MBA-Internship Report - M A A MASUM, 1005004

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.

i
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
Comilla University
Comilla-3503
SUBMITTED BY

MD. ABDULLAH- AL- MASUM

ID: 1005004
Session: 2010-11
MBA Program (HRM)
Comilla University
Comilla-3503

September 20, 2013


ii
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


iii
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
Comilla University


iv
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



v
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.
Its 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 2
nd
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.



vi
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 6
th
position. On the other hand in deposit growth rate
it archived a 2
nd
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.


vii
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


viii

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 1 1. .3 3 S Sc co op pe e o of f T Th he e R Re ep po or rt t 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


ix
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


x
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.

1


2
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 I nvestment: A Study of Al- Arafah I slami 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


3
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 customers.

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.


4
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.


5


6
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-Quran 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 6
th
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 13
th
September, 2013)
Deposit 118,683.39 Million
Investment 106.650.42 Million
Number of Employees 2110
Number of Shareholders 52739


7
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.


8
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.


9
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 Banks 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.


10
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 27
th
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 (6
th
, 7
th
, 8
th
& 9
th
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 (3
rd
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


11
2.10 FORM OF ORGANIZATION

Figure 1: Form of AIBL

BOARD OF DIRECTORS
SHARIAH COUNCIL
EXECUTIVE COMMITTEE
AUDIT COMMITTEE
MANAGEMENT COMMITTEE


12
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)


13
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


14


15
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.


16
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


17


18
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-ISTISNAA (PRE-SHIPMENT FINANCE)
The Istisnaa 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
Istisnaa 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 31
st
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
31
st
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
1
9
4
5

2
2
1
9

2
3
3
0

2
5
1
9

2
7
1
0

2
8
9
9

3
0
1
1

3
0
7
4

3
1
7
3

3
2
6
0

3
3
4
0

3
4
4
2

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
3
2
,
6
8
5
.
1
3

3
4
,
0
7
4
.
8
0

5
5
,
9
3
4
.
1
0

7
6
,
1
1
2
.
1
0

7
1
,
9
3
1
.
7
0

2
0
,
1
7
6
.
6
4

2
3
,
4
5
6
.
1
0

3
2
,
5
4
6
.
4
0

5
2
,
2
0
2
.
1
0

1
1
,
9
3
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
9
3
.
1
5

5
,
3
0
5
.
6
4

7
,
6
8
5
.
5
8

1
1
,
3
3
2
.
5
9
1
6
,
6
9
2
.
5
8

2
,
8
6
5
.
0
5

3
,
5
7
5
.
8
1

4
,
4
6
2
.
3
1

7
,
0
0
5
.
8
1

1
1
,
9
3
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
3
0
6
.
3
4

3
4
8
.
8
9

5
4
8
.
2

9
6
9
.
7
7

7
5
6
.
1
8

1
,
5
2
8
.
1
0

1
,
7
2
9
.
8
3

3
,
2
2
3
.
2
7

4
,
3
2
6
.
7
9

4
,
7
5
5
.
5
4

Figure 12: Operating Profit
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
1
6

1
5
.
5

2
6

3
5

2
0

3
0
.
0
0

3
0
.
0
0

2
6
.
0
0

2
1
.
0
0

1
7
.
0
0

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
2
9
6
9
0
.
1
2

3
8
3
5
5
.
5

5
3
8
8
2
.
9
6

8
2
,
1
8
6
.
9
8

1
1
8
,
6
8
3
.
3
9

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 11332.5
9
Cost of Services and Supplies (10618.44) (6037.5
0)
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 Current
Account
Mudaraba Savings
Deposit
Other Mudaraba
Deposit
Mudaraba Term
Deposit
Bills Payable


43

2008 2009 2010 2011 2012
2
,
7
0
5
.
7
4

3
,
5
6
4
.
7
3

9
,
7
9
0
.
3
6

1
1
,
9
8
9
.
1
1

1
4
,
0
5
0
.
6
9

2
9
,
6
9
0
.
1
2

3
8
,
3
5
5
.
5
0

5
3
,
8
8
2
.
9
6

8
2
,
1
8
6
.
9
8

1
1
8
,
6
8
3
.
3
9

2
7
,
7
4
2
.
5
8

3
6
,
1
3
4
.
0
8

5
3
,
5
8
2
.
9
6

7
7
,
7
1
4
.
9
6

1
0
6
,
6
5
0
.
4
2

1
,
5
2
8
.
1
0

1
,
7
2
9
.
8
3

3
,
2
2
3
.
2
7

4
3
2
6
.
7
8

4
,
7
5
5
.
5
4

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 itll generate more income. The problem is that the banks
loans arent always repaid. Plus, the bank has to repay deposits on request, so having a ratio
thats 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 isnt 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. Thats 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%). Thats mean AIBLs 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
Thats mean the principal amount will be obtained within 3years and 6 months.

DISCOUNTED PAYBACK PERIOD:
Present Value Discounted Cash Outflow Cumulated Amount
PV in 1
st
year= 1581818 1581818
PV in 2
nd
Year= 1438017 3019835
PV in 3
rd
Year= 1307288 4327123
PV in 4
th
Year= 1188525 5515648 (4
th
Year)
PV in 5
th
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 1
st
year= 1581818
PV in 2
nd
Year= 1438017
PV in 3
rd
Year= 1307288
PV in 4
th
Year= 1188525
PV in 5
th
Year= 1080745

NPV= (1581818+1438017+1307288+1188525+1080745+)-6000000
NPV = 5,96,393 which is positive and good for bank. Thats 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


ii
REFERENCES

Articles/Books:
Khan, Dr. Azizur Rahman, Bank Management: A Fund Emphasis, 8
th
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

I nternet:
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


iii
GLOSSARY
Bai-Istisnaa: 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 customers 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.


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 Quran 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.


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 customers money from a branch
of one bank to another branch of the sane bank or to a branch of another bank through
telephonic message.

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Department of Management Studies

Comilla University, Comilla

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