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8/6/2019 Internship Report on Meezan Bank
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Meezan is a publicly listed company first incorporated on January 27, 1997. It started
operations as an investment bank in August of the same year. In January, 2002 in an
historic initiative, Meezan Bank was granted the nation's first full-fledged commercial
banking license dedicated to Islamic Banking, by the State Bank of Pakistan.
Our Vision
Establish Islamic banking as banking of first choice to facilitate the implementation of an
equitable economic system, providing a strong foundation for establishing a fair and just
society for mankind.
Our Mission
To be a premier Islamic bank, offering a one-stop shop for innovative value added
products and services to our customers within the bounds of Shariah, while optimizing the
stakeholders value through an organizational culture based on learning, fairness, respect
for individual enterprise and performance.
Introduction of Products
Riba Free Meezan Providence
Riba Free - Certificates of Islamic Investment
Riba Free - Monthly Musharakah Certificate
Riba Free - Dollar Saving Account
Riba Free - Rupee Saving Account
Riba Free - Current Account
Car Ijarah - Islamic Car Financing
Riba Free Meezan Providence:
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Islamic Mode of Financing
Musharakah
Mudarabah
Murabaha
Salam
Istisna
Ijarah
Net Profit
Years 2005 2006 2007 2008 profit 20.15 17.80 16.27 8.27
Share Price in Stock Market
Years 2005 2006 2007 2008Share Price 23.25 19.50 38.55 21.48
MBL is incorporated in Pakistan and engaged in Islamic and commercial banking. It is
listed on all the stocks exchanges in Pakistan. The bank’s registered office and principal
office are situated the adoption of new technology and offering new products has made
MBL one of the best domestic bank of Pakistan.
According to the department internship program I completed my eight weeks internship at
MBL Rahim Yar Khan.
General banking department is concerned with daily operation of the branch. This
department is divided into four sections which are Cash section, Clearing section,
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Remittance section and fixed deposit section. Cash section performs cash related function
like receipt of cash, payment of cash and collection of utility bills. Clearing section
performs the clearing of cheques for collection. Remittance section performs transferring
of funds from one branch to another or from one account to another.
Credit department issues short term and long-term loan. MBL offer two types of loans or
finances, fund based finances and non-fund based finances. Funds based finances include
running finance, demand finance, cash finance and staff finance. Non fund base finance
include letter of credit and guarantees like performance guarantees, mobilization
guarantees shipping guarantees, bid bonds and security deposit guarantees.
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Meezan bank is a premier Islamic bank and publicly listed company first
incorporated on January 27, 1997. It started operations as an investment bank in
August of the same year. In January, 2002 in an historic initiative, Meezan Bank
was granted the nation's first full-fledged commercial banking license dedicated to
Islamic Banking, by the State Bank of Pakistan.
Meezan Bank stands today at a noteworthy point along the evolution of Islamic
Banking in Pakistan. The banking sector is showing a significant paradigm shift
away from traditional means of business and is catering to an increasingly astute
and demanding financial consumer who is also becoming keenly aware of Islamic
Banking. Meezan Bank bears the critical responsibility of leading the way forward
in establishing a stable and dynamic Islamic Banking system replete with dynamic
and cutting-edge products and services.
The Bank has made fundamental and significant progress forward, and in doing sohas established a strong and credible management team comprised of experienced
professionals, which have achieved a strong balance sheet with excellent
operating profitability, including a capital adequacy ratio that places the Bank at
the top of the industry, a long-term entity rating of A+, and a short-term entity
rating of A1+, the highest short-term rating.
The Bank's main shareholders are leading local and international financialinstitutions, including Pak-Kuwait Investment Company, the only AAA rated
financial entity in the country, the Islamic Development Bank of Jeddah, and the
renowned Shamil Bank of Bahrain, that in addition to their strength and stability,
add significant value to the Bank through Board representation and applied
synergies.
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We believe in adding value to our customers' lives and businesses through
dynamic and competitive products and services that fulfill their needs while
conforming completely with the dictates of Shariah. At the same time, we
endeavor to deliver competitive risk adjusted returns to our stakeholders.
1.1 History of Islamic banking in Pakistan
Al-Meezan Investment Management Limited (AMIM) was established in 1995 as
a joint venture between Pakistan Kuwait Investment Company (PKIC), NationalInvestment (Trust) Limited, and Jardine Fleming Investment Management
International Limited (Jardine Fleming). AMIM has over the years benefited
immensely from domestic investment management expertise of PKIC and
National Investment (Trust) Limited and international expertise of Jardine
Fleming.
Jardine Fleming made a substantial contribution towards the development of systems and procedures for AMIM during its six years of association with the
company. The key investment professionals of Jardine Fleming, Hong Kong who
served as Directors of AMIM for these six years, contributed to the development
of strategic plans and investment policies of the company.
The Holy Quran "We must work our destiny in our own way and present to the works an economic
system based on true Islamic concept of equality of manhood and social justice
"Quaid's concept of Islamic Banking [Opening Ceremony of The State Bank of
Pakistan on July 1, 1948]
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What is Riba?
The Holy Quran did not give any definition for the term for the simple reason that
it was well known to its immediate audience. But many scholars defined Riba in
the following words.
“Riba is Arabic word. It means increase, addition, expansion or growth.
Imam Abubakr Al-Jassas (D.380 AH) in his famous work Ahkamul Quran has
explained riba in the following words:
“And the riba which was known to and practiced by the Arabs was that they used
to advance loan in the form of Dirham (silver coin) or Dinar (gold coin) for a
certain term with an agreed increase on the amount of the principal advanced.”
Shariah Board
The members of the Shariah Board of Meezan Bank are Internationally-renowned
scholars serving on the boards of many Islamic banks operating in different
countries.
The members of the Shariah Board are:
Justice (Retd.) Muhammad Taqi Usmani
Dr. Abdul Sattar Abu Ghuddah
Sheikh Essam M. Ishaq
Dr. Muhammad Imran Ashraf Usmani - Shariah Advisor
Permanent Member International Islamic Fiqh Academy, Jeddah
Vice President, Darul Uloom Karachi
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Chairman, Shariah Council AAOIFI, Bahrain
Member, Islamic Fiqh Academy of Rabita-al-Alam-e-Islami, Makkah
Member, European Council of Fatwa and Research, Dublin, Ireland
Chairman, Center for Islamic Economics Pakistan since 1991
Chairman, Shariah Board Dow Jones Islamic Market Index, New York
Chairman, Shariah Board, Bahrain Monetary Agency, Bahrain
Chairman, Shariah Board, Amana Investments Limited, Sri Lanka
Chairman, Shariah Board Abu Dhabi Islamic Bank, UAE
Chairman, Shariah Board Islamic House of Britain plc, UK Member, Shariah Board, First Islamic Investment Bank, Bahrain
Member Shariah Board, Islamic Corporation for Development of the
Private Sector, (ICD) an organ of IDB, Jeddah.
Member Shariah Board, Guidance Financial Group, USA
Member Shariah Board, Saudi American Bank
Member Shariah Supervisory Board, First Islamic Investment Bank
BOARD OF DIRECTORS
H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman)
(Undersecretary, Ministry of Finance & National Economy, State of Bahrain)
Naser Abdul Mohsen Al-Marri (Vice Chairman)
Yousif Saleh Khalaf
Zaigham Mahmood Rizvi
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Mohammad Hussain
Tarik Kivanc
Mazen Khalid Al-Braikan
Irfan Siddiqui (President & Chief Executive Officer)
Ariful Islam (Chief Operating Officer)
Rana Ahmad Humayun
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Meezan bank is provide services in the market to their customers and shareholders
its nature is reflected by its admission statements.
Our Vision
Establish Islamic banking as banking of first choice to facilitate
the implementation of an equitable economic system, providing a strong
foundation for establishing a fair and just society for mankind.
Our Mission
To be a premier Islamic bank, offering a one-stop shop for
innovative value added products and services to our customers within the bounds
of Shariah, while optimizing the stakeholders value through an organizational
culture based on learning, fairness, respect for individual enterprise and
performance.
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Introduction of Products
Types of products offered
Riba Free Meezan Providence
Riba Free - Certificates of Islamic Investment
Riba Free - Monthly Musharakah Certificate
Riba Free - Dollar Saving Account
Riba Free - Rupee Saving Account
Riba Free - Current Account
Car Ijarah - Islamic Car Financing
Riba Free Meezan Providence:
It is a long term investment product especially designed for the need and to fulfil
the requirements of the corporate and business concerns for purpose of
investing their provident, pension and Gratuity Funds as any sensible and wise person who wants to invest his earning, his main concerns would be total security
along with the best returns possible, especially as these earnings or funds are a
trust from his employees and one that bears an important responsibility.
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Meezan Providence rests on the well known and solid financial strength of
Meezan Bank, which has a strong and credible balance sheet with excellent
operating profitability, including a capital adequacy ratio that has placed the Bank
at the top of the industry.
Furthermore, its sterling track record shows consistently beneficial and highly
competitive returns for their broad range of investors. Finally, comes the benefit
of truly Halal returns, a benefit you may not have had the opportunity to enjoy
before and one that you can now pass on to your employees, many of whom
would be grateful for such an opportunity.
Key Features of Meezan Providence
A 100% hilal investment in strict compliance with Shariah
High returns
Long Term security ensured
Minimum investment amount: PKR 1,000,000
Available tenures of 3, 5 and 7 years.
Pre-mature withdrawal options available
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Riba –Free-Certificates of Islamic Investment:
This investment product is designed to meet the short term and long term
needs. The minimum investment is PKR 50,000 and it is available in tenures
of 3 and 6 months, 1, 2, 3 and 5 years.
Furthermore, these certificates can be encashed at any time without any charge or
penalty, only the profit rates will be adjusted according to the tenure completed.
You can earn profit on your investment on the following basis:
Monthly profit on 1, 2, 3 and 5 years
Quarterly profit on 1, 2, 3 and 5 years
At maturity profit payment for all tenures
In the Riba Free COII, you enter into the Musharakah agreement that is strictly
in conformity with the principles of Islamic Shariah. The deposits of the
customers together with the Bank ’ s contribution are invested in a pool that
consists of Ijarah and Murabaha financing. The profit/loss on this pool iscalculated every month on the basis of profit sharing ratio determined by
assigning weightings. Such weightings are assigned at the beginning of every
month and are displayed on the bank notice board and website. This facility is
available during the course of investment. However, profit shall be paid only
after completion of one month of investment.
Riba Free-Monthly Musharakah Certificate:
The riba free Monthly Musharakah Certificates are a flexible investment product
which has been designed to give the depositor a monthly return which is
Halal. The depositors participate with the bank in the pool of investments
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which is comprised of Murabaha and Ijarah transactions. The minimum
investment required is required is only PKR 100,000 and you receive profit
for each complete month of investment with the bank. The profit rate, so
calculated, is applied to all investments which mature between the periods starting
from the 6thday of each month to the 5thday of the next month. During your
relationship with us, you would be entitled to receiving the following additional
benefits.
• Personalized cheque books.
• No restriction on withdrawals.
• Call centre facilities.
• Monthly profit payment to your current or saving account with us.
• Free bank balance certificates
• Personal financial consultancy services
• Access to priority desk
Riba Free-Dollar Saving Account
With a minimum of only $100 you can open a Dollar Saving Account with
us under a Mudarabah arrangement that is strictly in conformity with the
principles of Islamic Shariah. The return earned on the Mudarabah pool is
calculated every month and the profit ratio for all investors is declared at the
beginning of the month. If you maintain a minimum average monthly balance of $
500, you shall be eligible to receive profits that shall be disbursed to you every
month. Apart from first class service and personalized attention that our
customers get when they bank with us, we offer the following additional
conveniences to our customers.
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• Personalized cheque books
• No restriction on withdrawals or number of transactions.
• Call centre facilities
• Monthly profit payment
• Free bank balance certificates
• Taking stop payment instructions.
• Taking hold mail instructions.
• Issuance of duplicate statement of account.
• Personal financial consultancy services.
• Access to priority desk.
Riba Free-Rupee Saving Account
With a minimum of only PKR 10,000 THE Rupee Saving Account can be opened
under musharakah agreement. The profit earned is calculated every month. And if
the client maintains a monthly balance of PKR 10,000 the client is eligible for the
profits that will be disbursed every month. However, the clients of COII may
open this account with any minimum balance.
Profit calculation is based on weight ages in the following tiers:
PKR 10,000 up to PKR 9,999,999
PKR 10,000,000 up to PKR 49,999,999
PKR 50,000,000 up to PKR 99,999,999
PKR 100,000,000 and above
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Riba Free - Current Account
In this type of account the client is allowed to deposit or withdraw money as helikes. He may, thus, deposit or withdraw several times in a day as he likes.
Usually the bank allows this and charges service charges are deducted by the
bank from current deposit account. It gives advantage for paying debts by the
convenient and safe means of sending cheques through the post thus avoiding the
trouble and loss. This bank account that is ideal for businesses and individuals
looking for Shariah compliant banking and ease of access. With a minimum
amount of only Rs.10,000 this product offers you a range of benefits
including personalized checking facility, no restrictions on the number of
transactions, free Call Centre facilities, free balance certificates, priority
banking and much more.
Car Ijarah – Islamic Car Financing
Car Ijarah is Pakistan's first "Interest Free" car-financing based on Islamic
financing mode of Ijarah or Islamic leasing. This product is ideal for
interest averse individuals, looking for a car financing that provides the
convenience of a well designed product while avoiding an interest based
transaction. Car Ijarahtotally halal auto finance facility that is very affordable,
with quick processing and minimal documentation. Car financing that is very
competitively priced, hassle-free, and totally Halal.
As Ijarah is basically is the transfer of usufruct of a fixed asset to another person
for an agreed period, at an agreed consideration. Under car Ijarah agreement the
car will be given to the customer for the period agreed on the time of contract. In
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car Ijarah the asset remains in the ownership and risk of bank and the customers
only pay the rentals for use of the asset: just like house rent. The product
has grown all over the country with a portfolio of Rs 291 million as of 31st
December with non-performing contracts.
Key Features of Car Ijarah
No application fee
Ease of acquiring any new locally assembled car
No upfront Insurance Payment
No advance Rental
Available in tenures of 3, 4 and 5 years
Minimum security deposit as low as 20%
Islamic Mode of Financing
These modes of financing have been written by Maulana Taqi Usmani who is the
former Chairman of Shariah board of Meezan Bank. After studying these we will
be in a position to understand the 90% working of the bank. The important modes
of financing are:
1. Musharakah
2. Mudarabah
3. Ijarah
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Musharakah
Hadees-e-Qudsi Allah Subhan-o-TAllah has declared that He will become a partner in a
business between two Mushariks until they indulge in cheating or breach of trust
(Khayanah).
Introduction:-'Musharakah' is a word o f Arabic origin which literally means sharing. In the
context of business and trade it means a joint enterprise in which all the
partners share the profit or loss of the joint venture. It is an ideal
alternative for the interest-based financing with far reaching effects on both
production and distribution. In the modern capitalist economy, interest is the
sole instrument indiscriminately used in financing of every type. Since Islam has
prohibited interest, this instrument cannot be used for providing funds of anykind. Therefore, 'Musharakah' can play a vital role in an economy based on
Islamic principles.
Difference between Interest and Musharakah
Interest' predetermines a fixed rate of return on a loan advanced by the financier
irrespective of the profit earned or loss suffered by the debtor, while Musharakahdoes not envisage a fixed rate of return. Rather, the return in Musharakah is based
on the actual profit earned by the joint venture. The financier in an interest-
bearing loan cannot suffer loss while the financier in Musharakah can suffer loss,
if the joint venture fails to produce fruits. Islam has termed interest as an unjust
instrument of financing because it results in injustice either to the creditor or to
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the debtor. If the debtor suffers a loss, it is unjust on the part of the creditor to
claim a fixed rate of return; and if the debtor earns a very high rate of profit, it is
injustice to the creditor to give him only a small proportion of the profit leaving
the rest for the debtor.
The Concept of Musharakah
“Musharakah” is a term frequently referred to in the context of Islamic
modes of financing. The connotation of this term is a little limited than the
term "Shirkah" more commonly used in the Islamic jurisprudence. For the
purpose of clarity in the basic concepts, it will be pertinent at the outset to explain
the meaning of each term, as distinguished from the other.
"Shirkah" means "Sharing" and in the terminology of Islamic Fiqh, it has been
divided into two kinds:
Some objections on Musharakah Financing
1) Risk of Loss
2) Dishonesty
3) Secrecy of the Business
4) Clients' Unwillingness to Share Profits
Let us now examine some objections raised from practical point of view against
using Musharakah as a mode of financing.
Risk of Loss:-
It is argued that the arrangement of musharakah is more likely to pass on losses of
the business to the financier bank or institution. This loss will be passed on to
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depositors also. The depositors, being constantly exposed to the risk of loss, will
not want to deposit their money in the banks and financial institutions and thus
their savings will either remain idle or will be used in transactions outside of the
banking channels, which will not contribute to the economic development at
national level.
This argument is, however, misconceived. Before financing on the basis of
musharakah, the banks and financial institution will study the feasibility of the
proposed business for which funds are needed.
Even in the present system of interest-based loans the banks do not advance loans
to each and every applicant. They study the potentials of the business and if they apprehend that the business is not profitable, they refuse to advance a
loan. In the case of musharakah, they will have to carry out this study with more
depth and precaution.
Moreover, no bank or financial institution can restrict itself to a single
musharakah. There will always be a diversified portfolio of musharakah. If a
bank has financed 100 of its clients on the basis of musharakah, after studying
the feasibility of the proposal of each one of them, it is hardly conceivable
that all of these Musharakah or the majority of them will result in a loss. After
taking proper measures and due care, what can happen at the most is that some
and them make a loss. But on the other hand, the profitable Musharakah are
expected to give more return than the interest-based loans, because the actual
profit is supposed to be distributed between the client and the bank.
Therefore, the Musharakah portfolio, as a whole, is not expected to suffer loss,
and the possibility of loss to the whole portfolio is merely a theoretical possibility which should not discourage the depositors. This theoretical
possibility of loss in a financial institution is much less than the possibility of loss
in a joint stock company whose business is restricted to a limited sector of
commercial activities. Still, the people purchase its shares and the possibility of
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loss does not refrain them from investing in these shares. The case of the bank
and financial institutions is much stronger, because their Musharakah
activities will be so diversified that any possible loss in one Musharakah
will be more than compensated by the profits earned in other Musharakah.
Apart from this, 'an Islamic economy must create a mentality which
believes that any profit earned on money is the reward of bearing risks of the
business. This risk may be minimized through expertise and diversifying the
portfolio where it becomes a hypothetical or theoretical risk only. But there is noway to eliminate this risk totally. The one, who wants to earn profit, must accept
this minimal risk. Since this understanding is already there in the case of normal
joint stock companies, nobody has ever raised the objection that the money of the
shareholders is exposed to loss. The problem is created by the system which
separates the banking and financing from the normal trade activities, and which
has Compelled the people to believe that banks and financial institutions deal in
money and papers only, and that they have nothing to do with the actual results
emerging in trade and industry. Therefore, it is argued that they deserve a fixed
return in any case. This separation of financing sector from the sector of trade
and industry has brought great harms to the economy at macro-level.
Obviously, when we speak of Islamic banking, we never mean that it will follow
this conventional system in each and every respect. Islam has its own values and
principles which do not believe in separation of financing from trade and industry.
Once this Islamic system is understood, the people will invest in the
financing sector, despite the theoretical risk of loss, more readily than they
invest in the profitable joint stock companies.
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of dishonesty is more severe for the Islamic Banks and Financial institutions
working in isolation from the main stream of conventional banks. They have
not much support from their respective governments and central Banks. They
cannot change the system, nor can they impose their own laws and regulations.
However, they should not forget that they are not just commercial institutions.
They have been established to introduce a new system of banking which has its
own philosophy. They are duty bound to promote this new system, even if they
apprehend that it will reduce the size of their profits to some extent. Therefore,
they should start using the instrument of musharakah, at least on a selective basis.
Each and every bank has a number of clients whose integrity is beyond all doubts.
The Islamic banks should, at least, start financing them on the basis of truemusharakah. It will help setting good precedents in the market and induce others
to follow suit. Moreover, there are some sectors of financing where musharakah
can be used easily. For example, the
use of musharakah instrument in financing exports has not much room for
dishonesty. The exporter has a specific order from abroad. The prices are
agreed. The cost is not difficult to determine. Payments are normally secured by
a letter of credit. The payments are made through the bank itself. There is no
reason in such cases why the musharakah arrangement should not be adopted.
Similarly, financing of imports may also be designed on the basis of
musharakah with some precautions, as explained earlier in this chapter.
Secrecy of the Business:
Another criticism against musharakah is that, by making the financier a partner in
the business of the client, it may disclose the secrets of the business to the
financier, and through him to other traders.
However, the solution to this problem is very easy. The client, while entering into
the musharakah, may put a condition that the financier will not interfere with the
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Termination of Musharakah without closing the business If one of the
partners wants termination of the musharakah, while the other partner or
partners like to continue with the business, this purpose can be achieved by
mutual agreement. The partners who want to run the business may purchase the
share of the partner who wants to terminate his partnership, because the
termination of musharakah with one partner does not imply its termination
between the other partners.
However, in this case, the price of the share of the leaving partner must be
determined by mutual consent, and if there is a dispute about the valuation of the
share and the partners do not arrive at an agreed price, the leaving partner maycompel other partners on the liquidation or on the distribution of the assets
themselves.
The question arises whether the partners can agree, while entering into the
contract of the musharakah, on a condition that the liquidation or separation
of the business shall not be effected unless all the partners, or the majority of
them wants to do so, and that a single partner who wants to come out of the
partnership shall have to sell his share to the other partners and shall not force
them on liquidation or separation.
Most of the traditional books of Islamic Fiqha seem to be silent on this question.
However, it appears that there is no bar from the Shariah point of view if the
partners agree to such a condition right at the beginning of the musharakah. This
is expressly permitted by some Hanbali jurists. This condition may be justified,
especially in the modern situations, on the ground that the nature of
business, in most cases today, requires continuity for its success, and the
liquidation or separation at the instance of a single partner only may cause
irreparable damage to the other partners.
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If a particular business has been started with huge amounts of money which has
been invested in a long term project, and one of the partners seeks liquidation in
the infancy of the project, it may be fatal to the interests of the partners, as well as
to the economic growth of the society, to give him such an arbitrary power of
liquidation or separation.
Murabaha
IntroductionMost of the Islamic banks and financial institutions are using "Murabaha" as an
Islamic mode of financing, and most of their financing operations are based on
"Murabaha". That is why this term has been taken in the economic circles today
as a method of banking operations, while the original concept of "Murabaha" is
different from this assumption.
"Murabaha" is, in fact, a term of Islamic Fiqh and it refers to a particular kind of sale having nothing to do with financing in its original sense. If a seller agrees
with his purchaser to provide him a specific commodity on a certain profit
added to his cost, it is called a "Murabaha" transaction. The basic ingredient
of "Murabaha" is that the seller discloses the actual cost he has incurred in
acquiring the commodity, and then adds some profit thereon. This profit may be
in lump sum or may be based on a percentage.
Some Basic Rules of Sale
'Sale' is defined in Shariah as 'the exchange of a thing of value by another
thing of value with mutual consent' . Islamic jurisprudence has laid down
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is totally unacceptable, because Murabaha can be used only where a commodity is
intended to be purchased by the customer. If funds are required for some other
purpose, Murabaha cannot work. In such cases, some other suitable modes of
financing, like musharakah, leasing etc. can be used according to the nature of the
requirement.
2. In some cases, the clients sign the Murabaha documents merely to obtain
funds. They never intend to employ these funds to purchase a specific
commodity. They just want funds for unspecified purpose, but to satisfy the
requirement of the formal documents, they name a fictitiously commodity.
After receiving money, they use it for whatever purpose they wish.
Obviously this is a fictitious deal, and the Islamic financiers must be very careful
about it. It is their duty to make sure that the client really intends to
purchase a commodity which may be subject to Murabaha. This assurance
must be obtained by the authorities sanctioning the facility to the customer. Then,
all necessary steps must be taken to confirm that the transaction is genuine.
For example:
(a) Instead of giving funds to the customer, the purchase price should be
paid directly to the supplier.
(b) If it becomes necessary that the client is entrusted with funds to purchase the
commodity on behalf of the financier, his purchase should be evidenced by
invoices or similar other documents which he should present to the financier.
(c) Where either one of the above two requirements is not possible to be
fulfilled, the financing institution should arrange for physical inspection of
the purchased commodities.
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Anyhow, the Islamic financial institutions are under an obligation to make sure
that Murabaha is a real and genuine transaction of actual sale and is not
being misused to camouflage an interest-based loan.
3. In some cases, sale of commodity to the client is effected before the
commodity is acquired from the supplier. This mistake is invariably committed
in transactions where all the documents of Murabaha are signed at one time
without taking into account various stages of the Murabaha. Some
institutions have only one Murabaha agreement which is signed at the time of
disbursement of money, or in some cases, at the time of approving the facility.
This is totally against the basic principles of Murabaha. It has already been
explained in this article that the Murabaha arrangement practiced by the banksis a package of different contracts which come into play one after another at
their respective stages. These stages have been fully highlighted earlier
while discussing the concept of 'Murabaha Financing'. Without observing this
basic feature of Murabaha financing, the whole transaction turns into an
interest-bearing loan. Merely changing the nomenclature does not make it
lawful in the eyes of Shariah.
The representatives of the Shariah Boards of the Islamic banks, when they check
the transactions of the bank with regard to their compliance with Shariah, must
make sure that all these stages have been really observed, and every transaction is
effected at its due time.
4. International commodity transactions are often resorted to for liquidity
management. Some Islamic banks feel that these transactions, being asset-
based, can easily be entered into on Murabaha basis, and they enter the field
ignoring the fact that the commodity operations as in vogue in the
international markets, do not conform to the principles of Shariah. In many
cases, they are fictitious transactions where no delivery takes place. The
parties end up paying differences. In some cases, there are real commodities but
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Consumer goods financing
House financing
Vehicle financing
Land financing
Shop financing
PC financing
Ijarah
"Ijarah" is a term of Islamic fiqh. Lexically, it means 'to give something on rent'.
In the Islamic jurisprudence, the term 'Ijarah' is used for two different
situations. In the first place, it means 'to employ the services of a person on
wages given to him as a consideration for his hired services."
The employer is called 'musta jir' while the employee is called 'ajir'.
Therefore, if A has employed B in his office as a manager or as a clerk on a
monthly salary, A is musta jir, and B is an ajir. Similarly, if A has hired theservices of a porter to carry his baggage to the airport, A is a musta jir while the
porter is an ajir, and in both cases the transaction between the parties is termed as
Ijarah. This type of Ijarah includes every transaction where the services of a
person are hired by someone else. He may be a doctor, a lawyer, a teacher, a labor
or any other person who can render some valuable services. Each one of them
may be called an 'ajir' according to the terminology of Islamic law, and the
person who hires their services is called a 'musta jir', while the
wages paid to the ajir are called their 'ujrah'.
The second type of Ijarah relates to the usufructs of assets and properties, and not
to the services of human beings. 'Ijarah' in this sense means 'to transfer the
usufruct of a particular property to another person in exchange for a rent
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and all the rules concerning the transaction of loan shall accordingly apply. Any
rent charged on this invalid lease shall be an interest charged on a loan.
4. As the corpus of the leased property remains in the ownership of the
lessor, all the liabilities emerging from the ownership shall be borne by the
lessor, but the liabilities referable to the use of the property shall be borne by the
lessee.
Example:-
A has leased his house to B. The taxes referable to the property shall be borne by
A, while the water
tax, electricity bills and all expenses referable to the use of the house shall be borne by B, the lessee.
5. The period of lease must be determined in clear terms.
6. The lessee cannot use the leased asset for any purpose other than the purpose
specified in the lease agreement. If no such purpose is specified in the agreement,
the lessee can use it for whatever purpose it is used in the normal course.
However if he wishes to use it for an abnormal purpose, he cannot do so unless
the lessor allows him in express terms.
7. The lessee is liable to compensate the lessor for every harm to the leased asset
caused by any misuse or negligence on the part of the lessee.
8. The leased asset shall remain in the risk of the lessor throughout the lease
period in the sense that any harm or loss caused by the factors beyond the control
of the lessee shall be borne by the lessor.
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Example (2):
In the above example, A puts a condition in the agreement that the rent of Rs.
2000/- per month is fixed for the first year only. The rent for the subsequent years
shall be fixed each year at the option of the lessor. The lease is void, because the
rent is uncertain.
The determination of rental on the basis of the aggregate cost incurred in the
purchase of the asset by the lessor, as normally done in financial leases, is
not against the rules of Shari„ah, if both parties agree to it, provided that all
other conditions of a valid lease prescribed by the Shari„ah are fully adhered
to.
14. The lessor cannot increase the rent unilaterally, and any agreement to to this
effect is void.
15. The rent or any part thereof may be payable in advance before the
delivery of the asset to the lessee, but the amount so collected by the lessor
shall remain with him as 'on account' payment and shall be adjusted towards the
rent after its being due.
16. The lease period shall commence from the date on which the leased asset has
been delivered to the lessee, no matter whether the lessee has started using it or
not.
17. If the leased asset has totally lost the function for which it was leased, and no
repair is possible, the lease shall terminate on the day on which such loss has been
caused. However, if the loss is caused by the misuse or by the negligence of
the lessee, he will be liable to compensate the lessor for the depreciated
value of the asset as; it was immediately before the loss.
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• Saving Deposit accounts
• Term Deposit accounts
• I knew about different types of saving accounts like MBA (Meezan Bachat
Account), KMA (karobari Munafa Account), COII, MMC, MAC and etc. these
are MUDARABA based deposits products.
• I learnt about the profit rates of the accounts and procedures to open these
accounts.
I learnt about also CDR (Call Deposit Receipts) and its procedure and knew its purposeand how to fill it an proceed.
2nd
& 3rd
week
I started this week with the lectures of the Bank officer about bank and its performance. I
learnt the actual means of practical work in the bank. First of all I started my work in the
ACCOUNT OPPENING DEPARTMENT of the bank in which I learnt how an account
can be opened in a bank, which documents are necessary to attach it with the account
opening form and how many kinds of account are used in bank like
• Single
• Joint personal
• Sole proprietorship
The requirement for opening these types of a/c are
• Select the nature of a/c
•
Attested photo of applicant• Then the permanent address
• NIC copy.
• occupation
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• The reference of any person who has already the a/c or any respected
personality
• The other information related to the a/c filled on choice of applicant.
• The signatures are done on form as well as on the specimen signature card
from where the signature will be scanned as a record in computer
Partnership
Limited company
Trusts
Clubs
Association etc.
The requirement for opening these types of a/c are
For partnership
• Attested photocopy of CNIC of all partners
• Attested copy of Partnership Deed duly signed by all partners of firm.
• Attested copy of Registration Certificate with register of Firm. In case the
partnership is unregistered this fact should be clearly mentioned on the a/c opening form
• Authority letter, in original, in favor of the person authorized to operate on the a/c
of the firm.
For Joint Stock Company
• Resolution of Board of Directors for opening of a/c specifying the person(s)
authorized to operate the company a/c
• Memorandum and articles of association.
• Certificate of incorporation
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• First of all I learnt about ATM PIN ISSUANCE procedure and knew why it is
necessary for customer or account holder.
• Then he showed us module in computer that how he enters the data of customer
and how it proceeds.
• After proceeding computer shows a pin number that is issued for that customer
who filled the form for ATM. And this work is done means pin issuance by Head
Office.
Then I learnt about the term ATM Cash Replenish . He told us that how it works and
what its procedure and why it is used.
5 th Week
I started my working day with some work, which has to complete from the previous week
with account opening forms.
• I learnt about inward and out ward clearing and learnt how the transactions are
made.
• I learnt how to write the inward clearing cheques in the transaction record book.
• I learnt to deduct the return cheques from the added amount of all cheques.
• I learnt the entry of pay orders in the record book.
• Know how of employees.
THEN
I started my work again in Accounts Department. The officer also does/handle the other
work Like REMITTANCE department.
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• I learnt about the PAY ORDER and DEMAND DRAFT. He told us the difference
of Pay Order and DD.
• I learnt also about the procedure of it. I also saw the Pay Order cheque and knew
about its attributes.
• But DD is not made in Sahiwal Branch. But sometimes if necessary then they
made it. But mostly Pay Orders are made and send it to other cities also. Only
Meezan Bank provide this opportunity of Pay Order to send outside the city also.
• I also learnt about the facility of LOCKERS and its functions.
• Lockers have 3 types of it:
Small Size Lockers
Medium Size Lockers
Large Size Lockers
• The officer told us its functions and charges and I knew about that how can hold
locker and which documents are required for getting the lockers. Lockers are the
fire proof.
I attended the weekly meeting of bank manager with employees and attended thelecture about modern way of banking delivered by the bank manager for the
success if the branch’s business.
6 th & 7th week
I started my day with the daily lecture and general discussion about banking and scope of
banking in Pakistan in coming years.
• I revised all practices according to account opening departments and cleared
my all confusion related to that department trough got work in that field.
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• I gave my feedback as a internee about the environment of the bank and about
my work experience in that department
• I started my day with the daily lecture about Bank.
• After that I went to ACCOUNTS DEPARTMENT and started my work. First
of all I cleared my all confusions about the previous topics then I started to
learn further.
• I learnt about FTT (Foreign Telegraphy Transfer) also known as SWIFT
Message.
• In it I knew that how can get and send money from and to foreign countries.
• He told us its procedure and function. I knew about how the message can
create and what sources are used for it.
• Then I learnt about SMS ALERTS . He told us its function and I knew about
that what information is required for its activation and what information it
gives to customer through SMS.
• I learnt what are the Local Posting and Online Transferring and how it is
done.
• Then I learnt what Stop Payment is and how it is performing and what its
terms and conditions.
• I knew about what Account Closing is and what its procedures to close it and
what charges are required for it.
• Then I saw the module of daily Accounts and Expense Entries posting. And
knew about the reason of entering it.
8 th Week
I started my 8 th week of internship with the lecture of the Bank Manager who is Mr.
Shoaib, the lecture was about Islamic banking and its differences in convention banking.
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• I knew about the Shariah and the sources of Islamic Shariah .
• Then I learnt about Islamic Banking and knew what its actual meaning.
• In Islamic Banking a term Riba Free is used which means “Avoid Interest”.
• Islamic Banking is a system of Trade where Goods and Services are sold and
Capital is invested to earn Halal profit by taking Risk.
• Interest Free Banking is subset of Islamic Banking concept representing a number
of Banking Operations which avoid Interest.
• I learnt about Convention Banking which is based on Pricing money and earning
Interest.
• Apparently Islamic and Convention Banking may look same but Islamic Banking
is permissible means “Allah has permitted trade and forbidden Riba”.
• I learnt about difference b/w Islamic and Convention Banking up to some extent.
• Then I moved to next department that was ACCOUNTS DEPRTMENT.(with the
hold of IT deptt, Remittance deptt)
• I started my work in Accounts Department.
• The Officer who is Mr. Faysal gave the overview of his working that he does.
• I learnt about cheques how to fill them and knew about its functions.
• I learnt that in banking cheque is known as Dr. Instrument.
• Then I learnt about cross cheque and cross cheque has two types :
Simple crossing
Special crossing
• I knew also another type of cheque that is Order Cheque and its purpose and
function. That day I learnt about cheque procedure and its use in different ways.
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Net Profit
Years 2005 2006 2007 2008 profit 20.15 17.80 16.27 8.27
Net Profit
0
5
1015
20
25
1 2 3 4
2005 2006 2007 200
From above we can analyze that growth are decreasing as per year so the bank has to
work over to improve their net profit. Bank has to remove if there is any barrier.
Market Share
With the Strategic Plan in place our task for 2008 will be very challenging in the current
political situation and economic slow down witnessed in the last three months. However,
the Bank has a positive outlook for the country and believes that the future government
will continue with the growth policies. Therefore, the Bank will continue to build market
share through an aggressive branch expansion plan supported by a strong technology
backbone. Meezan Bank plans to expand its branch network to approximately 140
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branches by the end of the year that will further increase its customer out-reach
INSHALLAH.
With 166 Branches (including 35 sub-branches) in 40 cities across Pakistan, Meezan
Bank is clearly positioned as the leading Islamic Bank in the country. Work starts on the
construction of Meezan Bank’s new Head Office building.
The financing and investment portfolio of local Islamic banks reached Rs. 185 billion in
December 2008 compared to Rs. 137.6 billion in December 2007. Market share in the
overall banking increased to five per cent at end December 2008 compared with four per
cent at end December 2007. Total assets of Islamic banking reached Rs. 271.1 billion in
December 2008 compared to Rs. 205.2 billion in December 2007.
Volume of Assets (millions)
Years 2005 2006 2007 2008
Total Assets 30676 46439 67179 85276
0
20000
40000
60000
80000100000
Valu e oAssets
1 2 3 4
2005 2006 2007 2
Asset
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Share Price In Stock Market
Years 2005 2006 2007 2008Share Price 23.25 19.50 38.55 21.48
Share P ric
0
10
2030
40
50
1 2 3 4
2005 2006 2007 20
Series1
From above we can analyze that the share price is low as compared to previous year, so
we have to keep focus on it. Make a plan to improve or increase price to attract previous
share holders.
Number of Employees
Meezan Bank continued to attract and recruit staff through 2008 for its aggressive branch
expansion plan as well as for its Head Office departments. Meezan Bank believes that its
3000+ employees are its greatest asset and a major reason for its growth and success.
Years 2005 2006 2007 2008Employees 786 1389 2205 3170
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Liquidity Ratio
It is the relationship between the current assets and current liabilities of a concern.
Current Ratio = Current Assets/Current Liabilities
Year 2005 2006 2007 2008Current assets 6812761 10212269 9373577 7108685Current liabilities 3242446 4848440 3607766 5065513Current Ratio 2.1 2.10 2.59 1.4
Liquidity Current Ratio
2.1 2.12.59
1.4
0
1
2
3
1 2 3 4
2005 2006 2007 2008
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Solvency Ratio
Debt equity Ratio = Debt liabilities/ Net assets
Year 2005 2006 2007 2008Debt liabilities 24408794 36826824 57864137 74325579Net assets 6812761 10212269 5706656 5974978Debt equity Ratio 3.58 3.60 10.13 12.4
Debt Equ ity Ra
0
10
20
2005 2006 2007 2
Ser ies1 3.58 3 .6 10.13 12.4
1 2 3 4
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Capital Adequacy Ratio (Capital to Risk (Weighted) AssetsRatio)
Year 2005 2006 2007 2008Average Ratio 1.67 1.57 1.70 .82Average Equity 16.70 15.64 10.30 18.39
Average Ratio
1.67 1.57 1.7
0.82
0
0.5
1
1.5
2
1 2 3 4
2005 2006 2007 2008
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Average Equity
16.7 15.64
10.3
18.39
0
5
10
15
20
1 2 3 4
2005 2006 2007 208
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“Authentic marketing is not the art of selling what you make but knowingwhat to make. It is the art of identifying customer needs and creating
solutions that deliver satisfaction to the customers, profits to the producer
and benefits to the stakeholders”.
Philip Kotler
A small survey was conducted by asking some of the bank employees to do a SWOT
analysis of the bank in light of their experience in the banking field. My analysis,consolidated with theirs', is given below:
Strengths
• First exclusive Islamic bank.
• The largest Islamic Bank in Pakistan with a network of over 166 branches in 40
cities. And ending this year they have increase his branches in Pakistan to 180
branches.• Strong growth of its Islamic banking SBU.
• The members of the Shariah Supervisory Board of Meezan Bank are
Internationally-renowned scholars, serving on the boards of many Islamic banks
operating in different countries.
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• Meezan Providence Certificate is a long-term investment certificate specially
designed to cater to the needs of corporate and business concerns for purposes of
investing their Provident, Pension and Gratuity Funds. As any prudent investor,
your main concerns would be total security along with the best returns possible,
especially as these funds are a trust from your employees and one that bears an
important responsibility.
• Karachi, August 20, 2008: Meezan Bank, the largest Islamic Bank in Pakistan has
been conferred the Best Islamic Bank Award by Rawalpindi Chamber of
• Commerce and Industry. The Chief Minister of Punjab Mr. Shahbaz Sharif
bestowed this award to Mr. Saleem Khan Regional Manger - North, Meezan Bank
at 21st RCCI achievement awards ceremony held at the Convention Center in
Islamabad.
• Dedicated and professional staff
• Shariah board of renowned scholars
• Healthy working environment
• Strong shareholding
Weaknesses
• High charges for different activities such as online or Demand Draft as comparedto competitors.
• lack of promotions and advertising of their products and services.
• Lengthy & extensive documentation
• Centralized procedures making process slow
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• Weak marketing strategy, Target market not identified
• Offering fewer services than the competitors
• Risk Averse, approach of Head office.
• The Islamic economic system is not something that can work in isolation of the
geo-political and legislative system, as well as, and more importantly the society's
behaviors towards the injunctions of Islamic Shariah in personal and collective
matters. Accordingly, one can easily imagine that in an economy whereby most of
the businessmen are not honest in fairly presenting the financial statements of
their businesses, how difficult it is to introduce a profit-and-loss sharing based
financial solution.
• Meezan Bank Limited has no Credit card facility
• Restricted Shariah based policies
Opportunities
• House financing sector can be targeted to maximize the profit.
• Growing demand of Islamic financial product and services.
• Venturing into Islamic groups out side the countries as opportunity to expand business in UAE and Golf states. i-e financial institutions.
• Coming up with. Products for the SME to targeting the medium level customers.
• Doing business with companies having Islamic mindset. I-e Islamic financialInstitutions.
• Increase branch network within the country.
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Threats
• New competitors setting up their Islamic banking sections and they have the
infrastructure, skill, ability, resources & attitude to capture the market more thanthe Meezan bank.
• High Interest Rate from SBP
• SBP has not special policy regarding Islamic Banking.
• Disassociation of Maulana Taqi Usmani from the Shariah advisory board of Meezan Bank.
• Govt. policies are mostly for conventional banking system not for speciallydesigned for Islamic banking.
• Change in Government's attitude towards Islamic banking.
• Fears on the credibility of Islamic banking ethical compliance and monitoringsystems.
Reviewing this SWOT analysis from time to time would help evaluate the bank's
position. It would help the management in comparing their strengths of the past withthose of the present and to what extent the management has been able to overcome the
weaknesses.
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I spent eight weeks of my internship in MBL RYK Branch. During these eight weeks, Ifelt myself to be a part of bank. Even, this was my first experience of working in a bank,
but I learned a lot from this experience. Based on my experience & observation regarding
the operations and policies of Meezan Bank, I have tried to stipulate some
recommendations for further improvement.
Meezan Bank Limited should establish a Department of Human Resource
Management.
Meezan Bank Limited should continue to expand its business, by increasing its
deposit portfolio through aggressive market penetration strategies.
Meezan Bank Limited needs to improve its website.
More information relating to financial performance of the bank should be
available on the website.
Management should distribute work equally among different employees.
Some of the employees are overburdened while some sections are overstaffed.
Related jobs should be assigned to the employees so that they can work more
efficiently.
Cheques, which are drawn on Meezan Bank Branch and returned unpaid in
clearing, are not reflected in the Statement of Account of the customers. These
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cheques must be reflected in the accounts so that credibility of the customers may
be assessed.
The employees should be signed jobs for specific period and than they should
shifted to other department so that they gain knowledge of other jobs. Lockers,
ATM, all these facilities should be provided to attract more customers.
Increase the Size of waiting room.
For Future
Here it been a conventional bank equipped with an extensive network and complete
portfolio of products, we would have proposed….
"Early to bed, early to rise
Work like hell & ADVERTISE"
But this is not the case with Meezan Bank. The network and the portfolio of the products
offered are limited. For this we would propose...“Early to bed, early to rise
Work like hell & IMPROVISE"
In this particular scenario, the word IMPROVISE stands for;
• Innovation
• Market perceptions
• Prudence
• Rifle approach
• Objectives clearly understood
• Vision
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• Identifying & understanding customer needs
• Satisfying customer needs
• Educating the customers
• TV. Advertising
• Press Advertising
• Spreading awareness through Dars• Wall clocks for mosques
• Awareness through curriculum
• Umra and Haj packages
• It will ensure proper auditing and monitoring, which will in turn inspire public
confidence in the bank.
• RIBA FREE COMMERCIAL BANKING to be set up in all countries of the
world/ Muslims & non-Muslims. This will greatly facilitate international exportimport trade without the fear of being involved in any riba dealing
• Increase consumer banking
• Develop the healthy and sound competition b/w employees and bosses.
• Meezan bank does not provide job security to the employees. Mostly are hired on
contractual basis. More people must be employed on permanent basis/ providing
job security and satisfaction.
•
There is no separate department for the training of new employees. There should be establishment of a separate department for the training of the new employee
and a competent teaching staff should be hired for their training.
• MBL should become very specific about its competitors, so that it can understand
whose its competitor is in the first degree and who is in the second degree. Then
the first-degree
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One of the most important aims of the student life is to express him / her correctly andadequately. This was believed in my mind when I first decided to go to Islamic Meezan
Bank Limited to complete my internship program.
The organization has been not growing both in size and profit for past few years
and but repute in the market is good. The employee turnover is very high which they
have to cut down as they are losing a number of good trained employees due to its poor
policy. The year 2007 is expected to offer increased competition in the secured assets
business as more Islamic banks are in the market. With their focused strategy and product
development initiatives planned for the year, Meezan Bank is strongly positioned to meet
these challenges. The bank has very well repute in the market. Overall bank is going well
and doing a good business but there are few problems for that I have tried to give few
recommendations that might help company to improve. So finally this internship program
has helped me a lot in gaining practical knowledge of job that will help me in the
practical life once I complete my BBA.
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Reference& sources :
I used following references to prepare my reports
Manager of the branch
1I collect information from manager in the form interviews
Operation manger
Employees of the branch
1I collect information from other staff members of the branch in the form
interviews.
Pamphlet or brochure
I also study the different pamphlet of the different products and department
Friends and teachers
The most important of me in the preparation in my reports are my friends and my
teachers who help me and guided at each step.
Internet
The very important source where I collect data about the Meezan bank is the
internet. I visit cite of the Meezan bank and AL-Meezan investment group.
Following are both the websites are.
www.meezanbank.com.pk
www.almeezan.com.pk
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Annual Report 2007, 2008
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