MBA-Internship Report- M a a MASUM, 1005004(1)

Department of Management Studies Comilla University, Comilla

An Analysis of Investment: A Study of Al- Arafah Islami Bank Limited

Md. Abdullah- Al- Masum, ID No- 1005004. MBA(HRM), Department of Management Studies, Comilla University.

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An Internship Report On

“An Analysis of Investment: A Study of Al- Arafah Islami Bank

Limited”

SUBMITTED TO

DR. MOHAMMAD AHSAN ULLAH

Associate Professor& Supervisor Department of Management Studies

Comilla University Comilla-3503

SUBMITTED BY

MD. ABDULLAH- AL- MASUM

ID: 1005004 Session: 2010-11

MBA Program (HRM) Department of Management Studies

Comilla University Comilla-3503

September 20, 2013



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LETTER OF TRANSMITTAL September 20, 2013 To, Dr. Mohammad Ahsan Ullah Associate Professor & Supervisor Dept. of Management Studies Comilla University Subject: Submission of an Internship Report Sir, With due respect and humble submission, I herewith place my internship report entitled “An Analysis of Investment: A Study of Al- Arafah Islami Bank Limited” prepared as per the requirements of Master of Business Administration (MBA) offered by Comilla University, Comilla. To know about & making an analysis on investment and other financial issues of Al Arafah Islami Bank Limited (Comilla branch), I have studied books, reports and the related websites, face to face interaction with the employees of Al Arafah Islami Bank Limited to gather information, which I observed as relevant to the topic of the report. Therefore, I hope that my report will fulfill the need to know the banking system of Al- Arafah Islami Bank Limited Ltd (Comilla branch). Any short comings or mistakes are absolutely of mine and I would always be available at any time to interpret any issue regarding this report. I, therefore, pray and hope that you would be kind enough to accept my internship report and oblige thereby. Sincerely yours, Md. Abdullah- Al- Masum



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CERTIFICATION

This is to certify that an Internship Report entitled “An Analysis of Investment: A Study

of Al- Arafah Islami Bank Limited” presented here has been prepared by “Md. Abdullah-

Al- Masum” bearing Registration No. MBA-MGT-400004 and ID No. 1005004 to submit to

the Department of Management Studies, Comilla University, Comilla in the partial

fulfillment of the requirements for the degree of Master of Business Administration (MBA).

This report is prepared as per my guidelines and it is suitable for submission.

Certified by Dr. Mohammad Ahsan Ullah Associate Professor Department of Management Studies Comilla University



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DECLARATION

I do hereby declare that this internship report on “An Analysis of Investment: A Study of

Al- Arafah Islami Bank Limited” submitted by me to Department of Management Studies,

Comilla University, Comilla in partial fulfillment of the requirements for the degree of

Master of Business Administration (MBA) is an original work.

It or any part of it has not been copied from any other report or reports. It has not been

submitted earlier, either partly or wholly to any other University or Institution for the

award of any other Degree, Diploma, Fellowship or other similar titles or prizes and that

the work has not been publishes in any journal or magazine.

Declared by Md. Abdullah- Al- Masum



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ACKNOWLEDGEMENT I would like to acknowledge the guidance and effort of honorable Chairman Dr. Mohammad

Ahsan Ullah for arranging such a nice program for co-relating theoretical learning with real

life situation.

It’s a pleasure to convey my heartiest gratitude and greeting to my honorable supervisor

Dr. Mohammad Ahsan Ullah, Associate Professor, Management Studies Department,

Comilla University. Without of his co-operation it was not possible to prepare the report

perfectly.

I would also like to acknowledge and thanks those personnel who has extended their

whole-hearted co-operation for preparing the report. Some of them are A. K. M. Fakrul

Islam Majumder (AVP and Manager, AIBL), Mr. Syed Taslim Alam (AVP and 2nd Officer,

AIBL, Md. Matiur Rahman (EO, AIBL), Mr. Sana Ullah (Officer, AIBL), Mr. Monirul Islam (EO,

AIBL), Mr. Rafiqul Islam (PO, AIBL), Mr, Fazle Mahmud Khondoker (SEO, AIBL) and other

personnel of AIBL of Comilla Branch.

Lastly I like to thank to all my teachers and friends who give me suggestions to make this

report.

Md. Abdullah- Al- Masum



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PREFACE

In the development of economic sector of a country banking sector plays a vital role. Al

Arafah Islami Bank is one of the markets leading bank in the Islami banking sector as well

as general banking sector and it has already contribution in the socioeconomic prospect.

My report titled on “An Analysis of Investment: A Study of Al-Arafah Islami Bank Limited”;

a case study in Comilla Branch is prepared for as the completion of MBA Program from

Management Studies Department of Comilla University.

AIBL is one of the Best Rated Bank in Bangladesh and its bed loss is .85% (Number 1)

where other Private banks this percentage has UP to 13% and Government Bank has up to

30%. In CAMELS rating AIBL is in the 6th position. On the other hand in deposit growth rate

it archived a 2nd position ( Tk. 177 crore – Tk. 285 Crore).

My report, basically, has seven parts. In fast part I give some introduction about this report

stating that origin, objectives of report, sources of information and some limitation. In

second part I give an overview of AIBL. In third part I mentioned the products and services

of AIBL. In fourth part I explained the overall general banking system of AIBL in Comilla

Branch. In Fifth part I analyzed the investment system of AIBL. In Sixth part I analyzed the

deposit and income of AIBL and in seventh part I mentioned some suggestions.

AIBL is one of the best rated banks in Bangladesh. Its banking system based on the Islami

Shariah Board. AIBL prefer to make profit rather than interest. It is using well-known

banking software named Ababil. The product and services of AIBL are little bit different

from other traditional commercial bank. One of the great characteristics of this bank is the

entire employee of this bank are heartily cooperative and honest.



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ACRONYMS A/C Account AIBL Al Arafah Islami Bank Ltd. ASB Al Arafah Savings Bond ATM Automated Teller Machine BDT Bangladeshi Taka CD Current Deposit CIB Credit Information Bureau CIS Consumer Investment Schemes CWD Cash Waqf Deposit Scheme DD Demand Draft DSE Dhaka Stock Exchange FCD Foreign Currency Deposit GB General Banking GDP Gross Domestic Products GSIS Village and Small Investment Schemes HPSM Hire Purchase HPSM Hire Purchase Shirkatul Melk IBC Inward Bill for Collection ITD Monthly Installment Based Term Deposit LBC Local Bills Collection LDS Mudaraba Lakhpoti Deposit Scheme MDBDS Mudaraba Double Benefit Deposit Scheme MDS Mudaraba Millionaire Deposit Scheme MHD Al - Arafah Monthly Hajj Deposit MIS Management Information System MIS Monthly Installment Based Marriage Savings Investment Scheme MKDS Mudaraba Kotipoti Deposit Scheme MMI Investment Schemes in Masque and Madrasa MPTD Monthly Profit Based Term Deposit Scheme MSD Mudaraba Savings Deposit MSPDS Mudaraba Special Pension Deposit Scheme MTDR Mudaraba Term Deposit NOC No Objection Certificate OBC Outward Bill for Collection PDS Pension Deposit Scheme PTD Monthly Profit Based Term Deposit SEIS Small Enterprise Investment Schemes SME Small and Medium Enterprise SND Mudaraba Short Notice Deposit SWOT Strength Weakness Opportunities and Threats THD A l- Arafah Termed Hajj Deposit TIN Tax Identification Number TT Telegraphic Transfer VAT Value Added Tax



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SL No. PARTICULARS Page No.

1 INTRODUCTION (PART- I) 1 2 1.1 Background of The Report 2 3 1.2 Objectives of The Study 2 4 11..33 SSccooppee ooff TThhee RReeppoorrtt 2 5 1.4 Methodology 3 6 1.5 Sources of Data 3 7 1.5.1 Primary Sources 3 8 1.5.2 Secondary Sources 4 9 1.6 Limitations of The Report 4

10 AIBL OVERVIEW (PART- II) 5 11 2.1 Background of The Company 6 12 2.2 Vision of AIBL 7 13 2.3 Mission of AIBL 7 14 2.4 Objectives of AIBL 7 15 2.5 AIBL Main Focus in 2012 8 16 2.6 Special Features of AIBL 9 17 2.7 Commitments of AIBL 9 18 2.8 Line of Business of AIBL 10 19 2.9 Branches of AIBL 10 20 2.10 Form of Organization 11 21 2.11 Management Organogram of AIBL 12 22 2.12 Organogram of AIBL (Comilla Branch) 13

23 PRODUCT/SERVICES OF AIBL (PART- III) 14 24 3.1 Deposit Accounts of AIBL 15 25 3.2 AIBL Investment Products 16 26 3.3 Services of AIBL 16

27 AN OVERVIEW OF INVESTMENT DEPARTMENTO OF AIBL (PART- IV) 28 4.1 Definition of Investment: 18 29 4.2 Introduction of Investment: 18 30 4.3 Investment Division: 18 31 4.4 Investment Policy: 19 32 4.5 Industry And Business Segment Focus: 19 33 4.6 Investment Sectors: 19 34 4.7 Investment Types: 19 35 4.8 SME Banking 22

36 4.8.1 Purpose 22

37 4.8.2 Modes 22

38 4.8.3 Rate of Profit/ Rent 23

39 4.8.4 Other Charges 23

40 4.8.5 Repayment 23

41 4.8.6 Eligibility 23

42 4.8.7 Securities Against Investment: 24

43 4.8.8 Documentation: 24

44 4.9 Micro Finance 25 45 4.9.1 Main Characteristics 25

46 4.9.2 Purpose 25

47 4.9.3 Eligibility 26

48 4.9.4 Modes 26

49 4.9.5 Securities Against Investment 26

50 4.9.6 Documentation 26

51 4.9.7 Savings 27

52 4.9.8 Rate of Profit/ Rent 27

53 4.9.9 Other Charges 27

54 4.9.10 Repayment 27

CONTENTS



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SL No. PARTICULARS

Page No.

55 INVESTMENT ANALYSIS OF AIBL (PART- V) 28

56 5.1 Investment Analysis 29 57 5.2 Small & Medium Enterprise Investment 30 58 5.3 Grameen Small Investment Scheme (GSIS) 32 59 5.4 Investment On Agricultural Sectors 33 60 5.5 Investment For Growing Spices 34 61 5.6 Investment On Women Entrepreneurs 34 62 5.7 Al-Arafah Solar Energy Investment Scheme 35 63 5.8 Treasury Operations 36 64 5.8.1 Local Treasury 36 65 5.8.2 Foreign Exchange Treasury 36 66 5.9 The International Trade 37 67 OTHER FINANCIAL ANALYSIS (PART- VI) 38 68 6.1 Income Analysis 39 69 6.2 Expenditure 39 70 6.3 Administrative And Other Expenses: 39 71 6.4 Operating Profit 40 72 6.5 Dividend 40 73 6.6 Deposits 41 74 6.7 Value Added Statement 42 75 6.8 Share Information 44 76 6.9 Operating Performance Ratio 46 77 FINDINGS (PART- VII) 49 78 7.1 Findings at AIBL 50 79 7.2 Recommendations 51 80 7.3 Conclusion 53

81 Appendix 82 References 83 Glossary

Index



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LIST OF TABLES SL NO. PARTICULARS PAGE NO.

1 Table 1: AIBL Profile 6

2 Table 2: Branches of AIBL 10

3 Table 3: Various Deposit Products 15

4 Table 4: Sector Wise Investment 29

5 Table 5: SME Investment 31

6 Table 6: GSIS Details 32

7 Table 7: Agriculture sector Investment 33

8 Table 8: Solar Energy Investment Scheme 35

9 Table 9: Deposit Mix 41

10 Table 10: Value Added Statement 42

LIST OF FIGURES

SL NO. PARTICULARS PAGE NO.

1 Figure 1: Form of AIBL 11

2 Figure 2 : Organogram of AIBL 12

3 Figure 3: Organogram of Comilla Branch of AIBL 13

4 Figure 4: Investment Growth 29

5 Figure 5: Sector wise Investment (%) 30

6 Figure 6: Accumulated SME Disbursement of AIBL 31

7 Figure 7: Gradual Development of GSIS 33

8 Figure 8: Sector wise Agricultural Investmen 34

9 Figure 9: Gradual Development of Solar Energy Investment Client 36

10 Figure 10: Total Import and Export 37

11 Figure 11: Total Income and Expenditure 39

12 Figure 12: Operation Profit 40

13 Figure 13: Dividend 40

14 Figure 14:Deposit Growth 41

15 Figure 15: Deposit Mix 42

16 Figure 16: Distribution of Value Addition 43

7 Figure 17: Performance at a glance 43

8 Figure18: Earning per Share 44

9 Figure 19: Market Price Per Share 44

10 Figure 20: Price Earning Ration 45

11 Figure 21: Price Equity Ratio 45

12 Figure 22: Net Profit Margin 46

13 Figure 23: Investment/Deposit Ratio 46

14 Figure 24: Return on Equity 47

15 Figure 25: Return on Assets 47

16 Figure 26: Cost of Dividend 48

Figure 27: Cost/Income ration in operating business 48


Md. Abdullah- Al- Masum, ID No- 1005004, MBA(HRM) Department of Management Studies, Comilla University.

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1.1 BACKGROUND OF THE REPORT

This report is a comprehensive study prepared as a requirement for the completion of the MBA

Program in Comilla University from Department of Management Studies. The primary goal of

report is to provide an opportunity for translation of theoretical conceptions in real life situation.

The program covers a period of 3 months comprehensive study about the banking system of Al

Arafah Islamic Bank Limited in Bangladesh at Comilla branch. This comprehensive study titled

“An Analysis of Investment: A Study of Al- Arafah Islami Bank Limited” prepared under the

guidance of my faculty member and supervisor Dr. Mohammad Ahsan Ullah. As a requirement

for the completion of the MBA program I need to submit this report, which would include an

overview of the Investment of AIBL was attached with and elaboration of the project I were

supposed to conduct during the study period.

1.2 OBJECTIVES OF THE STUDY

The objective of the internship program is to familiarize students with real business situation, to

compare them with the business theories and at last stage make a report on assign task.

Objectives regarding this study are as follows:

To analyze the Investment of the AIBL to evaluate the performance.

To earn practical experience and knowledge about the banking operations and corporate

functions performed by Al- Arafah Islami Bank Limited.

1.3 SCOPES OF THE REPORT

This report helps me to understand the clear real-time experience about the total management of

AIBL. It helps me to understand, how the bank manages its total processes. It also helps me to

understand how they deal with the customers. In Comilla branch, there are some limitation in

case of department, facilities and resources. The scope of this study are-

General Banking Divisions of AIBL

Cash

Accounts

Clearing

Foreign Remittance

Investment Department of AIBL

SME

Micro-Finance

GSIS



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1.4 METHODOLOGY

To conduct this study I preferred different types of method suitable for me as well as

understanding the information. Mainly, my report is based on theoretical explanations. To collect

my needed information I used different types of primary and secondary sources. To present my

report I used these methods-

Theoretical Explanation

Ratio Analysis

Table Presentation

Different Types of Chart and Graph

Bar Chart

Pie Chart

Column Chart

Line Chart

1.5 SOURCES OF DATA

I have collected both primary and secondary data. I collected Secondary data from prior records

of AIBL. I have collected primary information by-

Interviewing employees, Managers via the process assigned by AIBL

Observing various organizational procedures & structures

Directly communicating with the customer’s.

1.5.1 PRIMARY SOURCES:

When searching in the field directly to collect data was called primary sources of data. I

collected data from primary sources using the following method:

Observation method

Interview method

Primary Points:

Personal experience gained by visiting, different desks.

Personal investigation with bankers.

Face to face communication with employees of the AIBL.



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1.5.2 SECONDARY SOURCES

The secondary data had been collected from the MIS of AIBL. To clarify different secondary

sources such as office memo, operating Islamic shariah manuals, circulation & publication used

by the AIBL in this regard.

(I). Internal Sources

Bank's Annual Report 2010, 2011

Group Business Principal manual

Prior research report

Any information regarding the Banking sector.

Islamic Shariah Manual

(II). External Sources

Different books and periodicals related to the banking sector

Bangladesh Bank Report

Newspapers.

Previous reports and journals relevant to the banking industry

Other published documents of Bangladesh Bank

Relevant AIBL paper and published documents.

1.6 LIMITATIONS OF THE REPORT

There were a few limitations faced while reaching the objectives of this report. Some of these

following limitations are apparent in this study:

Secondary Information: There was a lack of proper secondary information for Al-Arafah Islami

Bank Ltd. and its products. Annual reports, policy guidelines, website and other related

documents do not cover full and sufficient information

Confidentiality: In order to guard the secrecy of the bank, Al-Arafah Islami Bank Ltd. is not

interested to disclose some certain information required for this report.

Lack of Co-operation: As the bank officials are so much busy that it difficult for them to co-

operate with me, which is also a constraint for this report.



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2.1 BACKGROUND OF THE COMPANY

Al-Arafah Islami Bank started its journey on 18 June 1995 with the said principles in mind and

to introduce a modern banking system based on Al-Qur’an and Sunnah. The opening ceremony

took place on 27 September 1995. A group of established, dedicated and pious personalities of

Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar,

economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the

founder chairman of the bank. His progressive leadership and continuous inspiration provided a

boost for the bank in getting a foothold in the financial market of Bangladesh. A group of 20

dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of

the bank. They are also noted for their business acumen. Wisdom of the directors, Islamic

bankers and the wish of Almighty Allah make Al- Arafah Islami Bank Ltd. most modern and a

leading bank in Bangladesh. The bank has achieved a continuous profit and declared a good

dividend over the years. High quality customer service through the integration of modern

technology and new products is the tool of the bank to achieve success. The bank has a diverse

array of carefully tailored products and services to satisfy customer needs.

Now AIBL is one of the Best-Rated banks in Bangladesh and it is in the 6th

position in CAMELS

rating. The Bank is committed to contribute significantly to the national economy. It has made a

positive contribution towards the socio economic development of the country with 90 branches.

Table 1: AIBL Profile

AIBL Profile Date of Registration 18 June 1995

1st Branch Motijheel Branch, Dhaka

Opening Ceremony 27 September, 1995

Authorized Capital 10,000.00 Million

Paid-up Capital 7,130.98 Million

Local Partnership of Capital

100%

Equity 14,050.69 Million

Number of Branches 106 (Up to 13th September, 2013)

Deposit 118,683.39 Million

Investment 106.650.42 Million

Number of Employees 2110

Number of Shareholders 52739



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2.2 VISION OF AIBL

To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the

growth of the national economy.

To establish an interest free transaction in the economy.

2.3 MISSION OF AIBL

Achieving the satisfaction of Almighty Allah both here & hereafter.

Proliferation of Shariah Based Banking Practices.

Quality financial services adopting the latest technology.

Fast and efficient customer service.

Maintaining high standard of business ethics.

Balance growth.

Steady & competitive return on shareholders’ equity.

Innovative banking at a competitive price.

Attract and retain quality human resource.

Extending competitive compensation packages to the employees.

Firm commitment to the growth of national economy.

Involving more in Micro and SME financing.

2.4 OBJECTIVES OF AIBL

Al-Arafah Islami Bank Ltd. believes in its uncompromising commitment to fulfill its customer

needs and satisfaction and to become their first choice in banking. The bank is committed to run

all its activities as per Islamic Shariah. AIBL throughout its steady progress and continued

success has, by now, earned the reputation of being one of the leading Private-Banks of the

country. The objectives of AIBL are as under:

All the activities of AIBL are conducted on interest-free system according to Islamic

Shariah.

Investment is made through different mode permitted under Islamic Shariah.

Investment income of bank is shared with the Mudaraba depositors according to a ratio to

ensure a reasonably fair rate of return on their depositors.



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Its aims are to introduce a welfare-oriented banking system and also to establish equity

and justifies in the field of all economic activities.

It extends co-operative to the poor, helpless, and low-income group of the people for their

economic enlistment particularly in the rural areas.

It plays a vital role in human resource development and employment-generation,

particularly for the unemployed youths.

Its aims are to achieve balanced growth & development of the country through

investment operations, particularly in the less development areas.

2.5 AIBL MAIN FOCUS IN 2013 WILL BE ON

Introduced credit card and Process to get VISA membership to provide Islamic VISA

International and local card among our customers very soon.

To become more shariah compliant and To reduce the non-performing assets below

0.75%.

Opening AIBL Capital Management Ltd. which is the subsidiary company of Al-Arafah

Islami Bank Ltd.

Establish 105 ATM Booths at various important location. Meanwhile we have deployed

30 ATM booths in prime location and another 75 ATMs are in pipe line.

We have already joined as a pilot project member bank of National Payment System

(NPS) conducted by Bangladesh Bank which will make our customers very comfortable

in case of ATM, POS and other electronic transactions by accessing this system.

Thrust in SME investment, Sound financial management.

Thrust in SME investment, Sound financial management.

Business & product diversification and Expand and diversify customer base.

Strengthening the AIBL capital market services limited which is the subsidiary company

of Al- Arafah Islami bank Limited.

Up-gradation of Online Banking, Increase foreign inward remittance.

Opening of 10 new branches, Stable dividend, Green Banking Policy and Establish

ethical Bank

Development skill manpower through imparting training as part of Eco friendly business

& CSR activities.



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2.6 SPECIAL FEATURES OF AIBL

All activities of the bank are conducted according to Islamic Sharia where profit is the

legal alternative to interest.

The Bank’s investment policy follows different modes approved by Islamic Shariah

based on Quran & Sunnah.

The Bank is committed towards establishing welfare oriented banking system, economic

enlistment of the low-income group of people, create employment opportunities.

According to the needs and demands of the society and the country as a whole the Bank

invests money to different Halal business. The bank participates in different activities

aiming at creating jobs, implementing development projects taken by the Government

and developing infrastructure.

The Bank is committed to establish an economic system through social justice and equal

distribution of wealth. It is committed to bring about changes in the underdeveloped rural

areas for ensuring balanced socio economic development of the country through

Investment program. According to Mudaraba system, the depositors are the partners of

the investment income of the bank. During the period under review, 70% of the

investment income has been distributed among the Mudaraba distributors.

To render improved services to the clients imbued with Islamic spirit of brotherhood,

peace fraternity and by developing an institutional cohesion.

The Bank is contributing to economic and philanthropic activities side by side. Al Arafah

English Medium Madrasha and AIBL Library are among mention worthy. (Source-

Annual Report-2012)

2.7 COMMITMENTS OF AIBL

Ours is a customer focused modern Islamic Banking making sound and steady growth in

both mobilizing deposit and making quality investment to keep AIBL position as a

lending Islamic bank in Bangladesh.

To deliver financial services with the touch of heart to retail, small and medium scale

enterprises, as well as corporate clients through AIBL branches across the country.

AIBL business initiative is designed to match the changing trade & industrial needs of the

client.



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2.8 LINE OF BUSINESS OF AIBL

Investment banking (capital market operation in DSE & CSE)

International Foreign Trade Finance (Import & Export)

Foreign Exchange dealing (Currency dealing & Remittance)

Corporate finance

SME banking

Personal banking

Transport Investments

House Building Investments (Staff & Commercial)

Merchant banking

Broker house

2.9 BRANCHES OF AIBL

AIBL started its working at 161; Motijheel C/A Dhaka with a Branch named Motijheel Branch

on 27th

September, 1995 was the first & main Branch of Bank and has been operating throughout

the country. The Head Office of the Bank was situated at the same holding of Motijheel Branch

since its establishment but from 11 January, 2007 it has started its working at its own premises

36, Dilkusha (6th

, 7th

, 8th

& 9th

floor), Dhaka-1000. The age of the Bank is only 18 years and

during this short period of time, the Bank has established total 106 Branches (3rd

September,

2013) over the country and made a smooth network inside the country. The number of Branches

as Division wise is mentioned in the following table:

Division No. of Branches

Dhaka Division 55

Chittagong Division 23

Rajshahi Division 5

Khulna Division 7

Sylhet Division 7

Barisal Division 5

Rangpur Division 4

Total 106

Table 2: Branches of AIBL



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2.10 FORM OF ORGANIZATION

Figure 1: Form of AIBL

BOARD OF DIRECTORS

SHARIAH COUNCIL

EXECUTIVE COMMITTEE

AUDIT COMMITTEE

MANAGEMENT COMMITTEE



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2.11 ORGANOGRAM OF AIBL

Figure 2 : Organogram of AIBL

Chairman

Managing Director

Additional Managing Director

Deputy Managing Director

Executive Vice President

Senior Vice President

Vice President

AVP

FAVP

Senior Principal Officer

Principal Officer

Exicutive Officer

Officer

Assistant Officer

M.C.G. (Messenger cum Guard)



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2.12 ORGANOGRAM OF AIBL (COMILLA BRANCH)

Figure 3: Organogram of Comilla Branch of AIBL

(AVP & Manager)

A K M FAKRUL ISLAM MAJUMDER

Senior Principal Officer

Second Officer

SYED TASLIM ALAM

PO (Alternative Power User)

MD. SOLAIMAN

SEO (Power User)

MD. FAZLE MAHMUD KHONDOKER

EO

Cash In Charge

MD. SHAFIQUL ISLAM

Teller (Payment)

SELIM MIAH

Teller (Recieve)

MD. FAZLUL HAQUE

Teller (Recieve)

MD. ISMAIL

Teller (Recieve)

MD. TOFAZZOL

PO

GB In Charge

MD. SOLAIMAN

SEO (Accounts)

MD. FAZLE MAHMUD KHONDOKER

EO (Clearing)

MD. MATIUR RAHMAN

EO

MYNUL ISLAM AZAD

EO

MD. SADEQUR RAHMAN

PO

Investment In Charge

MD. RAFIQUL ISLAM

PO

MD. HANIF

EO

MD. MONIRUL ISLAM

EO

RUMEN KABIR BHUIYAN

Officer (GSIS/MIS)

MD. SANA ULLAH

Officer (GSIS/MIS)

MD. AKRAM HOSSAIN



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3.1 DEPOSIT ACCOUNTS OF AIBL

Table 3: Deposit Products of AIBL

Various deposit product of the Bank in 2011

SL No. Types of Deposit

1 Mudaraba Term Deposit

a) 36 Months

b) 24 Months

c) 12 Months

d) 06 Months

e) 03 Months

f) 01 Month

2 Mudaraba Savings Deposit

3 Short Notice Deposit (SND)

4 Monthly Hajj Deposit

5 Monthly Installment Term Deposit (ITD)

6 Monthly Profit Based Term Deposit (PTD)

7 Monthly Savings Investment (SID)

8 One Time Hajj Deposit

9 a) Al-Afafah Savings Bond (3 Years)

b) Al-Afafah Savings Bond (5 Years)

c) Al-Afafah Savings Bond (8 Years)

10 Marriage Savings Investment Scheme (MSIS)

11 Pensioners Deposit Scheme

12 Special Savings (Pension) Scheme

13 Cash WAQF

14 Lakhopati Deposit Scheme

15 Kotipati Deposit Scheme

16 Millionaire Deposit Scheme

17 Double Benefit Scheme

18 Triple Benefit Deposit Scheme

19 Probashi Kallyan Deposit Pension Scheme

20 Mudaraba Savings Deposit Student, Farmers, Freedom Fighters.



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3.2 AIBL INVESTMENT PRODUCTS

Investment in Agricultural Sector

Investment in Industrial Sector

Investment in Business Sector

Investment in Foreign Trade

Investment in Construction and Housing

Investment in Transportation Sector

Hire Purchase Shirkatul Melk (HPSM)

Investment Schemes in Masque and Madrasa (MMIS)

Village and Small Investment Schemes (GSIS)

Small Enterprise Investment Schemes (SEIS)

Consumer Investment Schemes (CIS)

3.3 SERVICES OF AIBL

ATM Card Service

Online Banking

Lookers Service



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4.1 DEFINITION OF INVESTMENT:

Investment, transaction between two parties in which one ( the creditor or lender) supplies

money, goods, services or securities in return for a promised future payment by the other (the

debtor or borrower). Such Transaction normally includes the payment of interest to the lender.

Investment may be extended by the public or private institutions to finance business activities,

agricultural operation, consumer expenditures or government projects.

4.2 INTRODUCTION OF INVESTMENT:

Modern Investment management is extended through specialized financial institutions of which

commercial banks are the oldest and most important. In present days of industrial economics,

the banks are able to extend and increase the supply of Investment by the creation of

Investment management for their loan customers. The lender must judge each loan he makes on

the basis of the charter of the borrower (his intention to pay), (his capacity to pay), (based on his

potential for earning) and his collateral pledged in case of default on the loan. The terms of

Investment transactions may be publicly regulated to prevent abuses by customers and lenders as

well as to channel Investment in to particular sectors of the economy.

4.3 INVESTMENT DIVISION:

Al-Arafah Islami Bank is a new generation bank. It is committed to provide high quality

financial services/products to contribute to the growth of G.D.P of the country through

stimulating trade & commerce, accelerating the pace of industrialization, boosting up export,

creating employment opportunity for the educated youth, poverty alleviation, raising standard of

living of limited income group and over all sustainable socio-economic development of the

country. In achieving the aforesaid objective, investment operation of the bank is of paramount

importance as the greatest share of total revenue of the band is generated from it, maximum risk

is centered in it and even the very existence of band depends on practical management of

its investment portfolio. The failure of a bank is usually associated with the problem in

investment portfolio and is less often the result of shrinkage in the value of other assets. As such

investment portfolio not only features dominant in the assets structure of the, it is critically

important to the success of the bank also. In view of the above this investment policy and control

guidelines of the bank has been prepared which is subject to amendment, revision, readjustment



19

and refinement from time to time as may be warranted by the change of circumstances due to

passage of time to suite the requirement of the bank.

4.4 INVESTMENT POLICY:

The investment policy should be updated annually to reflect changes in the economic outwork

and evolution of banks investment portfolio. The investment proposal should be forwarded to

head office for sanction with recommendation showing justification that should include the

following:

4.5 INDUSTRY AND BUSINESS SEGMENT FOCUS:

The bank shall provide suitable investment services & products for the following sectors, which

must meet the other requisites as set by the bank from time to time.

4.6 INVESTMENT SECTORS:

Steel & engineering.

Food & Allied.

Agriculture.

Textile & garments.

Pharmaceuticals & Chemicals.

Paper & paper products.

Service industries.

Housing & real Estate.

Cement.

Bricks Fields.

Edible oil.

Assembling industry.

Cottage industry.

Electronics & Electrical Commodities.

Constructions

Trading (retail/whole sale)

Others.

4.7 INVESTMENT TYPES:

The Total investment of the bank in 2012 stood at Tk. 106,650.42 Million, against previous year

investment of Tk. 77,714.95 million. The bank extends investments to the clients under the

following modes of investment under Islamic Shariah (Annual report 2012).


Md. Abdullah- Al- Masum, ID No- 1005004, MBA (HRM), Department of Management Studies, Comilla University.

20

4.7.1 BAI-MURABAHA OR SIMPLY MURABAHA:

The terms Bai-Murabahai have derived from Arabic words Bai and Ribhum. The word Bai

means purchase and sale and the word Ribhum means an agreed upon profit. So Bai-Murabaha

means sale for an agreed upon profit. It may be defined as a contract between a Buyers and a

Seller under which the seller sells certain specific goods permissible under Islamic Shariah and

the word Law of the land to the Buyer at a cost plus and agreed upon profit payable today or on

some date in the future in lump-sum or by installments. The profit may be either a fixed sum or

based on a percentage of the price of the goods.

4.7.2 MUSHARAKA:

The word Musharaka is derived from the Arabic word Sharikah meaning partnership. Islamic

jurists point out that the legality and permissibility of Musharakah is based on the injunctions of

the Holy Quran, Sunnah and Ijma (consensus) of the scholars. Musharaka transaction may be

conducted in the following manner:

One, two or more entrepreneurs approach an Islamic Bank to request the financing required for a

project. The bank, along with other partners, provides the necessary capital for the project. All

partners including the Bank have the right to participate in the project. The profit is distributed

according to an agreed ratio. However, losses are shared in exactly the same proportion in which

the different partners have provided the finance for the project.

4.7.3 MUDARABAH:

The term Mudarabah refers to a contract between two parties in which one party supplies capital

to the other party for the purpose of engaging in a business activity with the understanding that

any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole

responsibility of the provider of the capital. The first party provides capital and the other party

provides the expertise with the purpose of earning lawful profit (approved by Islamic law) which

will be shared in a mutually agreed upon proportion.



21

4.7.4 BAI-MUAJJAL:

The term Bai and Muajjal are derived from the Arabic words Bai and Ajal where Bai means

purchase and sale and Ajal means a fixed time or a fixed period. So Bai-Muajjal is a sale for

which payment is made at a future fixed date or within a fixed period. In short, it is a sale on

Credit. It is basically a contract between a buyer and seller under which the seller sells certain

specific goods, permissible under Shariah and law of the country to the buyer at an agreed fixed

price payable at a certain fixed future date in lump-sum or in fixed installments.

4.7.5 BAI-SALAM:

The term Bai-Salam is used to define a sale in which the buyer makes advance payment, but

delivery is delayed until sometime in the future. Usually the seller is an individual or business

and the buyer is the bank.

4.7.6 BAI-ISTISNA’A (PRE-SHIPMENT FINANCE)

The Istisna’a sale is contract in which the price is paid in advance at the time of the contract and

the objective of sale is manufactured and delivered later. The majority of the jurists consider

Istisna’a as one of the divisions of Bai-Salam. The definition can be stated as “It is contract with

a manufacturer to make the something” and “It is a contract on a commodity on liability with the

provision of work”.

4.7.7 QARD-E-HASANA (BENEVOLENT LOANS)

It is a contract in which one of the party/ parties (the lender) places into the ownership of the

other party (the borrower) a definite parcel of his property, in exchange nothing more than the

eventual return of something in the same value of the property loaned. Qard-E-Hasana loans are

granted compassionate basis and no service charges are imposed on the borrower.

4.7.8 HIRE PURCHASE SHIRKATUL MELK (HPSM)

It is a contract under which the Bank shall invest to purchase articles for the clients on obtaining

initial equity and rent out the same at a determined rate to be charged on the outstanding balance

amount (on reducing balance method) together with an additional amount to pay off the principal

together with accrued rent in a fixed period.



22

4.8 SME BANKING

Small and Medium Enterprise (SME) is playing a significant role to the growth of overall GDP

of the country. Of all industrial productions, a huge part stems from SME. In order to boost up

the small and medium enterprises of the country, Bangladesh Bank has recently advised the

commercial banks to enhance the flow of investment and offered directives and policies to

supervise and monitor this sector. As SME has emerged as a thrust sector, Al-Arafah Islami

Bank Ltd. also considers it important to extend and enhance finance for the same. Keeping this

idea in the forefront, the bank has prepared an integrated policies, methods and procedures for

SME investment.

4.8.1 PURPOSE

To facilitate small and medium level entrepreneurs

To boost up the small business in the country

To facilitate the growth of agro-industries

To create employment

To broaden the base of Islamic Banking in the society

To encourage women entrepreneurs

4.8.2 MODES

Working Capital Investment

Bai-Muajjal

Murabaha / Murabaha TR

MPI / MPI- TR

Mudaraba

Musharaka

Fixed Capital Investment

HPSM (Equity required)

Mudaraba

Musharaka



23

4.8.3 RATE OF PROFIT/ RENT

4.8.4 OTHER CHARGES

4.8.5 REPAYMENT

4.8.6 ELIGIBILITY

Permanent resident of Bangladesh

The age must range between 25 years to 60 years

Physically fit and capable of working hard

Capable of reading & writing

Capable of managing his / her business successfully

Sufficient Infra-structure and skilled personnel

At least 02 (two) year experience in the applied business

Having Transparent CIB Report

Valid Licenses, such as- Trade License, VAT registration, TIN, NOC from Environment

Department (where applicable)

Other terms and conditions stipulated by the bank


• 16% (On Reducing Balance Method)


• 15% (On Reducing Balance Method)

Supervision Fee

• 01% of Investment Limit (Payable before disbursement).

Risk Fund

• 01% of Investment Limit (Payable before disbursement)


• 1 (one) year on equal monthly installment basis with no gestation period.


• 5 (five) year on equal monthly installment basis with no gestation period.



24

4.8.7 SECURITIES AGAINST INVESTMENT:

Personal guarantee of spouse/parents/other family members.

In case of limited companies, guarantees of all directors other than nominated directors

shall be obtained.

Registered mortgage of immovable properties with registered Power of Attorney (for 2

lac and above).

Third party personal guarantees (at least one).

Post-dated cheques for each installment and one undated cheque for full investment value

including full mark-up profit.

Hypothecation on the inventory, receivables, advance payments, plant and machinery.

Bank may relax the security for investment amount up to 2 lacs taka for the growth of

SME investment.

4.8.8 DOCUMENTATION:

Investment Application Form duly signed by the client

Acceptance of the terms and conditions of Sanction Advice

Trade License and other related documents

Borrower's request letter for disbursement

Demand Promissory Note

Letter of hypothecation of stocks and goods

Letter of hypothecation of book debts & receivables

Letter of hypothecation of plant & machinery

Mode wise investment agreement

Purchase Schedule

Irrevocable letter authority to sell hypothecation goods

Cash memo in the name of bank

Charge on fixed assets

Personal Letter of Guarantee

Other documents stipulated by the Bank



25

4.9 MICRO FINANCE

The economy of Bangladesh mostly depends on rural development. Poverty stands in the way of

the growth of this economy. Although a number of NGOs and financial organizations work in

the sub-urban and villages with a view to alleviating poverty, a very few are found working with

the compliance of Islamic Sariah. It is a national responsibility to alleviate abject poverty from

the rural area. To help change the socio-economic condition of the impoverished people of the

villages, Al-Arafah Islami Bank Limited has initiated a project entitled "Krishi O Grameen

Khudra Biniog Prokolpa (Microfinance). With this project, Bank is working for reduction of

poverty, development in agricultural sectors, creation of job opportunities etc. I hope this will

develop the socio-economic condition of a large segment of the rural folk.

4.9.1 MAIN CHARACTERISTICS

This is a supervised investment programme

A group consists of 5 (five) members

8 (eight) groups make a Samitee. It means that a Samitee contains 40 members

Every group has a Group Leader and a Deputy Group Leader

Every Samitee has a Samitee Leader and a Deputy Samitee Leader

All members must attend the weekly meeting

Ceiling of Microfinance Investment is from Tk. 3,000 to Tk. 50,000

4.9.2 PURPOSE

To facilitate rural entrepreneurs

To develop socio-economic condition of rural people

To save rural people from usury

To facilitate the growth of agro-industries

To create employment scope

To broaden the base of Islamic Banking in the rural society

To encourage women entrepreneurs



26

4.9.3 ELIGIBILITY

Permanent resident of branch's commanding area

Age must range between 18 to 50 years

Physically fit and capable of working hard

The person borrowed any amount of money from other institution is not eligible to be

AIBL microfinance member

All members in a group are the guarantor of each other

Other terms and conditions stipulated by the bank

4.9.4 MODES


o Bai-Muajjal


o HPSM (20% Equity required)

4.9.5 SECURITIES AGAINST INVESTMENT

Members in a group are the guarantor of each other

Personal guarantee of local eminent personalities

Hypothecation of stock-in-trade and goods to be fixed delivered under deferred payment

If necessary, Bank may lien personal savings and Long term deposits

4.9.6 DOCUMENTATION

Nationality Certificate from Union Parishad Chairman or Birth Registration Certificate or

National ID card,

Letter of group guarantee

Letter of agreement

Some necessary Charge Documents

Photographs



27

4.9.7 SAVINGS

Members of the group have to open a Non-operative Savings Account in their individual

names

Minimum Weekly compulsory savings is 0.2% of approved investment

Normally members cannot withdraw their savings before adjustment of investment, but

when emergency, they can take it by fulfilling some terms and conditions.

4.9.8 RATE OF PROFIT/ RENT

Working Capital Investment : 15% (On Reducing Balance Method)

4.9.9 OTHER CHARGES

Risk Fund: 01% of Investment Limit (Payable before disbursement)

4.9.10 REPAYMENT

Weakly installment basis

Number of installment is 50 (2% of Investment per week).



28



29

5.1 INVESTMENT ANALYSIS

The investment of the bank has stood at Tk.106,650.42 million as on 31st December 2012 as

against Tk 77,714.95 (Net off PR) million in the previous year showing an increase by 37.23 %.

The investment portfolio of the bank is well diversified and covers a broad spectrum of

businesses and industries including readymade garments, textile, edible oil, ship scraping, steel

& engineering, chemicals, pharmaceuticals, cement, telecommunication, construction, health

care, real estate, education, transport and investment under consumer schemes. AIBL have

geared up efforts to improve the recovery rate of disbursed investment and also taken adequate

measures for converting the classified investment into performing assets. As a result, classified

investment of the bank could be kept at a low level far below the national average. It is 0.95% in

AIBL as on 31st December 2012. The bank gives top-most priority to the creation of quality

assets and does appropriate risk grading while approving commercial, trade and project

investment to different clients.

2007 2008 2009 2010 2011 2012

22,906.37 27,742.57

36,134.08

53,582.96

77,714.95

106650.42 Figure 4: Investment Growth (In Million Taka)

Sector-wise Investment 2012

Sectors Taka in million Agriculture, Fishing and Forestry 1382.00

Industry 27983.42

Construction 4658.54

Water works & Sanitary Service 552.48

Transport & communication 3894.49

Storage 745.10

Trade finance 73806.08

Miscellaneous 1158.20

Total (Including Profit Receivable) 114180.31

Less Unearned profit on Investment 7529.89 Total 106650.42



30

5.2 SMALL & MEDIUM ENTERPRISE INVESTMENT

The role of small and medium enterprises (SMEs) is indispensable for overall economic

development of a country like Bangladesh. Being labour intensive with short gestation period,

SMEs are capable of increasing national income as well as rapid employment generation;

achieving goal of eradicating extreme poverty and women empowerment. SME development is

currently considered as one of the major pro-poor socioeconomic development policy. Fulfilling

the growing domestic demand with local resources and products is critical to economic growth.

SMEs are playing a vital role in meeting domestic demand in our country. To ensure proper

manifestation and rapid advancement of Small & Medium Enterprises, a number of SME related

schemes are running in this Bank. In the light of a unique definition by Bangladesh Bank, bank is

giving priority over financing to three categories of enterprises viz. Industry, Trade & Services.

Investment up to December 2012 of SME investment portfolio is 17370.90 million. Besides, to

speed up SME investment flow and to include in people who are beyond the range of banking

facilities, a scheme named 'Small Enterprise Investment Scheme (SEIS)' is launched.

With this scheme, operation of collateral security free SME investment is running all 106

branches are under the operation. At the end of December 2012, number of security free SME

investment client is 3950 and investment portfolio is Tk.489.84 million. Skilled and experienced

1.21

24.51

4.08

0.48

3.41

0.65

64.64

1.01

Figure 5: Sectorwise Investment (%)

Agricutlture, Fishing and Forestry

Industry

Construction

Water Works & Sanitary Services

Transport & Communication

Storage

Trade Finance

Miscellaneous



31

staffs are recruited in different branches to ensure proper expansion of collateral security free

SME investment. AIBL prior Area Approach Method when SME financing. The statistics as on

31st December, 2012 is shown in the table:-

Particulars Status

Accumulated Disbursement

SME Investment Portfolio

Terms & Conditions

Tk. 87265.40 Million

Tk. 15886.40 Million

Stipulated by the Bank

SME Collateral Security Free Investment

Accumulated Disbursement Tk. 1280.10 Million

Portfolio Tk. 489.84 Million

Minimum Investment Tk. 50,000.00

Maximum Investment Tk. 700,000.00

Number of Clients 3950 Persons

Number of Branches under the scheme 100

Rate of Profit 10 %

Supervision Fee 0.50 %

Maximum Duration 3 Years

Repayment system Monthly Installment

Recovery Rate 99.98 %

Terms & Conditions Soft

Table 5: SME Investment

2007 2008 2009 2010 2011 2012

10,050.00

22,120.00

40,610.00

55,109.30

69,894.50

87265.4 Figure 6: Accumulated SME Disbursement of AIBL (In Million Taka)



32

5.3 GRAMEEN SMALL INVESTMENT SCHEME (GSIS)

Bangladesh has achieved the richest experience of poverty alleviation through rapid expansion of

microfinance activities in the last one and half decade. So the experience of microfinance in

Bangladesh has made important contributions to the emergence of this concept globally.

On the focus of socio-economic development of rural poor, a scheme named 'Grameen Small

Investment Scheme (GSIS)' is running in the bank from the year 2001. At present, 61 rural

branches are included in this scheme and this number is increasing gradually. At the end of

December 2012, Tk. 1030.62 million is disbursed to 24,424 clients in different income generated

programs, of which outstanding is Tk. 228.94 million. Functioning on the basis of Group and

Samity, this scheme helps on socio-economic development of farmers, labours, fishermen, micro

businessmen and small entrepreneurs. Another important objective of this scheme is to give

priority to make economically self-dependent of rural women entrepreneur. To get investment

under this scheme, no collateral security is required. Repayment system is weekly installment

basis. Basically, this scheme is one kind of supervised investment system and skilled personnel

are working in different branches to ensure proper as well as continuous supervision. The

statistics as on 31 December, 2012 is shown in the table:

Particulars Status

Accumulated Disbursement Tk. 1030.62 Million

Portfolio Tk. 228.94 Million

Number of Villages Covered 920

Minimum Investment Tk. 5000.00

Maximum Investment Tk. 30,000.00



Number of Samity 1064

Number Group 5304

Rate of Return 11 %

Repayment system Weekly Installment



Table 6: GSIS Details



33

5.4 INVESTMENT ON AGRICULTURAL SECTORS

To face the increasing food shortage of the country, bank is paying massive attention to invest on

agricultural sectors. The main items of agricultural sectors are- crops, fisheries, warehouse,

poverty alleviation, irrigation, livestock development etc. At the end of December 2012, total

agricultural investment portfolio is Tk. 944.00 million of the fiscal year 2012-2013. With

collateral and without collateral both are practiced in agricultural investment. The statistics as on

31 December, 2012 is shown in the table:

Particulars Status

Agricultural Investment

Total Investment portfolio Tk. 944.00 Million

Fisheries Tk. 409.15 Million

Poverty Alleviation Tk. 177.37 Million

Development of Livestock Tk. 159.05 Million

Warehouse of corps Tk. 56.55 Million

Crops Tk. 47.80 Million

Others Tk. 94.08 Million


Rate of Profit 10 % - 13 %


Terms & Conditions Stipulated by the Bank

Table 7: Agriculture Sector Investment

Jan-12; 22459

Mar-12; 22860

Sep-12; 24007 Dec-12; 24424

Jan-12 Mar-12 Sep-12 Dec-12

Figure 7: Gradual Development GSIS (Number of Client)



34

5.5 INVESTMENT FOR GROWING SPICES

As per instruction of Bangladesh Bank, and to increase the production of different types of spices

like Pulse, Oil-seed, Spice and Maize, AIBL started investment at a lowest rate of profit (only

4%) to the marginal farmers. As on 31 December, 2012 the statistics is shown below:

Name of Crops Investment Amount

Pulse, Oil-seed, Spice and Maize 2.03 Million

5.6 INVESTMENT ON WOMEN ENTREPRENEURS

About half of the population of Bangladesh is women. Women participation in the mainstream of

economic activities especially in the productive sectors is crucial for attaining sustainable

economic growth, poverty reduction and women's empowerment. But women participation in

economic sector is inadequate and the number of women entrepreneurs is very low compared to

that of their male counterparts. In fact, there exist many obstacles in women participation in the

mainstream of economic activity although the degree of integrity, devotion, creativity and

expertise of women make us surprised. Especially women participation in micro credit

programmes and readymade garments industry is contributing significantly to the country's

industrialization. Similarly, participation of women entrepreneurs in SME sector is vital for the

flourishing of Bangladesh economy and enhancing women empowerment. Al-Arafah Islami

18%

5%

46%

20%

6% 5%

Figure 8: Sectorwise Agriculture Investment

Livestock (20%)

Crops (7%)

Fisheries (32%)

Poverty Alleviation (24%)

Warehouse of Crops (3%)

Others (12%)



35

Bank Ltd. is working with women entrepreneurs to make them capable of earning by connecting

with country's economic activities. AIBL prior women-entrepreneurs to invest on various

productive sectors. By the side of collateral secured investment, collateral security free

investment is also considered in the question of women development. The statistics as on 31

December, 2012 is shown in the table:

Particulars Status

Investment Portfolio Tk. 452.30 Million

Terms & Conditions Stipulated by the Bank

5.7 AL-ARAFAH SOLAR ENERGY INVESTMENT SCHEME

A Pioneer investment scheme named 'Al-Arafah Solar Energy Investment Scheme' is launched in

order to face the present electricity crisis and to spread the benefits of renewable energy among

the rural people. This program treats as an innovative step on the history of Private Banking

Sector in Bangladesh. It also has unveiled the wide field of Green Banking concept, the burning

issue. 'Solar Energy Investment Scheme' is running under the control of SME Department with

the support of newly created Power & Technology Unit. Skilled Electric Engineers & Solar

Technicians are recruited in order to ensure the perfect technical support. AIBL have already

established 1,74,639 Watt Peak of electricity among 3442 families through 17 Rural Branches so

far. AIBL are running this program with own funding as well as skilled personnel. The statistics

as on 31 December, 2012 is shown in the table:

Particulars Status

Accumulated Disbursement Tk. 107.53 million

Total Investment Tk. 58.26 Million

Electricity Provided 1,74,639 Watt Peak

Number of privileged Family 3442


Rate of Return 11 %

Repayment system Down payment & Monthly Installment basis

Recovery Rate 100 %


Table 8: Solar Energy Investment Scheme



36

5.8 TREASURY OPERATIONS

AIBL Treasury included Local & Foreign Exchange money market operated under the norms of

Islami shariah principles and guideline of Bangladesh Bank which is the Core-banking and one

of the best earning units of the Bank.

5.8.1 LOCAL TREASURY

The Local treasury department operates its functions to maintain CRR & SLR matching with

total deposit flow & Investment requirements of the Bank. But it does not participate in the call

money market for complying of Islamic shariah principles.

5.8.2 FOREIGN EXCHANGE TREASURY

The treasury environment is ever changing due to new market dynamics, products developments

as such new risks are evolving on a continuous basis. As per instructions & guidance of highly

skilled Management & Board of Directors, the Bank's Treasury activities have been expanding

gradually in local and Global Market through its active Dealing room on those products

permissible under Islamic Shariah to cope with the changing & challenging market situation. The

Bank has separated Treasury front Office (Dealing Room), Mid Office & Back office with

reporting lines each of the offices as per international best practices of Treasury Management. At

present, The Bank's Treasury engages in providing competitive /live exchange rates, dealing with

Corporate transactions, contribution to stabilize the Inter-Bank Market, exploring new

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

19

45

22

19

23

30

25

19

27

10

28

99

30

11

30

74

31

73

32

60

33

40

34

42

Figure 9: Gradual Development solar Energy Investment Clinet (Number) Year-2012



37

avenues/opportunity to utilize funds at home and abroad, managing local currency liquidity, day

today management of risk associated with Treasury activities and thereby ensures profitability of

the Bank. The Management of the Bank has developed different strategies to check & controls

key issues like Counterparty limit, Stop-Loss limit, daylight Limit, Management action triggers

(MAT), Open Position/Overnight limit, time & amount limit for reconciliation of Nostro

Accounts and ensure adherence/compliance of these limits.

5.9 THE INTERNATIONAL TRADE

AL-Arafah Islami Bank Limited is quite active in conducting international trade activities

through financing of import export and Foreign Remittances business. It has at present a network

of 100 Branches throughout the county out of which 21 Branches are authorized to deal in

Foreign Exchange Business. AIBL has 28 Nostro Accounts 281 Relationship Management

Application (RMA) with different renowned Foreign Banks/Foreign Correspondents in 49

countries across the world. At the end of 2012 the total Foreign Exchange Portfolio (Import,

Export and Remittances) was Tk. 1,53,528.70 million showing a growth of 13.56% of this bank

in compare with the corresponding year. The total export of the bank was Tk 52,202.10 million

in 2011 which was increased by 12.02% to Tk 58,476.60 million in 2012.Similarly, the amount

of import has decreased from Tk. 76,113.10 million in 2011 to Tk 71,931.70 million in 2012 a

negative growth of 5.49%. The Inward Foreign Remittances Business of the Bank recorded a

tremendous growth rate of 236.04% from Tk. 6,876.20 million to Tk. 23,120.40 million in

compare with last year due to starting live dealing by Treasury and delivery of quality services to

the clients.

2008 2009 2010 2011 2012

32

,68

5.1

3

34

,07

4.8

0

55

,93

4.1

0

76

,11

2.1

0

71

,93

1.7

0

20

,17

6.6

4

23

,45

6.1

0

32

,54

6.4

0

52

,20

2.1

0

11

,93

7.0

4

Figure 10: Total Import and Export (In million Taka)

Total Import Total Export



38



39

6.1 INCOME ANALYSIS

Investment Income: The investment income was Tk. 14,998.60 million during the year 2012

which registered a growth of 58.20% over the previous year. Investment income is 89.85% of the

total income of Tk. 16,692.58 million.

Income From Other Than Investment: The bank has earned Tk. 1,693.98 million from sources

other than investment like commission income, exchange income, locker rent etc. in the current

year which is 10.15% of the total income. It indicates (8.51) growth over the year 2011.

6.2 EXPENDITURE

The Bank has paid the depositors Tk. 9,710.48 million which is 64.74% of the investment

income and 81.35% of the total expenditure Tk. 11,937.04 for the year 2012. It indicates 77.65%

growth over the year 2011.

6.3 ADMINISTRATIVE AND OTHER EXPENSES:

The administrative and other expenses were Tk.2,226.56 million during the year showing

44.61% growth over the year 2011. It is 18.65% of the total expenditure.

2008 2009 2010 2011 2012

4,3

93

.15

5,3

05

.64

7,6

85

.58

11

,33

2.5

9 16

,69

2.5

8

2,8

65

.05

3,5

75

.81

4,4

62

.31

7,0

05

.81

11

,93

7.0

4

Figure 11: Total Income & Expenditure (In million Taka)

Total Income Total Expenditure



40

6.4 OPERATING PROFIT

The bank earned operating profit of Tk. 4,755.54 million during the year 2012. The operating

profit of the Bank during the year 2011 was Tk 4,326.78 million and thus the Bank attained

Positive growth of 9.91% in respect of operating profit. The provision for income tax for the year

amounted to Tk. 1,709.80 million and divisible profit available for appropriation amounted to

Tk. 1,215.14 million.

6.5 DIVIDEND

The bank has been paying dividend every year since 1998 just after conversion of a public

limited company. The Board of Directors of the Bank is pleased to recommend 17% stock

dividend in the year 2012. Table of Historical Dividend Payment Percentage are as follows:

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

30

6.3

4

34

8.8

9

54

8.2

96

9.7

7

75

6.1

8

1,5

28

.10

1,7

29

.83

3,2

23

.27

4,3

26

.79

4,7

55

.54

Figure 12: Operating Profit

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

16

15

.5

26

35

20

30

.00

30

.00

26

.00

21

.00

17

.00

Figure 13: Dividend %



41

6.6 DEPOSITS

The total deposit of the bank was Tk. 82,186.98 million at 31st December 2011 as against Tk.

53,882.96 million at 31st December 2010 recording a growth of 52.53% of which Tk. 3,512.48

million was bank deposit and Tk. 78,674.50 million was general deposit. The present strategy is

to increase the deposit base through maintaining competitive profit rates and having low cost of

funds to ensure a better spread with an average return on investment. The mix deposit of the

bank on December 31, 2011 was as follows:

Table 9: Deposit Mix

Deposit Mix 2011

Products Taka in Million

Al Wadia Current Account 12898.84

Mudaraba Savings Deposit 9998.52

Other Mudaraba Deposit 76618.03

Mudaraba Term Deposit 18208.83

Bills Payable 959.17

Total 118683.39

2008 2009 2010 2011 2012

29

69

0.1

2

38

35

5.5

53

88

2.9

6

82

,18

6.9

8

11

8,6

83

.39

Figure 14: Deposit Growth In million



42

6.7 VALUE ADDED STATEMENT

Value added is a measure of wealth created by the Bank through various business activities. The

statement of value added shows the total wealth created and how it was distributed among

stakeholders, including the Government, employees and shareholders.

Value Added Statement BDT In Million

Particulars 2012 2011

Income from Banking Service 16692.58 11332.59

Cost of Services and Supplies (10618.44) (6037.50)

Value Added by Banking Services 6074.14 5295.09

Provisions for Investment and Off-Balance Sheet Items (811.44) (380.16) Total Value Addition 5262.70 4914.93

Value Distributed To Employees 1419.21 918.41

To Statutory Reserve 729.24 658.35

To Government as Income Tax 1998.69 1747.87 Depreciation 150.66 86.77

Retained Earning 964.90 1503.53 Total 5262.70 4914.93

Table 10: Value Added Statement

11%

8%

65%

15%

1%

Figure 15: Deposti Mix (%)

Al Wadia CurrentAccountMudaraba SavingsDepositOther MudarabaDepositMudaraba TermDepositBills Payable



43

2008 2009 2010 2011 2012

2,7

05

.74

3,5

64

.73

9,7

90

.36

11

,98

9.1

1

14

,05

0.6

9 29

,69

0.1

2

38

,35

5.5

0 53

,88

2.9

6

82

,18

6.9

8

11

8,6

83

.39

27

,74

2.5

8

36

,13

4.0

8 5

3,5

82

.96

77

,71

4.9

6

10

6,6

50

.42

1,5

28

.10

1,7

29

.83

3,2

23

.27

43

26

.78

4,7

55

.54

Figure 17: Performance at a glance (In Million Taka)

Shareholders Equity Deposit

Investment Profit before Tax & Provision

31%

16%

43%

3% 7%

Figure 16: Distribution of Value Addition

To Employee

To Statutory Reserve

To Government as Income Tax

Depreciation

Retained Earning



44

6.8 RATIO ANALYSIS

1. INVESTMENT (LOAN)/DEPOSIT RATIO:

A very important ratio for banks to calculate is their loans to deposits ratio. A high loans to

deposits ratio means that the bank is issuing out more of its deposits in the form of interest-

bearing loans, which, in turn, means it’ll generate more income. The problem is that the bank’s

loans aren’t always repaid. Plus, the bank has to repay deposits on request, so having a ratio

that’s too high puts the bank at high risk. A very low ratio means that the bank is at low risk, but

it also means it isn’t using its assets to generate income and may even end up losing money.

Here is how to calculate the loans to deposits ratio:

Loans to deposits ration = Average Net Loan

Average Deposits

Investment Deposit Ratio is about to average point now, but with an increasing rate of 1.67%.

Now the ratio of Investment/Deposit is 90.56%. From the given data I can say that AIBL running

though a risk, because this ratio is high. That’s mean the bank is offering more loan according to

its deposits. Bangladesh Bank gave order to all banks to maintain their ration under 85% and

90% for Islamic banks. Now the banks need to decrease its profit on deposit.

2. RETURN ON EQUITY:

Return on equity or return on capital is the ratio of net income of a business during a year to its

stockholders' equity during that year. It is a measure of profitability of stockholders' investments.

It shows net income as percentage of shareholder equity.

93.44 94.21 93.43

89.07

90.56

2008 2009 2010 2011 2012

Figure 18: Investment /Deposit Ratio



45

The formula to calculate return on equity is:

ROE = Annual Net Income

Average Stockholders' Equity

Net income is the after tax income whereas average shareholders' equity is calculated by dividing

the sum of shareholders' equity at the beginning and at the end of the year by 2. The net income

figure is obtained from income statement and the shareholders' equity is found on balance sheet.

You will need year ending balance sheets of two consecutive financial years to find average

shareholders' equity.

Return on equity is an important measure of the profitability of a company. Higher values are

generally favorable meaning that the company is efficient in generating income on new

investment. Investors should compare the ROE of different companies and also check the trend

in ROE over time. However, relying solely on ROE for investment decisions is not safe. It can be

artificially influenced by the management, for example, when debt financing is used to reduce

share capital there will be an increase in ROE even if income remains constant.

Return on Equity ratio is not good at all for the bank. This ratio is going to down over the year.

Most of the time it has been in a decreasing rate. Now the ratio is 13.51% with a decreasing rate

of (-26.31%).

24.70 24.10

20.01 18.34 13.51

2008 2009 2010 2011 2012

Figure 19: Return on Equity (ROE)%



46

3. RETURN ON ASSETS:

Return on assets is the ratio of annual net income to average total assets of a business during a

financial year. It measures efficiency of the business in using its assets to generate net income. It

is a profitability ratio. The formula to calculate return on assets is:

ROA = Annual Net Income

Average Total Assets

Net income is the after tax income. It can be found on income statement. Average total assets are

calculated by dividing the sum of total assets at the beginning and at the end of the financial year

by 2. Total assets at the beginning and at the end of the year can be obtained from year ending

balance sheets of two consecutive financial years. Return on assets indicates the number of cents

earned on each dollar of assets. Thus higher values of return on assets show that business is more

profitable. This ratio should be only used to compare companies in the same industry. The reason

for this is that companies in some industries are most asset-insensitive i.e. they need expensive

plant and equipment to generate income compared to others. Their ROA will naturally be lower

than the ROA of companies which are low asset-insensitive. An increasing trend of ROA

indicates that the profitability of the company is improving. Conversely, a decreasing trend

means that profitability is deteriorating.

In 2010 return on assets was at highest point over the last 5 years which was at 2.65%. Now it is

1.30 with a decreasing rate of (-36.73%). That’s mean AIBL’s authority should give more

concentration on their investment. On the other hand ROA become low when they invest in low

risk and low profit securities and bond.

1.80 1.77

2.65

2.06

1.30

2008 2009 2010 2011 2012

Figure 20: Return on Assets (ROA)%



47

4. EARNINGS PER SHARE

Earnings per Share (EPS) of a business is the portion of its net income of a period that can be

attributed to each share of its common stock. Earnings per share can be calculated by dividing

net income of a period by the number of common shares outstanding during the period.

Companies are required to show EPS with their income statement. While comparing the

profitability of stocks, their prices and the total earnings of the respective companies do not help

because we need to compare apples to apples. Therefore we calculate the earnings per share of

the stocks. But EPS still is not much helpful if compared directly. It is used to calculate the

price/earnings ratio of a stock which is directly compared with the price/earnings ratio of other

stocks.

The formula to calculate earnings per share is:

Earnings per Share (EPS) = Net Income − Dividends on Preferred Shares

Weighted Average Number of Common Shares Outstanding

Earnings per share is calculated on annual basis i.e. annual net income and preferred stock

dividends are used in the formulas. The use of weighted average common shares outstanding

delivers accurate result however, just a simple average, or the number of common share

outstanding at the end of the year can also be used instead of weighted average figure for

simplicity.

An important aspect of EPS that's often ignored is the capital that is required to generate the

earnings (net income) in the calculation. Two companies could generate the same EPS number,

but one could do so with less equity (investment) - that company would be more efficient at

using its capital to generate income and, all other things being equal, would be a "better"

company. Investors also need to be aware of earnings manipulation that will affect the quality of

the earnings number. It is important not to rely on any one financial measure, but to use it in

conjunction with statement analysis and other measures.



48

Earnings per share of AIBL is now at decreasing rate. In 2008 it was 3.72 taka per share. In 2010

it was tk. 4.14 which is highest in recent 5 year. Now it is going to down and the EPS is 2.83.

The Growth rate of this year to previous year is (-14.70%).

5. PRICE EARNINGS RATIO:

A valuation ratio of a company's current share price compared to its per-share earnings

Calculated as:

Market Value per Share

Earnings per Share (EPS)

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the

estimates of earnings expected in the next four quarters (projected or forward P/E). A third

variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Also sometimes known as "price multiple" or "earnings multiple." In general, a high P/E

suggests that investors are expecting higher earnings growth in the future compared to

companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's

usually more useful to compare the P/E ratios of one company to other companies in the same

industry, to the market in general or against the company's own historical P/E. It would not be

useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a

technology company (high P/E) to a utility company (low P/E) as each industry has much

different growth prospects.

3.72

2.00

4.14 3.73

2.83

2008 2009 2010 2011 2012

Figure 21: Earning Per Share (Taka)



49

The P/E is sometimes referred to as the "multiple", because it shows how much investors are

willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of

20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

It is important that investors note an important problem that arises with the P/E measure, and to

avoid basing a decision on this measure alone. The denominator (earnings) is based on an

accounting measure of earnings that is susceptible to forms of manipulation, making the quality

of the P/E only as good as the quality of the underlying earnings number.

Things to Remember

Generally a high P/E ratio means that investors are anticipating higher growth in the

future.

The average market P/E ratio is 20-25 times earnings.

The p/e ratio can use estimated earnings to get the forward looking P/E ratio.

Companies that are losing money do not have a P/E ratio.

Price Earnings ratio is at average point over the last 5 years. Now it is 12.21 with a decreasing

rate 24.67.

9.53 11.23

13.24

10.13 10.21

2008 2009 2010 2011 2012

Figure 22: Price Earning Ratio (Times)



50

6. PRICE EQUITY RATIO:

Price Equity Ratio was at top level in the year 2010 which was 4.06. Now it is in decreasing rate

of 46.88% at the point of 1.20.

7. MARKET PRICE PER SHARE:

Market price of share was high in 2010 (66.88) which is highest in previous 5 year. Now it is

24.29 with a decreasing rate of (-35.74%) to previous year.

2.27 2.71

4.06

2.26

1.20

2008 2009 2010 2011 2012

Figure 23: Price Equity Ratio (Times)

44.40

53.63 66.88

37.80

24.29

2008 2009 2010 2011 2012

Figure 24: Market Price Per Share (Taka)



51

8. NET PROFIT MARGIN:

Net Profit Margin is better now over the last 5 years. Now it is at 5.88% with an increasing rate

of 5.99%.

9. COST OF FUND:

Cost of fund is now at highest point over the last 5 year. Now it is 12.34% with an increasing rate

of 11.37%.

4.87

4.11

2.22

5.55

5.88

2008 2009 2010 2011 2012

Figure 25: Net Profit Margin%

10.46 11.08

9.72

11.08

12.34

2008 2009 2010 2011 2012

Figure 26: Cost of fund %



52

10. COST/INCOME RATIO IN OPERATING BUSINESS:

In 2012 cost/income ration in operating business is at highest point which is 71.51%. Increasing

rate of this ratio is now at 15.68%.

6.9 CAPITAL BUDGETING

The process in which a business determines whether projects such as building a new plant or

investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime

cash inflows and outflows are assessed in order to determine whether the returns generated meet

a sufficient target benchmark. Also known as "investment appraisal."

Ideally, businesses should pursue all projects and opportunities that enhance shareholder value.

However, because the amount of capital available at any given time for new projects is limited,

management needs to use capital budgeting techniques to determine which projects will yield the

most return over an applicable period of time.

Popular methods of capital budgeting include net present value (NPV), internal rate of return

(IRR), discounted cash flow (DCF) and payback period.

65.17 67.40

58.06 61.82

71.51

2008 2009 2010 2011 2012

Figure 27: Cost /Income ratio in operating business (%)



53

6.9.1 INVESTMENT CALCULATION OF AIBL AIBL offer various types of loan facilities to their customers. Basically they called it as

Investment instead of credit or loan. AIBL calculate profit instead of interest on investment.

They calculate their profit in various ways. Such as-

Flat Rate Method

Reducing Rate Method

Customized Rate Method

a. Flat Rate Method:

This method is mainly used to calculate the interest payable for personal loans and car / hire

purchase loans. You pay interest on the entire loan balance throughout the duration of the loan.

Flat interest rate calculation formula can be represented like this:

Interest Payable per Installment = (Original Loan Amount * No. of Years * Interest Rate p.a. )

/ Number of Installments

b. Reducing Rate Method:

This method is mainly used to calculate the interest payable for housing / mortgage / property

loans, overdraft (OD) facilities, and credit cards. You only pay interest on the remaining loan

balance. A reducing balance interest calculation formula can be represented like this: - See more

at:

v. Customized Rate Method:

In the case of Customized Rate Method bank determine its bank rate considering bank policy and

customer preference and priority. It is very complex calculation. This type of calculation vary

customer to customer specially for VIP customers.



54

6.9.2 CALCULATION OF INSTALLMENT:

Now I will calculate an investment scheme and analyses of it with some capital budgeting

formula. “Bank offers to Mr. Jamal an amount of tk. 60,00,000 invest on House-building loan

with an interest rate of 18% for five years. 10% opportunity cost. So installment for every month

will be as follows

=tk 27,00,041

So installment for every months will be

= tk. 1,45,000

PAYBACK PERIOD:

In every month getting return 1,45,000 payback period will be as follows,

Payback Period=

= 42 months

That’s mean the principal amount will be obtained within 3years and 6 months.

DISCOUNTED PAYBACK PERIOD:

Present Value Discounted Cash Outflow Cumulated Amount

PV in 1st year= 1581818 1581818

PV in 2nd Year= 1438017 3019835

PV in 3rd Year= 1307288 4327123

PV in 4th Year= 1188525 5515648 (4th Year)

PV in 5th Year= 1080745 6596393

∴ Discounted Payback Period is 4+

= 4.44 Years



55

(NET PRESENT VALUE)NPV:

Cash outflow from the investment 6000000 is 1740000 every year. With an 10%

opportunity cost the NPV will be.

NPV= PV-Principal Amount (where PV=

PV in 1st year= 1581818

PV in 2nd Year= 1438017

PV in 3rd Year= 1307288

PV in 4th Year= 1188525

PV in 5th Year= 1080745

NPV= (1581818+1438017+1307288+1188525+1080745+)-6000000

∴ NPV = 5,96,393 which is positive and good for bank. That’s mean the investment decision

and profit rate and installment period is right for bank.



56



57

7.1 FINDINGS AT AIBL: AIBL is one of the best ranking banks in Bangladesh. Though it is a strong bank but it has some

lacking also. As I prepared my report on Investment and but I visit all the departments to find out

overall performance of this bank. Some findings that I got during my study are as follows.

Investment as well as credit department is not well organized, especially in case of

getting loan customer have to visit various table without any synchronization of

procedure.

To get a loan there is no specific date line to approve it.

The software used by AIBL has not so speed.

Lack of available security system like emergency exit, metal detector etc.

Close Circuit Camera does not cover all floor Space and no Intercom facility is available.

The worldwide trend of mergers and acquisition in financial institutions is causing

problems.

Frequency taka devaluation and foreign exchange rate fluctuation is causing problem.

Lots of new banks are coming in the scenario with new service.

Local competitors can capture huge market share by offering similar products

Unstable political situations cause great distraction in the otherwise smooth flow of

business. Sudden Hartals and other political programs sometimes present problems for

the employees in commuting to and from the office.

Service personnel are working under pressure because they have to deal with large

number of customer every day.

Technology that AIBL is using for their banking system is not updated. Now there are

some international banks in Bangladesh, they are very fast and very up dated.

Al-Arafah Islami bank is not too much centralized.

Lack of information to get and sitting arrangement in the branch is a trouble for the

customers.

Advertising and promotion are the weak point of Al-Arafah Islami Bank Ltd. AIBL does

not have any marketing Agent. Others banks have betters marketing strategy.

Lack of competitiveness in product and service innovation.

I have found no specific Practiced dress code for its officials; But Securities special dress

code which has found.



58

7.3 RECOMMENDATIONS

The fast pace of growth in the Islamic financial sector and the emergence of conventional

finance companies offering Islamic products and services has brought critical attention to key

issues facing this sector. Some of the core issues identified after analyzing this report that Al-

Arafah Islami Bank Limited should give lots of attention in many sectors, which are given

below.

Increased market transparency is needed to enhance credibility and increase consumer

confidence. The application of relevant international accounting standards will enhance

transparency of Islamic financial institutions and the comparability of financial

statements. At this stage, Islamic product standards and accounting practices are not yet

accepted globally.

Increased education is needed to ensure that the Shariah standards are understood and

accepted across the industry by regulators, international organizations, and the private

sector.

A robust regulatory and supervisory framework is necessary to maintain financial

stability and growth of Islamic finance as a viable, resilient, and sustainable sector. The

unique characteristics of Islamic banking operations and Islamic financial instruments

require the development of a regulatory-supervisory framework that adequately addresses

the requirements of this industry.

The authority of AIBL should exert pressure on Government bodies to run proper and

sufficient application of Islamic banking laws in Bangladesh.

Inclusion of more subjects based on the Quran and Sunnah in the Training courses of the

Islami Bank Training & Research Academy in order to develop human resources having

morally.

Arrangement of monthly /quarterly training courses /workshops for the clients should be

selected by the Branches in order to promote Foreign Exchange activities of the desired

level.

To fulfill the vision of "mass banking" this Bank should provide more foreign exchange

and other sorts of facilities to new customers/new entrepreneurs /new businessmen/ new

companies etc.



59

AIBL should give more emphasize on their marketing effort and try to increase their sales

force.

AIBL should try to attend different type of target customers.

AIBL should Introduce Islami Debit and Credit Cards as soon as possible.

They should carry out more promotional activities to make clients aware about their

offers.

It was observed that, AIBL is absent in TV, Print Media, Bill Boards, and Sponsorships

etc. The Bank should advertise about itself and its offers so that it can attract more

customers that will increase the business volume of the bank.

AIBL should utilize "Internship Program" as one kind of promotion policy to encourage

its present and potential customers/clients. Because, young generations are the vital post

of our economy. To do so this Bank should provides facilities to the internees through

proper placement and practical operations as well as job certainty to those who bring

introduced themselves the best performers in doing their particulars.



60

7.4 CONCLUSION

The concept of Islami Banking is several decades old. The third attempt to establish an Islamic

Financial Institution took place in Pakistan in the late 1950s with the establishment of a local

Islami Bank in a rural area (Wilson 1995. After 45 years, Islamic Banking system is established

in Bangladesh as a financial institution that is named “Al-Arafah Islami Bank Limited”.

Al-Arafah Islamic Bank Limited is a Bank which operates its activities according to Quaran and

Sunnah. Its banking activities based on profit \ loss sharing. It does not create any illegal

pressure on client.

On the other hand, every client is not 100% honest. So they are taking investment from AIBL

and after maturity, they are showing loss on that project intentionally. So AIBL is losing some

profits from their investment.

Threats of Al-Arafah Islami Bank Limited are - at this time, many financial institutions have

commenced their financial activities according to Islamic shariah. This type of organization will

create more competition in the financial market. So it is a threat for Al-Arafah Islami Bank

Limited.

Although it is facing some problem, it has a bright future and day-by-day it is enhancing its

financial activities over the country. Many organizations are following to AIBL and they are

starting their business based on Islamic shariah in the economy of Bangladesh.

After all, Al-Arafah Islami Bank is increasing its reputation day after day through providing

various sorts of innovative product and service. Moreover, AIBL,s customer services and

management are also being enhanced. Foreign Direct Investment Department will be fully

computerized soon.

An Analysis on General Banking System and Investment of Al-Arafah Islami Bank Limited

Md. Abdullah- Al- Masum, ID No- 03043, Department of Management Studies, Comilla University. i

5 Year Financial Highlights (Appendix- I) (Figure in Million)

Particulars 2007 2008 2009 2010 2011 Growth %

Income Statement Investment Income

2,243.15

3,456.34

4,004.54

4,306.62

9,481.01

120.15

Profit paid on Deposit 1,628.63 2,220.47 2,667.34 3,133.69 5,466.12 74.43

Net Investment Income 614.52 1,235.87 1,337.20 1,172.93 4,014.89 242.30

Non Investment Income 712.46 936.81 1,301.10 3,378.95 1,851.58 (45.20)

Non Investment Expenses 570.80 644.59 908.47 1,328.61 1,539.69 15.89

Net Non Investment Income 141.66 292.22 392.63 2,050.34 311.89 (84.79)

Profit Before Tax & Provision 756.18 1,528.09 1,729.83 3,223.27 4,326.78 34.24 Provision For Investment 173.34 269.20 140.59 370.80 380.16 2.52 Profit Before Tax 582.84 1,258.89 1,589.24 2,852.47 3,946.62 38.36 Provision For Tax (including Deferred Tax) 235.53 590.66 730.25 893.43 1,747.87 95.64

Profit After Tax 47.31 668.23 858.99 1,959.04 2,198.75 12.24

Balance Sheet Authorized Capital

2,500.00

2,500.00

5,000.00

5,000.00

10,000.00

100.00

Paid up Capital 1,153.18 1,383.81 1,798.95 4,677.28 5,893.37 26.00 Reserve Funds & Other Reserve 653.00 905.33 1,223.18 1,779.08 2,437.43 37.01 Shareholders' Equity (Capital & Reserve) 2,037.50 2,705.74 3,564.73 9,790.36 11,989.11 22.46 Deposits 23,009.13 29,690.12 38,355.50 53,882.96 82,186.98 52.53 Investment 22,906.37 27,742.57 36,134.08 53,582.96 77,714.95 45.04 Investment in Shares & Securities 868.58 1,090.23 1,502.00 2,078.83 3,771.83 81.44 Fixed Assets 334.48 396.76 466.30 655.39 968.13 47.72

Total Assets (Excluding off-balance sheet items) 30,182.32 37,177.22 48,515.79 74,005.01 106,768.18 44.27

Foreign Exchange Business Import Business

27,042.72

32,685.13

34,074.80

55,934.10

76,112.10

36.07

Export Business 12,714.91 20,176.64 23,546.10 32,042.40 52,202.10 62.92 Guarantee Business 601.88 784.49 2,841.32 3,081.15 1,812.38 (41.18)

Inward Foreign Remittance 1 ,843.94 2,672.04 2,832.28 4,431.90 6,876.20 55.15

Capital Measures Core Capital (Tier-l)

1,970.84

2,639.08

3,498.07

9,582.85

11,924.50

24.44

Supplementary Capital (Tier-ll) 274.29 410.26 567.89 929.96 1,123.40 20.80 Tier-l Capital Ratio 9.59 9.70 9.68 13.21 12.31 (6.81) Tier-ll Capital Ratio 1.33 1.51 1.57 1.28 1.16 (9.38) Total Capital 2,245.13 3,049.34 4,065.96 10,512.81 13,047.90 24.11

Total Capital Ratio 10.92 11.21 11.25 14.49 13.47 (7.04)

Investment Quality Volume of Non-Performing investment

854.41

817.90

608.14

610.48

751.10

23.03

% of NPIs to Total investment 3.72 2.75 1.68 1.14 0.95 (16.67) Provision for Unclassified investment 220.48 298.09 409.19 666.95 866.46 29.91 Provision for Classified investment 246.48 329.78 173.13 137.58 105.93 (23.00)

Provision for Off Balance sheet Exposures 19.45 77.80 124.35 230.71 214.48 (7.03)

Share Information Number of Shares Outstanding

115,317,540

138,381,040

179,895,360

467,727,936

589,337,199

26.00

Earning per Share (Taka) 2.51 3.72 2.00 4.14 3.73 (9.90) Book Value per Share (Taka) 19.67 19.55 19.82 16.47 16.69 1.34 Market Price per Share (Taka) 44.00 44.40 53.63 66.88 37.80 (43.48) Price Earning Ratio (Times) 14.62 9.53 11.23 13.24 10.13 (23.49)

Price Equity Ratio (Times) 2.24 2.27 2.71 4.06 2.26 (44.23)

Dividend per Share Cash Dividend (%)

-

-

-

-

-

-

Bonus Share 20 30 30 26 21 (19.23)

Operating Performance Ratio Net Profit Margin%

3.69

4.87

4.11

2.22

5.55

149.77

Investment /Deposit Ratio 99.55 93.44 94.21 93.43 89.07 (4.67) Return on Equity (ROE)% 17.05 24.70 24.10 20.01 18.34 (8.35) Return on Assets (ROA)% 1.15 1.80 1.77 2.65 2.06 (22.20) Cost of fund % 10.99 10.46 11.08 9.72 11.08 13.99

Cost /Income ratio in operating business (%) 74.52 65.17 67.40 58.06 61.82 6.47

Other Information Number of Branches

46

50

60

78

88

13

Number of Employees 1,033 1,080 1,296 1,711 1,807 5.61

Number of Shareholders 12,013 10,664 11,382 49,386 54,267 9.88


Md. Abdullah- Al- Masum, ID No- 03043, Department of Management Studies, Comilla University. ii

REFERENCES

Articles/Books:

Khan, Dr. Azizur Rahman, “Bank Management: A Fund Emphasis”, 8th Edition, Ruby

Publication, Dhaka, Year- 2008, pp-1-487

Sarker Md. Abdul Awwal, “Islamic Banking In Bangladesh: Performance, Problems &

Prospects”, International Journal of Islamic Financial Services, Year-2010, Vol. 1

No.3.

Laldin Dr. Mohamad Akram, “ Shari'ah Supervision of Islamic Banking From

Regulatory Perspective” Year-2011

Magazines/Reports:

AIBL, Annual Report 2012

AIBL, Annual Report 2011

Islamibank Shariah Mannual

Internet:

www.al-arafahbank.com/

http://bankinfobd.com/banks/8/Al_Arafah_Bank

http://bd24x7.com/al-arafah-islami-bank-limited/

http://en.wikipedia.org/wiki/Al-Arafah_Islami_Bank_Limited

http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=A

LARAB:BD

http://www.thebankerdatabase.com/index.cfm/banks/94/Al-Arafah-Islami-Bank

http://mybdpages.com/bd/node/269

http://bangladeshibanks.blogspot.com/2012/03/al-arafah-islami-bank-limited-

aibl.html


Md. Abdullah- Al- Masum, ID No- 03043, Department of Management Studies, Comilla University. iii

GLOSSARY

Bai-Istisna’a: It is contract with a manufacturer to make the something and It is a contract on a commodity on liability with the provision of work Bai-Muajjal: Bai-Muajjal is a sale for which payment is made at a future fixed date or within a fixed period. In short, it is a sale on Credit. Bai-Murabaha: Bai-Murabaha means sale for an agreed upon profit. It may be defined as a contract between a Buyers and a Seller under which the seller sells certain specific goods permissible under Islamic Shariah and the word Law of the land to the Buyer at a cost plus and agreed upon profit payable today or on some date in the future in lump-sum or by installments. Bai-Salam: Bai-Salam is used to define a sale in which the buyer makes advance payment, but delivery is delayed until sometime in the future. Banker: No person or body, corporate or otherwise, can be a banker who does not 1) Take deposit accounts 2) Take current accounts 3) Issued and pay cheque and 4) Collect cheque, crossed and uncrossed, for his customer. Banking: Accepting, for the purpose of lending or investment, of deposit of money from the public, repayable on demand or otherwise, and withdraw able by checks, drafts order or otherwise. Bearer: A bearer means a person who by negotiation comes into possession of a negotiable instrument which is payable to bearer Bill of exchange: Bill of exchange is an instrument in writing containing an unconditional order signed by maker, directing a certain person to pay a certain sum of money only to, or order of, a certain person or to the bearer of the instrument. Branch banking: branch banking system every bank, as a single legal entity having one board of director and one group of share holders, operates through a network of branches throughout the country. Cheque: A cheque is a bill of exchange brawn on a specific banker and not expressed to be payable otherwise than on demand. Commercial bank: A financial institution that provides services such as a accepting deposits and giving business loans. Crossing cheque: Crossing cheque is an instruction given to the paying banker to pay the amount of the cheque through a banker only and not directly to the person presenting it at the counter. A cheque bearing such an instruction is called a crossed cheque. Customer: A person who has an account in a bank is considered its customer. To constitute a customer there must be some recognizable course of habit of dealing in the nature of regular banking business Demand Draft: This is an instrument through which customer’s money is remitted to another person/ firm/organization in outstation Deposit: Deposit refers to saving money in the bank by giving some charges with return of profit/interest. Dormant Account: If any account is inoperative for more than one year is called dormant account. To operate these accounts manager permission is necessary. Endorsement: Endorsement means signing on the back of the cheque/other negotiable instrument in order to transfer right to the endorsee. Exporting: Exporting is the sending of the good from one country to another country.


Md. Abdullah- Al- Masum, ID No- 03043, Department of Management Studies, Comilla University. iv

Foreign exchange: The term foreign exchange has different meanings. Often foreign exchange is used to donate foreign currency. When banks buys or sell foreign exchange, it deals in claim on foreign currency. Function of commercial banks: The business of a commercial bank is primarily to hold deposit and make loans and investments with the object of securing profits for its share holders

Halal: Halal means any subject, meter, food or anything that can be taken, eaten, used according to the rules of Islam. Hire Purchase Shirkatul Melk: It is a contract under which the Bank shall invest to purchase articles for the clients on obtaining initial equity and rent out the same at a determined rate to be charged on the outstanding balance amount (on reducing balance method) together with an additional amount to pay off the principal together with accrued rent in a fixed period. Importing: Importing is the import of the good from other country Investment: transaction between two parties in which one ( the creditor or lender) supplies money, goods, services or securities in return for a promised future payment by the other (the debtor or borrower) Investments: Investments are stated in the Balance Sheet net of profit receivable/mark-up profit. Inward Clearing: When a particular branch receives instruments, which drawn on them and sent by other member bank for collection are treated as inward clearing Islamic: Any term based on Islamic concept or in the light of Qur’an and Sunnah. Money market: Money market is the market in which short-term funds are borrowed and lent. The money market does not deal in cash or money. But in trade bills, promissory notes and government paper which are drawn for short period. Mudarabah: The term Mudarabah refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Musharaka: One, two or more entrepreneurs approach an Islamic Bank to request the financing required for a project. The bank, along with other partners, provides the necessary capital for the project. All partners including the Bank have the right to participate in the project. Negotiable instruments: A negotiable instrument means a promissory note, bill of exchange or cheques payable to either to order or bearer. Outward Clearing: Outward clearing means when a particular branch receives instruments drawn on the other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered and outward clearing for that particular branch Pay order: Pay order gives the payee the right to claim payment from the issuing bank Promissory note: A promissory note is an instrument in writing ( not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument Qard-E-Hasana: It is a contract in which one of the party/ parties (the lender) places into the ownership of the other party (the borrower) a definite parcel of his property, in exchange nothing more than the eventual return of something in the same value of the property loaned.


Md. Abdullah- Al- Masum, ID No- 03043, Department of Management Studies, Comilla University. v

Remittance: Remittance means transfer of fund from one place to another place Services: A service is any set act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Shariah: Shariah means the rules and regulation define by islam religion. Statutory reserve: Bank Companies Act, 1991 requires the Bank to transfer 20% of its current year's profit before tax to reserve until such reserve along with share premium equals to its paid up capital. Telegraphic Transfer: This is a mode of transfer/remit customer’s money from a branch of one bank to another branch of the sane bank or to a branch of another bank through telephonic message.

MBA-Internship Report- M a a MASUM, 1005004(1)

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