Abstract of A Doctoral Thesis

On

“The Role of Marketing on Financial

Performance in showing differences between the
Traditional and Islamic Banking in the context of
Bangladesh”

Marketing is the performance of business activities that boosts up the overall flow of a
company's products and services to its clients with a view to achieving the desired goal based
on profit. The goal of banking business deals with a profit in market penetration by pricing,
promoting and distributing of products for which there is a significant achievement of an
organization. People at the helm consider MARKETING is every thing to exploit the untapped
potentials of an organization.

The broad objective in perusing research is to uphold and evaluate the implication of marketing
on the financial performance in showing salient differences between The Traditional and
Islamic banking in the context of Bangladesh. To some extent, the study mainly focuses on
Islami Bank Bangladesh Ltd (IBBL), Al-Arafa Islami Bank, EXIM Bank Ltd, Shahajalal Islami
Bank Ltd and their marketing devices on financial performances have been compared with that
of four other commercial banks in Bangladesh, such as National Bank Ltd. (NBL), Prime Bank
Ltd. (PBL), Standard Chartered Bank (SCB) and Citi Bank N. A. (CNA).

AIMS AND OBJECTIVES

o To conduct interest free banking.

o To establish participatory banking instead of banking on debtor - creditor relationship.

o To invest through different modes permitted under Islamic Shariah.
o To accept deposits on Mudaraba & AI-Wadeeah basis
o To establish a welfare-oriented banking system.
o To extend co-operation to the poor, the helpless and the low-income group for their
economic uplift.

o To play a vital role in human development and employment generation.

o To contribute towards balanced growth and development of the country through
investment operations, particularly in the less developed areas.

o To contribute in achieving the ultimate goal of Islamic Economic System.

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FUNCTIONS

o To maintain all types of deposit accounts.

o To make investment.
o To conduct foreign exchange business.
o To extend other banking services.
o To conduct social welfare activities.

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 EXECUTIVE SUMMARY

Marketing is the performance of business activities that directs the flow of a company's products and
services to clients with a view to achieving the desired goal based on profit. Banking business goal
deals with a profit by pricing, promoting and distributing of products for which there is a market.

The broad objective of the study is to evaluate the implication of Marketing on the financial
performance of commercial banks. The study mainly focuses on Islami Bank Bangladesh Ltd.
(IBBL), Export Import Bank of Bangladesh Ltd. (EXIM), Al-Arafah Islami Bank Ltd. (AAIB),
Shahjalal Islami Bank Ltd. (SJBL), Prime Bank Ltd. (PBL), National Bank Ltd. (NBL), Standard
Chartered Bank (SCB), and Citi Bank N.A. (CNA). Performances of sample banks have been
compared from different angles.

Islami Bank Bangladesh Ltd.

Islami Bank Bangladesh Limited (IBBL) was incorporated on 13th March,1983 as a public company
with limited liability under the companies Act, 1913 (Amendment, 1994). The Bank started
functioning from 30th March, 1983. IBBL is the first interest-free Bank in South-East Asia. The
establishment of this bank ushered in a new era in Bangladesh, the 3rd largest Muslim Country of the
world. The Bank is commited to run all its activities as per Islamic Shariah. IBBL through its steady
progress and continued success has, by now, earned the reputation of being one of the leading private
sector banks of the country.

Aims and Objectives

• To conduct interest free banking.

• To establish participatory banking instead of banking on debtor - creditor relationship.

• To invest through different modes permitted under Islamic Shariah.

• To accept deposits on Mudaraba & Al-Wadeeah basis

• To establish a welfare-oriented banking system.

• To extend co-operation to the poor, the helpless and the low-income group for their economic
uplift.

• To play a vital role in human development and employment generation.

• To contribute towards balanced growth and development of the country through investment
operations particularly in the less developed areas.

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• To contribute in achieving the ultimate goal of Islamic Economic System.

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Corporate Information
Authorised Capital: Tk. 500.00 Million
Paid-up Capital: Tk. 317.98 Million
Share in Capital:
Local Share holders: 38%
Foreign Share holders: 62%
Number of Branches: 105
Number of Employees: 2171
Total Deposit: Tk.19750.99 Million
Total Investment: Tk. 13454.74 Million

Management of IBBL
Islami Bank Bangladesh Limited is managed by Board of the Directors consisting of 24 Members out
of whom 8 are foreigners and 16 are local. A 9-member Executive committee is formed by the Board
of Directors for efficient operation of the Bank. Besides, a Management Committee looks after the
daily affairs of the Bank.

Functions:
• To maintain all types of deposit accounts.

• To make investment.

• To conduct foreign exchange business.

• To extend other banking services.

• To conduct social welfare activities through Islami Bank Foundation.

Export Import Bank of Bangladesh Ltd.

"Export Import Bank of Bangladesh Ltd." is widely named as "EXIM Bank" which is a completely
shariah based Islamic bank. All of its activities are being operated under the norms of Islamic shariah.
The bank was established as a traditional bank on the 3rd of August in the year of 1999. Though it
started its operation as a traditional bank, it was converted to an Islamic bank on the 1 st of July in the
year of 2004. The bank has got a dramatic change through this conversion.

Vision:
The main of vision of Export Import Bank of Bangladesh Ltd. is “Together Towards Tomorrow”. The
bank believes in togetherness with its customers in the growth and progress with services. To achieve
the desired goal, there will be pursuit of excellence at all stages with a climate of continuous
improvement, because, in Export Import Bank of Bangladesh Ltd., everybody believes the line of
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excellence is never ending. Bank’s strategic plans and networking will strengthen its competitive edge
over others in rapidly changing competitive environments. Its personalized quality services to the
customers with the trend of constant improvement will be cornerstone to achieve bank’s operational
success.

Mission:

1. To be the most caring and customer friendly and service oriented bank.
2. To create a technology based most efficient banking environment for its customers.
3. To ensure ethics and transparency in all levels.
4. To ensure sustainable growth and establish full value of the honorable shareholders and
5. Above all, to add effective contribution to the national economy.

Corporate Information

Date of incorporation : June 02, 1999

Inauguration of first Branch : August 03, 1999

Authorised Capital
Paid-up Capital
Number of Branches
Credit Rating
: Tk.350.00 Crore
: 171.375 Crore
: 35(Thirty Five)
: Long Term – A- (Adequate Safety)
Short Term – ST-3 (Good Grade)

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Al-Arafah Islami Bank Limited

Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with limited
liability by shares. It started business on 27 September of that year with an authorised capital of Tk
1,000 million. At inception, its paid up capital was Tk 101.20 million divided into 101,200 ordinary
shares of Tk 1,000 each. 23 sponsors of the bank subscribed the total issued capital.

Al-Arafah Bank is an interest-free shariah bank and its modus operandi is substantially different from
those of regular commercial banks. The bank however, renders all types of commercial banking
services under the regulation of the Bank Companies Act 1991. It conducts its business on the
principles of musharaka, Bai-murabaha, Bai-muajjal and Hire Purchase transactions. A Shariah
Council of the bank maintains constant vigilance to ensure that the activities of the bank are being
conducted according to the precepts of Islam.

The management of the bank is vested in a 23-member board of directors, who oversee the affairs of
the bank through a managing director, the chief executive officer of the bank.

Special Features of the Bank

1. All activities of the Bank are conducted under an interest-free system according to Islamic
Shariah.

2. It's investment policies under different modes are fully Shariah compliant.

3. During the year 2003, 70% of the investment income has been distributed among the Mudaraba
depositors.

4. It believes in providing dedicated services to the clients imbued with Islamic spirit of
brotherhood, peace and fraternity.

5. The bank is committed towards establishing a welfare-oriented banking system to meet the needs
of low income and underprivelage class of people.

6. The Bank upholds the Islamic values of establishment of a just economic system through social
emancipation and equitable distribution of wealth.

7. Following the Islamic traditions, it is assisting in the economic progress of the socially
disadvantage people; in the creation of employment opportunities and in upliftment of rural
areas to ensure a balance development of the country.

8. The Bank believes in social and philanthropic activities and has established AIBL English
Medium Madrasha and AIBL library. More endeavours will inshallah follow in future.

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Corporate Information

Date of Registration : June 18, 1995

Inauguration of first Branch
Authorised Capital
Paid-up Capital
Equity
Number of Branches
Deposit
Investment
Number of Manpower
Number of Shareholder
: September 27, 1995
: Tk.250.00 Crore
: 85.42 Crore
: 169.01 Crore
: 46 (Forty Six)
: 1677.53 Crore
: 1742.31 Crore
: 912
: 4487

Shahjalal Islami Bank Limited (SJBL)

Shahjalal Islami Bank Limited (SJBL), a Sharial Based commercial Bank in Bangladesh was
incorporated as a Public Limited Company on 1st April, 2001 under Companies Act 1994.

The Bank commenced commercial operation on 10th May 2001 by opening its 1st branch, i.e., Dhaka
Main Branch at 58, Dilkusha, Dhaka obtaining the license from Bangladesh Bank, the central Bank of
Bangladesh.

Objectives

To establish interest-free and welfare oriented banking system.

• To help in poverty alleviation and employment generations.

• To contribute in sustainable economic growth.

Vision
• To provide quality services to our customers,
• To set high standards of integrity,
• To extend our customers innovative services acquiring state-of-the-art technology blended with
Islamic principles, and brings total satisfaction to our clients, sponsors and employees.

Mission
To expand Islamic banking through welfare oriented banking system, ensure equity and justice in
economic activities, extend financial assistance to poorer section of the people and achieve balanced
growth and equitable development.

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Corporate Information:
Commencement of Business : 10th May 2001
Number of Branches : 21
Number of Employees : 377
Authorized Capital : Tk.200 Crore
Paid-up Capital : 187.16 Crore
Face Value per Share : Tk.100.00

Prime Bank Limited

The bank was incorporated as a public limited company in Bangladesh under Companies Act 1994. It
commenced its banking business with one branch from April 17,1995 under the license issued by
Bangladesh Bank. Presently the bank has 42 branches all over Bangladesh and a booth located at
Dhaka club, Dhaka. Out of above 42 branches, 05 branches are designated as Islamic Branches
complying with the rules of Islamic Shariah, the modus operandi of which is substantially differently
from other branches run on commercial conventional basis. The bank is listed with Dhaka Stock
Exchange Limited and Chittagong Stock Exchange Limited as a publicly quoted company for its
general class of share.

The principal activities of the bank are to provide all kinds of commercial banking services to its
customers through its branches in Bangladesh. The bank also carries out merchant banking activities
under the license issued by the Securities and Exchange Commission (SEC), Dhaka, Bangladesh.

Vision
The vision is to be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.

Mission
1. To build Prime Bank Limited in to an efficient, market driven, customer focused institution
with good corporate governance structure.

2. Continuous improvement in our business policies, procedure and efficiency through integration
of technology at all levels.

Objectives:
The objectives for which the bank is established are as follows:
1. To carry on, transact, undertake and conduct the business of banking in all branches.
2. To receive, borrow or to raise money on deposit, loan or otherwise upon such terms as the
company may approve.

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3. To carry on the business of discounting and dealing in exchange of shares and securities and all
kinds of mercantile banking.

4. To provide for safe-deposit vaults and the safe custody of valuables of all kinds.

5. To carry on business as financiers, promoters, capitalists, concessionaires and brokers.

6. To act as agents for sale and purchase of any stock, shares or securities or for any other
momentary or mercantile transaction.

7. To establish and open offices and branches to carry on all or any of the business abroad and
within the country provided prior permission is obtained from Bangladesh bank.

Corporate Information
Incorporation of the Company : 12 February 1995
Commencement of Business : 17 April 1995
Number of Branches : 50
Number of Employees : 1172
Authorized Capital : Tk.400.00 Crore
Paid-up Capital : Tk.175.00 Crore
Total Assets : Tk.5120.28 Crore
Total Equity : 333.39

National Bank Limited

National Bank Limited has its prosperous past, glorious present, prospective future and under
processing projects and activities. Established as the first private sector Bank fully owned by
Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the
passage of time after facing many stress and strain. The member of the board of directors is creative
businessman and leading industrialist of the country. To keep pace with time and in harmony with
national and international economic activities and for rendering all modern services, NBL, as a
financial institution automated all its branches with computer network in accordance with the
competitive commercial demand of time. Moreover, considering its forth-coming future the
infrastructure of the Bank has been rearranging. The expectation of all class businessman,
entrepreneurs and general public is much more to NBL. Keeping the target in mind NBL has taken
preparation to open new branches by the year 2007.

Mission
• To provide highest benefits to our customers and good returns to our shareholders.

• To Provide services at the doorsteps of the clients through diversification and further expansion of
the financial sector.

• To ensure highest utilization of human resources through increasing efficiency and creativity.

• To encourage people to grow habits of savings.

• To increase investment for keeping the pace of market economy.

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• To simplify international transaction and foreign trade to earn the trust of all concerned.

• To identify the needs of the clients based on practical necessity and ensure short and long-term
finance.

• To utilize bank asset through proper investment and participation of different welfare programmes
of the country.

• To help keep the share market active through meaningful presence of the bank in the capital
market.

• To utilize information technology for modern banking operation.

• To strengthen the discipline in the bank management and provide best services to the clients
through creating long lasting relation with them.

• To achieve economic growth through business and different social programmes.

• To enhance the bank’s image within and outside the country.

Corporate Information
Commencement of Business
Number of Branches
Number of Employees
Authorized Capital
Paid-up Capital
Total Assets
: March 23, 1983
: 91
: 2270
: Tk.2450.00 Crore
: Tk.805.47 Crore
: Tk.46796.04 Crore

Standard Chartered
Standard Chartered Bank started its business in Bangladesh in 1948, opening its first branch in the
port city of Chittagong. The bank increasingly invested in people, technology and premises as its
business grew in relation to the country's thriving economy. At present the bank has 6 offices in
Dhaka Chittagong and Sylhet, including the country's only offshore banking unit inside the Dhaka
Export Processing Zone at Savar.

Extensive knowledge of the market and essential expertise in a wide range of financial services
underline our strength to build business opportunities for corporate and institutional clients at home
and abroad. Continuous upgrading of technology and control systems has enabled the bank of offer
new services, which include unique ATMs and Phone banking. Standard Chartered's services in
Bangladesh, ranges from Personal & Corporate Banking to Institutional Banking, Treasury and
Custodial services.

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Broad strategic objectives

• Creating a congenial work environment

• Modernization of the management information system to achieve full automation by drastically

cutting down the paper works in long term.

• Focusing on service quality and consume needs

• Recruiting and maintaining top grade, efficient employees

• To invest in those technological systems which will upgrade and enhance financial services

Citibank N A

Citibank N A is a foreign private bank in Bangladesh. The Bangladesh branch commenced its banking
operations on 24 June 1995 after obtaining license from Bangladesh Bank in January 1995. Before
starting full-fledged banking activity through the branch at Dhaka, it established a foreign
representative office here in 1987. The present branch of the bank is the upgraded and transformed
shape of the representative office.

Citi Group Inc., a merger of Citicorp Inc. and Travelers Group Inc. formed on 8 October 1998, is a
bank holding company under the laws of United States of America. It is the sole shareholder of
Citibank N A and its head office in New York governs the businesses of its Bangladesh branch. The
bank commenced business in Bangladesh with a paid up capital of Tk.204 million and total assets of
Tk.809 million.

Principle Activities
The principal activities of the Dhaka branch of Citibank NA are to provide all kinds of commercial
and merchant banking services to its customers.

In addition to traditional lending activities, the bank is extensively involved in long-term financing in
Bangladesh through equity participation and in other forms of term investments. It has equity
participation in Shinepukur Ceramic Ltd and the country's first private television channel Ekushey
(ETV).

Citibank N A provided support to large, medium and small scale industries in the form of working
capital financing, medium and long-term financing, export servicing and import financing, and loans
and advances to trade and commerce. Lending rates on these financing schemes varied between 8%
and 16.50% during its operations in Bangladesh.

Concepts & Role of Service Marketing

A bank’s performance in terms of achieving its goal of profit maximization mostly depends on how
its deposit and investment schemes are successfully marketed. The banks collect the saved funds of
the people by offering various deposit schemes against which they pay interest to the depositors. In
against to that, the banks lend those deposits to the another set of people who carry out the investment

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function in the economy. A bank offers several deposit schemes for the depositors to mobilize funds
such as: Current Account, Savings Account, Fixed/Term Deposit Account, Foreign Currency Deposit
Account, Savings Bond Account, Hajj Saving Account, Deposit Pension Scheme Account and
Special Notice Deposit Account. A bank, on the other hand, offers several investment schemes for the
investors to invest its accumulated fund such as: Different Project Investment schemes, Transport
Investment Schemes, Hire-Purchase Investment, House Hold Durable Goods Schemes, Education
Schemes, Real-estate Investment Schemes, Credit Card Scheme, Doctors Schemes and Agricultural
Investment Schemes etc.

Banking Services are characterized with intangibility, lack of identity, in-built inertia, wide range of
needs, geographic dispersion, wide indirect competition and growth balanced with risk. Service
marketing mix includes product, price, place, promotion, people, physical evidence and process.

Logical steps that make marketing effective are market intelligence, setting business as well as market
objectives and strategies, marketing plans, action and control. Successful marketing efforts exhibit
three basic features, such as, customer-focused, customers’ satisfaction and involvement in the entire
organization. In fact, Bank’s service marketing requires not only External Marketing but also
Internal Marketing and Interactive Marketing.

The Project: Findings & Recommendation

Analyzing the different aspects of marketing functions of the eight selected banks, the study reveals
the fact that the banks that practice Islamic banking are performing better. Among the eight banks, in
respect of deposit growth rate, SJBL has been retaining the first position in 2002, 2003 and 2004 and
C NA took that position in 2005 and PBL in 2006. SJBL also stood first in investment growth rate up
to 2005 and was replaced as second by AAIB that held the first position in 2006 which also reflected
in investment per branch growth rate. On the basis of net profit, SJBL was in the first position up to
2005 except SCB in 2003. AAIB went ahead of SJBL and placed SJBL in the second position in
2006. In growth rate of branch expansion, deposit per employee along with investment per employee
and net profit per employee SJBL showed consistency and held first position over the period.

The elevation of SJBL and AAIB is nothing but obviously a result of their recent development of
market oriented operations. SJBL has redesigned its Marketing Department to enhance the scopes of
its marketing functions. It has also increased number of employees. To meet customers’ demands,
SJBL has introduced some attractive service packages. It is successfully marketing its products during
this time.

PBL has also a Marketing Department through which it has been able to bring a great achievement in
some areas. In deposit growth rate PBL held the fist position in 2006 and in income expenditure ratio
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it always showed the lowest ratio over the whole period except C NA in 2005. It proved its efficiency
over its competitors. Besides, it has introduced innovative services like Credit Card, Micro Credit etc.
PBL is expanding and strengthening its Marketing Department day by day.

Though CNA is operating through only three branches in Bangladesh, by dint of practicing market-
oriented operations, it is earning more market share eventually. In deposit per branch growth rate it
held first position in 2006. In manpower expansion growth rate it had highest ratio in 2006 which also
reflected in its employee per branch in 2006 and employee per branch growth rate in 2004, 2005 and
2006.

In deposit position IBBL had an all time unbeaten position where it held first position in import and
remittance in 2006. But it was failed to show the required results in other sectors. It happened due to
IBBL is yet to develop an organized Marketing Department. It has many deposit & investment
schemes but it can’t market most of them successfully because of not having market oriented
operational drive. In consideration of total deposit and investment amount, IBBL stands first in
deposit and second in investment. But as far as growth rate of deposit & investment are concerned,
IBBL never stood first among eight selected banks. Most of the deposit amounts are cost bearing
which is responsible for earning less profit. On the other hand, SCB, NBL & PBL have huge amount
of cost free funds. They have been able to attract depositors of cost free funds by dint of their well-
furnished working environment, automation in all operations and above all with planning and
implementing marketing techniques.

NBL paid the highest dividend in 2006. In order to achieve sustainable growth and development,
NBL needs to be market-oriented. A self-sufficient Marketing Department should be established. This
Department will analyze market situations, current changes in customers’ demand and recommend
strategies to design and launch innovative services. In addition to this, working environment needs to
be developed and motivation level of employees needs to be improved. Computerization and the latest
communicational method should be applied in all areas of operations. NBL needs to increase
expenditure for promotional purposes. It can use Publicity, Personal Selling & Mail Marketing as
media to promote its services as these have been found most effective.

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