Term Paper

Report
CORPORATE GOVERNANCE OF AL-
ARAFAH ISLAMI BANK LIMITED

Department of Economics
East West University
2009

1
 Prepared For
Dr. MUHAMMAD MAHBOOB ALI
Professor
Guest Faculty

Prepared By
A.B.M. Raihan Talukder
ID: 2007-2-30-019

Submission Date
January 1, 2010

A dissertation/report Submitted to the name of East West University, as fulfillment of

the partial requirement for the ECO 360 of ECONOMICS Program.

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 DECLARATION

January 1, 2010

I, do thereby declare that the term paper titled “Corporate Governance of Al-Arafah Islami Bank
Limited” submitted to the Dr. MUHAMMAD MAHBOOB ALI

for completion of the Course Code No. ECO 360. This is an original work of mine. No part of it, in any
form, has been submitted to any University or Institute for any degree, diploma or for other similar
purposes.

A.B.M. Raihan Talukder

ID: 2007-2-30-019

East West University

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 CERTIFICATE

January 1, 2010

I have the pleasure to certify that the report titled “Corporate Governance of Al-Arafah Islami Bank
Limited” has been prepared under my supervision and direction. To the best of my knowledge, it is the
researcher’s unique work.

I also certify that I have gone through the draft and final hand-written version of the study and now I
approve it for submission to the Dr. Muhammad Mahboob Ali Bangladesh as a partial fulfillment of the
requirements for the completion of the code no. 360.

Prof. Dr. Muhammad Mahboob Ali

Guest Faculty

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 ABSTRACT
Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to
be successful both in our mortal and immortal life. Therefore in every aspect
of our life we should follow the doctrine of Al-Qur'an and lifestyle of Hazrat
Muhammad (Sm.) for our supreme success. Al-Arafah Islami Bank started its
journey in 1995 with the said principles in mind and to introduce a modern
banking system based on Al-Qur’an and Sunnah.

This is an exploratory paper with the aim of determining the corporate

governance of Al-Arafah Islami Bank Limited. Corporate Governance is the
system of internal controls and procedures used to define and protect the
rights and responsibilities of various stakeholders. The bank has adequately
complied with all the corporate governance guidelines of Bangladesh bank
and SEC. It is ensured by the board that all activities and transactions of the
bank are conducted in compliance with international best practices to protect
the highest interest of all the stakeholders. Economy is better off by corporate
governance. Al-Arafah Islami Bank Limited should follow the BRPD
circulars to maintain the terms and conditions of corporate governance. I have
researched with this topic for three months. I have used secondary source and
it is a qualitative analysis. I have mainly used Annual Report 2008 of Al-
Arafah Islami Bank Limited as the source of this paper.

Key words: Corporate Governance, Al-Arafah Islami Bank Limited, BRPD circular, Bangladesh.

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 CONTENTS

A. Chapter: 1 07

1) Introduction 07

2) Literature review 08

3) Objective 09

4) Methodology 09

B. Chapter: 2 10

1) Present Status 10

2) Analysis of research 10

C. Chapter: 3 13

1) Conclusion 13

2) Recommendation 13

3) Limitation 14

Reference 14

Appendix 15

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CHAPTER: 1

INTRODUCTION
There is a broad agreement on the need for and importance of Corporate Governance. However, there is
no general agreement on its definition Examples of some definitions are as follows:

• Some experts define corporate governance as “the way directors and outside auditors handle
their responsibilities toward shareholders.” Others have defined it as “doing every thing better.”
The president of the World Bank was quoted as saying “corporate governance is about
promoting corporate fairness, transparency and accountability.”

• The system by which Companies are directed and controlled.

• The process and structure used to direct and manage the business and affairs of the Company
with the objective of enhancing shareholder value, which includes ensuring the financial viability
of the business. The process and structure define the division of power and established
mechanisms for achieving accountability among shareholders, the Board of Directors, and
management. The direction and management of the business should take into account the impact
on other stakeholders such as employees, customers, suppliers and communities.

• The systems by which business corporations are directed and controlled. The corporate
governance structure specifies the distribution of rights and responsibilities among different
participants in the corporation, such as, the board, managers, shareholders and other
stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.
By doing this, it also provides the structure through which the company objectives are set, and
the means of attaining those objectives and monitoring performance.

In essence, Good corporate governance is key to the integrity of corporations, financial institutions and
markets, and central to the health of our economies and their stability. Corporate governance indicates
the policies and procedures applied by firms to attain certain sets of objectives, corporate missions and
visions with regard to stockholders, employees, customers, suppliers and different regulatory agencies
and community at large.

This paper is about Corporate governance of Al-Arafah Islami Bank Limited. I choose Al-Arafah Islami
Bank Limited to work on Corporate Governance based on Al-Qur’an and Sunnah. It was founded in
1995.

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LITERATURE REVIEW
According to the Oxford English Dictionary states governance to be ‘‘the act or manner of governing,
the office or function of governing, sway, control’’. In this definition it is not to government and such
but rather to management as ‘‘handle, administer, run, supervise, look after, watch over, direct, head,
oversee, superintend, preside over, be in charge of . . .’’ This all seems to make sense to the lay user of
such words. (Kenneth Tombs, 2002). According to Tricker [1994], corporate governance is an umbrella
term that includes specific issues from interactions among senior management, shareholders, board of
directors, and other corporate stake holders. In its narrowest sense, the term may describe the formal
system of accountability of senior management to the shareholders. At its most expansive, the term is
stretched to include the entire network of formal and informal relations involving the corporate sector
and their consequences for society in general. The issues and challenges confronting business
corporations have rarely been as turbulent and unpredictable as they are today.

Although the Nineteenth century concept of corporate entity as distinct person still holds good and
exercises influence over business affairs every where. The concern about Corporate Governance which
includes changing pattern of distribution of share ownership, large scale corporate collapses in recent
past, auditing and accounting standards, lack of accountability, disclosures and transparency, adequacy
of board structures and processes, quality of directorial competencies, apparent lack of corporate social
responsibility, destabilizing impact of growth of the mergers and acquisitions, increasing incidents of
corporate fraud and the weakness of corporate self regulation have become more pressing than at any
time since the evolution of the joint limited liability concept. Shleifer and Vishny state that “Corporate
governance deals with the ways in which suppliers of finance to corporations assure themselves of
getting a return on their investment.” (1997, p.737), while Blair (1995, p.3) argues that corporate
governance implicates “ the whole set of legal, cultural, and institutional arrangements that determine
what publicly traded corporations can do, who controls them, how that control is exercised, and how the
risks and returns from the activities they undertake are allocated.” There are many definitions to the term
‘Corpo rate Governance.’ For instance, Milton Friedman (A famous economist, recipient of the 1976
Nobel Memorial Prize for Economic Science) has defined Corporate Governance as “Conducting
business in accordance with owners’ or shareholders’ desires.” The Auditor General of Australia, Pat
Barrett in November 2000 stated, “Corporate governance is largely about organizational and
management performance. Simply put, corporate governance is about how an organization is managed,
its corporate and other structures, its culture, its policies and the ways in which it deals with its various
stakeholders.” Corporate Governance is that which deals with the ways in which suppliers of finance to
corporations assure themselves of getting a return on their investment (Shleifer & Vishny, 1997). This
definition is very relevant because in the emerging markets, before making an investment, the investors
generally like to ensure that not only the capital markets or enterprises with which they are investing
competently, but they also have good corporate governance.

In other words, when investments take place, the investors want to be sure that not only is their capital
handled effectively and adds to the creation of wealth, but the business, decisions are also taken in a
manner that is not illegal or, that which does not involve a moral hazard. In a nutshell, we can conclude
that corporate governance is a topic recently conceived, yet ill defined and consequently blurred at the

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edges. Having a common global definition and a common global approach for corporate governance is
very difficult as the legal framework varies from country to country. However, it is high time to define
corporate governance as a subject, as an objective, or as a regime to be followed for the welfare of the
shareholders, employees, customers, bankers and indeed for the reputation and surveillance of ones’
nation and its economy.

OBJECTIVES
The report aims to cultivate and share knowledge and ideas in order to assist banking businesses to
enhance their corporate governance practice based on Al-Qur’an and Sunnah. And I try to find out the
core activities of Al-Arafah Islami Bank Limited in following Corporate Governance combined with Al-
Qur’an and Sunnah. Along with this I wish to know the activeness of the Corporate Governance of
AIBL and also its economy better off by the corporate governance. I also provide some policy
implications here which are combined by the Islami Sariah & Bangladesh government rules and
recommend some aspects to AIBL.

METHODOLOGY
To make out the best of this paper, I have considered secondary source and took information from the
Annual Report of Al-Arafah Islami Bank Limited 2008, BRPD circulars, books, journals and internet
etc.

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 Chapter: 2

PRESENT STATUS
Good corporate governance system is vital for efficient and effective business operation, long-term
stability, and sustainable growth for any organization. The corporate governance system in AIBL is
designed to ensure transparency and accountability at all levels in doing business. It also ensures that
duties and responsibilities are appropriately segregated between the board and management to provide
sufficient check and balance and flexibility for smooth business operations with Islami Shariah. The
board provides leadership and direction for the management, approves strategic and major policy
decisions and oversees management to attain predetermined goals and objectives of the bank. Integrity
and compliance throughout AIBL are encouraged by the board. The board also ensures that adequate
internal control systems are in place and that it is consistently complied with to provide reasonable
assurance that financial records are reliable for preparation of financial statements. The board further
ensures that quality of financial reporting is maintained, assets of the bank are safeguarded against
unauthorized use or disposition and accountability for assets and business transactions is maintained.

On the other hand, AIBL has many things to improve regarding BRPD Circulars and in social side. The
bank should increase emphasis on woman empowerment. There are no directors in the board. It is
noticeable. And the bank should focus on the workability of transparency and stakeholders’ rights. Bank
should improve in risk management and lending.

ANALYSIS OF RESEARCH
Issues involving corporate governance principles include:

• Effective boardroom performance

• Control and regulation
• Executive leadership
• The role and contribution of external (non-executive) directors
• The growing importance of governance in the wake of ever-greater corporate
scandals
• Redefinitions and reassessments of corporate governance models
• The role of business in society
• The changing nature of the relationship and responsibilities of the firm towards
various stakeholders
• The incentives required to encourage more socially- and environmentally-
responsible corporate action

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 • The role and impact of local and international regulatory agencies and regimes on
corporate behaviour.

AIBL has internal controls and internal auditors following the BRPD circulars. Circulars said banks
should have two sub committees: Executive committee and Audit Committee. AIBL has this. Though
there is concern about the audit quality but it is well published. In case of loan risk management they are
as usual of other banks. But this bank is cautious about the position, promotion and transfer orders
which should be made as the circulars principles.

This ongoing analysis mainly focused on BRDP circulars of Bangladesh Bank. These circulars are like
Bible of Banks. Banks must follow these circulars. With this ongoing analysis of AIBL’s Corporate
Governance, here I mention some Circular aspects and analyze the AIBL’s sincerity of following these:
1. The bank shall determine the objectives and goals and chalk out strategies and work plans on
annual basis.

AIBL is following this aspect and published it in Annual Report.

2. Lending and risk management should be in proper process.

This bank still has to improve in this side.

3. The board shall be vigilant on the internal control system of the bank in order to attain and
maintain satisfactory qualitative standard of its loan/investment portfolio.

The bank has strong internal control but it should follow the audit committee’s report more
efficiently.

4. Policies relating to recruitment, promotion, transfer, disciplinary and punitive measures, human
resources development etc. and service rules shall be framed and approved by the board.

Only policies should be made by the board and CEO would take decisions. This bank tries to
balance in this issue.

5. The annual budget and the statutory financial statements shall finally be prepared with the
approval of the board.

This is well followed by AIBL

6. There shall be no committee or sub-committee of the board other that the executive committee
and the audit committee. No alternate director shall be included in these committees.

AIBL has two sub committees: Executive Committee and Audit Committee as the Circular said.It
also have another committee which is Shariah Council.

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 7. The board shall appoint a competent CEO for the bank with the approval of the Bangladesh
Bank.

This bank appointed CEO with the permission of Bangladesh Bank.

8. In terms of the financial, business and administrative authorities vested upon him by the board,
the CEO shall discharge his own responsibilities.

It is a order from Bangladesh Bank and AIBL’s CEO discharge his responsibilities.

9. The recruitment and promotion of all staff of the bank except those in the two tiers below him
shall rest on the CEO.

This is well followed by AIBL The bored or the chairman of any committee of the board or any
director shall not get involved or interfere into such affairs.

10. Man and woman should work parallel. But in the board there are no woman directors. It was
found from the board and committees members’ name.

AIBL should focus on this more.

Commonly accepted principles of corporate governance include and role of AIBL here:

 Rights and equitable treatment of shareholders: Organizations should respect the rights of
shareholders and help shareholders to exercise those rights. They can help shareholders exercise
their rights by effectively communicating information that is understandable and accessible and
encouraging shareholders to participate in general meetings.

And AIBL publish its information and try to communicate with shareholders and wants to keep
their rights safe and secure.

 Interests of other stakeholders: Organizations should recognize that they have legal and other
obligations to all legitimate stakeholders.

AIBL follows the BRPD circulars to meet these obligations.

 Role and responsibilities of the board: The board needs a range of skills and understanding to
be able to deal with various business issues and have the ability to review and challenge
management performance. It needs to be of sufficient size and have an appropriate level of
commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix
of executive and non-executive directors.

In this case, AIBL follows the Bank Companies Act, 1991. And following this different circulars
were published by Bangladesh Bank.

 Integrity and ethical behavior: Ethical and responsible decision making is not only important
for public relations, but it is also a necessary element in risk management and avoiding lawsuits.
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 Organizations should develop a code of conduct for their directors and executives that promotes
ethical and responsible decision making. It is important to understand, though, that reliance by a
company on the integrity and ethics of individuals is bound to eventual failure. Because of this,
many organizations establish Compliance and Ethics Programs to minimize the risk that the firm
steps outside of ethical and legal boundaries.

This bank tries to follow all the integrity and ethical behavior. But the fact is it needs to be more
accurate in practicing these aspects.

 Disclosure and transparency: Organizations should clarify and make publicly known the roles
and responsibilities of board and management to provide shareholders with a level of
accountability. They should also implement procedures to independently verify and safeguard
the integrity of the company’s financial reporting. Disclosure of material matters concerning the
organization should be timely and balanced to ensure that all investors have access to clear,
factual information.

AIBL publish Annual Report annually to be transparent. And there are also other publications.

Without some aspects AIBL is flawless in following BRPD circulars and other social responsibilities.
And it is well known that the economy is bettering off from this kind of banks. AIBL plays a role in the
economy of Bangladesh. Following the corporate governance’s factors AIBL bettering off the economy.
If it is not following well of the Circulars’ order then it is easy to say that AIBL’s activities are not good
for our economy.

CHAPTER: 3
CONCLUSION
The study examined whether Al-Arafah Islami Bank Limited follows Corporate Governance perfectly.
As the time frame is short the paper finds few things to focus. It is an ongoing process. In future the
focus will expand and run through the social responsibilities too. But here we find a well balance
between literature review and AIBL’s activities. Few things need to focus and that are woman
empowerment, risk management and lending etc. But overall Al-Arafah Islami Bank Limited is going
well through Corporate Governance.

RECOMMENDATIONS
Analyzing on Corporate Governance with Al-Arafah Islami Bank Limited I founded some facts to
recommend. If these recommendations are followed well enough then this bank could follow Corporate
Governance fully. And economy will better off from this governance.

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  To become more shariah compliant.

 Thurst in SME investment.

 Support the huge investment in IT platform, branch and ATM network.

 Expand & diversify customer base.

 Efficient and productive resources and better risk management

 Woman empowerment is necessary

 Up-gradation of online banking.

 Development skill manpower through imparting training as part of CSR activities.

 Provide support to expand agricultural sector

 Sustainable growth with improved asset quality in corporate governance system.

LIMITATION
Bank, Secondary source, Time limitation etc.

REFERENCE
BRPD Circulars

Annual Report of Al-Arafah Islami Bank Limited 2008

http://www.scribd.com/doc/19759887/Corporate-Governance-and-Its-Implication

www.en.wikipedia.org/wiki/Corporate_governance

http://www.scribd.com/doc/7480825/Corporate-Governance-101-Bibi-Consulting

www.oecd.org/corporate

www.financialexpress.com/...corporate-governance/364843/

Books, Journals etc.

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APPENDIX:
1. BRPD circular No. 16

Banking Regulations & Policy Department

Bangladesh Bank

Head Office

Dhaka

BRPD Circular No. 16 Date: 24 July, 2003

Chairmen, Boards of Directors/Chief Executives

All Private Banks of Bangladesh.

Dear Sirs:

Restrictions in respect of responsibilities and accountabilities

Of the board of directors and the CEO of private bank.

Board of directors and management of a bank should comprise of the competent and professionally
skilled persons with a view to ensuring good and corporate governance in the bank management. It is
also inevitable to have specific demarcation of responsibilities and authorities between these controlling
bodies over bank’s affairs. In absence of specific division of responsibilities and authorities, even in
spite of these bodies being formed with skilled and efficient persons, the desired goals of an institution
cannot be achieved due to lack of transparency and accountability of all concerned. Such kind of
situation is more undesirable in an institution like bank-company as it deals with huge public money and
interest of the depositors.

In view of the above, rescinding the instructions as contained in BRPD Circular No. 09 dated 17
September 1996 on the captioned subject, the specific demarcation of responsibilities and authorities
among the board of directors, its chairman, Chief Executive Officer (CEO) of and adviser to the private
bank in respect of its overall financial operational and administrative policymaking and executive affairs
including overall business activities, internal control, human resources management and development
thereof, income and expenditure etc., along with lending and risk management issue outlined as
follows:-

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1. Responsibilities and authorities of the board of directors:

(a) Work-planning and strategic management:

(i) The board shall determine the objectives and goals and to this end shall chalk out
strategies and work-plans on annual basis, it shall specially engage itself in the
affairs of making strategies consistent with the determined objectives and goals and
in the issues relating to structural change and reorganization for enhancement of
institutional efficiency and other relevant policy matters. It shall analyze/monitor at
quarterly rests the development of implementation of the work-plans.

(ii) The board shall have its analytical review incorporated in the Annual Report as
regard the success/ failure in achieving the business and other targets as set out in its
annual work-plan and shall apprise the shareholders of its
opinions/recommendations on future plans and strategies. It shall set the Key
Performance Indicators (KPIs) for the CEO and other senior executives and have it
evaluated at times.

(b) Lending and risk management:

(i) The policies, strategies, procedures etc. in respect of appraisal of loan/investment

proposal, sanction, disbursement, recovery, reschedulement and write-off thereof
shall be made with the board’s approval under the purview of the existing laws,
rules and regulations. The board shall specifically distribute the power of sanction
of loan/investment and such distribution should desirably be made among the CEO
and his subordinate executives as much as possible. No director, however, shall
interfere, directly or indirectly, into the process of loan approval.

(ii) The board shall frame policies for risk management and get them complied with
and shall monitor at quarterly rests the compliance thereof.

(c) Internal control management:

The board shall be bigilant on the internal control system of the bank in order to attain and
maintain satisfactory qualitative standard of its loan/investment portfolio. It shall review at
quarterly rests the reports submitted by its audit committee regarding compliance of
recommendations made in internal and external audit reports and the Bangladesh Bank
inspection reports.

(d) Human resources management and development:

(i) Policies relating to recruitment, promotion, transfer, disciplinary and punitive

measures, human resources development etc. and service rules shall be framed and
approved by the board. The chairman or the directors shall in no way involve
themselves or interfere into or influence over any administrative affairs including
recruitment, promotion, transfer and disciplinary measures as executed under the

16
 set service rules. No member of the board of directors shall be included in the
selection committees for recruitment and promotion be different levels.
Recruitment and promotion to the immediate two tiers below the CEO shall,
however, rest upon the board. Such recruitment and promotion shall have to be
carried out complying with the service rules i.e. policies fee recruitment and
promotion.

(ii) The board shall focus its special attention to the development of skills of bank’s
staff in different fields of its business activities including prudent appraisal of
loan/investment proposals, and to the adoption of modern electronic and
information technologies and the introduction of effective Management
Information System (MIS). The board shall get these programs incorporated in its
annual work plan.

(e) Financial management:

(i) The annual budget and the statutory financial statements shall finally be prepared
with the approval of the board. It shall at quarterly rests review/monitor the
position in respect of bank’s income, expenditure, liquidity, non-performing asset,
capital base and adequacy, maintenance of loan loss provision and steps taken for
recovery of defaulted loans including legal measures.

(ii) The board shall frame the policies and procedures for bank’s purchase and
procurement activities and shall accordingly approve the distribution of power for
making such expenditures. The maximum possible delegation of such power shall
rest on the CEO and his subordinates. The decision on matters relating to
infrastructure development and purchase of land, building, vehicles etc. for the
purpose of bank’s business shall, however, be adopted with the approval of the
board.

(f) Formation of supporting committees:

For decision on urgent matters an executive committee, whatever name called, may be formed
with the directors. There shall be no committee or sub-committee of the board other tha the
executive committee and the audit committee. No alternate director shall be included in these
committees.

(g) Appointment of CEO:

The board shall appoint a competent CEO for the bank with the approval of the Bangladesh
Bank.

2. Responsibilities of the chairman of the board of directors:

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 (a) As the chairman of the board of directors (or chairman of any committee formed by the board
or any director) does not personally possess the jurisdiction to apply policymaking or
executive authority, he shall not participate in or interfere into the administrative or
operational and routine affairs of the bank.

(b) The chairman may conduct on-site inspection of any bank-branch or financing activities
under the purview of the oversight responsibilities of the board. He may call for any
information relating to bank’s operation or ask for investigation into any such affairs; he may
submit such information or investigation report to the meeting of the board or the executive
committee and if deemed necessary, with the approval of the board, he shall effect necessary
action thereon in accordance with the set rules through the CEO. However, any complaint
against the CEO shall have to be apprised to Bangladesh Bank through the board along with
the state ment of the CEO.

(c) The chairman may be offered an office-room, a personal secretary/assistant, a telephone at

the office and a vehicle in the business-interest of the bank subject to the approval of the
board.

3. Responsibilities of the adviser:

The adviser, whatever name called, shall advise the board of directors or the CEO on such issues
only for which he is engaged in terms of the conditions of this appointment. He shall neither
have access to the process of decision-making nor shall have the scope of effecting executive
authority in any matters of th bank including financial, administrative or operational affairs.

4. Responsibilities and authorities of the CEO:

The CEO of the bank, whatever name called, shall discharge the responsibilities and effect the
authorities as follows:

(a) In terms of the financial, business and administrative authorities vested upon him by the
board, the CEO shall discharge his own responsibilities. He shall remain accountable for
achievement of financial and other business targets by means of business plan, efficient
implementation thereof and prudent administrative and financial management.

(b) The CEO shall ensure compliance of the Bank Companies Act, 1991 and/or other relevant
laws and regulations in discharge of routine functions of the bank.

(c) The CEO shall report to Bangladesh Bank of issues violative of the Bank Companies Act,
199 or of other laws/regulations and, if required, may apprise the board post facto.

(d) The recruitment and promotion of all staff of the bank except those in the two tiers below
him shall rest on the CEO. He shall act in such cases in accordance with the approved
18
 service rules on the basis of the human resources policy and sanctioned strength of
employees as approved by the board. The bored or the chairman of any committee of the
board or any director shall not get involved or interfere into such affairs. The authority
relating to transfer of and disciplinary measures against the staff, except those at one tier
below the CEO, shall rest on him, which he shall apply in accordance with the approved
service rules, besides, under the purview of the human resources policy as approved by the
board, he shall nominate officers for training etc.

This circular is issued with the authority vested under section 45 of the Bank
Companies Act, 1991, which shall take effect immediately.

This directors of the bank shall have to be furnished with the copy of this circular.

Yours faithfully,
Sd/-
(Ahmed Ehteshamul Haider)
Deputy General Manager
Phone: 7120377

2. BRPD circular No. 12

Banking Regulation & Policy Department

19
 Bangladesh Bank

Head Office

Dhaka

BRPD Circular Letter No.12 Date: 18, August, 2008

03 bhadro.1415

Chief executive officer

All Bank-Companies working in Bangladesh except Foreign Banks.

Dear Sir,

Appointment Of Directors from the Depositors of Banking companies Rules, 2008.

On the above subject please refer to the Appointment of Directors from the Depositors of
Banking companies Rules, 2008 issued under the clause 15(5) of the banking companies act, and
through notification no.BRPD(R-1)717/208-462 dated 22 July 2008.

As per the stated rules you are advised to appoint 2(two) directors from the depositors in the
banking companies within 30 September 2008. Later on if the post is vacated initiative shall be taken to
appoint directors in this post within 15 days from the date of vacation.

Curriculum vitae, declaration as per annexure-A and personal information as per annexure-B of
the person nominated as director shall be attached while sending the proposal for appointment of
directors from the depositors to Bangladesh bank.

Please acknowledge receipt.

Yours faithfully

Sd/-

(Md.Jahangir Alam)

General Manager

Phone-7117825

Enclosed: 2(two) pages.

I, hereby, declare that as per section 15(5) of the banking companies act.1991 the Appointment of
Directors from Depositors of banking Companies Rule, 2008 and according to the fit and proper test
criteria set in the BRPD Circular No.11.2007 regarding appointment of Directors and Banking
companies am eligible for the post of Directors from the depositor of…..(name of the bank to be
mention)….I, further. State that:-
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1. I have not convicted by any court in any criminal offence or involved in any fraud/forgery,
financial crime or other illegal activities.
2. There is no adverse observation/comments against me verdict of the court of any civil/criminal
case.
3. I am not convicted in regard to contravention of rules, regulation or discipline of the regulatory
authorities’ financial sector.
4. I am not engaged with any political party.
5. I am not a defaulter of loan tax or bill.
6. I have not been involved with any company/firm whose registration/license has been revoked or
cancelled or which has goes into liquidation.
7. There are no loans taken by me or my allied concern from any bank or financial institution that
has been defaulted.
8. I have not been adjusted a bankrupt by a court.
9. I am not a director, officer/staff or advisor of any bank company, financial institution, insurance
company or stock exchange.
10. I never was a salaried staff or held an office of profit or a law advisor or an external advisor or a
director of the………(name of the concern bank)
11. I or my family members combine holding ……percent (zero to be mention in case of no holding
of share) share of paid-up capital of……(name of the concern bank) and except deposit and
holding. Percent (zero to be mention in case of no holding of share) share of paid-up capital I
have no business or profit oriented relationship in…..(name of the concern bank).

Date: Signature

( )

Chairman, board of
director….bank limited

21
 (Name of the Bank)

Information regarding proposed Director from Depositors

1. Name

2. Father’s name

3. Mother’s name

4. Spouse name (where applicable)

5. Date of birth

6. Business address (with telephone No.)

7. Permanent Address

8. Deposit account No. & type

9. National Id No.

10. Passport No.

11. Tax identification No.

12. Education qualification

13. Experience in years(in term of section 3(ka) of

BRPD circular No. 11/2007)

14. Date of first appointment(where applicable)

15. Date of last re-appointment(where applicable)

16. Date of interval between first appointment and last

re-appointment(where applicable)

17. Percentage of shareholding of the person and

his/her family members to the total shares of the
bank as per section 14 ka of the banking companies
act,1991(where applicable)

18. Particulars of business:

22
 Name of Registered Business Credit facility obtained
company/business address address
yes No
entity
Name of the
bank/financial
institution/others

Signature

(Managing director)

………Bank ltd.

Date:

23
 Compliance Report on SEC Notification
Status of compliance with the conditions imposed by the Securities and Exchange Commission’s
Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 issued under
Section 2CC of the Securities and Exchange Ordinance. 1969.

Compliance Status
(put in the Explanation for non-
Condition
Title appropriate compliance with the
No:
column) condition
Yes No
1.1 Board’s Size 
As per order passed by
Honorable high court
not to reconstitute the
Board in the writ-
1.2 (i) Number of independent director  petition no. 2472/04
and to maintain the
status quo in respect of
leave to appeal no.
759/04.
As per order passed by
Honorable high court
not to reconstitute the
Board in the writ-
1.2 (ii) Appointment of independent director  petition no. 2472/04
and to maintain the
status quo in respect of
leave to appeal no.
759/04.
1.3 Chairman of the board & CEO 
FS presents fairly its state of affairs,
1.4 (a) result of its operation, cash flows & 
changes in equity.
Proper books of account of the issuer
1.4 (b) 
company have been maintained.
Appropriate accounting policies have
been consistently applied in
preparation of the financial statements
1.4 (c) 
and that the accounting estimates are
based on reasonable and prudent
judgment.
International accounting Standards, as
applicable in Bangladesh, has been
followed in preparation of the
1.4 (d) 
financial statements and any departure
there from has been adequately
disclosed.
24
 The system of internal control is
sound in design and has been
1.4 (e) 
effectively implemented and
monitored.
There are no significant doubts upon
the issuer company’s ability to
continue as a going concern. If the
1.4 (f) 
issuer company is not considered to be
a going concern, the fact along with
reasons thereof should be disclosed.
Significant deviations from last year in
operating results of the issuer
1.4 (g) 
company should be highlighted and
reasons thereof should be explained.
Key operating and financial data of at
1.4 (h) least preceding three years should be 
summarized.
If the issuer company has not declared
1.4 (i) dividend (cash or stock) for the year, 
the reasons thereof should be given
The number of Board meetings held
1.4 (j) during the year and attendance by 
each director should be disclosed.
1.4 (k) Pattern of Shareholding 

The company should appoint a Chief

Financial Officer (CFO), a head of
2.1 
Internal Audit and Company
Secretary.
2.2 Requirement to Attend Board Meeting 

3.1 Constitution on Audit committee 

Number of member of Audit
3.1 (i) 
committee
As per order passed by
Honorable high court
not to reconstitute the
Board in the writ-
Inclusion of independent director in
3.1 (ii)  petition no. 2472/04
the Audit committee
and to maintain the
status quo in respect of
leave to appeal no.
759/04.
Fill in the casual vacancy in Audit
3.1 (iii) 
committee

25
 Selection of the Chairman of Audit
3.2 (i) 
committee
Qualification of the chairman of Audit
3.2 (ii) 
committee
Report by the Audit committee on its
3.3.1 (i) 
activities to the board of directors
Report to the board by the Audit
3.3.1 (ii) 
committee on:
(a) Conflicts on interests 
(b) Suspected or presumed fraud or
irregularities or material defect in the 
internal control system
(c) Suspected infringement of laws 
(d) Any other matter 
Reporting to the regulators by the
3.3.2 
Audit committee
Reporting to the shareholders and
3.4 
general investors

4.00 Statutory Auditors not engaged in: 

Appraisal or valuation services or
4.00 (i) 
fairness opinions
Financial information system design
4.00 (ii) 
& implementation
Book-keeping or other services related
4.00 (iii) to the accounting records or financial 
statements;
4.00 (iv) Broker-dealer services 
4.00 (v) Actuarial services 
4.00 (vi) Internal Audit services 
Any other service that the Audit
4.00 (vii) 
Committee determines

Directors’ Report

26
 Directors’ Report to the Shareholders as per condition No. 1.4 of SEC Notification No SEC /
CMRRCD / 2006-158 / Admin / 02-08 Dated 20 February 2006

The Directors also report that:

a) The financial statement prepared by the management of the company present fairly its state of
affairs, the result of its operation, cash flow and changes in equity.
b) Proper books of accounts of the company have been maintained .
c) Appropriate accounting policies have been consistently applied in preparation of the financial
statements and that the accounting estimates are based on reasonable and prudent judgment.
d) International accounting standards as applicable in Bangladesh have been followed in
preparation of the financial statements.
e) The system of internal control is sound in design and has been effectively implemented and
monitored.
f) There is no significant doubt upon the ability of AIBL to continue as a going concern.
g) There is a significant deviation in the operating result from the result of the last year. A
highlights along with reasons thereof are given below:

Growth
Particular 2008 2007
%
Investment income 3502.14 2243.15 56.13
Profit paid to Depositors 2220.47 1628.63 36.34
Net investment income 1281.68 614.52 108.57
Commission, Exchange & other income 885.12 712.46 24.23
Total operating income 2166.80 1326.98 63.29
Total operating expanse 638.70 570.80 11.90
Profit before tax & provision 1528.10 756.18 102.08
Provision on investment & others 269.20 173.34 55.30
Profit before tax 1258.90 582.84 115.99
Provision for taxation 590.66 235.53 150.78
Net Profit after tax 668.24 347.31 92.40
EPS 48.29 25.10 92.39

Investment income increased by 56.13% compared to previous year due to increase investment Tk.
668.10 crore in 2008 & optimum utilization of surplus fund. On the other hand profit pad on deposits &
borrowings increased by 36.34% compared to previous year inspite of deposits & borrowings increased
by Tk. 714.10 crore. The bank mobilized low cost fund as well as borrowing from Bangladesh Govt.
Islami bond fund amounting to Tk. 178.00 crore in the year 2008. As a result net investment income
increased 108.57% compared to previous year.
Commission exchange and other income increased by 24.23% compared to previous year as our foreign
exchange business increased 33.48% compared to previous year.
Total operating expenses increased by 11.90% compared to previous year.

h) Key operating and financial data of 5 preceding years have been presented in the Annual report.
i) AIBL has declared dividend.
j) The number of board meeting and attendance of director during the year 2008 is presented in The
Annual report.
27
 k) The pattern of shareholding along with the name wise detail of:

i. Parent/subsidiary/associated companies and other parties of: Nil.

ii. Director’s shareholding given below and Chief Executive Officer, Company Secretary, Chief
Financial Officer, Head of internal audit.

iii. In the top 5 salaried executive, Md. Abdul Jalil Mia, Executive vice president, have 368 share.

iv. Shareholder holding ten percent or more voting interest in the company as at 31 December 2008:
nil

Directors’ attendance in the board meeting for the year 2008

Sl Meeting
Name of The Directors Designation Attended Remarks
No. held
01 Al-Hajj Badiur Rahman Chairman 14 09
02 Al-Hajj Mir Ahmed Sowdagar Vice- Chairman 14 12
03 Al-Hajj Nazmul Ahsan Khaled Director 14 12
04 Al-Hajj Md. Harun-Ar- Rashid Kahn Director 14 12
05 Al-Hajj Ahmed Ali Director 14 13
06 Al-Hajj Abdul Malek Molla Director 14 12
07 Al-Hajj Hafiz Md. Enayet Ullah Director 14 13
08 Al-Hajj Kazi Md. Mofizur Rahman Director 14 14
09 Al-Hajj Abdul Moktadir Director 14 03
10 Al-Hajj Ahamedul Haque Director 14 10
11 Al-Hajj Abdus Samad Director 14 11
12 Al-Hajj Kh. Mesbahuddin Director 14 14

Statement of Shares held by Chief Executive Officer, Company Secretary, Chief Financial Officer
and Head of Internal Audit (as on 31 December 2008)

Sl No. of
Name of the Executive Status
No. Shares
01 M A Samad Sheikh Chief Executive Officer Nill
02 Md. Mofazzal Hossain Company Secretary & Head of internal Audit 650
03 Muhammad Nadim ACA Chief Financial Officer 550

Shariah Board of AIBL

Scholars of high repute with extensive experience in law, economics and banking systems and
specialising in law and finance as prescribed by Islamic Shariah make up the AIBL's Fatwa & Shariah

28
Supervision Board. The Board is appointed by the bank's Board of Directors. The Shariah Board
supervises the development and creation of innovative Shariah -compliant investment and financing
products and services. The Board is empowered to issue fatwas on any matter proposed to it by different
business units of the bank. The Shariah auditors ensure that all the transactions are carried out in strict
compliance to Islamic principles of banking. This framework along with a stringent compliance to rules
has made AIBL the pioneering organization to practice Islamic finance in true letter and spirit. The
name AIBL has come to signify innovation, financial dynamism, leadership and above all a complete
assurance that all the transactions are free from riba (interest).

The Board's Role

The Fatwa & Shariah Supervision Board oversees the application of different aspects of Shariah in the
Bank. It also ensures that all transactions are in strict compliance with the right of contradicting (fatwa)
any violating procedures, if found. The Board of Directors is obligated to obey the fatwas, irrespective
of whether a unanimous or a majority consensus secured the decision (clause ---- of the Bank’s
Memorandum & Articles of Association).
Board meetings are held periodically or whenever the need arises. The rights of the Board are enshrined
in Article Seven o the Bank's Memorandum & Articles of Association (Clauses).

Important Duties of the Shariah Board:

 As an expert source on Islamic Principles ( Including Fatwas), the Board through a

representative, usually the General Secretary of the Board, supervises the Shariah compliance of
all the transactions in the Bank.

 To devote time and effort to devising more Shariah -compliant transactional procedures,
templates and banking products that enable the Bank to adapt to market trends while
maintaining a high competitive edge in deposit procedures, investments, and banking services.
At the same time, the Board gives its opinion on proposed new templates, and banking
transactions.

 Analysing unprecedented situations that are not covered by fatwa, in the Bank's transactional
procedures or those reported by different departments, branches and even the customers. This is
to ensure Shariah compliance before the Bank develops any new products or implements any
new procedure.

 Analysing contracts and agreements concerning the Bank's transactions, as submitted by the
Chairman of the Board of Directors or any department/branch within the bank or requested by
the Board itself so that Shariah compliance can be evaluated and maintained.

 Ensuring Shariah compliance in the implementation of all banking transactions and correcting
any breaches.

 Analysing administrative decisions, issues and matters that require the Board's approval.

 Supervising Shariah training programmes for the Bank's staff.

29
  Preparing an annual report in the Bank's balance sheet with respect to its Shariah compliance.

The Fatwa & Shariah Supervision Board submits a complete annual report for the Board of Director,
summarizing all the issues referred to the Board, as well as its opinion on the Bank's transactional
procedures

Shariah Supervisors

The Clause ---- of the Bank's Memorandum & Articles of Association requires the Board of Directors to
appoint a Shariah Supervisor, responsible for monitoring all the Bank's transactional procedures and
assuring Shariah compliance.
Also the General Secretary of the Fatwa & Shariah Supervision Board, the Shariah Supervisor handles
queries about the Bank's administration from staff members, shareholders, depositors and customers,
liaises with the Shariah auditors and provides them with guidance. He submits reports and suggestions to
the Fatwa & Shariah Supervision Board and to the Chairman of the Board of Directors. The position
also calls for participation in the Bank's training programmes.

Shariah Auditing

The supervisory function forms a part of the Shariah Supervision procedures, its main task being to
check Shariah compliance under the guidance of the Shariah Supervisor.
The auditors continuously review the Bank's transactional procedures to ensure adherence to the
framework created by the Fatwa & Shariah Supervision Board. The Shariah auditors submit periodic
reports to the Shariah Supervisor so as to monitor and maintain Shariah compliance.

Auditor’s Report
Report of the Audit Committee of the Board as per Securities and Exchange Commission Notification No.
SEC/CMRRCD/2006-158/Admin/02-08, on Corporate Governance, dated February 20, 2006
30
The Audit Committee of the Board was duly constituted by the Board of Directors of the Bank in accordance with
the BRPD Circular Number 14 dated 25th June, 2003 of Bangladesh Bank.

The objectives of the Audit Committee are to assist the Board of Directors mainly in the following areas:

1. we have obtained all the information and explanations which to the best of our knowledge and
belief were necessary for the purposes of our audit and made due verification thereof;

2. in our opinion, proper books of account as required by law have been kept by the Bank so far as
it appeared from our examination of those books and proper returns adequate for the purposes of
our audit have been received from branches not visited by us;

3. the Bank's Balance Sheet and Profit and Loss Account together with the annexed notes 1 to 30
dealt with by the report are in agreement with the books of account and returns

4. the expenditure incurred was for the purpose of the Bank's business;

5. the financial position of the Bank at 31 December 2008 and the profit for the year then ended
have been properly reflected in the financial statements, the financial statements have been
prepared in accordance with the generally accepted accounting principles;

6. the financial statements have been drawn up in conformity with the Bank Companies Act 1991
and in accordance with the accounting rules and regulations issued by the Bangladesh Bank;

7. adequate provisions have been made for advances and other assets which are, in our opinion,
doubtful of recovery;

8. the financial statements conform to the prescribed standards set in the accounting regulations
issued by the Bangladesh Bank after consultation with the professional accounting bodies of
Bangladesh;

9. the records and statements submitted by the branches have been properly maintained and consolidated in
the financial statements;

10. the information and explanations required by us have been received and found satisfactory;

11. 80% of the risk-weighted assets have been reviewed spending over 3500 man-hours.

Hoda Vasi Chowdhury & Co. Syful Samsul Alam & Co.
Chartered Accountants Chartered Accountants
Place: Dhaka
Date: 12 March, 2009

31