Rural Development Scheme of Islami Bank Bangladesh Limited

A Scheme in the name and style of 'Rural Development Scheme' has been introduced in 1995 to cater to the investment needs of the agriculture and rural sector to create opportunity for generation of employment and raising income of the rural people with a view to alleviate poverty. It is treated as first Islamic Microfinance Model in the Country & abroad.

Integrated Development approach

The purpose of the Scheme is not only providing Micro Investment facilities to the stake- holder but also ensure various types of facilities & services to the downtrodden people as a part of Integrated Development Approach as well as Corporate Social Responsibility. The following areas have been covered under the Scheme:

Humanitarian Assistance Program.

Education Program.

Capacity building or Training Program.

Health & Medicare Program.

Environment protection Program.

Command Area and Baseline Survey

Each designated Branch & SME/Krishi Branch selects villages within a radius of 10 kilometers of the Branch premises. Following criteria is being followed in selecting a village:

■    Easy communication;
■    Availability of agriculture and other off-farm activities;
■    Abundance of low-income people;

After primary selection of a project area consisting of 4 to 6 villages, Branch conducts detailed Baseline Survey to identify the target group people and the varieties of economic activities in those areas. The concerned Branch has to ensure the availability of at least 400 target group people in the selected area.

18 to 50 years and the permanent resident of the project area.0.50 acre land

The clients are provided investment maximum of BDT 15,000/-($145) at the first time and the good performers are given enhancement, upon his requirement, by BDT 2,000 to BDT 5,000 in every next term up to the ceiling of a particular sector.

Rate of Return

■        The rate of return is determined by the authority from time to time.
■        At present, the rate of return is 12.5%. Timely repayment is encouraged by offering 2.5% rebate.

Security Requirements ■

Generally, collateral security is not required against investment under the Scheme, as the Scheme has been drawn taking into account the social welfare objective of the Bank for upliftment of the socially down-trodden and economically backward and weaker section of the population of the society. However, Group discipline should be strictly followed and complied with so that only the right persons are selected and included as members of the Group.

    ■ Each member of the Group gives personal guarantee for other members of the same Group and the members are jointly and severally liable and responsible for payment of investment.

Savings Plan

• The members of the Group have to open Mudaraba Savings Account (RDS) in their individual names with the Branch from the very inception of the Group activity.
• This Mudaraba Savings Account is non-cheque account, which induces the clients to make a habit of compulsory savings.
• The weekly compulsory savings is minimum Tk.20.00 only.

Centre Fund

• Each member of the Group has to deposit minimum Tk.5.00 only per week as Centre     Fund.
• his Fund is kept by opening a Mudaraba Savings Account in the name of the respective centre.
• This Fund is utilized for the welfare of the members by way of Quard as per decision of the Centre in the weekly meeting. This account is operated by Centre Leader & Deputy Centre Leader jointly.

Modes of Investment

The Branch selects any of the following modes depending upon the sector and purpose of investment :      
▪           Bai-Muajjal
▪           Hire-Purchase Shirkatul Meelk (HPSM)  or Leasing
▪           Bai-Salam
▪           Murabaha TR
▪           Mudaraba
▪           Musharaka

Sanction and Disbursement ■

On the basis of the list submitted by the Field Officers, the Investment Committee of the Branch carefully scrutinizes the applications and sanction the investment at the Branch level. The Investment Committee consists of Manager, Project Officer and the Field Officer.

    ■ After sanction of the investment, the Branch complete documentation formalities and then disburse the amount with the help of the Investment Officer and Field Officer.     ■ In all the cases, Branch must ensure strict adherence to the banking and Shariah norms.

Documentation

To secure Bank’s investment, the following documents have to be executed:

Group Guarantee form

Deed of Agreement

Usual charge documents

Modus Operandi

The cardinal principle of the Scheme is the 'Group Approach', Allah loves those 'who conduct their affairs by mutual consultation' (Al-Quran 42:38). For all decision-making activities, this mutual consultation is given high priority. The operational procedure in brief are as under:

■ Select suitable villages within 10 kilometer radius from the Branch location.

■ Conduct Base Line Survey to identify target group people and also to have base line situation.

■ Small Groups to be formed consisting of 5 members preferably of similar professions/ occupations.

■ The members of the Group select their Group Leader and Deputy Group Leader to co-ordinate the Group activities. After formation of the Group, the Branch Manager visits the Group and has discussion with the Group members and then he gives formal recognition of the Group through issuance of Pass Books.

■ A Centre is formed by minimum 2 to maximum 8 Groups. The group leaders under a particular centre select the Centre Leader and Deputy Centre Leader from amongst themselves to co-ordinate the Centre activities.

■ The Centre has to conduct regular weekly meeting. The weekly meetings are to be organized in a particular place, day and time as decided in the meeting of the Centre.

■ Centre meetings are recorded in a Resolution Book along with signature of the members (members who do not know signature must learn it). Attendance in the Centre meeting is the first requirement to become a dependable client member of the Scheme.

■ The Centre meetings are conducted by the Field Officers with the following agenda:

	■	Discussion on different Islamic topics, moral values, social rights & responsibilities
	■	Collection of Investment Installments, Personal Savings, Centre Fund etc.
	■	Appraisal & approval of Investment proposals, etc.

■ Investment client are selected in the Centre meeting and supplied with the application forms and other related papers. On finalization of the investment application, the list of the selected clients, supported by their  applications, are submitted to Branch Manager duly signed by the Group Leader, Centre Leader, Field Officer and Project Officer.

■ Each member of the Group has to provide guarantee against investment of other members of his Group. If any member of a particular Group does not comply with the principles or rules of the Group, then other members make him compelled to observe Group discipline, otherwise they held responsible to recover the defaulted amount and/or loss, if any.

■ Clients are allowed to take investment initially BDT 15,000/-(US$ 145) maximum after 8 weeks of his/her enrollment as active member in the group and the highest of amount of investment under the scheme is BDT 1,00,000/- (US$1,449).

■ The investment amount along with profit has to be paid back by the clients in 45 equal weekly installments.

Supervision, Follow-up and Monitoring

■ The investment under the Scheme is fully supervised. The Branch has to take the responsibility for the investment as well as recovery. To ensure 100% recovery the Field Officers make very close and intensive supervision over the clients. Moreover, the group approach is very helpful in this process - Clients are motivated, induced and pressed by the fellow members in recovering the investment.

■ One each Field Officer is appointed for 400 investment clients and one or more Assistant Officer/Officer is engaged in the Branch as Project Officer to supervise the activities of the Field Officers.

■ One or more officials in each Zonal Office are assigned as RDS Zone Officer to supervise the RDS activities of the Branches under the Zone. The Zone Officers visit the Branches under their respective Zone at least twice in a year.

■ Head Office Officials also visit the activities in the Branch level once in a year.

■ Moreover, weekly, monthly, quarterly and annual statement of RDS of the Branches are prepared and sent to the higher authority to monitor and evaluate the activities regularly.

Investment under MEIS

■ A special scheme has been introduced in the name and style of Micro Enterprise Investment Scheme (MEIS) in 2005 in order to satisfy the graduated clients who are already availed highest limit of investment under the Scheme.

■ The ceiling of MEIS investment is BDT 50,000/-($725) to BDT 300,000/-          ($ 4348) and Local small traders & entrepreneurs may also be provided this facilities under the limit.

■ The existing Field Officers and Project Officers explore the possibilities of investment in the areas under the aforesaid Schemes and recommend to the Branch for sanction. After scrutiny the proposals, the Branch Manager will approved the same if found satisfactory.

■ The entire Scheme has been chalked out in such a way so that all the persons within the command/target areas may be brought within the fold of Bank's Investment for productive economic activities.