Al-Arafah Islami Bank

An Internship Report
On

A critical analysis of investment policy

Of

Al-Arafah Islami Bank

Limited
Prepared For:
Prof, Md Ashraf Hossain
Dean
School of Business
Asian University of Bangladesh

Prepared By:
Name
: Md Ruhul Amin
Program : BBA
Batch
: 33
Section : B
ID
: 200820163
Department of finance

Date of submission: 07/09/2012.

This report is submitted as the partial fulfillment of
BBA program
1

Al-Arafah Islami Bank

Dedication

Dedicated to my Parent

Al-Arafah Islami Bank

September, 07, 2012

Wahiduzzaman Khan
Assistant Professor
Department of Marketing
Asian University of Bangladesh
Subject: Submission of internship report
Dear Sir
I have pleasure to submit my internship report on the Al-Arafah Islami bank limited.

The report paper based on Investment Management & Performance Evaluation of Al-Arafah
Islami Bank Limited has helped me to increase my understandability on management of

credit as well as Performance Evaluation for 4 years and all of its related aspects. During
preparing this report paper I have enforced my best effort. Surely it enriches my
knowledge and promotes my study. I have also learnt much about the dynamic business
world.
I have thoroughly enjoyed preparing this project. If you need any clarification I will be
obliged to provide you with further information.
Thanking you,
3

Al-Arafah Islami Bank

Yours Sincerely,
(..)
Md Ruhul Amin
Batch-33th, ID-200820163
Department of Finance
Asian University of Bangladesh

This is to certify that Md:Ruhul Amin bearing ID No. 200820163, BBA Program,
Department of Finance, Faculty of Business Administration, Asian University Of
Bangladesh has successfully completed her Internship Program & prepared the report on
Al-Arafah Islami bank limited" within the time period May,29 -2012 to August,30-2012

with utmost sincerity and devotion.

I wish him every success in life.

_______________________

Wahiduzzaman Khan
Assistant Professor of Marketing
Asian University of Bangladesh

Al-Arafah Islami Bank

At first, I express a lot of thanks to my almighty Allah Who make me able to prepare this
report. I would like to acknowledge the guidance and effort of Internship and placement
committee 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
Mr. Wahiduzzaman Khan Lecturer, School of Business, Asian University of Bangladesh
(AUB). None of his co-operation it would have been possible to prepare the report into a
nice ending.
I would also like to acknowledge and thanks the following personnel who has extended
their whole-hearted co-operation for preparing the report.
Finally, I would like to convey my heartiest thanks and gratitude to all of my teachers,
friends, and many others who extend their support to prepare the report.

Al-Arafah Islami Bank

Preface
We shall be benefited of by our education if we can effectively apply the institutional
education in practical fields. Hence, we all need practical education to apply theoretical
knowledge in real world. By considering this importance arranges internship program
each semester compulsory for the students of Bachelor of Business Administration to
complete the requirement of the course. As a part of this program my topic of the study
was selected as A critical analysis of investment policy of Al-Arafah Islami Bank
Limited..

I tried my best to conduct effective study by collecting current data. Even though if
mistake appears, it is truly undesirable. So I would request to look at the matter with
merciful eyes.

Al-Arafah Islami Bank

Through this Internship report an attempt has been made to assess the performance of AlArafah Islami Bank Limited (AIBL). Basically this report has been developed from the
basis of secondary data. The sources of information are annual report of the bank,
internet, newspaper, magazine etc. My experience also helps me to establish this report.

Banking is a system of intermediation. Modern commercials banks since their early days
had been doing two main functions. These are Acceptance of deposits from the public and
lending money to the people.

Based on nature of these services, they may be classified as under

(a) agency services: collection and payment of cheques, payment on behalf of customs,
purchase and sale of stocks, acting as trustees, acting as agency
(b) General services: opening letter of credit, safe custody, dealing in foreign exchange,
providing Investment reports, underwriting of loans, providing remittance facilities,
complete service in foreign trade.
The structure of the banking system has changed substantially over the last few years..
Presently, Al-Arafah Islami Bank Ltd. has got 57 braches and a total of 850 employees
working in AIBL (as of June 20010). Its authorized capital is Taka 300 crores and the
paid-up capital is Taka 85.40 crores.

Al-Arafah Islami Bank

The bank conducts its business on the principles of islami sarih. Musharaka, BaiMurabaha, Bai-Muajjal and Hire Purchase investment modes are approved by
Bangladesh Bank. Naturally, its mode and operations are substantially different from
those of other conventional commercial banks.
AIBL strives hard to optimize profit through conduction of transparent business
operations with in the legal and social framework with malice to none and justice for all.

Part

Contents
Dedication
Acknowledge
Preface
Executive Summary

Part: 1

Part:2

Part:3

Page No
ii

Introduction
Background of the Study
Objective of the Study
Scope of the Study
Methodology
Limitations
Banking Overview

v
vi
vii-viii
X
Xi
Xi
Xii
Xiii
Xiii
Xiv
Xv

Introduction
Overview of Banking Industry
Concepts of Islamic Banking
Islamic Banking around the World
Islamic Banking in Bangladesh
Objective of Islamic Banking
Organizational Overview
History of AIBL
Special features of AIBL
Chairman & Directors of AIBL
Executive Committee of AIBL
Audit Committee
Members of Shariah Council
Hierarchy of the Executive Body of AIBL
Branch Location all over Bangladesh
Graphically AIBL Countrywide Branches
Shariah Board
Corporate Culture
Information Technology of AIBL
8

Xvi
Xvi
Xix
Xx
Xx
Xxi
Xxi
Xxiv
Xxv
Xxvi
Xxvii
Xxvii
Xxvii
Xxviii
Xxiv
Xxx
Xxxi
Xxxi
Xxxi

Introduction of Report

Al-Arafah Islami Bank

Part:4

Part:5

Part:6

Part:7

Part:8

Part:9

Welfare Projects of AIBL

Classification of Bank product
Services of Al-Arafah Islami Bank Ltd:
General Banking
Introduction of General Banking
Cash Section
Account Opening
Cheque Clearing
Local Remittance
Various Types Of Deposit Account
Clearing Department
Clearing House
Foreign Exchange Division
Introduction of Foreign Exchange
Import
Export
Foreign Remittance
Investment Division
Introduction of Investment Division
Investment Policy
Investment Facility Parameters
CIB
Loan Classification
Marketing Strategies of AIBL
Vision of AIBL
Mission of AIBL
Marketing Strategies
SWOT,Analysis,Findings,Recommendation& Conclusion
SWOT Analysis
Findings & Analysis
Recommendation
Conclusion
Bibliography & Reference
Bibliography
Reference

Xxxi
xxxii
Xxxv
Xxxvi
Xxxvii
Xxxvii
Xxxviii
Xli
Xli-xlii
Xlii-xlv
Xlv
Xlvi
Xlvii
Xlviii
xlviii-l
Xliv-li
lii
Liv
Lv
Lv-lviii
Lviii
Lix
Lx
Lxi
Lxii
Lxii
Lxii
Lxiii
Lxiv-lxv
Lxv
Lxvi
Lxvii-lxviii
Lxiv
Lxx
Lxxi

Al-Arafah Islami Bank

Chapter 1: Introduction

1.1

Introduction

1.2

Background of the Study

1.3

Objective of the Study

1.4

Scope of the Study

1.5

Methodology

1.6

Limitations

Introduction
10

Al-Arafah Islami Bank

1.1 Introduction:
Banking is one the most competitive industries of Bangladesh that has seen a huge
amount of growth during the last decade. A large number of new banks have made
their places in the industry and yet there are more to register in the list. In such a
highly competitive service industry, the importance of customer satisfaction cannot
be de-emphasized.

To keep pace with this situation, we need banking knowledge for future career. If we
want to build our career in banking area, only theoretical knowledge would not help us.
As internship program is established to gather practical knowledge regarding various
sector of economy, I chose to get practical knowledge regarding banking sector and I
select Al-Arafah Islami Bank as my organization to work.
The duration of my program was 3months and during this period, I have learned many
things. I observed that there is a great difference between theoretical knowledge and
practical knowledge. I learned many terms, functions and nature of banking activities. I
also get practical knowledge regarding organizational environment.

1.2 Background of the Study:

To supply well-versed graduates Asian University Of Bangladesh is conducting
BBA program with good reputation. Each of the professional degree needs practical
knowledge of respective field of discipline to be fruitful. To complete BBA program
also has an internship, relating to the exchange of theoretical knowledge into the
real life practical situation. The main purpose of the preparation of the report is due
to the partial fulfillment of the internship program conducted by the Department of
Business Administration, Asian University Of Bangladesh.
During the Internship Program, I was under the supervision and guidance of
Wahiduzzaman Assistant Professor, Department of Business Administration, Asian
University Of Bangladesh assigned to prepare a report about particular topic
among some option which should be relevant to my practical knowledge within
11

Al-Arafah Islami Bank

these 3 months tenor. To fulfillment of the internship program the report is
originated entitled The process and the challenges of retail products.

1.3 Objective of the Study:

The main objective of this study is to have some practical exposures that will be helpful
for my Final year courses in the BBA Program.
To achieve the broad objective the following specific objectives has been attained:

To find out the marketing strategy of Al-Arafah Islami Bank Ltd Bank Ltd.

To find the financial performance of Al-Arafah Islami Bank Ltd Bank Ltd.

Analyzing the performance of the bank

To find out the different banking procedures of the branch.

To know the competitive strength and weakness of the bank.

To know the marketing and expansion strategy of bank that can help to face the
potential threats and opportunities.

To know the technological advantage and lacking of this bank in the modern
banking system.

To find out the relations among the various department.

To make a bridge between the theories & practical procedures of banking day-today operations.

To make possible recommendations for the internship organization to improve the

services & service range so that the department can cater to the needs and
demands of customers.

1.4 Scope:
12

Al-Arafah Islami Bank

The study encompasses the overall banking activities, management, organizational
structure, credit facilities & Foreign Exchange Division, Retail banking of Al-Arafah
Islami Bank.
I have got the opportunities to see the internal work environment as like their thought,
their behavior, their services as well as with their strategies that they follows, which was
really helpful for me.

1.5 Methodology:
In order to carry out this study, two sources of data and information have been
used:

1.5.1 Primary data:

Primary data were collected through discussions with the executives & officials of the
AIBL, which has been presented in the report.

1.5.2 Secondary data:

Annual Reports of 2007-2008 of Al-Arafah Islami Bank Bangladesh Ltd.
Desk report of the related department

Manuals

of Al-Arafah

Islami

Remittance)

13

Bank

Bangladesh

Limited

(Foreign

Al-Arafah Islami Bank

1.6 Limitations:
The study report consists of few limitations:
The report has been conducted within a limited time frame.
The study is self financed.
To analysis SWOT of emerging market is a wide spread survey material. However,
time constraint restricted the report to specific feature.
Banks policy of not disclosing some data and information for obvious reason, which
could be very much useful.

Chapter 2: Banking
14
Overview

Al-Arafah Islami Bank

2.1

Introduction

2.2

Overview of Banking Industry

2.3

Concepts of Islamic Banking

2.4

Islamic Banking around the World

2.5

Islamic Banking in Bangladesh

2.6

Objective of Islamic Banking

2.1 Introduction:
15

Al-Arafah Islami Bank

A bank is a financial institution whose main objective is the mobilization of fund from
the surplus unit to deficit unit. In the process of acceptance of deposits and provision of
loan, Bank creates money. This characteristics feature sets bank apart from other financial
institutions.
Bank is very old institution that is contributing toward the development of any economy
and is treated as an important service industry in modern world. Now a day the function
of bank is not limited to within the same geographical limit of any country. Due to
globalization and free market economy, this industry is facing severe competition in any
country and implementation of WTO will further increase competition. The overall
performance of Bank does not only depend upon the banking industry itself but also on
the performance of economy where it is operating.

2.2 Overview of Banking Industry:

After the surrender of the Pakistani forces on 16th December 1971, the government of the
Peoples Republic of Bangladesh formally took over the charge of the administration of
the territories now constitute Bangladesh. In order to rehabilitate the war devastated
banking system of Bangladesh, the government promulgated a law called Bangladesh
Bank (temporary) Order, 1971(Acting Presidents Order No 2 of 1971). By this order the
State Bank of Pakistan was declared as Bangladesh Bank and the offices, branches and
assets of the said State Bank was declared to be deemed as offices, branches and assets of
Bangladesh Bank. It was also declared by the aforesaid Order that all currency notes and
coins issued by the said State Bank and government of Pakistan .

The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are
Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign
banks and the rest five are Development Financial
Institutions (DFIs). Sonali Bank is the
16

Al-Arafah Islami Bank

largest among the NCBs while Bank Asia is leading in the private ones. Among the 12
foreign banks, Standard Chartered and HSBC has become the largest in the country.
Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank,
Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial
sector. Bangladesh Bank (BB) regulates and supervises the activities of all banks.

Private sector banks started functioning during the year 1983-84 with the objective of
government policy to make sure effective and meaningful participation of the private
sector in the overall national economy.

The perception of Islamic banking has been bloomed from the inspiration of building up
a society on justice in accordance with basic socio-economic principles of Islam. The
difference between Islamic bank and conventional bank is on principles. The functions of
this type of bank are completely different. This bank is established on Islamic Shariah
and all types of transactions are free from interest. Justified profit is the basis of financial
transaction of this bank. This bank is committed to establish socio-economic justice.

Bangladesh Bank
17

Al-Arafah Islami Bank

Commercial Bank

Specialized Bank and Credit

Agents

Private
Bank

Nationalized
bank

Traditional
Bank
BKB

Co-operative Banks

Foreign
Bank

Islamic Bank

RAKUB

BSBL

BSB

CCBL

BSRS

PSC
BASIC

Grameen
Bank

Karmasanghtan
Bank

Ansar-VDP
Unnayan Bank

Figure 1: Banking Operation under BB

Sources: Chowdhry, L.R. (2002, 2nd edition), A Text Book On Banker Advances

Some words used as a abbreviate form in the diagram are:

BKB -

Bangladesh Krishi Bank

RAKUB-

Rajshahi Krishi Unnayan Bank

BSB-

Bangladesh Shilpa Bank

BSRS-

Bangladesh Shilpa Rin Shangshta

BASIC-

Bangladesh Small Industries & Commerce.

BSBL-

Bangladesh Samabaya Bank Ltd.

2.3 Concepts of Islamic Banking:

18

Al-Arafah Islami Bank

The difference between Islamic bank and conventional bank is on principles. The
functions of this type of bank are completely different. This bank is established on
Islamic Shariah and all types of transactions are free from interest. Justified profit is the
basis of financial transaction of this bank. Islamic banks is committed to establish socioeconomic justice.

2.3.1 The Need for Islamic Banking:

The objective of Islamic banking is not only to earn profit but also to do good and
welfare to the people. Islam upholds the concept that money, income and property belong
to Allah and this wealth is to be used for good of the society .Islamic Banks operate on
Islamic principle of profit and loss sharing strictly avoiding interest, which is the root of
all expansion and is responsible for large-scale inflation and unemployment. An Islamic
bank is committed to do away with disparity and established elasticity in the economy,
trade, commerce and industry build socioeconomic infrastructure and create employment
opportunities.

2.3.2 Related Definitions of Islamic Bank:

The general secretariat of the organization of the Islamic conference defines an Islamic
Bank, as Islamic bank is a financial institution whose status, rule and procedure
expressly state its c to the principle of Islamic Shariah and to the banning of procedures
expressly state its commitment to the principles of Islamic Shariah and to the banning of
the receipt and payment of interest on any of its operation.

Islamic Banking means any company, which carries on Islamic Banking

business and holds a valid license, and all the offices and branches in Malaysia
of such a bank shall deemed to be one bank.

The Islamic Republic of IRAN has promulgated The for usury- free banking
on August 30, 1983 incorporating the detail objective and duties of the banking
system in Iran;

19

Al-Arafah Islami Bank

Islamic Banking Business means banking business whose aims and operation
do not involve any elements, which is not approved by the RELIGION OF
Islam.

2.4 Islamic banking around the world:

The expansion and unfolding of Islamic banking along with traditional interest based
banking is recent phenomenon. Islmic banking is an inseparable part of Islamic economy.
During fifties it was only a subject mattered of research and was limited to the Waiting of
scholar and philosopher. During the sixties actual experiments were made and in the
seventies institution started gaining strength. The eighties and nineties are the period of
consolidation and now Islamic Banking is coming up as the only welfare banking system
of the modern world. There has always been a desire to establish financial institution to
operate as per the tenants of Islamic Shriah. A successful ISLAMIC Banking venture in
MytGamr, Egypt was made in 1993. Subsequently, Islamic-banking movement achieved
steady progress and assumed significant dimension and role with the establishment of the
Nasser Social Bank (1972). Dubai Islamic Bank(1975).Islamic development
bank(1975),Faysal Islamic Bank in Egypt and Sudan(1977).Emergence of development
bank as an international Financial Institution with a view to involving all the Islamic
countries in the establishment of Islamic banks and financial institution with a view to
involving all the Islamic countries and of Islamic banks and financial institution in about
50 countries of Asia, Africa, Europe , America like U.K, U.S.A,Germany,Argentina, was
established on the basis of Islamic Shariah.

2.5 Islamic banking in Bangladesh:

In AGUST 1974, Bangladesh signed the Charter of Islamic Development Bank

and committed itself to recognize its economic and financial system as Islamic
Shariah.

In January 1941, the president of Peoples Republic of Bangladesh while

addressing the 3rd Islamic summit conference held at MAKKA and TAIF
suggested, The Islamic countries should develop a separate Banking system of
their own in order to facilities trade and commerce.
20

Al-Arafah Islami Bank

The statement of the president indicate favorable attitude of the Government of

the people Republic of Bangladesh towards establishing Islamic Banks and
financial institution in the country.

Earlier in November 1980, Bangladesh Bank, the countrys central Bank, sent a
representative to study the working of several Islamic Bank in a aboard.

In November 1982, a delegation of IDB Visited Bangladesh and showed keen

interest to participate to establishing a joint venture Islamic bank in the private
sector. They found a lot of work had already been and Islamic banks were already
forming for immediate introduction. Two professional bodies-Islamic economic
researches Bureau (IERB) AND Bangladesh Islamic Bankers Association
(BIBA) made significant contribution toward introduction of Islamic banking in
the country.

They come forward to provide training on Islamic banking to top bankers and
economist to fill-up the vacuum of leadership for the future Islamic banks in
Bangladesh. Thy also held seminars, symposia and workshops on Islamic
economics and banking throughout the country to mobilized public opinion in
favor of Islamic banking.

The professional activities were reinforced by a number of Muslim Entrepreneurs

working under the agent of the Muslim Business Society (now reorganized as
Industrialist and Business Association).The body concentrated mainly in
mobilizing equity capital for the emerging Islamic bank.

At last the long drawn struggle to established an Islamic bank in Bangladesh

become a realty and Islami bank Bangladesh Ltd was established in 1983 in
which 19 Bengali national, 4 Bangladeshi institution an 11 banks.

2.6 Objectives of Islamic Banking:

It is a golden desire of every Muslim that his social and political lives should be in
accordance with the divine guides prescribed in the holy Quran and the Sunnah. In the
same tune of aspiration as above, he desires to follow a unified life in financial and
business life. So, the objectives of the Islamic Banking may be derived from the broader
objectives of the Islamic economy. Two quotations may help us understand our
objectives.
21

Al-Arafah Islami Bank

Ibn al- Qayyim says. The basis of the Shariah is the wisdom and welfare of the people in
this world as well as the hereafter. This welfare lies in complete justice, mercy, wellbeing and wisdom. Anything that departs from justice to oppression, from mercy to
harshness, from welfare to misery and from wisdom to folly, has nothing to do with the
Shariah Al-Ghazali says, "The very objective of the shariah is to promote the welfare of
the people which lies in safeguarding their faith, their life, their intellect, their posterity
and their property. Whatever ensures the safeguard of these five serves public interest and
is desirable."
However M. UmerChapra, in his book "Towards a just Monetary System discussed some
of the most fundamental characteristics of Islamic money and banking system.
Those are as follows:
1. Broad-based economic well-being with full employment and optimum rate for
economic ground;
2. Socio-economic justice and equitable distribution of income and wealth;
3. Stability in the value of money to enable the medium of exchange to be a reliable unit
of account, a just standard of deferred payments, and a stable store or value.
4. Mobilization and investment of savings for economic development in an equitable
manner such that a just return is ensured to all parties concerned, and

22

Al-Arafah Islami Bank

Chapter 3:
Organizational
3.1

History of AIBL

3.2

Special features of AIBL

3.3

Chairman & Directors of AIBL

3.4

Executive Committee of AIBL

3.5

Audit Committee

3.6

Members of Shariah Council

3.7

Hierarchy of the Executive Body of AIBL

3.8

Branch Location all over Bangladesh

3.9

Graphically AIBL Countrywide Branches

3.10

Corporate Culture

3.11

Shariah Board

3.12

Information Technology of AIBL

3.13

Welfare Projects of AIBL

3.14

Classification of Bank product

3.15

Services of Al-Arafah Islami Bank Ltd

3.1 History of AL-Arafah Islami Bank

(AIBL):
23

Al-Arafah Islami Bank

Islamic ideology encourages us to succeed in life here& hereafter. To achieve this success
we must follow the way dictated by the HOLY QURAN and the path shown by Rasul
(SM). With this goal in view AL Arafah Islami Bank Ltd was established (registered) as a
public limited company on 18 June 1995. The inaugural ceremony took place on 27
September 1995. The authorized capital of the Bank is TK.2500.00 million and the paid
up capital TK.1153 million. Some very renowned Islamic personalities and pious
businessmen of the country are the sponsors of the bank. The total paid up capital was
invested locally.
The Bank is committed to contribute significantly in the national economy. It has made a
positive contribution towards the towards the socio economic development of the country
by opening 46 branches on which 16 authorized dealer (AD) throughout the country.
The equity of the bank stood at TK.2037 million Crore as on 31 December 2007, the
manpower are 1033 and number of shareholders are 12013.
The Bank conducts its business on the principles of Musaraka, Bai-muazzal, and hire
purchase transactions approved by Bangladesh Bank. Naturally, its modes and operations
are substantially different from those of other conventional commercial Bank. There is a
Shariah council in the Banks who maintains constant vigilance to ensure that the activates
of the bank are being conducted on the precepts of Islam. The Shariah council consists of
prominent Ulema, reputed, Bankers, renowned lawyers and eminent Economist.

3.2 Special Features of AIBL:

All activities of the bank are conducted according to Islamic Shariah where profit
is the legal alternative to interest.
24

Al-Arafah Islami Bank

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 upliftment 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 socioeconomic development of
the country through micro credit 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 depositors.

To render improved services to the clients imbued with Islamic spirit of

brotherhood, peace and fraternity and by developing an institutional cohesion.

The bank is contributing to economic and philanthropic activities side by side.

AIBL English Medium Madrasah and AIBL library are among mention worthy.

25

Al-Arafah Islami Bank

3.3 Chairman and Directors of Al-Arafah Islami Bank Ltd:

Al-hajj Md. Anower Hossain

Chairman

Al-hajj Mir Ahmed Sowdager

Vice Chairman

Al-hajj Ahmed Ali

Director

Al-hajj Hafez Md. Enayetullah

Director

Al-hajj Kazi Md.Mofizur Rahman

Director

Al-hajj Badiur Rahman

Director

Al-hajj Md. Harun-ar-Rashid Khan

Al-hajj Abdul Muktadir

Director
Director

Al-hajj Md. Fazlur Rahman

Director

Al-hajj Nazmul Ahsan Khaled

Director

Al-hajj Abdus Samad

Director

Al-hajj Abdul Malek Mollah

Director

Al-hajj Engr. Kh. Mesbahuddin Ahmed

Shareholder Director

Md. Abdus Samad Sheikh

Ex-Officio
Director/Managing
Director
Company Secretary

Md. Mofazzal Hossain

26

Al-Arafah Islami Bank

3.4 Executive Committee of AIBL:

Al-hajj Abdus Samad
Al-hajj Abdul Malek Mollah
Al-hajj Md. Anower Hossain
Al-hajj Mir Ahmed Sowdager
Al-hajj Md. Harun-ar-Rashid Khan
Al-hajj Nazmul Ahsan Khaled
Al-hajj Hafez Md. Enayetullah
Al-hajj Kazi Md.Mofizur Rahman
Al-hajj Ahmedul Haque

Chairman
Co-Chairman
Member
Member
Member
Member
Member
Member
Member

3.5 Audit Committee:

Al-hajj Nazmul Ahsan Khaled
Al-hajj Ahmed Ali
Al-hajj Engr. Kh. Mesbahuddin Ahmed

Chairman
Member
Member

3.6 Members of Shariah Council:

Moulana Md. Siddiqur Rahman

Chairman

Moulana Abu Sayeed Mohammad Omar Ali

Member

Mufti Moinul Islam

Member

Alhajj Md. Anwar Hossain

Member

Alhajj A J M Shamsul Alam

Member

3.7 Hierarchy of the Executive Body of AIBL:

27

Al-Arafah Islami Bank

Managing Director

Additional Managing Director

Executive Vice
President

Senior Vice
President

Vice President

Assistant Vice
President

3.8 Branch Location all over Bangladesh:

28

Al-Arafah Islami Bank

Jubily Road
O R Nizam Road
Coxs Bazar
Chowmouhani
Feni
Comilla
Companohonj

DHAKA DIVISION(28):
Motijheel
Moulovi Bazar
VIP Road
Motijheel Corporate
Nowabpur Road
North South Road
Hazaribag
Keranigong
Uttara Model Town
New Elephant Road
Banani
Gulsan-2
Mirpur
Mouchak
Dhanmondi
Mohammadpur Krishi Market
Dilkusha
Islampur
Progoti Sboroni
Mymensing
Joydebpur
Madhobdi
Pagla
Narayangonj
Kapasia

hathajary
gollai
RAJSHAHI DIVISION(4):
Rajshahi
Bogura
Syedpur
Mohadevpur

KHULNA DIVISION(6):
Khulna
Satkhira
Mongla
Benapole
Jessore
Chuknagar

BARISAL DIVISION(2):
Barisal
Jhalokhati

SYLHET DIVISION(6):
Lal Dhigir Par
Jinda Bazar
Moulovi Bazar
Ruposhpur
Biani Bazar
ammborkhana

Khilkhet
voirob

jatrabary
CHITTAGONG DIVISION(11)
Agrabad
Khatun Ganj

3.9 Graphically AIBL Countrywide Branches:

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Al-Arafah Islami Bank

3.10 Corporate Culture:

Al-Arafah Islami bank is one of the most disciplined Banks with a distinctive corporate
culture based on Islami Shariah. Here they believe in shared meaning, shared
30

Al-Arafah Islami Bank

understanding and shared sense making. The people in this bank can see and understand
events, activities, objects and situation in a distinctive way. They mould their manners
and etiquette, character individually to suit the purpose of the Bank and the needs of the
customers who are of paramount importance to the bank. The people in the Bank see
themselves as a tight knit team/family that believes in working together for growth. The
corporate culture has developed has not been imposed; it has rather been achieved
through their Corporate conduct.

3.11 Shariah Board:

Shariah Council of AIBL consists of 5 members specialized in Fiqhul Muamalat (Islamic
Commercial Law) according to guidelines given by the Bangladesh Bank to ensure
whether all banking operations are transacted in accordance with Islami Shariah i.e.
Quran, Sunnah, Ijma, and Iztihad.
In the year 2007 the Shariah Council has complied various decisions taken by the council
on different matters at different times under the caption Islami Banking Shariah
Nitimala (1995-2006) and prepared a Shariah Manual and published which is first of its
kind in Bangladesh. Shariah Council advices everybody concerned to comply with
Shariah requirements and render all out efforts to increase the standard of service
rendered to the clients.

3.12 Information Technology of AIBL:

AIBL has already started providing on-line general banking services to the clients from
23 May 2008 through a network of all branches in the country using satellite based
Communication links. This bank is a member of the Society for Worldwide Interbank
Financial Telecommunications (SWIFT).All of the Authorized Dealer Branches has site
www.al-arafahbank.com

3.13.1 Staff Welfare Project:

The Bank always kept a careful eye on the economic security and benefit of its staffs &
officers. The Bank operates a contributory provident fund, a social security & benevolent
31

Al-Arafah Islami Bank

fund and a gratuity fund for its employees. In the year 2007 Tk. 7.5 lac was paid to wife
of late Mr. Shahidul Islam, AVP & former branch manager of Joydevpur Branch from
bank's social security & benevolent fund. Till now a total of Tk. 30 lac has been paid
from the fund to the families of late officers & staffs of the bank.

3.13.2 Al-Arafah Islami Bank Foundation:

The Bank has a Foundation launching philanthropic activities Al-Arafah English Medium
Madrasah and Al-Arafah Islami Bank Library are major two wings for launching
philanthropic activities.

3.13.3 Al-Arafah English Medium Madrasah:

Al-Arafah English Medium Madrasah has been established by the Al-Arafah Bank
Foundation with a view to building next generation according to the ideals of peace and
equality of Islam and to establishing banking and other aspects of life in the way of
Islam. The prime aim of this madrasah is to contribute towards building human resource
and in the broader sense to ensure human welfare. With this in view Al-Arafah Islami
Bank Foundation has established an English Medium Madrasah at Dhanmondi in 1999.
Such institution up to O level of its kind is for the first time in Bangladesh.

3.13.4 Al-Arafah Islami Bank Library:

Library is the carrier and reservoir of knowledge. Al-Arafah Islami Bank has shown that
other than generating profit, it can also contribute significantly in the field of providing
good source of knowledge by establishing a public library at 32, Topkhana Road,
Chittagong Bhaban (1st floor), Dhaka, thus strengthening social development. It is placed
in a sound, healthy surroundings. It harbours 23,000 books of reference for the
32

Al-Arafah Islami Bank

researchers, students, professionals, bankers, physicians, engineers, politicians, writers or
journalists, even for the kids. It is open to all from the year 2000 and well located &
accessible to everybody. It procured some exceptional collection of books on Religion,
Economics, Banking, Computer Science, Business Administration, Sociology, English &
Arabic language and juvenile literature in Bangla, English, Urdu & Arabic which are very
rare.
Varieties of good books were procured in the library, but those were predominantly to
enrich Islamic knowledge and culture. To fulfill that goal Al-Arafah Islami Bank
distributed a total of 1084 copies of Arabic-BangIa 'Torjomatul Quran' to all the upazillas
of the country.
Education is the harmonious development of body, mind & soul. If religion is not
attached to it the real attitude towards life and values will fail to develop. It is mandatory
to learn Elm-e-Din to govern our life in the right way of Islam. To fulfill this noble
intention Al-Arafah Islami Bank Library started Dars-ul-Quran (Teachings of Quran)
program. This program will cover translation with detail explanation of Quran starting
from Sura Fatiha upto Sura Nas gradually. Dars-ul-Quran program takes place every
Monday after Magrib prayer.
Other than this Al-Arafah Islami Bank Library arranges shows of feature films or
Documentary films on Islamic life & Culture.

3.14 Classification of bank product:

THE PRODUCT

Deposits

Advances

Time demand

International
banking

Consultancy
Tax, consultancy,
Marcent banking
project,
33
Counseling,
Investment
counseling

Miscellaneous
Self-custody,
Sale of drafts,
Standing
instruction,
Trusteeship.etc.

Al-Arafah Islami Bank

L/C, Foreign
currency

Fund oriented

Non-fund oriented

Guarantees
Terms loans, Clean
Letter of credit.
loans, Bills
discounting, Pre
shipment, Post
shipment, Lines of
credit- Secured,
unsecured,
Overdraft.

Fig: - Structure of Bank Product

3.15 Services of Al-Arafah Islami Bank Ltd:

The importance of mobilizations of savings for the economic development of our country
can hardly be over emphasized. We considered savings and deposits as lifeblood of the
bank. More the deposit, greater is the strength of the bank. The bank intends to launch
various new savings scheme with prospect of higher return duly supported by a wellorchestrated system of customer services. The bank would cater to the credit needs of
individuals as well as corporate clients. Initial it will emphasize on trade finance, which
would be short term and self-liquidating in nature. Considering the importance of foreign
trade in our national life, financing and handling of export & import business and also
handling of foreign remittance business would be given top most priority. Moreover the
34

Al-Arafah Islami Bank

bank operate all of its activities under the rules and regulations of Islamic Shariah.The
services provided by the Al-Arafah Islami Bank Ltd. is given bellow: -

Bank services

General banking

Credit/advance

Different accounts
open, issues of
DD. TT. PO,
Clearing,
FD, Different
Scheme etc.

SOD General loan,

House building
loan, Lease finance,
Hire purchase,CC
hypo, Staff loan,
CCS etc.

Foreign exchange
Export
Import
Remittance

Figure: various services provided by Al-Arafah Islami Bank

Chapter 4: General
Banking
4.1

Introduction of General Banking

4.2

Cash Section

4.3

Account Opening

4.4

Cheque Clearing

4.5

Local Remittance

4.6

Various Types Of Deposit Account

4.7

Clearing Department

4.8

Clearing House
35

Al-Arafah Islami Bank

4.1 Introduction of General Banking:

The starting point of all the banking operations is General Banking. It is an important
department for all banks because it provides services to the customers day-to-day. Front
Desk is the important for general banking. Customers give their deposits and meet their
demand for cash by honoring Cheques. The customer opens new accounts, remit funds,
issues bank drafts and pay orders etc. There are various sections in this department,
which are as follows: Cash Section
Accounts Opening Section
Cheque Clearing Section
Remittance Section
36

Al-Arafah Islami Bank

4.2 Cash Section:

The most vital and important section of the branch is Cash Department. It deals with all
kinds of cash transactions. This department starts the day with cash in vault. Each day
some cash that is opening cash balance are transferred to the cash officers from the cash
vault. Opening cash balance is added by cash receipts and payments. The figure is called
closing balance. This balance is then added to the vault. This is the final cash balance
figure for the bank at the end of any particular day.

4.2.1 Books Maintained By This Section:

Vault Register

: It keeps account of cash balance in vault in

Cash Receipt Register

: Cash receipt in whole of the day is recorded here.

Cash Payment Register

: Cash payments are made in a day are entered here.

Rough Vault Register

the bank.

: Cash calculation for final entry in vault register is done here as

any error and correction here is not acceptable.

4.2.2 Functions of Cash Department:

1. Cash payment is made only against Cheque
Cash Payment

2. This is the unique function of the banking system, which is

known as payment on demand
3. It makes payment only against its printed valid Cheque.

Cash Receipt

1. It receives deposits in form of cash

2. It collects money only its receipts forms.

4.2.3 Cheque Cancellation or Cash Payment Process:

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Al-Arafah Islami Bank

Step 1

1. Receiving Cheque by the employee in the cash counter

2. Verification of the followings by the cash Officer in the computer
section

Step 2

1. Date of the Cheque(present within 6 months from issue date)

2. Issued from this branch
3. Amounts in figure and sentence written does not differ
4. Signature of the drawer does not differ
5. Cheque is not torn or mutilated

Step 3

Gives pay cash seal and sends to the payment counter

Step 4

Payment officers make payment

4.3 Account Opening:

Account opening section is an important factor for banks because customer is the main
source of bank. Selection of customer is another important factor. Banks success and
failure largely depends on their customers. If customer is not good then may create fraud
and other problems by their account with bank and thus destroy goodwill of banks.

Therefore, bank must be conscious in selecting its customer. For this reason Al-Arafah
Islami Bank Ltd. keep key information system.

4.3.1 Accounts Opening Process:

Step 1
I. Receiving filled up application in banks prescribed form mentioning what type
of account is desired to be opened.
II. The form is filled up by the applicant himself/ herself
III. Two copies of passport size photographs from individual are taken, in case of
firms
IV. photographs of all partners are taken
V. Officer are taken information from customer by key information system
38

Al-Arafah Islami Bank

Step 2
I. Applications must submit required documents
II. Applications must sign specimen signature sheet and give mandate
III. Introducers signature and accounts number-verified by legal officer
Step 3
I. Filling & signing up KYC or Know Your Customer Form
II. Filling & signing up Owner Information Form
Step 4
Authorized Officer accepts the application
Step 5
Minimum balance is deposited-only cash is accepted
Step 6
Account is opened and a cherub book and pay-in-slip book is given

4.3.2 Required Information to Open Account:

A.Individual
1. Name
2. Present and Permanent Address
3. Date of birth and age
4. Nationality
5. Tax information number (TIN- if available )
6. Passport or certificate provided by the employer
7. Photograph of the account holder
8. One photograph of the nominee duly attested by the account holder.
9. nominee declaration form
10. money laundering leaflet
B. Partnership Firm
1. Information Mentioned in -A
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Al-Arafah Islami Bank

2. Copy of Partnership Dead
3. Mandate from the partners is essential indicating who will operate the account
C. Limited Company
1. Information Mentioned in -A
2. Certificate of Incorporation
3. Copy of Memorandum and Article of Association
4. Certificate of Commencement
5. Copy of Resolution of the Board of Directors
Dormant Account
If any account is inoperative for more than one year is called dormant account. To operate
these accounts manager permission is necessary.

Transfer of Account
When account is transferred, following steps are considered:
A) Application in written to the Manager of the account maintaining branch
B) Manager sends a request to the manager of the desired branch of depositors
C) Sends original Account opening application and specimen signature sheet with the
balance remained in the account at he sent Managers request
D) New account is opened at desired branch

4.4 Cheque Clearing:

Bank receives all kinds of Cheque in favor of the client for clearing. When Cheque is
received it is necessary to endorse it and cross it specially.
Types

Explanation

Clearing Process

Inward

Cheque received from the Partys A/C ----Dr.

Clearing

Clearing

Cheque

Arafah Islami Bank.

Cheques of other branch of These Cheques are directly sent to the respective

OBC

(Outward Bills forAl-Arafah

Collection)

House

Islami

of

Al-Al-Arafah Islami Bank General A/C---Cr

BankBranch and request them to sent IBCA. When it comes,

within its Clearing Housethen Customers Accounts is credited for the Cheque.
40

Al-Arafah Islami Bank

area.
Clearing Cheque Cheques
within

another

BankThese cheques are sent to clearing house via

Al-Arafah

IslamiDhanmondi branch. When drawee bank honor the

Bank Clearing House area. Cheques, then the account of Cheque depositors are
Outward Clearing

Cheques for

credited.
If any branch of Al-Arafah Islami Bank exists Within

another bank

the clearing house area of drawee Bank then Al-Arafah

outside the clearing area

Islami Bank send the Cheque to that Branch of AlArafah Islami Bank and sends IBCA to it.

Inward Bills for CollectionFrom other branch of Al- These Cheques are settled by IBCA, i.e. debiting
(IBC)

Arafah Islami Bank

depositors account and crediting senders

branch account

4.5 Local Remittance:

When money is sending from one place to another place for the customer is another
important service of banks. In addition, this service is an important part of countrys
payment system. For this service, people, especially businesspersons can transfer funds
from one place to another place very quickly. There are five kinds of techniques for
remitting money from one place to another place. These are:
1) Demand Draft
2) Telegraphic Transfer
3) Telephone Transfer
4) Pay Order
Telegraphic and Telephone Transfer (TT) are almost the same, both are them are known
as TT in short.
Pay Order
Pay order gives the payee the right to claim payment from the issuing bank. It is payment
from issuing branch only. Within the clearinghouse area of issuing branch. Payment is
made through clearing.
1) Examine genuinely the pay order
2) Enter into PO register and give contra entry
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Al-Arafah Islami Bank

3) Debit if fund OK for payment.
4) Charges of pay order are shown in bellow by a chart:
5)
Amount of P.O.
1-100000
100001-500000
500001-1000000
1000001-Above

Commission
20
30
50
100

VAT
3
4
8
15

Total
23
34
58
115

4.6 Various Types Of Deposit Account:

AIBL Bank offers following types of deposit account:
1. Mudaraba Savings Deposit Account (MSD)
2

Mudaraba Current Deposit Account (CD)

3

Mudaraba Term Deposit Receipt Account (MTDR)

Short Notice Deposit Account (SND)

5 Installment Term Deposit (ITD)

6

Mudaraba Hazz Account

Mudaraba Pension Scheme

Mudaraba Lakhpoti Scheme

Mudaraba milliner Scheme

10 Mudaraba Kotipoti Scheme

11 Mudarab Double Deposit Scheme

4.6.1 Brief Description Of Different Accounts:

1. Current Account:
Current account facilitates the account holder to draw money at any times but no profit is
given to the current account deposited money. Current accounts can be opened by any
individual or joint or any name of proprietorship business, private limited company or
public limited company, association, clubs, societies, trusts etc. Generally, current
42

Al-Arafah Islami Bank

account is opened for businessman and traders for easy transaction. By taking this
3 months
6 months
1 year
Profit
11.00%
11.50%
12.00%
liability, AL-ARAFHA-ISLAMI Bank takes service charge 100/- for six months.
2. Mudaraba Term Deposit Receipt Account (MTDR):
It's a certain period deposited system, which is not repayable before the maturity
date of a fixed period. AL-ARAFHA-ISLAMI Bank offers higher rates of profit on such
deposits. Usually customers are allowed to open this account for a certain period and the
rate of profit in accordance with the terms of the deposit. The features of MTDR as
follows:
Minimum balance: TK 10000.00

3. Savings Account:
To maintain smooth and certain life in future Savings account is very suitable for
middle class groups. The attributes of Savings Account are:
500/- is the minimum amount of initial deposit.
Client cannot withdraw money more than twice a week,
The profit rate is 8% against MD account
For opening of this type of accounts following requirements are necessary:
a) The introducer must be attested photograph.
b) The introducer must be account holder of MD of AL-ARAFAH-ISLAMI Bank
Bangladesh Ltd.
4. Short Term Deposit (SND):
Short Term Deposit has following attributes:

6% profit rate against STD.

No restriction over withdrawal of money

1000/- is the minimum balance.

a) Installment Term Deposit (ITD)

43

Al-Arafah Islami Bank

It's a sure investment for a steady return. It can be opened for 5, 8, 10, or 12 years
for Tk.200, Tk.300, Tk.500, Tk.1000, Tk.1500 and Tk2000. The savings amount is to be
deposited any day of the month. If the depositor has a separate account in the bank for
which a standing instruction can be given to transfer the monthly deposit in the scheme's
account. Incase of failure to make the monthly installment in the schedule time 5% on
overdue installment amount will be charged. The lowest charge will be Tk. 10 and this

will be added with the following months installment. After 3 years of savings in this
schemed the depositor is eligible for a loan up to 80% of his deposited amount.
b) Highlights of the Scheme
o Mudaraba Lakhpoti Scheme
o Mudaraba milliner Scheme
o Mudaraba Kotipoti Scheme
Mudaraba Kotipoti Scheme: This are the most popular & target oriented
schemes. One can open for 3,4,5,6,7,10,12,15,18,20 years and have to pay (Monthly
installment) 2,39,500/- 1,69,500/- 1,27,500/- 99,500/- 80,000/- 46,000/- 33,450/- 21,485/14,330/- 11,100/- respectively and will get 1corror.
Mudaraba

milliner

Scheme:

For

Mudaraba

milliner

Scheme

3,4,5,6,7,10,12,15,20 years monthly installments are 23,950/- 16,950/- 12,750/- 9,950/8,000/- 4,600/- 3,345/- 2,170/- 1,150/- respectively and will get 10million.
Mudaraba Lakhpoti Scheme: For Mudaraba Lakhpoti Scheme 3,5,8,10,12
years monthly installments are 2,375/- 1,275/- 670/- 460/- 335/-/- respectively and will
get 1lak.

4.7 Clearing Department:

Cheques clearing section of Al-Arafah Islami Bank Ltd. receives cheque, demand drafts
and pay orders of their clients. Upon the receipt of the instrument the cheque clearing
section examines:
44

Al-Arafah Islami Bank

Whether the paying bank within Dhaka city.
Whether the paying bank outside Dhaka city.
Whether the paying bank of their own branch..

The Paying Bank within Dhaka City:

The cheques clearing section of Al-Arafah Islami Bank Ltd., Dhanmondi Branch sends
Inter Branch Debit Advice (IBDA) to the head office on the receiving day of the
instruments. The main branch takes those instruments to the clearinghouse on the
following day. If the instruments are dishonored, Head Office of Al-Arafah Islami Bank
Ltd. sends IBDA to the Al-Arafah Islami Bank Ltd., Dhanmond branch
The Paying Bank of Their Own Branch:
The cheque clearing section of Al-Arafah Islami Bank Ltd., Dhanmond branch sends
outward bills for collection (OBC) to the concerned paying branch to get Inter Branch
Credit Advice (IBCA) from the paying branch. If the paying branch dishonors the
instrument, the paying branch returns it to the Al-Arafah Islami Bank Ltd., Dhanmond
branch describing why the instrument is dishonored.

4.8 Clearing House:

Clearing House is an arrangement under which member banks agree to meet, through
their representatives, at an appointed time and place to deliver instruments drawn on the
other and in exchange, to receive instruments drawn on them. The net amount payable or
receivable as the case may be, is settled through an account kept with the controlling
bank.

4.8.1 Types of Clearing

1. Outward Clearing

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Al-Arafah Islami Bank

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 ad outward clearing for that particular branch.
2. 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.

Chapter 5: Foreign
Exchange
Division
46

Al-Arafah Islami Bank

5.1

Introduction of Foreign Exchange

5.2

Import

5.3

Export

5.4

Foreign Remittance

5.1 Introduction of Foreign Exchange:

Foreign exchange is the means and methods by which rights to wealth in a country's
currency are converted into rights to wealth in another country's currency. In banks when
we talk of foreign exchange, we refer to the general mechanism by which a bank converts
currency of one country into that of another. Foreign Exchange Department (FED) is the
international department Bangladesh Bank issues license to scheduled banks to deal with
foreign exchange. These banks are known as Authorized Dealers. If the branch is
authorized dealer in foreign exchange market, it can remit foreign exchange from local
47

Al-Arafah Islami Bank

country to foreign countries. So AL-ARAFAH ISLAMI Bank, Principal branch is an
authorized dealer.
There are three kinds of foreign exchange transaction:A) Import.
B) Export.
C) Remittance.

5.2 Import:
To import, a person should be competent to be and importer. According to Import and
Export Control Act, 1950, the Office of Chief Controller of Import and Export provides
the registration (IRC) to the importer. In an international business environment, buyers
and sellers are generally unknown to each other. So seller of goods always seeks security
for the payment of his exported goods. Bank gives export guarantee that it will pay for
the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter
of Credit. Thus the contract between importer and exporter is given a legal shape by the
banker by 'Letter of Credit'.

5.2.1 Letter of Credit:

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at
the instance of its customer (known as the opener) addressed to a person (beneficiary)
undertaking that the bills drawn by the beneficiary will be duly honored by it (opening
bank) provided certain conditions mentioned in the letter gave been complied with.

5.2.2 Parties to the L/C

Importer

Who applies for L/C

48

Al-Arafah Islami Bank

Issuing Bank
Confirming Bank

It is the bank which opens/issues a L/C on behalf of the

importer.
It is the bank, which adds its confirmation to the credit and it,
is done at the request of issuing bank. Confirming bank may

Advising or Notifying

or may not be advising bank

It is the bank through which the L/C is advised to the

Bank

exporters. This bank is actually situated in exporters

country. It may also assume the role of confirming and / or

Negotiating Bank

negotiating bank depending upon the condition of the credit.

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

Accepting Bank

confirming bank.
It is the bank on which the bill will be drawn (as per

Reimbursing Bank

condition of the credit). Usually it is the issuing bank

It is the bank, which would reimburse the negotiating bank
after getting payment - instructions from issuing bank.

Date of Payment:
Usually payment is made within seven days after the documents have been received. If
the payment is become deferred, the negotiating bank may claim interest for making
delay.
Preparing Sale Memo:
A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID,
the difference between these two rates is exchange trading. Finally, an Inter Branch
Exchange Trading Credit Advice is sent to ID.
Requisition for the Foreign Currency:
For arranging necessary fund for payment a requisition is sent to the International
Department
Transmission of Message:
49

Al-Arafah Islami Bank

Message is transmitted to the correspondent bank ensuring that payment is being made.

5.3 Export:
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 (CC & E).
No exporter is allowed to export any commodity permissible for export from Bangladesh.
Unless he is registered with CC& 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 formalities
and procedure are enumerated as follows:

5.3.1 Procedure of Export:

1. Obtaining exports LC: To get export LC form exporter issued by the importer.
2. Submission of export documents: Exporter has to submit all necessary documents to
the collecting bank after shipping of goods
3. Checking of export documents: After getting the documents banker used to check the
documents as per LC terms
4. Negotiation of export documents: If the bank accepts the document and pays the
value draft to the exporter and forward the document to issuing bank that is called a
negotiating bank. If the bank does buy the LC then the bank normally acts as collecting
bank
50

Al-Arafah Islami Bank

5. Realization of proceeds: This is the period when the issuing bank has realized the
payment.
6. Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank
has to report to respective department of Bangladesh bank by mentioning latest payment.
7. Issue to proceeds realization certificate (PRC): Bank has to issue precede realization
certificate of export LC to the supplier / exporter for getting cash assistance

5.3.2 Export operation:

Bangladesh exports a large quantity of goods and services to foreign households.
Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen
shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries.
They open export L/Cs here to export their goods, which they open against the import
L/Cs opened by their foreign importers.
Export L/C operation is just reverse of the import L/C operation For exporting goods by
the local exporter, bank may act as advising banks and collecting bank (negotiable bank)
for the exporter.

5.4 Foreign Remittance:

This bank is authorized dealer to deal in foreign exchange business. As an authorized
dealer, a bank must provide some services to the clients regarding foreign exchange and
this department provides these services.
The basic function of this department are outward and inward remittance of foreign
exchange from one country to another country. In the process of providing this remittance
service, it sells and buys foreign currency. The conversion of one currency into another
takes place an agreed rate of exchange, which the banker quotes, one for buying and
another for selling. In such transactions the foreign currencies are like am other
51

Al-Arafah Islami Bank

commodities offered for sales and purchase, the cost (convention value) being paid by the
buyer in home currency, the legal tender.

5.4.1 Remittance procedures of foreign currency:

There are two types of remittance:
1. Inward remittance
2. Outward remittance.
1. Inward Foreign Remittance: Inward remittance covers purchase of foreign currency
in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a
beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange
control Department of Bangladesh bank on Form-C.

2. Outward Foreign Remittance: Outward remittance covers sales of foreign currency

through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign
exchange under L/C and against import bills retired.

5.4.2 Workings of this department:

1. Issuance of TC, Cash Dollar /Pound
2. Issuance of FDD, FTT & purchasing, Payment of the same.
3. Passport endorsement.
4. Encashment certificate5. F/C Account opening &filing.
6. Opening of Export FC retention Quota A/C& maintain.
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Al-Arafah Islami Bank

7. Maintenance of ledger of Cash Dollar, FC Deposit A/C & TC.
8. Maintain FBC register &follow up FBC.
9. Opening of Student file &Maintain.
10. Preparation of all related statement, Voucher & posting.
11. Preparation of Weekly, Monthly. Yearly Statement for Bangladesh Bank return
timely.
12. Attending all related correspondence to other Bank or Institutions.

6.1 Introduction of Investment Division

6.2 Investment Policy
6.3 Investment Facility Parameters

6.4 CIB
Chapter
6: Investment
6.5 Loan Classification
Division

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6.1 Introduction of Investment Division:

AL-ARAFAH ISLAMI 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 socioeconomic development of the country. In achieving the aforesaid objective of the bank,
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 prudent management of its investment portfolio. The failure
of a commercial 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 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.

6.2 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:
a) 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.
Sectors:a) Steel & engineering.
b) Food & Allied.
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c) Agriculture.
d) Textile & garments.
e) Pharmaceuticals & Chemicals.
f) Paper & paper products.
g) Service industries.
h) Housing & real Estate.
i) Cement.
j) Bricks Fields.
k) Edible oil.
l) Assembling industry.
m) Cottage industry.
n) Electronics & Electrical Commodities.
o) Construction Company.
p) Trading (retail/whole sale)
q) Others.
Every year at the time of investment budgeting a clear indication of banks appetite for
growth to be reflected approved investment budget shall be strictly followed for the
development of the bank.
b) Investment categories:
As initiated by Bangladesh bank vide BCD circular no. 33 dated 16-11-89 different kinds
of lending were subdivided into 11 categories w. e. f 01-01-90, which was subsequently
reduced to 9 vide BCD circular no. 23 dated 09-10-93 and again to 7 prime sectors vide
BCD circular no. 8 dated 25-04-94 for fixation of rates of profit by the individual banks.

C) Types of investment facilities:

Depending on the various nature of financing all the lending activities have been brought
under the following major heads.
I. lzara bill baia (general):
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Short term, medium term & long term investments followed to individual/firm/industries
for a specific purpose but for a definite period and generally repayable by installments
fall under this head. This type of lending is mainly allowed to accommodate financing
under the categories (i) large & medium scale industry and (ii) others are also included
here.

II. Izara Bill Baia (HB):

Investments allowed to individual/enterprises for construction of house (commercial) fail
under this type of investment. The amount is repayable by monthly installment with a
specified period. Such investments are known as Izara Bill Baia (HB): No investment for
construction of residential house building shall be accommodated to the Bank's customer
where there is no other business consideration.
III. Izara Bill Baia (Staff HB):
Investment allowed to our Bank employees for purchase/construction of house shall be
know as Investment (STAFF HB).
IV. Other Investment to Staff:
Investment allowed to employees other than for House Building shall be grouped under
head of Staff Izara Bill Baia (General).
V. Bai-Muazzal:
Investment allowed to individual/firm for trading as well as wholesale purpose or to
industries to meet up the working capital requirements against hypothecation of goods as
primary security fall under this type of lending, it is a continuous investment. It is
allowed under the categories (i) "Commercial Lending" when the customer is other than a
industry and (ii) "Working Capital" when the customer is an industry.
VI. Murdaraba:
Financial accommodations to individual/firm for trading as well as for wholesale or to
industries as working capital against pledge of goods as primary security fall under this
head of investment. !t is also a continuous investment and like the above allowed under
the categories (i) "Commercial Lending" and (ii) Working Capital". '

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VII. Izara Bill Baia (HP) :

Izara Bill Baia (HP) is a type of installment investment under which the Purchaser agrees
to take the goods on hire at a stated rental, which is inclusive of the repayment of
Principal as well as profit for adjustment of the investment within a specified period.
VIII. Izara (LF) :
Izara (LF) is one of the most convenient sources of acquiring capital machinery and
equipment whereby a client is given the opportunity to have an exclusive right to use an
asset usually for an agreed period of time against payment of rent. It is a term financing
repayable by installment.
IX. House Hold Durable Scheme (HDS) :
It is a special investment scheme of the Bank to finance purchase of consumer durable to
the fixed income group to raise their standard of living. The investments are allowed on
soft terms against personal guarantee and deposit of specified percentage of equity by the
customers. The investment is repayable by month installment within a fixed period.

X. Bai-Muazzal (General/FO) :
Investment allowed to individual/firms against financial obligation (i.e. lien on MTDR/
PSP/BSP/insurance Policy/Share etc.) This may not be a continuous Investment.

6.3 Investment Facility Parameters:

a) Tenure:
Bank shall not ordinarily go for any investment facilities for long term basis. Short-term
investment facilities shall be for 3 month to 12 months. Medium term investment shall be
12 months to 36 months. Long terms investment shall be more than 36 months.

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b) Size:
i) Maximum 50% (Funded & non-funded) of total capital of the Bank
ii) Maximum 25% (funded) facility of total capital of the bank.
c) Security:
All assets (Bai-Muazzal & Murabaha) must be covered under proper insurance risk with
enlisted insurance Companies. Insurance coverage obtained outside enlisted companies
are discouraged. For valuation of securities following guidelines to be followed:
d) Valuation of Primary Security:
MPI: MPI facility shall be allowed as post-import finance against imported goods under
our L/Cs. MPI facility should not exceed invoice value net of L/C margin unless the4
Bank agrees to finance duties/VAT. However, where market price of the goods is lower
than landed cost necessary arrangement should be made with the customer to obtained
additional deposit. Head Office should approve the price at which MPI goods to be
released to customer or it may be at market price or landed cost whichever is higher,

6.4 CIB:
Bangladesh Bank has established within itself a Credit Information Bureau (CIB), which
collects credit information from the banks. Banks are required to furnish such
information in respect of credit limit of Tk.50000 and over. They mention the Name of
facility, security and charge along with outstanding balance. After consolidating such
information in respect of each customer the central bank supplies to the total limits
sanctioned to and the number of banks dealing with a party. Thus the banks can find out
if any of their customers is having excessive borrowings from the banking system at any
particular time.
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6.5 Loan Classification:

Loan classification is a process by which the risk or loss potential associated with the
loan accounts of a bank on a particular date is identified and quantified to measure
accurately the level of reserves to be maintained by the bank to provide for the probable
toss on account those risky loan.
Like other banks, all types of loans of AL-ARAFH-ISLAMI fall into following four
scales:
Unclassified: Repayment is regular.

Substandard: Repayment is stopped or irregular but has reasonable

prospect of improvement.

Doubtful debt: Unlikely to be repaid but special collection efforts may

result in partial recovery.

Bad/Loss: Very little chance of recovery.

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Chapter 7: Marketing
Strategies of AIBL

8.1 Vision of AIBL

8.2 Mission of AIBL
8.3 Marketing Strategies

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8.1 Vision of AIBL:

To be a pioneer in Islamic Banking in Bangladesh and contribute significantly to the
growth of the national economy.

8.2 Mission of AIBL:

Achieving the satisfaction of Almighty Allah both here and hereafter.
Proliferation of Shariah Based Banking practices.
Quality financial services adopting the latest technology.
Fast and efficient customer service .
Maintaining high standard of business ethics.
Balanced growth.
Steady and competitive return on shareholders equity.
Innovative banking at a competitive price.
Attract and retain quality human resources.
Extending competitive compensation packages to the employees.
Firm commitment to the growth of national economy.
Involving more in Micro and SME financing.
8.3 Marketing Strategies:
The main strategy of the bank is using Islami Banking System to attract its
market.
Providing efficient customer service
Maintaining corporate and business ethics
Being trusted repository of customers and their financial advices
Making its products superior and rewarding to the customers
Display team spirit and professionalism
Sound capital base
Enhancement of shareholders wealth
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Chapter 8: SWOT
Analysis, Findings,

9.1 SWOT Analysis

9.2 Findings & Analysis
9.3 Recommendation
9.4 Conclusion

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9.1SWOT Analysis:
Not surprisingly, in the competitive arena of marketing era SWOT analysis is a must
based on Product, Price, Place and Promotion of a financial institute like private bank.
From the SWOT analysis we can figure out ongoing scenario of the bank. So to have a
better view of the present banking practices of Al-Arafah Islami Bank Ltd.

Internal Factors
Strength

Weakness

External Factors
Threats

In SWOT analysis two factors act as prime movers

Internal factors which are prevailing inside the concern which include Strength
and weakness.
On the other hand another factor is external factors which act as opportunity and
threat.

9.1.1 Strength:
Usage of faster PC Bank software.
Membership with SWIFT.
Good banker-customer relationship.
Online banking system.
Islami Shariah based Banking system.
Energetic as well as smart work force.
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Competitive Profit provider comparing with other Islamic Bank.
Strong Financial Position.
Efficient administration

9.1.2 Weakness:
Reluctance to ad campaign.
Existing manual vouchers.
Lack of consumer credit scheme.
Manpower is not sufficient.
Marketing policy is not well setup.
Limited number of branches in its network.
Officers have limited experience and not enough trained
Many inexpert and laggard assistant officers.
The bank has no ATM service
Insufficient number of deposit Scheme and loan.

9.1.3 Opportunity:
Huge business area.
Introducing consumer credit scheme.
Growth of sales volume.
Introducing branch banking through online.
Develop relations and correspondence with foreign banks.
More concentrated Banking based on Islamic Shariah.
Few Competitors practicing Islamic Banking.

9.1.4 Threats:
Competitors have more attractive deposit schemes.
Bangladesh Bank has no well established Islami Banking Rules.
Different classic services of other banks.
Entrance of new private commercial banks.
Young, energetic, dynamic, talent and smart work force of competitors.
Govt. imposes high rate of taxes and VAT.
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Political unrest and Economic recession.
Illegal business operation by the some clients.

9.2 Findings and Analysis:

AIBL profit earning capacity is not satisfactory.

Its marketing strategy is not well designed.

Existing Human Resources are not sufficient for AIBL. They have to recruit
more skilled employees.

Number of Branches are not satisfactory, AIBL have to give more

emphasize on increasing number of Branches.

The whole activities of AIBL is not computerized, still there exist manual
record keeping system.

Insufficient training program for the employees.

Slower in modernization comparing with its competitors.

The working environment in any branch is not congenial & appropriate.

The working desk provides sound pollution. It looks like a hall room.

The modern technology is not used in the recruitment and selection process.
The backdated methods are using for selection till today.

Salary structure of AIBL is satisfactory comparing with other Islamic

Banks, the pension policy and the payment of pension to the employees are
very fair and transparent.

The transfer and promotion process is fair but the promotion is not faster.

Loan facilities are very attractive to the employees of AIBL.

Most of the policies are backdated. Only the authority amends the policy
but preserve the old policy.

There is no policy to build up harmonious relationship among the

employees. The employees cannot protest the injustice of the authority
because the pure trade union is absent there.

The record keeping system is also backdated, not followed computerized

system properly
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Security system of many branches is not sufficient.

9.3 Recommendation:
AIBL should concentrate in increasing its profit earning capacity.
It should develop effective marketing strategy to attract new customers.
Raising the capital, statutory reserve and increase the investment.
The number of branches should be increased
Expand and diversify customer base.
Upgrade Online Banking.
Bank should introduce independent Marketing Department
Personal relationship should be build with the customers.
Customers are the heart of the organization. They should provide more space in
the office and if possible they should have some entertainment facility.

Few branches are not under online banking system, so all the branches should
confirm on line banking system.

Ensure stable dividend.

Ensure high level customer service.
The Bank should follow Islami Sharia strictly in every of its operation.
Bank should introduce ATM system.
Should introduce one-stop service centre.
Bank should introduce consumer credit scheme.
Bank should increase their office space and take more care in interior decoration.
Some new investment schemes are to be introduced for socio-economic
development and welfare of the distressed humanity.

Finally the Bank should has the vision to automate its all operations and
functionalities and should be committed
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Al-Arafah Islami Bank

9.4 Conclusion:
Today the banking service is very competitive. From the practical materialization
of customer dealing procedure during the whole period of my practical orientation
in AL-ARAFAH-ISLAMI Bank limited I have reached a firm and concrete
conclusion in a very confident way. I believe that my realization will be in
harmony with most of the banking thinkers. It is quite evident that to build up an
effective and efficient banking system to the highest desire level, computerized
transaction is must.
AL-ARAFAH-ISLAMI Bank Ltd. 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 and 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 overall sustainable socio-economic development of the country. The is
not so far when it will be in a position to overcome the existing constraints and it
may be expected that by establishing a network over the country and by increasing
resources this bank will be able to play a considerable role in the portfolio of
development of financing.
Success in the banking business largely depends on effective lending. Less the
amount of loan losses, the more the income will be from credit operations. The
more the income from credit operations the more will be the profit of the ALARAFAH-ISLAMI Bank Ltd. and here lays the success of credit financing.
It can be argued that though the results achieved so far are not satisfactory, credit
financing is a modern scientific technique for enhancing AL-ARAFAH-ISLAMI
Banks strength and there lies the opportunities to make it more effective in the
future for our own benefit.

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Chapter 9: Bibliography &

Reference

10.1 Bibliography
10.2 Reference

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10.1 Bibliography:
o
o http://banglapedia.search.com.bd/HT/T_0234.htm
o http://www.secbd.org/Full%20Prospectus%20of%20Trust
%20Bank%20Limited.pdf
o http://en.wikipedia.org/wiki/List_of_Banks_in_Bangladesh
o http://investing.businessweek.com/research/stocks/private/snapshot.asp?
privcapId=31030707
o http://www.highbeam.com/doc/1P1-83729256.html

Annual Report of AL-ARAFAH ISLAMI Bank Limited (2007)

Several Booklets from AL-ARAFAH ISLAMI Bank.

Several Newsletter s from AL-ARAFAH ISLAMI Bank.

Credit Operational Manual of AL-ARAFA H ISLAMI Bank Limited.

SHARIAH MANUEL published by Al-Arafah Islami Bank Limited.

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10.2 Reference:
Md. Sharif Chowdhury
AVP & Manager
Al-Arafah Islami Bank Limited
Khilkhet branch, Dhaka

AND
Md Atiqur Rahman (SEO)
Md Jashim Uddin
(SEO)
Md sahah Alam
(SEO)
Md Khalieque
(SEO)
Kazi md Abdul Hashem (SEO)
Md Omar Faruq
(EO)
Md Nazmul Hoque
Fild Supervisor

AL-ARAFAH ISLAMI BANK LIMITED

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