internship report on meezan bank complete

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.

Islamia University Of Bahawalpur (Rahim Yar Khan Campus) 1

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:

Islamic Mode of Financing

Musharakah

Mudarabah


Murabaha

Salam

Istisna

Ijarah

Net Profit

Years 2005 2006 2007 2008profit 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,

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.


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 so

has 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 financial

institutions, 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.

The Bank has an internationally renowned, very high caliber and pro-active

Shariah Supervisory Board presided over by Justice (Retd.) Maulana Muhammad

Taqi Usmani, a renowned figure in the field of Shariah, particularly Islamic

Finance. He holds the position of Deputy Chairman at the Islamic Fiqh Academy,

Jeddah and in his long and illustrious career has also served as a Judge in the

Shariat Appellate Bench, Supreme Court of Pakistan. The Bank also has a resident

Shariah advisor, Dr. Imran Usmani, who strictly monitors the regular transactions


of the Bank. The board also includes Sheikh Essam M. Ishaq (Bahrain), and Dr.

Abdul Sattar Abu Ghuddah (Saudi Arabia).

At Meezan Bank, we strive to find commonalties with the conventional banking

system with absolutely no compromise on Shariah rulings. The bank has

developed an extraordinary research and development capability by combining

investment bankers, commercial bankers, Shariah scholars and legal experts to

develop innovative, viable, and competitive value propositions that not only meet

the requirements of today's complex financial world, but do so with the world-

class service excellence that our customers demand, all within the bounds of

Shariah.

Furthermore, the Bank has built a strong Information Technology and customer

knowledge-based focus that continues to use state of the art technology and

systems. The Bank's Corporate and Investment Banking business unit is geared

towards nurturing and developing a long-term relationship with clients by

understanding their unique financing requirements and providing Shariah

compliant financing solutions across the horizon of corporate banking and

structured finance. The Bank is also implementing robust and aggressive strategic

and tactical initiatives on the consumer banking side. The Bank has a rapidly

growing branch network across all major cities nation-wide. Providing our

customers accessibility and convenience is a prime target, within an atmosphere

and culture of dedicated service and recognition of their needs.

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), National

Investment (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]

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

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

Mohammad Hussain

Tarik Kivanc

Mazen Khalid Al-Braikan

Irfan Siddiqui (President & Chief Executive Officer)


Ariful Islam (Chief Operating Officer)

Rana Ahmad Humayun


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.

Our Objectives

To develop a committed service culture which ensures the

consistent delivery of our products and services within the highest quality service


parameters, promoting Islamic values and ensuring recognition and a quality

banking experience to our customers.


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


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.

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

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 is

calculated 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


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.

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



In this type of account the client is allowed to deposit or withdraw money as he

likes. 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

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


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 any

kind. 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 Musharakah

does 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


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

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


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 no

way 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.


Dishonesty:-

Another apprehension against Musharakah financing is that the dishonest

clients may exploit the instrument of Musharakah by not paying any return to

the financiers. They can always show that the business did not earn any profit.

Indeed, they can claim that it has suffered a loss in which case not only the profit,

but also the principal amount will be jeopardized. It is, no doubt, a valid

apprehension, especially in societies where corruption is the order of the day.

However, solution to this problem is not as difficult as is generally believed or

exaggerated.

If all the banks in a country are run on pure Islamic pattern with a careful

support from the Central Bank and the government, the problem of dishonesty is

not hard to overcome. First of all, a well-designed system of auditing should be

implemented whereby the accounts of all the clients are fully maintained and

properly controlled. It is already discussed that the profits may be calculated to

the basis of gross margins only. It will reduce the possibility of disputes and

misappropriation. However, if any misconduct, dishonesty or negligence is

established against a client, he will be subjected to punitive steps, and may be

deprived of availing any facility from any bank in the country, at least for a

specified period.

These steps will serve as strong deterrent against concealing the actual

profits or committing any other act of dishonesty. Otherwise also, the clients of

the banks cannot afford to show artificial losses constantly, because it will be

against their own interest in many respects. It is true that even after taking all

such precautions, there will remain a possibility of some cases where dishonest

clients may succeed in their evil designs, but the punitive steps and the general

atmosphere of the business will gradually reduce the number of such cases (Even

in an interest-based economy, the defaulters have always been creating the

problem of bad debts) But it should not be taken as a justification, or as an excuse,

for rejecting the whole system of musharakah. Undoubtedly, the apprehension


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 true

musharakah. 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

management affairs, and he will not disclose any information about the business


to any person without prior permission of the client. Such agreements of

maintaining secrecy are always honored by the prestigious institutions, especially

by the banks and financial institutions whose entire business is based on

confidentiality.

Clients' Unwillingness to Share Profits

Many a time, it is mentioned that the clients are not willing to share with the

Banks the actual profits of their business. The reluctance is based on two reasons:

1. They think that the bank has no right to share in the actual profit, which may be

substantial, because the bank has nothing to do with the management or running

of the business and why they should (the clients) share the fruit of their labor with

the Bank who merely provides funds. The Clients also argue that conventional

banks are content with a meager rate of interest and so should be the Islamic

Banks.

2. Even if the above was not a factor, the Clients are afraid to reveal their true

profits to the Banks, lest the information is also passed on to the tax authorities

and Clients' tax liability increases. The solution to the first part, though not easy,

is not difficult or impossible either. Such Clients need to be convinced and

persuaded that borrowing on interest is a cardinal sin, unless there is a dire

necessity for such borrowing. Mere expansion of business is not a dire

need, by any stretch of imagination. By making a legitimate arrangement for

obtaining funds for their business, by way of Musharakah, not only do they

earn Allah's pleasure but also a legitimate return for themselves, as well as for the

Islamic Banks.

In respect of the second factor, all that can be said is that in some Muslim

countries, rate of taxation are indeed prohibitive and unjust. Islamic Banks as


well as their Clients must lobby with the governments and struggle to change

the laws which hamper the progress towards Islamic banking. The governments

should also try to appreciate the fact that if rates of taxation are reasonable and if

the tax-payers are convinced that they will benefit by honestly paying their taxes,

this would increase, and notdecrease, government revenues.

Termination of Musharakah

Musharakah is deemed to be terminated in any one of the following events:

(1) Every partner has a right to terminate the musharakah at any time after giving

his partner a notice to this effect, whereby the musharakah will come to an end.

In this case, if the assets of the musharakah are in cash form, all of them will be

distributed pro rata between the partners. But if the assets are not liquidated,

the partners may agree either on the liquidation of the assets, or on their

distribution or partition between the partners as they are. If there is a dispute

between the partners in this matter i.e. one partner seeks liquidation while the

other wants Partition or distribution of the non-liquid assets themselves, the latter

shall be preferred, because after the termination of musharakah, all the assets are

in the joint ownership of the partners, and a co-owner has a right to seek partition

or separation, and no one can compel him on liquidation. However, if the assets

are such that they cannot be separated or partitioned, such as machinery, then they

shall be sold and the sale-proceeds shall be distributed.

(2) If any one of the partners dies during the currency of musharakah, the contract

of musharakah with him stands terminated. His heirs in this case, will have

the option either to draw the share of the deceased from the business, or to

continue with the contract of musharakah.

(3) If any one of the partners becomes insane or otherwise becomes incapable of

effecting commercial transactions, the musharakah stands terminated.


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 may

compel 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.


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

Introduction

Most 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


enormous rules governing the contract of sale, and the Muslim jurists have

written a large number of books, in a number of volumes, to elaborate them

in detail. What is meant here is to give a summary of only those rules which are

more relevant to the transactions of Murabaha as carried out by the financial

institutions.

1. The subject of sale must be existing at the time of sale. Thus, a thing

which has not yet come into existence cannot be sold. If a non-existent thing has

been sold, though by mutual consent, the sale is void according to Shari„ah.

Example: A sells the unborn calf of his cow to B. The sale is void.

2. The subject of sale must be in the ownership of the seller at the time of sale.

Thus, what is not owned by the seller cannot be sold. If he sells something before

acquiring its ownership, the sale is void.

Example: A sells to B a car which is presently owned by C, but A is hopeful that

he will buy it from C and shall deliver it to B subsequently. The sale is void,

because the car was not owned byA at the time of sale.

Some Basic Mistakes in Murabaha Financing

After explaining the concept of Murabaha and its relevant issues, it will be

pertinent to highlight some basic mistakes often committed by the financial

institutions in the practical implementation of the concept.

1. The first and the most glaring mistake is to assume that Murabaha is a

universal instrument which can be used for every type of financing offered by

conventional interest-based banks and NBFIs. Under this false assumption,

some financial institutions are found using Murabaha for financing overhead

expenses of a firm or company like paying salaries of their staff, paying the bills

of electricity etc. and setting off their debts payable to other parties. This practice


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.


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 banks

is 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

they are subjected to forward sales or short sales which are not allowed in


Shariah. Even if the transactions are restricted to spot sales, they should be

formulated on the basis of Islamic principles of Murabaha by fulfilling all

the necessary conditions already mentioned in this book.

5. It is observed in some financial institutions that they affect Murabaha on

commodities already purchased by their clients from a third party. This is again a

practice never warranted by the Shariah. Once the commodity is purchased by

the client himself, it cannot be purchased again from the same supplier. If it is

purchased by the bank from the client himself and is sold to him, it is a buy-back

technique which is not allowed in Shariah, especially in Murabaha. In fact, if the

client has already purchased a commodity, and he approaches the bank for funds,

he either wants to set-off his liability towards his supplier, or he wants to use the

funds for some other purpose. In both cases an Islamic bank cannot finance him

on the basis of Murabaha. Murabaha can be affected only on commodities not

yet purchased by the client.

Uses of Murabaha

Murabaha can be used in following conditions:

Short / Medium / Long Term Finance for:

Raw material

Inventory

Equipment

Asset financing

Import financing

Export financing (Pre-shipment)

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 the

services 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

claimed from him.' In this case, the term 'Ijarah' is analogous to the English term

'leasing'. Here the lessor is called 'Mu‟jir', the lessee is called 'musta‟jir' and the

rent payable to the lessor is called 'ujrah'


Both these kinds of 'Ijarah' are thoroughly discussed in the literature of

Islamic jurisprudence and each one of them has its own set of rules. But for the

purpose of the present book, the second type of Ijarah is more relevant, because

it is generally used as a form of investment, and as a mode of financing

also.

The rules of Ijarah, in the sense of leasing, are very much analogous to the rules

of sale, because in both cases something is transferred to another person for a

valuable consideration. The only difference between Ijarah and sale is that in

the latter case the corpus of the property is transferred to the purchaser,

while in the case of Ijarah, the corpus of the property remains in the

ownership of the transferor, but only its usufruct i.e. the right to use it, is

transferred to the lessee.

Therefore, it can easily be seen that ‘Ijarah’ is not a mode of financing in its

origin. It is a normal business activity like sale. However, due to certain

reasons, and in particular, due to some tax concessions it may carry, this

transaction is being used in the Western countries for the purpose of

financing also. Instead of giving a simple interest - bearing loan, some

financial institutions started leasing some equipment’s to their customers. While

fixing the rent of this equipment, they calculate the total cost they have incurred

in the purchase of these assets and add the stipulated interest they could have

claimed on such an amount during the lease period. The aggregate amount so

calculated is divided on the total months of the lease period, and the monthly rent

is fixed on that basis.

The question whether or not the transaction of leasing can be used as a

mode of financing in Shari„ah depends on the terms and conditions of the

contract. As mentioned earlier, leasing is a normal business transaction and not a

mode of financing. Therefore, the lease transaction is always governed by the


rules of Shari„ah prescribed for Ijarah. Let us, therefore, discuss the basic rules

governing the lease transactions, as enumerated in the Islamic Fiqh. After the

study of these rules, we will be able to understand under what conditions the

Ijarah may be used for the purpose of financing.

Although the principles of Ijarah are so numerous that a separate volume is

required for their full discussion, we will attempt in this chapter to

summarize those basic principles only which are necessary for the proper

understanding of the nature of the transaction and are generally needed in the

context of modern economic practice. These principles are recorded here in the

form of brief notes, so that the readers may use them for quick reference.

Basic Rules of Leasing

1. Leasing is a contract whereby the owner of something transfers its usufruct to

another person for an agreed period, at an agreed consideration.

2. The subject of lease must have a valuable use. Therefore, things having no

usufruct at all cannot be leased.

3. It is necessary for a valid contract of lease that the corpus of the leased

property remains in the ownership of the seller, and only its usufruct is

transferred to the lessee. Thus, anything which cannot be used without consuming

cannot be leased out. Therefore, the lease cannot be effected in respect of money,

eatables, fuel and ammunition etc. because their use is not possible unless they are

consumed. If anything of this nature is leased out, it will be deemed to be a loan

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.

9. A property jointly owned by two or more persons can be leased out, and

the rental shall be distributed between all the joint owners according to the

proportion of their respective shares in the property.


10. A joint owner of a property can lease his proportionate share to his co-sharer

only, and not to any other person.

11. It is necessary for a valid lease that the leased asset is fully identified

by the parties.

Example:-

A said to B. "I lease you one of my two shops." B agreed. The lease is void,

unless the leased shop is clearly determined and identified.

Determination of Rental:-

12. The rental must be determined at the time of contract for the whole

period of lease. It is permissible that different amounts of rent are fixed for

different phases during the lease period, provided that the amount of rent for each

phase is specifically agreed upon at the time of effecting a lease. If the rent for a

subsequent phase of the lease period has not been determined or has been left at

the option of the lessor, the lease is not valid.

Example (1)

A leases his house to B for a total period of 5 years. The rent for the first year is

fixed as Rs. 2000/- per month and it is agreed that the rent of every subsequent

year shall be 10% more than the previous one. The lease is valid.

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.

When I have start internship of Islamic Meezan Bank at 2nd September 2008. In first day I

have sat with Mr. Subtain (Operation Manager). He has very good person and he have

help me in this department that they have customer relationship department and try to

good information to customer or me relative to Meezan Bank so I have under your work

of one week. All members of the branch are very committed to their work. According to


hierarchy chart from top to bottom are very committed of work and prove helpful for me

during my internship.

Introduction of Rahim Yar Khan Branch

Bank has decided to open a branch in Rahim Yar khan due its business market or market

potential. Today there is only one branch in Rahim Yar khan. This branch has appointed

21 officers. 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.

Duration of my internship program

I am started my internship program 1st July. 2007 and ending date of this program 31st of

August.

I have done in all mostly work in every department.

Marketing department

Credits

Deposits

Clearing department

Car finance department

Training program


1st week

I started my first day of internship with the introduction of bank employees

and with introduction of bank departments. In This week just know how work done in the

various departments in the bank Like:

Finance

Marketing

I T

Operation Management etc

I knew about the purpose of the bank and the functions of the bank and judge the

practical performance of the departments.

I started my second day of internship with the lecture of the bank officer. He told

us about Riba and its types:

Riba al Nasiah

Riba al Fadl

Then he told about important element Basic Mode of Financing in which

Mudaraba and Musharaka lies.

I learnt about characteristics and procedure of Mudaraba and Musharaka.

Then I moved to Accounts Department for learning something new.

I learnt about IBTDR (Islamic Bank Term Deposit Receipts) and knew what its

meaning and functions.

Basically IBTDR involves Accounts:

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 purpose and 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

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

Certificate of Commencement of Business

Attested photocopies of CNIC of all directors

List of directors on Form 29 issued by the Registrar Joint Stock Company

For Clubs, societies and Associations

Certificate copies of Certificate of registration By- law / rules &regulations


Resolution of the Governing Body / Executive Committee for opening of a/c

authorized the person to operate the a/c and attested copy of the CNIC of the

authorized person(s)

As understanding signed by all authorized persons on behalf of the institute

mentioning that when any change takes place in the persons authorized to operate

on the a/c, the banker will be informed immediately.

For Agents a/c

Certificate of power of Attorney

Attested photocopy of CNIC of the agent.

Trusts a/c

Attested copy of Certificate of Registration

Attested photocopy of CNIC of all the trustees

Certified copy of instrument of Trust.

"The most difficult task related to bank for a common citizen is to open an a/c in any

bank" said Sir Tanveer.

Then the two applicant forms are filled in front of me. It took too much time to gather the

information from applicant.

I filled up some forms for practical practices and knew about the nature of the

form.

I practically performed how letter of thanks attached to the forms and send to the

customer.


I learnt about the different types of stamps, which are necessary for the account

opening and learnt about the use of the stamps at the right place.

I learnt how to attach signature specimen card to the account opening form for

bank record.

4th Week

I started my week of internship with the daily lectures of the bank officer (Mr. Subtain

[OGII]) who is the organizer of internship program for internees in meezan bank.

I learnt about the role of STATE BANK OF PAKISTAN in Pakistan’s economy

from the lecture and know about the prudential regulations briefly not explanatory

which are

Regulation M-1 Know Your Customer (KYC)

Regulation M-2 Anti-Money Laundering Measures

Regulation M-3 Record Retention

Regulation M-4 Correspondent Banking

Regulation M-5 Suspicious Transactions

In account opening department I learnt the use of ATM card and learnt how to fill

ATM form.

Then I know how to receipts are filled.

I learnt how on line payments are made and how cash or receipts are transferred.

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.

5th 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.

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 the

lecture about modern way of banking delivered by the bank manager for the

success if the branch’s business.

6th & 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.

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.

8th Week

I started my 8th 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.

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.


Net Profit

Years 2005 2006 2007 2008profit 20.15 17.80 16.27 8.27


Net Profit

0510152025

1 2 3 4

2005 2006 2007 2008

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

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 2008Total Assets 30676 46439 67179 85276

020000400006000080000100000

Value of Assets

1 2 3 4

2005 2006 2007 2008

Assets

Share Price In Stock Market

Years 2005 2006 2007 2008Share Price 23.25 19.50 38.55 21.48


Share Price

01020304050

1 2 3 4

2005 2006 2007 2008

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


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


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 Equity Ratio

0

10

20

2005 2006 2007 2008

Series1 3.58 3.6 10.13 12.4

1 2 3 4

Profitability ratio


Year 2005 2006 2007 2008Net Profit margin 18.5 17.80 16.27 8.27Gross profit margin 43.83 45.86 46.39 54.61Return on capital employed

.018 0.0020 .0022 .0024

Profitability ratio

0

0.01

0.02

2005 2006 2007 2008

Series1 0.018 0.002 0.0022 0.0024

1 2 3 4

Return on capital employed =(PBIT / Capital employed)*100

PBIT = Core banking income before provision

Capital Employed = Equity + Long term liabilities

2008 6341 + 11025091 = 11031432

2007 5720 + 57864137 = 57869857

2006 4763 + 36826824 = 36831587

2005 3821 + 24408794 = 24412615


Investment Ratio

Year 2005 2006 2007 2008Earning Per Share 1.16 1.88 1.96 1.26Price Earning Ratio 15.92 10.51 15.2 17.03Dividend Per Share 16 10 20 8.6

Earning Per Share

0

2

4

2005 2006 2007 2008

Series1 1.16 1.88 1.96 1.26

1 2 3 4

In 2007 the per share earning is good but it decreases in 2008 1.96 to 1.26 so the

management has to give attention here.


Price Earning Ratio

15.9210.51

15.2 17.03

0

10

20

2005 2006 2007 2008

Series1 15.92 10.51 15.2 17.03

1 2 3 4

Here the management has recovered their position and improved.

Dividend Per Share

16

10

20

8.6

0510152025

1 2 3 4

2005 2006 2007 2008

The dividend has decreased 20 to 8.6 R.s. This is very bad for company’s good will or

stock market. Management has to focus over it other wise the company has to bear more

loss in future.


Capital Adequacy Ratio (Capital to Risk (Weighted) Assets Ratio)

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

Average Equity

16.7 15.64

10.3

18.39

0

5

10

15

20

1 2 3 4

2005 2006 2007 208


“Authentic marketing is not the art of selling what you make but knowing


what 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.

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 compared to competitors.

lack of promotions and advertising of their products and services.

Lengthy & extensive documentation

Centralized procedures making process slow

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 financial Institutions.

Increase branch network within the country.

Threats

New competitors setting up their Islamic banking sections and they have the infrastructure, skill, ability, resources & attitude to capture the market more than the 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 specially designed for Islamic banking.


Change in Government's attitude towards Islamic banking.

Fears on the credibility of Islamic banking ethical compliance and monitoring systems.

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 with

those of the present and to what extent the management has been able to overcome the

weaknesses.


I spent eight weeks of my internship in MBL RYK Branch. During these eight weeks, I

felt 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

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

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 export

import 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

Competitors should be closed closely.

A research cell should continuously try to gather information about the present

action so its competitors and expected future actions. So in this way more

effective strategies can be formulated.

The performance reward linkage should be making strong as it is said “A happy

employee delivers more than he receives from the organization". The MBL

should also try to make its employees happier.

The management should develop in workers the operator ownership to encourage

them and make them responsible for their work.

The worker should be given sense of teamwork and the managers should be

trained to manage the team as a good leader.

Maximum automated machines should be used.

New schemes should be introduced and maximum privileges should be given to

customer, so that to win money market.


Working hours should be increased for customer’s convenience; night banking

service may be used to increase the business.

New marketing strategies should be developed to attract new customers.


One of the most important aims of the student life is to express him / her correctly and

adequately. 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.


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

Annual Report 2007, 2008


http://www.almeezan.com.pk/

http://www.meezanbank.com.pk/

internship report on meezan bank complete

Documents

Transcript of internship report on meezan bank complete