ECONOMY ROUND-UP

The last two years have witnessed a gradual and noticeable improvement in the
economy. The upsurge in inward remittances, proactive policy initiatives on country debt
reduction, implementation of IMF program and negligible trade gap have led to a
progressive strengthening of the external account. These factors have led to a healthy build-
up of reserves and improved the investment outlook of Pakistan.

At the domestic level from the financial industry’s perspective, the emphasis on
monetary policy initiated in 2001 to reflate the economy continued resulting in surplus
liquidity in the banking sector and further lowering of interest rates.

Despite the foregoing positive catalysts to re-invigorate the economy, the real sector
continues to be plagued with subdued economic activity and an increase in unemployment
levels. There are multiple causative factors for the current situation as far as the real sector is
concerned. The large scale-manufacturing sector suffers from excess supply as a result of
heavy investments in the nineties. Discernable investment in recent times has been in
selective areas primarily oil and gas and textile exporting units. Domestic investment by
small and medium industries seems to be hostage to investor anxiety perhaps stemming
from geo-political and domestic political risk.

Fiscal measures to compliment the expansionist monetary policy need to be

crystallized and implemented to re-spark economic growth. The development of appropriate
fiscal measures, coupled with social and development spending program of GOP and
sustenance of good governance by the new government will be important for the future
economic revival.

Emanating from the operating environment and the monetary policy, the banking
system continues to reflect hefty investments in Treasury bills etc well in excess of the SLR
requirements. In response there is a marked change in the efforts of the financial fraternity to
explore new avenues to lend; consumer financing seems to be the flavor of the day. Factors
like skill, technology to originate and manage consumer loans in a cost effective manner,
development of a borrowing culture in individuals and evolving cost-effective legal and
collection framework and lastly job creation in the economy are needed for volumetric
growth in consumer financing. The impact of this on advances will however, be felt in the

1
longer term and in the interim low margins from the existing borrowing segments will
continue to pressure banks profitability.

EMERGENCE OF BANKING

The word “bank” is derived from “Bancus” or “Banque”. History of banking is

traced to 2000 B.C in Greece. Priest and Goldsmiths acted as financial agents by keeping
money and valuables of people in temples in strong safes. Thus, the first stage in the
development of modern banking was accepting of deposits of cash from those who had
surplus money with them.

The Goldsmiths issued receipts for the money deposited with them, which began
to pass from hand to hand in settlement of transaction as people had confidence in the
integrity and solvency of goldsmiths. The receipts were drawn on a way that it entitled
the holder to claim that specified amount of money from goldsmiths. These receipts were
the earlier bank notes. Thus the second stage in the development of banking was the
issues of bank notes.

The goldsmiths discovered all the people who had deposited money did not come
to withdraw their finds in cash, only a few people presented the receipts for encashment
during a given period of time and they also found that most of the money deposited with
them was lying idle. They also found they were being constantly requested for loan on
good security. They thus thought it profitable to lend at least some of the money with
them to needy persons. This proved profitable for them. Instead of charging interest from
deposits, they began to give them interest on money deposited with them. This was the
third stage in the development of banking.

Through experience, banks came to know that they could keep a small proportion
of total deposits for meeting demands of customers for cash and could easily lend the
rest. They allowed deposits to draw over and above than the money standing to their
credit. They thus allowed the overdraft facility to their deposits and this was the fourth
stage in the development of banking. Every bank issued receipts and most allowed

2
overdraft facility and this caused too much confusion the systems. In order to earn profits,
banks did not keep adequate reserves to meet demands of customers for cash. This failure
on the part of bankers to return money caused widespread distress among people.

In order to create confidence among the people, steps were taken to regulate the
banking. A conference was held in Nuremberg in 1548 where it was decided that a bank
should be set up by the state, which would streamline the banking organization and
technique. The first central bank was thus formed in Geneva in 1694. The responsibility
of issuing notes is now entrusted to a central bank in each country.

With passage of time, activities of commercial bank increased. They dealt with
large number of issues such as obtaining funds, advancing loans to business, farmers,
households, making investment in stocks, discounting bills of exchange etc. commercial
banks are now multi-service organizations and play a very important role in financial
markets.

3
 OVERVIEW OF THE FINANCIAL SECTOR IN PAKISTAN

The history of banking system in Pakistan dates back to independence of Pakistan in

August 1947 when various banks transferred their Head Quarters and funds to areas likely to
fall in India. This trend emerged due to dominant role of Hindus in pre-partitioned Indian
banking system.

According to various books there were 3496 branches of Indian scheduled banks in
the undivided sub-continent as on 1st March 1947 out of which only 487 branches were
located in areas presently constituting Pakistan. However the number of scheduled banks
drastically declined to 195 from 487 immediately after partition.

At the time of partition there were only two banks having the honor to be first
commercial bank of Pakistan namely Habib Bank Ltd., which was set up in 1941 with its
Head Office in India and the Australasia Bank Ltd., which was established in 1944 with its
Head Office in Pakistan.

By following the partition, an expert committee was set up and this committee
recommended that the Reserve Bank of India being the Central Bank of the undivided India
should continue to function as Central Bank of Pakistan and the Indian currency notes
would continue to be legal tender in Pakistan till 30th September 1948. Subsequently it was
decided to have separate Central Banks and the State Bank of Pakistan was set up and
started functioning from 1st July 1948.

Thus the history of Banking system in Pakistan started with the establishment of the
State Bank of Pakistan which was inaugurated by Quaid-e-Azam Mohammad Ali Jinah on
1st July, 1948. Consequently three banks were established which include Muslim
Commercial Bank Ltd. formed in September 1948. Bank of Bhawalpur in October 1948 and
National Bank of Pakistan in 1949. Habib Bank also transferred its Head Office from
Bombay to Karachi due to partition in August 1947 and it was assisted by the State Bank to
finance domestic trade of the country.

4
 BANK ALFALAH LIMITED

Bank Alfalah Limited was incorporated in June 21st, 1997 as a public limited
company under the Companies Ordinance 1984. Its banking operations commenced from
November 1st ,1997. The bank is engaged in commercial banking and related services as
defined in the Banking companies ordinance 1962. The Bank is currently operating
through 45 branches in 21 cities, with the registered office at B.A.Building, I.I.
Chundrigar, Karachi.

Since, its inception as the new identity of H.C.E.B after the privatization in 1997,
the management of the bank has implemented strategies and policies to carve a distinct
position for the bank in the market place. Strengthened with the banking of the Abu
Dhabi Group and driven by the strategic goals set out by its board of management, the
Bank has invested in revolutionary technology to have an extensive range of products and
services. This facilitates their commitment to a culture of innovation and seeks out
synergies with clients and service providers to ensure uninterrupted services to its
customers.

The bank perceived

the requirements of
customers and matches
them with quality products
and service solutions.
During the past five years,
bank has emerged as one of
the foremost financial
institution in the region
endeavoring to meet the
needs of tomorrow as well
as today. To continually

5
upgrade the quality of service to the customers, training of team members in all the
integral aspects of banking, customer service and IT was specially focused.

The portfolio concentrates on all aspects of conventional banking as well as the

financial needs of corporate sector. Dynamic and high value product includes Car
Financing, Home Financing, Rupee Travellers Cheques, Credits Cards, Debit Cards, On
line Banking, ATM and consumer Durables. In addition to this, Islamic Banking Division
is a recent initiative, which operates as separate branch. It offers Shariah Compliant
products through a network of five branches, which will increase to 50 by the year 2007.
The bank is committed to combine all it s energies and resources to bring high value,
security and satisfaction to its customers, employees and shareholder. The Bank has
invested in revolutionary technology to have an extensive range of products and services.
This facilitates commitment to a culture of innovation and seeks out synergies with client
and service providers to ensure uninterrupted services to it customers.

6
 VISION

“To be the premier

organizations operating locally
and internationally that
provided the complete range of
financial services to all
segments under one roof”

7
 MISSION
“To develop and deliver the
most innovative products,
manage customers experience,
deliver quality service that
contributes to brand strength,
establishes a competitive
advantage and enhances
profitability, thus providing
value to the stakeholders of the
bank

8
 BOARD OF DIRECTORS

H.E. Sheikh Hamdan Bin Mubarak

Al Nahayan
Chairman

Mr. Mohammad Saleem Akhtar Mr. Abdulla Nasser

Chief Executive Officer Hawalileel Al-Mansoori

Mr. Ikram Ul-Majeed

Mr. Abdulla Khalil Al Mutawa
Sehgal

Mr.Khalid Mana Saeed Al Otaiba Mr. Nadeem Iqbal Sheikh

9
 MANAGEMENT

Chief Executive Officer

Executive Incharge
Executive Incharge
Strategic Planning & Global
International &Treasury Division
Marketing
Executive Incharge Executive Incharge
Human Resources Division IT Division
Executive Incharge Executive Incharge
Credit Division System & Operation Division.
Executive Incharge
Executive Incharge
Credit Monitoring Division
Establishment & Administratration

Executive Incharge Executive Incharge

Business Development Division Legal Affairs Division.
S.A.M./ Car Finance/ Leasing
Executive Incharge
Executive Incharge
Finance Division
Audit & Inspection Division

Executive Incharge Executive Incharge

Corporate Banking, Islamic Banking Division
SME Financing & Home Loans
Executive Incharge
Executive Incharge
New Products &
Cards Division
Service Quality Division

10
NETWORK OF BANK ALFALAH LIMITED IN PAKISTAN

11
 The detail of Bank Alfalah Network in over Pakistan is as under:

Sr. No. Branch Phone Number

KARACHI

1. Main Branch 111-777-786

B.A. Building, I.I Chundrigar Road, Karachi 021-2414030-9

2. Clifton Branch, Karachi 021-583778-2

3. Korangi Industrial Area Branch, Karachi 021-5065701-2

4. Muhammad Ali Jinnah Branch, Karachi 021-7750627-30

5. Sharah-e-Faisal Branch, Karachi 021-4313536-8

6. Defence Branch, Karachi 021-5374330-5

7. Gulshan-e-Iqbal, Karach 021-4984937

8. Cloth Market Brach, Karachi 021-2401621-26

9. Jodiah Bazar Branch, Karachi 021-7532482-84

10. North Karachi Branch, Karachi 021-698760

11. KESC Branch, Karachi 021-2417515-9

12. Paper Market Branch, Karachi 021-2211353-8

13. North Napier Road, Branch, Karachi 021-7540067-68

14. S.I.T.E Branch, Karachi 021-2582114-16

15. PECHS Branch, Karachi 021-4535861-2

16. Timber Market Branch, Karachi 021-7750635-9

17. Bahadurabad Branch, Karachi 021-4128578-81

LAHORE

18. LDA Plaza Branch, Lahore 042-6306201-10

19. Defence Branch, Lahore 042-5729772-6

12
Sr. No. Branch Phone Number

20. Township Branch, Lahore 042-5114722-23

21. Gulberg Branch, Lahore 042-5877800-8

042-5757791-2

22. Circular Road Branch, Lahore 042-7638256-8

23. Badami Bagh Branch, Lahore 042-7708291-5

24. Allama Iqbal Brach, Lahore 042-5432961-3

25. Shah Alam Branch, Lahore 042-7673401-6

26. Shadman Branch, Lahore 042-7538116-8

27. Mall Road, Brnach, Lahore 042-7350033-35

RAWALPINDI

28. Main Branch, The Mall, Rwp. 051-5582288

051-566084-6

29. Satellite Town, Branch, Rwp 051-4424080-5

ISLAMABAD

30. Blue Area Branch, Islamabad 051-2275286

051-2270193
051-206986-7

Branches in Other Cities

31. Liaqat Road Branch, Sargodha 0451-724138-9

32. Sarwar Road Branch, Sahiwal 0931-73631-2

33. College Road Branch, D.I Khan 0961-711730-3

34. Saidu Sharif Road Branch, Mangora 0936-726745-6

35. Saddar Branch, Hyderabad 0221-786020-2

36. Islamia Road Branch, Peshawar 091-287051-5

13
Sr. No. Branch Phone Number

37. Cantt Branch, Peshawar 091-287051-5

38. Hospital Road, Nawabshah 0214-62127-9

39. Liaquat Bazar, DG Khan 0641-468201-4

40. Circular Road, Gujrat 0433-530219

41. Bank Road Branch, Mardan 0931-73631-2

42. The Mall Branch, Wah Cantt. 0596-539426-8

43. Circular Road Branch, Bahulpur 0621-889922-5

44. Cantt. Branch Jhelum 0541-610022

45. Abdali Road Branch, Multan 061-546792-6

46. Paris Road, Branch, Sialkot 0342-591741-43-44

47. Liaquat Road Branch, Faisalabad 041-617436-39

48. G.T Road Branch, Gujranwala 0431-255556-16

49. Frefre Road Branch, Sukkur 071-28173-75

50. Shahi Road Branch, Rahim Yar Khan 0731-84771-73-79

51. M.A Jinnah Road Branch, Quetta 081-827567

ISLAMIC BANKING BRANCH NETWORK

1. Islamic Banking Main Branch 042-5715241-5

66, Main Boulevard, Gulberg, Lahore

2. Islamic Banking Y-Block Branch 042-5746191-95

93-Y, Phase-3-C, DHA, Lahore Cantt

3. Islamic Banking Katchery Branch 041-603021-25

Kutchyery Bazar, Faisalabad

4. Islamic Banking Jinnah Avenue Branch 051-2879589

REDCO Plaza, 8-E, Blue Area, Islamabad

14
Sr. No. Branch Phone Number

5. Islamic Banking Uni Tower Branch 021-2472001

UNI Tower, I.I Chundriger Road, Karachi

6. Islamic Banking McLeod Road, Branch 042-7211640

Plot No. 13, McLeod Road, Lahore

7. Islamic Banking Faisal Arcade, Branch 0431-557301-5

G.T Road, Gujranwala

8. Islamic Banking Murree Road Branch

Near Ministry of Defence

15
ORGANIZATIONAL STRUCTURE

President (CEO)

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

Assistant Vice President

Officers Grade I, II, III

16
 Clerical Staff Non-Clerical Staff

Cashier Typist Clerks & Guards Messengers

Assistants

17
 GOALS & OBJECTIVES

Goals and objectives are factors through which the company’s devotion and
commitment to the job can be seen. If the goals are realistic and achievable, than surely
that organization is doing it’s job.

Bank Alfalah also has certain goals and objectives which it is trying to achieve,
through it’s various strategies and operations. The goals and objectives are mentioned
below:

1. To create a sound base, and through efficient systems achieve modern

banking through out Pakistan.

2. By the end of every accounting year there is an increase in deposits. As the

deposit rate of during 2002 was approx 52 Million and the same has been
increased in 2003 by 77 Million.

3. To create unit banking network in all the branches of Bank Alfalah, the
end of the year. This means that all the operations of the bank, i.e. deposits
to advances, imports, exports, L/C Opening, foreign currency and many
more aspects under one roof, so that the customer can be facilitate in one
visit.

4. Islamic Banking is one of the goals of Bank Alfalah though it has been
initiated in the last fiscal year and it is very acceptable for general public.
However, there is lot of work to do for successful implementation of the
Islamic Banking Plan. In this regard the Bank is opening specific Islamic
Banking Branch under the supervision of its Islamic Banking Division.

18
 STRATEGIES

Bank Alfalah has formulated certain sets of strategies to enable it to achieve its
goals and objectives. These strategies are mentioned below:

1. In order to achieve it’s goals of creating a sound base and presence of efficient
modern banking system, Bank Alfalah has started operation of Automated Teller
Machines in all the major areas like Karachi, Lahore, Islamabad and other cities of
Pakistan.

2. Bank Alfalah is committed to building long-lasting relationships through an

assertion to service excellence and providing innovative products to meet the changing
needs of our valued customers. Although still in its infancy, compared to the exalted
banking standards, Bank Alfalah, backed by a strong Abu Dhabi Group and inspired by
the vision of its Board and Management, has built up a strong customer base. The Bank
provides a full range of banking services to corporate clients, while applying leading
technologies. Today the Bank is well-positioned to provide appropriate banking services
to customers.

3. The main focus is building relationships and being known by the way they do
business. Management recognizes that a banking relationship requires compatibility,
communication, and cooperation and that each customer deserves nothing less than full
attention and available resources to meet their financial objectives.

4. Core value and corporate culture is based on the belief that superior personalized
service is the most important product. Bank is in the process of getting to know
customers by name and understand their business and personal financial needs. This one-

19
on-one, personalized service quality has served as Bank Alfalah's unique signature since
inception and continues to separate it from other financial institutions.

5. The Bank Alfalah team comprises of some of the most highly skilled and
professional financial experts in banking industry. Managers, lenders and trust advisors
offer the unique perspective of knowing and understanding in the local economy. The
Management focuses its attention on making informed and feasible economic decisions,
bringing better returns and more profitability for investors and customers.

6. Keeping in view the unrest among the Islamic Community on the Interest Bearing
Banking the Alfalah is in the process of target marketing and gives its full attention to this
segment of a large population over the world.

7. To acquire the reputation and status of bank which operates on international

standard, Alfalah Bank was to get the credit rating of Pakistan Credit Rating Agency,
which gave it the AA- and A1+ in the long term and short term respectively.

20
 ACCOUNTING POLICIES

Bank Alfalah is a scheduled commercial bank and is principally engaged in the

business of bak as defined in the Banking Companies Ordinance, 1962.

Basis of Presentation

In accordance with the directive of the Federal Government regarding the shifting
of the Banking system to Islamic modes, the State Bank of Pakistan has issued various
circulars from time to time. On permissible form of trade related mode of financing
comprises of purchase of goods by the banks from their customers and resale to them at
appropriate mark-up in price on deferred payments basis. The purchase and slaes arising
under these arrangements are not reflected in these accounts as such but are restricted to
the amount of facilities actually utilized and the appropriate portion of mark-up thereon.

Accounting Conversion

These accounts have been prepared using the historical cost convention in
conformity wit the accepted practice of banking institution in Pakistan.

Fixed Assets

Owned: Fixed assets are stated at cost less accumulated depreciation. Depreciation
is computed over the estimated useful lives of the related assets at varying rates and
methods depending on the nature of the assets.

The cost of the assets is depreciated on the diminishing balance method, except
for vehicles, carpets and renovation costs of leased premises, which are depreciated on a

21
straight-line basis. Depreciation is charged for the full month on purchase/acquisition of
assets while no depreciation is charged in the month of disposal of an assets.

Maintenance and normal repairs are charged to income as and when incurred.
Major renewal and improvements are capitalized. Gains and losses on disposal of fixed
assets are taken to the profit and loss account.

Leased: Assets held under finance lease are accounted or by recording the assets
and the related liabilities at the amounts determined on the basis of lower of fair value of
the assets and present value of minimum lease payments. Finance charge is allocated to
accounting periods in a manner so as to provide a constant periodic rate of charge on the
outstanding liability. Depreciation is charged on leased assets on the basis similar to that
of owned assets.

Investment

Investments are stated at cost, net off provisions made for diminution in value.
Profits and losses on sale of investment are dealt with through the profit and loss account
in the year in which they arise.

Advances

Advances are stated net off provisions for bad and doubtful debts. Specific and
general provisions for bad and doubtful debts are determined by the management kepping
in view the requirements of the Prudential Regulations issued by the State Bank of
Pakistan.

Foreign Currencies

Assets and liabilities in foreign currencies have been translated into Pak Rupees at
the rates of exchange approximating those ruling at the Balance Sheet date except those
covered by forward exchange contracts which are converted at contracted rates.
Exchange gains and losses are included in income currently.

Taxation

Provision for tax is based on applicable rates of tax after taking into account tax
credit available, if any.

22
 The Bank accounts for deferred tax, if any, taking into account major timing
differences, using the liability method. However, deferred tax is not provided it can be
established with reasonable probability that the timing differences will not reverse in the
foreseeable future.

Revenue Recognition

Income is recognized on accrual basis.

23
 PRODUCTS
COMPREHENSIVE AND DIVERSIFIED PRODUCT PORTFOLIO

With the mission to provide all-encompassing banking services to the customers,

Bank Alfalah has a uniquely defined menu of financial products. Currently it is one of the
most comprehensive portfolios of personalized financial solutions that are custom-
tailored to serve the requirements not only of conventional customers but also fulfill the
needs of the corporate sector:

 Car Financing
 Rupee Travellers Cheques
 Online Banking
 Credit Cards
 ATMs
 Home Financing
 Islamic Banking
 Corporate and Structured Financing

Car Financing

Car Financing is one of the major renowned product of Bank Alfalah and can be
utilized in terms of Financing of Used Vehicles, Loan against Car, Balance Transfer
Facility, Refinancing Facility (only for Alfalah Customers) and it is characterized in
terms of:

 Lowest Mark up

 Lower Insurance

 Quick Processing

 Lower Down Payment

24
Home Financing

Major features of Bank Alfalh Home Financing are

Lowest Mark-up, Quick Processing, Multiple Repayment
Options and Free Valuation. It has been bifurcated in terms
of “Home Buyer, Home Construct, Home Improver, Home
Balance Transfer Facility”.

 Financing Limit : upto Rs. 10,000,000/-

 Tenure : upto 20Years

 Equity Participation : 30% Borrower / 70% Bank

Rupee Travelers Cheques

Rupee Travelers Cheques are as good as cash and are accepted at the major shops,
travel agents, hotels business establishments and all over the country and abroad. This
service is being offered to facilitate instant fund availability to travelers and business people
who used to carry a large sum of money with them.

Credits Cards

Bank Alfalah Visa Card is everywhere and

globally acce pted and welcomed at locations
displaying the VISA logo. It is accepted at nearly 30
million merchants and 870,000 ATMs in
more than 150 countries around the globe
and over 10,000 establishments in Pakistan.
Alfalah VISA pays for shopping, travel,
entertainment, meals and much more.

Debit Cards

25
 Bank Alfalah Limited presents Alfalah HilalCard, the first Visa Electron
International Debit Card which gives an unlimited access to current / savings account
with a simple swipe, at millions of retail shops and ATMs, worldwide. The Alfalah Hilal
Card comes with a host of conveniences and benefits combined with the wide reach of
Visa Network enabling it to be accepted at more than 840,000 ATMs and 13 million retail
outlets around the world, making it the most acceptable Debit Card available in Pakistan.

On Line Banking

To provide enhanced and

value added products to customer
bank is constantly striving for
additional facilities. Bank provide
fully automated on-line telephone
banking facilities to its customers
enabling them to carry out banking
transactions like balance inquiries,
statement requests, product information and exchange rate.

Automated Teller Machine (ATM)

The bank offers 24 hours self service banking facilities to it customers on country
wide basis through deployment of Automated Teller Machine. This system allows the
banking facilities such as cash withdrawls, cash deposits, funds transfer, balance
inquiries, account statements. Electronic cash dispensing facilities are available in major
cities of Pakistan. All ATMs are linked through a state-of-the-art Satellite Based
Communication System which offers 24 hours real time service.

Islamic Banking

A separate division is a recently initiated, which operates as separate branch. It

offers Shariah Compliant products through a network of five branches, which will

26
increase to 50 by the year 2007. Islamic Banking has launched following products with
the perception that these are in accordance with the Sharia Principles.

a. Alfalah Masharaka Homes

b. Murabaha Finance

c. Aflalah Car Ijarah

Corporate and Structured Financing

The portfolio concentrates on all aspects of conventional banking as well as the

financial needs of corporate sector including dynamic and high value product.

 Loaning against securities

 Letter of Credit

 Letter of Guarantee

 Demand Finance

 Cash Finance

27
BOSTON CONSULTING GROUP (BCG) MATRIX FOR THE SBU’S

MARKET SHARE
HIGH LOW
GROWTH RATE

HIGH

Car
Financing Islamic
Home Banking
Financing
Online ATM
Banking
Debit Card
LOW

Deposits Rupee
Travelers
Investments Cheques

Credit
Cards

28
 ENVIRONMENTAL ANALYSIS
Any environment which interacts with the functions and operations of a company,
should be properly studied and evaluated so that the environment only benefits the
company rather than affecting it negatively. Like other institutions, Bank Alfalah also has
an environmental effect on its functions. Basically two types of environment effect the
bank operations, policies and strategies.

Micro Environment

Microenvironment is in fact the internal environment, which ahs an effect on the

functions of the bank. Micro environment of Bank of Alflah consiss of:

1. Deposits

2. Advances

3. Competitors

1. Deposits

Depositors are the main source of profit generation for

the bank. Alflah offers depositors number of incentive by virtue
of which they too care make same money. Alflah relies on
depositors & workers to increase their volume every year. This
is evident from the fact that the growth rate increased 48.40%
during 2002-03, as this growth rate is satisfactory it is a must
that this environment of deposit growth should not decline.

2. Advances

29
 Advances are basically what Alflah give to people asking for money. If there shall
be more people depositing money. There will be more asking for advances as well. Banks
tend to make profit by giving advances at a rate higher than what they owe to the
depositors. The difference is the banks profit. If the environment is healthy then more &
more people will be asking for advances for business and other options. It is also evident
from the fact that during the year 2002-03 the advances growth rate is 71.12%.

3. Competitors

Competitors should always be studied with great care, because competitors, can
greatly influence an organization position. Bank Alfalah has a lot of competitors because
in a short span of 5 year it has achieved what not many banks had achieved. This leads to
competitions. Similarly Bank Alfalah should keep a tag on the competitors move or any
other new technology it is introducing, because to sustain in the micro environment, a
competitor has to be viewed with a lot of care.

Macro Environment

Every organization is subject to general trends prevailing in the environment. For

the success of the organization these trends are of significant importance and must be
thoroughly studies. Bank Alfalah faces the following factors in connection with its macro
environment:

1. Demographic Sector

2. Economic Sector

3. Technological Sector

4. Social Sector

5. Political Sector

30
 HUMAN RESOURCE MANAGEMENT

Human Resource Planning

At Bank Alfalah Limited, Human Resource Planning involves a decision making

in three areas of combined activites:

Step-I The bank identifies its organizational needs and then acquires a
right king of human resource accordingly.

Step-II Bank motivates them to achieve excellent performance by giving

them different sorts of targets according to their job requirements.

Step-III It also creates an interactive link between the employee goals and
the organizational goals.

Job Description

It is descriptive in nature and constitutes a record of existing and additional job

facts. The order of job description is as follows:

• Job identification

• Job summary

• Duties performed

• Supervision given and received

Recruitment and Selection

Bank Alfalah Limited recruits three kinds of employees:

1. Top Level Management

2. Trainee Officers

3. Contractual Basis Employees

31
Training and Development

In Bank Alfalah Ltd. the process of Training and Development consists of various
other activities like:

a. Training:

i. The appraisal form of an employee indicates the areas in which the

employee should be trained and developed. It also elaborates the
abilities of an employee.

ii. Management and Organization Development Division of each region

timely reviews the employees and recommends them for training
during the operations it they note any discrepancy between the desired
and actual performance. This review is performed after every quarter.

iii. Upon the request of GM (Operation), indicates which sort of training

is needed in a particular region regarding the Operation Support and
Service

b. Development:

i. Management Skill Training,

ii. Special Training for Foreign Transferred Employees,

Performance Appraisal:

It is a structured discussion between employee and supervisor. It provides an

opportunity for the supervisor to recognize an employee’s achievement, offer suggestions
for improvement when needed, discuss job responsibilities, define objectives, counsel for
career advancement, and justify a pay adjustment. Regarding the performance appraisal,
bank adopts both type of approaches.

32
 a. Traditional Approach:

The traditional approach is primarily concerned with the overall

organization and its past performance. In Bank Alfalah, overall
performance is reviews at branch level. Each branch is liable to show its
performance in a positive direction according to set goals.

b. Development Approach:

This approach viewed the employees as individuals and has been forward
looking through the use of goal setting. All the employees in the each of
the branches are given a performa. Every employee working in the bank is
assigned targets, usually their target are in the form of amount. The
performances of all the branches are reviewed in the end of December. Till
yet Bank Alfalah, has no computerized system to assess the performance
of employees

Performance Appraisal Process:

The performance appraisal process in the Bank Alfalah Ltd. consists of four inter-
related steps:

i. Establish a common understanding between the manager (evaluator) and

employee (evaluate) regarding work expectations, mainly the work to be
accomplished and how those work are to be evaluated.

ii. Establish ongoing assessment of performance and the progress against

work expectation.

iii. Formal documentation of performance through the completion of a

performance and development appraisal form appropriate to the job
family.

33
 iv. The formal performance and development appraisal discussion, based on
the completed appraisal form and ending in the construction of a
development plan.

Reward Management

Reward Management elaborates how people are rewarded in accordance with

their value to an organization. It is concerned with both financial and non-financial
rewards. A reward system of an organization consist of integrated policies, processes and
practices for rewarding its employees in accordance with contribution, skill and
competence and their market worth.

In Bank Alfalah the elements of reward management system are consists of Basic
Pay; the fixed salary or wage which constitutes the rates for the job. This rate is varied in
a skill based or competence based system according to the individual’s skill or
competence. The rates are fixed by managerial judgement of what is required to recruit
and retain the employee.

In Bank Alfalah there is no any concept of individual performance related pay

except to the Business Development Officer. Business Development Officers are those
who are hired at contractual basis. They are assigned different targets. If they exceed to
the targets they can enjoy the individual performance related pay otherwise they are fied.

There is no concept of bonuses, commission or over time related pay. The official
timing of bank is 09.00 AM to 06.00 PM but almost all of the employees have to work till
near 08.00 PM. However, for this additional work they are not getting any additional
bonuses / over time.

34
 SWOT ANALYS I S

STRENGTHS

Since, inception of Bank Alfalah, it has moved rapidly in expanding branch

network and deposit base, along with making profitable advances and increasing the
range of products and services bank have made a break-through in providing premier
services at an affordable cost to our customers.

Bank Alfalah has been awarded an AA- (double A minus) and an A1+ (A one
plus) in the long and short term respectively by the PACRA. These rating denote very
high credit quality and very low expectation of credit risk.

The main source of a financial institution is public savings in this regard public
confidence plays a vital role. So, the confidence of customers are the main strength of
Bank Alfalah.

In order to maintain an effective communication of information regarding the

need of valued clients bank has designed its website to be as user-friendly as possible.
This facilitates to pursue the path of excellence and customer satisfaction through
delivering higher quality of services, thereby adding synergy to our existing management
expertise, financial strength and profitability. Hence, it’s a channel of communication for
the delivery of quality products and services that enhance value to our stakeholders.

WEAKNESSES

As per Bank policy, advertising and publicity is not extensively emphasized.

Through advertisement customers could be kept abreast with the products and services.

The main focus of Bank is major cities of Pakistan. It is direly needed to extend
its network and people should be educated about the functioning of bank. Since, Bank
Alfalah has strong set up in UAE and Middle East, therefore, specifically those areas of

35
Pakistan should be targeted where large number of people are working abroad. Hence,
bank could avail an excellent deposit rate by using its annual budget specified for
network extension.

OPPORTUNITIES

The life cycle of an organization is comprised of threats as well as opportunities.

If we say, today the rates of challenges are too high but simultaneously the rate of
opportunities is also high. It is mandatory to try to make progress with consistency as
well as to adapt changes with the needs of time, in order to cope up with both conditions.

In the prevailing scenario, Bank Alfalah could penetrate further and could capture
various corporate customers in addition to the retail customers by expanding their
network.

In addition to the excellent routine banking, it has earned a good name by offering
special products like car financing, home financing and credit card. So, the penetration of
these products could enhance the market share.

In the rapidly growing industry of Pakistan, launching of another SBU, Alwarid

Mobile will be an excellent addition towards the credibility as well as enhancement of
Bank Alfalah’s market share.

Bank Alfalah has launched another division known as Islamic Banking. This new
aspect will also attract a large number of people, who don’t want to deal with interest
bearing banking. Hence, it’s a new opportunity where competitors are limited.

THREATS

While doing business, threats are part of the game. Especially, in this era, most of
the financial institutions are working as Private Limited Company and facing or have a
fear of threat from their competitor as well as new entrants.

36
 In order to maintain as well as to enhance the market share, banks always try to
introduce new schemes / packages. Hence, the environment is very much innovative and
adaptive to the needs of customers.

Though Bank Alfalah has a strong footing and maintain a good number of loyal
customer, still bank has threats in various sectors:

a. In Car Financing MCB & UBL are threats however, the expected
car financing of ABN Ambro could also be a threat for Bank
Alfalah.

b. In Home Financing Union Bank or to some extent NBP are

threats.

c. In credit cards, Bank Alfalah captured the market share of Citi

Bank and Standard Chartered Bank. Till yet the bank has no
prominent threat. But, the launch of Askari Bank Master Card and
Union Bank Card might be threat after some time.

37
 MANAGERIAL PRACTICES

Aggressive Banking

Bank alfalah expanding their network of Islamic Banking. Bank Al Baraka has been
serving the Islamic banking sector since 10 years and they have only 5 braches in
Pakistan. On the other hand bank Alfalah has established 20 branches in a year.

Motivation

Bank Alfalah motivating their employees by giving them comprehensive benefits and
professional environment within the organization, which enhances the performance of the
employees. Bank motivates their employees by giving 3 bonuses in a year.

BENEFITS

Monitory Benefits

Monitory benefits are given to the employees on the basis of their performance like salary
rise, cash prize.

Grade Promotion

Bank also provides benefit to their employees in the form of grade promotion. Grade
promotion motivates the employee to do their work efficiently and effectively.

Abroad Posting

Bank benefit their employees by sending them on overseas posting where they can
enhance their professional skills and get handsome financial benefits in terms of salary or
fridge benefits.

Controlling

Bank has proper setup of controlling the day to day transactions and operational affairs.
Bank controls the operations through a proper check and balance system and properly
monitor the daily work.

38
Internal Control Unit

Bank has an Internal Control Unit that monitors the daily transactions within the
organization and keeps informing the management about the rules and policies violation.
Internal control unit has a proper check and balance on operations and other bank
departments.

Internal Audit

Internal audit is a tool to have a proper check on daily working in a bank. Internal auditor
has to point out the discrepancies found during audit. Internal auditors hand over the
audit report to the audit chief and he hand over that to the management. Management
overlook all the discrepancies and try to reduce the violation and also took the necessary
actions. Internal audit conducted in a bank twice a year.

External Audit

External auditors are the representatives of state bank of Pakistan. State bank assigned
them to audit the banks the find out the lapses or discrepancies according to the rules and
regulations of state bank of Pakistan. State bank imposed penalty on bank if they found
any discrepancies related to banking practices or procedures. External auditor hand over
the audit report to state bank of Pakistan and SBP handover the report to the management
along with the debit advice in form of penalty and management overlook the
discrepancies and take necessary actions. External audit conducted once in a year. Bank
Al Falah has a Chartered Accountant Company on his panel who prepare and overview
the financial reports of the bank Taseer Hadi & Co. is a chartered firm which is on the
panel of Bank Alfalah.

39
0
CUSTOMERS PROBLEMS

It seems that the priority is given to the corporate customers in Bank Al Falah as the
individuals from middle class have to remind the management of certain branch to do the
needful for them. Customer is the king and customer always right. Bank is earning profit
from the customers. Bank should have a proper relationship with corporate as well as
individual customers. It is recommended that the management should stress on having
satisfactory relationship with individual customers because they can also provide the
revenue in term of profit.

EMPLOYEES PROBLEMS

1 Insufficient Employees
To compete in the banking industry Bank Al Falah should have enough
employees to facilitate the customers, and divide the workload of the existing
employees by hiring new people, because the bank cannot use the alternative
to reduce the number of customers and loosing the market share.

2 Working Hours
Bank Al Falah although providing the customer service in better way but there
is a lot of work to do in a routine banking to the employees due to which they
work for long time. Management should gave relaxation to the employees by
hiring new professionals and reduce the working hours.

40