Term Paper on AIBL

8/10/2019 Term Paper on AIBL

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ACKNOWLEDGEMENT

All praises for Allah, the Omnipresent, Omnipotent and Omniscient, who hasenabled us to complete the report work as well as to submit term paper.

We feel it a proud privilege to declare our profound respect, deepest sense ofintense gratitude, heartfelt indebtedness and kind regards to our reverend teacherand supervisor Lecturer, Shuvabrata Saha, Department of Accounting andInformation Systems, Comilla University, for his genial encouragement, scholasticguidance, boundless co-operation, constructive advice and intellectual instructionsduring our report work and immense help in successful completion of the term

paper.

We especially grateful to Mr. A .K. M. Fakrul Islam, Manager of Al-Arafa IslamiBank, Comilla Branch, for helping us of taking interviews of different bankers.We express our earnest sense of respect to all the bankers of Al-Arafa IslamiBank, Comilla Branch, for their valuable co-operation, inspiration andencouragement during the whole report work.

We would like to express heartfelt indebtedness to our beloved parents, sisters and brothers for their never ending prayer, encouragement, sacrifice and dedicatedefforts to educate us to this level which can never be forgotten .

The Authors


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EXECUTIVE SUMMARY

This report has prepared as a requirement of The theories and practices of banking course. The report is based upon the Firsthand knowledge of bankingactivities . This Report will help us know about overall banking activities ofAIBL. The report will also focus on total Banking activities and performance

analysis of AIBL.

Primary data has been collected from branch and Secondary sources of data have been collected & used to gather information in this report. The report has analyzedthe overall banking activities & financial performance for the term of last twofinancial years.

The aim of the study is to provide a clear notion about the firsthand knowledge onoverall banking activities which will assist us to gather knowledge and enrich ourselves on banking activities to face on growing demand of job market.


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ORIENTATION OF THE STUDY

Introduction:

Financial Institutions historically have been distinguished by the types of services they provide. In recent years Financial Institutions have diversified their services by creating newsubsidiaries that perform additional services or by merging with other types of financialinstitutions .Al-Arafah Islami Bank Ltd was incorporated in Bangladesh as a one of the leadingislami banking company. We have studied about the overall activities of AIBL. This has givenus the opportunity to know more on different aspects of the banking system.

Objectives of the study:Objectives regarding this study are as follows:

To understand the environment, functions and management of AIBL. To gather firsthand knowledge about banking activities. To know about the service products of AIBL. To fulfill academic requirement. To identify major strengths of AIBL in retail products in respect to other bank.

Methodology:For preparing this paper, we used both Primary and Secondary data.

Primary data

Most of the necessary information has been collected by from the personal observationand one to one discussion with the relevant officials. Throughout the tenure of our study, weobserved the activities of different departments and that gave us a great opportunity to collectinformation and learn more.

Secondary data

The details of the bank and the selected department have been collected from secondarysources. The relevant information of this bank has been collected from annual reports, web

pages and other published documents

Scope of the study:

In spite of limitations we also enjoyed some facilities to complete our term paper. Theemployees whose held a responsible post in all the departments helped us lot. They gave us allessential data and conversed with us. Our honorable course teacher Shuvabrata Saha also helpedus a lot. He gave us guidelines how to prepare our Term Paper more attractive and perfect. This

bank has given us the opportunity to observe the banking environment for the first time indeed.

We got an opportunity to gather knowledge different departments of the bank.


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Limitations:

Although it has been tried on the level best to make this report based on facts andcomplete information available, there are some limitations that are inevitable. They arefollowing:

The main obstacle while preparing this report was time. In spite of being busy with the banking activities, the AIBL officials have tried their level best to co-operate with us, butit wasnt enough to highlight everything deeply.

Confidentiality of information was another barrier that hindered the study.

Why we choose AIBL?

Islami Banking System is becoming more and more attractive day by day to peoplesirrespective of nations, religious, colors and species. More than 300 Banks & financialinstitutions are serving Islami banking throughout the world. At present in our country 7 fullfledged Islamic Banks are working successfully. And other traditional banks have IslamiBanking Wings conducting Shariah based banking activities. Recent Development ofBangladesh Government Islamic Investment Bond (BGIIB) is the milestone for shariah based

banking practices in Bangladesh. In our country, Al-Arafah Islami Bank Limited is a renownedshariah based islami bank. According to CRAP, there are 7 A category banks in our country.Among them AIBL is in number 7. Thats why we choose Al -Arafah Islami Bank Limited.


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OVERALL BANK IDENTITY

Historical Background Of Bank:

With the objective of achieving success in life here & hereafter following the way

directed by the Holy Quran and the path shown by Rasul (SM) Al ArafahIslami Bank Ltd wasestablished (registered) as a public limited company on 18 June 1995. The inaugural ceremonytook place on 27 September 1995.

Renowned Islamic Scholars and pious businessmen of the country are the sponsors ofthe Bank. 100% of paid up capital is being owned by local shareholders. The equity of the bankhas stood at Tk. 11,989.11 million as on 31 December 2011, the manpower was 1,807 and thenumber of shareholders was 54,386. It has achieved a continuous profit and declared a gooddividend over the years. High quality customer service through the integration of moderntechnology 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. The Bank iscommitted to contribute significantly to the national economy. It has made a positivecontribution towards the socio economic development of the country with 88 branches ofwhich21 is AD throughout the country.

They are pledge-bound to convert the Bank into aIslami Bank on global standard whichwill be dynamic in actions, progressive in ideas, honest in dealings, correct in judgment,futuristic in attitude, fair in approach, polite in behavior and devoted to high quality service tocustomers. Their aims are for boosting modern management, advancedtechnology, good

profitability and steady growth transparency. They are also firmly committed to disclosure andcompliance to shariah and regulatory authorities. Today the bank is an agile organization which

promotes innovation, encourages improvement, values sense of urgency and develops peoplewho accept challenges and turns them into opportunities.

Vision: To be a pioneer in Islami Banking in Bangladesh and contribute Significantly to the growth of the national economy.

Mission: Achieving the satisfaction of Almighty Allah both here & hereafter.

Proliferation of Shariah Based Banking Practices. Quality financial services adopting the latest technology. Fast and efficient customer service. Maintaining high standard of business ethics. Balanced growth. Steady & competitive return on shareholders' equity. Innovative banking at a competitive price. Attract and retain quality human resources. Extending competitive compensation packages to the employees. Firm commitment to the growth of national economy. Involving more in Micro and SME financing.


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Commitments: It is a customer focused modern Islamic Banking making sound and steady growth in

both mobilizing deposit and making quality Investment to keep its position as a leadingIslami Bank in Bangladesh.

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

scale enterprises, as well as corporate clients through their branches across the country. Their business initiatives are designed to match the changing trade & industrial needs ofthe clients.

Special Features of Al-Arafah Islami Bank Ltd.: All activities of the bank are conducted according to Islamic Shariah where profit is the

legal alternative to interest. The bank's investment policy follows different modes approved by Islamic shariah based

on the Qur'an & Sunnah. The bank is committed towards establishing welfare oriented banking system, economic

upliftment of the low-income group of people, create employment opportunities. According to the need and demand of the society and the country as a whole the bank

invests money to different 'Halal' business. The bank participates in different activitiesaiming at creating jobs, implementing development projects of the government andcreating infrastructure.

The bank is committed to establish an economic system resulting in social justice andequitable distribution of wealth. It is committed to bring about changes in theunderdeveloped rural areas for ensuring balanced socio economic development of the

country through micro credit program and financing of SME's as well. According to Mudaraba system, the depositors are the partners of the investment income

of the bank. About 70% of the investment income is distributed among the Mudarabadepositors.

To render improved services to the clients imbued with islamic spirit of brotherhood, peace and fraternity and by developing an institutional cohesion.

The bank is contributing to economic and philanthropic activities. AIBL EnglishMedium Madrasah and AIBL library patronize by the Bank are two such examples.


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BRANCH IDENTITY

The branch identity with the following matter:

Starting Time: Comilla Branch of AIBL is established on 29th

November, 1998.

Name of the Manager: Mr. A. K. M. Fakrul Islam.

Joining Date of Manager : 3 rd December 2009.

Objectives of the Branch:

1) To achieve the positive economic value added each year.2) To be the market leader in customer satisfaction3) To be one of the financial institutions in Comilla.

Banking Hour: Service Hour: 10 am to 4 pm, Working Hour: 1 pm to 6 pm.

Technology: This branch is fully connected with internet. The bank performs all activitiesthrough the Software named Ababil millimum .

Number of Employee : At present, there are 22 employees who engaged in this branch.

Number of Transaction: The average daily amount of transaction is about 500. The averagedaily payment is about 1.5 corer and average daily received is about 1.5 corer.


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ACTIVITIES OF BANKGenerally all activities of bank are performed under three sections. These are discussed bellowin detailed-

1) General Banking: General banking consists of three major sections. These are-

Activities of Bank

1) Generralbanking 2) Deposit 3)Investment 4)Clearing

General Banking

A ) Cash B) Foreignremittance

C) Foreignexchange

a) Receive

b)Payment

I. CashII. Draft(cash)

III. Every bill(cash)

IV. FDR (cash)

I. ChequesII. Draft

III. Every billIV. FDR


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A) Cash section:

In cash sections all kinds of cheques, draft, bill, FDR, are debited and credited here.Generally banks refer the cash sections in general people .In cash department people deposittheir money and withdraw their money when they needed. And banks are liable to pay themoney on clients demand. Bank provides their best security of deposited money. It ismentionable that all money and assets of this bank are under insurance policy. In this branchdaily average number of transactions is about 300, and the amount of transactions is 2.5 cores to3 cores.

Generally cash department consists of two major parts:

a) Receive: In receive section all kinds of cash receive are credited to clients account. Before

crediting bank examines some conditions which is signed by clients at the time ofopening that account. These conditions are-

Amount of deposit will not be exceeds signed amount. If the depositors deposit money exceed signed amount then bank examine the

source of income. Any amount deposit in the account of OSAMA BIN LADEN and AL-QUEDA

NETWORK would not be credited here. If the deposit amount exceeds tk. 7, 00,000 then bank prepare CTR (cash

transaction report) which is sent to central bank. If the bank suspect that this deposit amount is under suspicious transaction then bank prepare a STR (Suspicious Transaction Report) which is sent to central

bank through head office. According banking Act. 1991,if any fake note is identified by receiver then bankshould inform the police station, but in considering the clients reputation bankgenerally not Inform police station, but they destroy these notes.

It is mentionable that, the total amount of deposit of this branch is 150 cores. And dailyaverage receive is 1.5 to2 cores.

b) Payment:

Payment section is the main part of cash department. Payment section performs all kinds ofactivities of debiting client accounts. In payment section bank pay all kinds of cheques, bill,draft, FDR, etc. payment procedure is completed by following steps-

1) At first clients submit their cheques to verifying officer.2) Verifying officer verify the following matters-

In case of Bearer cheques:

Name Date

Amount in digits Amount in written


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Check amount to be same in digit and written Check account balance Signature.

In case of order cheques: Name of bearer authorized by account holder Date Amount in digits Amount in written Check amount to be same in digit and written Check account balance Signature.

In case of draft, bill, FDR:

Assume draft, bill, FDR as bearer cheques bank verify all necessary condition which ismentioned in case of bearer cheques. If the account holder bears the cheque then in the place ofname self have to be written. In other cases the name of the bearers.

3) After verifying these cheque are transfer to the casher.4) Cashier records it payment register and pay the amount to the customer.

Cheques: Cheques are two types:

1. General cheque2. Cross cheque

Cross cheque: Bank has some consideration when cashier payment the cross cheque. Generallycross cheque means the transfer balance of one account to another account .The considerationare given below:

Account name Pay To Amount Account Holder Signature

If the above condition are fulfilled then bank transfer the balance from one account toanother account.

Dishonor of cheque: From the following reason cheque are dishonor which are given below:

Stale cheque:If the cheque is not present to the bank within 6 month from the date ofissue.

If mismatching between digits and written amounts. If the signature is overwriting. If the mention amount is not satisfied by the balance of depositors account.

Post cheque: Post cheque is kind of cheque which is not payment by the bank because of somespecific defects.


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Cash register: Cash register maintains the following register:

Receive register Payment register cash closing register Vault register Stamp register Cash in register for office Cash in register for others.

Report submit: Report submit is necessary if the daily client amount is more than 700000 andweekly amount is more than Tk10,00,000 and total monthly statement is prepared by this branchand these report transfer to the head office and head office transfer the Central Bank. At

payment section the, the average daily total payment is nearby 1.5 core.

Cheque lost: If the client cheque is lost then client should inform the bank and bank takenecessary against losing cheque..

B) Foreign Exchange:

Generally AIBL do not perform the activities of foreign exchange directly .AIBL performforeign exchange through with other branches nearby Dhaka and Chittagong if any client wantto purchase or exchange something.

C) Foreign Remittance:

AIBL provides these services on demand of customer .In bank when provide remittance tocustomer bank also verify customer signature and signature is correct bank pay the amount

Foreign Remittance Service @ AIBL

Service Digit Account OnlineAnexpress 02(Alphabet)+9 Digits Necessary YesAftab Currency 13 Digits Not Necessary NoBangladesh MoneyTransfer(BMT)

BMT+5 Digits Necessary Yes

Eldorado - Not Necessary NoKushiara Alphabet(02)+ O5 Digits Not Necessary YesKS 05 Digits Not Necessary NoMoney Gram 08 Digits Not Necessary Yesrchid Money Gram(OMT) 06 Digits Not Necessary YesRia 02 Digits Of The Country

Code + 10 Digits Not Necessary Yes

Xpress Money 16 Digits Not Necessary YesWestern Union 10 Digits Not Necessary Yes

Transmit InternationalMoney Ltd.

- Not Necessary No


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2)Deposit Section:In deposit section, banks receive the money of client under various account & term and

provide highest security of deposit.

This bank receives money through by following deposit scheme and provides various facilitiesto withdraw money.

Product name Profit rateAl-Wadeah Current Deposit 0%MUDARABA SAVINGS DEPOSIT 4%MUDARABA SAVINGS DEPOSIT (STAFF) 4%MUDARABA SAVINGS DEPOSIT (STUDENT) 4%

MUDARABA SAVINGS DEPOSIT (FARMER/FREEDOM FGIHTER) 4%Mudaraba Short Notice Deposit 3.5%

MTDR

Product Name Profit rateMUDARABA 03 MONTH TERM DEPOSIT 12.5%MUDARABA 06 MONTH TERM DEPOSIT 12.5%MUDARABA 12 MONTH TERM DEPOSIT 12.5%

MUDARABA 24 MONTH TERM DEPOSIT 12.5%MUDARABA 36 MONTH TERM DEPOSIT 12.5%MUDARABA 01 MONTH TERM DEPOSIT 12.5%MUDARABA PROFIT PAYABLE TERM DEPOSIT 5 YEARS (PTD) 13.33%MUDARABA PROFIT PAYABLE TERM DEPOSIT 2 YEARS (PTD) 13.33%MUDARABA PENSION DEPOSIT SCHEME(PDS):05 YEARS 12.6%MUDARABA PENSION DEPOSIT SCHEME(PDS):02 YEARS 12.6%MUDARABA PENSION DEPOSIT SCHEME(PDS):03 YEARS 12.6%MUDARABA 6 YEARS DBDS -

MUDARABA 7.6 YEARS DBDS -MUDARABA 9 YEARS DBDS -


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Product Name Profit RateMUDARABA 05 YEARS ITD 12%MUDARABA 08 YEARS ITD 12%MUDARABA 10 YEARS ITD 12%MUDARABA 12 YEARS ITD 12%MUDARABA 02 YEARS ITD 12%MUDARABA 03 YEARS ITD 12%MUDARABA 10 YEARS ITD 12%MUDARABA 12 YEARS ITD 12%MUDARABA 05 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 06 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 10 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 12 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 13 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 15 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 18 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA 20 YEAR HAJJ DEPOSIT (MHD) 12%MUDARABA PENSION SCHEME: 5 YEARS 12%MUDARABA PENSION SCHEME: 10 YEARS 12%MUDARABA PENSION SCHEME: 15 YEARS 12%MUDARABA PENSION 3 YEARS LDS 12%MUDARABA PENSION 5 YEARS LDS 12%MUDARABA PENSION 8 YEARS LDS 12%MUDARABA PENSION 10 YEARS LDS 12%MUDARABA PENSION 12 YEARS LDS 12%MUDARABA PENSION 3 YEARS MDS 12%MUDARABA PENSION 4 YEARS MDS 12%MUDARABA PENSION 5 YEARS MDS 12%MUDARABA PENSION 6 YEARS MDS 12%MUDARABA PENSION 7 YEARS MDS 12%MUDARABA PENSION 10 YEARS MDS 12%MUDARABA PENSION 12 YEARS MDS 12%MUDARABA PENSION 15 YEARS MDS 12%MUDARABA PENSION 20 YEARS MDS 12%MUDARABA PENSION 3 YEARS KDS 12%MUDARABA PENSION 6 YEARS KDS 12%MUDARABA PENSION 10 YEARS KDS 12%MUDARABA PENSION 12 YEARS KDS 12%MUDARABA PENSION 15 YEARS KDS 12%MUDARABA PENSION 18 YEARS KDS 12%

MUDARABA PENSION 20 YEARS KDS 12%


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They also offer special Deposit Scheme for Student (Minor) Account, Freedom FighterAccount, Farmer Account. The account opening procedure is as like as other account. Butthe initial opening amount is 100 taka. They don not charge any service charge against theseaccounts. On maturity they get 12% profit. But before maturity if they close the account theyget 4% profit. In case of minor account after their 18 age their accounts are automatically

converted into normal accounts.

Deposit Section

Account Opening Active ATM Card

Current A/C

Savings A/C

Fixed A/C


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Account Opening Procedure (Current & Savings)

1. Collecting Application Form :The interested client first collect application form from the fornt desk or account openingdesk.

2. Filling Up The Application form & Its information :After submitting the required document the interested client get a application form &according to the officer direction he has to fill up the application form. The formcontains the following information :

name of the account

name of the account holder

types of account

types of organization

currancy (taka,dollar,euro)

declaration of maintence of account (single,jointly,any one)

name of account holder if more than one

client's other aaccount ( if any)

introducer's information(name,acc. no. id no. telephone no. signature along with date )

initial deposite (minimum 500 for current, 100 for savings)

organization's address

trade licence no.

register authority & country

source of finance

commencement & signature


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S p e c

i m e n

O

f

A p p

l i c a

t i o n

F o r m


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3. Specimen signature:To maintain bank account specially to withdraw money or for identification of clients thespecimen card is very important. To open an account after filling up the application formthe clients give three specimen signature in the form. Here applicant gives signature aslike as signature he gives in the application form. Applicant

4. Attachment of Required document :

Person Organization ID card/passport/legal document as

chairman certificate/birth certificate Trade license, memorandum,

article of association, deed

Two color photographs of accountholder attested by introducer

Two color photographs of accountholder attested by introducer

One color photograph of nomineattested by account holder

One color photograph of nomineattested by account holder.


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5. Submission of Application Form:After attachment of required documents with the application form the applicant submitthe form to the respective officer. Getting this form the officer Scan the form to verify &give entry to their central database& issue an account no to the account holder. Theofficer also open an online bank account on the same account number for the account

holder.

6. Collecting Deposit receipt & Paying Primary Deposit :Getting the permission of opening account the applicant collect the deposit receipt & payinitial deposit in the bank counter to his issued account number. The initial amount isdifferent for different types of accounting. The initial amount for Current A/C isTk.1000, for Saving A/C is Tk.100.

7. Receiving Cheque Book:With the receiving of the initial deposit the account opening procedure comes to end.After this the officer issue cheque book on clients name to operate his acc ount.

Method of Opening Fixed Account:

1. Collection, fill-up & submission of application:To open a fixed account the applicant has to maintain almost same procedure. The

applicant collects form & fill- up the form. After filling up the form applicant submit it tothe officer. Here nominee is an important issue. So, the applicant must mention the name& percentage of share of profit. The nominee gets profit in absence of the applicant aftermaturity of the fixed deposit.

2. Collecting fixed deposit receipt:If bank grant the application the applicant deposit the amount mentioned in application &give the fixed deposit receipt. The receipt contain the amount of money, time of fixeddeposit, rate of profit& other information. The receipt number is considered as clientsaccount number.


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S p e c

i m e n

O f F i x e d

A c c o u n

t A p p

l i c a

t i o n

F o r m


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ATM Service:

AIBL has ATM service around the country. They issue the ATM card along with theopening of new account. But the existing account holders who do not have ATM card can getthe card by filling up the ATM application form. There are some information about ATM card-

1. The loss of Bangladesh shall govern all the terms and conditions mentions in this form2. AIBL will accept application for issuance of fast cash ATM card service on prescribed

from dully filled in and signed by authorized signatories of the account only(subject toverification ).

3. The ATM card is, and will at all times, be the property of the bank and shall be returnedto the bank unconditionally and immediately upon the banks request. the bank reservesthe right to cancel / withdraw at any time without prior notice or to renew at its direction,the ATM / or any services thereby offered at any time.

4. The bank reserves the right to vary, modify and add to these terms and conditions and

levy charges at any time , without notice and without assign any reason whatsoever.5. The bank shall debit the designated account for the amount withdrawn from any

automated teller machine (ATM) / point of sale (POS) or any other payment gateway inBangladesh by the use of card..

6. The card holder will have to maintain sufficient funds in his/her account, in order tofacilitate continuity of service. This account will be debited with the amount of anywithdrawal and / or other transaction effected by the use of ATM card as well as therelated charges there to the banks tariff.

7. Inconsideration of issuing the card, the card holder undertakes to indemnify the bankagainst all losses, claims, actions, proceeding, demands, damages, costs and expensesincurred or sustained by the bank whatever nature and howsoever arising out of or inconnection with the issuance or use of the card, provided that the bank acts in good faith.

8. The card and pin are issued to the cardholder entirely at cardholders own risk and the bank shall bear no liability whatsoever for any financial loss, any other loss, or damagedwhatsoever caused this issue whether directly or indirectly.

9. The Bank reserve the right to disclose, in strict confidence, to other institutions, suchinformation concerning the card holders account as may be necessary or appropriate inconnection with its participation in any Electronic Fund Transfer Network.

Chairman Mr. Badiur Rahman inaugurated the commercial launching ceremony of AIBL'sATM/Debit card known as the 'Fast Cash' card


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3)Investment Section:AIBL dont provide any cash amount to the client. It provides loan to client as a form of

Investment in various sectors.

TABLE: Details of investment scheme (At a glance)

SlNo.

ProductName

SectorClientQualifications

SecurityInvestmentIncomeRate

Range

01.

BAI-MUAZZAL(GENERAL)

CommercialInvestment

1.Legal Entity Yes 12% -2.Naturee ofBusiness3.Colletaral

02.BAI-MUAZZAL(GSIS)

SocioEconomicDevelopmentof Rural poor

1.Own capital No 11% 50, 000-5, 00,000(Beginning),extend-7, 00,000 ( incontinuing)

2.Nature of business3.One yearcontinuity4.Halal

product5.One Grantor(bloodconnected)

03.BAI-MUAZZAL(MEIS)

MediumEnterprise

1.Own capital No 11% -2.Nature ofBusiness3.One yearcontinuity4.Halal

product(exceptgold & parlor)5.Two Grantor

(bloodconnected)

04.BAI-MUAZZAL(CIS)

ConsumerCommodities

1.Profession Yes 10-11% ConsumerIncome Level2.Income level

3.Otherincome source

05.BAI-MUAZZAL(SEIS)

SmallEnterprise

1.Own capital No 11% -2.Nature of

business

3.One yearcontinuity


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4.HalalProduct(exceptgold & parlor)5.One grantor(blood

connected)

06.H.P.S.M.(LONGTERM)

Real Estate,Big Vehicle,Machineries,House Loan

1.Legal Entity2.Naturee of

Yes -

Business3.Colletaral

07.H.P.S.M.(SHORTTERM)

Real Estate,Car Loan,Hospital &OtherServices

1.Legal Entity Yes -2.Naturee ofBusiness3.Colletaral

08.QUARDAGAINSTTDR

FixedDepositReceipt

FDR AccountHolder

Yes N/A 80% of FDR

An agro-project financed by Al-Arafa-Islami Bank-Limited


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Investment Procedure

*In terms of valuing securities/ collaterals the value of the security should be minimum 1.5times more than the proposed investments limit.

INVESTMENT RECOVERY PROCEDURE

The bank authority takes the following steps for recovering loan:

1. Over telephone reminder,2. Officially reminder by letter,3. Remind by physical presence.

If the client cannot pay the loan amount within maturity date then the bank considers it as a baddebt. Then the bank takes the following steps respectively:

1. Legal notice,2. Auction notice (security based investment),3. Legal notice to grantor (without security based investment),

STEP: 1 OPEN AN ACCOUNT

STEP: 2 PROPOSAL FOR LOAN

STEP: 3 RECEIVE DOCUMENTS OF COLLERAL/SECURITIES

STEP: 4 VALUATION OF SECURITIES/ COLLETERAL*

STEP: 5 TRANSFER TO HEAD OFFICE

STEP: 6 SANCTIONED BY HEAD OFFICE

STEP: 7 ACCEPTENCE BY CUSTOMER

STEP: 8 CONVET COLLETARAL INTO MORTGAGE

STEP: 9 STAMPING

STEP: 10 DISBURSMENT


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4)Clearing Department

Clearing house is the place where respective of the banks is the sane locality meet eachday at an agreed time to exchange cheques, drafts and similar items on each other and to settlethe resulting balance.In Bangladesh Bangladesh Bank perform as central bank as well asclearing house. Where Bangladesh Bank has no branch there Sonali Bank Ltd. performs asclearing house on behalf of Bangladesh Bank. Al-Arafah Islami Bank Ltd. uses both Manual &Automated Data Base System. By this way they settle the outward & inward cheques.

Manual System:

For settlement the officers visit Sonali Bank Ltd., Corporate Branch, Comilla with thecheques& their list in the morning at 11.00 a.m. He delivers the cheques to the officers ofrespective banks. Similarly he also receives the cheques drawn on his branch from theofficers of the other banks.

Then, the officials returns to their respective bank to meet again in the afternoon at 3.00 p.m. to return any dishonored cheques drawn on his branch from the officers of other banks.

The officials of each bank computes the final balance payable or receivable by his branch from other banks after taking into accounts the various amounts of receipts & payments.

The final settlement is effected by the supervisor of the clearing house by debiting & creditingthe accou nt of their clients banks.

Automated Data Base System:

Clearing House does not now mean a place because it has become automated. Nowofficials get the facility on online setting on their own braches & settle the inter bankingtransitions. In automated data base system the branch receives the image of cheques. They useUB machine to justify the cheques they receive in their branch drawn on other banks. Then theysend their cheques to a character readable machine are called MICR (Megnated Ink CharacterReader). In every cheque there are some code numbers which they cannot understand normally.But MICR can read this code after scanning these cheques& all information about these chequeson their computer screen. They have to show their cheque within 12:30 p.m. to 5:00 p.m. tocentral bank.


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PERFORMANCE ANALYSIS OF AIBL

Current Ratio:

Interpretation: The current ratio is a popular financial ratio used to test a company's liquidity(also referred to as its current or working capital position) by deriving the proportion of currentassets available to cover current liabilities. In theory, the higher the current ratio, the better.From this graph it shows that AIBLs current ratio is increasing year to year. This impli es thatthey have short-term assets (cash, cash equivalents, marketable securities, receivables andinventory) which are readily available to pay off its short-term liabilities (notes payable, current

portion of term debt, payables, accrued expenses and taxes).

Debt ratio:

Interpretation: The debt ratio compares a company's total debt to its total assets, which is usedto gain a general idea as to the amount of leverage being used by a company. A low percentagemeans that the company is less dependent on leverage, i.e., money borrowed from and/or owedto others. The lower the percentage, the less leverage a company is using and the stronger itsequity position. In general, the higher the ratio, the more risk that company is considered to havetaken on. From this ratio, AIBL has decreasing percentage of debt ratio but year to year but thedecreasing pattern is very high.

0%

50%

100%

2011 2010Current Ratio 2.57 1.109

2.57 1.109Current Ratio

0%

50%

100%

2011 2010Debt Ratio 38.7 89.3

38.7 89.3Debt Ratio


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Loan Ratio:

Interpretation: The loan ratio indicated the extent to which assets are devoted to loans as

opposed to other assets including cash, securities, and equipment and so on. This is taken as a percentage of total assets. From this ratio we see that AIBL had high loan ratio in 2011 but in2010 they did not take any loan.

Profit Margin Ratio:

Interpretation: It measures the relation between sales and profit. It is calculated by dividingnet income by the operating revenues of the bank. A high profit margin ratio is a sign of goodmanagement. Here we see that AIBL had a increasing profit margin in 2010. But in 2011 it hadlow profit margin.

0%

20%

40%

60%

80%100%

2011 2010Loan Ratio 33.02 0

33.02

0

Loan Ratio

0%

20%

40%

60%

80%

100%

2011 2010Profit Margin Ratio 57.47 62.43

57.47 62.43

Profit Margin


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Return on Assets:

Interpretation: This ratio indicates how profitable a company is relative to its total assets. The

return on assets (ROA) ratio illustrates how well management is employing the company's totalassets to make a profit. The ROA ratio is calculated by comparing net income to total assets, andis expressed as a percentage. From the graphs ROA ratio has increased every year to year. Thatimplies higher the return; the more efficient management is in utilizing its asset base.

Return on Equity:

Interpretation: The return on equity implies the return that a firm generates against its commonequity. So, it is very important to increase return on equity. Here return on equity is higher in2011 than 2010. So, in the year 2011 investment in AIBL is safe and increase net worth of the

bank, value of the share and reputation than 2010.

0

5

5.85

0.95

2011 2010Return on Assets 5.85 0.95

Return on Assets

0%

20%

40%

60%

80%

100%

2011 2010Return on Equity 9.55 8.91

9.55 8.91

Return on Equity


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Earning per Share:

Interpretation: Earnings per share are generally considered to be the single most importantvariable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. From the graph, we can compare the EPS from previous years and itindicates the rate of growth AIBLs earnings is not decreasing. That is well.

Price to Earning Ratio:

Interpretation : The price/earnings ratio (P/E) is the best known of the investment valuationindicators. The P/E ratio has its imperfections, but it is neverthelessthe most widely reported andused valuation by investment professionals and the investing public. The average P/E ratio forthe broad market has been reduced from 16.15 to 10.15.

0%

20%

40%

60%

80%100%

2011 2010Earning Per Share Ratio 3.73 4.14

3.73 4.14

Earning Per Share Ratio

0%

20%

40%

60%

80%

100%

2011 2010Price to Earning Ratio(inmillion)

10.13 16.15

10.13 16.15Price to Earning Ratio(in million)


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Cost Income Ratio:

Interpretation: Cost Income Ratio compares The Companys Operating Expense to itsOperating Income. The lower

Progress Analysis:

Interpretation: At the end of 2011, the number of depositors stood at 508,798 and theaccumulated deposit was Tk.82,186.98 million. The total number of investors stood at 67,117

and total investment extended to them was Tk. 77,714.95 million. During the year 2011 the totalincome was Tk. 11,332.59 million and total expenditure was Tk. 7,005.81 million. At the end ofthe year the profit before tax and provision stoodTk.4, 326.78 million.

0

0.05

0.1

2011

2010

2011 2010Cost Income Ratio 0.095 9E-05

Cost Income Ratio


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CORPORATE SOCIAL RESPONSIBILITY

CSR is an integral part of their corporate culture and ethics. They respond positively in everysphere of Social activities. They are delivering innovative solution to their valued customer andin the same manner they are also helping different areas of social activity through their CSRactivities. As a Shariah based financial institute, the Bank never forget its responsibilities to thesociety. 'AIBL School Students Scholarship' to the poor meritorious students is one of the greatexamples . To enhance social service as part of corporate social responsibility, the Bank hasfacilitated farmers & freedom fighters to open savings accounts with special facilities of giving

profit on daily balance and not realization Account Maintenance Fee from those accounts. TheBank has also originated School Banking to open savings accounts of school students (minor)with same facilities as offered to farmers and freedom fighters in operating their savingsaccounts. During the year 2011 they accomplished different humanitarian and social activitieswhich include allocation of fund Tk.2.07 Corer. Besides, they have taken a program to developmanpower and make them self employed as well as assisting them for employment in abroad.Besides these due to responsibility to the society, the bank distributed Solar Panels to poorfamilies in the rural areas, distributed blankets among the poor inhabitants of northern districtsof the country, donated life saving Blood Bags to Bangladesh Thalassemia Hospital, arranged

blood donation program for Thalassemia patients.


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FINDINGS

1. As Islami Banking is becoming more & more attractive day by day to peoplesirrespective of nations, religious, colors & species thats why AIBL is becoming popular.

2. As AIBL is based on shariah thats why it cant invest in all profitable sectors like other

commercial banks do. It doesnt do anything against Islami shariah.3. AIBL has acquired first position for preventing money londering.4. AIBL doesnt have one stop service. 5. In comilla AIBL has only one ATM Booth, which is not sufficient.6. Comilla Branch is not involved with foreign exchange directly.7. The rate of profit on investment and the rate of profit on deposit is not constant &

fluctuate time to time.8. AIBL provides evening banking service.9. AIBL doesnt practice offshore banking. 10. In current year(2012), AIBL comilla branch has already achieved 4.5 crore out of 5 crore

which has been targeted by the branch manager.

CONCLUSION

The success of bank depends on service delivery to its customer. Now, so many banks in ourcountry have emerged to cater to the needs of customer but most of the banks in Bangladesh areused to conventional banking system. In this case, AIBL is exception in this trend. From theoverall discussion, we found that AIBL provides various services to satisfy their customer. Wehave included the overall banking identity, branch identity, banking activities and we alsocalculate performance analysis of AIBL through ratio analysis. Finally, at the end of ourdiscussion, we see that although they have some limitations but AIBL can overcome thoselimitations by removing all the weakness to develop the product effectively & grab moreopportunity hidden in the banking industry & the bank should also increase the strength withtheir solid brand image, experience and skills of the employees. With their strength AIBL canalso reduce the threats existing in the market.


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APPENDIXAppendix-1:

Current Ratio

Item Formula 2011 2010CurrentRatio

Currentasset/currentliabilities.

7249796303/2819583077=2.57

4067349286/3665822832=1.109

Appendix-2:Debt Ratio

Item Formula 2011 2010DebtRatio

TotalDebt/TotalAsset

2819583077/7285422839=38.7%

3665822832/4104967444=89.3

Appendix-3:Loan Ratio

Appendix-4:Profit Margin Ratio

Item Formula 2011 2010PMR (Net

Income/Operating Income)*100

(70936900/742573298)*100=.095%

(60575/62691955)*100=.00009%

Appendix-5:Return on Assets

Item Formula 2011 2010ReturnOnAsset

(Netincome/Totalassets)*100

(426695150/7285422839)*100=5.85%

(39144612/4104967444)*100=.95

Item Formula 2011 2010LoanRatio

(Net loan/Totalassets)*100

(2405755505/7285422839)*100=33.02%

Nill


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Appendix-6:

Return on Equity

Item Formula 2011 2010Return

OnEquity

(Net income/Total

shareholders equity)*100

(426695150/44658397

62)*100=9.55%

(34144612/439144612)*

100=8.91%

Appendix-7:Earning Per Share

Item Formula(in millions) 2011 2010EarningPer Share

(Earning Available forShare Holder/No. of

Share)*100

3.73 4.14

Appendix-8Share Holder Equity on Total Asset

Item Formula 2011 2010SHEOTA

(Share HolderEquity/Total

Asset)*100

(4465839762/7285422839)*100=61.30%

(439144612/4104967444)*100=10.69%

Appendix-9:Price to Earnings Ratio

Item Formula(inmillions)

2011 2010

PTER Market Price Per

Share/Earning PerShare

37.80/3.73=10.13 66.8/4.14=16.15

Appendix-10:Cost Price Ratio

Item Formula(inmillions)

2011 2010

Cost

PriceRatio

Operating

Expenses/OperatingIncome

70936900/745132

98=.095

60657/62691955=

.00009


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Reference

AIBLs Annual Report -2011

Official web side of AIBL Documents Supplied by The AIBL Officials of Comilla Branch.

Special Thanks To

A.K.M. Fakrul Islam-Branch Manager( AL-Arafah Islami BankLimited, Comilla Branch).

Md. Fazle Mahmud Khondoker Senior Executive Officer &Power User, Accounts Departments.

Md. Sadekur Rahman- Front Desk Officer Md. Rafiqul Islam- Principle officer & Investment In-charge

Term Paper on AIBL

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