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Of
Al-Arafah Islami Bank Ltd (AIBL),
Bangladesh
Based on the study on 2012 Financial statement and business police
SUBMITTAD BY:
Asma Akhter
Program: Bachelor Business Administration
Student ID-240241
Session-09-10
Dhaka International University-DIU
Letter of Transmittal
Dear Sir,
Here is the report on titled the overall foreign exchange activities of Al-Arafah Islami Bank Ltd
(AIBL), Bangladesh-a comprehensive study. Prepared for you as a final report of the semester.
It took one month to prepare the report and I have tried to gather as much information as possible
within this limited time. Although the stipulated time is not enough to have in depth knowledge about
the real corporate world, this report give me much insight in Islamic banking practiced by the
conventional banks like (AIBL).
I would like to thank you for giving me the opportunity to prepare this report under your sincere
guidance and cooperation.
Thank you,
Sincerely yours,
Asma Akhter
Acknowledgement
A lot of concentration, effort, responsibility and study have been involved in preparing this paper into
realty. In preparing a report one need a number of assistance and guidance from reliable sources. This
report also stands on the basis of such efforts. I received active co-operation from the VP responsible
as a manager, 1st AVP Responsible as a second officer, Officer of Al-Arafah Islami Bank (AIBL).I
sincerely express my heart- felt gratitude to them for their co-operation, which helped me to conduct
and complete this report. They have provided us some important books on banking and some books
on marketing and finance sharing, consent and given some advice of making a research report.
However this report suffers from many shortcomings. Moreover, I have exerted my best effort in
preparing this report. We seek excuse for the errors that might have occurred in spite of my best
efforts.
Executive summary
TABLE OF CONTENTS
Page
Title Flyi
Title Page.ii
Letter of transmittaliii
Acknowledgementiv
Executive Summary.v
1.0
1.1
1.2
1.3
1.4
INTRODUCTION..1
Origin of the report.
Objective of the study..
Scope of the study
Methodology.
2.0 History of Al-Arafah Islami Bank Limited
2.1 Aims and Objective
2.2 Mission and Vision of AIBL.
2.3 Commitments.
3.0 MANAGEMENT OF AIBL
3.1 Planning
3.2 Organizing
3.3 Staffing.
3.4 Directing.
3.5 Controlling
3.6 Distribution of Branch..
3.7 The Financial position of AIBL.
3.8 AIBL Product Service ..
3.9.1Genenral Banking..
3.8.1 Foreign Exchange..
3.8.2 Services of the bank
3.8.3 Products of AIBL.
4.0 Banking system in Bangladesh
4.1 Corporate Information..
4.2 Financial Analysis of Al-Arafah Islami Bank ..
4.3 Performance of AIBL....
4.4 Progressive Analysis of AIBL..
4.4.1 Capital..
4.4.2 Deposit..
4.4.3 Investment
4.4.4 Grameen & Small Medium Enterprise (SME) Scheme..
4.4.5 International Trade
4.4.6 Investment Income.
4.5 . Economic Impact Analysis of AIBL:.
5
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:
a. General Objectives:
The general objective of this report is to fulfill the requirement of internship report.
To earn practical experience and knowledge about the banking operations and corporate functions
performed by Al- Arafah Islami Bank Limited.
b. Specific Objectives:
To submit a brief description about the performance of Al-Arafah Islami Bank Ltd.
To understand the various services the bank offers and to understand the mechanism of the
services.
Bank Ltd.
To suggest remedial measurement for the improvement of the whole process of the AlArafah Islami Bank Ltd.
To formulate recommendations that could add value to the service of Al- Arafah Islami Bank
Ltd.
5. Scope 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 as well as the foreign policy of their bank like- the
process of doing LC and export & import etc.
6. Information Needs
In order to conduct this research project and fulfill the research objectives the following information
will be required:
7
B) Secondary Data.
A sample survey was conducted to collect primary data using two pre-designed survey instruments
from concerned groups following an appropriate sample design.
8. 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.
a. Primary Source of Information
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:
a. Observation method
b. Interview method
Now mention some primary points: 8
a. Collection of Primary data: For collecting primary data personal interview technique
have been used through a set of organized and structured questionnaire with mostly closeended and open-ended questions as the instruments.
70 employees at different levels of Al Arafah Islami Bank Limited are interviewed through
formal and informal way.
b. Collection of Secondary data: In order to collect the secondary data different related
printed materials like corporate profile, annual report 2007-2008 and the official web site has
been followed. Moreover, various library sources like textbooks (Organizational Behavior,
Business Research, and Basic Business Communication) also have been used.
10. Data Processing & Analysis
After collecting all the required data, question area has been coded and data processing has been done
according to the employees personal information, experience, preference,
analyzing purpose. MS Word had been used to prepare graphical
With the objective of achieving success in the life here and hereafter following the way directed by
the Holy Quran and the path shown by Rasul (SM) Al Arafah Islami Bank Ltd was established
(registered) as a public limited company on 18 June 1995. It started business on 27 September of that
year with an authorized capital of Tk 1,000 million. At inception, its paid up capital was Tk 101.20
million divided into 101,200 ordinary shares of Tk 1,000 each. 23 sponsors of the bank subscribed
10
the total issued capital. In 2000, the paid up capital of the bank increased to Tk 253 million, of which
Tk 126.50 million were paid by the promoters/sponsors and Tk 126.50 million by the general public.
In compliance with the new provision, Al Arafah bank has raised its capital and reserve from Tk.
2245 million in the year 2007 to Tk 3049.34 million in 2008 by declaring 30% stock dividend out of
the profit of the 2008. The paid up capital of the bank has stood at Tk. 1383.81 million at 31 st
December 2008.
Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank.
100% of paid up capital is being owned by local shareholders. In 2008 the bank earned a net profit
before tax & provision of Tk. 1,528.10 million which is 102.08% higher than the previous year. The
bank is listed in the two
STOCK EXCHANGEs
subscription and trading by the public. Al-Arafah Bank is an interest-free shariah bank and its modus
operandi is substantially different from those of regular commercial banks. The bank however,
renders all types of commercial banking services under the regulation of the Bank Companies Act
1991. It conducts its business on the principles of musharaka, bai-murabaha, bai-muajjal and hire
purchase transactions. A Shariah Council of the bank maintains constant vigilance to ensure that the
activities of the bank are being conducted according to the precepts of Islam.
Objectives of AIBL:
Al-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the objectives t
implement and materialize the economic and financial principles of Islamic in the banking arena. The
objectives of AIBL are not only to earn profit, but also to do good and welfare to the people. The
main objectives of AIBL are listed below
up liftmen
To play a vital role in human development and employment generation
To contribute towards balances growth and development of the country through investment
operations particularly in the less developed areas
To contribute in achieving the ultimate goal of Islamic economic System.
11
12
Ours is a customers focused modern Islamic Banking making sound and steady
growth in both mobilizing deposit and making quality Investment to keep our
position as a leading Islamic bank in Bangladesh.
To deliver financial services with the touch of our heart to retail, small and medium
scale enterprises, as well as corporation clients through our branches across the
country.
Our business initiatives are designed to match the changing trade & industrial needs
of the clients.
d. MANAGEMENT OF AIBL:
For any financial and non-financial organization, Management are the most valuable and important
resources of any kind of organization. And, a well-organize management provides the organization to
reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling
of all financial and non-financial resources of an organization. Different aspects of management
practice in AIBL are discussed below.
Planning
AIBL has done its planning within the preview of the corporate plan. The overall planning approach
in AIBL is top to bottom. Each branch can plan according to the goal imposed by the corporate level.
It doesnt plan independently. And, AIBL has a planning sector. This department is mainly
responsible for the overall planning.
Organizing
AIB is organized as per the existing business locations. It has fifty branches, each of which is a
separate entity. Each unit is responsible for its own performance and each is headed at least by a
Senior Assistant Vice President (SAVP) in designation followed by Manager (Operations). He is
directly responsible for the performance of their unit. Within each branch, it is organized functionally.
Staffing
The recruitment in AIBL is done in two ways. One as a Provisional Officer for the management
program and it has a probation period of two years. Another one is non-management level as Trainee
Officers. Provisional Officers are recruited in officer category and their career path is headed
towards different managerial jobs.
Directing
The management approach in AIBL is top-down or authoritative. Each information seeks through
13
lower management layer. Works are designed in such a way that one cannot leave without clearing
the tasks as he is assigned for a day. Sitting arrangement in all offices is done in a way that the
superior can monitor the subordinate all time. Manager (HOB) and Manager Operation all time watch
the operation of the bank through CC camera. Security is maintained properly. Budgeting, rewarding,
punishing, etc. are also practiced as control mechanism.
Controlling
AIBL does not believe in the traditional banking. It tries to increase and maintain its market share in
the private banking sector through two types of control techniques:
Feedback control technique monitor outputs of a process and feed into the system to obtain desired
outputs. On the other hand feed forward control technique monitor inputs into a process to ascertain
weather these are as planned or not. If they are not, the inputs are changed in order to get the desired
result.
20. Distribution of Branches:
AIBL started its working at 161; Motijheel C/A with a Branch named Motijheel Branch on 27 th
September, 1995 was the first & main Branch of AIBL 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 36, Dilkusha (6 th, 7th, 8th & 9th
floor), Peoples Tower, Dhaka-1000. The age of the Bank is only 17 years and during this short period
of time, the Bank has established total 100 Branches 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
51
Chittagong Division
22
Rajshahi Division
Khulna Division
Sylhet Division
Barisal Division
Rangpur
4
14
Total
100
b. Foreign Exchange:
Letter of Credit Issue
Letter of Credit Advise
Bill of Negotiation
Foreign Remittance
c. Services of the Bank:
ATM Card Service
Online Banking
Lookers Service
d. Products of AIBL:
Cash management
15
Wire transfer
Automated clearinghouse (ACH) transaction
Bill presentment and payment
Balance inquiry
Funds transfer
Downloading transaction information
Loan applications
Investment activity
Other value-added services
12. The Banking System in Bangladesh
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4
nationalized commercial banks (NCB), 5 government owned specialized banks, 42 domestic private
banks, 11 foreign banks (including 7 Islamic Bank) and 2 non-bank financial institutions including 1
Central bank. The financial system also embraces insurance companies, stock exchanges and cooperative banks. The financial sector of Bangladesh is dominated by the commercial bank. A number
of national, private, foreign, specialized commercial bank and non-banking financial institutions
having a network of correspondents and branches are operating all over the country and abroad to
center to the people and business of the country. After the reform program, the financial institutions
are more systematic and borrowing and lending through formal markets is increasing. Apart from
normal commercial banking, banks are now providing consumer credit scheme, and financing in
industrial credit and development project. Electronic commerce gives the banking industry a real
competitive edge. The banking industry of our country has started its journey soon after the liberation
war in 1971. The early 70s, immediately after liberation, banking industry started its journey without
any participation of the private sector in a very restrictive financial system. In early 80s few privet
commercial banks were allowed to start functioning. Due to lack of experience and absence of
supervisory as well as controlling environment, 1st generation private banks faced various problems in
the next few years. During the late 80s and early 90s, with the passage of Financial Sector Reform
program, Banking Regulation Structure suggested by BIS and followed by developed countries began
to start incorporation into the banking regulations of Bangladesh. The following table shows a few
snap shots that indicates a brief history of the banking industry of Bangladesh.
2. Corporate Information:
16
Chairman
Badiur Rahman
Vice Chairman
Managing Director
Company Secretary
Md Moffazzal Hossain
Legal Status
Principal Activity
Commercial Banking
Registered Office
Date of Registration
18 June 1995
Opening ceremony
27 September 1995.
Authorized Capital
2500.00 million.
Paid up capital
1383.81 million
100%
Equity
2705.74 million
Number of Branches
100
Deposit
120,000.00 million
Investment
105,600.00 million
Number of manpower
2950
Number of shareholders
12013.
Phone
Fax
880-2-9569351
17
SWIFT
ALARBDDH
aibl@al-arafahbank.com
Website
www.al-arafahbank.com
Slogan
Logo
2005
2006
2007
2008
Authorized Capital
1000.00
2500.00
2500.00
2500.00
Paid up Capital
677.94
854.20
1153.18
1383.81
Reserve Fund
542.22
835.98
1091.95
905.33
Shareholders Equity
1220.16
1690.18
2037.50
2705.74
Deposit
11643.66
16775.34
23009.13
29690.12
Investment
11474.41
17423.19
22906.37
29723.79
Import
12631.60
1882.14
27042.72
32685.13
18
Export
4932.90
914.27
12714.91
20176.64
Total Income
1452.68
2172.48
2955.61
4387.26
Total Expenditure
904.48
1202.71
2199.43
2859.16
548.20
855.47
756.18
1528.09
262.90
470.02
347.31
668.24
Income Tax
215.10
385.45
235.53
590.66
Total Assets
15336.89
21368.17
30182.32
39158.44
Fixed Assets
208.00
215.11
334.48
396.76
387.80
550.24
30.12
48.29
4.89
26.00%
35%
20%
30%
No. of Shareholders
5402
4487
12013
10664
Number of Employees
771
912
1033
1080
Number of Branches
41
46
46
50
19
20
23
22
19
b. Reserved Fund
The total balance of the reserve fund stood at Tk. 835.94 million in the current year against Tk.
542.22 million compared to previous year 2005. In this fund, the bank experienced a growth rate of
54.18%.s
c. Capital Adequacy
The Bangladesh Bank has fixed the ratio of capital adequacy against Risk-Weighted Assets at 9.00%
in place of 8% in the month of September 2002. In 2002, the amount of total equity of the bank was
41.57 core taka, which stood at Tk. 104.27 core in the year 2004 & taka 1309.56 cores in the year
2005.This year it stood at taka 183.04 cores. At 31 December 2006, the capital adequacy ratio of the
bank is 10.71% against 12.17% at the same period of 2004.
21
Deposit Mix
16775.33
11643.66
10022.33
7012.12
Amount
(Million
Taka)
Year
8013.25
2004
2005
2006
2007
2008
Year
Bai-Murabha
Hire-Purchase
Under
28%
Shirkatul Melk
Bai-Muajjal
49%
Quard
1%3%
0%
0% 0%
16%
Bai-Salam
Mudaraba
Musharaka
Total
22
Industrial
25%
Commercial
Real Estate
Transport
51%
16%
4%
1% 3%2%
Agriculture
Others
Total
Investment Mix
17423.19
Amount
in
(Million
Taka)
11474.41
6030.25
Year
7045.8 7500.25
2004
2005
2006
2007
2008
3
Year
g. International Trade
At the year of 2006, the bank experienced satisfactory growth in the foreign trade. At the end of 2005,
the total amount of foreign trade (Export, Import and Remittance) was Tk. 18020.10 million; which
has increased at 60.18% to reach Tk. 28865.00 million in 2006. The total export of the bank was
Tk.4932.90 million in 2005, which has increased at 85.34% growth rate to reach Tk. 9142.70 million
in 2006, whereas the national growth was 85.34% during the same period. Similarly the amount of
import has increased from Tk. 12631.60 million of 2005 to Tk. 18821.40 million in 2006,
experiencing a growth rate of 49.80%. Last year the amount of remittance through the bank was Tk.
455.60 million, which grows to Tk. 900.90 million in the current year.
money laundering and establishment of Internal Control and Compliance. The prime objective of the
risk management is that the Bank takes well calculative business risks while safeguarding the Bank's
capital, its financial resources and profitability from various risks. In this context, the Bank takes
steps to implement the guidelines of Bangladesh Bank.
The failure may result from unwillingness of the counter party of decline in his/her financial
condition. Therefore, Bank's credit risk management activities have been designed to address all these
issues.
3. Economic Impact Analysis of AIBL:
Economic impact can be defined as any increase or decrease in productive potential of an economy.
By analyzing the economic impact we can understand how a bank adds value to the society.
Economic impacts can be broadly categorized as:
i)
Direct Impact
ii)
Indirect Impact
a. Direct Impact
Direct impacts are the immediate economic effects resulting from the banks financial transactions.
Banks direct contribution to the economy resulted in the creation of employment opportunities,
payment of tax to the government and maximization of shareholders wealth.
b. Indirect Impact
Indirect impacts are the spill over economic effects that occur through Banks normal course of
operations. Banks generate indirect impact by addressing the deficiency of capital in the economy by
mobilizing deposit and channeling the same to prospective investors.
Through catering financial services, the Bank helped distribute the wealth among all the stakeholders
for example shareholders received dividend, depositors and investors got profit, employees received
compensation and other benefits, the under privileged reaped benefits out of
General Banking
Customer
Relation
Desk-1
Customer
Relation
Desk-2
Clearing
Cash
Dispatch
(Nonoperating)
1. Buildup relation
with clients.
2. Account
opening
(operating)
Current A\C
Saving A\C
MSTD
MMSS
MHD
MED
3. Account
Closing
4. Issue cheque
book
5. Posting of
opening &
closing
accounts.
6. Proper
maintaining
of KYC
form &
1. Buildup relation
With clients.
2. Account
opening (nonoperating)
FDR
3. Profit giving
voucher issue of
FDR
4. Remittance:
Pay Order
TT
DD
1.
1. Cheque receives
for collection.
2. Cheque, PO,
DD, TT receive
for transfer.
3. Nikash
maintaining,
printing & copy
and validation
print.
4. LBC issue &
receive.
5. OBC issue &
receive.
6. IBCA/IBDA
issue & receive.
7. Preparing salary
sheet.
8. Issue
expenditure
voucher.
9. Different
statement
preparation
for Head
26
1. Receiving &
payment of
cash.
2. Signature
verifying.
3. Accounts
checking of
funds
sufficiency
for any
payment.
4. Maintaining
share
transactions.
5. Providing
income tax
certificate.
6.
Solven
cy certificate.
1. Provides
documents
sending with
date &
number.
2. Receive
documents
from courier.
3. Sends
documents
through
courier.
Issuing Bank
Confirming Bank
Negotiating Bank
It is the bank, which negotiates the bill and pays the amount
of the beneficiary. The advising bank and the negotiating
bank may or may not be the same. Sometimes it can also be
confirming bank.
Accepting Bank
Reimbursing Bank
c. Issuing Bank
The Issuing Bank or the Opening Bank is one which issues the credit i.e. undertakes, independent of
the undertaking of the applicant: to make payment provided the terms and conditions of the credit
provides for sight payment, or at with. The payment may be at sight if the credit provides for sight
payment or at maturity dates if the credit provides for deferred payment. Especially the issuing bank
should satisfy himself on the credit worthiness of the applicant. The credit application must be in
accordance with the Uniform Customs and practices for Documentary Credit (UCPDC) LC
publication no. 500 edition of 1993.
d. Advising Bank
The Advising Bank advises the credit to the beneficiary authenticating the genuineness of the credit.
The advising bank is generally situated in the country/place of the beneficiary.
e. Confirming Bank
A confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby,
undertaking the responsibility of payment / negotiation / acceptance under the credit in addition to
28
that of the issuing bank. A confirming bank normally docs so if requested by the issuing bank. When
the creditworthiness of the issuing bank is in doubt, beneficiary's bank may request the issuing bank
to give additional confirmation by another bank. It is said Add Confirmation in practices.
f. Negotiating Bank
A Negotiating Bank is the hank nominated or authorized by the issuing bank to pay, to incur a
deferred payment liability, to accept drafts or to negotiate the credit.
g. Reimbursing Bank
A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement of
negotiation / acceptance / payment lodged with it by the negotiating bank or accepting bank. It is
normally the bank with which the issuing bank has account from which payment is to be made.
Reimbursement claims in foreign exchange business settled by the Uniform Rules for
Reimbursement (URR)ICC publication no. 525.
2. Import Business:
Import trade in Bangladesh is controlled under the Import and Export control Act 1950. Authorized
Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E.
circular and other instructions from competent authorities from time to time. Import payments during
2007-08 amounted to US$ 21600 million (27.30% of GDP) compared to US$ 17157 million (25.10%
of GDP) in 2006-07 showing an increase of 26.0% in 2007-08 compared to 16.30% increase in 200607. The significant increase in the overall volume of imports stemmed from imports of capital goods,
consumer & intermediate goods, and imports by EPZs.
The Year Wise Import as Follows:
Year
2002
2003
2004
2005
2006
2007
Import
5559.27
5162.51
7698.29
9337.49
12631.60
18821.40
Business
29
The bank has to inform about the LC and goods to the Bangladesh Bank in Foreign Exchange
Regulation Act, 1947 form (IMP). And then the LC is closed.
C.prosediors Prepare a L/C
To prepare a L/C the branch takes care on the following points:
L/C Number
Shipment date
Presentation period
Applicant
Beneficiary
Advising Bank
Amount
Availability
Documents required
Payment
UCP
Bill of lading
Bill of Exchange
Pre-shipment Inspection
Data content
Special conditions
3. Export Business:
The goods and services sold by Bangladesh to foreign households, businessmen and Government are
called export. The export trade of the country is regulated by the Imports and Exports (control) Act,
1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of
goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of
Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to
export any commodity permissible for export from Bangladesh unless he is registered with CCI & E
and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year.
The ERC number is to be incorporated on EXP forms and other documents connected with exports.
The Year Wise Export as Follows:
Year
2002
2003
2004
2005
2006
2007
Export Business
2524.63
1894.77
31
3075.52
3639.34
4932.90
9142.70
L/C value shall not exceed the admissible percentage of net FOB value of relative Master
L/C.
32
The import L/C is opened for 75% of the value of Export L/C.
Arrangements are such that export L/C matures first then out of this export profit, import L/C
is paid out.
If all the documents are in order then the bank purchase the documents. Several things should
be checked at the time of purchasing.
How much back-to-back and PC (packing Credit) facility the client has taken.
After taking all these charges, the rest amount is paid to the client and a FDBP account is
opened.
Foreign documentary bills for collection signifies that the exporter will received payment only when
the issuing bank gives payment. The exporter submits duplicate EXP from and commercial invoice
subsequently.
4. Foreign Remittance
Foreign remittance plays a significant role in a banking system though economy system of a country.
Like other Al-Arafah Islami Bank Ltd also have a department of foreign exchange dealing. Mostly
US dollar, Euro, British pound and other remittances like Australian dollar, Canadian dollar,
Malaysian ringgit and currencies of Middle East have been dealing here. Other Al-Arafah Islami
Bank Ltd buys and sells all regular kinds of foreign currencies though foreign exchange department is
not available in all the branches of Al-Arafah Islami Bank Ltd.
a. Outward Remittance:
On March 24, 1994 Bangladesh Taka was declared convertible for current international transaction.
As a result remittance becomes more liberalized. Outward remittance include sale of Foreign
Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose.
Traveler's Cheque
Travelers Cheque (TC) is an instrument for a specific amount of widely accepted foreign currencies,
issued in favor of Travelers/ Visitors to carry foreign exchange for meeting heir expenses in abroad.
Traveler's cheque may be in different currencies, such as US Dollar, Pound Starling, Japanese Yen,
Saudi Riyal, Canadian Dollar, French Frank, German Marks, and Swiss Frank etc. But traveler's
cheque is not issued in this branch.
Issuance of Outward DD and TT :
ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or foreign
nationals as per their entitlement. But foreign TT and DD are not issued in this branch.
b. Inward Remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc. but
also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes, TC, DD
34
and similar instrument for protecting the bank from probable loss as well as safety of the bank
officials concerned. But this type of purchase is not done in this branch.
c. Collection of Foreign Currency Instrument: Principal Branch collects foreign remittance
through the following instruments on behalf of their customer
Money Gram
Express money
Instant cash
Placid express
Remit master
process of completion of the job. People are eager to help each other and people in general are
devoted to w
Quality: Al-Arafah Islami Bank strives to endow its customers with appreciable quality in every
service it provides. Customer satisfaction claims the highest priority, as it should be in any serviceoriented organization.
Adaptability :Al-Arafah Islami Bank draws its strength from the adaptability and dynamism it
possesses. It has quickly adapted to world class standard in terms of banking services. Al-Arafah
Islami Bank has also adopted state of the art technology to connect with the world for better
communication to integrate facilities.
Efficient Management
All the levels of management are solely directed to maintain a culture for the betterment of the
quality of the service and for developing a brand image in the market through the organizations wide
team approach and horizontal communication system.
Human Resource Expertise
One of the key-contributing factors behind the success of Al-Arafah Islami Bank is its HR who is
highly trained and most competent in their own respective fields. Al-Arafah Islami Bank provides its
employees with training both in-house and outside job.
Financial Strength
Al-Arafah Islami Bank is a financially sound company. As a result customers feel comfortable and
more secure while dealing with the bank. Its already established its position in the banking industry
of Bangladesh. They achieved a high growth rate accompanied by an impressive profit growth rate in
2006. The number of deposits and the loans and advances are also increasing rapidly from year to
year.
b. WEAKNESSES
Limited Workforce
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Al-Arafah Islami Bank has very limited human resources compared to its financial activities. There
are not many people to perform most of the tasks. As a result many of the employees are burdened
with extra workloads and works late hours without any overtime facilities. This might cause high
employee turnover that will prove to be too costly to avoid.
Liquidity Crisis
Average asset quality and tight liquidity position is another weakness of Al-Arafah Islami Bank
Limited. Banks asset quality is not up to the standard as SCB or CITI N.A. or Prime Bank.
Sometimes the bank faces liquidity crisis especially during the period of vacation which needs to be
checked by the bank otherwise the bank will be in deep trouble in near future.
Diversification
AIBL can pursue a diversification strategy in expanding its current line of business. The management
can consider options of starting client service in its merchant banking division.
Product line proliferation
In this competitive environment AIBL can expand its product line to enhance its Sustainable
Competitive Advantage (SCA). As a part of its product line proliferation, AIBL can concentrate more
on SME & Agro based industrial loan because these two sectors have huge potential.
d. THREATS
Multinational Banks:
The emergence of the multinational banks and their rapid expansion poses a potential threat to the
new PCBs. Due to the booming energy sector, more foreign banks are expected to arrive in
Bangladesh. Moreover, the already existing foreign banks such as Standard Chartered are now
pursuing an aggressive branch expansion strategy. These banks are establishing more branches
countrywide and are expected to get into for operation soon. Since the foreign banks have
tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of
grabbing the lucrative clients.
Upcoming Banks:
The upcoming private local banks can also pose a threat to the existing PCBS. It is expected that in
the next few years more local private banks may emerge. If that happens the intensity of competition
will rise further and banks will have to develop strategies to complete against an on slaughter of
foreign banks.
Mergers and acquisitions:
The worldwide trend of mergers and acquisition in financial institutions is causing concentration in
power in the industry and competitors are increasing in power in their respective areas.
Contemporary Banks:
The contemporary banks of AIBL such as Dhaka Bank, Prime Bank, Eastern Bank and Dutch-Bangla
Bank are its major rivals. Prime Bank and others are carrying out aggressive campaign to attract
lucrative corporate clients as well as big time depositors. AIBL should remain watchful about the
steps take by these banks as these will in turn affect AIBL strategies.
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Political Instability:
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 (esp. female
employees) in commuting to and from the office. Political instability also promotes a weak law and
order system leading to an increase in crime rate in the society. This might also be considered as a
potential external threat for a financial institution.
G. Ending Part of the Report:
1. Findings of the Study:
Some findings of Al-Arafah Islami Bank Limited, Uttara Model Town Branch are given below
In Foreign Exchange Department they follow the traditional banking system. The entire Foreign
Exchange procedures are not fully computerized.
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 is some
international bank in Bangladesh, they are very fast and very up dated.
The Al-Arafah Islami bank is too much centralized. For each and every work, branch office has to
get permission from the head office. The head office tightly controls each and every branch
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 effective marketing activities. Others banks have betters marketing strategy.
Al-Arafah Islami Bank Ltd has less amount of foreign exchange business compare to other
Banks.
2. 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.
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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.
Foreign exchange department should be fully computerized and reduce the paper based work
to make it more smooth and faster.
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.
At the beginning time of opening of Letter of Credit, every officer should check the required
documents very carefully whether there is any mistake or not.
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.
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.
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AIBL should Introduce Islami Debit and Credit Cards as soon as possible.
They should carryout 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 give the highest attention on recovery of bad things related to opening LC.
This concerns the worst image of the Bank to the clients
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.
3. 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. For this reason, Al-Arafah Islami Bank Limited has closed its bai mechanism. Now it is not providing investment under this mechanism.
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.
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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.
H. Appendix Part:
1. Bibliography
Ivancevich, John M., and Steven J. Skinner. Business for the 21st Century. Boston: Irwin, 2003.
Kotler, Philip. Marketing Management. 9th ed. New Delhi: Prentice-Hall, 1999.
Kinnear, Thomas C., and James R. Taylor. Marketing Research: An Applied Approach. 5th Ed. New
Delhi: McGraw Hill, 2003.
Annual Report, Al-Arafah Islami Bank Limited, 2008 - Published by AIBL.
A Journal of Islamic Banking Published by AIBL
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