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The Overall Financial Activities
Of
Al-Arafah Islami Bank Ltd (AIBL),
Bangladesh
Based on the study on 2012 Financial statement and business police
Dhaka International University- (DIU)
1
The Overall Financial activities of
Al-Arafah Iislami Bank Ltd (AIBL), Bangladesh
SUBMITTED TO :
Md Rafiqul Islam
Associate Professor
Chairman and Register (Acting)
Department of Business Administration
Faculty of Business Studies
Dhaka International University-DIU
SUBMITTAD BY:
Asma Akhter
Program: Bachelor Business Administration Student ID-240241
Session-09-10Dhaka International University-DIU
2
Letter of Transmittal
22nd August, 2013
Md Rafiqul Islam
Associate Professor
Chairman and Register (Acting)
Department of Business Administration
Faculty of Business Studies
Dhaka International University-DIU
Dear Sir,
Here is the report on titled the overall foreign exchange activities of Al-Arafah Islami Bank Ltd
(AIBL), Bangladesh-a comprehensive study. Prepared for you as a final report of the semester.
It took one month to prepare the report and I have tried to gather as much information as possible
within this limited time. Although the stipulated time is not enough to have in depth knowledge about
the real corporate world, this report give me much insight in Islamic banking practiced by the
conventional banks like (AIBL).
I would like to thank you for giving me the opportunity to prepare this report under your sincere
guidance and cooperation.
Thank you,
Sincerely yours,
Asma Akhter
3
Acknowledgement
A lot of concentration, effort, responsibility and study have been involved in preparing this paper into
realty. In preparing a report one need a number of assistance and guidance from reliable sources. This
report also stands on the basis of such efforts. I received active co-operation from the VP responsible
as a manager, 1st AVP Responsible as a second officer, Officer of Al-Arafah Islami Bank (AIBL).I
sincerely express my heart- felt gratitude to them for their co-operation, which helped me to conduct
and complete this report. They have provided us some important books on banking and some books
on marketing and finance sharing, consent and given some advice of making a research report.
However this report suffers from many shortcomings. Moreover, I have exerted my best effort in
preparing this report. We seek excuse for the errors that might have occurred in spite of my best
efforts.
4
Executive summary
TABLE OF CONTENTS Page
Title Fly…………………………………………………………………………i
Title Page……………………………………………………………………….ii
Letter of transmittal……………………………………………………………iii
Acknowledgement………………………………………………………………iv
Executive Summary…………………………………………………………….v
1.0 INTRODUCTION………………………………………………………..1
1.1 Origin of the report…………………………………………………………….
1.2 Objective of the study……………………………………………………..
1.3 Scope of the study…………………………………………………………
1.4 Methodology……………………………………………………………….
2.0History of Al-Arafah Islami Bank Limited………………………………
2.1 Aims and Objective…………………………………………………………
2.2 Mission and Vision of AIBL……………………………………………….
2.3Commitments……………………………………………………………….
3.0MANAGEMENT OF AIBL…
3.1Planning………………………………………………………………………
3.2Organizing……………………………………………………………………
3.3Staffing……………………………………………………………………….
3.4Directing……………………………………………………………………….
3.5Controlling……………………………………………………………………
3.6Distribution of Branch………………………………………………………..
3.7The Financial position of AIBL……………………………………………….
3.8AIBL Product Service …………………………………………………………..
3.9.1Genenral Banking………………………………………………………..
3.8.1 Foreign Exchange…………………………………………………..
3.8.2 Services of the bank……………………………………………………
3.8.3 Products of AIBL……………………………………………………….
5
4.0Banking system in Bangladesh……………………………………………………
4.1 Corporate Information……………………………………………………..
4.2 Financial Analysis of Al-Arafah Islami Bank …………………………………..
4.3 Performance of AIBL……………………………………………….………….…..
4.4 Progressive Analysis of AIBL……………………………………………………..
4.4.1 Capital…………………………………………………………………………..
4.4.2 Deposit…………………………………………………………………………..
4.4.3 Investment………………………………………………………………………
4.4.4 Grameen & Small Medium Enterprise (SME) Scheme………………………..
4.4.5 International Trade………………………………………………………………
4.4.6 Investment Income……………………………………………………………….
4.5 . Economic Impact Analysis of AIBL:………………………………………………….
5.0Functions of Al-Arafah Islami Bank Ltd ……………………………………………..
5.1 Foreign Exchange of Al-Arafah Islami Bank Ltd ……………………………………….
5.2 Opening LC in AIBL: ……………………………………………………………………..
5.3 Import Business:……………………………………………………………………..
5.4 Export Business:…………………………………………………………………….
5.5 Procedure of preparing L/C……………………………………………………………
5.6 Back to Back L/C:……………………………………………………………………….
5.7 Features of Back to Back L/C……………………………………………………………
5.8 Foreign Documents Bills for Collection (FDBC):……………………………………….
6.0Performance Analysis of AIBL………………………………………………………….
6.1 Al-Arafa Islami Bank Ltd: SWOT Analysis…………………………………………….
6.1.1 Strengths……………………………………………………………………………….
6.1.2 Weaknesses…………………………………………………………………………….
6.1.3 Opportunities………………………………………………………………………….
6.1.4 Threats………………………………………………………………………………….
7.0 ENDING PART PF THE REPORTE…………………………………………………….
7.1 Findings and Analysis…………………………………………………………………….
8.1 Recommendations…………………………………………………………………………
9.1 Conclusion…………………………………………………………………………………
10.0 Appendix…………………………………………………………………………………..
6
10.1 Bibliography………………………………………………………………………
INTRODUCTION:
2. Origin of the Report:
This report is a comprehensive study prepared as a requirement for the completion of the
BBA Program of DIU- Dhaka International University. The primary goal of report is to
provide an opportunity for translation of theoretical conceptions in real life situation. We are
placed in enterprises, organizations, research institutions as well as development projects.
The program covers a period of 3 months comprehensive study about the Products and
works of Al Arafah Islamic Bank Limited in Bangladesh.
The comprehensive study about the Products and works of Al Arafah Islamic Bank and
other Traditional Banks in Bangladesh prepared under the guidance of our faculty member .
Md Rafiqul Islam. As a requirement for the completion of the program we need to submit
this report, which would include an overview of the Products of the Banks was attached
with and elaboration of the project we were supposed to conduct during the study period.
4. Objectives of the Study:
The objective of the internship program is to familiarize students with real business situation, to
compare them with the business theories and at last stage make a report on assign task. Objectives
regarding this study are as follows:
a. General Objectives:
The general objective of this report is to fulfill the requirement of internship report.
To earn practical experience and knowledge about the banking operations and corporate functions
performed by Al- Arafah Islami Bank Limited.
b. Specific Objectives:
To submit a brief description about the performance of Al-Arafah Islami Bank Ltd.
To make a general evaluation of AIBL activities among different professionals.
To understand the various services the bank offers and to understand the mechanism of
the services.
To analyze the Ratio of the bank to evaluate the performance
7
To identify the strengths and weakness, opportunities and threats of Al- Arafah Islami
Bank Ltd.
To know about the conventional banking and their operation.
To know about the Islamic banking and their operation.
To suggest remedial measurement for the improvement of the whole process of the Al-
Arafah Islami Bank Ltd.
To formulate recommendations that could add value to the service of Al- Arafah Islami Bank
Ltd.
5. Scope of the Report5. Scope of the Report
This report helps me to understand the clear real-time experience about the total management of
AIBL. It helps me to understand, how the bank manages its total processes. It also helps me to
understand how they deal with the customers as well as the foreign policy of their bank like- the
process of doing LC and export & import etc.
6. Information Needs
In order to conduct this research project and fulfill the research objectives the following information
will be required:
Information about Al Arafah Islami Bank Limited
Information about the facility provided by AIBL
Information about the job characteristics
Information about compensation and benefits policy
General information about the employees of AIBL
General information about motivation concepts
Information about the different wings of PB & head office of AIBL
Information about the expectation of the employees’ of AIBL
To know the financial performance of the bank
To know the work of general banking system of the bank
8
Methodology: A Research may be conducted either exploratory or conclusive. Based upon the
research topic and environment scenario I have decided to conduct exploratory research. To conduct
the research I have collected two types of data.
A) Primary Data and
B) Secondary Data.
A sample survey was conducted to collect primary data using two pre-designed survey instruments
from concerned groups following an appropriate sample design.
8. Sources of data
I have collected both primary and secondary data. I collected Secondary data from prior records of
AIBL.
I have collected primary information by interviewing employees, managers via the process assigned by AIBL, observing various organizational procedures, structures, directly communicating with the customer’s.
a. Primary Source of Information
When searching in the field directly to collect data was called primary sources of data. I collected
data from primary sources using the following method:
a. Observation method
b. Interview method
Now mention some primary points: -
Open ended and close ended questions
Personal experience gained by visiting, different desks
Personal investigation with bankers
Face to face communication with employees of the AIBL.
b. Secondary Sources of Data
The secondary data had been collected from the MIS of HSBC. To clarify different secondary
sources such as office memo, operating manuals, circulation & publication used by the HSBC in
this regard.
(1). Internal Sources
9
1. Bank's Annual Report
2. Group Business Principal manual
3. Group Instruction Manual & Business Instruction Manual
4. Prior research report
5. Any information regarding the Banking sector.
(2). External Sources
1. Different books and periodicals related to the banking sector
2. Bangladesh Bank Report
3. Newspapers.
Previous reports and journals relevant to the banking industry
Other published documents of Bangladesh Bank
Relevant AIBL paper and published documents.
Annual reports of 2006, 2007.
9. Data collection procedures:
The following procedures have been used to collect data with the respective instruments for
conducting the research paper.
a. Collection of Primary data: For collecting primary data personal interview technique have been used through a set of organized and structured questionnaire with mostly close-ended and open-ended questions as the instruments.
70 employees at different levels of Al Arafah Islami Bank Limited are interviewed through
formal and informal way.
b. Collection of Secondary data: In order to collect the secondary data different related
printed materials like corporate profile, annual report 2007-2008 and the official web site has
been followed. Moreover, various library sources like textbooks (Organizational Behavior,
Business Research, and Basic Business Communication) also have been used.
10. Data Processing & Analysis
10
After collecting all the required data, question area has been coded and data processing has been done
according to the employees’ personal information, experience, preference, satisfaction level etc. for
analyzing purpose. MS Word had been used to prepare graphical representation and the graphs have
been interpreted accordingly.
11. Limitation of the Report
Time frame for the research is very limited.
Large-scale research is not possible due to constraints and restrictions posed by the
organization.
The research only covers the employees of Banani Branch, Dhaka.
The survey was limited to the employees of General banking and Foreign Exchange
Division.
Respondents were busy as well as reluctant to go through the process of questionnaire.
The respondents sometimes did not agreeable in providing accurate statistics and
information
Historical Background of Al Arafah Islami Bank:
With the objective of achieving success in the life here and hereafter following the way directed by
the Holy Quran and the path shown by Rasul (SM) Al Arafah Islami Bank Ltd was established
(registered) as a public limited company on 18 June 1995. It started business on 27 September of that
year with an authorized 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. In 2000, the paid up capital of the bank increased to Tk 253 million, of which
Tk 126.50 million were paid by the promoters/sponsors and Tk 126.50 million by the general public.
In compliance with the new provision, Al Arafah bank has raised its capital and reserve from Tk.
2245 million in the year 2007 to Tk 3049.34 million in 2008 by declaring 30% stock dividend out of
the profit of the 2008. The paid up capital of the bank has stood at Tk. 1383.81 million at 31 st
December 2008.
Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank.
100% of paid up capital is being owned by local shareholders. In 2008 the bank earned a net profit
before tax & provision of Tk. 1,528.10 million which is 102.08% higher than the previous year. The
bank is listed in the two STOCK EXCHANGEs of the country and has offered 126,000 shares for
subscription and trading by the public. Al-Arafah Bank is an interest-free shariah bank and its modus
11
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.
Objectives of AIBL:
Al-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the objectives t
implement and materialize the economic and financial principles of Islamic in the banking arena. The
objectives of AIBL are not only to earn profit, but also to do good and welfare to the people. The
main objectives of AIBL are listed below-
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 accepts deposits on profit loss sharing basis
To establish as welfare–oriented banking system
To extend co-operation to the poor, the helpless and the low income group for their economic
up liftmen
To play a vital role in human development and employment generation
To contribute towards balances growth and development of the country through investment
operations particularly in the less developed areas
To contribute in achieving the ultimate goal of Islamic economic System.
10. Corporate Culture:
This bank is one of the most disciplined Banks with a distinctive corporate culture. Here they believe
in shared meaning, shared understanding and shared sense making. Their people can see and
understand events, activities, objects and situation in a distinctive way. They mould their manners
and etiquette, character individually to suit the purpose of the Bank and the needs of the customers
who are of paramount importance to us. The people in the Bank see themselves as a tight knit
team/family that believes in working together for growth. The corporate culture they belong has not
been imposed; it has rather been achieved through their corporate conduct
12
3. Mission:
Achieving the satisfaction of Almighty Allah both here & hereafter.
Proliferation of Shariah Based Banking Practices.
Quality financial services adopting the latest technology.
Fast and efficient customer services.
Maintaining high standard of business ethics.
Balanced growth.
Steady & competitive return on shareholders’ equity.
Innovation banking at a competitive price.
Attract and retain quality human resources.
Extending competitive compensation packages to the employees.
Firm commitment to the growth of national economy.
Involving more in Micro & SME financing.
4. Vision:
To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of
the national economy.
To improve Banker- Customer relationship through improving customer service.
To develop new and innovate product/service through integration of technology and policy
and principle.
5. Commitments:
Ours is a customer’s focused modern Islamic Banking making sound and steady
growth in both mobilizing deposit and making quality Investment to keep our
position as a leading Islamic bank in Bangladesh.
To deliver financial services with the touch of our heart to retail, small and medium
scale enterprises, as well as corporation clients through our branches across the
country.
Our business initiatives are designed to match the changing trade & industrial needs
of the clients.
d. MANAGEMENT OF AIBL:
For any financial and non-financial organization, Management are the most valuable and important
resources of any kind of organization. And, a well-organize management provides the organization to
13
reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling
of all financial and non-financial resources of an organization. Different aspects of management
practice in AIBL are discussed below.
PlanningAIBL has done its planning within the preview of the corporate plan. The overall planning approach
in AIBL is top to bottom. Each branch can plan according to the goal imposed by the corporate level.
It doesn’t plan independently. And, AIBL has a planning sector. This department is mainly
responsible for the overall planning.
Organizing AIB is organized as per the existing business locations. It has fifty branches, each of which is a
separate entity. Each unit is responsible for its own performance and each is headed at least by a
Senior Assistant Vice President (SAVP) in designation followed by Manager (Operations). He is
directly responsible for the performance of their unit. Within each branch, it is organized
functionally.
StaffingThe recruitment in AIBL is done in two ways. One as a “Provisional Officer” for the management
program and it has a probation period of two years. Another one is non-management level as
“Trainee Officers”. Provisional Officers are recruited in officer category and their career path is
headed towards different managerial jobs.
Directing
The management approach in AIBL is top-down or authoritative. Each information seeks through
lower management layer. Works are designed in such a way that one cannot leave without clearing
the tasks as he is assigned for a day. Sitting arrangement in all offices is done in a way that the
superior can monitor the subordinate all time. Manager (HOB) and Manager Operation all time watch
the operation of the bank through CC camera. Security is maintained properly. Budgeting, rewarding,
punishing, etc. are also practiced as control mechanism.
Controlling
AIBL does not believe in the traditional banking. It tries to increase and maintain its market share in
the private banking sector through two types of control techniques:
Feed Forward Control
Feedback Control
14
Feedback control technique monitor outputs of a process and feed into the system to obtain desired
outputs. On the other hand feed forward control technique monitor inputs into a process to ascertain
weather these are as planned or not. If they are not, the inputs are changed in order to get the desired
result.
20. Distribution of Branches:AIBL started its working at 161; Motijheel C/A with a Branch named Motijheel Branch on 27 th
September, 1995 was the first & main Branch of AIBL and has been operating throughout the
country. The Head Office of the Bank was situated at the same holding of Motijheel Branch since its
establishment but from 11 January, 2007 it has started its working at 36, Dilkusha (6th, 7th, 8th & 9th
floor), Peoples Tower, Dhaka-1000. The age of the Bank is only 17 years and during this short period
of time, the Bank has established total 100 Branches over the country and made a smooth network
inside the country. The number of Branches as Division wise is mentioned in the following table:
Division No. of Branches
Dhaka Division 51
Chittagong Division 22
Rajshahi Division 5
Khulna Division 7
Sylhet Division 7
Barisal Division 4
Rangpur 4
Total 100
21. AIBL’s Products and Services:
Al-Arafah Islami Bank Limited is providing many product and services to satisfy their customers. For that
reason, AIBL has made significant progress in all areas of its operations within a short period of time, such as
deposit mobilization, credit management, remittance handling and foreign exchange and trade. AIBL offers
variety of products and services to the customers which are picked up below:
a. General Banking:
15
Current Account
Saving A/C
STD (Short Term Deposit) A/C
Fixed Deposit Account
1 Months Fixed Deposit
3 Months Fixed Deposit
6 Months Fixed Deposit
12 Months Fixed Deposit
Foreign Currency A/C
b. Foreign Exchange:
Letter of Credit Issue
Letter of Credit Advise
Foreign Documentary Bill Purchase (FDBP)
Foreign Documentary Bill Collection (FDBC)
Bill of Negotiation
Foreign Remittance
c. Services of the Bank:
ATM Card Service
Online Banking
Lookers Service
d. Products of AIBL:
Cash management
Wire transfer
Automated clearinghouse (ACH) transaction
Bill presentment and payment
Balance inquiry
Funds transfer
Downloading transaction information
Loan applications
Investment activity
Other value-added services16
12. The Banking System in Bangladesh
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4
nationalized commercial banks (NCB), 5 government owned specialized banks, 42 domestic private
banks, 11 foreign banks (including 7 Islamic Bank) and 2 non-bank financial institutions including 1
Central bank. The financial system also embraces insurance companies, stock exchanges and co-
operative banks. The financial sector of Bangladesh is dominated by the commercial bank. A number
of national, private, foreign, specialized commercial bank and non-banking financial institutions
having a network of correspondents and branches are operating all over the country and abroad to
center to the people and business of the country. After the reform program, the financial institutions
are more systematic and borrowing and lending through formal markets is increasing. Apart from
normal commercial banking, banks are now providing consumer credit scheme, and financing in
industrial credit and development project. Electronic commerce gives the banking industry a real
competitive edge. The banking industry of our country has started its journey soon after the liberation
war in 1971. The early 70’s, immediately after liberation, banking industry started its journey without
any participation of the private sector in a very restrictive financial system. In early 80’s few privet
commercial banks were allowed to start functioning. Due to lack of experience and absence of
supervisory as well as controlling environment, 1st generation private banks faced various problems in
the next few years. During the late 80’s and early 90’s, with the passage of Financial Sector Reform
program, Banking Regulation Structure suggested by BIS and followed by developed countries began
to start incorporation into the banking regulations of Bangladesh. The following table shows a few
snap shots that indicates a brief history of the banking industry of Bangladesh.
2. Corporate Information:
Name of the Bank Al Arafah Islami Bank Limited
Chairman Badiur Rahman
Vice Chairman Md. Shamim Iqbal
Managing Director Md. Habibur Rahman
Company Secretary Md Moffazzal Hossain
Legal Status Private Limited Company
17
Principal Activity Commercial Banking
Registered Office Peoples Insurance Building 36, Dilkusha C/A, Dhaka-1000
Date of Registration 18 June 1995
1st Branch opening Motijheel branch, Dhaka
Opening ceremony 27 September 1995.
Authorized Capital 2500.00 million.
Paid up capital 1383.81 million
Local Partnership of Capital 100%
Equity 2705.74 million
Number of Branches 100
Deposit 120,000.00 million
Investment 105,600.00 million
Number of manpower 2950
Number of shareholders 12013.
Phone 9567885, 9567819, 9569353, 9568007
Fax 880-2-9569351
SWIFT ALARBDDH
E-mail [email protected]
Website www.al-arafahbank.com
Slogan A rare combination of Shariah & modern banking
Logo
18
C. Financial Analysis of Al-Arafah Islami Bank
1. Al-Arafah Islami Bank’s Business Position:
Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to be successful both in
our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of
Al-Qur’an and lifestyle of Hazrat Muhammad (Sm.) for our supreme success. Al-Arafah Islami Bank
started its journey in 1995 with the said principles in mind and to introduce a modern banking system
based on Al-Qur’an and Sunnah. A group of 13 dedicated and noted Islamic personalities of Bangladesh are
the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah
Islami Bank Ltd. has 46 braches and a total of 1033 employees (as of December 2007). Its authorized capital is
Taka 2500 millions and the paid-up capital is Taka 1153.18 millions.
(In million taka)
Particulars 2005 2006 2007 2008
Authorized Capital 1000.00 2500.00 2500.00 2500.00
Paid up Capital 677.94 854.20 1153.18 1383.81
Reserve Fund 542.22 835.98 1091.95 905.33
Shareholders Equity 1220.16 1690.18 2037.50 2705.74
Deposit 11643.66 16775.34 23009.13 29690.12
Investment 11474.41 17423.19 22906.37 29723.79
Import 12631.60 1882.14 27042.72 32685.13
Export 4932.90 914.27 12714.91 20176.64
Total Income 1452.68 2172.48 2955.61 4387.26
Total Expenditure 904.48 1202.71 2199.43 2859.16
Profit before Tax 548.20 855.47 756.18 1528.09
19
Profit after Tax 262.90 470.02 347.31 668.24
Income Tax 215.10 385.45 235.53 590.66
Total Assets 15336.89 21368.17 30182.32 39158.44
Fixed Assets 208.00 215.11 334.48 396.76
Earning per share (Taka) 387.80 550.24 30.12 48.29
Profit Earning Ratio 4.89
Dividend per share 26.00% 35% 20% 30%
No. of Shareholders 5402 4487 12013 10664
Number of Employees 771 912 1033 1080
Number of Branches 41 46 46 50
Manpower per Branch 19 20 23 22
a. Performance of AIBL at a glance:
The overall performances of AIBL are picked up as follows through graphical representation.
(In Million Taka)
20
Fig: Performance of AIBL
2. Progressive Analysis of AIBL:
At the end of current year, the number of depositors stood at 243,273 and the amount of deposit has
accumulated to Tk. 16775.33 million. The total numbers of investors are 13213 and total investment
extended to them was a sum of Tk. 17423.19 million.
The bank has earned Tk. 2172.48 million and incurred an expense of Tk. 1202.71 million in the
current year. At the end of the year the profit before tax has stood Tk. 855.74 million which is
78.97% more than Tk. 478.00 million pre-tax income of the last year.
a. Capital
The Bank company act 1991 which passed in March, 2003 includes a provision of raising the capital
to a new level of Tk. 100 core for the commercial banks. In compliance with the new provision, the
bank has raised its capital from Tk. 41.58 core in the year 2002 to Tk. 85.56 core in 2003 by issuing a
right share against each of existing shares in the year 2003 and declared 16% bonus dividend from
the profit of the year 2003. The bank again declared 15.20% bonus dividend from the profit 2004.as a
result, the paid up capital of the bent stood at taka 67.79 million as at 31st December, 2005.
Bank declared 26.00% bonus dividend for the year 2005. As a result the paid up capital of the bank
stood at taka 85.42 million as at 31st December, 2006.
21
b. Reserved Fund
The total balance of the reserve fund stood at Tk. 835.94 million in the current year against Tk.
542.22 million compared to previous year 2005. In this fund, the bank experienced a growth rate of
54.18%.s
c. Capital Adequacy
The Bangladesh Bank has fixed the ratio of capital adequacy against Risk-Weighted Assets at 9.00%
in place of 8% in the month of September 2002. In 2002, the amount of total equity of the bank was
41.57 core taka, which stood at Tk. 104.27 core in the year 2004 & taka 1309.56 cores in the year
2005.This year it stood at taka 183.04 cores. At 31 December 2006, the capital adequacy ratio of the
bank is 10.71% against 12.17% at the same period of 2004.
Fig: Total Assets (In Million Taka)
d. Deposit
The total deposit of the bank was Tk. 16775.33 at 31st December, 2006, of which bank deposit was
Tk. 611.72 million and general deposit was Tk. 843.40 core. At the same time in the last year, the
amount of total deposits was Tk. 16163.61 million taka. At the same time in the last year, the amount
of total deposit was 11643.66 million taka in this area the growth rate is 44.07%.
22
Fig: Deposit Mix
e. Investment
At the end of year 2006, the amount of investment of the bank was Tk. 793.28 core in comparison to
Tk. 17423.19 million in comparison to tk.11474.41 million of the last year 2005.The amount of
investment has increased 5948.78 million taka within this period, which is around 5184%.
Fig: Mode Wise Investment
23
Deposit Mix
2004 2005 2006 2007 2008
7012.128013.25
10022.3311643.66
16775.33
1 2 3 4 5
Year
Amount(MillionTaka)
Year
Mode wise Investment: 31-12-2007
28%
16%3%1%
0%0%0%
49%
Bai-Murabha
Hire-PurchaseUnder
Shirkatul Melk
Bai-Muajjal
Quard
Bai-Salam
Mudaraba
Musharaka
Total
Fig: Sector Wise Investment
f. Grameen & Small Medium Enterprise (SME) Scheme
An investment product “Grameen and Small Investment” is in operation. The objective of this project
is to introduce Shariah based banking system in rural and village area, creating employment through
financing to low income group, build up savings attitude, improvement of living standard of rural low
income mass people, creating opportunity to carry out Islamic lifestyle by way of alleviating poverty
and at the same time to make other financially established by investing in small investment project.
Initially this scheme was introduce in three branches of AIBL i.e. Gallai, Comilla, Ruposhpur,
Srimongol and Companigong Comilla. There is a plan to expend this project gradually in other rural
branches.
Fig: Investment Mix24
Sector wise Investment
25%
16%4%2%3%1%
51%
Industrial
Commercial
Real Estate
Transport
Agriculture
Others
Total
Investment Mix
2004 2005 2006 2007 2008
6030.25 7045.8 7500.25
11474.41
17423.19
1 2 3 4 5
Year
Amountin
(Million
Year
Taka)
g. International Trade
At the year of 2006, the bank experienced satisfactory growth in the foreign trade. At the end of
2005, the total amount of foreign trade (Export, Import and Remittance) was Tk. 18020.10 million;
which has increased at 60.18% to reach Tk. 28865.00 million in 2006. The total export of the bank
was Tk.4932.90 million in 2005, which has increased at 85.34% growth rate to reach Tk. 9142.70
million in 2006, whereas the national growth was 85.34% during the same period. Similarly the
amount of import has increased from Tk. 12631.60 million of 2005 to Tk. 18821.40 million in 2006,
experiencing a growth rate of 49.80%. Last year the amount of remittance through the bank was Tk.
455.60 million, which grows to Tk. 900.90 million in the current year.
Fig: Total Import & Export (In Million Taka)
h. Investment Income
The total investment of the bank was Tk.17423.09 million at 31st December of 2006. The total
income generated from this investment is Tk. 1701.40 million9.33 which is 80.32% of the total
income. At the corresponding period of 2002, this income was Tk. 78.32 of the total income.
m. Risk Management of AIBL
The risk of Al-Arafah Islami Bank limited is defined as the possibility of losses, financial or
otherwise. The risk management of the Bank covers 5 (five) Core risk Areas of banking i.e. Credit
risk management, foreign exchange risk management, Assets Liability Management, prevention of 25
money laundering and establishment of Internal Control and Compliance. The prime objective of the
risk management is that the Bank takes well calculative business risks while safeguarding the Bank's
capital, its financial resources and profitability from various risks. In this context, the Bank takes
steps to implement the guidelines of Bangladesh Bank.
The failure may result from unwillingness of the counter party of decline in his/her financial
condition. Therefore, Bank's credit risk management activities have been designed to address all
these issues.
3. Economic Impact Analysis of AIBL:
Economic impact can be defined as any increase or decrease in productive potential of an economy.
By analyzing the economic impact we can understand how a bank adds value to the society.
Economic impacts can be broadly categorized as:
i) Direct Impact
ii) Indirect Impact
a. Direct Impact
Direct impacts are the immediate economic effects resulting from the banks financial transactions.
Bank’s direct contribution to the economy resulted in the creation of employment opportunities,
payment of tax to the government and maximization of shareholders wealth.
b. Indirect Impact
Indirect impacts are the spill over economic effects that occur through Bank’s normal course of
operations. Banks generate indirect impact by addressing the deficiency of capital in the economy by
mobilizing deposit and channeling the same to prospective investors.
Through catering financial services, the Bank helped distribute the wealth among all the stakeholders
for example shareholders received dividend, depositors and investors got profit, employees received
compensation and other benefits, the under privileged reaped benefits out of CSR while the
government government earned tax revenue.
At the end of 2008, the Bank mobilized total deposits of BDT 29,723.79 million as investment to
different sectors of the economy. Apart from these, the Bank performed significant import and export
business.
26
D. Functions of Al-Arafah Islami Bank Ltd.
Functions of AIBL:
Islamic banks render almost similar services to their customer’s conventional banks do. Like
a conventional bank, AIBL also accepts deposits from customers and advances loans. AIBL
also acts as a custodian of its customers and performs all foreign transactions on behalf of
them. AIBL perform mainly three different types of functions.
1. General Banking Activities of AIBL:
General Banking activities of AIBL are performed through the following areas:
27
Customer Relation Desk-1
1. Buildup relation with clients.
2. Account opening (operating)
Current A\C Saving A\C MSTD MMSS MHD MED3. Account
Closing4.Issue cheque
book5.Posting of
opening & closing accounts.
6.Proper maintaining of KYC form & other necessary
Customer Relation Desk-2
(Non-operating)
1. Buildup relationWith clients.
2. Accountopening (non-operating)
FDR3. Profit giving
voucher issue of FDR
4. Remittance: Pay Order TT DD
1.
Clearing
1. Cheque receives for collection.
2. Cheque, PO, DD, TT receive for transfer.
3. Nikash maintaining, printing & copy and validation print.
4. LBC issue & receive.
5. OBC issue & receive.
6. IBCA/IBDA issue & receive.
7. Preparing salary sheet.
8. Issue expenditure voucher.
9. Different statement preparation for Head office &
Cash
1. Receiving & payment of cash.
2. Signature verifying.
3. Accounts checking of funds sufficiency for any payment.
4. Maintaining share transactions.
5. Providing income tax certificate.
6. Solvency certificate.
Dispatch
1. Provides documents sending with date & number.
2. Receive documents from courier.
3. Sends documents through courier.
General Banking
E. Foreign Exchange of Al-Arafah Islami Bank Ltd.
Foreign Exchange Department of AIBL:
Financial institutions especially banks play a very important role in foreign exchange transaction of a
country. Mainly transactions with overseas counties of imports, exports and foreign remittance are
the main function of the Foreign Exchange department.
Foreign exchange refers to the process or mechanism by which the currency of one country is
converted into the currency of another country. Foreign exchange is the means and methods by which
rights to wealth in a country's currency are converted into rights to wealth in another country's
currency Foreign Exchange Department plays significant roles through providing different services
for the customers. Opening or issuing letters of credit is one or the important services provided by the
banks.
1. Opening LC in AIBL:
There are several factors for what customers come to this bank to open LC. The procedures,
techniques, facilities, services and other factions for opening LC are stated details as follows:
a. Letter of Credit:
A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the
instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that
the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain
conditions mentioned in the letter have been complied with.
b. Parties of the L/C
Importer Who applies for L/C
Issuing Bank It is the bank which opens/issues a L/C on behalf of the
importer.
Confirming Bank It is the bank, which adds its confirmation to the credit and it
is done at the request of issuing bank. Confirming bank may
28
or may not be advising bank.
Advising or Notifying
Bank
It is the bank through which the L/C is advised to the
exporters. This bank is actually situated in exporter’s country.
It may also assume the role of confirming and / or negotiating
bank depending upon the condition of the credit.
Negotiating Bank It is the bank, which negotiates the bill and pays the amount
of the beneficiary. The advising bank and the negotiating
bank may or may not be the same. Sometimes it can also be
confirming bank.
Accepting Bank It is the bank on which the bill will be drawn (as per
condition of the credit). Usually it is the issuing bank.
Reimbursing Bank It is the bank, which would reimburse the negotiating bank
after getting payment – instructions from issuing bank.
c. Issuing Bank
The Issuing Bank or the Opening Bank is one which issues the credit i.e. undertakes, independent of
the undertaking of the applicant: to make payment provided the terms and conditions of the credit
provides for sight payment, or at with. The payment may be at sight if the credit provides for sight
payment or at maturity dates if the credit provides for deferred payment. Especially the issuing bank
should satisfy himself on the credit worthiness of the applicant. The credit application must be in
accordance with the Uniform Customs and practices for Documentary Credit (UCPDC) LC
publication no. 500 edition of 1993.
d. Advising Bank
The Advising Bank advises the credit to the beneficiary authenticating the genuineness of the credit.
The advising bank is generally situated in the country/place of the beneficiary.
e. Confirming Bank
29
A confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby,
undertaking the responsibility of payment / negotiation / acceptance under the credit in addition to
that of the issuing bank. A confirming bank normally docs so if requested by the issuing bank. When
the creditworthiness of the issuing bank is in doubt, beneficiary's bank may request the issuing bank
to give additional confirmation by another bank. It is said Add Confirmation in practices.
f. Negotiating Bank
A Negotiating Bank is the hank nominated or authorized by the issuing bank to pay, to incur a
deferred payment liability, to accept drafts or to negotiate the credit.
g. Reimbursing Bank
A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement of
negotiation / acceptance / payment lodged with it by the negotiating bank or accepting bank. It is
normally the bank with which the issuing bank has account from which payment is to be made.
Reimbursement claims in foreign exchange business settled by the Uniform Rules for
Reimbursement (URR)–ICC publication no. 525.
2. Import Business:
Import trade in Bangladesh is controlled under the Import and Export control Act 1950. Authorized
Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E.
circular and other instructions from competent authorities from time to time. Import payments during
2007-08 amounted to US$ 21600 million (27.30% of GDP) compared to US$ 17157 million (25.10%
of GDP) in 2006-07 showing an increase of 26.0% in 2007-08 compared to 16.30% increase in 2006-
07. The significant increase in the overall volume of imports stemmed from imports of capital goods,
consumer & intermediate goods, and imports by EPZs.
The Year Wise Import as Follows:
Year 2002 2003 2004 2005 2006 2007
Import
Business
5559.27 5162.51 7698.29 9337.49 12631.60 18821.40
30
Import Business
116%
216%
317%
417%
517%
617% 1
2
3
4
5
6
Fig: 1.1 Performance of Import Business
a. Process to Open a L/C
If a party comes to open a LC at this branch then the following requirement is required-
a. Current A/C
b. Registration Certificate /IRC
c. TIN /VAT certificate
d. Insurance Cover Note
e. Indeed / Invoice
f. LCA(Letter of Credit Authorization) agreement form
g. Foreign Exchange Regulation Act, 1947 form (IMP)
Other payment of the party-
a. Insurance cover note with payment order commission and vat
b. Margin (% of LC value)
Then the bank opens the LC and sent to the beneficiary’s bank. In case of foreign LC, the
documents are sent through swift
Then the exporter or beneficiary sent the goods and beneficiary bank sent document which refers
that the party has sent the goods.
And this issuing bank has to pay to the beneficiary’s bank. For this the branch sent the payment
amount to the HOID (Head Office International Division) and the HOID pays this amount
through NOSTRO A/C of the bank.
The duplicate copy of the LC needs to release the goods from the customs. And the bank supplies
this document to the party to release their goods from the custom.
31
The bank has to inform about the LC and goods to the Bangladesh Bank in Foreign Exchange
Regulation Act, 1947 form (IMP). And then the LC is closed.
C.prosediors Prepare a L/C
To prepare a L/C the branch takes care on the following points:
L/C Number Place and date of issue
Date and place of expiry Shipment date
Presentation period Applicant
Beneficiary Advising Bank
Amount Availability
Tenure of the draft Documents required
Payment UCP
Bill of lading Bill of Exchange
Pre-shipment Inspection Data content
Special conditions Authenticity of the credit
Part-shipment and Trans shipment Port of shipment and port of destination
3. Export Business:
The goods and services sold by Bangladesh to foreign households, businessmen and Government are
called export. The export trade of the country is regulated by the Imports and Exports (control) Act,
1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of
goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of
Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to
export any commodity permissible for export from Bangladesh unless he is registered with CCI & E
and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every
year. The ERC number is to be incorporated on EXP forms and other documents connected with
exports.
The Year Wise Export as Follows:
32
Year 2002 2003 2004 2005 2006 2007
Export Business 2524.63 1894.77 3075.52 3639.34 4932.90 9142.70
Export business
116%
216%
317%
417%
517%
617%
1
2
3
4
5
6
Fig: 1.2 Performance of Export Business
a. Back to Back L/C:
A back to back mechanism involves two separate L/C. One is master export L/C and another is back
to back L/C. On the strength of Master L/C, Bank issues Back to Back L/C. Back to Back L/C is
commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling.
It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two
separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master
Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On
the contrary, Master Export L/C is known as Selling L/C.
Features of Back to Back L/C:
An Import L/C to procure goods /raw materials for further processing.
It is opened based on Export L/C.
It is a kind of Export Finance.
Export L/C is at Sight but back to Back L/C is at insurance.
No margin is required to open Back to back L/C
Application is registered with CCI&E
Applicant has bonded warehouse license.
L/C value shall not exceed the admissible percentage of net FOB value of relative Master
L/C.
Insurance period will be up to 180 days.
33
The import L/C is opened for 75% of the value of Export L/C.
Here L/C issued against the lien of export L/C.
Arrangements are such that export L/C matures first then out of this export profit, import L/C
is paid out.
(1) Documents Required for Opening a Back-to-back L/C:
In Al-Arafah Islami Bank Ltd Principal Branch, following papers/ documents are required for
opening a back-to-back L/C-
1. Master L/C
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)
3. L/C Application and LCAF duly filled in and signed
4. Performa Invoice or Indent.
5. Insurance Cover Note with money receipt.
6. IMP Form duly signed.
In addition to the above documents, the followings are also required to export oriented garment
industries while requesting for opening a back-to-back L/C –
1. Textile Permission.
2. Valid Bonded Warehouse License.
(2) Procedure for Foreign Documentary Bill Purchase (FDBP):
If all the documents are in order then the bank purchase the documents. Several things should
be checked at the time of purchasing.
How much back-to-back and PC (packing Credit) facility the client has taken.
After taking all these charges, the rest amount is paid to the client and a FDBP account is
opened.
(3) Foreign Documents Bills for Collection (FDBC):
Al-Arafah Islami Bank Ltd forwards the documents for collection due to the following reasons:
If the documents have discrepancies
If the exporter is new client
The banker is in doubt.
34
Foreign documentary bills for collection signifies that the exporter will received payment only when
the issuing bank gives payment. The exporter submits duplicate EXP from and commercial invoice
subsequently.
4. Foreign Remittance
Foreign remittance plays a significant role in a banking system though economy system of a country.
Like other Al-Arafah Islami Bank Ltd also have a department of foreign exchange dealing. Mostly
US dollar, Euro, British pound and other remittances like Australian dollar, Canadian dollar,
Malaysian ringgit and currencies of Middle East have been dealing here. Other Al-Arafah Islami
Bank Ltd buys and sells all regular kinds of foreign currencies though foreign exchange department is
not available in all the branches of Al-Arafah Islami Bank Ltd.
a. Outward Remittance:
On March 24, 1994 Bangladesh Taka was declared convertible for current international transaction.
As a result remittance becomes more liberalized. Outward remittance include sale of Foreign
Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose.
Traveler's Cheque
Travelers Cheque (TC) is an instrument for a specific amount of widely accepted foreign currencies,
issued in favor of Travelers/ Visitors to carry foreign exchange for meeting heir expenses in abroad.
Traveler's cheque may be in different currencies, such as US Dollar, Pound Starling, Japanese Yen,
Saudi Riyal, Canadian Dollar, French Frank, German Marks, and Swiss Frank etc. But traveler's
cheque is not issued in this branch.
Issuance of Outward DD and TT :
ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or foreign
nationals as per their entitlement. But foreign TT and DD are not issued in this branch.
b. Inward Remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc. but
also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes, TC, DD
35
and similar instrument for protecting the bank from probable loss as well as safety of the bank
officials concerned. But this type of purchase is not done in this branch.
c. Collection of Foreign Currency Instrument: Principal Branch collects foreign remittance
through the following instruments on behalf of their customer-
Money Gram
Express money
Instant cash
Placid express
Remit master
2. SWOT ANALYSIS of AIBL
SWOT analysis facilitates the organization to make their existing line of performance and also
foresee the future to improve their performance in comparison to their competitors. As though this
tool, an organization can also study its current position, it can also be considered as an important tool
for making changes in the strategic management of the organization.
a. STRENGTHS:
Bank reputation AIBL has already established a favorable reputation in the banking industry of the
country with its significant business growth. With in a period of 14 years, AIBL has already
established a firm footing in the banking sector having tremendous growth in the profits and deposits.
All these have leaded them to earn a reputation in the banking field.
Corporate Culture
AIBL has an interactive corporate culture. Unlike other local organization, AIBL’s working
environment is very friendly, interactive and informal. There are no hidden barriers or boundaries
while interactive among the superior or the subordinate. The environment is also lively and since the
nature of the banking job itself is monotonous and routine, AIBL’s lively work environment boosts
up the sprit and motivation of the employees.
Team Work at Mid level & Lower level
At AIBL’s mid level and lower level management, there are often team works. Many jobs are
performed in-groups of two or three in order to reduce the burden of the workload and enhance the
36
process of completion of the job. People are eager to help each other and people in general are
devoted to w
Quality: Al-Arafah Islami Bank strives to endow its customers with appreciable quality in every
service it provides. Customer satisfaction claims the highest priority, as it should be in any service-
oriented organization.
Adaptability :Al-Arafah Islami Bank draws its strength from the adaptability and dynamism it
possesses. It has quickly adapted to world class standard in terms of banking services. Al-Arafah
Islami Bank has also adopted state of the art technology to connect with the world for better
communication to integrate facilities.
Efficient Management
All the levels of management are solely directed to maintain a culture for the betterment of the
quality of the service and for developing a brand image in the market through the organization’s wide
team approach and horizontal communication system.
Human Resource Expertise
One of the key-contributing factors behind the success of Al-Arafah Islami Bank is its HR who is
highly trained and most competent in their own respective fields. Al-Arafah Islami Bank provides its
employees with training both in-house and outside job.
Financial Strength
Al-Arafah Islami Bank is a financially sound company. As a result customers feel comfortable and
more secure while dealing with the bank. It’s already established its position in the banking industry
of Bangladesh. They achieved a high growth rate accompanied by an impressive profit growth rate in
2006. The number of deposits and the loans and advances are also increasing rapidly from year to
year.
b. WEAKNESSES
Limited Workforce
37
Al-Arafah Islami Bank has very limited human resources compared to its financial activities. There
are not many people to perform most of the tasks. As a result many of the employees are burdened
with extra workloads and works late hours without any overtime facilities. This might cause high
employee turnover that will prove to be too costly to avoid.
Liquidity Crisis
Average asset quality and tight liquidity position is another weakness of Al-Arafah Islami Bank
Limited. Bank’s asset quality is not up to the standard as SCB or CITI N.A. or Prime Bank.
Sometimes the bank faces liquidity crisis especially during the period of vacation which needs to be
checked by the bank otherwise the bank will be in deep trouble in near future.
Lack of Qualified System Operators
Currently AIBL’s Head office and in the Branches, there are system operators who do not have any
background academic knowledge on computer applications. As a result they frequently make
mistakes in the preparation of various computerized statements. At the same time, computer operators
do not have the skill to carry out their activities. Above all its MIS is still on primary stage which
needs to be modified as soon as possible to compete in the market.
c. OPPORTUNITIES
Government support
Government of Bangladesh has provided its full support to the banking sector for a sound financial
status of the country, as it is becoming one of the vital sources of employment in the country now.
Such government concern will facilitate and support the long-term vision for Al-Arafah Islami Bank.
Evolution of Online Banking
Emergence of e-banking will open more scope for Al-Arafah Islami Bank to reach the clients not
only in Bangladesh but also in the global area. It will also facilitate wide area network in between the
buyer and the production unit of Al-Arafah Islami Bank Ltd. to smooth operation to meet the desired
need with least deviation.
38
DiversificationAIBL can pursue a diversification strategy in expanding its current line of business. The management
can consider options of starting client service in its merchant banking division.
Product line proliferation
In this competitive environment AIBL can expand its product line to enhance its Sustainable
Competitive Advantage (SCA). As a part of its product line proliferation, AIBL can concentrate more
on SME & Agro based industrial loan because these two sectors have huge potential.
d. THREATS
Multinational Banks:
The emergence of the multinational banks and their rapid expansion poses a potential threat to the
new PCB’s. Due to the booming energy sector, more foreign banks are expected to arrive in
Bangladesh. Moreover, the already existing foreign banks such as Standard Chartered are now
pursuing an aggressive branch expansion strategy. These banks are establishing more branches
countrywide and are expected to get into for operation soon. Since the foreign banks have
tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of
grabbing the lucrative clients.
Upcoming Banks:
The upcoming private local banks can also pose a threat to the existing PCB’S. It is expected that in
the next few years more local private banks may emerge. If that happens the intensity of competition
will rise further and banks will have to develop strategies to complete against an on slaughter of
foreign banks.
Mergers and acquisitions:
The worldwide trend of mergers and acquisition in financial institutions is causing concentration in
power in the industry and competitors are increasing in power in their respective areas.
Contemporary Banks:
The contemporary banks of AIBL such as Dhaka Bank, Prime Bank, Eastern Bank and Dutch-Bangla
Bank are its major rivals. Prime Bank and others are carrying out aggressive campaign to attract
39
lucrative corporate clients as well as big time depositors. AIBL should remain watchful about the
steps take by these banks as these will in turn affect AIBL strategies.
Political Instability:
Unstable political situations cause great distraction in the otherwise smooth flow of business. Sudden
Hartals and other political programs sometimes present problems for the employees (esp. female
employees) in commuting to and from the office. Political instability also promotes a weak law and
order system leading to an increase in crime rate in the society. This might also be considered as a
potential external threat for a financial institution.
G. Ending Part of the Report:
1. Findings of the Study:
Some findings of Al-Arafah Islami Bank Limited, Uttara Model Town Branch are given below-
In Foreign Exchange Department they follow the traditional banking system. The entire Foreign
Exchange procedures are not fully computerized.
Service personnel are working under pressure because they have to deal with large number of
customer every day.
Technology that AIBL is using for their banking system is not updated. Now there is some
international bank in Bangladesh, they are very fast and very up dated.
The Al-Arafah Islami bank is too much centralized. For each and every work, branch office has to
get permission from the head office. The head office tightly controls each and every branch
Lack of information to get and sitting arrangement in the branch is a trouble for the customers.
Advertising and promotion are the weak point of Al-Arafah Islami Bank Ltd. AIBL does not have
any effective marketing activities. Others banks have betters marketing strategy.
Al-Arafah Islami Bank Ltd has less amount of foreign exchange business compare to other
Banks.
Lack of competitiveness in product and service innovation.
2. Recommendations:
The fast pace of growth in the Islamic financial sector and the emergence of conventional finance
companies offering Islamic products and services has brought critical attention to key issues facing
40
this sector. Some of the core issues identified after analyzing this report that Al-Arafah Islami Bank
Limited should give lots of attention in many sectors, which are given below.
Increased market transparency is needed to enhance credibility and increase consumer
confidence. The application of relevant international accounting standards will enhance
transparency of Islamic financial institutions and the comparability of financial statements. At
this stage, Islamic product standards and accounting practices are not yet accepted globally.
Increased education is needed to ensure that the Shariah standards are understood and
accepted across the industry by regulators, international organizations, and the private sector.
Foreign exchange department should be fully computerized and reduce the paper based work
to make it more smooth and faster.
A robust regulatory and supervisory framework is necessary to maintain financial stability
and growth of Islamic finance as a viable, resilient, and sustainable sector. The unique
characteristics of Islamic banking operations and Islamic financial instruments require the
development of a regulatory-supervisory framework that adequately addresses the
requirements of this industry.
The authority of AIBL should exert pressure on Government bodies to run proper and
sufficient application of Islamic banking laws in Bangladesh.
At the beginning time of opening of Letter of Credit, every officer should check the required
documents very carefully whether there is any mistake or not.
Inclusion of more subjects based on the Quran and Sunnah in the Training courses of the
Islami Bank Training & Research Academy in order to develop human resources
having morally.
Arrangement of monthly /quarterly training courses /workshops for the clients should be
selected by the Branches in order to promote Foreign Exchange activities of the desired level.
To fulfill the vision of "mass banking" this Bank should provide more foreign exchange and
other sorts of facilities to new customers/new entrepreneurs /new businessmen/ new
companies etc.
AIBL should give more emphasize on their marketing effort and try to increase their
sales force.
41
AIBL should try to attend different type of target customers.
AIBL should Introduce Islami Debit and Credit Cards as soon as possible.
They should carryout more promotional activities to make clients aware about their offers.
It was observed that, AIBL is absent in TV, Print Media, Bill Boards, and
Sponsorships etc. The Bank should advertise about itself and its offers so that it
can attract more customers that will increase the business volume of the bank.
AIBL should give the highest attention on recovery of bad things related to opening
LC. This concerns the worst image of the Bank to the clients
AIBL should utilize "Internship Program" as one kind of promotion policy to encourage its
present and potential customers/clients. Because, young generations are the vital post of our
economy. To do so this Bank should provides facilities to the internees through proper
placement and practical operations as well as job certainty to those who bring introduced
themselves the best performers in doing their particulars.
3. Conclusion:
The concept of Islami Banking is several decades old. The third attempt to establish an Islamic
Financial Institution took place in Pakistan in the late 1950s with the establishment of a local Islami
Bank in a rural area (Wilson 1995. After 45 years, Islamic Banking system is established in
Bangladesh as a financial institution that is named “Al-Arafah Islami Bank Limited”.
Al-Arafah Islamic Bank Limited is a Bank which operates its activities according to Quaran and
Sunnah. Its banking activities based on profit \ loss sharing. It does not create any illegal pressure on
client.
On the other hand, every client is not 100% honest. So they are taking investment from AIBL and
after maturity, they are showing loss on that project intentionally. So AIBL is losing some profits
from their investment. For this reason, Al-Arafah Islami Bank Limited has closed its bai -
mechanism. Now it is not providing investment under this mechanism.
Threats of Al-Arafah Islami Bank Limited are - at this time, many financial institutions have
commenced their financial activities according to Islamic shariah. This type of organization will
create more competition in the financial market. So it is a threat for Al-Arafah Islami Bank Limited.
Although it is facing some problem, it has a bright future and day-by-day it is enhancing its financial
activities over the country. Many organizations are following to AIBL and they are starting their
business based on Islamic shariah in the economy of Bangladesh. 42
After all, Al-Arafah Islami Bank is increasing its reputation day after day through providing various
sorts of innovative product and service. Moreover, AIBL,s customer services and management are
also being enhanced. Foreign Direct Investment Department will be fully computerized soon.
H. Appendix Part:
1. Bibliography
Ivancevich, John M., and Steven J. Skinner. “Business for the 21 st Century ”. Boston: Irwin, 2003.
Kotler, Philip. “Marketing Management”. 9th ed. New Delhi: Prentice-Hall, 1999.
Kinnear, Thomas C., and James R. Taylor. “Marketing Research: An Applied Approach”. 5th Ed.
New Delhi: McGraw Hill, 2003.
Annual Report, Al-Arafah Islami Bank Limited, 2008 - Published by AIBL.“A Journal of Islamic Banking” – Published by AIBL
43
