise position Name of Division No. Br. No. Employees Dhaka (Including CHO+OBU) 70 1878 Chattogram 30 395 Khulna 8 112 Sylhet 7 101 Rajshahi 8 77 Barishal 5 52 Rangpur 4 42 132 2657 Total Male Female 623 313 250 115 71 Below 30 Years 30 to 40 Years 40 to 50 Years 195 6 50 to 60 Years 3 0 Above 60 Years iv. Service Length Wise Position b. Branch Vs Corporate Head Office Service Officer Executive Officer Length Cash 15 Years and 66 73 1 above. 11 - 14 Years 84 333 43 Sub Total % Total 48 188 7 Employee Type CHO Branch Total % of Total 211 671 25 Executive 118 152 270 10 7 - 10 Years 69 519 181 115 884 33 Officer 383 1046 1429 54 31 170 119 51 371 14 3 358 361 14 3 - 6 Years Below 3 Years 20 337 122 64 543 21 Sub-Staff 111 486 597 22 Total 615 2042 2657 % of Total 23 77 Cash Officer Officer Particulars Executives & Officers Per Official Investment Per Official Deposit Per Official Profit Sub-Staff 7.1.8 SJIBL Talents Pool Human Resources at CHO 19% 18% Execu�ve Human Resources at Branch 7% 7% Execu�ve Officer Cash Officer 23% 51% 2015 2016 2017 2018 2019 2020 1685 1724 1934 1927 2161 2168 5.75 7.13 8.20 9.66 9.13 9.07 6.48 7.22 7.57 9.18 9.25 9.94 0.14 0.17 0.17 0.24 0.28 0.20 Human Resources Division pursues professional development for each employee to have excellence in banking career with SJIBL. The Bank promotes employees to undertake professional certification, obtaining advanced degree to sharpen the learning curve and making the operation much stronger. At present SJIBL has the following pool of talents achieved professional degree/ certification and added value to the Bank. 63% 19% v. Employee & Business: (Crore Taka) Sub-Staff CA/FCA CIMA/CMA/ACCA Phd. CDCS, CSDG CAMS Chartered Secretary 4 3 1 45 8 7 Shahjalal Islami Bank Limited
  261. 262 7 .1.9 Harassment free workplace for better employee relationship SJIBL Employee Produc�vity The Board of Directors of the Bank in their 302nd Meeting dated 12.08.2020 approved the policy on “Sexual Harassment Eradication & Prevention Policy-2020” to set out guidelines to all employees with regard to prevention and eradication of sexual harassment at workplace of the Bank. SJIBL is committed to providing work environment that ensures every employee is treated with dignity and respect and afforded equitable treatment. The Bank is also committed to promoting a safe, pleasant, harassment free, and friendly workplace based on the principles of gender equity that is conducive to the professional growth. One of the core values of SJIBL is not to tolerate/endure any action related to sexual harassment. Promulgation of this policy guideline addressing all discriminations ensures equal opportunities of all employees irrespective of age, sex, marital status, education or profession. Being a Shariah Bank, it is stipulated by the Islamic code of conduct, which is strict against the Sexual harassment as well. The Policy identifies what constitutes sexual harassment, establishes the Complaint Committee (“CC”), identifies the processes to be followed by the CC and outlines the redressal mechanism in the face of any breach of Policy. Any complaint received on account of sexual harassment is being dealt with utmost seriousness by SJIBL and any one in breach of the Policy is strictly dealt with in terms of this Policy. Human Resource Accounting is the activity of knowing the cost invested for employees towards their recruitment, training them, payment of salaries & other benefits and in return knowing their contribution to organization towards it’s profitability. Human resource accounting is the measurement of the cost and value of the people for the organization. 31/12/2020 31/12/2019 Total Asset 293,517.00 293,517.00 Human Asset (Individuals' value) $22,623.56 $22,092.01 Value of investments (Training Expense) 2.25 7.00 Total Asset including Human Asset 316,142.81 315,616.01 Total Liabilities 293,517.00 293,517.00 Human Capital Value Total Capital & Liabilities including Human capital 22,625.81 22,099.01 316,142.81 315,616.01 SJIBL reported the total value of Human Capital to be Tk. 22,625.81 Million in the year 2020 compared to Tk. 22,099.01 million in 2019 using Present Value of Future Earning Model (Lev & Schwartz) which discounts total benefits payable to employees with the assumption of minimum expected earnings up to the date of retirement. Mentionable that while 5% inflation was considered in calculating future growth of salary & allowance as well as with 10% cost of capital, SJIBLs existing human resources retirement tenor was assumed another 20 years from the given period of time. ANNUAL REPORT 2020 3.96 1.77 1.75 1.37 Opera�ng Income per employee 1.47 Opera�ng Cost Net Profit Before Tax per employee per employee For 9% profit cap on investment/ loan repayment throughout 2020, income naturally decreased to all scheduled banks and FIs and same happened to SJIBL. Due to the impact of COVID 19 operating income naturally decreased per employee while operating cost increased in all branches for mainly depreciation policy and additional purchase of cleaning and other sanitization items in order to comply with regulatory requirement. Since pandemic is not a normal situation, such decrease of operating income and net profit in 2020 compared to the year 2019 is not supposed to be considered as the true reflection of performance by banks employees. However, continuation of income and profitability in 2020 irrespective of amount justified SJIBLs human resources ability to survive amidst the challenges of pandemic. 7.1.11 Enhancing Capacity of Human Resources 7.1.10 Human Resource Accounting Particulars (in BDT & Million) 3.31 2020 2019 Training is a crucial factor to enhance professional excellence and advancement for the organization. Indeed, continued training and the process of learning have played a vital role towards the growth of the bank and earning satisfaction from the customers across the country. Shahjalal Islami Bank Limited has put into place a rigorous training regime for its employees, in order to enhance their knowledge and skills on every areas of banking. The learning initiatives includes basic orientation for all new employees, specialized functional training and multi skilling course. Bank considers each training as an investment where training courses are perfectly designed keeping in view of the objective and hired right trainers to ensure that each program since conducted are useful and help to develop required skill & capabilities of the employee to better handle any complex issues. In an effort to adapt to the prevailing situation, Shahjalal Islami Bank Training Academy has started its training program through digital platform after 3 months’ gap period due to COVID 19. Since the start of the pandemic, Training Academy has shifted all learning programs from traditional classrooms to digital platforms since July, 2020. Synopsis of Online Trainings held via ZOOM Training Areas General Banking, Investment, Foreign Trade, NIS, ICT Security, Prevention of ML/TF, CIB Rules, Banking Laws & Practice, Shariah Compliance, e-GP Financing, Cyber Security, Internal Control & Compliance, IT Risk Management, Foundation Training etc. Number of Sessions 43 Employees Trained 9840
  262. 263 Summary of total training programs in year -2020 Sl No Course Type 1 . SJIBL (in house) Training Program Training Provider/Training Institute SJIBTA & Head Office No. of Participants % of Total 45 9903 2. External Training Programs (Local) Bangladesh Bank & BBTA 07 12 3. External Training Programs (Local) BIBM 46 146 4. External Training Programs (Local) Nelito Systems Limited, India, BAB, IBCFRTA, FinPro Consultants Limited., Blackstone Institute, CSBIBB and BIBM, CSBIBB, BFEDA, FinExcel, The Institute of Chartered Accountants of Bangladesh, CIBAFI and IBBL, CSBIB and BIBM, CIBAFI, ICCB, Royal United Services, External Training Programs Dun & Bradstreet South Asia Middle East Ltd, Management (Foreign) Excellence, Switzerland, Zurich, Indo-Bangladesh joint Business Council(IBJBC), Hyderabad, India Total 21 71 03 03 122 10135 5. 7.2 Organizational Chart SJIBL organizational chart outlines the internal structure of the company. It emphasizes on the roles, responsibilities and relationships between individuals within the company. The organizational chart is shown on page no. 88-89 of this Annual report. 8. COMMUNICATION TO SHAREHOLDERS AND STAKEHOLDERS 8.1 Policy on effective Communication with Shareholders and Other Stakeholders The Company Secretary of the Bank is the In-charge of the Share Department that is responsible for effective communication with shareholders and other stakeholders of the Bank. Shareholders and other stakeholders may contact this department during office hours for any sort of information and queries. SJIBL provides updated information on its website from time to time for the shareholders and other stakeholders of the Bank. The Bank communicated to its shareholders in the following ways: ●● By Publishing Price Sensitive Information (PSI) in National Dailies and On-Line News Portal; ●● By releasing PSI via the website of DSE, CSE and also in Bank’s website; ●● By publishing Press Release about Bank’s important events in the newspapers; ●● By issuing notices to the Shareholders for holding Annual General Meeting every year and Extra-Ordinary General Meeting (as and when necessary); ●● By sending the Annual Reports of the Bank to the shareholders every year; ●● By publishing Financial Statements in the newspapers; ●● By holding General Meetings of Shareholders; 8.2 Policy on Ensuring Participation of Shareholders at AGM SJIBL publishes the notice of the AGM in the daily newspapers with the necessary details within a reasonable period to ensure the effective participation of the shareholders in the AGM. The AGM normally takes place in a well-known place and at a convenient time. Annual Reports are circulated as per the provision of Companies Act 1994 and related Notification issued by BSEC, so that shareholders would get sufficient time to go through the report and freely provide their valuable comments and suggestions in the AGM. Shareholders are allowed to speak in the AGM freely to give their valuable suggestions. The valuable suggestions of the shareholders are noted for future compliance by the personnel of the Financial Administration Division and Board Division. As a result of the outbreak of COVID-19, the 19th AGM was held through the Zoom digital platform to ensure social distancing. The Glimpses of the 19th AGM is presented below: AGM held in 2020 through digital platform zoom to ensure social distancing for COVID 19. Shahjalal Islami Bank Limited
  263. 264 8 .2.1 Redressal of shareholders complaints Any complaint, received at AGM or throughout the year, related to transfer and transmission of shares, non-receipt of Annual Reports, non-receipt of dividends timely and other share-related matters, is resolved lawfully in time. The Company Secretary of SJIBL is the responsible person and plays an active role to handle any such issue related to our shareholders. 2) Gender SJIBL Board has ensured participation of female directors along with male in order to avoid gender bias attitude in decision making process. At present SJIBL has 2 (two) female Directors and 18 (eighteen) male Directors. Gender diversity in Board 10% 8.2.2 Shareholders’ satisfaction and confidence toward the company AGM is considered as the day of judgment of last one year activities of any organization by the shareholders. Shareholders of SJIBL are free to express their opinion, satisfaction or dissatisfaction on the day of AGM and Board secretariat note issues for future compliance. SJIBL Board of Directors is elected by obtaining shareholders’ approval in the AGM. Besides, shareholders are showing their satisfaction and confidence in the bank which is reflected in our share price. 8.2.3 Reminders to shareholders for encashment of dividend Reminders to shareholders are given by SJIBL Share Department for encashment of dividends. SJIBL Share Department also monitors how much dividends are en-cashed after AGM. Share Department of SJIBL takes necessary measures to inform shareholders to en-cash their unclaimed dividend. Female Male 90% 3) Professional Background Most of the directors have vast knowledge in business and commerce because of having many other businesses apart from bank business which is a value addition for the Board. Among the Board of Directors of SJIBL, 1 (One) is renowned Chartered Accountant, 2 (two) are Ex-Managing Director of Private Commercial Banks, 1 (one) is PhD, 4 (four) are CIP and remaining Directors are the market leaders & entrepreneurs in Business sector. Professional Background 5% 8.2.4 Compliance of ICSB Secretarial Standard 5% SJIBL follows the Bangladesh Secretarial Standard of the Institute of Chartered Secretaries of Bangladesh (ICSB) meticulously. SJIBL Board secretariat follows all procedures to ensure sound corporate governance. BSS No. Title of BSS Compliance Status BSS–1 Meetings of the Board of Directors Complied BSS–2 General Meetings Complied BSS–3 Minutes Complied BSS–4 Dividend Complied 8.3 Diversity of the Board SJIBL Board comprises of experts from various fields that provide a well rounded view to the company that helps in effective strategic management and implementation. SJIBL has a diversified Board in terms of following categories: 1) Board Composition Board of SJIBL is well organized by independent directors as well as executive and non-executive directors. While 3 (three) independent directors exercise full freedom and 17 (seventeen) non-executive directors work as a healthy balance of power. 15% ANNUAL REPORT 2020 Ex-MD of private commercial Bank PhD 20% 60% CIP Business entrepreneur 4) Experience Independent directors have long length of services in different reputed Banks and other organizations. Other Directors also have long time business experiences. Experience of Directors 40% 25% 10 to 20 years 21 to 30 years 31 to 40 years 35% 8.4 Rights of Shareholders Shareholders are the true owners of the Bank. As such, shareholders have specific privileges and rights that are governed by the laws. The basic rights that the shareholders enjoy are: Diversity of the Board 85% Chartered Accountant 10% ●● Entitlement of dividend ●● Effective participation and voting in shareholders’ meetings Independent Director ●● Right to elect the board members Non-excu�ve Director ●● Ability to convey or transfer shares ●● Participation and informed on basic decisions including amendments to governing documents, new share authorization and extraordinary transactions
  264. 265 ●● Sufficient and timely information on the Board Meetings ●● Right to question the board and put input on fundamental issues ●● Allowed to consult with each other concerning their interest 8.5 Free-Float Shares & Interest of General Investors Free float shares are generally described as that portion of shares held by investors other than restricted shares owned by the company’s Sponsor Share Holders and Directors. General investors have the option to invest in these Free Float shares. Sponsor Share Holders and Directors of SJIBL float shares in the market only after obtaining permission from the competent regulatory bodies and by ensuring all required compliance. To protect the interest of general investors as part of good governance, SJIBL authority exercises maximum due diligence. 8.6 Shareholding Pattern The authorized Capital of Shahjalal Islami Bank Limited is Tk. 15,000,000,000 divided into 1,500,000,000 ordinary shares of Tk.10.00 each. The paid-up capital of the Bank is Tk. 9,800,923,350 divided into 980,092,335 ordinary shares of Tk.10.00 each. As per Section 1(5) (xxiii) of BSEC Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 dated 03 June 2018 the pattern of shareholding is given below: 3 4 a) Md. Jafar Sadeq FCA, Chief Financial Officer b) Spouse / Minor Children of the Chief Financial Officer a) Md. Monzurul Alam Chowdhury Head of Internal Control and Compliance b) Spouse / Minor Children of the Head of Internal Control and Compliance Nil Nil Nil Nil 8.9 Shares held by top five salaried Executives in the regular services of the Bank Types of Shareholders Percentage of Holding Number of Share Abdul Aziz Additional Managing Director S.M. Mainuddin Chowdhury Md. Shahjahan Shiraj Additional Managing Director Nil Nil Deputy Managing Director Nil Mian Quamrul Hasan Chowdhury Md. Mahmudul Haque Deputy Managing Director Nil Senior Executive Vice President Nil 8.10 List of Shareholders holdings 10% and above shares in the Paid Up Capital of the Bank General Shareholders Group 37.96% 372,041,910 As per Section 14A of Bank Company Act 1991, no person, no company or member of the family either individually or jointly or in both ways, shall buy more than ten percent of the shares of a Bank. There were no shareholders holdings 10% and above shares in the Paid-up Capital of the Bank either individually or jointly or in both ways during the year 2020. Foreign Group 0.15% 1,470,139 Total 100% 980,092,335 8.11 Disclosure about Family influence in the Bank Percentage of Holding 48.77% 13.12% Types of Shareholders Sponsor & Director Group Institutes Group Shareholding pa�ern 0.15% 37.96% 48.77% Number of Share 477,992,172 128,588,114 Sponsor & Director Group Ins�tutes Group General Shareholders Group Foreign Group 13.12% 8.7 Share held by Parent or Subsidiary or Associated Companies SJIBL has no parent company or Associated Companies. It has only one subsidiary company named Shahjalal Islami Bank Securities Limited. The subsidiary company does not hold any shares of Shahjalal Islami Bank Limited, thus no share was held by Parent or Subsidiary or Associated Companies during the year 2020. 8.8 Shares held by Chief Executive Officer, Company Secretary,Chief Financial Officer, Head of Internal Control & Compliance and their spouses and minor children. Sl. No. Designation Shareholdings as on 31.12.2020 1 a) M Shahidul Islam, Chief Executive Officer Nil 2 b) Spouse / Minor Children of Chief Executive Officer a) Md. Abul Bashar, Company Secretary Nil b) Spouse / Minor Children of the Company Secretary Nil Nil No person, no company or member of the family either individually or jointly or in both ways hold 10% or more shares of the Paid-up Capital of the Bank. So there is no family influence in the Bank because no individual or single-family holds majority shares of the Bank to control the Bank unilaterally. 9. ENVIRONMENTAL AND SOCIAL OBLIGATIONS 9.1 Policies and practices relating to social and environmental responsibility of SJIBL The Board of Shahjalal Islami Bank Limited is very sincere regarding environmental and social issues. To ensure sustainable banking practice the Board approved Green Banking Policy and Environmental and Social Risk Management Guideline. The Board or Management is not approving any investment without Environmental Clearance Certificate from DOE. The Board is not approving any environmentally risky investment proposal. The Bank is approving a substantial part of CSR for the protection of the environment and climate change. The bank has constructed its Head Office Building which is a LEED-certified Green Building first ever in the Banking sector of Bangladesh. The detail of environmental and social obligations is stated in “Sustainability Report” of this Annual Report. 9.2 SJIBL’s Disclosure of specific activities undertaken by the Bank in pursuance of these policies and practices SJIBL is also focusing on Earth and its sustainability, shifting from the traditional financing approach. In this regard, we are making our investment appraisal process to be much more stringent from an Environmental and Social Risk Management (ESRM) perspective – evaluating all the environmental and social factors such as project impacts on the environment and the community in the long run, prior to approving an investment. Specific activities undertaken in this regard are disclosed in “Sustainability Report” of this Annual Report. Shahjalal Islami Bank Limited
  265. 266 DECLARATION BY CEO AND CFO 10 March 2021 The Board of Directors Shahjalal Islami Bank Limited Corporate Head Office Shahjalal Islami Bank Tower Plot – 4, Block – CWN (C ) Gulshan Avenue, Dhaka – 1212. Subject: Declaration on Financial Statements for the year ended on 31 December 2020 Dear Sirs, Pursuant to the condition no. 1(5) (xxvi) imposed vide the commission’s Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 Dated 3 June 2018 under section 2CC of the Securities and Exchange Ordinance, 1969, we do hereby declare that: (1) The Financial Statements of Shahjalal Islami Bank Limited for the year ended on 31 December 2020 have been prepared in compliance with International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh and any departure there from has been adequately disclosed; (2) The estimates and judgments related to the financial statements were made on a prudent and reasonable basis, in order for the financial statements to reveal a true and fair view; (3) The form and substance of transactions and the Company’s state of affairs have been reasonably and fairly presented in its financial statements; (4) To ensure above, the Company has taken proper and adequate care in installing a system of internal control and maintenance of accounting records; (5) Our Internal auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed; and (6) The management’s use of the going concern basis of accounting in preparing the financial statements is appropriate and there exists no material uncertainty related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. In this regard, we also certify that: i) We have reviewed the financial statements for the year ended on 31 December 2020 and that to the best of our knowledge and belief: (a) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; (b) These statements collectively present a true and fair view of the Company’s affair and are in compliance with existing accounting standards and applicable laws. (ii) There are, to the best of knowledge and belief, no transaction entered into by the Company during the year which is fraudulent, illegal or in violation of the code of conduct for the company’s Board of Directors or its members. Md. Jafar Sadeq FCA Chief Financial Officer ANNUAL REPORT 2020 M Shahidul Islam Managing Director & CEO
  266. 267 COMPLIANCE CERTIFICATE ON CORPORATE GOVERNANCE CODE TO THE SHAREHOLDERS OF SHAHJALAL ISLAMI BANK LIMITED Certificate on Compliance on the Corporate Governance Code We have examined the compliance status to the Corporate Governance Code by SHAHJALAL ISLAMI BANK Limited for the year ended on 31 Dec , 2020. This Code relates to the Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 dated 3 June 2018 of the Bangladesh Securities and Exchange Commission. Such compliance with the Corporate Governance Code is the responsibility of the Company. Our examination was limited to the procedures and implementation thereof as adopted by the Management in ensuring compliance to the conditions of the Corporate Governance Code. This is a scrutiny and verification and an independent audit on compliance of the conditions of the Corporate Governance Code as well as the provisions of relevant Bangladesh Secretarial Standards (BSS) as adopted by Institute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not inconsistent with any condition of this Corporate Governance Code. We state that we have obtained all the information and explanations, which we have required, and after due scrutiny and verification thereof, we report that, in our opinion: (a) The Company has complied with the conditions of the Corporate Governance Code as stipulated in the above mentioned Corporate Governance Code issued by the Commission; (b) The Company has complied with the provisions of the relevant Bangladesh Secretarial Standards (BSS) as adopted by the Institute of Chartered Secretaries of Bangladesh (ICSB) as required by this Code; (c) Proper books and records have been kept by the company as required under the Companies Act, 1994, the securities laws and other relevant laws; and (d) The Governance of the company is highly satisfactory. Place: Dhaka Dated: 11 March 2021 Maria Howlader FCA Proprietor Howlader Maria & Co. Chartered Accountants Shahjalal Islami Bank Limited
  267. 268 COMPLIANCE STATUS ON BSEC NOTIFICATION ON CORPORATE GOVERNANCE The Bangladesh Securities and Exchange Commission (BSEC) issued a Corporate Governance (CG) Code in 2018 which is being followed by the banks on ‘Comply’ basis. Status of compliance by Shahjalal Islami Bank Limited with the said CG code issued by BSEC through Notification No.SEC/CMRRCD/2006-158/207/Admin/80 dated 3 June 2018 issued under the Section 2CC of the Securities and Exchange Ordinance, 1969 is as follows: (Report under Condition No. 9.00) Compliance Status (Put √ in the appropriate column) Complied Not complied Condition No. Title 1. Board of Directors 1(1) Size of the Board of Directors: The total number of members of a company’s Board of Directors (hereinafter referred to as “Board”) shall not be less than 5 (five) and more than 20 (twenty). Independent Directors √   - 1(2) (a) At least one fifth (1/5) of the total number of directors in the Company's board shall be independent directors. √   The Board of Directors consists of 20 (Twenty) members including 3 (Three) Independent Directors which is in compliance with the Section- 15(9) of Bank Company Act, 1991 (Amended up to 2018) 1(2) (b) ‘Independent director’ means a director- 1(2) (b) (i) who either does not hold any share in the company or holds less than one percent (1%) shares of the total paid-up shares of the company; √   1(2) (b) (ii) who is not a sponsor of the company or is not connected with the company’s any sponsor or director or nominated director or shareholder of the company or any of its associates, sister concerns, subsidiaries and parents or holding entities who holds one percent (1%) or more shares of the total paid-up shares of the company on the basis of family relationship and his or her family members also shall not hold above mentioned shares in the company; who has not been an executive of the company in immediately preceding 2 (two) financial years; who does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary or associated companies; Who is not a member or TREC (Trading Right Entitlement Certificate) holder, director or officer of any stock exchange. who is not a shareholder, director excepting independent director or officer of any member or the holder of stock exchange or an intermediary of the capital market; who is not a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of the concerned company’s statutory audit firm or audit firm engaged in internal audit services or audit firm conducting special audit or professional certifying compliance of this Code; Who is not independent director in more than 5 (five) listed companies. √   √   - √   - √   - √   - √   - √   - √   - √   - √   - √   - √   - 1(2) 1(2) (b) (iii) 1(2) (b) (iv) 1(2) (b) (v) 1(2) (b) (vi) 1(2) (b) (vii) 1(2) (b) (viii) 1(2) (b) (ix) who has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan or any advance to a bank or a NonBank Financial Institution (NBFI); and 1(2) (b) (x) Who has not been convicted for a criminal offence involving moral turpitude. 1(2) (c) The independent director(s) shall be appointed by the Board and approved by the shareholders in the Annual General Meeting (AGM); 1(2) (d) The post of independent director(s) cannot remain vacant for more than 90(ninety) days and 1(2) (e) The tenure of office of an Independent Director shall be for a period of 3 (three) years which may be extended for 1 (one) tenure only. 1(3) Qualification of Independent Director :- ANNUAL REPORT 2020 Remarks (if any)   None of the Independent Director holds any share of the Bank.
  268. 269 Condition No . 1(3) (a) 1(3) (b) Title Independent director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial laws, regulatory requirements and corporate laws and can make meaningful contribution to the business; Independent Director shall have following Qualification. 1(3) (b) (i) Business Leader who is or was a promoter or director of an unlisted company having minimum paid-up capital of Tk. 100.00 million or any listed company or a member of any national or international chamber of commerce or business association; or 1(3) (b) (ii) Corporate Leader who is or was a top level executive not lower than Chief Executive Officer or Managing Director or Deputy Managing Director or Chief Financial Officer or Head of Finance or Accounts or Company Secretary or Head of Internal Audit and Compliance or Head of Legal Service or a candidate with equivalent position of an unlisted company having minimum paid-up capital of Tk. 100.00 million or of a listed company; or 1(3) (b) (iii) Former official of government or statutory or autonomous or regulatory body in the position not below 5th Grade of the national pay scale, who has at least educational background of bachelor degree in economics or commerce or business or Law; or 1(3) (b) (iv) University Teacher who has educational background in Economics or Commerce or Business Studies or Law; or 1(3) (b) (v) Professional who is or was an advocate practicing at least in the High Court Division of Bangladesh Supreme Court or a Chartered Accountant or Cost and Management Accountant or Chartered Financial Analyst or Chartered Certified Accountant or Certified Public Accountant or Chartered Management Accountant or Chartered Secretary or equivalent qualification; 1(3) (c) The Independent Director(s)shall have at least 10 (ten) years of experiences in any field mentioned in clause (b); 1(3) (d) In special cases, the above qualification or experiences may be relaxed subject to prior approval of the commission. Compliance Status (Put √ in the appropriate column) Complied Not complied √ Remarks (if any)     N/A   √   N/A   Two Independent Directors have such qualification. N/A √ One Independent Director has such qualification. √ - - No such deviation found 1(4) Duality of Chairperson of the Board of Directors and Managing Director or Chief Executive Officer:- 1(4) (a) The positions of the Chairperson of the Board and the Managing Director (MD) and/or Chief Executive Officer (CEO) of the company shall be filled by different individuals; √ 1(4) (b) √ different individual - √ - √ - √ - 1(5) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed company shall not hold the same position in another listed company; The Chairperson of the Board shall be elected from among the nonexecutive directors of the company; The Board shall clearly define respective roles and responsibilities of the Chairperson and the Managing Director and/or Chief Executive Officer; In the absence of the Chairperson of the Board, the remaining members may elect one of themselves from non-executive directors as Chairperson for that particular Board’s meeting; the reason of absence of the regular Chairperson shall be duly recorded in the minutes. Directors’ Report to Shareholders:- 1(5) (i) An industry outlook and possible future developments in the industry; √   1(5) (ii) The segment-wise or product-wise performance; √   - 1(5) (iii) Risks and concerns including internal and external risk factors, threat to sustainability and negative impact on environment, if any; A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin, where applicable; √   - √   A discussion on continuity of any extraordinary activities and their implications (gain or loss); A detailed discussion on related party transactions along with a statement showing amount, nature of related party, nature of transactions and basis of transactions of all related party transactions; √   Cost of Fund, Operating & Net Profit and related ratios are provided. SJIBL does not have such gain or loss √   N/A   1(4) (c) 1(4) (d) 1(4) (e) 1(5) (iv) 1(5) (v) 1(5) (vi) 1(5) (vii) A statement of utilization of proceeds raised through public issues, rights issues and/or any other instruments; The Chairman of the Board and MD & CEO of the Bank are No such issue was made during the Year 2020 Shahjalal Islami Bank Limited
  269. 270 Condition No . 1(5) (viii) 1(5) (ix) 1(5) (x) 1(5) (xi) 1(5) (xii) 1(5) (xiii) 1(5) (xiv) 1(5) (xv) 1(5) (xvi) 1(5) (xvii) 1(5) (xviii) 1(5) (xix) 1(5) (xx) 1(5) (xxi) 1(5) (xxii) 1(5) (xxiii) 1(5) (xxiii) (a) 1(5) (xxiii)(b) 1(5) (xxiii)(c) 1(5) (xxiii)(d) 1(5) (xxiv) Title An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Share Offer, Direct Listing, etc.; An explanation on any significant variance that occurs between Quarterly Financial performances and Annual Financial Statements; Compliance Status (Put √ in the appropriate column) Complied Not complied Remarks (if any) N/A   - √   Variance occurred between Q1 & other quarters due to effect of COVID-19 pendamic and implementation of single digit cap by BB - A statement of remuneration paid to the directors including independent √   directors; A statement that the financial statements prepared by the management √   of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity; A statement that proper books of account of the issuer company have √   been maintained; A statement that appropriate accounting policies have been consistently √   applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment; √   A statement that International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there from has been adequately disclosed; A statement that the system of internal control is sound in design and √   has been effectively implemented and monitored A statement that minority shareholders have been protected from abusive √   actions by, or in the interest of, controlling shareholders acting either directly or indirectly and have effective means of redress; A statement that there is no significant doubt upon the issuer √    company’s ability to continue as a going concern, if the issuer company is not considered to be a going concern, the fact along with reasons there of shall be disclosed; An explanation that significant deviations from the last year’s operating √   results of the issuer company shall be highlighted and the reasons thereof shall be explained; A statement where key operating and financial data of at least preceding √   5 (five) years shall be summarized; An explanation on the reasons if the issuer company has not declared N/A   dividend (cash or stock) for the year Board’s statement to the effect that no bonus share or stock dividend has N/A   been or shall be declared as interim dividend; The total number of Board meetings held during the year and attendance √ by each director; A report on the pattern of shareholding disclosing the aggregate number of shares (along with name-wise details where stated below) held by: Parent or Subsidiary or Associated Companies and other related parties √   (name wise details); Directors, Chief Executive Officer, Company Secretary, Chief Financial √   Officer, Head of Internal Audit and their spouses and minor children (name wise details); Executives; and √   Shareholders holding ten percent (10%) or more voting interest in the √   company (name-wise details); In case of the appointment or re-appointment of a Director a disclosure on the following information to the Shareholders: 1(5) (xxiv) (a) a brief resume of the Director; √   1(5) (xxiv)(b) √   Nature of his/her expertise in specific functional areas; and - 1(5) (xxiv)(c) Names of companies in which the person also holds the directorship and √   the membership of committees of the board. 1(5) (xxv) A Management’s Discussion and Analysis signed by CEO or MD presenting detailed analysis of the company’s position and operations along with a brief discussion of changes in the financial statements, among others, focusing on: 1(5) (xxv) (a) accounting policies and estimation for preparation of financial statements; √ 1(5) (xxv)(b) changes in accounting policies and estimation, if any, clearly describing the effect on financial performance or results and financial position as well as cash flows in absolute figure for such changes; ANNUAL REPORT 2020 √ Depreciation rate and method have been changed
  270. 271 Condition No . 1(5) (xxv)(c) Title Compliance Status (Put √ in the appropriate column) Complied Not complied Remarks (if any) 1(6) comparative analysis (including effects of inflation) of financial performance or results and financial position as well as cash flows for current financial year with immediate preceding five years explaining reasons thereof; compare such financial performance or results and financial position as well as cash flows with the peer industry scenario; briefly explain the financial and economic scenario of the country and the globe; risks and concerns issues related to the financial statements, explaining such risk and concerns mitigation plan of the company; and future plan or projection or forecast for company’s operation, performance and financial position, with justification thereof, i.e., actual position shall be explained to the shareholders in the next AGM; Declaration or certification by the CEO and the CFO to the Board as required under condition No. 3(3) shall be disclosed as per Annexure-A; and The report as well as certificate regarding compliance of conditions of this Code as required under condition No. 9 shall be disclosed as per Annexure-B and Annexure-C. Meetings of the Board of Directors - 1(7) The company shall conduct its Board meetings and record the minutes √ of the meetings as well as keep required books and records in line with the provisions of the relevant Bangladesh Secretarial Standards (BSS) as adopted by the Institute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not inconsistent with any condition of this Code. Code of Conduct for the Chairperson, other Board members and Chief Executive Officer The Board shall lay down a code of conduct, based on the recommendation of the Nomination and Remuneration Committee (NRC) at condition No. 6, for the Chairperson of the Board, other board members and Chief Executive Officer of the company; The code of conduct as determined by the NRC shall be posted on the website of the company including, among others, prudent conduct and behavior; confidentiality; conflict of interest; compliance with laws, rules and regulations; prohibition of insider trading; relationship with environment, employees, customers and suppliers; and independency. Governance of Board of Directors of Subsidiary Company N/A - N/A - 1(5) (xxv)(d) 1(5) (xxv)(e) 1(5) (xxv)(f) 1(5) (xxv)(g) 1(5) (xxvi) 1(5) (xxvii) 1(7) (a) 1.7. (b) 2 2 (a) 2 (b) 2 (c) 2 (d) 2 (e) 3.0 3 (1) 3 (1) (a) 3 (1) (b) 3 (1) (c) 3 (1) (d) 3 (1) (e) 3(2) √ - √ - √ - √ - √ - √ - √ - Provisions relating to the composition of the Board of Directors of the √   holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company. At least 1 (one) independent director on the Board of Directors of the √   holding company shall be a director on the Board of Directors of the subsidiary company. The minutes of the Board meeting of the subsidiary company shall be √   placed for review at the following Board meeting of the holding company. The Minutes of the respective Board meeting of the holding company shall √   state that they have reviewed the affairs of the Subsidiary Company also. The Audit Committee of the holding company shall also review the Financial √   Statements, in particular the investments made by the Subsidiary Company. Managing Director (MD) or Chief Executive Officer (CEO), Chief Financial Officer (CFO), Head of Internal Audit and Compliance (HIAC) and Company Secretary (CS) Appointment The Board shall appoint a Managing Director (MD) or Chief Executive Officer (CEO), a Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of Internal Audit and Compliance (HIAC); The positions of the Managing Director (MD) or Chief Executive Officer (CEO), Company Secretary (CS), Chief Financial Officer (CFO) and Head of Internal Audit and Compliance (HIAC) shall be filled by different individuals; The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any executive position in any other company at the same time; The Board shall clearly define respective roles, responsibilities and duties of the CFO, the HIAC and the CS; The MD or CEO, CS, CFO and HIAC shall not be removed from their position without approval of the Board as well as immediate dissemination to the Commission and stock exchange(s). Requirement to attend Board of Directors’ Meetings √   √   √   √ - N/A No such situation arisen in the reporting year Shahjalal Islami Bank Limited
  271. 272 Condition No . Title The MD or CEO, CS, CFO and HIAC of the company shall attend the meetings of the Board. 3(3) 3(3) (a) 3(3) (a) (i) 3(3) (a) (ii) 3(3) (b) 3(3) (c) 4 Compliance Status (Put √ in the appropriate column) Complied Not complied √ Remarks (if any)     Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief Financial Officer (CFO) The MD or CEO and CFO shall certify to the Board that they have reviewed financial statements for the year and that to the best of their knowledge and belief:  these statements do not contain any materially untrue statement or √   omit any material fact or contain statements that might be misleading; and these statements together present a true and fair view of the company’s √   affairs and are in compliance with existing accounting standards and applicable laws; The MD or CEO and CFO shall also certify that there are, to the best of √ knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or in violation of the code of conduct for the company’s Board or its members; The certification of the MD or CEO and CFO shall be disclosed in the Annual √ Report. Board of Directors’ Committee:For ensuring good governance in the company, the Board shall have at least following sub-committees: 4 (i) Audit Committee 4 (ii) Nomination and Remuneration Committee. 5 Audit Committee:- 5 (i) Responsibility to the Board of Directors. 5(i) (a) √ 5 (2) The company shall have an Audit Committee as a sub-committee of the Board; The Audit Committee shall assist the Board in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business; The Audit Committee shall be responsible to the Board; the duties of the Audit Committee shall be clearly set forth in writing. Constitution of the Audit Committee 5 (2)(a) The Audit Committee shall be composed of at least 3 (three) members; √ 5 (2)(b) The Board shall appoint members of the Audit Committee who shall be non-executive directors of the company excepting Chairperson of the Board and shall include at least 1 (one) independent director; All members of the audit committee should be “financially literate” and at least 1 (one) member shall have accounting or related financial management background and 10 (ten) years of such experience; When the term of service of any Committee member expires or there is any circumstance causing any Committee member to be unable to hold office before expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons, the Board shall appoint the new Committee member to fill up the vacancy immediately or not later than 1 (one) month from the date of vacancy in the Committee to ensure continuity of the performance of work of the Audit Committee The company secretary shall act as the secretary of the Committee; √ The quorum of the Audit Committee meeting shall not constitute without at least 1 (one) independent director. Chairperson of the Audit Committee √ The Board shall select 1 (one) member of the Audit Committee to be Chairperson of the Audit Committee, who shall be an independent director; In the absence of the Chairperson of the Audit Committee, the remaining members may elect one of themselves as Chairperson for that particular meeting, in that case there shall be no problem of constituting a quorum as required under condition No. 5(4)(b) and the reason of absence of the regular Chairperson shall be duly recorded in the minutes. Chairperson of the Audit Committee shall remain present in the Annual General Meeting (AGM): Meeting of the Audit Committee √ The Audit Committee shall conduct at least its four meetings in a financial year. √ 5(i) (b) 5(i) (c) 5 (2)(c) 5 (2)(d) 5 (2)(e) 5 (2)(f) 5(3) 5(3) (a) 5(3) (b) 5(3) (c) 5(4) 5(4)(a) ANNUAL REPORT 2020 √ N/A - √ - √ - √ √ - √   √ √ -   - -
  272. 273 Condition No . 5(4) (b) 5(5) Title The quorum of the meeting of the Audit Committee shall be constituted in presence of either two members or two-third of the members of the Audit Committee, whichever is higher, where presence of an independent director is a must. Role of Audit Committee Compliance Status (Put √ in the appropriate column) Complied Not complied √ Remarks (if any) - The audit committee shall:5(5) (a) Oversee the financial reporting process; √   5(5) (b) Monitor choice of accounting policies and principles. √   - 5(5) (c) Monitor Internal Audit and Compliance process to ensure that it is adequately resourced, including approval of the Internal Audit and Compliance Plan and review of the Internal Audit and Compliance Report; Oversee hiring and performance of external auditors. √   - √   - Hold meeting with the external or statutory auditors for review of the annual financial statements before submission to the Board for approval or adoption; Review along with the management, the annual financial statements before submission to the Board for approval; Review along with the management, the quarterly and half yearly Financial Statements before submission to the Board for approval. Review the adequacy of internal audit function. √   - √ 5(6) Review the Management’s Discussion and Analysis before disclosing in the Annual Report; review statement of all related party transactions submitted by the management; Review Management Letters or Letter of Internal Control weakness issued by statutory auditors. Oversee the determination of audit fees based on scope and magnitude, level of expertise deployed and time required for effective audit and evaluate the performance of external auditors; and Oversee whether the proceeds raised through Initial Public Offering (IPO) or Repeat Public Offering (RPO) or Rights Share Offer have been utilized as per the purposes stated in relevant offer document or prospectus approved by the Commission: Reporting of the Audit Committee 5(6)(a) Reporting to the Board of Directors 5(6)(a) (i) The Audit Committee shall report on its activities to the Board of Directors. 5(6)(a) (ii) The Audit Committee shall immediately report to the Board of Directors on the following findings, if any:- 5(6)(a)(ii)(a) Report on conflicts of Interests. 5(5) (d) 5(5) (e) 5(5) (f) 5(5) (g) 5(5) (h) 5(5) (i) 5(5) (j) 5(5) (k) 5(5) (l) 5(5) (m) 5(6)(a)(ii)(b) Suspected or presumed fraud or irregularity or material defect identified in the internal audit and compliance process or in the financial statements; 5(6)(a)(ii)(c) Suspected infringement of laws, regulatory 5(6)(a)(ii) (d) 5(6)(b) 5(7) 6 6(1) 6 (1)(a) √ - √   - √   - √   - √   - √   - N/A √ -   -   No such event arose -   No such event arose -   No such event arose compliances including securities related laws, rules and regulations; and Any other matter which the Audit Committee deems necessary shall be   No such event arose disclosed to the Board immediately;   No such event arose Reporting to the Authorities: If the Audit Committee has reported to the Board about anything which has material impact on the financial condition and results of operation and has discussed with the Board and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee shall report such finding to the Commission, upon reporting of such matters to the Board for three times or completion of a period of 6 (six) months from the date of first reporting to the Board, whichever is earlier. √   Reporting to the Shareholders and General Investors:- Report on activities carried out by the Audit Committee, including any report made to the Board under condition No. 5(6)(a)(ii) above during the year, shall be signed by the Chairperson of the Audit Committee and disclosed in the annual report of the issuer company. Nomination and Remuneration Committee (NRC) The Bank applied to the Central Bank for their guidance in order to solve the issue. Responsibility to the Board of Directors The company shall have a Nomination and Remuneration Committee (NRC) as a sub-committee of the Board; -   The Bank is waiting for Central Bank’s reply Shahjalal Islami Bank Limited
  273. 274 Condition No . 6 (1)(b) 6 (1)(c) 6(2) 6(2)(a) 6(2)(b) 6(2)(c) 6(2)(d) 6(2)(e) 6(2)(f) 6(2)(g) 6(2)(h) 6(2)(i) 6(3) 6(3)(a) 6(3)(b) 6(3)(c) 6(4) Title The NRC shall assist the Board in formulation of the nomination criteria or policy for determining qualifications, positive attributes, experiences and independence of directors and top level executive as well as a policy for formal process of considering remuneration of directors, top level executive; The Terms of Reference (ToR) of the NRC shall be clearly set forth in writing covering the areas stated at the condition No. 6(5)(b). Constitution of the NRC The Committee shall comprise of at least three members including an independent director; All members of the Committee shall be non-executive directors; Members of the Committee shall be nominated and appointed by the Board; The Board shall have authority to remove and appoint any member of the Committee; In case of death, resignation, disqualification, or removal of any member of the Committee or in any other cases of vacancies, the board shall fill the vacancy within 180 (one hundred eighty) days of occurring such vacancy in the Committee; The Chairperson of the Committee may appoint or co-opt any external expert and/or member(s) of staff to the Committee as advisor who shall be non-voting member, if the Chairperson feels that advice or suggestion from such external expert and/or member(s) of staff shall be required or valuable for the Committee; The company secretary shall act as the secretary of the Committee; Compliance Status (Put √ in the appropriate column) Complied Not complied - - - - - The quorum of the NRC meeting shall not constitute without attendance of at least an independent director; No member of the NRC shall receive, either directly or indirectly, any remuneration for any advisory or consultancy role or otherwise, other than Director’s fees or honorarium from the company. Chairperson of the NRC - The Board shall select 1 (one) member of the NRC to be Chairperson of the Committee, who shall be an independent director; In the absence of the Chairperson of the NRC, the remaining members may elect one of themselves as Chairperson for that particular meeting, the reason of absence of the regular Chairperson shall be duly recorded in the minutes The Chairperson of the NRC shall attend the annual general meeting (AGM) to answer the queries of the shareholders: Meeting of the NRC - - - - 6(4) (a) The NRC shall conduct at least one meeting in a financial year; - 6(4) (b) The Chairperson of the NRC may convene any emergency meeting upon request by any member of the NRC; The quorum of the meeting of the NRC shall be constituted in presence of either two members or two third of the members of the Committee, whichever is higher, where presence of an independent director is must as required under condition No. 6(2)(h); The proceedings of each meeting of the NRC shall duly be recorded in the minutes and such minutes shall be confirmed in the next meeting of the NRC. Role of the NRC - 6(4) (c) 6(4) (d) 6(5) 6(5) (a) NRC shall be independent and responsible or accountable to the Board and to the shareholders; 6(5) (b) NRC shall oversee, among others, the following matters and make report with recommendation to the Board: 6(5) (b)(i) Formulating the criteria for determining qualifications, positive attributes and independence of a director and recommend a policy to the Board, relating to the remuneration of the directors, top level executive, considering the following: 6(5) (b)(i)(a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate suitable directors to run the company successfully; 6(5)(b)(i)(b) the relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and ANNUAL REPORT 2020 - - - - - Remarks (if any)
  274. 275 Condition No . Title 6(5) (b)(i)(c) remuneration to directors, top level executive involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals; 6(5) (b)(ii) devising a policy on Board’s diversity taking into consideration age, gender, experience, ethnicity, educational background and nationality; 6(5) (b)(iii) identifying persons who are qualified to become directors and who may be appointed in top level executive position in accordance with the criteria laid down, and recommend their appointment and removal to the Board; 6(5) (b)(iv) formulating the criteria for evaluation of performance of independent directors and the Board; 6(5) (b)(v) identifying the company’s needs for employees at different levels and determine their selection, transfer or replacement and promotion criteria; and 6(5) (b)(vi) developing, recommending and reviewing annually the company’s human resources and training policies; 6(5) (c) The company shall disclose the nomination and remuneration policy and the evaluation criteria and activities of NRC during the year at a glance in its annual report. 7 External or Statutory Auditors. 7(1) Compliance Status (Put √ in the appropriate column) Complied Not complied - - The issuer company shall not engage its external or statutory auditors to perform the following services of the company, namely:- 7(1)(i) appraisal or valuation services or fairness opinions; √ 7(1)(ii) financial information systems design and implementation; √ 7(1)(iii) √ 7(1)(iv) book-keeping or other services related to the accounting records or financial statements; broker-dealer services; 7(1)(v) actuarial services; √ 7(1)(vi) internal audit services or special audit services; √ 7(1)(vii) any service that the Audit Committee determines; √ 7(1)(viii) audit or certification services on compliance of corporate governance as required under condition No. 9(1); and Any other service that creates conflict of interest. √ No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company; his or her family members also shall not hold any shares in the said company: Representative of external or statutory auditors shall remain present in the Shareholders’ Meeting (Annual General Meeting or Extraordinary General Meeting) to answer the queries of the shareholders. Maintaining a website by the Company. √ The company shall have an official website linked with the website of the stock exchange. The Company shall keep the website functional from the date of listing. √ The company shall make available the detailed disclosures on its website as required under the listing regulations of the concerned stock exchange(s). Reporting and Compliance of Corporate Governance. √ The company shall obtain a certificate from a practicing Professional Accountant or Secretary (Chartered Accountant or Cost and Management Accountant or Chartered Secretary) other than its statutory auditors or audit firm on yearly basis regarding compliance of conditions of Corporate Governance Code of the Commission and such certificate shall be disclosed in the Annual Report. The professional who will provide the certificate on compliance of this Corporate Governance Code shall be appointed by the shareholders in the annual general meeting. The directors of the company shall state, in accordance with the Annexure-C attached, in the directors’ report whether the company has complied with these conditions or not. √   √   √   7(1)(ix) 7(2) 7(3) 8 8(1) 8(2) 8(3) 9 9(1) 9(2) 9(3) Remarks (if any) √ √ √ √     Included in this Annual Report Shahjalal Islami Bank Limited
  275. 276 COMPLIANCE STATUS OF BANGLADESH BANK ’S GUIDELINES ON CORPORATE GOVERNANCE To ensure good governance i.e. corporate governance in bank management, Bangladesh Bank (BB) issued three circulars in 2013 covering three broad areas as follows: 1. BRPD Circular No.11 dated 27 October 2013: Formation and responsibilities of Board of Directors (BoD). 2. BRPD Circular Letter No. 18 dated 27 October 2013: Appointment and responsibilities of Chief Executive Officer (CEO). 3. BRPD Circular Letter No. 19 dated 27 October 2013: Contractual appointment of Advisor and Consultant. The summary of the BB guidelines and SJIBL’s compliance thereto are presented below: 1. Formation and responsibilities of Board of Directors (BoD) Sl. No. Particulars 1.0 1.1   b. Nominated person’s declaration Complied c. 'Declaration for confidentiality' by the nominated person Complied d. In case of independent director, the approval letter from BSEC Complied e. In case of Independent director, a declaration of the directors concern Complied f. CIB report of the nominated person Complied g. Updated list of Directors Complied 1.2 Vacation of office of Director:   (a) The office of director shall be vacated according to the instructions specified in section 108(1) of the Companies Act, 1994. Besides, when a bank director becomes defaulter and does not repay the loan within two months after getting a notice under the section 17 of the Bank Company Act, 1991; provides false statement at the time of appointment; or fails to fulfill the minimum eligibility criteria, the office of the director will be vacated. (b) If the office of a director is vacated by a notice under the section 17 of the Bank Company Act, the person will not be eligible to become a director of the bank or any other bank or any financial institution for one year from the date of repayment of the total amount due to the bank. It is mentionable here that the dues can be adjusted with the shares held by the director in that bank. When a director receives a notice under section 17 of the Bank Company Act, 1991, he/she can’t transfer his/her shares of that bank until he/she repays all the liabilities of the noticed bank or financial institution. (c) Bangladesh Bank can remove a director or chairman of a bank, except state owned banks, for conducting any kind of activities that is detrimental to the interest of the banks depositors or against the public interest under Section 46 and can supersede the Board of a banking company under Section 47 of Bank Company Act, 1991. Removal of Directors from office: With the prior approval of Bangladesh Bank, a bank director other than specialized banks can be removed from his office for the reason specified in its Articles of Association. For this purpose, the reason and grounds of the dismissal/removal and copy of the decision of the board and list of directors should be submitted to Bangladesh Bank. In this case, the removal will be effective from the date of Bangladesh Bank’s approval. Appointment of Alternate Director: An alternate director can be appointed to act for a director during his absence for a continuous period of not less than three months from Bangladesh. In this context, the following instructions should be followed: (a) Bank has to collect and properly maintain the documentary evidences relating to departure and arrival of the original director. If there is any exception, the chief executive officer should immediately inform it to Bangladesh Bank. (b) The copy of the decision of the board regarding appointment of alternate director, with original director’s probable returning date from abroad should be sent to Bangladesh Bank within 7 days of taking the decision and the director’s arrival date must be intimated to Bangladesh Bank immediately after his return. (c) Any loan defaulter or any person who is not eligible to become a director as per any rules & regulation will not be appointed as an alternate director. (d) As appointment of alternate director is a temporary measure; therefore, he/she will not be included in any kind of committee constituted by the board. (e) While in the office, an alternate director or his/her affiliated organization will not get any kind of loan facilities from his bank. In case of previous loan, enhancement of limit or extension of time period or any kind of exemption or interest waiver will not be allowed. Moreover, all restrictions applicable to directors according to rules & regulations will also be applicable to the alternate director. 1.3 1.4   Compliance Status Formation of Board of Directors: Prior approval of Bangladesh Bank before the appointment of new bank Complied directors, as well as dismissal, termination or removal of any director from the post; director’s fit & proper criteria; maximum number of directors; appointment of independent directors; appointment of maximum 4(four) members from a family as director. Appointment of New Directors: Every banking company, other than specialized banks, at the time of taking prior approval from Bangladesh Bank for appointing/reappointing directors should furnish the following documents along with the application: a. Personal information of the nominated person Complied ANNUAL REPORT 2020 No such case No such case No such case No such case Complied Complied Complied Complied Complied Complied
  276. 277 Sl . No. Particulars 2 3 Compliance Status Depositor Director: As per appointment of director from depositors is no longer required. But, after complying regulation under sec 15(9) of the Bank Company Act, 1991 (amended up to 2018) bank can consider the tenure of existing depositor director or may appoint them as independent director. Information regarding Directors: Banks are advised to take the following steps regarding directors information: Complied, No Depositor Director in SJIBL   (a) Every bank should keep an updated list of bank directors. Complied   Complied   (b) Banks should send a directors’ list to other banks or financial institutions immediately after the appointment or release of director. (c) Banks should display a list of directors on the website and update it on a regular basis. 4 Responsibilities of the Board of Directors (Board) 4.1 Responsibilities and Authorities of the Board: (a) Work planning and strategic management   (i) The board shall determine the objectives and goals and to this end shall chalk out strategies and work-plans on annual basis. It shall specially engage itself in the affairs of making strategies consistent with the determined objectives and goals and in the issues relating to structural change and reformation for enhancement of institutional efficiency and other relevant policy matters. It shall analyze/monitor, at quarterly rests, the development of implementation of the work-plans. (ii) The board shall have its analytical review incorporated in the Annual Report as regards to the success/failure in achieving the business and other targets as set out in its annual work-plan and shall apprise the shareholders of its opinions/ recommendations on future plans and strategies. It shall set the Key Performance Indicators (KPIs) for the CEO & officers immediate two tiers below the CEO, and have it evaluated from time to time. Credit and risk management Complied (i) The policies, strategies, procedures etc. in respect of appraisal of loan/investment proposal, sanction, disbursement, recovery, reschedule and write-off thereof shall be made with the board's approval under the purview of the existing laws, rules and regulations. The board shall specifically distribute the power of sanction of loan/investment and such distribution should desirably be made among the CEO and his subordinate executives as much as possible. No director, however, shall interfere, direct or indirect, into the process of loan approval. (ii) The board shall frame policies for risk management and get them complied with and shall monitor the compliance at quarterly rests and review the concerned report of the risk management team and shall compile in the minutes of the board meeting. The board shall monitor the compliance of the guidelines of Bangladesh Bank regarding key risk management. Internal Control Management Complied The board shall be vigilant on the internal control system of the bank in order to attain and maintain satisfactory qualitative standard of its loan/investment portfolio. The board will establish such an internal control system so that the internal audit process can be conducted independently from the management. It shall review the reports submitted by its audit committee at quarterly rests regarding compliance of recommendations made in internal and external audit reports and the Bangladesh Bank inspection reports. Human Resources (HR) Management and Development Complied (b)   (c)   (d)   (e)   (f) (i) Policies relating to recruitment, promotion, transfer, disciplinary and punitive measures, human resources development etc. and service rules shall be framed and approved by the board. The chairman or the directors shall in no way involve themselves or interfere into or influence over any administrative affairs including recruitment, promotion, transfer and disciplinary measures as executed under the set service rules. No member of the board of directors shall be included in the selection committees for recruitment and promotion to different levels. Recruitment, promotion, transfer & punishment of the officers immediate two tiers below the CEO shall, however, rest upon the board. Such recruitment and promotion shall have to be carried out complying with the service rules i.e., policies for recruitment and promotion. (ii) The board shall focus its special attention to the development of skills of bank's staff in different fields of its business activities including prudent appraisal of loan/investment proposals, and to the adoption of modern electronic and information technologies and the introduction of effective Management Information System (MIS). The board shall get these programs incorporated in its annual work plan. (iii) The board will compose Code of Ethics for every tier and they will follow it properly. The board will promote healthy code of conducts for developing a compliance culture. Financial Management (i) The annual budget and the statutory financial statements shall be finalized with the approval of the board. It shall at quarterly rests review/monitor the positions in respect of bank's income, expenditure, liquidity, nonperforming asset, capital base and adequacy, maintenance of loan loss provision and steps taken for recovery of defaulted loans including legal measures. (ii) The board shall frame the policies and procedures for bank's purchase and procurement activities and shall accordingly approve the distribution of power for making such expenditures. The maximum possible delegation of such power of expenditures shall rest on the CEO and his subordinates. The decision on matters relating to infrastructure development and purchase of land, building, vehicles etc. for the purpose of bank's business shall, however, be adopted with the approval of the board. iii) The board will review whether an Asset-Liability Committee (ALCO) has been formed and it is working according to Bangladesh Bank guidelines. Appointment of Chief Executive Officer (CEO): In order to strengthen the financial base of the bank and obtain confidence of the depositors, one of the major responsibilities of the board of directors is to appoint an honest, efficient, experienced and suitable CEO or Managing Director. The Board of directors will appoint a suitable CEO with the approval of the Bangladesh Bank. Complied Complied. SJIBL Board reviews HR Policy time to time. Complied. Complied. Shahjalal Islami Bank Limited
  277. 278 Sl . No. Particulars (g) 4.2 Other responsibilities of the Board: The board should follow and comply with the responsibilities assigned by Bangladesh Bank. Meetings of the Board of Directors: Board of Directors may meet once or more than once in a month upon necessity and shall meet at least once in every three months. Excessive meetings are discouraged. 4.3 Responsibilities of the Chairman of the Board:   (a) As the chairman of the board of directors or chairman of any committee formed by the board or any director does not personally possess the jurisdiction to apply policy making or executive authority, he/she shall not participate in or interfere into the administrative or operational and routine affairs of the bank. (b) The chairman may conduct on-site inspection of any bank-branch or financing activities under the purview of the oversight responsibilities of the board. He may call for any information relating to bank's operation or ask for investigation into any such affairs; he may submit such information or investigation report to the meeting of the board or the executive committee and if deemed necessary, with the approval of the board, he shall effect necessary action thereon in accordance with the set rules through the CEO. However, any complaint against the CEO shall have to be apprised to Bangladesh Bank through the board along with the statement of the CEO. (c) The chairman may be offered an office-room, a personal secretary/assistant, one peon/MLSS, one telephone at the office, one mobile phone to use inside the country and a vehicle in the business-interest of the bank subject to the approval of the board. Formation of Supportive Committees of the Board: Each bank company can form 1(one) executive committee, 1(one) audit committee and 1(one) risk management committee with the directors. Board can’t form any other permanent, temporary or sub-committee except the above mentioned three committees. Executive Committee (EC): Executive committee should be formed with the members of the board to continue the urgent and daily or routine works between the intervals of two board meetings. Executive committee will perform according to their terms of reference determined by the board of directors. a) Organizational structure: 5 5.1     i. Members of the committee will be nominated by the board of directors from themselves; Compliance Status Complied. The Board of Directors do so as and when required by Bangladesh Bank. Complied. Usually SJIBL holds one or two Board Meetings in a month. Complied Complied Complied Complied Complied Complied ii. The executive committee will comprise of maximum 07 (seven) members; iii. Members may be appointed for a 03 (three)-year term of office; iv. Chairman of the Board of Directors can be the chairman of executive committee; v. Company secretary of the bank will be the secretary of the executive committee.   b) Qualifications of the Members:   i. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee; ii. Each member should be capable of making valuable and effective contributions in the functioning of the committee; iii. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank's business, operations and its risks. c) Roles and Responsibilities of the Executive Committee: Complied   i. The executive committee can decide or can act in those cases as instructed by the Board of directors that are not specifically assigned on full board through the Bank Company Act, 1991 and other laws and regulations. ii. The executive committee can take all necessary decision or can approve cases within power delegated by the board of directors. iii. All decisions taken in the executive committee should be ratified in the next board meeting. Complied   d) Meetings   i. The executive committee can sit any time as it may deem fit.   Complied ii. The committee may invite Chief Executive Officer, Head of internal audit or any other Officer to its meetings, if it deems necessary; iii. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; iv. All decisions/observations of the committee should be noted in minutes. 5.2   Audit Committee: The board will approve the objectives, strategies and overall business plans of the bank and the audit committee will assist the board in fulfilling its oversight responsibilities. The committee will review the financial reporting process, the system of internal control and management of financial risks, the audit process, and the bank's process for monitoring compliance with laws and regulations and its own code of business conduct. a) Organizational structure: ANNUAL REPORT 2020 Complied
  278. 279 Sl . No. Particulars   Compliance Status i. Members of the committee will be nominated by the board of directors from the directors; Complied ii. The audit committee will comprise of maximum 05 (five) members, with minimum 2(two) independent directors; iii. Audit committee will comprise with directors who are not executive committee members; iv. Members may be appointed for a 03 (three) year term of office; v. Company secretary of the bank will be the secretary of the audit committee.   b) Qualifications of the Member:     i. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee ; ii. Each member should be capable of making valuable and effective contributions in the functioning of the committee; iii. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank's business, operations and its risks. iv. Professionally Experienced persons in banking/financial institutions specially having educational qualification in Finance, Banking, Management, Economics, Accounting will get preference informing the committee. c) Roles and Responsibilities of the Audit Committee   i) Internal Control:   1. Evaluate whether management is setting the appropriate compliance culture by communicating the importance of internal control and the management of risk and ensuring that all employees have clear understanding of their roles and responsibilities; 2. Review management’s actions in building computerization of the bank and its applications and bank's Management Information System (MIS); 3. Consider whether internal control strategies recommended by internal and external auditors have been implemented by the management; 4. Consider reports relating to fraud, forgery, deficiencies in internal control or other similar issues detected by internal and external auditors and inspectors of the regulatory authority and place it before the board after reviewing whether necessary corrective measures have been taken by the management. (ii) Financial Reporting: Complied   1. Audit committee will check whether the financial statements reflect the complete and concrete information and determine whether the statements are prepared according to existing rules & regulations and standards enforced in the country and as per relevant prescribed accounting standards set by Bangladesh Bank; 2. Discuss with management and the external auditors to review the financial statements before its finalization. Complied   (iii) Internal Audit:   1. Audit committee will monitor whether internal audit working independently from the management.   Complied Complied 2. Review the activities of the internal audit and the organizational structure and ensure that no unjustified restriction or limitation hinders the internal audit process; 3. Examine the efficiency and effectiveness of internal audit function;   4. Examine whether the findings and recommendations made by the internal auditors are duly considered by the management or not. (iv) External Audit   1. Review the performance of the external auditors and their audit reports; Complied 2. Examine whether the findings and recommendations made by the external auditors are duly considered by the management or not. 3. Make recommendations to the board regarding the appointment of the external auditors.   (v) Compliance with existing laws and Regulations:   Review whether the laws and regulations framed by the regulatory authorities (central bank and other Bodies) and internal regulations approved by the board are being complied with. (vi) Other Responsibilities: Complied 1. Submit compliance report to the board on quarterly basis on regularization of the omission, fraud and forgeries and other irregularities detected by the internal and external auditors and inspectors of regulatory authorities; 2. External and internal auditors will submit their related assessment report, if the committee solicit; Complied       3. Perform other oversight functions as desired by the Board of Directors and evaluate the committee's own performance on a regular basis. d) Meetings:   1. The audit committee should hold at least 4 meetings in a year and it can sit any time as it may deems fit;   Complied 2. The committee may invite Chief Executive Officer, Head of internal audit or any other Officer to its meetings, if it deems necessary; 3. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; 4. All decisions/observations of the committee should be noted in minutes. Shahjalal Islami Bank Limited
  279. 280 Sl . No. Particulars 5.3     Compliance Status Risk Management Committee: To play an effective role in mitigating impending risks arising out from strategies and policies formulated by the Board and to carry out the responsibilities efficiently, a risk management committee will be formed. After identifying and assessing several risk factors like credit risks, foreign exchange risks, internal control and compliance risks, money laundering risks, information and communication risks, management risks, interest risks, liquidity risks etc.; the risk management committee will scrutinize whether appropriate risk management measures are being put in place and applied and whether adequate capital and provision is being maintained against the risks identified. a) Organizational Structure: Complied 1. Members of the committee will be nominated by the board of directors from themselves; Complied 2. The Risk Management Committee will comprise of maximum 05 (five) members; 3. Members may be appointed for a 03 (three) year term of office; 4. Company secretary of the bank will be the secretary of the Risk Management Committee.   b) Qualifications of the Member:     1. Integrity, dedication, and opportunity to spare time in the functions of committee will have to be considered while nominating a director to the committee; 2. Each member should be capable of making valuable and effective contributions in the functioning of the committee; 3. To perform his or her role effectively each committee member should have adequate understanding of the detailed responsibilities of the committee membership as well as the bank's business, operations and its risks. c) Roles and Responsibilities of the Risk Management Committee:   i) Risk identification & control policy :   Formulation and implementation of appropriate strategies for risk assessment and its control is the responsibility of Risk Management Committee. Risk Management Committee will monitor risk management policies &methods and amend it if necessary. The committee will review the risk management process to ensure effective prevention and control measures. ii) Construction of organizational structure: Complied The responsibility of Risk Management Committee is to ensure an adequate organizational structure for managing risk within the bank. The Risk Management Committee will supervise formation of separate management level committees and monitor their activities for the compliance of instructions of lending risk, foreign exchange transaction risk, internal control & compliance risk, money laundering risk, information & communication risk including other risk related guidelines. iii) Analysis and approval of Risk Management policy: Complied Risk management policies & guidelines of the bank should be reviewed annually by the committee. The committee will propose amendments if necessary and send it to the Board of Directors for their approval. Besides, other limits including lending limit should be reviewed at least once annually and should be amended, if necessary. iv) Storage of data & Reporting system: Complied Adequate record keeping & reporting system developed by the bank management will be approved by the risk management committee. The committee will ensure proper use of the system. The committee will minute its proposal, suggestions & summary in a specific format & inform the Board of Directors. v) Monitoring the implementation of overall Risk Management Policy: Complied Risk Management Committee will monitor proper implementation of overall risk management policies. They will monitor whether proper steps have been taken to mitigate all risks including lending risk, market risk, and management risk. vi) Other responsibilities: Complied 1. Committee’s decision and suggestions should be submitted to the Board of Directors quarterly in short form; Complied                     2. Comply instructions issued time to time by the controlling Body; 3. Internal & external auditor will submit respective evaluation report whenever required by the committee. Complied   Complied   d) Meetings:   1. The risk management committee should hold at least 4 meetings in a year and it can sit any time as it may deem fit; 2. The committee may invite Chief Executive Officer, Chief Risk Officer and any other Officer to its meetings, if it deems necessary; 3. To ensure active participation and contribution by the members, a detailed memorandum should be distributed to committee members well in advance before each meeting; 4. All decisions/observations of the committee should be noted in minutes. Complied Training of the Directors: The Directors of the Board will acquire appropriate knowledge of the Banking laws and other relevant laws, rules and regulations to effectively discharge the responsibilities as a Director of the bank. Intimation of the Circular to the Board and related persons by CEO: The CEO will inform about this Circular to the directors and other related persons. Complied   6 7 ANNUAL REPORT 2020 Complied Complied   Complied
  280. 281 2 . Appointment and responsibilities of Chief Executive Officer (CEO) Sl. No. A 1   2   3   4 5 6   7 8 9 10 11 B Particulars Compliance Status Rules and regulations for appointment of the CEO Moral Integrity: In case of appointment to the post of CEO, satisfaction in respect of the concerned person should be ensured to the effects that: a) He has not been convicted by any Criminal Court of Law. Complied b) He has not been punished for violating any rules, regulations or procedures/ norms set by any regulatory authority. c) He was not associated with any such company/organization; registration or license of which has been cancelled. Experience and Suitability: a) For appointment as a CEO, the concerned person must have experience in banking profession for at least 15 Complied (fifteen) years as an active officer and at least 02 (two) years experience in a post immediate below the CEO of a bank. b) He must have a Master’s degree at minimum from any recognized university. Higher academic education in the field of Economics, Banking and Finance or Business Administration will be treated as additional qualification for the concerned person. c) In respect of service, the concerned person should have excellent track record of performance. d) Satisfaction should be ensured that the concerned person was not dismissed from service when he was chairman/ director/official of any company. e) Any director of any bank or financial institution or any person who has business interest in the concerned bank will not be eligible for appointment to the post of the CEO. Transparency and financial integrity: Before making appointment as a CEO, satisfaction should be ensured to the effects that: a. The concerned person was not involved in any illegal activity while performing duties in his own or banking Complied profession. b. He has not deferred payment to creditors or has not compromised with his creditors to be relieved from debts or he is not a loan defaulter. c. He is not a tax defaulter. d. He has never been adjudicated a bankrupt by the Court. Age Limit: No person crossing the age of 65 years shall hold the post of CEO of a bank. Complied Tenure: The tenure of the CEO shall not be more than 03 (three) years, which is renewable. If the candidate has less Complied than 3 years left to attain 65 years, he/she can be appointed for that shorter period Guidelines in fixing the salary and allowances: Banks are required to follow the guidelines stated below while determining the salary and allowances of the CEO and submitting such proposal to Bangladesh Bank: a. In fixing the salary and allowances of the CEO, financial condition, scope of operation, business-volume and Complied earning capacity of the bank; qualifications, achievement of the candidate in the past, age and experience and the remuneration paid to the persons occupying same position in the peer banks shall have to be taken into consideration. b. Total salary shall be comprised of direct salary covering ‘Basic Salary’ and ‘House Rent’ and allowances as ‘Others’. The allowances (e.g., provident fund, utility bill, leave-fare assistance) in ‘Others’ head should be specified in amount/ ceiling. Besides, other facilities (e.g., car, fuel, driver etc.), as far as possible, shall have to be converted in the monetary value and thus determining monthly total salary, it shall have to be mentioned in the proposal submitted to Bangladesh Bank. In the proposal, Basic Salary, House Rent, Festival Allowance, other allowances and other facilities shall have to be specified in Taka amount. c. Without improving the bank’s major financial indicator like- CAMELS, annual salary increment will not be payable. d. Terms of salary-allowances and other facilities as specified in the terms and conditions of appointment cannot be changed during the tenure. In case of renewal, proposal may be made for re-fixation of the salary considering the work performance of the current CEO. e. The CEO so appointed shall not get any other direct or indirect facilities (e.g., dividend, commission, club expense, etc.) other than the salary-allowances and other facilities as enumerated in clause (b) above. f. The bank shall not pay any income tax for the CEO, i.e., the CEO so appointed shall have to pay it. Incentive Bonus: The CEO will get incentive bonus subject to paying incentive bonus to all executives/officers/workers Complied of the bank and the said bonus amount will not exceed BDT 1,000,000 in a year. Honorarium for attending the Board Meeting: Being a salaried executive, CEO will not get any honorarium for Complied attending the Board meeting or Board formed Committee meeting. Evaluation Report: For reappointment of the CEO, the Chairman of the bank shall have to submit a Board approved Complied evaluation report to Bangladesh Bank. Prior Approval from Bangladesh Bank: Prior approval from Bangladesh Bank is mandatory before appointing CEO as Complied per section 15(4) & (5) of Bank Company Act 1991 (amended up to 2018). For processing such approval, along with the proposal signed by the Chairman of the Board, the selected person’s complete resume, offer letter (mentioning the direct & indirect remuneration and facilities) and copy of Board’s approval must be submitted to Bangladesh Bank. The selected person must also submit declarations as per Annexure Ka& Annexure Kha to Bangladesh Bank. Decision of Bangladesh Bank is final: The decision of Bangladesh Bank regarding appointment of the CEO will be Complied treated as final and such appointed CEO cannot be dismissed, released or removed from his/her office without prior approval from Bangladesh Bank. Responsibilities and Authorities of the CEO: The CEO of the bank, whatever name called, shall discharge the responsibilities and exercise the authorities as follows: Shahjalal Islami Bank Limited
  281. 282 Sl . No.   Particulars a. In terms of the financial, business and administrative authorities vested upon him by the Board, the CEO shall discharge his own responsibilities. He shall remain accountable for achievement of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management. b. The CEO shall ensure compliance of the Bank Company Act 1991 and other relevant laws and regulations in discharging of routine functions of the bank. c. The CEO shall include clearly any violation from Bank Company Act 1991 and/or other relevant laws and regulations in the “Memo” presented to the meeting of the Board or any other Committee (s) engaged by the Board. d. The CEO shall report to Bangladesh Bank of issues in violation of the Bank Company Act 1991 or of other laws/ regulations. e. The recruitment and promotion of all staffs of the bank except those in the two tiers below him/her shall rest on the CEO. He/she shall act in such cases in accordance with the approved service rules on the basis of the human resources policy and approved delegation of employees as approved by the Board. f. The authority relating to transfer of and disciplinary measures against the staff, except those at two tiers below the CEO, shall rest on him/her, which he/she shall apply in accordance with the approved service rules. Besides, under the purview of the human resources policy as approved by the Board, he/she shall nominate officers for training etc. Compliance Status Complied Complied Complied Complied Complied Complied 3. Contractual appointment of Advisor and Consultant Sl. No. Particulars A 1 Rules and regulations for appointment of an Advisor Experience and Suitability: For appointment as advisor, the concerned person will have to fulfill the following requirements with regard to experience and qualifications: a. Experience in Banking or Administration for at least 15 (fifteen) years or have a long experience in social activities. b. Higher academic education in the field of Economics, Banking and Finance or Business Administration will be treated as additional qualification for the concerned person. c. Satisfaction should be ensured that the concerned person was not dismissed from his service when he was Chairman/ Director/ Executive of any company. d. The person who is working in any bank or financial institution or who has business interest in that bank will not be eligible for appointment to the post of Advisor. e. Satisfaction should be ensured that the concerned person is not a loan defaulter or tax defaulter and has never been adjudicated a bankrupt by the Court. Responsibilities of the Advisor: The roles and responsibilities of the Advisor should be defined specifically. The Advisor can advise the Board of Directors or CEO only on those matters specified in the appointment letter. The routine and general activities of the bank will not be included in his terms of reference. He will not be entitled to exercise any power or involved himself in the decision making process of financial, administrative, operations or other activities of the bank. Prior approval from Bangladesh Bank: Prior approval from Bangladesh Bank is mandatory before appointing an Advisor. For such appointment, the justifications of the post of advisor, responsibilities or terms of reference, complete resume of the concerned person, terms of appointment (mentioning remuneration and facilities) and copy of Board’s approval shall be submitted to Bangladesh Bank. The nominated person has to make a declaration as per Annexure A. This declaration shall also be submitted to Bangladesh Bank. Remuneration and other facilities of Advisor: The post of Advisor is not a fixed or substantive post in the bank’s organization structure. Advisor will not be entitled to salaries and allowances as regular employee except gross amount of remuneration, transport and telephone facilities. Remunerations inconsistent with the terms of reference of the advisor will not be considered as acceptable to Bangladesh Bank. Tenure of Advisor: The tenure of the Advisor shall be maximum 01(one) year, which is renewable. An evaluation report (by the Chairman that is approved by the Board) of previous tenure should be submitted to Bangladesh Bank along with the re-appointment proposal. Appointment of Ex-officials: For ensuring good governance, any former Director, CEO or any other Executive of the bank will not be eligible to become an Advisor in the same bank immediately after their retirement or resignation. However, after one year from such retirement or resignation, he/she will be eligible for appointment as Advisor. Rules and regulations for appointment of a Consultant Terms of reference of Consultant: Consultant can be appointed for specialized tasks like tax, law and legal procedures, engineering and technical works, information technology, etc. Consultants’ appointment should be avoided as much as possible for those works that could be done by regular employees of the bank. Responsibilities of a Consultant: The responsibilities or terms of reference of a Consultant should be specified. He/ she should not be involved in any activities beyond his/her terms of references and he/she cannot exercise any kind of power in bank operation or cannot participate in the decision making process. Appointment of a Consultant: A Consultant can be appointed with the approval of the Board. After Such appointment the bank shall send the Consultant’s complete resume, terms of reference and details of remuneration to Bangladesh Bank immediately. Tenure of a Consultant: The tenure of a Consultant should be consistent with the terms of reference, but would not exceed 02 (two) years. Generally the Consultant will not be eligible for re-appointment. But to complete the unfinished tasks, his contract may be extended for maximum period of 01 (one) year with the approval of Bangladesh Bank. The Chairman of the bank upon approval of the Board shall have to submit the extension proposal to Bangladesh Bank with the evaluation report of his previous tenure. Remuneration/Honorarium of a Consultant: The Consultant’s remuneration should be in the form of monthly or single lump-sum payment and he is not entitled to any other facilities. Appointment of Ex-officials: For ensuring good governance, any former Director, CEO or any other Executive of the bank will not be eligible for appointment as a Consultant in the same bank immediately after their retirement or resignation. However, after one year from such retirement or resignation, he/ she will be eligible for appointment as a Consultant.   2 3 4 5 6 B 1 2 3 4 5 6 ANNUAL REPORT 2020 Compliance Status N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
  282. 283 ANNUAL REPORT OF SHARIAH SUPERVISORY COMMITTEE-2020 All praises is due to Almighty Allah , the Lord of the Universe and peace and blessings of Allah be upon the Prophet Mohammad (s.a.w.) and his all other descendants and companions. The Honorable Members of Shariah Supervisory Committee met in 03 (three) Supervisory Committee Meetings and 2 (two) Sub Committee Meeting in the year-2020 to review and confer decision on the matters referred by the Board of Directors and the Management of the Bank. The Shariah Supervisory Committee gave necessary instructions and guidelines to the management from time to time to operate the Banking transactions according to the principles of Islamic Shariah. Shariah Inspection reports of the Branches are submitted to Shariah Supervisory Committee Secretariat by Shariah Inspection and Compliance Division to review. After reviewing the reports and the performance of transactions of Shahjalal Islami Bank Limited, the Shariah Supervisory Committee gives their opinions and suggests as following: 1. Shariah awareness has been developed during the year compared to previous ones due to motivation and other measures taken; 2. Distribution of profit among the various Mudarabah depositors have been made as far as possible in accordance with the principles of Islamic Shariah; 3. The Management of the Bank should remain more careful to operate all its Banking transactions as per Shariah principles by implementing suggestions given by Shariah Supervisory Committee from time to time; 4. Besides existing investment schemes, some new small investment schemes specially for the development of agriculture sector are to be introduced to uplift socio-economic condition and welfare of the distressed humanities; 5. The Management has to be more cautious to ensure buy-sale with supporting necessary documents in all cases, especially in case of Bai-Muajjal and Bai-Murabaha investment. Also pro-active initiatives should be taken for implementation of Mudaraba and Musharaka mode of investment in its operations gradually; 6. Shariah audit should be conducted in all Branches more frequently to verify/rectify Banking transactions to comply with Shariah; 7. To ensure effective compliance of Shariah principles; Bank Management should be more vigilant to continue implementation of suggestions given from Shariah Supervisory Committee time to time; 8. After normalization of the Covid-19 Pandemic more “Meetings, Seminars, Workshop, Symposiums and Get-together” should be organized centrally and at branch level to develop awareness among the valued clients as well as employees of the Bank about Islamic Banking and its benefits. May Allah (swt), the Lord of the Universe, grant us the strength and courage to participate in the endeavor of establishing welfare and balanced economic system throughout the world eliminating interest based harmful & discriminatory economic system. Aa-meen! Mufti Abdul Halim Bukharee Chairman, Shariah Supervisory Committee Shahjalal Islami Bank Limited
  283. 284 kixqvn & mycvifvBRvix KwgwUi evwl©K cÖwZ‡e`b-2020 mKj cÖksmv gnvb Avjøvn& iveŸyj Avjvgx‡bi, whwb †MvUv wek¦ Rvnv‡bi cÖwZcvjK| AmsL¨ `iƒ` I mvjvg ivn&gvZzwjøj Avjvgxb wcÖq bex nhiZ gynv¤§` gy¯Ídv mvjøvjøvû AvjvBwn Iqvmvjøvg, Zuvi cwiev‡ii m`m¨eM© I mvnvev‡q †Kivg, Zv‡eqxb, Zv‡eÕ Zv‡eqxb, AvB¤§v‡q gyRZv‡n`xb Ges wK¡qvgZ ch©šÍ AbvMZ Abymvix‡`i cÖwZ| kvn&Rvjvj Bmjvgx e¨vsK wjwg‡UW kixqvn& mycvifvBRvix KwgwUi m¤§vwbZ m`m¨e„›` e¨vs‡Ki cwiPvjbv cl©` I e¨e¯’vcbv KZ…©cÿ KZ…©K Dc¯’vwcZ welqvw`i Dci w`K-wb‡`©kbvg~jK wm×všÍ cÖ`v‡bi Rb¨ 2020 Bs m‡b mycvifvBRvix KwgwUi 3 (wZbwU) wU mfv Ges mve KwgwUi 2 (`yB) wU mfvq wgwjZ nb| Zv Qvov kixqvn& bxwZgvjvi Av‡jv‡K e¨vswKs Kvh©µg cwiPvjbvi Rb¨ mycvifvBRvix KwgwUi cÿ †_‡K mgq mgq e¨e¯’vcbv KZ…©cÿ‡K cÖ‡qvRbxq civgk© I w`K-wb‡`©kbv cÖ`vb Kiv nq| kixqvn& B݇cKkb wefv‡Mi gva¨‡g e¨vs‡Ki kvLv¸‡jv‡Z kixqvn& wbixÿv Kvh©µg cwiPvjbv K‡i wbixÿv cÖwZ‡e`b¸‡jv kixqvn& mwPevj‡q Rgv †`qv nq| kixqvn& mycvifvBRvix KwgwU kvn&Rvjvj Bmjvgx e¨vsK wjwg‡U‡Wi kixqvn& wbixÿv cÖwZ‡e`bmg~n ch©v‡jvPbv I hveZxq Kvh©vejx ch©‡eÿY I g~j¨vqb Kivi ci wb‡gœv³ gZvgZ I civgk© cÖ`vb K‡ib t 1. m‡PZbZv e„w×i j‡ÿ¨ M„nxZ wewfbœ c`‡ÿ‡ci Kvi‡Y weMZ eQi¸‡jvi Zyjbvq kixqvn& m¤ú‡K© AviI AwaK m‡PZbZv e„w× †c‡q‡Q| 2. wewfbœ cÖKvi gy`vivevn& Rgvi wecix‡Z †h gybvdv e›Ub Kiv n‡q‡Q, Zv h_vm¤¢e kixqvn& bxwZgvjvi Av‡jv‡KB Kiv n‡q‡Q| 3. mycvifvBRvix KwgwUi cÿ †_‡K mgq mgq e¨e¯’vcbv KZ…©cÿ‡K †hme w`K-wb‡`©kbv cÖ`vb Kiv n‡q‡Q, e¨vs‡Ki hveZxq Kg©Kv‡Û †m m‡ei cwic~Y© ev¯Íevq‡bi cÖwZ e¨e¯’vcbv KZ…©cÿ‡K AviI m‡Pó _vK‡Z civgk© †`qv n‡q‡Q| 4. †`‡ki Av_©-mvgvwRK Ae¯’vi Dbœq‡b I A‡cÿvK…Z myweavewÂZ gvby‡li `vwi`ª we‡gvP‡b we`¨gvb wewb‡qvM cÖKímg~‡ni cvkvcvwk AviI bZyb bZyb ÿz`ª wewb‡qvM we‡klfv‡e K…wl Lv‡Zi Dbœq‡b Kvh©Ki wewb‡qvM cÖKí MÖnY Kiv GKvšÍ cÖ‡qvRb, hv‡Z cjøx A‡ji RbM‡Yi g‡a¨ kixqvn&wfwËK A_©bxwZi mydj AviI e¨vcK AvKv‡i cÖmvi jvf Ki‡Z cv‡i| 5. evBÔ‡q gyqv¾vj I evBÔ‡q gyivevnv wewb‡qvMmn mKj †ÿ‡Î e¨e¯’vcbv KZ©„cÿ‡K e¨vsK KZ…©K gvjvgvj µq-weµq wbwðZ Kivi Rb¨ Acwinvh©© WKz¨‡g›Um m¤ú‡K© AviI mRvM _vK‡Z n‡e| cvkvcvwk, av‡c av‡c gy`vivev I gykvivKv wewb‡qvM c×wZi Abykxj‡bI ev¯Íe c`‡ÿc MÖnY Ki‡Z n‡e| 6. kvLv ch©v‡q kixqvn& wbixÿv Kvh©µg AviI e¨vcKfv‡e cwiPvjbv K‡i e¨vswKs †mevq kixqvn& bxwZgvjv m¤ú~Y©iƒ‡c ev¯Íevqb Kivi mvwe©K e¨e¯’v MÖnY Ki‡Z n‡e| 7. kixqvn& bxwZgvjv cwicvj‡bi j‡ÿ¨ kixqvn& mycvifvBRvix KwgwUi cÿ †_‡K mgq mgq cÖ`Ë civgk©mg~n ev¯Íevq‡b e¨vsK KZ©„cÿ‡K AviI †ekx m‡Pó n‡Z n‡e| 8. Bmjvgx e¨vswKs-Gi mvdj¨ I AMÖhvÎv m¤ú‡K© m‡PZbZv e„w×i j‡ÿ¨ e¨vs‡Ki MÖvnK I Kg©KZ©ve„›`‡K G wel‡q AviI †ekx DØy× Kivi Rb¨ K‡ivbv (†KvwfW-19) cwiw¯’wZ ¯^vfvweK n‡j †K›`ªxq I kvLv ch©v‡q Ò†mwgbvi, wm‡¤úvwRqvg, IqvK©kc, MÖvnK mgv‡ek I cÖxwZm‡¤§jbÓ Av‡qvR‡bi Dci AZ¨waK ¸iæZ¡v‡ivc Kiv cÖ‡qvRb| cwi‡k‡l gnvb Avjøvn& iveŸyj Avjvgx‡bi `iev‡i cÖv_©bv, wZwb †hb AKj¨vYKi I mgv‡R ˆelg¨ m„wóKvix my`x avivi g~‡jvrcvUb K‡i †MvUv we‡k¦ Kj¨vYgyLx mylg A_© e¨e¯’v cÖwZôvi cÖqv‡m AskMÖn‡Yi `„p cÖZ¨q I kw³ Avgv‡`i `vb K‡ib| Avgxb! gydZx Avãyj nvjxg eyLvix †Pqvig¨vb, kixqvn& mycvifvBRvix KwgwU ANNUAL REPORT 2020
  284. 285 FROM THE DESK OF CFO Md . Jafar Sadeq FCA Chief Financial Officer Bismillahir Rahmanir Rahim By the grace of Almighty Allah, Shahjalal Islami Bank Limited (SJIBL) has completed another year which was different from any other year. Our operating profit had negative growth but other financial indicators were stable and improving in a different scenario. As on 31 December 2020, our market capitalization was Tk. 22,444 million, with 28,924 shareholders. We had Tk. 293,518 million of total assets, Tk. 196,513 million of General Investment, Tk.218,443 million of deposits and Tk. 17,949 million of shareholder’s equity. Covid-19 impact and management The COVID-19 pandemic has created global crisis of a completely different magnitude and one that requires a response of unprecedented scale. Business activities of majority of the organizations interrupted because of the lockdown, starting from 26 March, 2020. In addition RMG businesses started losing their confirmed orders. With limited operations, banks continued to face reduction in earnings from non-interest/non-profit income sources as well as interest/ profit income for implementation of 9% interest/profit rate cap. The realization of loan/investment has reduced drastically as well as the private sector credit/ investment growth was lower than expected. In order to manage the negative impact of COVID–19 government has announced various stimulus packages of Tk.1,240,530 million, majority of which is facilitated by the commercial banks. Accordingly, SJIBL has actively participated in all the stimulus packages and distributed Tk. 12,867.20 million to different clients under different packages. We have taken every possible step to lessen the adverse impacts of COVID-19. Budget and achievement Budget, the numerical expression of a plan of the Bank, plays an important role to specify the position to be reached by a stipulated time period. So, we have prepared our business budgets for helping us to achieve our ultimate goal. In order to make the budget realistic, participation of both the branches and Head Office management is essential. Accordingly, we have prepared our budget with the participation of both branches and head office. First quarter of 2020 was very much impressive; there were tremendous growth in almost all the indicators. The growth was seriously affected by COVID-19 pandemic as well as profit rate cap by Bangladesh Bank. In this adverse situation we had to revise our target and fixed up a revised Budget. Fortunately, we have achieved almost all the targets set in our revised budget 2020. The important targets and their achievements of 2020 are shown below:  Amount in million Taka Sl. Particulars 1 Deposit Budget 215,650 Actual Achievement 218,443 101% 2 Investment 207,330 196,513 95% 3 Operating profit 3,750 4,095 109% 4 Export 126,200 133,580 106% 5 Import 132,900 148,470 112% Shahjalal Islami Bank Limited
  285. 286 Opera �ng Income (Amount in million) Export Import 8,653 10,506 8,805 3,750 4,095 132,900 148,470 Actual 126,200 133,580 Budget 207,330 196,513 215,650 218,443 Budget VS Achievement in Key Indicator (Million Taka) Deposit Investment Opera�ng Profit Cost Rationalization Due to the emergence of COVID 19 pandemic and profit rate cap by Bangladesh Bank in 2020 cost rationalization had become essential for the existence of banking sector as a whole. In this regard, Financial Administration Division had made a drive of cost rationalization awareness and initiatives across SJIBL. We had made a noteworthy contribution by reducing Rent, Taxes, Insurance, Electricity etc. by 6.06%, Stationary, Printing, Advertisement, etc. by 30.19% and Other Expenses by 8%. In spite of savings of operating expenses, cost to income ratio increased slightly due to profit rate cap. In the coming days, we will focus more on cost rationalization that will reap up the benefits for the Bank. Financial performance highlights of SJIBL Banking industry passed a challenging year due to COVID 19 pandemic in 2020. Despite intensified challenges, SJIBL managed its portfolio efficiently closing the year 2020 with an NPL of 4.57% that was 4.91% in 2019 which is lower than that of industry average of 7.77%. The prime focus during the year has been improving asset quality, recovering classified investments, mobilization of low cost no cost deposits, process automation, upholding service excellence, and rationalizing costs. A brief review of financial performances is as follows: ●● ●● ●● Net profit income decreased by 21.77% in 2020 compared to last year due to profit rate cap by Bangladesh Bank and negative investment growth for COVID 19 during the year. Profit income decreased by 16.05% and profit expense decreased by 12.92%. Non-profit income decreased by 4.13% mainly due to decrease of commission, exchange and brokerage income by 14.84% and increase of income from investment in shares and securities by 30.61%. A decrease in export and import business due to outbreak of COVID 19 pandemic all over the world resulted a decreased commission, exchange and brokerage income in 2020. On the other hand Bank had huge liquidity due to lower investment appetite in the market due to COVID lead uncertainty. The Bank used its idle money in investment in shares and securities as a result income from investment in shares and securities increased by 30.61%. The operating income decreased by 16.19% and operating expense increased by 1.50% during the year 2020 compared to last year. As a consequence, operating profit of the Bank decreased notably by 30.18% and reached at Tk. 4,095 million in 2020 from Tk.5,865 million in 2019. ANNUAL REPORT 2020 2018 2019 2020 ●● Total provision decreased by 77.10% in 2020 compared to last year due to extension of moratorium period up to 31 December 2020 and restriction imposed by Bangladesh Bank for classification of investment as well as increase of market price of quoted securities. ●● Total tax provision decreased by 20.25% in 2020 compared to last year mainly due to decrease of operating profit by 30.18% in 2020. ●● Finally Bank’s profit after tax (PAT) increased by BDT 189.90 million or 11.05% in 2020 compared to 2019. ●● ROE increased to 11.08% from 10.98% and ROA increased to .68% from .67% due to increase of profit after tax by 11.05%. Cost to income ratio increased slightly due to lower growth of operating income than that of operating expense. The Capital to risk weighted assets ratio (CRAR) decreased to 14.19% in 2020 from 15.58% in 2019. CRAR decreased due to regulatory deduction and repayment of Mudaraba Subordinated Bond. Return of Equity (%) 10.98 11.08 10.47 2018 2019 2020 Appropriation of profit Profit after tax of the Bank stood at Tk. 1,908.20 million during the year out of which Tk.728.68 million was required to transfer to statutory reserve in 2020. Thus, cumulative profit available for distribution stands at BDT 1,187.96 million out of which the Board of Directors recommended 12% dividend (7% cash & 5% stock) for the year 2020. The Bank has been paying attractive dividend to its shareholders from its inception representing attractive market value of its share. Capital adequacy status under Basel III Bank’s Capital to Risk Weighted Assets Ratio (CRAR) remains consistently within the comfort zone against the requirement of 12.5% (Minimum total capital ratio plus capital conservation buffer) and ended at 14.19% as on 31 December 2020. The
  286. 287 Bank issued 1st and 2nd Mudaraba Subordinated Bond of BDT 4 ,000 & 6,000 million respectively. Repayment of 1st Mudaraba Subordinated Bond is going on. However, to keep pace with the business growth and increased CRAR requirement, issuance of Mudaraba Perpetual Bond of Tk.5,000 million is under process, which will increase our Additional Tier-1 capital as well as the 5% stock dividend will also increase our Tier-1 capital further. The bank will also keep focusing on quality of assets consistently in order to reduce the risk weighted assets as well as retention of profit to strengthen its capital base. Non-performing Investments Non-performing investment of banking sector of Bangladesh stood at 7.77% as on 31 December 2020 whereas nonperforming investment of SJIBL was 4.57% at the same period which is significantly lower than the country position. The Bank has strengthened investment discipline and streamlined the recovery process to reduce the NPIs to an acceptable level. NPI of SJIBL came down to 4.57% from 4.91% of previous year. However, we are taking more initiatives to realize and regularize non-performing investments and reducing it further. Regulatory Compliance Our utmost priority is to safeguard the interest of our customers and shareholders. We have continued to work closely with the regulators to ensure compliance in every aspect. Our focus during 2020 was to conduct businesses prudently keeping ourselves within regulatory framework. Accordingly, we complied with all key regulatory ratios of the Bank namely CRR, SLR, ID ratio, CRAR, leverage ratio, MCO, capital market exposure, LCR & NSFR that clearly shows our commitment to key stakeholders. All the reports, returns, statements required to submit different regulatory authorities has been submitted within stipulated time in a complete and correct manner. The bank complied with all regulatory requirements of primary regulator Bangladesh Bank as well as all other regulators during the year 2020. Reporting Standards (IFRSs) and where there are any departures from the Standards, adequate disclosures have been made in the notes to the Financial Statements. Accounting estimates and judgments related to Financial Statements were made on a prudent, reasonable and consistent basis. The Financial Statements are prepared on going concern assumption. Applicable circulars and Guidelines of Bangladesh Bank, Companies Act 1994, Bank Companies Act 1991, Securities & Exchange Commission Rules and other applicable laws, Rules and Guidelines are complied with, in preparing Financial Statements. Adequate disclosure is made to the Financial Statements by taking care of the needs and requirements of all types of stakeholders. SJIBL focuses on transparent and appropriate disclosures through financial reporting. I would like to take the opportunity to thank the Board of Directors of the Bank, Management of the Bank, my colleagues at all stages, the customers, the regulators and the stakeholders at large. I am positive that, we will continue to take the bank forward and deliver more value to our shareholders in the coming days. Ameen, Md. Jafar Sadeq FCA Chief Financial Officer CRAR (%) 15.58 14.50 2018 14.19 2019 2020 Financial Reporting The Financial Statements for the year ended on 31 December 2020 have been prepared in compliance with International Accounting Standards (IASs) and International Financial Shahjalal Islami Bank Limited
  287. 288 FINANCIAL STATEMENTS ANNUAL REPORT 2020
  288. 289 Independent Auditor ’s Report To the Shareholders of Shahjalal Islami Bank Limited Report on the Audit of the Consolidated and Separate Financial Statements Opinion We have audited the consolidated financial statements of Shahjalal Islami Bank Limited and its subsidiary (the “Group”) as well as the separate financial statements of Shahjalal Islami Bank Limited (the “Bank”), which comprise the consolidated and separate balance sheets as at 31 December 2020 and the consolidated and separate profit and loss accounts, consolidated and separate statements of changes in equity and consolidated and separate cash flow statements for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2020, and of its consolidated and separate financial performance, and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note no. 2.1. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), guidelines issued by Bangladesh Bank, and rules and regulations issued by Bangladesh Securities and Exchange Commission (BSEC), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye-Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Description of key audit matters Our response to key audit matters 1. Investments Refer to note no. 8 to the consolidated and separate financial statements Investments are the main element of financial statements of the Bank. Income of the Bank is mainly dependent on the portfolio of investments. Management performance is highly dependent on the target achievement of investments. Investment disbursement requires robust documentation followed by approval from appropriate level of authority. We tested the design and operating effectiveness of key controls focusing on credit appraisal, investment disbursement procedures and monitoring process of investments. We have performed procedure to check whether the Bank has ensured appropriate documentation as per Bangladesh Bank regulations and the Bank’s policy before disbursement of We have identified investments as key audit matter because investments. In addition, we have performed procedure to check there is an inherent risk of fraud in disbursement of investments whether the investments are recorded completely and accurately by management to meet specific targets or expectations. and that are existed at the reporting date. At year end the Group and the Bank reported total gross Furthermore, we have assessed the appropriateness of disclosure investments of BDT 199,137 million (2019: BDT 200,299 million) against Bangladesh Bank guidelines. and BDT 196,512 million (2019: BDT 197,285 million) respectively. Shahjalal Islami Bank Limited
  289. 290 Description of key audit matters Our response to key audit matters 2 . Recognition of income from investments Refer to note no. 8 and 23 to the consolidated and separate financial statements Recognition of investment income has significant and wide We tested the design and operating effectiveness of key controls over recognition and measurement of income from investments. influence on financial statements. Recognition and measurement of investment income has We have performed test of operating effectiveness on automated control in place to measure and recognise investment income. involvement of complex IT environment. We have identified recognition of income from investments as a key audit matter because this is one of the key performance indicators of the Bank and therefore there is an inherent risk of fraud and error in recognition of income by management to meet specific targets or expectations. We have also performed substantive procedure to check whether investment income is recognised completely and accurately. We have assessed the appropriateness and presentation of disclosure against relevant accounting standards and Bangladesh Bank guidelines. 3. Measurement of provision for investment Refer to note no. 8, 15a and 40 to the consolidated and separate financial statements The process for estimating provision for investments associated We tested the design and operating effectiveness of key controls with credit risk is judgmental, significant and complex. While focusing on the following: estimating such provision certain judgmental factors need to be Tested the credit appraisal, investments disbursement considered including: procedures, monitoring and provisioning process; Future business performance of the investment client; Reviewed identification of loss events, including early warning and default warning indicators; and Key assumptions relating to further business performance of the client; Reviewed quarterly Classification of Investments (CL); Market value of the collateral; Our substantive procedure in relation to the provisions for investments portfolio comprised the following: Ability to repossess collateral; and Recovery rates. Furthermore, these provisions are processed manually that deals with voluminous data extracted from the IT system of the Bank and following the instructions of Bangladesh Bank issued time to time. Due to high level of judgment involved and using some manual process in estimating the provision for investments, we considered this to be a key audit matter. At year end the Group and the Bank reported total provision for investments of BDT 6,015 million (2019: BDT 5,510 million) and BDT 5,664 million (2019: BDT 5,159 million) respectively. Reviewed the adequacy of the Group and the Bank’s general and specific provisions; Assessed the methodologies on which the provision amounts based, recalculated the provisions and tested the completeness and accuracy of the underlying information; and Finally, assessed the appropriateness and presentation of disclosures against relevant accounting standards and Bangladesh Bank guidelines. 4. Impairment assessment of unquoted shares Refer to note no. 7a.5 to the consolidated and separate financial statements In the absence of quoted price in an active market, the fair value of unquoted shares and securities, especially any impairment is calculated using valuation techniques which may take into consideration direct or indirect unobservable market data and hence requires an elevated level of judgement and assumption. We have assessed the process and controls put in place by the Bank to ensure all major investment decisions are undertaken through a proper due diligence process. We have tested a sample of investment valuation as at 31 December 2020 and compared our results to the recorded value. Due to high level of judgment and assumption involved in evaluating the impairment assessment of unquoted shares, we Finally, we have assessed the appropriateness and presentation of disclosures against relevant accounting standards and considered this to be a key audit matter. Bangladesh Bank guidelines. ANNUAL REPORT 2020
  290. 291 Description of key audit matters Our response to key audit matters 5 . Carrying value of investment in subsidiary by the Bank Refer to note no. 10a to the consolidated and separate financial statements The Bank has invested in equity shares of its subsidiary namely We have reviewed management’s analysis of impairment Shahjalal Islami Bank Securities Limited. As at 31 December 2020 assessment and recoverable value calculation of the subsidiary in the carrying value of these investments in Shahjalal Islami Bank accordance with IAS 36: Impairment of Assets. Securities Limited is BDT 2,515 million (2019: BDT 2,515 million). In particular, our discussion with the management was focused The Bank is required to perform impairment test of investment on the continued appropriateness of the value in use model, in subsidiary when impairment indication exists. The impairment the key assumption used in the model, the reasonably possible testing is considered to be a key audit matter due to the complexity alternative assumptions, particularly where they had the most and judgements required in determining the assumptions to be impact on the value in use calculation. used to estimate the recoverable amount which is higher of fair value less costs to sell and value in use. Management has conducted impairment assessment and calculated recoverable value of its subsidiary for Shahjalal Islami Bank Securities Limited in accordance with IAS 36. 6. Legal and regulatory matters We focused on this area because the Bank and its subsidiary (the “Group”) operates in a legal and regulatory environment that is exposed to significant litigation and similar risks arising from disputes and regulatory proceedings. Such matters are subject to many uncertainties and the outcome may be difficult to predict. We obtained an understanding, evaluated the design and tested the operational effectiveness of the Group and Bank’s key controls over the legal provision and contingency processes. We enquired those charged with governance to obtain their views on the status of all significant litigation and regulatory matters. These uncertainties inherently affect the amount and timing of potential outflows with respect to the provisions which have We enquired of the Group and the Bank’s internal legal counsel for all significant litigation and regulatory matters and inspected been established and other contingent liabilities. internal notes and reports. We also received formal confirmations Overall, the legal provision represents the Group’s best estimation from external counsel. for existing legal matters that have a probable and estimable We assessed the methodologies on which the provision impact on the Group’s financial position. amounts are based, recalculated the provisions, and tested the completeness and accuracy of the underlying information. We also assessed the Group and the Bank’s provisions and contingent liabilities disclosure. 7. IT systems and controls Our audit procedures have focused on IT systems and controls due to the pervasive nature and complexity of the IT environment, the large volume of transactions processed in numerous locations daily and the reliance on automated and IT dependent manual controls. Our areas of audit focus included master data management, user access management and developer access to the production environment and changes to the IT environment. Among others, these are key to ensuring operating effectiveness of IT dependent application based controls. We tested the design and operating effectiveness of the Group and the Bank’s IT access controls over the information systems that are critical to financial reporting. We tested IT general controls (logical access, changes management and aspects of IT operational controls). This included testing that requests for access to systems were appropriately reviewed and authorised. We tested the Group and the Bank’s periodic review of access rights. We also inspected requests of changes to systems for appropriate approval and authorisation. We considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit. Where deficiencies were identified, we tested compensating controls or performed alternate procedures. In addition, we understood where relevant, changes were made to the IT landscape during the audit period and tested those changes that had a significant impact on financial reporting. Other Information Management is responsible for the other information. The other information comprises all of the information included in the Annual Report other than the consolidated and separate financial statements and our auditor’s report thereon. The Annual Report is expected to be made available to us after the date of this auditor’s report. Shahjalal Islami Bank Limited
  291. 292 Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon . In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of Management and those Charged with Governance for the Consolidated and Separate Financial Statements and Internal Controls Management is responsible for the preparation and fair presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank in accordance with IFRSs as explained in note no. 2.1, and for such internal control as management determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. The Banking Companies Act, 1991 and the Bangladesh Bank regulations require the management to ensure effective internal audit, internal control and risk management functions of the Group and the Bank. The management is also required to make a self-assessment on the effectiveness of anti-fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. In preparing the consolidated and separate financial statements, management is responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. ANNUAL REPORT 2020
  292. 293 We communicate with those charged with governance regarding , among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements In accordance with the Companies Act, 1994, the Securities and Exchange Rules, 1987, the Banking Companies Act, 1991 and the rules and regulations issued by Bangladesh Bank, we also report that: (i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; (ii) to the extent noted during the course of our audit work performed on the basis stated under the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section in forming the above opinion on the consolidated financial statements of the Group and the separate financial statements of the Bank and considering the reports of the Management to Bangladesh Bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management’s Responsibility for the financial statements and internal control: (a) internal audit, internal control and risk management arrangements of the Group and the Bank as disclosed in the financial statements appeared to be materially adequate; (b) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Bank and its related entity; (iii) financial statements for the year ended 31 December 2020 of subsidiary namely Shahjalal Islami Bank Securities Limited have been audited by K. M. Hasan & Co., Chartered Accountants and have been properly reflected in the consolidated financial statements; (iv) in our opinion, proper books of accounts as required by law have been kept by the Group and Bank so far as it appeared from our examination of those books; (v) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; (vi) the consolidated balance sheet and consolidated profit and loss account together with the annexed notes dealt with by the report are in agreement with the books of accounts and returns; (vii) the expenditures incurred were for the purpose of the Bank’s business for the year; (viii) the consolidated financial statements of the Group and the separate financial statements of the Bank have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as related guidance issued by Bangladesh Bank; (ix) adequate provisions have been made for investments and other assets which are in our opinion, doubtful of recovery; x) the information and explanations required by us have been received and found satisfactory; (xi) we have reviewed over 80% of the risk-weighted assets of the Bank and spent over 4,200 person hours; and (xii) Capital to Risk-weighted Assets Ratio (CRAR) as required by Bangladesh Bank has been maintained adequately during the year. Dhaka, 10 March 2021 Signed for & on behalf of ACNABIN Chartered Accountants Md Moniruzzaman FCA Partner ICAB Enrollment No. 787 DVC : 2103100787AS738073 Shahjalal Islami Bank Limited
  293. 294 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Balance Sheet As at 31 December 2020 Note Property and Assets Cash Cash in Hand (including Foreign Currencies) Balance with Bangladesh Bank & Sonali Bank Ltd (including Foreign Currencies) 31.12.2020 Taka 31.12.2019 Taka 3 1,814,745,636 2,209,024,307 4 13,351,033,150 15,165,778,786 15,539,227,347 17,748,251,654 5 6 2,983,335,984 4,759,516,675 7,742,852,659 23,646,670,016 1,780,506,464 608,258,408 2,388,764,872 12,361,483,166 7 21,695,610,000 7,700,804,301 29,396,414,301 11,750,000,000 5,548,441,179 17,298,441,179 8 184,095,800,600 15,041,318,459 199,137,119,059 185,685,308,986 14,614,015,788 200,299,324,774 9 10 11 4,872,812,072 15,917,222,101 88,909,355 295,967,778,349 4,557,631,359 13,843,340,562 88,909,355 268,586,146,921 12 19,856,439,728 11,752,538,519 13 30,316,556,422 81,508,507,043 67,907,231,368 34,433,455,394 3,889,060,291 218,054,810,518 24,786,164,728 82,805,155,336 62,791,526,991 28,408,125,716 4,335,581,019 203,126,553,791 Mudaraba Subordinated Bond 14 9,200,000,000 10,000,000,000 Other Liabilities 15 30,403,236,018 26,771,315,560 Deferred Tax Liabilities Total Liabilities 16 256,677,740 277,771,164,004 186,322,984 251,836,730,853 Paid-up Capital Statutory Reserve Capital Reserve Retained Earnings Total Shareholders' Equity 17.2 18 9,800,923,350 6,959,872,664 2,878,961 1,206,062,264 17,969,737,239 9,334,212,720 6,231,188,665 2,878,961 954,727,530 16,523,007,876 Non-controlling Interest Total Liabilities & Shareholders' Equity 17.7 226,877,106 295,967,778,349 226,408,192 268,586,146,921 Balance with other Banks and Financial Institutions Inside Bangladesh Outside Bangladesh Placement with other Banks & Financial Institutions Investments in Shares & Securities Government Others Investments General Investment etc. Bills Purchased and Discounted Fixed Assets including Premises, Furniture and Fixtures Other Assets Non-Banking Assets Total Property and Assets Liabilities and Capital Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts Bills Payable Capital/Shareholders' Equity ANNUAL REPORT 2020 19
  294. 295 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Off-balance Sheet Items As at 31 December 2020 Note 31 .12.2020 Taka 31.12.2019 Taka 37,961,567,205 31,092,059,818 34,857,199,890 16,124,209,575 120,035,036,488 35,064,492,967 29,749,668,530 31,562,148,000 16,714,181,896 113,090,491,393 Contingent Liabilities Acceptances & endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total 20 21 Other Commitments Documentary credits, short term and trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance, revolving and underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total - Total off-balance sheet items including contingent liabilities Consolidated Net Asset Value per Share [previous year's figure restated] - 120,035,036,488 113,090,491,393 18.33 16.86 42(i) The annexed notes from 1 to 54 form an integral part of these consolidated financial statements. Chairman Director Director Managing Director This is the consolidated balance sheet referred to in our separate report of even date. Signed for & on behalf of ACNABIN Chartered Accountants Dhaka, 10 March 2021 Md Moniruzzaman FCA Partner ICAB Enrollment No. 787 DVC : 2103100787AS738073 Shahjalal Islami Bank Limited
  295. 296 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Profit and Loss Account For the year ended 31 December 2020 Note 2020 Taka 2019 Taka Operating Income Investment Income 23 16 ,986,601,742 20,301,832,199 Less: Profit paid on Deposits 24 11,440,711,730 13,206,651,379 5,545,890,012 7,095,180,820 Net Investment Income Income from Investments in Shares/Securities 25 722,883,847 554,392,574 Commission, Exchange and Brokerage 26 1,857,875,279 2,152,478,637 Other Operating Income 27 818,539,311 797,137,757 3,399,298,436 3,504,008,968 8,945,188,449 10,599,189,788 Total Operating Income Operating Expenses Salaries and Allowances 28 3,031,500,629 2,962,806,871 Rent, Taxes, Insurances, Electricity etc. 29 438,197,925 485,427,141 Legal Expenses 30 2,109,580 1,400,755 Postage, Stamps, Telecommunication etc. 31 46,959,444 42,371,544 Stationery, Printings, Advertisements etc. 32 84,665,701 120,538,132 Chief Executive's Salary & Fees 33 21,572,700 19,957,000 Directors' Fees & Expenses 34 6,737,530 7,396,409 Shariah Supervisory Committee's Fees & Expenses 35 295,512 1,317,660 Auditors' Fees 36 540,250 574,750 Depreciation & Repairs of Assets 37 408,833,601 308,457,118 Zakat Expenses 38 160,982,542 140,732,626 Other Expenses 39 620,498,003 675,394,431 4,822,893,418 4,766,374,437 4,122,295,031 5,832,815,351 Specific provision for Classified Investments 156,994,000 1,160,780,000 General Provision for Unclassified Investments 228,500,000 525,400,000 General Provision for Off-balance Sheet Items 65,900,000 32,200,000 Total Operating Expenses Profit/ (Loss) before Provision 22 Provision for diminution in value of Investments in Shares - Provision for Other Assets - Total Provision 40 Total Profit/ (Loss) before Taxes 252,600,000 - 451,394,000 1,970,980,000 3,670,901,031 3,861,835,351 Provision for Taxation Deferred Tax 41 70,354,756 44,887,632 Current Tax 41b 1,686,637,361 2,158,307,672 1,756,992,117 2,203,195,304 1,913,908,914 1,658,640,047 Net Profit/ (Loss) after Tax ANNUAL REPORT 2020
  296. 297 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Profit and Loss Account For the year ended 31 December 2020 2020 Taka 2019 Taka 1 ,913,440,000 1,663,539,273 468,914 (4,899,226) 1,913,908,914 1,658,640,047 954,727,530 921,461,996 Add: Net Profit after Tax (attributable to equity holders of SJIBL) 1,913,440,000 1,663,539,273 Profit available for Appropriation 2,868,167,530 2,585,001,270 728,684,000 778,829,989 933,421,266 848,564,790 - 2,878,961 1,206,062,264 954,727,530 2,868,167,530 2,585,001,270 1.95 1.70 Note Net Profit after Tax attributable to: Equity holders of SJIBL Non-controlling Interest Retained Earnings from previous year Appropriation: Statutory Reserve 18 Dividend Capital Reserve Retained Earnings 19 Consolidated Earnings per Share [previous year's figure restated] 42 The annexed notes from 1 to 54 form an integral part of these consolidated financial statements. Chairman Director Director Managing Director This is the consolidated profit and loss account referred to in our separate report of even date. Signed for & on behalf of ACNABIN Chartered Accountants Dhaka, 10 March 2021 Md Moniruzzaman FCA Partner ICAB Enrollment No. 787 DVC : 2103100787AS738073 Shahjalal Islami Bank Limited
  297. 298 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Cash Flow Statement For the year ended 31 December 2020 2020 Taka Note 2019 Taka Cash flows from operating activities Investment income receipt in cash Profit paid on deposits Dividend receipts Fees & commission receipt in cash Recoveries on investment previously written off Cash payments to employees Cash payments to suppliers Income tax paid Receipts from other operating activities Payments for other operating activities (i) Operating profit before changes in operating assets & liabilities 43 44 45 46 17,801,979,787 (12,336,325,947) 46,331,181 1,855,753,778 24,654,765 (3,053,073,329) (84,665,701) (2,185,842,395) 825,332,151 (1,283,938,535) 1,610,205,756 20,865,745,069 (12,811,231,677) 47,139,321 2,145,879,490 25,546,074 (2,982,763,871) (120,538,132) (1,980,449,839) 800,783,164 (1,385,159,900) 4,604,949,699 1,162,205,716 143,745,220 (11,285,186,850) 366,775,113 8,146,268,450 15,236,731,886 992,271,283 476,963,050 15,239,773,867 16,849,979,622 (10,325,846,999) 17,138,990 (848,186,850) 1,002,101,414 (12,576,095,036) 24,993,761,761 1,886,104,691 259,197,883 4,408,175,853 9,013,125,552 690,123,080 (12,788,096,201) 5,342,071 (721,144,515) (12,813,775,566) 311,857,274 (3,731,936,837) 208,086,515 (989,521,089) (4,201,514,137) Changes in operating assets and liabilities (Increase)/decrease in investment to customers (Increase)/decrease in other assets (Increase)/decrease of placement with other banks & financial institutions Increase/(decrease) in deposits from other banks Increase/(decrease) of placement from other banks & financial institutions Increase/(decrease) in deposits received from customers Increase/(decrease) in other liabilities on account of customers Increase/(decrease) in other liabilities (ii) Cash flows from operating assets and liabilities Net cash flow from operating activities (A)=(i+ii) 47 48 Cash flows from investing activities Proceeds from sale of securities Payments for purchases of securities Proceeds from sale of fixed assets Payments for purchases of property, plants & equipments Purchase/sale of subsidiaries Net cash used in investing activities (B) Cash flows from financing activities Receipts from issue of debt instruments Receipts/(payments) of Mudaraba Subordinated Bond Payments for redemption of debt instruments Receipts from issue of ordinary shares Dividend paid to ordinary shareholders Net cash used in financing activities (C) (800,000,000) (466,710,636) (1,266,710,636) Net increase in cash & cash equivalents (A+B+C) Add: Effect of exchange rate changes on cash & cash equivalents Add: Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Consolidated Net Operating Cash Flow per Share (NOCFPS) [Previous year’s figure restated] 49 42(ii) - 2,769,493,420 4,811,611,415 2,121,500 20,137,016,525 22,908,631,445 6,599,147 15,318,805,963 20,137,016,525 17.19 9.20 The annexed notes from 1 to 54 form an integral part of these consolidated financial statements. Chairman Dhaka, 10 March 2021 ANNUAL REPORT 2020 Director Director Managing Director
  298. 299 Shahjalal Islami Bank Limited and its Subsidiary Consolidated Statement of Changes in Equity For the year ended 31 December 2020 Particulars Paid-up Capital (Amount in Taka) Statutory Reserve Capital Reserve Balance as at 01 January 2020 9,334,212,720 6,231,188,665 2,878,961 Dividend for the year 2019: Stock Dividend (5%) 466,710,630 Cash Dividend Paid (5%) Net profit during the year 728,684,000 Total Shareholders' Equity as 9,800,923,350 6,959,872,664 2,878,961 at 31 December 2020 Add: General Provision for Unclassified Investments & Off-balance Sheet Items Add: Mudaraba Subordinated Bond Less: Shortfall of provision required against investments Total Eligible Regulatory Capital as at 31 December 2020 954,727,530 Noncontrolling Interest 226,408,192 Total Capital/ Shareholders' Equity 16,749,416,068 (466,710,630) (466,710,636) 1,184,756,000 1,206,062,264 468,914 226,877,106 (466,710,636) 1,913,908,914 18,196,614,345 Retained Earnings 3,207,465,735 6,720,000,000 329,797,981 27,794,282,099 For the year ended 31 December 2019 Particulars Paid-up Capital (Amount in Taka) Statutory Reserve Capital Reserve Retained Earnings Balance as at 01 January 2019 8,485,647,930 5,452,358,676 921,461,996 10% Stock Dividend issued for 848,564,790 (848,564,790) the year 2018 Net profit during the year 778,829,989 2,878,961 881,830,324 Total Shareholders' Equity as 9,334,212,720 6,231,188,665 2,878,961 954,727,530 at 31 December 2019 Add: General Provision for Unclassified Investments & Off-balance Sheet Items Add: Mudaraba Subordinated Bond Less: Shortfall of provision required against investments Total Eligible Regulatory Capital as at 31 December 2019 Noncontrolling Interest 231,307,418 - Total Capital/ Shareholders' Equity 15,090,776,020 - (4,899,226) 226,408,192 1,658,640,048 16,749,416,068 2,818,065,735 9,200,000,000 998,320,159 27,769,161,643 The annexed notes from 1 to 54 form an integral part of these consolidated financial statements. Chairman Director Director Managing Director Dhaka, 10 March 2021 Shahjalal Islami Bank Limited
  299. 300 Shahjalal Islami Bank Limited Balance Sheet As at 31 December 2020 Note Property and Assets 31 .12.2020 Taka 31.12.2019 Taka Cash Cash in Hand (including Foreign Currencies) 3a 1,814,745,636 2,209,024,307 4a 13,351,033,150 15,539,227,347 15,165,778,786 17,748,251,654 Inside Bangladesh 2,975,866,157 1,773,169,975 Outside Bangladesh 4,759,516,675 608,258,408 5a 7,735,382,832 2,381,428,382 6a 23,646,670,016 12,361,483,166 21,695,610,000 11,750,000,000 Balance with Bangladesh Bank & Sonali Bank Ltd (including Foreign Currencies) Balance with other Banks and Financial Institutions Placement with other Banks & Financial Institutions Investments in Shares & Securities Government Others 5,914,149,344 3,889,417,772 27,609,759,344 15,639,417,772 181,471,332,782 182,671,664,294 15,041,318,459 14,614,015,788 8a 196,512,651,241 197,285,680,082 Fixed Assets including Premises, Furniture and Fixtures 9a 4,740,650,245 4,503,970,454 Other Assets 10a 18,018,050,356 15,983,396,045 Non-Banking Assets 11 7a Investments General Investment etc. Bills Purchased and Discounted 88,909,355 88,909,355 293,517,852,175 265,992,536,911 19,730,962,466 11,382,596,297 Mudaraba Savings Deposits 30,316,566,001 24,786,167,880 Mudaraba Term Deposits 81,508,507,043 82,805,155,336 Other Mudaraba Deposits 68,295,354,091 62,937,938,001 Al-Wadeeah Current & Other Deposit Accounts 34,433,462,289 28,408,133,488 Total Property and Assets Liabilities and Capital Liabilities Placement from other Banks & Financial Institutions 12a Deposits and Other Accounts Bills Payable 3,889,060,291 4,335,581,019 13a 218,442,949,715 203,272,975,725 Mudaraba Subordinated Bond 14 9,200,000,000 10,000,000,000 Other Liabilities 15a 27,935,935,686 24,641,621,683 Deferred Tax Liabilities 16a 259,248,945 188,075,793 275,569,096,812 249,485,269,498 9,800,923,350 9,334,212,720 6,231,188,665 Total Liabilities Capital/Shareholders' Equity Paid-up Capital 17.2 Statutory Reserve 18 6,959,872,664 Retained Earnings 19a 1,187,959,349 941,866,028 17,948,755,363 16,507,267,412 293,517,852,175 265,992,536,911 Total Shareholders' Equity Total Liabilities & Shareholders' Equity ANNUAL REPORT 2020
  300. 301 Shahjalal Islami Bank Limited Off-balance Sheet Items As at 31 December 2020 Note 31 .12.2020 Taka 31.12.2019 Taka 37,961,567,205 31,092,059,818 34,857,199,890 16,124,209,575 120,035,036,488 35,064,492,967 29,749,668,530 31,562,148,000 16,714,181,896 113,090,491,393 Contingent Liabilities Acceptances & endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total 20 21 Other Commitments Documentary credits, short term and trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance, revolving and underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total - Total off-balance sheet items including contingent liabilities Net Asset Value per Share [previous year's figure restated] 42(i) - 120,035,036,488 113,090,491,393 18.31 16.84 The annexed notes from 1 to 54 form an integral part of these financial statements. Chairman Director Director Managing Director This is the balance sheet referred to in our separate report of even date. Signed for & on behalf of ACNABIN Chartered Accountants Dhaka, 10 March 2021 Md Moniruzzaman FCA Partner ICAB Enrollment No. 787 DVC : 2103100787AS738073 Shahjalal Islami Bank Limited
  301. 302 Shahjalal Islami Bank Limited Profit and Loss Account For the year ended 31 December 2020 Note 2020 Taka 2019 Taka Operating Income Investment Income 23a 17 ,033,748,679 20,290,692,595 Less: Profit paid on Deposits 24a 11,418,428,603 13,112,331,753 5,615,320,076 7,178,360,842 Net Investment Income Income from Investments in Shares/Securities 25a 625,322,945 478,761,405 Commission, Exchange and Brokerage 26a 1,752,496,265 2,057,856,991 Other Operating Income 27a 812,353,493 791,003,472 3,190,172,702 3,327,621,868 8,805,492,779 10,505,982,710 Total Operating Income Operating Expenses Salaries and Allowances 28a 2,980,281,717 2,911,379,476 Rent, Taxes, Insurances, Electricity etc. 29a 429,749,211 457,470,794 Legal Expenses 30a 1,235,580 1,145,455 Postage, Stamps, Telecommunication etc. 31a 44,513,612 39,643,446 Stationery, Printings, Advertisements etc. 32a 82,898,124 118,743,626 Chief Executive's Salary & Fees 33 21,572,700 19,957,000 Directors' Fees & Expenses 34 6,737,530 7,396,409 Shariah Supervisory Committee's Fees & Expenses 35 295,512 1,317,660 Auditor's Fees 36a 500,000 500,000 Depreciation & Repairs of Bank's Assets 37a 390,017,716 299,367,622 Zakat Expenses 38 160,982,542 140,732,626 Other Expenses 39a 591,894,537 643,198,651 4,710,678,782 4,640,852,765 4,094,813,997 5,865,129,945 Specific provision for Classified Investments 156,994,000 1,160,780,000 General Provision for Unclassified Investments 228,500,000 525,400,000 General Provision for Off-balance Sheet Items 65,900,000 32,200,000 Total Operating Expenses Profit/ (Loss) before Provision 22a Provision for diminution in value of Investments in Shares - Provision for Other Assets - Total Provision 40a Total Profit/ (Loss) before Taxes 252,600,000 - 451,394,000 1,970,980,000 3,643,419,997 3,894,149,945 Provision for Taxation Deferred Tax 41a 71,173,152 45,611,319 Current Tax 41c 1,664,048,258 2,130,236,894 1,735,221,410 2,175,848,213 1,908,198,587 1,718,301,732 Net Profit after Taxation ANNUAL REPORT 2020
  302. 303 Shahjalal Islami Bank Limited Profit and Loss Account For the year ended 31 December 2020 Note Retained Earnings from previous year 2020 Taka 2019 Taka 941 ,866,028 850,959,074 Add: Net Profit after Tax 1,908,198,587 1,718,301,732 Profit available for Appropriation 2,850,064,615 2,569,260,807 728,684,000 778,829,989 933,421,266 848,564,790 1,187,959,349 941,866,028 2,850,064,615 2,569,260,807 1.95 1.75 Appropriation: Statutory Reserve 18 Dividend Retained Earnings 19a Earnings per Share (EPS) [previous year's figure restated] 42a The annexed notes from 1 to 54 form an integral part of these financial statements. Chairman Director Director Managing Director This is the profit and loss account referred to in our separate report of even date. Signed for & on behalf of ACNABIN Chartered Accountants Dhaka, 10 March 2021 Md Moniruzzaman FCA Partner ICAB Enrollment No. 787 DVC : 2103100787AS738073 Shahjalal Islami Bank Limited
  303. 304 Shahjalal Islami Bank Limited Cash Flow Statement For the year ended 31 December 2020 Note Cash flows from operating activities Investment income receipt in cash Profit paid on deposits Dividend receipts Fees & commission receipt in cash Recoveries on investment previously written off Cash payments to employees Cash payments to suppliers Income tax paid Receipts from other operating activities Payments for other operating activities (i) Operating Profit before changes in operating assets & liabilities 43a 44a 2020 Taka 2019 Taka 17,580,956,079 (12,093,678,875) 46,331,181 1,750,374,764 24,654,765 (3,001,854,417) (82,898,124) (2,156,182,447) 811,759,372 (1,250,116,440) 1,629,345,858 20,635,681,058 (12,533,641,554) 47,139,321 2,051,257,844 25,546,074 (2,931,336,476) (118,743,626) (1,952,776,321) 790,996,280 (1,321,446,577) 4,692,676,024 773,028,842 153,312,500 (11,285,186,850) 366,775,113 8,348,366,169 15,478,449,149 992,271,283 161,945,697 14,988,961,902 16,618,307,760 (11,368,528,888) 393,133,601 (848,186,850) 1,002,101,414 (12,083,005,530) 24,830,671,105 1,886,104,691 400,288,889 4,212,578,431 8,905,254,454 259,379,720 (12,229,721,292) 5,036,971 (616,932,441) (12,582,237,042) 201,864,599 (3,520,751,174) 208,086,515 (985,909,527) (4,096,709,589) (800,000,000) (466,710,636) (1,266,710,636) - 2,769,360,082 4,808,544,866 49a 2,121,500 20,129,680,036 22,901,161,618 6,599,147 15,314,536,023 20,129,680,036 42(ii) 16.96 9.09 45a 46a Changes in operating assets and liabilities (Increase)/decrease in investment to customers (Increase)/decrease in other assets (Increase)/decrease of placement with other banks & financial institutions Increase/(decrease) in deposits from other banks Increase/(decrease) of placement from other banks & financial institutions Increase/(decrease) in deposits received from customers Increase/(decrease) in other liabilities on account of customers Increase/(decrease) in other liabilities (ii) Cash flows from operating assets and liabilities Net cash flow from operating activities (A)=(i+ii) 47a 48a Cash flows from investing activities Proceeds from sale of securities Payments for purchases of securities Proceeds from sale of fixed assets Payments for purchases of property, plants & equipments Purchase/sale of subsidiaries Net cash used in investing activities (B) Cash flows from financing activities Receipts from issue of debt instruments Receipts/(payments) of Mudaraba Subordinated Bond Payments for redemption of debt instruments Receipts from issue of ordinary shares Dividend paid to ordinary shareholders Net cash used in financing activities (C) Net increase in cash & cash equivalents (A+B+C) Add: Effect of exchange rate changes on cash & cash equivalents Add: Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Net Operating Cash Flow per Share (NOCFPS) [Previous year's figure restated] The annexed notes from 1 to 54 form an integral part of these financial statements. Chairman Dhaka, 10 March 2021 ANNUAL REPORT 2020 Director Director Managing Director
  304. 305 Shahjalal Islami Bank Limited Statement of Changes in Equity For the year ended 31 December 2020 (Amount in Taka) Particulars 9,334,212,720 6,231,188,665 941,866,028 Total Capital/ Shareholders' Equity 16,507,267,412 466,710,630 9,800,923,350 728,684,000 6,959,872,664 (466,710,630) (466,710,636) 1,179,514,587 1,187,959,349 (466,710,636) 1,908,198,587 17,948,755,363 Paid-up Capital Balance as at 01 January 2020 Dividend for the year 2019: Stock Dividend (5%) Cash Dividend Paid (5%) Net profit during the year Total Shareholders' Equity as at 31 December 2020 Statutory Reserve Total Equity for the purpose of Capital Adequacy Equity as per above Add: General Provision for Unclassified Investments & Off-Balance Sheet Items Add: Mudaraba Subordinated Bond Total Eligible Regulatory Capital as at 31 December 2020 Retained Earnings 17,948,755,363 3,159,500,000 6,720,000,000 27,828,255,363 For the year ended 31 December 2019 (Amount in Taka) Particulars Paid-up Capital Balance as at 01 January 2019 10 % Stock Dividend issued for the year 2018 Net profit during the year Total Shareholders' Equity as at 31 December 2019 8,485,647,930 848,564,790 9,334,212,720 Statutory Reserve 5,452,358,676 778,829,989 6,231,188,665 Total Equity for the purpose of Capital Adequacy Equity as per above Add: General Provision for Unclassified Investments & Off-Balance Sheet Items Add: Mudaraba Subordinated Bond Total Eligible Regulatory Capital as at 31 December 2019 Retained Total Capital/ Earnings Shareholders' Equity 850,959,074 14,788,965,680 (848,564,790) 939,471,743 1,718,301,732 941,866,028 16,507,267,412 16,507,267,412 2,770,100,000 9,200,000,000 28,477,367,412 The annexed notes from 1 to 54 form an integral part of these financial statements. Chairman Director Director Managing Director Dhaka, 10 March 2021 Shahjalal Islami Bank Limited
  305. 306 Shahjalal Islami Bank Limited Liquidity Statement (Assets & Liabilities Maturity Analysis) As at 31 December 2020 (Amount in Taka) Particulars Up to 01 Month 01-03 Months 03-12 Months 01-05 Years More than 05 years Total Assets Cash in Hand 1,814,745,636 1,814,745,636 Balance with other Banks 12,011,433,982 9,074,982,000 21,086,415,982 and Financial Institutions Placement with other 6,650,000,000 13,685,300,000 3,000,000,000 311,370,016 23,646,670,016 Banks & Financial Institutions Investments in Shares & 7,194,149,344 7,020,000,000 6,300,000,000 6,055,610,000 1,040,000,000 27,609,759,344 Securities Investments 27,708,283,825 65,006,385,030 73,751,198,011 25,271,526,950 4,775,257,425 196,512,651,241 Fixed Assets including 26,131,026 52,262,052 235,179,233 1,995,896,123 2,431,181,812 4,740,650,245 Premises, Furniture and Fixtures Other Assets 325,564,057 217,042,705 1,922,378,244 13,038,065,349 2,515,000,000 18,018,050,356 Non-Banking Assets 88,909,355 88,909,355 Total Assets (i) 55,730,307,871 85,980,989,787 85,297,664,843 46,672,468,438 19,836,421,237 293,517,852,175 Liabilities Placement from other Banks & Financial Institutions Deposits and Other Accounts Mudaraba Subordinated Bond Other Liabilities Deferred Tax Liabilities Total Liabilities (ii) Net Liquidity Gap (i-ii) 6,164,056,818 4,093,975,632 9,472,930,016 - 48,296,658,180 79,302,244,650 56,570,356,609 26,869,501,944 - - 2,000,000,000 7,200,000,000 - 19,730,962,466 7,404,188,333 218,442,949,715 - 9,200,000,000 639,732,927 1,868,914,097 10,422,897,605 10,336,296,204 4,668,094,853 27,935,935,686 259,248,945 259,248,945 55,100,447,926 85,265,134,379 78,466,184,229 44,405,798,148 12,331,532,131 275,569,096,812 629,859,945 715,855,408 6,831,480,614 2,266,670,291 7,504,889,106 17,948,755,363 The annexed notes from 1 to 54 form an integral part of these financial statements. Chairman Dhaka, 10 March 2021 ANNUAL REPORT 2020 Director Director Managing Director
  306. 307 Shahjalal Islami Bank Limited and its Subsidiary Notes to the Consolidated and Separate Financial Statements As at and for the year ended 31 December 2020 1 . Status of the Bank 1.1. Legal Form of the Bank Shahjalal Islami Bank Limited (hereinafter called the ‘Bank’ or ‘SJIBL’) was established as a public limited company (Banking Company) on 01 April 2001 under the Companies Act, 1994 as interest free Islamic Shariah based Commercial Bank and commenced its operation on 10 May 2001 with the permission of Bangladesh Bank. Currently, the Bank is operating its business through head office having 132 (one hundred thirty two) branches, 110 (one hundred ten) ATM booths, 52 (fifty two) agent banking outlets and 2,657 employees all over Bangladesh. The Bank also has a subsidiary Company named ‘Shahjalal Islami Bank Securities Limited’ and an Offshore Banking Unit. The Bank is listed with both the Stock Exchanges of the country, i.e., Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. The registered office of the Bank is located at Shahjalal Islami Bank Tower, Plot-04, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. 1.2. Nature of Business The Bank offers all kinds of Islamic Shari’ah based commercial Banking services to its customers through its branches following the provisions of the Banking Companies Act, 1991 (as amended up to 2018), Bangladesh Bank’s Directives and directives of other regulatory authorities and the principles of the Islamic Shari’ah. 1.3. Offshore Banking Unit Offshore Banking Unit (OBU) is a separate business unit of Shahjalal Islami Bank Limited, governed under the rules and guidelines of Bangladesh Bank. The Bank commenced the operation of its Offshore Banking Unit on 21 December 2008 with the permission from Bangladesh Bank vide letter no. BRPD(P-3)744(99)/2008-2800 dated 24 July 2008. The unit is located at Shahjalal Islami Bank Tower, Plot-04, Block-CWN(C), Gulshan Avenue, Gulshan, Dhaka-1212. Separate Financial Statements of Offshore Banking Unit are also presented. 1.4. Agent Banking Shahjalal Islami Bank Limited obtained permission from Bangladesh Bank on 16 October 2019 vide reference no. BRPD(P-3)745(54)/2019-8354 to commence Agent Banking services and subsequently started commercial operations on 02 January 2020. Till 31 December 2020 there were 52 Agent Banking Outlets in 31 districts across the country. Services that are currently being dispensed include account opening i.e., Al-Wadeeah Current A/C, Mudaraba Savings A/C, Mudaraba Scheme Deposit A/C, Mudaraba Term Deposit A/C, cash deposit and withdrawal from agent banking outlets and SJIBL branches, fund transfer (P2P), inward/outward cheque payment, remittance disbursement, balance inquiry, SMS banking, etc. 1.5. Shahjalal Islami Bank Securities Limited Shahjalal Islami Bank Securities Limited is a subsidiary company of Shahjalal Islami Bank Limited incorporated as a public limited company under the Companies Act, 1994 vide Certificate of Incorporation no. C-86917/10 dated 06 September 2010 and commenced its operation on 25 May 2011. The main objective of the company is to carry on business of stock brokers/dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the company. It has corporate membership of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. Shahjalal Islami Bank Limited holds 91.79% shares of Shahjalal Islami Bank Securities Limited. 2. Significant Accounting Policies The accounting policies set out below have been applied consistently to all the periods presented in these financial statements and have been applied consistently by the Bank: 2.1. Basis of Preparation of the Financial Statements The Bank and its subsidiary (the “Group”) are being operated in strict compliance with the rules of Islamic Shari’ah. The consolidated financial statements of the Group and separate financial statements the Bank have been prepared under the historical cost convention in accordance with International Financial Reporting Standards (IFRSs). As Financial Reporting Standards are yet to be issued by FRC, as per the provisions of FRA (Section-69), consolidated and separate financial statements of the Group and the Bank, respectively, have been prepared in accordance with the International Financial Reporting Standards (IFRSs) and International Accounting Standards (IASs) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) and, in addition to this, the Bank also complied with the requirements of the following laws and regulations from various Government bodies: i) The Banking Companies Act, 1991 and amendment thereon; ii) The Companies Act, 1994; iii) Circulars, Rules and Regulations issued by Bangladesh Bank (BB) time to time; iv) Bangladesh Securities and Exchange Ordinance, 1969; Bangladesh Securities and Exchange Rules, 1987; Bangladesh Securities and Exchange Act, 1993 and Bangladesh Securities and Exchange Commission (Public Issue) Rules, 2015 and amendments thereon; Shahjalal Islami Bank Limited
  307. 308 v ) The Income Tax Ordinance, 1984, and amendments thereon; vi) The Value Added Tax and Supplementary Duty Act, 2012, The Value Added Tax Rules, 2016 and amendments thereon; vii) Dhaka Stock Exchange Limited (DSE), Chittagong Stock Exchange Limited (CSE) and Central Depository Bangladesh Limited (CDBL) rules and regulations; viii) Financial Reporting Act, 2015; and In case any requirement of the Banking Companies Act, 1991 (as amended) and provisions and circulars issued by Bangladesh Bank differ with those of IFRSs as adopted, the requirements of the Banking Companies Act, 1991 and provisions and circulars issued by Bangladesh Bank shall prevail. As such the Group and the Bank have departed from those which are the requirements of IFRSs and IASs in order to comply with the rules and regulations of Bangladesh Bank are disclosed below: i) Presentation of Financial Statements IFRS/IAS: As per IAS 1: Presentation of Financial Statements, a complete set of financial statements comprises a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows, notes comprising a summary of significant accounting policies and other explanatory information and comparative information. IAS 1 has also stated the entity to disclose assets and liabilities under current and non-current classification separately in its statement of financial position. Bangladesh Bank: A format of financial statements (i.e., balance sheet, profit and loss account, cash flow statement, statement of changes in equity, liquidity statement) is prescribed in the “First Schedule” of Section 38 of the Banking Companies Act, 1991 (amended up to 2018) and BRPD circular no. 15 dated 09 November 2009 of Bangladesh Bank. Assets and liabilities are not classified under current and non-current heading in the prescribed format of financial statements. ii) Name of the Financial Statements IFRS/IAS: As per IAS 1, complete set of financial statements consists statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows and notes comprising a summary of significant accounting policies and other explanatory information. Bangladesh Bank: The forms of financial statements and directives for preparation thereof of the Islamic banking companies in Bangladesh are guided by BRPD circular no. 15 dated 09 November 2009 Bangladesh Bank. BRPD circular no. 15 states the statement of financial position as balance sheet and statement of profit or loss and other comprehensive income as profit and loss account. iii) Investments in Shares and Securities IFRS/IAS: As per requirements of IFRS 9: Financial Instruments, classification and measurement of investments in shares and securities will depend on how these are managed (the entity’s business model) and their contractual cash flow characteristics. Based on these factors it would generally fall either under “at fair value through profit or loss account” or under “at fair value through other comprehensive income” where any change in the fair value (as measured in accordance with IFRS 13) at the yearend is taken to profit and loss account or other comprehensive income respectively. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should be made for any loss arising from diminution in value of investments; otherwise, investments are recognised at cost. iv) Revaluation Gains/Losses on Government Securities IFRS/IAS: As per requirement of IFRS 9, where securities will fall under the category of fair value through profit or loss account and any change in fair value of the asset is recognised through profit or loss account. Held for Trading (HFT), any change in the fair value of held for trading assets is recognised through profit and loss account. Securities designated as amortised cost are measured at effective interest rate method and interest income is recognised through the profit and loss account. Bangladesh Bank: HFT securities are revalued on the basis of mark to market and at year end any gains on revaluation of securities which have not matured as at the balance sheet date are recognised in other reserves as a part of equity and any losses on revaluation of securities which have not matured as at the balance sheet date are charged in the profit and loss account. HTM securities which have not matured as at the balance sheet date are amortised at the year end and gains or losses on amortisation are recognised in other reserve as a part of equity. v) Provision on Investments and Off-balance Sheet Items IFRS/IAS: As per IFRS 9, an entity shall recognise an impairment allowance on investments (loans) based on expected credit losses. At each reporting date, an entity shall measure the impairment allowance for investments (loans) at an amount equal to the lifetime expected credit losses if the credit risk on these investments has increased significantly since initial recognition whether assessed on an individual or collective basis considering all reasonable information, including that which is forwardlooking. For those investments (loans) for which the credit risk has not increased significantly since initial recognition, at each reporting date, an entity shall measure the impairment allowance at an amount equal to 12 months’ expected credit losses that may result from default events on investments that are possible within 12 months after reporting date. ANNUAL REPORT 2020
  308. 309 Bangladesh Bank : As per BRPD circular no. 14 (23 September 2012), BRPD circular no. 19 (27 December 2012), BRPD circular no. 05 (29 May 2013), BRPD circular no. 16 (18 November 2014), BRPD circular no. 15 (27 September 2017), BRPD circular no. 01 (20 February 2018), BRPD circular no. 03 (21 April 2019) and BRPD circular no. 07 (19 March 2020), a general provision at 0.25% to 5% under different categories of unclassified loans (good/standard loans) has to be maintained regardless of objective evidence of impairment. Also, provision for sub-standard loans, doubtful loans and bad losses has to be provided at 20%, 50% and 100% respectively except (a) short-term agricultural and micro-credits were 5% for sub-standard and doubtful loans and 100% for bad & loss loans; and (b) cottage micro and small credits were 5% for sub-standard, 20% for doubtful and 100% for bad & loss loans depending on the duration of overdue. Again, as per BRPD circular no. 10 dated 18 September 2007 and BRPD circular no. 14 dated 23 September 2012, a general provision at 1% is required to be provided for all off-balance sheet exposures except LC issued against Fast Track Electricity Project & Bills for Collection according to BRPD circular letter no. 01 dated 03 January 2018 & BRPD circular no. 07 dated 21 June 2018 respectively. Such provision policies are not specifically in line with those prescribed by IFRS 9. vi) Recognition of Investment Income in Suspense IFRS/IAS: Investments (loans) to customers are generally classified at amortised cost as per IFRS 9 and interest income is recognised by using the effective interest rate method to the gross carrying amount over the term of the loan. Once a loan subsequently becomes credit-impaired, the entity shall apply the effective interest rate to the amortised cost of the investment (loan). vii) Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, once an investment (loan) is classified, investment income on such investment is not allowed to be recognised as income, rather the corresponding amount needs to be credited to an investment income in suspense account, which is presented as liability in the balance sheet. Other Comprehensive Income IFRS/IAS: As per IAS 1, Other Comprehensive Income (OCI) is a component of financial statements or the elements of OCI are to be included in a single other comprehensive income statement. Bangladesh Bank: Bangladesh Bank issued templates for financial statements which will strictly be followed by all Banks. The templates of financial statements issued by Bangladesh Bank do not include Other Comprehensive Income nor are the elements of Other Comprehensive Income allowed to be included in a single Other Comprehensive Income (OCI) Statement. As such the Bank does not prepare the other comprehensive income statement. However, elements of OCI, if any, are shown in the statements of changes in equity. viii) Financial Instruments – Presentation and Disclosure In several cases, Bangladesh Bank guidelines categorise, recognise, measure and present financial instruments differently from those prescribed in IFRS 9. As such full disclosure and presentation requirements of IFRS 7 cannot be made in the financial statements. ix) Financial Guarantees IFRS/IAS: As per IFRS 9, financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value plus transaction costs that are directly attributable to the issue of the financial liabilities. The financial guarantee liability is subsequently measured at the higher of the amount of loss allowance for expected credit losses as per impairment requirement and the amount initially recognised less, income recognised in accordance with the principles of IFRS 15. Financial guarantees are included within other liabilities. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, financial guarantees such as letter of credit, letter of guarantee will be treated as off-balance sheet item. No liability is recognised for the guarantee except the cash margin. x) Cash and Cash Equivalents IFRS/IAS: Cash and cash equivalent items should be reported as cash items as per IAS 7: Statement of Cash Flows. Bangladesh Bank: Some cash and cash equivalent items such as ‘money at call on short notice’, treasury bills, Bangladesh Bank bills and prize bond are not shown as cash and cash equivalents. Money at call on short notice is presented on the balance sheet, and treasury bills, prize bonds are shown in investments. xi) Non-Banking Assets IFRS/IAS: No indication of non-banking assets is found in any IFRSs. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, there must exist a face item named Non-Banking Asset. xii) Cash Flow Statement IFRS/IAS: The cash flow statement can be prepared using either the direct method or the indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently. Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003 and BRPD circular no. 15 dated 09 November 2009, cash flow is the mixture of direct and indirect methods. Shahjalal Islami Bank Limited
  309. 310 xiii ) Balance with Bangladesh Bank (Cash Reserve Requirement) IFRS/IAS: Balance with Bangladesh Bank should be treated as other asset as it is not available for use in day to day operations as per IAS 7. Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash equivalents. xiv) Presentation of Intangible Asset IFRS/IAS: An intangible asset must be identified and recognised, and the disclosure must be given as per IAS 38: Intangible Assets. Bangladesh Bank: There is no regulation for intangible assets in BRPD circular no. 15 dated 09 November 2009. xv) Off-balance Sheet Items IFRS/IAS: There is no concept of off-balance sheet items in any IFRS; hence, there is no requirement for disclosure of off-balance sheet items on the face of the balance sheet. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, off-balance sheet items (e.g., letter of credit, letter of guarantee, etc.) must be disclosed separately on the face of the balance sheet. xvi) Disclosure of Appropriation of Profit IFRS/IAS: There is no requirement to show appropriation of profit in the face of statement of comprehensive income. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, an appropriation of profit should be disclosed in the face of profit and loss account. xvii) Investments Net off Provision IFRS/IAS: Investments/loans and advances should be presented net off provision. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, provisions on investments/loans and advances are presented separately as liability and cannot be net off against investments/loans and advances. xviii) Recovery of Written off Investments/Loans IFRS/IAS: As per IAS 1, an entity shall not offset assets and liabilities or income and expenses, unless required or permitted by any IFRSs. Again, recovery of written off investments/loans should be charged to profit and loss account as per IFRS 15: Revenue from Contracts with Customers. Bangladesh Bank: As per BRPD circular no. 15 dated 09 November 2009, recoveries of amount previously written off should be adjusted with the specific provision for investments/loans and advances. xix) Revenue As per IFRS 15, revenue should be recognised on accrual basis, but due to the unique nature of Islamic Banks, income from investment under Murabaha, Bi-Muazzal, HPSM, Ijarah, Bi-Salam, Quard, IDBP and FDBP modes is accounted for on realization basis as per AAOIFI and Bangladesh Bank guidelines. 2.2. Basis of Consolidation The consolidated Financial Statements include the Financial Statements of Shahjalal Islami Bank Limited including Offshore Banking Unit and the Financial Statements of its subsidiary named Shahjalal Islami Bank Securities Limited made up to the end of the financial year. The consolidated Financial Statements have been prepared in accordance with IFRS 10: Consolidated Financial Statements. The consolidated Financial Statements are prepared to a common financial year ending 31 December 2020. 2.3.Subsidiary Subsidiary is that enterprise which is controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise to obtain benefits from its activities from the date that control commences until the date that control ceases. The Financial Statements of subsidiary are included in the consolidated Financial Statements from the date that control effectively commences until the date the control effectively ceases. 2.4. Transactions Eliminated on Consolidation All intra-group transactions, balances, income and expenses are eliminated on consolidation. Profit and Loss resulting from transaction between groups are also eliminated on consolidation. 2.5. Going Concern The Financial Statements have been prepared on a going concern principle which is the assumption that an entity will remain in business for the foreseeable future. Conversely, the Bank has neither any intention nor any legal or regulatory compulsion to halt operations and liquidate its assets in the near term at what may be very low fire-sale prices. Key financial parameters (including liquidity, profitability, asset quality, provision sufficiency, capital adequacy and credit rating) of the Bank continued to demonstrate a healthy trend for a couple of years. The management is not aware of any material uncertainties that may cause to believe that significant doubt upon the Bank’s ability to continue as a going concern. ANNUAL REPORT 2020
  310. 311 2 .6. Use of Estimates and Judgments The preparation of Financial Statements requires the Bank to make certain estimates and to form judgments about the application of accounting policies which may affect the reported amounts of assets, liabilities, income and expenses; due to that actual results may differ to reasonable extent. Estimates and underlying assumptions are reviewed on an ongoing basis and recognised its effects on present and future financial positions. The most significant areas where estimates and judgments have been made are on: provision for investments; provision for income taxes (current & deferred); gratuity fund; lease liabilities; and 2.7. liquidity statement. Assets and Basis of their Valuation 2.7.1 Cash and Cash Equivalents Cash and cash equivalents include cash in hand and balance with Bangladesh Bank and its agent bank and balances with other banks and financial institutions. 2.7.2 Investments in Shares and Securities Islamic Investment Bond Investment in Bangladesh Government Islamic Investment Bond (BGIIB) is reported at cost price. Bangladesh Government Investment Sukuk Investment in Bangladesh Government Investment Sukuk is reported at cost price. Mudaraba Perpetual Bond Investment in Mudaraba Perpetual Bond is reported at cost price. As per Bangladesh Bank DOS circular no. 04 dated 24 November 2011, provision for diminution in value of investment in Mudaraba Perpetual Bond was made by netting off unrealised gain/loss of shares from market price less cost price. Mudaraba Subordinated Bond Investment in Mudaraba Subordinated Bond is reported at cost price. Investment in Quoted Securities These shares and securities are brought and held primarily for the purpose of selling them in future or held for dividend income. These are reported at cost. As per Bangladesh Bank DOS circular no. 04 dated 24 November 2011, provision for diminution in value of investments was made by netting off unrealised gain/loss of shares from market price less cost price. Investment in Unquoted Securities Investment in unlisted securities is reported at cost under cost method. Adjustment is given for any shortage of book value over cost for determining the carrying amount of investment in unlisted securities. Derivative Investments Derivative is a financial security whose value is derived from the value and characteristics of an underlying security. Option contract, future and swaps are types of derivative. The Bank has no investments in any derivative investments. Investment in Subsidiary Investment in subsidiary is accounted for under the cost method of accounting in the Bank’s financial statements in accordance with the IAS 27: Separate Financial Statements, IFRS 3: Business Combinations, IAS 36: Impairment of Assets and IFRS 10: Consolidated Financial Statements. 2.7.2.1Held to Maturity Held to Maturity Securities are the securities that a firm has intention to hold until maturity. These are reported at amortised cost therefore; they are not affected by swings in the financial markets. 2.7.2.2Held for Trading Held for trading securities are those which are held with the intention of selling in order to generate profits. Held for trading securities are revalued at market price. Shahjalal Islami Bank Limited
  311. 312 2 .7.2.3 Investment - Initial Recognition and Subsequent Measurement Initial Recognition Investment Class Measurement after Initial Recognition Recording of Changes Govt. Treasury Securities - BGIIB Debenture/Bond Shares (Quoted) Cost Cost None Cost Cost Shares (Un-quoted) Cost Mutual Fund (Openend) Cost None Loss (net off gain) to profit and loss account but no unrealised gain booking Loss to profit and loss account but no unrealised gain booking Loss (net) to profit and loss account but no unrealised gain booking Mutual Fund (Closed-end) Cost Cost Lower of cost or market value (overall portfolio) Lower of cost or Net Asset Value (NAV) of last audited financial statements If average cost price (CP) > NAVCMP * 0.95, then required provision per unit will be (RP) = CP - NAVCMP * 0.95 If CP> Market Value (MV) or CP > NAVCMP * 0.85, then required provision (RP) per unit will be: Loss (net) to profit and loss account but no unrealised gain booking (i) in case of MV ≥ NAVCMP *0.85, then RP = CP - MV or (ii) in case of MV < NAVCMP * 0.85, then RP = CP - NAVCMP * 0.85 2.7.3 General Investments Investments are recognised at gross amount on the date on which they are originated. After initial recognition, investments are stated in the Balance Sheet net off profit receivables and unearned income. However, provisions for investments are not net off with investments. Investments are written off as per guidelines of Bangladesh Bank. These write off however will not undermine/affect the claim amount against the client. Detailed memorandum records for all such write off accounts are meticulously maintained and followed up. Provisions Investments are stated in the Balance Sheet net off unearned income. Provision on Investments (Loans & Advances) is made on the basis of period end review by the management and as per instructions contained in Bangladesh Bank BRPD circular no. 14 dated 23 September 2012, BRPD circular no. 19 dated 27 December 2012, BRPD circular no. 5 dated 29 May 2014, BRPD circular no. 15 dated 27 September 2017, BRPD circular no. 01 dated 20 February 2018, BRPD circular no. 03 dated 21 April 2019, BRPD circular no. 07 dated 19 March 2020, BRPD circular letter no. 52 dated 20 October 2020 and BRPD circular letter no. 56 dated 10 December 2020. Provision against Off-balance Sheet exposures in addition to existing provisioning arrangement is made as per BRPD circular no. 10 dated 18 September 2007. Provision for Short-term Agricultural and Micro-Credits is made as per BRPD circular no. 15 dated 27 September 2017 and BRPD circular no. 16 dated 21 July 2020. The rates of provision are given below: Percentage (%) of Provision Requirement Particulars Cottage, Micro & Small Investments Under CMSME Medium Enterprise Financing under SMEF Investment to Professional Investment for House Building Consumer Other than House Building & Professional Short-term Agricultural and Micro-Credits Investment to Stock Dealers & Stock Broker Credit Card All Other Investments Staff Investment Off-balance Sheet exposures Special General Provision for COVID-19 ANNUAL REPORT 2020 Un-classified Classified Standard SMA SS DF BL 0.25% 0.25% 5% 20% 100% 0.25% 2% 1% 2% 0.25% 2% 1% 2% 20% 20% 20% 20% 50% 50% 50% 50% 100% 100% 100% 100% 1% 2% 2% 1% 0% 1% 1% 1% 2% 2% 1% 0% N/A 5% 5% 20% 50% 20% 50% 20% 50% 20% 50% N/A N/A BRPD circular letter no. 56; Date: 10 December 2020 100% 100% 100% 100% 100% N/A
  312. 313 2 .7.4 Impairment of Financial Assets An asset is impaired when its carrying value exceeds its recoverable amount as per IAS 36: Impairment of Assets. At each balance sheet date, Shahjalal Islami Bank Limited assesses whether there is objective evidence that a financial asset or a group of financial assets, i.e., general investments, off-balance sheet items and investments in shares and securities are impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if- There is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the asset up to the balance sheet date; The loss event had an impact on the estimated future cash flows of the financial asset or the group of financial assets; and A reliable estimate of the loss amount can be made. In the event of impairment loss, the Bank reviews whether a further allowance for impairment should be provided in the profit and loss statement in addition to the provision made based on Bangladesh Bank guidelines or other regulatory requirements. 2.7.5 Fixed Assets including Premises, Furniture and Fixtures Recognition and Measurement All fixed assets including premises, furniture and fixtures are stated at cost less accumulated depreciation as per IAS 16: Property, Plant and Equipment. Land is measured at cost. The cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction or, where applicable, the amount attributed to that asset when initially recognised in accordance with the specific requirements of the IAS. The cost of an item of fixed assets including premises, furniture and fixtures is recognised as an asset if- it is probable that future economic benefits associated with the item will flow to the entity; and the cost of the item can be measured reliably. The cost of an item of fixed assets including premises, furniture and fixtures comprises: (a)Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; (b) Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; (c)The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purpose other than to produce inventories during that period. Subsequent Costs The cost of replacing part of an item of fixed assets is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day to day servicing of fixed assets are recognised in profit or loss as incurred. Depreciation No depreciation is charged on land. Depreciation is charged on straight-line method. Charging depreciation against fixed assets commences from the date of acquisition and ceases at the date when the assets are disposed. Asset category-wise depreciation rates are as follows: Name of the Assets 2019 Method of Dep. Rates of Dep. (%) Method of Dep. 2.50 Straight line 2.25 Reducing balance Furniture & Fixtures other than residence 10 Straight line 10 Reducing balance Furniture & Fixtures - residence 20 Straight line 20 Straight line Office Equipment 20 Straight line 20 Reducing balance Computer & Network Equipment 20 Straight line 20 Straight line Vehicles 20 Straight line 20 Straight line Books 20 Straight line 20 Straight line Building 2020 Rates of Dep. (%) Gain or loss on sale of fixed assets is recognised in profit and loss statement as per provision of IAS 16. Shahjalal Islami Bank Limited
  313. 314 A change in accounting estimates is an adjustment of the carrying amount of an asset or liability , or related expense, resulting from reassessing the expected future benefits and obligations associated with that asset or liability. Upon approval of the Board, Building, Furniture & Fixtures other than residence and Office Equipment has been depreciated under straight line basis instead of reducing balance from 01 January 2020. Construction Work in Progress/Building under Construction Building under construction is recognised and reported under Fixed Assets as per IAS 16 as Construction work in progress until the construction work is completed and the asset is ready for intended use. This asset is stated at cost and depreciation of the asset will be charged from the date of its intended use. Intangible Assets a. Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. Acquisitions of minority interest (non-controlling interest) are accounted as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. Subsequently goodwill is measured at cost less accumulated impairment losses. b. Software Software acquired by the Bank is stated at cost less accumulated amortisation and accumulated impairment losses. c. License Value of license is recognised at cost and since it has an indefinite useful life it is not amortised. The value of the license is not measured at fair value. 2.7.6 IFRS 16: Leases Shahjalal Islami Bank Limited applied IFRS 16: Leases using modified retrospective approach where the Bank measured the lease liability at the present value of the remaining lease payments and recognised a right-of-use asset at the date of the initial application on a lease by lease basis. According to IFRS 16, a contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is conveyed where the customer has both the right to direct the identified asset’s use and to obtain substantially all the economic benefits from that use. An asset is typically identified by being explicitly specified in a contract, but an asset can also be identified by being implicitly specified at the time it is made available for use by the customer. Upon lease commencement, the Bank recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the amount of the lease liability plus any initial direct costs incurred by the Bank. Adjustments may also be required for lease incentives, payments at or prior to commencement and restoration obligations or similar. After lease commencement, the Bank measures the right-of-use asset using a cost model. Under the cost model, a right-of-use asset is measured at cost less accumulated depreciation and accumulated impairment. The lease liability is initially measured at present value of the future lease payments discounted using the discount rate implicit in the lease. Subsequently, the lease liability is adjusted for interest and lease payments as well as the impact of lease modifications, amongst others. The Bank has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit and loss account on a straight-line basis over the lease term. On the balance sheet, right-of-use assets have been included in fixed assets including premises, furniture and fixtures and lease liabilities have been included in other liabilities. 2.7.7 Impairment of Fixed Assets At each balance sheet date, the Bank assesses whether there is any indication that the carrying amount of an asset exceeds its recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and an impairment loss is recognised as an expense in the profit and loss account unless the asset is carried at revalued amount in accordance with IAS 16 in which case any impairment loss of a revalued asset should be treated as a revaluation decrease under that accounting standard. No impairment loss was recognised up to the reporting period as there were no such indications existed as at balance sheet date. 2.7.8 Investment Properties a) Investment property is held to earn rentals or for capital appreciation or both and the future economic benefits that are associated with the investment property but not held for sale in the ordinary course of business. b) Investment property is accounted for under cost model in the financial statements. Accordingly, after recognition as an asset, the property is carried at its cost less accumulated depreciation and accumulated impairment loss. ANNUAL REPORT 2020
  314. 315 2 .7.9 Other Assets Other assets include all other financial assets and include fees and other unrealised income receivable, advance for operating and capital expenditure and stocks of stationery and stamps. 2.7.10Inventories Inventories are measured at the lower of cost and net realisable value. 2.8. Liabilities and Provisions 2.8.1 Placement from other Banks and Financial Institutions Placement from other Banks and Financial Institutions include profit bearing placements and Bangladesh Bank refinance. These items are brought to the financial statements at the gross value of the outstanding balance. 2.8.2 Deposits and Other Accounts Deposits and other accounts include non-profit bearing Al-Wadeeah current deposits redeemable at call, bills payable, profit bearing on demand and special notice deposits, Mudaraba savings deposits, Mudaraba term deposits and Mudaraba scheme deposits. These items are brought to the financial statements at the gross value of the outstanding balance. 2.8.3 Mudaraba Subordinated Bond The Bank issued floating rate non-convertible Mudaraba Subordinated Bond of BDT 400 crore and BDT 600 crore after obtaining approval from Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank. Mudaraba Subordinated Bonds were mainly issued to support and strengthen the capital base of the Bank under Tier-II, supplementary capital of Basel-III. 2.8.4 Other Liabilities Other liabilities comprise items such as provision for general investments, provision for investments in shares and securities, provision for taxation, profit payable, profit suspense, accrued expenses, obligation under finance lease, etc. Other liabilities are recognised in the balance sheet according to the guidelines of Bangladesh Bank, income tax laws and internal policy of the Bank. As per IAS 37: Provisions, Contingent Liabilities and Contingent Assets, the Bank recognises provisions only when it has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made. 2.8.5 Taxation Current Tax Provision for current income tax has been made at 37.50% as prescribed in the Finance Act, 2020 on the accounting profit made by the Bank after considering some of the add backs to income and disallowances of expenditure and provisions as per Income Tax Ordinance, 1984 in compliance with IAS 12: Income Taxes. Deferred Tax Principle of Recognition Deferred tax is recognised as income or an expense amount within the tax charge, and included in the net profit and loss account for the period. Deferred tax relating to items dealt with directly in equity is recognised directly in equity. Recognition of Taxable Temporary Difference A deferred tax liability is recognised for all taxable differences, except to the extent that the deferred tax liability arises from the initial recognition of goodwill; or the initial recognition of an asset or liability in a transaction which is not a business combination; and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Recognition of Deductible Temporary Difference A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination; and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). Measurement Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. 2.9. Capital/Shareholders’ Equity Authorised Capital Authorised capital is the maximum amount of share capital that the Bank is authorised by its Memorandum and Articles of Association. Paid-up Capital Paid-up capital represents total amount of share capital that has been paid in full by the ordinary shareholders. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote at shareholders’ meetings. In the event of winding-up of the Bank, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to receive any residual proceeds of liquidation. Shahjalal Islami Bank Limited
  315. 316 Statutory Reserve Statutory reserve has been maintained @ 20% of profit before tax in accordance with provisions of Section 24 of the Bank Companies Act, 1991 (amended up to 2018) until such reserve equals to its paid-up capital together with the share premium. Statutory reserve is transferred in yearly basis. Non-controlling (minority) Interest Non-controlling (minority) interest in business is an accounting concept that refers to the portion of a subsidiary company’s stock that is not owned by the parent company. The magnitude of the minority interest in Shahjalal Islami Bank Securities Limited, a majority owned subsidiary (91.79%) of Shahjalal Islami Bank Limited is very insignificant. Also, minority interest is reported on the consolidated profit and loss account as a share of profit belonging to the minority shareholders. 2.10. Contingent Liabilities Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or any present obligation that arises from past events but is not recognised because: It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or The amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised but disclosed in the financial statements unless the possibility of an outflow of resources embodying economic benefits is reliably estimated. Contingent assets are not recognised in the financial statements as this may result in the recognition of income which may never be realised. 2.11. Revenue Recognition In line with IFRS 15: Revenue from Contract with Customers, income of the Bank has been recognised in the financial statements as follows: Investment Income Income from general investments is accounted for on accrual basis except for investments under Musharaka, Mudaraba, BaiSalam, Ujarah (Khidmah & Wakalah for Islamic Credit Card) modes where the investment income is accounted for on realisation basis. The Bank does not charge any rent during the gestation period of investment against Hire Purchase under Shirkatul Melk (HPSM) mode of investment but it fixes the sale price of the asset at a higher level in such a way to cover its expected rate of return. Such income is recognised on realisation basis. Profit/rent/compensation accrued on classified investments are suspended and accounted for as per circulars issued by Bangladesh Bank in this regard from time to time. At the time of recovery or regularisation of those investments the related income which was suspended and shown as a liability is taken as investment income (except compensation) as per circulars issued by Bangladesh Bank. As a result, the entire transferred amount to investment income from suspense during the year has already been included in the investment income of the Bank. Profit on placement with other Banks & Financial Institutions is accounted for on accrual basis. Income on Investments in Securities Income on investments in securities is recognised on accrual basis. This income includes profit on Bangladesh Government Islamic Investment Bond (BGIIB), Bangladesh Government Investment Sukuk (BGIS), Mudaraba Perpetual Bond, Mudaraba Subordinated Bond, capital gain on investments in shares and dividend on investments in shares are also included in investment income. Dividend Income on Shares Dividend income from investments in shares is recognised when the Bank’s right to receive dividend is established. It is recognised when- a. It is probable that the economic benefits associated with the transaction will flow to the entity; and b. The amount of the revenue can be measured reliably. Fees, Commission and Exchange Income Fees, commission and exchange income on services provided by the Bank are recognised as and when the related services are rendered. Commission charged to customers on letter of credit and letter of guarantee are credited to Income at the time of effecting the transactions. Profit paid on Deposits As per agreement between the Mudaraba depositors and the Bank in line with Mudaraba Principle, the Mudaraba depositors are entitled to get minimum 65% of the investment income earned through deployment of Mudaraba Fund as per weightage assigned to each type of Mudaraba deposit. In the year 2020, the Bank paid 92.56% of Investment Income earned through deployment of Mudaraba Fund. Mudaraba Depositors do not share any income derived from various banking services where their fund is not involved and any income derived from investing Bank’s equity and other cost free fund. Al-Wadeeah depositors do not share any income of the Bank. Profit is paid to Mudaraba Deposit accounts at provisional rate throughout the year. Final rates of profit of any accounting year are declared after finalization of Shari’ah Inspection report and certifying the Investment Income of the Bank by the statutory auditor. ANNUAL REPORT 2020
  316. 317 Other Operating Expenses All other operating expenses are provided for in the books of the accounts on accrual basis according to the IAS 1 . Zakat Zakat is paid by the Bank at the rate of 2.58% (instead of 2.50% as the Bank maintains its Accounts following Gregorian Year) on the closing balances of Statutory Reserve, General Reserve (Retained Earnings). Zakat is chargeable in the profit and loss account of the Bank as per “Guidelines for Conducting Islamic Banking” issued by Bangladesh Bank through BRPD circular no. 15 dated 09 November 2009. 2.12. Dividend Payments Final dividend is recognised when it is approved by the shareholders in Annual General Meeting (AGM). The proposed dividend for the year 2020, therefore, has not been recognised as a liability however disclosed in the notes to the financial statements in accordance with IAS 10: Events after the Reporting Period. Dividend payable to the Bank’s shareholders is recognised as a liability and deducted from the shareholders’ equity in the period in which the shareholders’ right to receive the dividend is established. 2.13. Profit Suspense/Compensation Account & Shari’ah Non-Compliance Income Profit/compensation accrued on classified investments is suspended and accounted for as per circulars issued by the Bangladesh Bank. Moreover, income which is irregular (doubtful) as per Shari’ah is also not included in the distributable income of the Bank. The Bank charges compensation on unclassified overdue investments. Such compensation is not permissible as regular income of the Bank as per Shari’ah. Interest received from the balances held with Foreign Banks abroad and from Foreign Currency Clearing Account with the Bangladesh Bank and also other interest based Banks are also not credited to regular income since it is not permissible as per Shari’ah. Such doubtful income is being appropriated for charitable purpose through Shahjalal Islami Bank Foundation (a separate organisation). 2.14. Provision for Nostro Accounts According to Foreign Exchange Policy Department of Bangladesh Bank vide the circular letter no. (FEPD)/01/2005-677 dated 13 September 2005, the Bank is not required to make provision regarding the unreconciled debit balance of Nostro accounts as on the reporting date in these financials as there are no unreconciled outstanding entries for more than 03 (three) months. 2.15. Foreign Currency Transactions Functional and Presentation Currency The Financial Statements have been presented based on the Bank’s functional currency, Bangladesh Taka (BDT/Taka/Tk.). Functional currency of Offshore Banking Unit (OBU) is United States Dollar (USD/US$). Foreign Currency Translation The transactions in foreign currencies are converted into equivalent Taka currency using the ruling exchange rates on the dates of such transactions as per IAS 21: The Effects of Changes in Foreign Exchange Rates. At the Balance Sheet date, related assets and liabilities are converted to Taka using exchange rates prevailing on that date. Commitment Contingent liabilities/commitments for letter of credit, letter of guarantee and acceptance denominated in foreign currencies have been expressed in Taka currency at revaluation rate. 2.16. Earnings per Share This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding during the period as per IAS 33: Earnings per Share. Diluted Earnings per Share is not required to be calculated for the year, as there exists no dilution possibilities during the year. 2.17. Statement of Liquidity The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per following basis: a) Balance and Placement with other Banks and Financial Institutions are on the basis of their maturity term. b) Investments in shares and securities are on the basis of their residual maturity term. c) Investments are on the basis of their repayment/maturity schedule. d) Fixed assets are on the basis of their useful life. e) Other assets are on the basis of their adjustment. f) Placement from other Banks & Financial Institutions are as per their maturity/repayment term. g) Deposit and Other Accounts are on the basis of their maturity term, demand & time liability related guidelines of Bangladesh Bank and behavioral trend of encashment. h) Other long-term liabilities are on the basis of their maturity term. Provisions and other liabilities are on the basis of their expected settlement. Shahjalal Islami Bank Limited
  317. 318 2 .18. Cash Flow Statement Cash flow statement is prepared principally in accordance with IAS 7: Statement of Cash Flows; and as prescribed by BRPD circular no. 14 dated 25 June 2003 & Guidelines for Conducting Islamic Banking issued by Bangladesh Bank vide BRPD circular no. 15 dated 09 November 2009. The Cash Flow Statement shows the structure of and changes in cash and cash equivalents during the year. Cash flows during the year have been classified as Operating Activities, Investing Activities and Financing Activities. 2.19. Statement of Changes in Equity Statement of Changes in Equity has been prepared in accordance with IAS 1 and by following the guidelines of BRPD circular no. 14 dated 25 June 2003 and BRPD circular no. 15 dated 09 November 2009. 2.20. Off-balance Sheet Items Under general banking transactions, liabilities against acceptance, endorsement and other obligations and bills against which acceptances have been given and claims exist there against, have been shown as Off-balance Sheet items. 2.21. Changes in Accounting Policies and Estimates Shahjalal Islami Bank Limited did not change the accounting policies during the year 2020. However, the Bank changed its accounting estimates, i.e., depreciation rate and method. The depreciation methods in case of Building, Furniture & Fixtures other than residence and Office Equipments have been changed with effect from 01 January 2020 from previously used Reducing Balance Method to Straight Line Method using the practical expedients taking consideration of the useful life of underlying assets. On the other hand, the rate of depreciation on Building increased from 2.25% to 2.50%. 2.22. Reporting Period The Financial Statements cover one calendar year from 01 January to 31 December 2020. 2.23. Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 2.24. Employee Benefits Provident Fund (Defined Contribution Plan) A “Defined Contribution Plan” is a post-employment benefit plan under which an entity pays fixed contribution into a separate entity and will have no legal constructive obligation to pay further amounts. Provident fund benefit is given to the eligible staffs of the Bank in accordance with the rules of the provident fund duly recognised by the National Board of Revenue of Bangladesh. The Fund is administered by the Board of Trustees and is funded by fixed contributions equally from the employees and the Bank. The fund is managed separately from the Bank’s assets, as per rules of the fund & Section 399 of the Companies Act, 1994. The balance of forfeited Provident Fund for the year 2020 has been transferred to the Bank as per FRC notification no. 179/FRC/ FRM/Notification/2020/2 dated 07 July 2020. The balance of forfeited provident fund before the issuance of FRC’s notification will be transferred to the Bank after due diligence. Gratuity Fund (Defined Benefit Plan) Gratuity benefits are given to the staff of the Bank in accordance with the approved Gratuity Fund Rules. The National Board of Revenue has approved the gratuity fund as a recognised gratuity fund and the fund is operated by a separate Board of Trustees. Employees are entitled to get the benefit after the completion of minimum 05 (five) years of service in the Bank. The gratuity is calculated on the basis of last basic pay of every employee in service as per IAS 19: Employee Benefits. Gratuity fund is a “Defined Benefit Plan” and payable as per the modalities of the rules. Gratuity so calculated is transferred to the fund and charged to expenses of the Bank. Other Employee Benefits Superannuation Fund “Shahjalal Islami Bank Limited Employees’ Social Security- Superannuation Fund” commenced with effect from 01 January 2008. The purpose of the fund is to provide medical and death cum survival benefit in lieu of group insurance (death cum endowment). The fund shall be subscribed by the employees on monthly basis and with the contribution of the Bank. Benevolent Fund The Benevolent Fund for the regular and confirmed employees of Shahjalal Islami Bank Limited was established in the year 2007. This fund is mainly used for payment of scholarship to the meritorious students among the children of SJIBL’s officers and substaff, to allow short-term quard/grant for the unexpected and certain needs of the staff of SJIBL and their family like accident, clinical treatment, marriage ceremony, etc. Incentive Bonus The Bank usually paid incentive bonus among its employees. This bonus amount is distributed among the employees on annual basis considering specific terms & policies of the Bank. ANNUAL REPORT 2020
  318. 319 Hospitalisation Insurance The Bank operates a health insurance scheme to its confirmed employees and their respective spouses and children at rates provided in health insurance coverage policy . Workers Profit Participation Fund In consistent with widely accepted industry practice and in line with Section 11(1) of the Banking Companies Act, 1991 (as amended up to date) and subsequent clarification given by Bank & Financial Institutions Division (BFID), Ministry of Finance, no provision has been made by the Bank in the reporting period against Workers Profit Participation Fund (WPPF). 2.25. Reconciliation of Books of Accounts Books of accounts in regard to inter-Bank are reconciled and un-reconciled entries in case of inter-Branch transactions on the reporting date are not mentionable, which are, due to the time-gap before finalizing the same. Inter-Branch outstanding entries are less than 03 (three) months, details of which are disclosed in note no. 10a.5. 2.26. Related Party Disclosures A party is related to the company, if: i) directly or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with the company; has an interest in the company that gives it significant influence over the company; or has joint control over the company; ii) the party is an associate; iii)the party is a joint venture; iv)the party is a member of the key management personnel of the Company or its parent; v) the party is a close member of the family of any individual referred to in (i) or (iv); vi)the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or vii)the party is a post-employment benefit plan for the benefit of employees of the company, or of any entity that is a related party of the company. Related Party Transactions The Bank in its ordinary course of business undertook financial transactions with some entities or persons that fall within the definition of ‘Related Party’ as contained in IAS 24: Related Party Disclosures and relevant provisions of the Banking Companies Act, 1991 (as amended up to 2018) and Bangladesh Bank BRPD circular no. 14 dated 25 June 2003. As on the reporting date, the Bank had funded and non-funded exposures with its subsidiary and exposures to some related concerns of its Directors. Please refer to note no. 53 of financial statements for details of related party transactions. 2.27. Corporate Governance The Bank has given the priority to the compliance of the rules, regulations and guidelines of Bangladesh Bank, National Board of Revenue and Bangladesh Securities & Exchange Commission (BSEC). The Bank has also complied with all related International Financial Reporting Standards (IFRSs). 2.28. The Bank’s Compliance with Related Pronouncement of Bangladesh Bank i. Risk Management Department of Off-site Supervision (DOS) of Bangladesh Bank issued circular no. 02 dated 15 February 2012 under Section 45 of the Bank Companies Act, 1991 on Risk Management Guidelines for Banks and instructed all scheduled Banks operating in Bangladesh to follow this Guidelines for managing various risks which have been compiled by the Bank. In addition, the Bank is also following relevant Bangladesh Bank guidelines on risk based capital adequacy, supervisory review process, stress testing and managing the Banking risks in other core risk areas. The risk of a Bank is defined as the possibility of losses, financial or otherwise. The Risk Management of the Bank covers 6 (six) Core Risk Areas of Banking industry i.e., i) Internal Control and Compliance Risk; ii) Foreign Exchange Risk; iii) Investment (Credit) Risk; iv) Asset Liability Management Risk; v) Money Laundering Risk; and vi) Information & Communication Technology Security Risk. The risk management procedures in the core risk areas have been devised in line with the core risk management guidelines of Bangladesh Bank. Core Risk Management Guidelines are periodically reviewed by the Bank, and Bangladesh Bank periodically inspects the implementation status of these guidelines and as per the reports of Bangladesh Bank, and Shahjalal Islami Bank Limited is well compliant in Core Risk Management activities. In line with instruction of Bangladesh Bank, SJIBL formed a Risk Management Division (RMD) to formulate risk assessment and management policies, methodologies, guidelines and procedures for risk identification, risk measurement, risk monitoring, deciding acceptable level of risk and risk controlling by taking mitigating steps, Comprehensive Risk Management Report (CRMR), conducting monthly risk management meeting, stress testing and reporting the competent authority from time to time. It also reports to Bangladesh Bank on quarterly basis along with the CRMR, minutes of the monthly meeting and all other required supporting papers. Moreover, in compliance with the Banking Companies Act, 1991 (as amended), Section 15 (Kha) and BRPD circular no. 11 dated 27 October 2013 of Bangladesh Bank, the Bank has constituted a Risk Management Committee comprising of 5 (five) directors from the Board to formulate risk management policies, procedures and oversee the risk management activities of the Bank. Shahjalal Islami Bank Limited
  319. 320 The prime objective of the Risk Management Committee is that the Bank takes well calculative Business Risk Policy for safeguarding the Bank ’s capital, its financial resources and profitability from various risks. In this context, the Bank implemented all the guidelines of Bangladesh Bank as under: a) Investment (Credit) Risk Management The management of specific investment risk is developed according to associated risk with individual business units. The investment risk management function ensures that appropriate policies are established and ensures compliance with the related sanction, monitoring procedures and controls at the business unit level. Investment exposures are aggregated from individual business units and are monitored on a regular basis. Investment risks may be summarized as under: Difficulty in choosing core business. Failure in business of the customer. Encompassing a blend of Banking and non-Banking service. Investment either too liquid or of questionable quality. Competition from other commercial Banks. Security Control Risk. Market volatility both local and global. Portfolio monitoring is carried out by asset quality, background of the customer, soundness and viability of his/her business and cash flow, etc., sector of the economy, cost of long-term financing to match with the return on long-term investment. The Bank pays adequate emphasis on business risk than analysis of security risk because the security reduces the risk but does not always improve the quality of investment. Besides, the Bank addresses the Investment (Credit) risk guideline cited by the Bangladesh Bank. As regards to other parts of the Banking business, the control staffs follow a pragmatic program of regular monitoring and follow-up. b) Foreign Exchange Risk Management The Financial Institutions’ performance is directly related to Foreign Exchange Market. To ensure effective Foreign Exchange Risk Management, the Bank has wide scope in establishing organisational structure and formulating Manual as per Guidelines of Bangladesh Bank. However, the Bank has already formulated a comprehensive manual. The Bank maintains various Nostro accounts in order to conduct operations in different currencies including BDT. The senior management of the Bank set limits for handling Nostro accounts’ transactions that include time and amount limits. As per guidelines of Bangladesh Bank, the Foreign Exchange business should be audited internally to review the key control issues such as various limits, compliance requirements and statutory management. c) Asset Liability Risk Management The Asset Liability Management Committee (ALCO) that is formed with the senior executives headed by Managing Director conducted 12 (twelve) meetings during the year 2020. The key agenda of the meetings were liquidity position, pricing, risk related to the Balance Sheet, maintaining CRR & SLR, Economic Outlook & Market Status and Rate of Profit (Interest). For managing Balance Sheet risk properly, the Bank has already prepared a Manual of the Asset Liability Management according to the guidelines of Bangladesh Bank. d) Money Laundering Risk Management Shahjalal Islami Bank Limited is taking preventive measures against money laundering and terrorist financing in line with the Money Laundering Prevention Act, 2012 (amended 2015), Anti-Terrorism Act, 2009 (amended 2012 & 2013) and guidelines issued by the Bangladesh Financial Intelligence Unit (BFIU) from time to time. Shahjalal Islami Bank Limited applies risk sensitive customer due diligence measures, monitors business relationship and keeps records in line with regulations. The Bank regularly collects the accurate and complete documentation of Know Your Customer (KYC) which enables the prudential prevention of money laundering. The Bank has formed Central Compliance Committee (CCC) headed by the Deputy Managing Director as Chief Anti-Money Laundering Compliance Officer (CAMLCO) and the committee regularly monitors and ensures the compliance of issues relating to money laundering and terrorist financing through the trained personnel of Head Office and Branches. e) Internal Control & Compliance Risk Management Internal control is an effective mechanism to provide reasonable assurance on the attainment of the organisational objectives through achieving efficiency in operations, reliability of financial reporting and compliance with applicable laws, regulations and internal policies. The primary objective of Internal Control and Compliance of Shahjalal Islami Bank Limited (SJIBL) is to enable the Bank to perform better and add value through proper and adequate use of infrastructure and resources. SJIBL has established the Internal Control and Compliance Division (IC&CD) with the mission to provide independent objective assurance and advice designed to add value and improve the Banks’ operations. Depending on the size and complexity of the operations of the Bank, IC&CD of SJIBL comprises of 03 (three) units namely Internal Audit Unit, Compliance Unit and Monitoring Unit. ANNUAL REPORT 2020
  320. 321 As a guidance in performing above duties , SJIBL prepared ‘Internal Control and Compliance Manual’ following the prevailing BB guidelines “Guidelines on Internal Control & Compliance in Banks” and accommodating Bank’s internal rules and practices. The manual is being reviewed from time to time. f) Information and Communication Technology Security Risk Management According to BRPD circular no. 14 dated 23 October 2005 regarding “Guideline on Information and Communication Technology for Scheduled Banks”, BRPD circular no. 21 dated 20 May 2010 and BRPD circular no. 09 dated 17 September 2015, the Bank has followed IT Manual which deals operational risk, physical security control, potential for wide area disaster, data center disaster, recovery plan and backup/restore plan. The customers of SJIBL are enjoying 24 hours Banking facilities through using Internet Banking and Mobile Application with different services like other bank fund transfer, utility bill payment, transfer to Mobile Financial Services (MFSs), etc. In addition, SWIFT, REUTERS, SJIBL Visa Debit Card, Push-Pull Services & SMS Banking facilities are also available. The Bank joined Q-Cash consortium under which ATM and POS services are being offered to its customers to meet the demand of time. Moreover, the Bank is running on technology-based total Banking solution module, i.e., core banking software. Recently, the Bank has introduced Agent Banking Services around all over the country targeting unbanked rural people to bring under formal banking services. ii. Internal Audit The Internal Audit independently and objectively evaluate and report on the effectiveness of the Bank’s risk management, control, and governance processes. The Head of Audit Unit although being a part of IC&CD administratively, is reporting directly to the Audit Committee of the Board and is responsible to the Audit Committee of the Board. Internal Audit of SJIBL is being conducted based on Annual Audit Plan structured on a risk based approach and approved by the Audit Committee of the Board of Directors to provide vital information about risks and controls to assist the management in the following ways: a. Identification of gap in policy and procedures with the Business and its Operation. b. Identification of breach in policy and procedures against internal and regulatory policies & procedures. c. Assessment of qualitative and quantitative risk of the Business. d. Recommending remedial course of actions, where necessary. Irregularities detected in the Bank’s internal control & compliance report as well as external auditor’s report of the previous year have so far been rectified properly. iii.Fraud and Forgeries The Bank is operating its business by dealing with the public money. As a custodian of such money, the Bank have to set up strong internal control structure, introduce corporate governance, practice ethical standards in the Bank for safeguard & interest of the Stakeholders. Public confidence has been shaken when different types of malpractice, fraud and forgeries occurred in the Bank. Shahjalal Islami Bank Limited is fully aware of its responsibility towards stakeholders specially depositors. Shahjalal Islami Bank Limited follows a stringent screening process while recruiting officers and staff. The prospective employees’ family background/employment history/association are checked/cross checked in terms of integrity, attitude and behavioral pattern. The Bank has started to collect Police Clearance to know if the candidate had ever been engaged in anti-social or anti-state or detrimental/subversive activities. Check with Bangladesh Bank’s Corporate Memory Management Systems for background check of experienced Bankers, Financial Institution’s employees and verify National ID on-line. As a result, the Bank since its inception has seen comparatively very few cases of fraud and forgeries. Moreover, the Internal Control and Compliance Division (IC&CD) have been strengthened to remain ever vigilant. These have reduced the chances of fraudulent activities in Shahjalal Islami Bank Limited. Further, the number of fraud cases in Shahjalal Islami Bank Limited is at a minimal level. However, in the year 2020, 01 (one) case of fraud and forgery was identified. Total embezzled/irregular amount involved in the fraud case was Tk. 40,945,561 (Taka four crore nine lac forty five thousand five hundred sixty one) only and Tk. 25,000,000 (Taka two crore fifty lac) only have been realised/settled. The Bank has also reported the same to Bangladesh Bank in compliance with the Department of Off-site Supervision (DOS) circular letter no. 10 dated 09 May 2017 of Bangladesh Bank. 2.29. Compliance with Financial Reporting Standards as applicable in Bangladesh The Financial Reporting Act (FRA), 2015 was enacted in 2015. Under the FRA of the Financial Reporting Council (FRC), it is to issue financial reporting standards for public interest entities such as Banks. The Banking Companies Act, 1991 has been amended to require Banks to prepare their financial statements under such financial reporting standards. The FRC has been formed but yet to issue any financial reporting standards as per the provisions of the FRA and hence International Financial Reporting Standards (IFRSs) as issued by the Institute of Chartered Accountants of Bangladesh (ICAB) are still applicable. Accordingly, the financial statements of the Bank continue to be prepared in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Banking Companies Act, 1991, the rules and regulations issued by Bangladesh Bank, the Companies Act, 1994. In case any requirement of the Banking Companies Act, 1991, and provisions and circulars Shahjalal Islami Bank Limited
  321. 322 issued by Bangladesh Bank differ with those of IFRSs , the requirements of the Banking Companies Act, 1991, and provisions and circulars issued by Bangladesh Bank shall prevail. Material deviations from the requirements of IFRSs are mentioned above under note no. 2.1. Sl. No. 1 2 3 4 5 6 7 IAS No. 1 2 7 8 10 11 12 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 17 18 19 20 21 23 24 26 27 28 31 32 33 34 36 37 38 39 40 41 Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 IFRS No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 IAS Title Presentation of Financial Statements Inventories Statement of Cash Flows Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Construction Contracts Income Taxes Compliance Status Complied * Not Applicable Complied * Complied Complied Not Applicable Complied Property, Plant & Equipment Leases Revenue Employee Benefits Accounting for Government Grants and Discloser of Government Assistance The Effects of Changes in Foreign Exchanges Rates Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investment in Associates Interest in Joint Venture Financial Instruments: Presentation Earnings per Share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Financial Instruments: Recognition and Measurement Investment Property Agriculture Complied Replaced by IFRS 16 Replaced by IFRS 15 Complied Not Applicable Complied Not Applicable Complied Not Applicable Complied Not Applicable Not Applicable Not Applicable Complied Complied Complied Complied * Complied Not Applicable Not Applicable Not Applicable IFRS Title First-time Adoption of International Financial Reporting Standards Share-based Payment Business Combinations Insurance Contracts Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Financial Instruments: Disclosures Operating Segments Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Regulatory Deferral Accounts Revenue from Contracts with Customers Leases Compliance Status Not Applicable Not Applicable Complied Not Applicable Not Applicable Not Applicable Complied * Complied Complied * Complied Not Applicable Not Applicable Complied Not Applicable Complied Complied * Subject to departure disclosed in note no. 2.1 ANNUAL REPORT 2020
  322. 323 2 .30. Auditor of the Subsidiary Name of the Subsidiary Relationship Name of the Auditor Shahjalal Islami Bank Securities Limited Subsidiary K. M. Hasan & Co., Chartered Accountants 2.31 Impact of COVID-19 On 11 March 2020, the World Health Organization (WHO) declared a global pandemic due to Corona Virus related respiratory disease, commonly known as COVID-19. To contain the spread of this disease along with many other countries of the world, the Government of Bangladesh has also taken a number of measures such as declaration of general holiday, enforcement of lock down, social distancing, etc. As a result of these measures, all businesses and economic activities in the country have been adversely affected and this has also affected the Bank. Although the business operation and profitability of the Bank have been impacted by COVID-19, but due to the constantly changing nature of the situation and lack of certainty at present regarding how long this situation will prevail, the potential impact of COVID-19 related matters on the Bank’s operation and financial results cannot be reasonably assessed. The management of the Bank assessed the going concern and found no uncertainty regarding this for the upcoming 12 (twelve) months due to COVID-19. The global economy including Bangladesh has been seriously affected since March 2020 due to the outbreak of COVID-19 that has caused serious disruption in Export and Import business, especially in the month of April and May 2020. As a result, commission income has been reduced significantly during the period. Moreover, investment appetite in business sector has showed negative trend which has been reflected in our portfolio. As a result, investment income has also been reduced in the year 2020. 2.32 General Information i. Figures appearing in these Financial Statements have been rounded off to the nearest Taka. ii. Figures of previous year have been rearranged wherever necessary to conform to current year’s presentation. Shahjalal Islami Bank Limited
  323. 324 Note 3 3a .1 (Note-3a) Cash in Hand of the Bank (including Foreign Currencies) In local currencies In foreign currencies US Dollar Great Britain Pound Euro Amount in FC Exchange Rate (Mid Rate) 187,863.03 4,280.77 3,215.21 84.8000 113.9797 103.5832 (Note-4a) Balance with Bangladesh Bank and its agent bank(s) (including Foreign Currencies) In local currencies In foreign currencies Balance with Sonali Bank Ltd. as agent of Bangladesh Bank In local currencies In foreign currencies 4a.1 2,209,024,307 2,209,024,307 1,797,993,889 16,751,747 1,814,745,636 2,193,918,703 15,105,604 2,209,024,307 15,930,785 487,921 333,041 16,751,747 14,462,964 337,392 305,248 15,105,604 13,351,033,150 13,351,033,150 15,539,227,347 15,539,227,347 10,360,749,111 2,571,599,078 12,932,348,189 12,870,787,695 2,292,220,591 15,163,008,286 418,684,961 418,684,961 13,351,033,150 376,219,061 376,219,061 15,539,227,347 Consolidated Balance with Bangladesh Bank and its agent bank(s) Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 4a (Note-3a.1) 1,814,745,636 1,814,745,636 In Foreign Currencies Foreign Currency 4 31.12.2019 Taka Consolidated Cash in Hand (including Foreign Currencies) Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 3a 31.12.2020 Taka Cash Reserve Requirements (CRR) and Statutory Liquidity Ratio (SLR) Cash Reserve Requirements (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with the Section 33 of the Bank Companies Act, 1991 (as amended up to 2018) and subsequent MPD circular no. 03 dated 09 April 2020 and circular no. 02 dated 10 December 2013. 4a.2 Cash Reserve Ratio (CRR): 2020: 4.00%; 2019: 5.50% of Average Demand and Time Liabilities Required Reserve Actual Reserve held with Bangladesh Bank (in local currencies)* CRR Surplus Maintained (%) 9,074,982,000 11,669,433,000 10,746,257,840 1,671,275,840 12,605,539,310 936,106,310 4.74% 5.94% * Actual Reserve held with Bangladesh Bank (in local currencies) reported as per Statement of Bangladesh Bank. 4a.3 Statutory Liquidity Ratio (SLR): 5.50% of Average Demand and Time Liabilities Required Reserve Actual Reserve held SLR Surplus (Note-4a.4) Maintained (%) 4a.4 12,478,333,000 26,100,316,437 13,621,983,437 11,669,433,000 15,771,349,677 4,101,916,677 11.50% 7.43% 1,814,745,636 418,684,961 1,671,275,840 18,000,000,000 3,695,610,000 500,000,000 26,100,316,437 2,209,024,307 376,219,061 936,106,310 11,750,000,000 500,000,000 15,771,349,677 Components of Statutory Liquidity Ratio Cash in Hand Balance with Sonali Bank Ltd. as agent of Bangladesh Bank Excess CRR Bangladesh Bank Islamic Investment Bond Bangladesh Government Investment Sukuk (BGIS) Refinance Fund (with Bangladesh Bank) ANNUAL REPORT 2020 (Note-3a) (Note-4a) (Note-4a.2) (Note-7a) (Note-7a) (Note-6a.1)
  324. 325 Note 5 (Note-5a.1) 2,975,866,157 395,609,024 3,371,475,181 388,139,197 2,983,335,984 1,773,169,975 153,758,423 1,926,928,398 146,421,934 1,780,506,464 (Note-5a.2) 4,759,516,675 4,759,516,675 7,742,852,659 608,258,408 608,258,408 2,388,764,872 2,975,866,157 4,759,516,675 7,735,382,832 1,773,169,975 608,258,408 2,381,428,382 31,942,634 4,214 8,988,179 41,227,863 4,904 5,822,336 13,504,633 612 21,904,111 76,344,382 21,904,111 54,440,272 22,681,032 1,532 139,181 26,437,209 96,314,056 26,437,209 69,876,847 49,410,559 23,059,719 81,678 7,799,376 1,921,707,541 26,181 5,970 2,665,895 868,590,762 6,865,465 1,212,960 39,477,642 100,000 2,921,003,747 40,777,048 10,261,848 24,964 1,194,686 157,665,267 29,070 6,514 14,370 1,382,670,187 100,026,563 1,196,100 9,096,552 1,702,963,169 393,621 14,364 14,154 422,139 2,975,866,157 301,715 14,310 13,934 329,959 1,773,169,975 Less: Inter Company Transaction Outside Bangladesh Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 5a.1 31.12.2019 Taka Consolidated Balance with Other Banks and Financial Institutions Inside Bangladesh Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 5a 31.12.2020 Taka Balance with Other Banks and Financial Institutions of the Bank (Other than Mudaraba Fund) Inside Bangladesh (Note-5a.1) Outside Bangladesh (Note-5a.2) Inside Bangladesh Current Account Sonali Bank Limited (other than as agent of Bangladesh Bank) National Bank Limited (Narayangonj Branch) Standard Chartered Bank (Motijheel Branch) Agrani Bank Limited (Islami Banking Wing) Janata Bank Limited (Dinajpur Branch) Islami Bank Bangladesh Limited Offshore Banking Unit Less: Offshore Banking Unit Mudaraba Special Notice Deposit Export Import Bank of Bangladesh Limited Trust Bank Limited (Dilkusha Corporate Branch) Prime Bank Limited (Islami Banking Branch) Social Islami Bank Limited Agrani Bank Limited (Corporate Branch-Islami Banking Wing) AB Bank Limited (Islami Banking Branch) Jamuna Bank Limited (Naya Bazar Islami Banking Branch) Bank Alfalah (Islami Banking Branch) Al-Arafah Islami Bank Limited Southeast Bank Limited (Islami Banking Branch) The City Bank Limited (Islamic Banking Branch) Islami Bank Bangladesh Limited Mercantile Bank Limited (Islami Wing Main Branch) Mudaraba Saving Deposit Social Islami Bank Limited Al-Arafah Islami Bank Limited Islami Bank Bangladesh Limited Shahjalal Islami Bank Limited
  325. 326 Note 5a .2 Outside Bangladesh (Nostro Account) [as at 31 December 2020] Current Account Standard Chartered Bank NY Mashreq Bank psc, NY Standard Chartered Bank, Mumbai Habib American Bank, USA ICICI Bank, Hong Kong WACHOVIA BANK, NY, USA Commerzbank AG Frankfrut Bank Aljazira JPMorgan Chase Bank N.A., NY, USA AB Bank Ltd. Mumbai Standard Chartered Bank, Mumbai Nepal Bangladesh Bank, Nepal Standard Chart. Bank, Colombo ICICI Bank, Mumbai Habib Metropoliton Bank Ltd. United Bank of India, Kolkata Sonali Bank Ltd ACU, Kolkata Bank of Bhutan Ltd. Main Branch AXIS Bank Ltd. India MCB Bank Limited HDFC Bank Ltd., Mumbai Standard Chartered Bank, Frankfurt COMMERZBANK AG Wells Fargo Bank, N. A. London, UK JPMorgan Chase AG, Frankfurt Standard Chartered Bank,Tokyo Habib Bank AG Zurich ICICI Bank, Canada Bank Aljazira, KSA Riyad Bank, KSA Standard Chartered Bank London JPMorgan Chase Bank N.A., London MASHREQBANK PSC. UAE Emirates Islamic Bank PJSC, Dubai Standard Chartered Bank, China Currency-wise Distribution: Foreign Currency USD ACUD EURO YEN CHF CAD SAR GBP AED CNY Currency F.C. Amount 31.12.2020 Taka 31.12.2019 Taka Rate Taka USD 49,195,869.17 84.8000 4,171,809,706 USD USD USD USD USD USD USD USD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD ACUD EURO EURO EURO EURO YEN CHF CAD SAR SAR GBP GBP AED AED CNY 1,120,294.21 222,198.53 987,047.96 69,151.09 198,414.08 319,409.60 51,775.88 165,884.65 87,601.44 750,427.41 8,600.69 17,763.89 342,494.97 38,911.64 226,914.35 145,032.62 16,268.90 79,647.22 148,485.82 592,362.59 117,883.59 38,612.42 602,362.16 87,370.02 966,228.99 11,641.24 6,900.21 266,929.35 101,648.45 10,654.42 4,940.00 314,372.25 235,000.00 76,087.95 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 84.8000 103.5832 103.5832 103.5832 103.5832 0.8167 95.3773 66.0488 22.5977 22.5977 113.9797 113.9797 23.0849 23.0849 12.9771 95,000,949 18,842,435 83,701,667 5,864,012 16,825,514 27,085,934 4,390,595 14,067,018 7,428,602 63,636,244 729,339 1,506,378 29,043,573 3,299,707 19,242,337 12,298,766 1,379,603 6,754,084 12,591,598 50,232,348 12,210,759 3,999,598 62,394,600 9,050,066 789,119 1,110,310 455,751 6,031,989 2,297,021 1,214,388 563,060 7,257,252 5,424,952 987,401 4,759,516,675 BDT 4,437,587,830 208,142,579 87,655,024 789,119 1,110,310 455,751 8,329,011 1,777,447 12,682,203 987,401 4,759,516,675 Composition 93.24% 4.37% 1.84% 0.02% 0.02% 0.01% 0.17% 0.04% 0.27% 0.02% 100% For detailed comparative statement of 2020 & 2019 of foreign currency amount and rate thereof please see Annexure-C. 5a.3 In accordance with Bangladesh Bank Foreign Exchange Policy Department, Circular Letter no. FEPD (FEMO)/01/2005-677 dated 13 September 2005, the quarterly review of Nostro Accounts for the quarter ended 31 December 2020 reflect the true state of the Nostro Account entries recorded correctly and after review a separate audit certificate have also been given by the Auditor. The status of all outstanding unmatched entries are given below: ANNUAL REPORT 2020
  326. 327 As at 31 December 2020 Amount in US $ As per Bank's Book Debit Entries No. Up to 3 months 11 Amount 49,051,823 As per Correspondents' Book Credit Entries No. Amount 324 10,879,951 Debit Entries No. Amount 14 13,239 Credit Entries No. 302 More than 03 months but less than 06 months - - - More than 06 months but less than 09 months - - - - More than 09 months but less than 12 months - - - - - 11 49,051,823 - 324 10,879,951 - 14 13,239 - 302 As at 31 December 2019 Debit Entries No. Up to 3 months 11 Amount 20,087,182 As per Correspondents' Book Credit Entries No. 310 Amount 11,626,543 Debit Entries No. Amount 17 208,544 Credit Entries No. Amount 362 13,387,174 More than 03 months but less than 06 months - - - - More than 06 months but less than 09 months - - - - More than 09 months but less than 12 months - - - - More than 12 months - - - - 11 20,087,182 310 11,626,543 Note Maturity-wise groupings of Balance with Other Banks and Financial Institutions On Demand Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years Consolidated Placement with other Banks & Financial Institutions Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Placement with other Banks & Financial Institutions of the Bank Placement with other Banks Placement with Financial Institutions 17 208,544 31.12.2020 Taka 362 13,387,174 31.12.2019 Taka 54,478,264 7,680,904,568 7,735,382,832 69,906,543 2,311,521,839 2,381,428,382 (Note-6a) 23,646,670,016 23,646,670,016 23,646,670,016 12,361,483,166 12,361,483,166 12,361,483,166 (Note-6a.1) (Note-6a.2) 15,286,670,016 8,360,000,000 23,646,670,016 4,261,483,166 8,100,000,000 12,361,483,166 Less: Inter Company Transaction 6a 18,113,535 Amount in US$ As per Bank's Book 6 18,113,535 - More than 12 months 5a.4 Amount Shahjalal Islami Bank Limited
  327. 328 Note 6a .1 7a 311,483,166 3,450,000,000 500,000,000 4,261,483,166 300,000,000 930,000,000 900,000,000 1,400,000,000 250,000,000 380,000,000 300,000,000 1,200,000,000 250,000,000 400,000,000 300,000,000 1,200,000,000 3,000,000,000 2,000,000,000 8,360,000,000 23,646,670,016 2,500,000,000 1,000,000,000 150,000,000 8,100,000,000 12,361,483,166 21,335,300,000 2,000,000,000 311,370,016 23,646,670,016 12,050,000,000 311,483,166 12,361,483,166 Maturity-wise groupings of Placement with Other Banks and Financial Institutions On Demand Not more than 3 months More than 3 months but not more than 1 year More than 1 year but not more than 5 years More than 5 years 7 311,370,016 4,200,000,000 500,000,000 1,335,800,000 3,000,000,000 600,000,000 2,000,000,000 1,000,000,000 1,500,000,000 839,500,000 15,286,670,016 Placement with Financial Institutions Mudaraba Term Deposits-Financial Institutions Lanka Bangla Finance Limited Industrial and Infrastructure Development Finance Company Limited Union Capital Limited Phoenix Finance & Investments Limited Premier Leasing International Limited Industrial Promotion and Development Company of Bangladesh Limited IDLC Finance Limited Delta Brac Housing Finance Corporation Limited Islamic Finance and Investment Limited 6a.3 31.12.2019 Taka Placement with other Banks Mudaraba Term Deposits-other Banks ICB Islamic Bank Limited Export Import Bank of Bangladesh Limited Bangladesh Bank (Refinance Fund) Al-Arafah Islami Bank Limited Social Islami Bank Limited Agrani Bank Limited (Islami Banking Wing) Jamuna Bank Limited (Islami Banking Branch) Dhaka Bank Limited (Islami Banking Wing) Premier Bank Limited (Islami Banking Wing) Islami Bank Bangladesh Limited 6a.2 31.12.2020 Taka Consolidated Investments in Shares & Securities Government Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-7a) 21,695,610,000 21,695,610,000 11,750,000,000 11,750,000,000 Others Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd (Note-7a) 5,914,149,344 1,786,654,957 7,700,804,301 29,396,414,301 3,889,417,772 1,659,023,407 5,548,441,179 17,298,441,179 (Note-7a.2) (Note-7a.3) 18,000,000,000 3,695,610,000 21,695,610,000 11,750,000,000 11,750,000,000 Investments in Shares & Securities of the Bank Government Bangladesh Government Islamic Investment Bond (BGIIB) Bangladesh Government Investment Sukuk (BGIS) ANNUAL REPORT 2020
  328. 329 Note Others Mudaraba Perpetual Bond , Islami Bank Bangladesh Ltd. Mudaraba Subordinated Bond Investments in Shares 7a.1 7a.2 Maturity-wise groupings of Investments in Securities On Demand Not more than 3 months More than 3 months but less than 1 year More than 1 year but less than 5 years More than 5 years (Note-7a.4) (Note-7a.5) 31.12.2020 Taka 31.12.2019 Taka 47,550,542 3,720,000,000 2,146,598,802 5,914,149,344 27,609,759,344 47,550,542 2,040,000,000 1,801,867,231 3,889,417,772 15,639,417,772 14,214,149,344 6,000,000,000 4,795,610,000 2,600,000,000 27,609,759,344 8,269,417,772 5,650,000,000 1,360,000,000 360,000,000 15,639,417,772 Bangladesh Bank introduced Mudaraba Bond named "Bangladesh Government Islamic Investment Bond (Islamic Bond)" in September 2004 on behalf of the Government to facilitate Islamic Banks and Financial Institutions. Investment in this fund is considered as a component of Statutory Liquidity Ratio (SLR). The mobilized fund from Islamic Bond is invested by Bangladesh Bank and a portion of realized profit is distributed among the bondholders as per mudaraba principle of Islamic Shari’ah on the basis of the tenor of the bond. So the rate of return from Islamic Bond is dependent on fund deployment of Bangladesh Bank which is not prefixed. 7a.3 Bangladesh’s debut issuance of Sukuk of BDT 4,000 crore is a part of the Bangladesh Government Investment Sukuk (Ijara mode) for 5 years’ tenure, in order to mobilize funds for the implementation of a safe water supply project was held on 28 December 2020. SJIBL, in view of diversifying its investment portfolio and maintaining Statutory Liquidity Requirement (SLR), participated in the auction and received an allocation for investment of BDT 369.56 crore (Taka Three Hundred Sixty-Nine Crore and Fifty-Six Lac only) for which rental rate was fixed @4.69% per annum. 7a.4 Mudaraba Subordinated Bond SIBL Mudarabah Subordinated Bond IBBL Mudaraba Subordinated Bond IBBL 3rd Mudaraba Subordinated Bond AIBL 3rd Mudaraba Subordinated Bond 7a.5 Investments in Shares (at cost) Quoted Agricultural Marketing Company Ltd – AMCL (PRAN) Aamra Technologies Limited The ACME Laboratories Limited Active Fine Chemicals Ltd. Aftab Automobiles Limited AIBL 1st Islamic Mutual Fund Apex Footwear Limited Bangladesh Building Systems Ltd. Beximco Limited Bangladesh Steel Re-Rolling Mills Limited Dhaka Electric Supply Company Ltd. Eastern Housing Limited Envoy Textiles Ltd. Esquire Knit Composite Limited Export Import Bank of Bangladesh Limited Fareast Islami Life Insurance Co. Ltd. First Security Islami Bank Limited Generation Next Fashions Limited LafargeHolcim Bangladesh Limited M.I. Cement Factory Ltd 320,000,000 800,000,000 1,600,000,000 1,000,000,000 3,720,000,000 440,000,000 1,000,000,000 600,000,000 2,040,000,000 12,508,253 8,527,068 133,933,591 35,487,579 61,605,088 67,402,500 12,854,787 13,071,649 41,467,354 36,383,068 115,162,210 166,063,283 42,402,697 6,778,090 100,196,838 65,297,780 19,903,128 25,741,813 173,528,430 43,580,439 9,958,704 6,059,353 117,315,120 35,487,579 61,605,088 67,402,716 12,854,787 4,485,482 83,745,911 8,422,015 96,044,734 166,063,283 42,402,697 1,873,598 110,502,920 65,297,780 8,203,083 25,741,813 63,328,394 41,501,769 Shahjalal Islami Bank Limited
  329. 330 Note Quoted Meghna Petroleum Limited Metro Spinning Mills Limited Orion Pharma Ltd . RAK Ceramics (Bangladesh) Limited Square Textile Ltd The Dacca Dyeing & Mfg. Co. Limited Titas Gas Transmission and Distribution Co. Ltd Unique Hotel and Resorts Ltd Prime Islami Life Insurance Ltd. Premier Cement Mills Limited Shahjibazar Power Co. Ltd. Singer Bangladesh Limited Olympic Industries Ltd. Square Pharmaceuticals Ltd. Padma Islami Life Insurance Limited Bashundhara Paper Mills Limited The IBN SINA Pharmaceutical Industry Ltd. MJL Bangladesh Limited Sea Pearl Beach Resort & Spa Limited Silva Pharmaceuticals Limited Dominage Steel Building Systems Ltd. Robi Axiata Limited Linde Bangladesh Ltd. Power Grid Company of Bangladesh Ltd. Beacon Pharmaceuticals Limited Aman Cotton Fibrous Limited Baraka Power Limited BSRM Steels Limited Coppertech Industries Limited Genex Infosys Limited Islami Insurance Bangladesh Limited New Line Clothings Limited Runner Automobiles Limited Silco Pharmaceuticals Limited S. S. Steel Limited Summit Power Limited Un-Quoted Lanka Bangla Securiries Ltd Market Stabilization Fund, Asset Management Co. Ltd Lub-rref (Bangladesh) Limited ADN Telecom Limited 31.12.2020 Taka 31.12.2019 Taka 62,070,338 65,855,505 28,796,598 64,176,345 45,712,547 156,023,958 111,712,964 36,810,461 32,516,491 18,441,295 36,951,327 23,605,504 10,352,346 77,460,720 15,673,722 16,714,534 25,580,746 55,849,486 18,635 20,335,072 18,602 2,715,540 25,454,659 19,730,763 - 43,204,196 65,855,505 62,359,551 46,803,776 35,382,751 156,023,958 78,349,510 31,110,235 32,516,491 18,441,295 16,117,113 7,172,574 7,422,282 58,874,302 15,673,722 3,676,488 7,800,452 12,979,613 38,800 14,678,130 731,558 11,754,966 28,229,178 48,910 3,409 1,758,663 42,926 554,558 73,690 3,064 8,314,698 5,000,000 2,000,000 5,125,000 2,146,598,802 5,000,000 2,000,000 574,040 1,801,867,231 181,471,332,782 4,636,326,999 186,107,659,781 2,011,859,181 184,095,800,600 182,671,664,294 4,797,416,698 187,469,080,992 1,783,772,006 185,685,308,986 See Annexure-A for details regarding unrealised gain/(loss) & provision. 8 Consolidated Investments Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd Less: Inter Company Transaction ANNUAL REPORT 2020 (Note-8a)
  330. 331 Note Bills Purchased and Discounted Shahjalal Islami Bank Ltd Shahjalal Islami Bank Securities Ltd 8a 8a .2 (Note-8a.2) Maturity-wise Classification of Investments With a residual maturity of: Re-payable on Demand Not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years 14,614,015,788 14,614,015,788 200,299,324,774 189,174,075,576 7,702,742,794 193,427,000,258 10,755,335,963 181,471,332,782 15,041,318,459 196,512,651,241 182,671,664,294 14,614,015,788 197,285,680,082 27,708,283,825 65,006,385,030 73,751,198,011 25,271,526,950 4,775,257,425 196,512,651,241 18,998,610,992 61,355,846,506 71,673,887,574 27,343,795,259 17,913,539,751 197,285,680,082 4,345,494,581 10,941,976,594 15,287,471,175 246,152,716 15,041,318,459 5,038,836,486 10,026,408,077 15,065,244,563 451,228,775 14,614,015,788 2,120,825,903 4,975,668,146 4,211,569,168 3,733,255,241 15,041,318,459 3,453,291,931 3,247,234,308 4,283,368,027 3,630,121,522 14,614,015,788 2,422,671,777 1,881,187,195 81,360,652,400 110,845,959,276 2,180,592 196,512,651,241 2,201,648,077 1,594,249,991 85,215,891,715 108,090,615,813 183,274,487 197,285,680,082 Maturity-wise Classification of Bills Purchased and Discounted Re-payable: Within 1 month Over 1 month but less than 3 months Over 3 months but less than 6 months 6 months or more 8a.4 15,041,318,459 15,041,318,459 199,137,119,059 Bills Purchased and Discounted Payable inside Bangladesh Payable outside Bangladesh Gross Bills Purchased and Discounted Less: Profit receivable on Bills Purchased and Discounted Net Bills Purchased and Discounted 8a.3 31.12.2019 Taka Investments of the Bank Country-wise Classification of Investments: Inside Bangladesh Gross Murabaha, Bai-Muajjal etc. Less: Profit receivable on Murabaha, Bai-Muajjal etc. (Markup profit or unearned income) Net Murabaha, Bai-Muajjal etc. Net Bills Purchased and Discounted Outside Bangladesh 8a.1 (Note-8a) 31.12.2020 Taka Investments on the basis of significant concentration Investments to allied concern of Directors Investments to Executives/Officers Investments to Customer Groups Industrial Investments Others (Note-53.5) Investments allowed to single person/counterparty or a group which is equal to or greater than 10% of Bank's total capital: Total outstanding amount to such customers at end of the year Number of such types of customers Amount of Classified Investments thereon Measures taken for recovery 88,947.94 million 69,611.03 million 22 Nil Not applicable 17 Nil Not applicable Shahjalal Islami Bank Limited
  331. 332 31 .12.2020 Taka Note 31.12.2019 Taka The amount represents the sum of total investments (both Funded and Non-Funded) to single person/counterparty or a group equal to or greater than Tk. 2,782.83 million which is computed @ 10% and above of total capital of the bank, i.e. Tk. 27,828.26 million (Note-17.5.c) as at 31 December 2020. For details please refer to Annexure-D. 8a.5 Sector-wise Classification of Investments Sector Agriculture & Fishing As at 31 December 2020 Amount Composition As at 31 December 2019 Amount Composition 4,428,100,000 2.25% 1,807,500,000 0.92% Cotton & Textile 14,204,891,416 7.23% 15,250,291,010 7.73% Garments 35,917,795,745 18.28% 30,794,739,895 15.61% Cement 2,909,125,717 1.48% 3,068,247,845 1.56% Pharmaceuticals & Chemicals 3,502,368,796 1.78% 3,501,186,277 1.77% Real Estate 6,823,342,294 3.47% 7,169,488,684 3.63% Transport 3,852,956,608 1.96% 4,402,529,994 2.23% Information Technology 1,049,993,980 0.53% 1,372,210,601 0.70% Non Banking Financial Institutions 1,547,537,178 0.79% 1,747,709,864 0.89% Steel & Engineering 10,718,891,585 5.45% 10,930,918,259 5.54% Food Processing & Beverage 11,586,731,440 5.90% 14,270,811,185 7.23% Power & Energy 6,157,617,851 3.13% 4,577,192,177 2.32% Paper & Paper Products 2,220,723,185 1.13% 2,278,584,229 1.15% Plastic & Plastic Product 5,605,896,330 2.85% 5,715,496,150 2.90% Electronics 5,629,384,876 2.86% 5,205,879,865 2.64% Services Industries 6,660,892,213 3.39% 6,472,954,026 3.28% Trading 31,252,429,405 15.90% 33,629,882,240 17.05% Construction incl. Work Order Financing 20,620,941,948 10.49% 20,677,875,093 10.48% 2,256,505,482 1.15% 2,104,924,367 1.07% Share business Staff Investment Others Total 1,881,187,195 0.96% 1,594,249,991 0.81% 17,685,337,995 9.00% 20,713,008,331 10.50% 196,512,651,241 100.00% 197,285,680,082 100.00% 8a.6 Geographical Location-wise Investments Area As at 31 December 2020 Amount As at 31 December 2019 Composition Amount Composition 139,611,824,666 74.75% 140,650,645,454 75.20% 31,718,061,626 16.98% 31,812,635,642 17.01% Sylhet 1,803,989,407 0.97% 1,849,082,193 0.99% Rajshahi 5,037,596,743 2.70% 4,727,604,198 2.53% Rangpur 1,370,436,948 0.73% 1,380,517,101 0.74% Khulna 5,217,920,865 2.79% 4,779,313,497 2.56% i) Inside Bangladesh a) In Urban Areas Dhaka Chattogram Barishal Mymensingh Sub-total ANNUAL REPORT 2020 587,326,482 0.31% 483,492,853 0.26% 1,417,037,704 0.76% 1,355,735,067 0.72% 186,764,194,441 100% 187,039,026,005 100%
  332. 333 Area As at 31 December 2020 Amount Composition As at 31 December 2019 Amount Composition b ) In Rural Areas Dhaka 6,534,764,955 67.03% 7,003,688,496 68.35% Chattogram 1,363,660,141 13.99% 1,375,523,316 13.42% Sylhet 179,404,330 1.84% 193,277,081 1.89% Rajshahi 488,611,551 5.01% 524,695,751 5.12% Khulna 762,894,796 7.83% 772,273,512 7.54% Barishal 248,239,171 2.55% 201,760,903 1.97% Mymensingh 170,881,855 1.75% 175,435,020 1.71% 9,748,456,799 100% 10,246,654,078 100% Sub-total ii) Outside Bangladesh Total 196,512,651,241 100% 197,285,680,082 100% 8a.7 Grouping of Investments as per Classification Rules of Bangladesh Bank Status As at 31 December 2020 As at 31 December 2019 Amount Composition Amount Composition 181,843,113,633 92.54% 182,161,022,883 92.33% 5,696,061,505 2.90% 5,437,334,936 2.76% Unclassified: Standard (including staff Investment) Special Mention Account (SMA) Sub-total 187,539,175,138 187,598,357,819 Classified Substandard 355,172,100 0.18% 647,654,003 0.33% Doubtful 444,099,969 0.23% 522,812,490 0.27% 8,174,204,033 4.16% 8,516,855,771 4.32% Bad or loss Sub-total 8,973,476,102 Grand Total 9,687,322,264 196,512,651,241 100.00% 197,285,680,082 100.00% Status Basi for Provision Rate 31.12.2020 Taka 31.12.2019 Taka Unclassified (excluding Staff Investments) 112,398,437,987 1% (ex. RSDL BB NOC) 1,123,984,380 1,106,812,741 8a.8 Particulars of provision for Investments Standard: Staff Investments Consumer Financing (Other than HF & LP) Small & Medium Enterprise Housing Finance (HF) Loan for Professionals (LP) Share Business Short Term Agri Credit Islamic Credit Card SMA 1,881,187,195 0% 766,891,570 2% 15,337,831 33,042,516 62,751,407,604 0.25% 156,878,519 157,131,589 1,910,777,568 1% 19,107,776 23,474,304 1,844,551 2% 36,891 72,220 2,017,425,264 2% 40,348,505 35,961,727 3,503,067 1% 35,031 17,469 114,248,629 2% 2,284,973 644,713 5,696,061,505 - - 38,449,401 25,159,291 Special Reschedule & One time Exit 562,497,776 518,362,000 Special General Provision for "COVID-19" 263,071,409 2,222,032,492 1,900,678,570 Shahjalal Islami Bank Limited
  333. 334 Status Basi for Provision 31 .12.2020 Taka Rate 31.12.2019 Taka Sub-standard 355,172,100 20% & 5% (Agri, Cottage & Micro Credit) 7,352,179 43,914,444 Doubtful 444,099,969 50%; 20% (Cottage & Micro Credit) & 5% (Agri) 49,220,300 82,748,818 2,812,032,962 2,697,082,525 Bad or loss 8,174,204,033 100% Reschedule (BB NOC) 564,940,000 434,529,000 3,433,545,442 3,258,274,787 Required provision for Investments 5,655,577,933 5,158,953,357 Total provision maintained {note-15a.1(a) & (b)} 5,664,361,818 5,159,213,053 8,783,884 259,697 Surplus/(Shortfall) Provision The Bank has maintained provision on unclassified investments amounting to Tk. 2,224,300,000 (note-15a.1.b) and for classified investments amounting to Tk. 3,440,061,818 (note-15a.1.a), totaling Tk. 5,664,361,818. These exist surplus of Tk. 8,783,884 against the required provision. 8a.9 Particulars of Provision for Off-balance Sheet Items Status Basis for Provision Rate Rate 1% 1% Acceptances & endorsements 27,486,835,845 274,868,358 350,644,930 Letters of Guarantee 31,092,059,818 310,920,598 297,496,685 Irrevocable Letters of Credit 34,857,199,890 348,571,999 220,541,506 78,189,718 781,897 580,795 93,514,285,271 935,142,853 869,263,916 935,200,000 869,300,000 57,147 36,084 Bills for collection Required provision for Off-balance Sheet Items Provision maintained {note-15a.1(c)} Surplus Provision 31.12.2020 Taka 31.12.2019 Taka (i) Investments considered good in respect of which the banking company is fully secured 162,429,626,281 163,149,340,571 (ii) Investments considered good for which the banking company holds no other security than the debtor's personal security 31,363,419,138 31,486,794,541 (iii) Investments considered good and secured by personal security of one or more parties in addition to the personal security of the debtors 2,719,605,821 2,649,544,970 196,512,651,241 197,285,680,082 (v) Investments due by directors or officers of the banking company or any of them either severally or jointly with any other person 1,881,187,195 1,594,249,991 (vi) Investments due by companies or firms in which the directors of the banking company are interested as directors, partners or managing agents or, in the case of private companies as members (Note 53.5). 2,422,671,777 2,201,648,077 8a.10 Particulars of Investments (iv) Investments considered bad or doubtful not provided for ANNUAL REPORT 2020
  334. 335 31 .12.2020 Taka 31.12.2019 Taka (vii) Maximum total amount of investments, including temporary investments made at any time during the period to directors or managers or officers of the banking company or any of them eit