Internship Report on “Internship report on Credit Risk Management of Islami Bank Bangladesh PLC”

Abstract

This article makes a thorough assessment about risk management of credit in Islami Bank Bangladesh PLC (IBBL) on the basis of its credit risk management how bank dealing with the credit risk according to Islamic banking. The internship, at IBBL, offered a wonderful chance to acquire hands-on experience in credit management risk minimisation, loan classification and recovery procedures. Throughout the internship, the main aim had been to gain exposure and an overall understanding of the different components in place which would help drive credit risk within the bank, most notably with respect to Islamic finance. As a fellow employee, my duties and responsibilities included handling (as attaché) some tasks such as account opening, straight-through smart card issuance, remittance withdrawal transaction processing and helped in the acceptance for check deposits to other banks. These tasks exposed me first-hand to the daily activities in a leading Islamic bank in Bangladesh. Moreover, I was to report to Islami Bank Training and Research Academy (IBTRA) that enhanced my knowledge about the theoretical and practical dimension of credit risk management. The purposes of this report are two folds: to evaluate the total system of credit risk management in IBBL and secondarily, to review some aspects of the bank’s credit quality improvement including loan classification/credit appraisal/recovery. The paper investigates how Islami Bank Bangladesh PLC balances its commitment to Islamic financial standards against the necessity of credit risk management, notably in terms of loan approval, monitoring and recovery. In addition, the study examines how the bank mitigate credit risk covering how the bank classifies loan, evaluates borrowers' creditworthiness and manages non performing loans (NPLs). In examining those processes, this report intends to demonstrate the merits and weak points in the bank’s credit risk management system. It can be inferred from the study results that, IBBL has a strong system of credit risk management and with specific process of designing, reviewing and granting credit. Nevertheless, NPL management and recovery process are still a concern to the bank’s financial stability. This report also provides practical suggestions for strengthening the credit risk management culminated in improving the loan classification system and in increasing technology-based monitoring and risk assessment. The experiences from this internship are finally invaluable because of their implications for improving credit risk management practices in Islamic banks in Bangladesh and to the larger debate about how Islamic financial institutions may better manage credit risk without compromising Sharia adherence.