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A Rare Combination of Shariah and Modern Banking

Al Arafah Islami Bank Ltd. is able to provide innovative service to the customers of a developing country such as deposit products and services, commercial banking activities, foreign exchange and foreign trade. Based on the knowledge of practical field I prepared my internship report entitled of General banking activities with special reference to Al Arafah Islami Bank Ltd.


The internship program is a mandatory requirement for the students who wish to be a B.B.A graduate. In the internship program, I was attached to host organization name Al Arafah Islami Bank Ltd. this report prepared on my practical experience on the day to day banking activities, theoretical experience and under close supervision of my internal support as well as my official supervisor.


Broad objectives: Broad objectives of this report are to meet the partial requirement for the fulfillment of B.B.A program. Specific objective: In specific objective I have to prepare a sound report that must be reliable and dependable for the bank officials. The specific objectives to help in exchanging the broad objectives are as follows: To raise the ability to cope with new organization environment. To analyze the performance of the specific branch and the bank as a whole Highlighting the process of banks to deal with overall banking To analyze total procedure of Al Arafah Islami Bank Ltd. in general banking Identifying the major contribution of overall business in Bangladesh To suggest remedial measure for the development of Al Arafah Islami Bank To relate theoretical knowledge with practical field 1

A Rare Combination of Shariah and Modern Banking

To improve quality of evaluation To create the ability to recommend to the branch and its bank based on the gathered knowledge To improve the quality of communication To know about the different scheme, policy, procedures of AIBL


From my educational background I have learned different methodology in research process. So in this study I had the opportunity to implicate may educational knowledge in practical field. I have collected data from many sources:

Sources of data Primary sources Secondary sources

Figure: Sources of data collection Primary sources: officers of the branch Personal observation- observing the procedures of banking activities followed by each department Practical work exposure on different areas of the branch Informal conversation with the client or customers Relevant documents related to the study as provided by the officers Secondary sources:

Personal interview- face to face conversation and in depth interview with the respective

Annual report of AIBL Periodical published by Bangladesh bank Internet is also used as a theoretical sources of information Website and news letters are also used as major sources

A Rare Combination of Shariah and Modern Banking


In this internship period and preparing of the report, there is lot of learning points are available, such as organizational structure of Al Araafah Islami Bank Ltd. and its branch, organizational environment and culture, its deposit products and services, commercial banking activities and foreign exchange and foreign trade, general banking .


To prepare a report on the achieved practical experience in a short duration (only three months) is not an easy task. In preparing this report some problems and limitations have encountered which are as follows: The main constraint of the study are insufficiently of current information, relevant to the study Consolidated date related to the study are not available in the mind of the year All required information are not available in any specific branch of the bank and there are also limited opportunity to visit more then one branch Due to time limitations many of the aspects could not be discussed in the present report Confidential information Lack of experience in internship report writing

A Rare Combination of Shariah and Modern Banking


The bank stared its operation on June 18, 1995 as a commercial bank in the name and style of Al Arafah Islami Bank Limited. The prime objective of Al Arafah Islami Bank Limited is to serve the people for attainment of their economic goal and success in life here and here after. AIBL faced a several set backs in respect of business. With active initiative taken by the number of the board and the management team, the company could overcome the problem and get it converted into a full fledged commercial. Problem on 2001 after obtaining license from Bangladesh Bank as Al Arafah Islami Bank Ltd. the authorized capital of the bank was fixed at Tk. 100 million and paid up capital at Tk. 100.12 million of which 20.50 million was subscribed by the sponsors at that time. At present the bank is operating through 94 branches of the country.


Full name Nick Name History/Overview Al Arafah Islami Bank Limited AIBL With a vision to emerge as the leading bank Islami Bangladesh. Al Arafah Islami Bank was founded by a number of religious personalities from trade and industry. To a significant contribution to the national economy for sustainable growth is another bank program. AIBL offers all its services and products in accordance with Islamic law (sharia). A powerful sharia council is composed of recognized Islamic scholars and economists of the country and the board carefully examines every service and products Type Bank Type offering to the customers. Private Limited Company Private Commercial Banks of Bangladesh 4

A Rare Combination of Shariah and Modern Banking

SWIFT Code Industry Headquarters Established/Founded ATM Network Foreign Exchange Branches in Bangladesh Contact

ALARBDDH Industry 36, Dilkusha (6-9 floor) C/A Dhaka-1000, Bangladesh 1995 Available Available AIBL has branches all over the country Bangladesh Phone: +880-2-7123255-7, 9568007, 9569353 Fax: +880-2-9566160-69 9566074-75 Email:

Official website logo

To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of the national economy To improve banker customer relationship through improving customer service To develop new and innovative product or services through integration of technology, policy and principle

Achieving the satisfaction of Almighty Allah both here & hereafter Proliferation of Shariah Based Banking Practices Quality financial services adopting the latest technology Fast and efficient customer service Maintaining high standard of business ethics Balanced growth Steady & competitive return on shareholders' equity Innovative banking at a competitive price. Attract and retain quality human resources Extending competitive compensation packages to the employees 5

A Rare Combination of Shariah and Modern Banking

Firm commitment to the growth of national economy. Involving more in Micro and SME financing.


To have sustained growth, broaden and improve range of products and services in all areas of banking activities with the aim to add increased value to shareholders investment and offer highest possible benefits to our customers.


AIBL HAS a customer focused modern Islamic Banking sound and steady growth in both mobilizing deposit and making quality Investment to keep their position as a leading Islami bank in Bangladesh. To deliver financial services with the touch of heart to retail, small and medium scale enterprises, as well as corporate clients through AIBL branches across the country. AIBL business initiatives are designed to match the changing trade & industrial needs of the clients.


For customers: To become most caring Bank- by providing the most courteous and efficient service in every area of business For employees: For our shareholders: For our community By promoting the well- being of the members of the staff By ensuring fair return on their investment through generating stable profit By assuming role as a social responsible corporate entity in a tangible manner through close adherence to national policies



A Rare Combination of Shariah and Modern Banking

As an Islami bank, we are singular in every positive aspect. We provide a bunch of state-of-art banking services within the wide bracket of shariah. We are unique with our products, strict with our principle and uncompromising with our honesty. Some of our special features that make us notable in Islami banking sector are as follows: All activities of AIBL are conducted under an profit/loss based system according to Islamic Shariah to get the nation rid of Usury. Its investment policies under different modes are fully Shariah compliant and well monitored by the board of Shariah Council. During the year 2007, 70% of the investment income has been distributed among the Mudaraba depositors. In 2008, AIBL has included online banking in its wide range of services. Bangladeshi software has been introduced in this feature to promote the local developers. AIBL regularly arranges its AGMs (Annual General Meeting). Whenever needed EGMs (Extraordinary General Meeting) are also arranged. We regularly pay dividend to our valued shareholders. For the year of 2010, we declared 26% bonus dividend to our shareholders. We believe in providing dedicated services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity. The bank is committed towards establishing a welfare-oriented banking system to meet the needs of low income and underprivileged class of people. The Bank upholds the Islamic values of establishment of a justified economic system through social emancipation and equitable distribution of wealth. Following the Islamic traditions, it is assisting in the economic progress of the socially deprived people; in the creation of employment opportunities and in promotion of rural areas to ensure a balance development of the country. The Bank believes in social and philanthropic activities and has established AIBL English Medium Madrasha and AIBL Library. More endeavors will inshallah follow in future.



A Rare Combination of Shariah and Modern Banking

To establish an interest free economy To establish an modern banking system for all kinds of people To take part in the economic growth of the country To eradicate the poverty and to do social services by establishing schools, madrashas, university, hospital, public library etc. Finally to achieve ultimate goal i.e., Nazat in Akhirat


Export and Import Function Retail Banking Industrial financing trade financing Syndicated Loan Project financing Hire purchase Lease financing Online service Automated Accounting Integrated System Signature Verification Any Branch Banking ATM Services Other Delivery Channel Services


2.11.1 SHARIAH BOARD Scholars of high repute with extensive experience in law, economics and banking systems and specializing in law and finance as prescribed by Islamic Shariah make up the AIBL's Fatwa & Shariah 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 8

A Rare Combination of Shariah and Modern Banking

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). 2.11.2 THE BOARDS 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 Banks 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). 2.11.3 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. Analyzing 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. 9

A Rare Combination of Shariah and Modern Banking

Ensuring Shariah compliance in the implementation of all banking transactions and correcting any breaches. Analyzing administrative decisions, issues and matters that require the Board's approval. Supervising Shariah training programmes for the Bank's staff. 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. 2.11.4 AIBLS LIBRARY The AIBL's library houses a vast collection of more than 4,000 books on Islamic Fiqh, law, economy, banking and Shariah. The library was primarily established with the aim of serving the Fatwa & Shariah Supervision Board's research team and the AIBL staff. The facility is also accessible to the banks customers, researchers and students of higher education 2.11.5 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 programes. 2.11.6 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. 10

A Rare Combination of Shariah and Modern Banking


Divisions Dhaka Rangpur Chittagong Rajshahi Number Divisions 49 Khulna 04 Barisal 22 Sylhet 05 ## Total = 98 Number 07 04 07 ##


Management team is the most important part of an organization. Figure shows the management team of AIBL. Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

Assistant Vice President Figure: Management Team of AIBL



A Rare Combination of Shariah and Modern Banking

(In million TK.)

Particulars Authorized Capital Paid up Capital Reserve Fund Shareholders Equity Deposit Investment Import Export Total Income Total Expenditure Profit before Tax Profit after Tax Income Tax Total Assets Fixed Assets Earning per share (Taka) Profit Earning Ratio Dividend per share 0ther information No. of Shareholders Number of Employees Number of Branches Manpower per Branch

2007 2500.00 1153.18 653.00 2037.50 23009.13 22906.37 27042.72 12714.91 2172.48 1202.71 582.84 347.31 385.45 30182.32 334.48 2.51 4.89 20% 4487 1033 46 23

2008 2500.00 1383.81 905.33 2705.74 29690.12 27,742.57 32685.13 20176.64 2955.61 2199.43 1,258.89 668.24 235.53 37,177.22 396.76 3.72 30% 12013 1080 50 25

2009 2500.00 1798.53 1,223.18 3564.73 38355.50 36,134.08 34074.80 23546.10 4387.26 2859.16 1,589.24 858.99 590.66 48515.79 466.30 2.00 30% 10664 1296 60 28

2010 5000.00 4677.28 1,779.08 9,790.36 53,882.96 53582.96 55934.10 32042.40 5305.64 3575.81 2,852.47 1,959.04 730.25 74,005.01 655.39 4.14 9.53 26% 25621 1711 78 30

2011 10000.00 5,893.37 2,437.43 11,989.11 82,186.98 77,714.95 76,112.10 52,202.10 7522.25 4462.30 3,946.62 2,198.75 873.01 106,768.18 968.13 3.73 13.24 21% 54267 1807 88 33


A Rare Combination of Shariah and Modern Banking

90000 80000 70000 60000 50000 40000 30000 20000 10000 0 2007 2008 2009 2010 2011 shareholders equity deposit investment profit before tax and provision

Figure: Financial Performance summary

2000 1800 1600 1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011

1711 1033 1080 1296


Figure: No. of Employees (2007-2011


A Rare Combination of Shariah and Modern Banking

Islam provides a complete lifestyle. Main objective of Islamic lifestyle is to be successful both in mortal and immortal life. Therefore in every aspect AIBL follow the doctrine of Al- Quran and lifestyle of Hazrat Muhammad (Sm,) for supreme success. AIBL bear the mark of Sunnah of Prophet Muhammad (Sm.), of faith and conviction, values and attitudes towards life and that the entire environment of AIBL is conformity with Sunnah.


AIBL firm commitment to excellent customer service delivery has resulted to remarkable progress in all areas of operation during 2006. The bank believes in maintaining personal relationship with its clients. One of the major goals of the bank is to build long term relationship with the customer and to create value for them. To maintain this relationship, AIBL sometimes waive high charges for those valued clients who are linked with the bank for a long period of time.

Technology One of the major weaknesses of AIBL is the technology used by the bank. With the change of time, technological advancement is essential to survive in the competition. Hence, AIBL is lagging far behind in this area. Most of the branches are not well equipped. There are not enough computers, telephones or fax machine in the branches which often slower the pace of work. AIBL is the best Online Banking but the online facility which the bank is providing currently is not up to the standard. Remuneration The pay scale of employees in AIBL is not competitive compared to other private banks of the country. The employees of AIBL get compensation of around 60% of what other private banks, 14

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for example, Dhaka Bank, Mercantile Bank, Southeast Bank, etc. offer to their employees. This creates dissatisfaction among the employees which carries the risk of rise in employee turnover rate. Those who cannot switch bank are often discouraged to give their best effort in the job. Promotion When an employee gets a promotion to the next level, he/she gets more compensation. AIBL is regular in giving promotion, but the employees get late effect of this promotion. Often there is a long gap, for example a six month gap in getting the effect. Less emphasis on advertising through the electronic media AIBL does not promote their brand or products on a regular basis. They seem to be over confident over their companys publicity. They some times see it as an extra expenditure. They also dont do much electronic media advertising. On the other hand competitors like- Islami Bank Bangladesh Ltd, EXIM Bank Ltd, Dhaka Bank Ltd, Dutch Bangla Bank Ltd, Standard Chartered Bank Ltd, Jamuna Bank Ltd and others do the opposite frequently come up with creative adds for their banks. This is a big weakness for AIBL which may prove to be very big mistake in the future. To company should concentrate more on its promotional activities. Agency Problem Sometimes, some of the branches employees are often found not to be too keen on taking care of their customers. Though they have a short employee line in some branch, their loyalty to the company and their ethics level are not very satisfactory. Some of the employees always think about their own interest, which proves that agency problem is there. Some of them create unofficial groups through which they solve each others problem and support each other to achieve their personal goals, not too much concern about their personal interest.


AIBL providing many facilities to the customer mainly deposit sector. At present time customers needs technology in the banking sector, they want to do banking in the internet, card, e-business etc. AIBL using Ababil software, which have lots of functions but now all the functions are not activated, AIBL has goodwill in the deposit side but technology side is not well. AIBL has not available ATM booth. So AIBL future plan is develop its software and activate available ATM booth.


A Rare Combination of Shariah and Modern Banking

AIBL revised its plan of launching a TK. 100 crore Islamic mutual fund. Under the revised plan the bank as sponsor will subscribe 10 percent of the AIBL of the 1 st Islamic mutual fund. The bank said 50 percent of the fund will be raised through initial public offering (IPO) and the rest 40 percent through pre-IPO placement.


Al-Arafah Islami Bank Foundation:- The Bank has a Foundation launching philanthropic activities. Al-Arafah Islamic International School & College and AlArafah Islami Bank Library are major two wings for launching philanthropic activities. Al-Arafah Islamic International School & College:- Al-Arafah Islamic International School & College 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 Islamic International School & College is to contribute towards building human resource and in the broader sense to ensure human welfare. With the view Al-Arafah Islami Bank Foundation has established Al-Arafah Islamic International School & College at Dhanmondi in 1998. Such institution up to O level of its kind is for the first time in Bangladesh


A Rare Combination of Shariah and Modern Banking


Corporate level strategy:-To create value, a corporate strategy should enable a company, one, or more of its business units, to perform one or more of the value creation functions at a lower cost, or perform one or more of the value creation functions in a way that allows for differentiation and a premium price. But the AIBL does not have any corporate level strategy. Business level strategy:-Business level strategy refers to the plan of action that strategic managers adopt for using the companys resources and distinctive competencies to gain a competitive advantage over its rivals in a market or industry. AIBL is currently following low cost generic business level strategy. All most all competitors are following same business level strategy. It can be categorize as low cost strategic group. Functional level strategy:-Functional level strategies aimed at improving the effectiveness of a companys operations and thus its ability to attain superior efficiency, quality, innovation and customer responsiveness. AIBL has perused its functional-level strategy for building competencies in low cost for its services divisions.


SWOT analysis means analyzing the strengths, weakness, opportunities and threats of the Organization to know the present condition. This is very common analysis to determine the company's capabilities of doing effective business. This help to know the possible advantages and disadvantages of the firm that it has compare to compare to others. The SWOT analyses are briefly given in the below: Strength Better Commitment of Employees Fewer default loan Good banker-customer relationship 17 Weakness Some inexpert and laggard assistant officers Existing manual vouchers

A Rare Combination of Shariah and Modern Banking

Energetic work force Huge business area Maintaining a strong capital base Liquidity risk of the bank is low and it makes its position stronger. Good balance between the administration and the employees. Online banking service personnel-training good resources Opportunity Growth sales volume Introducing ATM card Strong business brand image Growing very quickly all over the

Lack of customer credit scheme Existence of other new private bank Not enough efficient administration Weak in marketing Online facility which the bank is providing currently is not up to the standard. No Variation in Products with No facility of Debit & Credit Card


Threat Increase of Competitors Political instability hampers the environment of the business society Advertisement & Promotion of Competitive Banks Still mostly dependent on manual work rather than technology. compensation package of AIBL is not attractive

SWIFT & other Technology Branch Network

4.3 PEST ANALYSIS Every organization operates in a larger macro environment of forces that shape opportunities and pose threats to the company. The four major forces, that is, Political, Economic, Social and Technological forces that affect the banks and the banking industry as a whole are discussed below: 4.3.1 Political forces The Political forces include laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society. There are lots of rules and 18

A Rare Combination of Shariah and Modern Banking

regulations created by the government for several reasons, first of all to protect companies from each other, to protect consumers from unfair business practices and to protect the interest of the society. The banking industry is heavily affected by political forces. The political situation is not stable in this country. Whenever a new Government comes, there is a change in profit rates or interest rates of deposit, loans, etc. The tax situation is affected. There are new policies regarding Export, Import and other activities which might affect the industry negatively. For example, Bangladesh Bank has directed other banks to reduce lending price to encourage industrialization. The SLR has been reduced from 20% to 18%. This has created a serious threat for the lending business of the banks. In another case, the corporate income tax has been increased from 40% to 45% which affected the profit of the banking industry. 4.3.2 Economic forces Economic forces are the factors that affect the consumer buying power and spending patterns. Some countries have subsistence economies where the consumers consume most of their own agricultural and industrial output. At the other extreme there are industrial economies, which constitute rich markets for many different kinds of goods. Banking industry is directly related to the economic factors, especially the consumer spending and savings pattern. Spending is very deeply related to income. As family income rises, the percentage spent on food declines, percentage spent on housing remains almost constant and savings increase. That means with a strong economy in the country the banking industry can expect the customers to deposit more. If we look at the Bangladesh Economy, it performed fair enough mainly due to contribution in the agriculture sector. The real GDP grew by 6.63% in 2009-2010 compared to 6.5% in 20082009. There was growth in all the sectors 7.7% in industry, service sector 5.7%, 9.4% in export and 13% in import. There had been much change in the banking sector due to economic forces. The industry witnessed changes, which stabilized wide swings in the call money market. Bangladesh Bank introduced long dated government bonds distributed by primary dealers. These bondholders can borrow by pledging these instruments. It had no longer a pre-announced rate band for transaction with banks. There is excess liquidity in the banking sector as a whole but investors


A Rare Combination of Shariah and Modern Banking

are discouraged to invest due to lack of security. Because of this reason, the banking industry might have a back push. 4.3.3 Social forces These are the forces related to societys basic values, perceptions, preferences and behavior. People grow up in a particular society that shapes their basic belief and behavior pattern. These forces affect the survival and success of an industry. As banking industry is a service-based industry, it mainly deals with the people coming from various demography of a society. There are differences in the size, density, location, age, gender, race, occupation and other statistics of the human population. As a result, their perception and behavior patterns also vary. So it is a difficult task to deal with different target markets and to handle the social forces. For example, in many societies, there is no culture or trend to save money. In those societies, it is hard for the banks to operate. Some religious societies might be against the banking business as it gets profit from the interest rates. There could be a behavior pattern among a group of people who are not risk takers. They might not take the risk of investing though they have surplus money. These social phenomenons have great impact on the banking industry as a whole. 4.3.4 Technical forces It is a common saying that todays world is a world of technology and only those will survive who can be up-to-date with the technology. Technological forces are those that create new advancement, create innovative products and market opportunities. Technology has released wonders as well as blunders. The attitude of the people depends on whether people are more impressed with its wonders or its blunders. Like any other industry, technology has deep impact in the banking industry. Using technology, banking has become fast, smooth, less risky and easier. The credit card, ATM machine, online banking, E-banking, etc. are the blessings of technology. Advance banking soft wares have made banking operation much easier. At the same time these technologies pose threat to those competitors who are still left behind. Technology gives an extra advantage to the banks to be ahead of time. So, technological forces might really rule the banking industry real soon. To operate in the macro economic environment, the banking industry should be careful about these forces and by getting acquainted with these forces, the industry would be able to make it strength rather than take is as a threat.


A Rare Combination of Shariah and Modern Banking

4.4 CAMEL FRAMEWORK CAMEL framework is used widely to determine the performance in banking sector. This involves evaluation of bank under five criteria. After analyzing the position and performance of each category, a bank is ranked. Till the year 2009, AIBL has been categorized as no. 1 rated bank of Islami Bank under Capital, Asset, Management, Earnings and Liquidity (CAMEL) rating by Bangladesh Bank and rated as a strong bank. 4.4.1 CAPITAL ADEQUACY Capital adequacy provides a safety net to depositors and other providers of business holder against losses that the bank might occur. The banking industry is required to maintain a minimum capital adequacy ratio is 9.95%. Though the foreign banks are having a capital adequacy ratio above 15% on average, the private banks are also doing well with an average ratio of 10%. Among these private banks, AIBL is maintaining a strong capital base with a capital adequacy ratio of 11.25% in 2009 and 14.49 in 2010. The bank is maintaining its capital adequacy position above the industry average. The bank had a target to have Tk. 6000 million of capital fund by the year 2012, whereas it reached capital fund of almost Tk. 5000 million by 2010 and its total capital is Tk. 10,512,800,000 positioning the bank as one of the strong capital based bank of Bangladesh. 4.4.2 ASSET QUALITY In order to encourage depositors to deposit money in the bank, it is required for the banks to have good asset quality. That means, the bank should not have too much of bad debts from its borrowers. The asset quality of a bank depends on certain ratio, for example, the net provision of loan losses to total loan, sector wise loan distribution, ratio of classified loan to total loans, etc. 10.4.3 MANAGEMENT EFFICIENCY Since all banks fall under the service industry thus most of their operations and functions require more involvement of its employees. Therefore, it is very important for banks to have an efficient management body. Sound management is the most important pre-requisite for the strength and growth of any financial institution. It is difficult to draw any conclusion regarding management soundness on the basis of monetary indicators, as characteristics of good management are rather qualitative in nature. Nevertheless, the performance of the management should be reflected in the overall financial strength and capability of the bank, therefore the 21

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total operating expense to total operating revenue ratio, the employee productivity ratio, are generally used to measure management soundness. For example a high and increasing expenditure to income ratio could be interpreted as operating inefficiency that could be due to flaws in management. 4.4.4 EARNINGS & PROFITABILITY ROA (Return on Asset), ROE (return on Equity) and NPM (Net profit Margin) are widely used indicators that measure the profitability and earnings of a bank. A strong earnings and profitability profile of a bank reflects its ability to support present and future operations. More specifically, this determines the capacity to absorb losses by building an adequate capital base, finance its expansion and pay adequate dividends to its shareholders. The earnings and profitability ratios of AIBL are falling from the previous year; however, it is still high comparing to the other banks of the industry. ROE of PBL is 31.55% in 2010, 27.32% in 2009, 21.07% in 2008 & 27.39% in 2007 whereas most of the other private banks have ROE of 20 to 25%. 4.4.5 LIQUIDITY Liquidity is a measure of how quickly the bank can meet its financial obligations. Shortfall of cash may drag down the bank to borrow at a huge rate. At the same time the excess liquid asset will keep banks away from earning enough. Therefore banks make a trade-off to maximize return while minimizing risks. Banks try to keep this part of the asset as low as possible so that they meet the Central Bank requirement and make a safeguard against liquidity shortfall and at the same time try to take all the opportunity of the investment and earning with its assets. In conclusion, it can be said that, AIBL is performing well enough in CAMEL framework. However, the bank should keep in mind that, its performance under CAMEL framework has been diminishing from the previous years which pushed it down to the 2 nd position from no. 1 position. Though the bank is still performing fairly, it should focus on this issue immediately.


A Rare Combination of Shariah and Modern Banking


In order to achieve highest goal and to ensure highest standard of updated banking services to its clients and stakeholders SBL authority maintained a standard ethics through a competitive recruitment criteria. Among the living creatures on earth the greatest creation of the Almighty is man. Allah has given man immense power of knowledge, wisdom, intelligence, consciousness and so on. These qualities have made them different from others. By the best use of these qualities in men it has been possible for our world of today to reach this stage of modern science and technology. Of all existing powers, manpower is the most in valuable in our daily life, in organizational needs and in diversified fields of action towards advancement. So, Human Resource division in any organization plays a very vital role in formulating policies, practices and in achieving its goal. Human resource is AIBL prime asset. It is neither the machine nor the technology alone, but the invaluable mix of man -machine interface that makes technology work. AIBL strongly believe while the capacity of machine is limited, the potential of human being is unlimited. The qualities of loyalty to the company and to the customers, tenacity to learn more and the commitment to perform characterize our human resource. AIBL employees with outstanding quality are rewarded in the Bank. As a result, AIBL staff morale is very high. They show good performance in the Bank. The management frequently communicates with the employees and listens to their new ideas and suggestions. A major factor behind AIBL success in 2011 and in the preceding years is AIBL employees. The Human Resource Division of Head Office is responsible for fixing principles and policies concerning personnel and certain areas of administration. The division is responsible for employee relation, staffing succession, planning, training, employee benefits, compensation and their social security. The salary and compensation package for all levels of our employees was reviewed and revised last year to be competitive with all local private sector Banks and 23

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financial institutions in the country. It is targeted to attract and retain good performers in the Bank. AIBL recruited 243 fresh entrants and 20 experienced Bankers during the year 2011 through a transparent recruitment process to fulfill the manpower requirement in the Bank. The Bank also sent 01 employee to BIBM, 04 employees abroad, 38 employees to Bangladesh Bank for training in different fields to upgrade themselves with the latest techniques of modern banking. AIBL have 1,807 staff in the Bank of whom 77 are executives, 1,382 are officers and 384 other staffs as on December 31st 2011. Sl. No. 01 02 03 Total Designation Category Executives Officers others Number 77 1382 348 1807

The Bank Plans to rationalize per-Branch employee by equitable Manpower distribution of human resource amongst the existing and future branches. As a part of social commitments Bank accommodated 388 students from different renowned universities for doing internship program in our Bank during the year 2011. The Bank has recruited experienced new manpower to strengthen its large scale operations. Total manpower employed in the Bank including Managing Director is 1,807 at 31 December 2011; which was 1,711 at the end of the last year


Training is one of the most effective and well-recognized weapon in developing human resources. Training programs are being carried out for the Probationary Officers, Assistant Officers, Junior Officers, Branch Managers and Officers of different grades and Executives by Al-Arafah Islami Bank Training & Research Academy from its very inception. AIBTRA sets training-plans from the early hours of the year and every year a training calendar is prepared and approved by the Management. Training Academy conducts training Courses / Workshops simultaneously at Dhaka as well as outside Dhaka. Training courses, workshops, In-house training etc., are tabled and conducted on current day updated banking aspects concerning new ideas, procedures and techniques of banking. In the training sessions lecture methods as well as discussions, group discussions, case study, 24

A Rare Combination of Shariah and Modern Banking

exercise, practical works, simulation method etc. are followed. Training materials e.g., course folders; CD etc comprising hand-out are delivered to the participants. For enhancing effectiveness, modern training aids e.g. multimedia projector, power point presentation, flip chart etc. are used. For the purpose of assessing trainees' knowledge and skill pre-course and post course evaluations are done. Evaluation of the trainers is also conducted secretly by the participants for making training more effective. In 2011 total number of 1974 trainees were trained at training Academy through 47 training courses / workshop consisting of 157 working days. A total 379 executives/officials have been trained on different subject through 5 out reach and 31 "In-house training at Branches". In these programs, training sessions were conducted by resource persons from Bangladesh Bank, BIBM and many other government and private Banks and financial institutions. 1(One) officer has received training from Bangladesh Institute of Bank Management (BIBM). At the same time, 38 officers and executives have been trained in several training institutes including Bangladesh Bank Training Academy. Moreover, 4 executives of the Bank participated in training courses in Thailand, India and China in the year 2011.


One or one more increment permanently postponed Removed from service Compulsory retirement Demotion in lowest rank Bent down in lowest scale of salary scale



A Rare Combination of Shariah and Modern Banking


Al-Arafah Islami Bank Ltd. offers following types of deposit account: Mudaraba Savings Deposit Account (MSD) Mudaraba Current Deposit Account (CD) Mudaraba Term Deposit Receipt Account (MTDR) Short Notice Deposit Account (SND) Installment Term Deposit (ITD) Mudaraba Haj Deposit Account (MHD) Mudaraba Pension Deposit Scheme (PDS) .Mudaraba Lakhpoti Deposit Scheme (LDS) Mudaraba Millionaire Deposit Scheme (MDS) Mudaraba Kotipoti Deposit Scheme (KDS) Mudarab Double Benifit Deposit Scheme (DBDS)

6.1.1 CONDITIONS: Mudaraba Savings Deposit Account (MSD): In savings deposit account, profit is payable to the customer. The profit for savings account is 4 percent Profit is calculated on a monthly basis on the lowest balance in the account during the month Customer can withdraw twice in a week and maximum limit per transaction is BDT.5 Lac and withdrawal beyond this limit requires 7(seven) days prior notice. If the total withdrawal without notice is allowed twice in a week up to 25% of the balance in the account subject to maximum limit of BDT.5,00,000 withdrawal beyond the maximum limit will require 7(seven) days prior notice, failing of which profit will not be allowed for the month in which the withdrawal occurs Profit rate may be subject to change without notice to customer. Profit will be credited to customers account on half-yearly basis. 26

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The minimum account opening balance is Tk.500. The minimum balance must be maintained in the account. The amount of minimum initial deposit is the minimum balance for maintenance. The account maintaining fee is Tk.500 and charged twice a year. If the balance falls below Tk.500, bank will charge minimum balance charge Tk.250 half-yearly

The bank reserves the right to realize an incidental charge and or/ to close the account without prior notice to the customer(s), if he/she/they fail to maintain the minimum balance. Mudaraba Current Deposit Account (CD):

No profit is payable in current accounts Current account has advantages over savings account. Advantages are - no such withdrawal limit and overdraft facility. The minimum account opening balance is Tk.2000. The minimum balance must be maintained in the account. The account maintaining fee is Tk.500 and charged twice a year. If the balance falls below Tk.2000, bank will charge minimum balance charge Tk.250 half-yearly. Mudaraba Term Deposit Receipt Account (MTDR): customers who can deposit money for fixed period of time These deposits are repayable subject to a period of notice and hence known as time deposits or time liabilities meaning thereby that these are withdraw able subject to a period of notice and not on demand. The Bank has defined its MTDR products in various time slabs, which are as follows: Mudaraba Term Deposit 1 month Mudaraba Term Deposit 3 months Mudaraba Term Deposit 6 months Mudaraba Term Deposit 12 months Mudaraba Term Deposit 24 months 27

Mudaraba Term Deposit Receipt (MTDR) is a profit bearing account intended for those

A Rare Combination of Shariah and Modern Banking

Mudaraba Term Deposit 36 months

Profit rate varies according to the above defined time slabs No profit on MTDR is paid against the deposit for less than 1 (One) month. In other cases of pre-mature encashment the time duration of the deposit is divided in nearest slab. Like, if a client makes a MTDR for 24 months and tries to en cash in 18 months time then his/her MTDR is treated for profit calculation as follows: *For 12 months time 12 months MTDR profit rate is applied *For next six months 6 months MTDR profit rate is applied This is a profit and loss bearing product. Profit is calculated on daily basis and credited on term end using the provisional rate of profit. After year end the accounts are adjusted with actual rate of profit. If the actual profit rate is greater than that of provisional then the extra profit is credited to the accounts or to sundry account if any account has closed during the year. In case where the actual rate is lower than the provisional rate the loss amount is debited from the clients account or notice can be send to the client to rebate the loss amount if the account is closed during the year. After profit is being credited to accounts income tax is deducted / debited from the accounts. The rate of income tax is 10%. Depending on the amount of deposit there is a yearly excise duty to be charged on this type of account. There is also a specific amount of service charge, chargeable on half-yearly basis. Loan can be taken against MTDR. The Bank may sanction about 80% of the MTDR amount. This is a non-cheque bearing product. Short Notice Deposit Account (SND): Deposits held for 7 days to 89 days, which is withdraw able on notice, are specified as Short Notice Deposit. In SND deposit account, profit is payable to the customer The profit rate for SND account is 4 percent. Profit is calculated on daily basis on the balance in the account during the month. But customer will only receive profit if the balance is 5 lac or above. Profit will be credited to customers account once in a calendar 28

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year at the end of December. To qualify for profit any credit into the account must remain deposited for at least 07 days. The minimum account opening balance is Tk.5,000. The minimum balance must be maintained in the account The account maintaining fee is Tk.500 and charged twice a year. If the balance falls below Tk.5,000, bank will charge minimum balance charge Tk.250 half-yearly Installment Term Deposit (ITD): with profit after tenure Deposit can be made by convenient monthly installment depending on your income Installments can be deposited in any working day of the month. Even advance installment may be deposited Profit will be calculated on daily basis upon your deposit. To make it more attractive deposited amount will be weighted 1.05, which is 0.05 percent higher than 3 years term deposit Duration of the deposit will be 5, 8, 10 or 12 years along with installment amount of either Tk. 200/-, 300/-, 500/-, 1000 Any person above 18 can open this magnificent scheme. Even an ITD can be opened on behalf of a minor! This worthwhile scheme will make your deposit to grow in the following ratio: Tenor Deposit 200 300 500 1000 1500 2000 3000 4000 16182/24273/40410/80818/121272/161632/242484/323395/5 years 8 years 10 years 12 years

An exciting chance to save monthly a certain amount and get attractive return along

Gross return (Deposit + Profit) at maturity (Projected) 31095/46457/77524/155157/232780/310285/465661/621209/29 44003/65894/109970/219862/329801/440069/660280/880760/59910/89737/149787/299499/449414/599765/900179/1200981/-

A Rare Combination of Shariah and Modern Banking






Mudaraba Haj Deposit Account (MHD): Al-Arafah Islami Bank Limited has introduced a Monthly installment based Hajj Deposit for the middle class pious Muslims In this scheme, your sacred wish for pilgrimage will be fulfilled with relatively smaller monthly deposits One can open only one Hajj account in his/her name which will be operated by the rules of Mudaraba One can prepare for the Hajj within one to twenty years and accordingly he/she can select the amount of monthly installment from the following chart The main attraction of the scheme is the profit based on daily stay of your deposit. In fact it holds 0.06 more weightage than a 3 years deposit In the year 2012 the estimated expenditure for Hajj is Tk.2,55,500/- and for the upcoming years it has been gradually incremented in the rate of 5%. A variety of maturity period and installment size will give you the option to make it your own affordable scheme If the depositor wants to go for Hajj before maturity period, he/she can amend the residual amount with the deposit and fulfill his/her holy wish. Estimated expenditure for Hajj for next 20 years after 2008 and the relative installment amounts will be as under: Year 20 19 18 17 16 15 14 13 Monthly Installment 750/800/880/950/1020/1070/1170/1375/30 Estimated Expenditure & Saving for Hajj 635000/605000/590000/556000/531000/485000/466000/450600/-

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12 11 10 9 8 7 6 5 4 3 2 1

1450/1600/1770/2050/2360/2680/3140/3900/4880/6600/10000/20000/Mudaraba Lakhpoti Deposit Scheme (LDS): of becoming a "hundred thousand taka" true


Al-Arafah Islami Bank Limited has brought this tremendous scheme to make the dream One can select the maturity period from 3, 5, 8, 10 or 12 years This eye catching scheme is lucrative because it will accumulate profit on your deposit in a daily-stay basis with a weightage 0.05 more than that of a 2 years deposit. A single person can open more than one account in the same branch Tax will be applicable on the deposited amount along with profit according to the country law Monthly installment can be deposited on any working day from any branch. One can give standing order to make payment of the installment from his savings account maintained with the branch.

Period 3 years 5 years 8 years

Monthly Deposit 2,325/1,275/645/31

Estimated return after maturity 1,00,000/1,00,000/1,00,000/-

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10 years 12 years



Mudaraba Millionaire Deposit Scheme (MMDS):

With this excellent scheme your deposit will increase to million taka The size of monthly installment may be 24400/-17530/-13500/-10800/-8800/-5400/4100/-2870/-1700/- taka The main attraction of this Mudaraba-based scheme is that, profit will be accumulated on your deposit in a daily-stay basis. To make it a more important scheme it will have a weightage of 1.05, which is 0.05 more than that of a 3 years deposit. Monthly installment can be deposited on any working day from any branch. One can even give standing order to make payment of the installment from his savings account maintained with the branch. Advance deposit is also possible This scheme comes with exciting investment facility. One can take advantage of 80% of his/her deposit as investment facility. Tax will be applicable on the deposited amount along with profit according to the country law Period 3 Years 4 Years 5 Years 6 Years 7 Years 10 Years 12 Years 15 Years 20 Years Monthly Deposit 24400/17530/13500/10800/8800/5400/4100/2870/1700/Estimated return after maturity period 10 Lacs (1 Million) 10 Lacs 10 Lacs 10 Lacs 10 Lacs 10 Lacs 10 Lacs 10 Lacs 10 Lacs

Mudaraba Kotipoti Deposit Scheme (KDS): 32

A Rare Combination of Shariah and Modern Banking

With the help of Kotipoti scheme, your savings will rise to a mammoth amount of 10 million taka. Various installment amounts along with different maturity periods are available in this scheme, which will definitely match your requirement Any person above 18 can open this magnificent scheme. Even an MKDS can be opened on behalf of a minor! The main attraction of this Mudaraba-based scheme is that, profit will be accumulated on your deposit in a daily-stay basis. In this scheme, profit will be given with a weightage of 1.05, which is 0.05 more than that of a 3 years deposit Monthly installment can be deposited on any working day from any branch. One can even give standing order to make payment of the installment from his savings account maintained with the branch. Advance deposit is also possible. Tax will be applicable on the deposited amount along with profit according to the country law This scheme comes with an exciting investment facility. One can take advantage of 80% of his/her deposit as investment
Period of Deposit 3 Years 4 Years 5 Years 6 Years 7 Years 10 Years 12 Years 15 Years 18 Years 20 Years Monthly Installment 244000/175300/135000/108000/88000/54000/41000/28600/20700/16900/Expected return after maturity period 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore 1 Crore


A Rare Combination of Shariah and Modern Banking

22% 14%
Al Wadia Current Account Mudaraba Saving Deposit Other Mudaraba Depos Mudaraba Term Deposit

13% 1%


Bills Payable

Figure: Percentage of Account 6.2 LOCKER SERVICES:


A Rare Combination of Shariah and Modern Banking

Al-Arafah Islami Bank Ltd. has been providing 'Safe Deposit Locker' services for a long period of time. At present five of our fifty branches have these facilities. The numbers, rent and other information is given in the following table: Locker sizes Large Medium Small Security/unit(taka) 10,000.00 10,000.00 10,000.00 Rent/unit(taka) 2,500.00 2,000.00 1,500.00

No. of lockers Locker sizes Banani Branch, Dhaka Large Medium Small 12 48 36 Dhanmondi Uttara Branch, Dhaka 30 87 66 Model Town Branch, 12 48 36 Dakkhinkhan Branch, Dhaka 12 24 25 15 33 48 12 48 36 Narayangonj Branch Feni Branch

The valuables kept in the lockers are also insured with coverage of the following amount under a group insurance policy: Locker sizes Large Medium Small 6.3 ATM SERVICES: Head Office, Card Division 36, Dilkhusha C/A. (9th Floor) Dhaka-1000 Motijheel Branch 161, Motijheel C/A, Dhaka1000 Uttara Branch H # 13, R # 14/A, Sec-4, Uttara Model Town, Uttara, Dhaka-1230 Gazipur Holding # k-280, BIDC Road Gazipur Mirpur 1 no super market, Asha Plaza, Mirpur-1, Dhaka-1216 Dhanmondi Branch House # 54/1, Road # 4/A Dhanmondi, Dhaka-1209 Insurance coverage (taka) 1,50,000.00 1,00,000.00 50,000.00


A Rare Combination of Shariah and Modern Banking

Narayangonj Branch

Cox's bazar

Zindabazar Idris


Jessore Rail

71, Honeymoon Bongobondhu Road, Narayangonj Resort, Block#B, Plot #

Branch A Hossain 50, 4, Road,

Market,Hold Plaza, ing # 4/A Sir 04, Zindabazar, Road Khulna

Iqbal Kotowali, Jessore

Kolatoli R/A, Sylhet Coxs bazar



A Rare Combination of Shariah and Modern Banking


General banking division usually performs a lot of important banking activities. General banking division is the division, which is mostly exposed to the maximum number of bank customers. It is the introductory department of the bank to its customers. All business concerns earn a profit through selling either product or a service. A bank does not produce any tangible product to sell but does offer a variety of financial services to its customers. AIBL has all the required sections of general banking and this section are run by manpower with high quality banking knowledge. This section is consists of activities of open of account, issue of cheque, payment, clearing of inter bank transaction; inter branch transaction, and closing of account. Open of account is one kind of technique of collection of deposits from customers. "Deposits are Debts"- The money deposited with the banker is not held by him in trust but as his debts to the depositors and the relationship that exists between the banker and the depositor is strictly that of debtor and creditor. The deposits are accepted by the banker through current and saving accounts withdrawable by cheques. Deposits are also accepted against deposit a receipt, which is deposited against term deposit accounts. Those are primary source of fund of a bank.

Saving Accounts

Current Accounts

Term Deposits

Fund Figure: Primary Sources of Bank Account Negotiable Instrument Act, 1881 provides37

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The deposits accepted by the banker are repayable on demand or otherwise and withdrawable by cheque, draft, and order or otherwise. The total deposits held by the banker are broadly classified as demand deposits and time deposits, the former being payable on demand and the latter as per terms of the deposits. "Customer"- The Negotiable Instrument Act has not defined a 'customer' but from section 131 of NIA and different court decisions as quoted in books of banking, it appears that only those constituents of the banker are customers who have some sort of an account with him duly introduced for the purpose, with the deposits put therein being withdraw able by cheques. Since bank is confined to provide the services every day, general bank is also known as .retail banking. General Banking 01 Cash section 02 Accounts opening section 03 Cheque clearing section 04 Remittance section


Cash department is the most vital and sensitive organ of the branch as 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 Al-Arafah Islami Bank are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash Al-Arafah Islami Bank. The figure is called closing Al-Arafah Islami Bank. This closing Al-Arafah Islami Bank is then added to the vault. And this is the final cash Al-Arafah Islami Bank figure for the bank at the end of any particular day. 7.2.1 Functions of cash department Cash Payment Cash payment is made only against cheque. This is the unique function of the banking system which is known as payment on demand. Cash Receipt It makes payment only against its printed valid Cheque It receives deposits from the depositors in form of cash. So it is the .mobilization unit. of the banking system It collects money only its receipts forms 7.2.2 Cash payment or Cheque cancellation process: 38

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Step-1 Step-2

Receiving Cheque by the employee in the cash counter Verification of the followings by the cash Officer in the computer section Date of the Cheque (it is presented within 6 month from issue date) Issued from this branch Amounts in figure and sentence written does not differ Signature of the drawer does not differ

Step-3 Step-4

Cheque is not torn or damage Gives pay cash seal and sends to the payment counter Payment officer makes payment

7.2.3 Books maintained by this section Vault Register Cash Receipt Register Cash Payment Register Rough Vault .Register Cash Al-Arafah Islami Bankance Book It keeps account of cash Al-Arafah Islami Bank in vault in the bank. Cash receipt in whole of the day is recorded here Cash payments are made in a day are entered here Cash calculation for final entry in vault register is done here, as any error and correction here is not acceptable. Al-Arafah Islami Bankance here is compared with vault register. If no difference is found, indicates no error


This section welcomes the customers and clients with smiling face. The staff and officer of this section: Opens the new accounts (all types) Maintains subsidiary day books Gives various types of information to the customers. This section opens different types of account for their valued customers. Selection of customer is very important for the bank because banks success and failure largely depends on their 39

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customers. If customers are bad they creates fraud and forgery by their account with bank and, this destroys the good will of the banks. So, this section takes extreme caution in selecting its valued customer. Function of this department: Account Opening Sending Thanks letter Cheque Book issue. Account Closing Create Pay Order, TT and DD. (Work of Remittance Department) Cheque Collection for Clearing, I.B.C and O.B.C.

7.3.1 Who can open Account? Minor (Minor can open the account in the name of the minor's guardian or jointly with the guardian) Discharged bankrupt Proprietorship firm Partnership firm Limited company Non-trading concerns Co-operative society Corporation and public body


8% 25%

18-22 23-27 28-32 33-37

13% 28%



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Figure: Age Level

This pie chart shows the age level of the customers. Its about different ages of the people. It shows clearly that, 28-32 years age people usually come to their Dakkhin khan branch at a big numbers. More than 38 years and the range of 23-27 years people usually come to their bank as well and its about 25%. 7.3.2 Who can't open Account? Minor (Minor is not allowed individually open account) Drunker Undischarged bankrupt Insane Lunatic 7.3.4 Accounts opening process Step-1 Step-2 Receiving filled up application in banks prescribed form mentioning what type of account is desired to be opened The form is filled up by the applicant himself / herself Two copies of passport size photographs from individual are taken, incase of firms photographs of all partners are taken Applicants must submit required documents Application must sign specimen signature sheet and give mandate Introducers signature and accounts number verified by legal Step-3 Step-4 officer Authorized Officer accepts the application Minimum Al-Arafah Islami Bankance is deposited only cash is accepted 41

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Account is opened and a Cheque book and pay-in-slip book is given

7.3.5 Required documents: Individual or sole proprietorship firm: Photograph of the signatories 2 copies. Photograph of the nominee 1 copy each (attested by account holder). Photocopy of passport (first 5 pages). Photocopy of national ID. Copy of valid trade license. Income Tax Certificate Transaction Profile Rubber stamp of the firm. (if it is a sole proprietor firm) Partnership business: Photograph of the signatories 2 copies. Photocopy of passport (first 5 pages). Copy of the valid trade license. Transaction Profile Rubber stamp of the firm. Copy of Partnership Deed. Income Tax Certificate Limited company: Certified true copy of the memorandum and article of association of the company. Certificate of incorporation of the company of inspection and return (along with a duly certified photocopy for banks records). Certificate from the register of joint stock company that the company is entitled to commencement business (in case of public Ltd .co.).


A Rare Combination of Shariah and Modern Banking

Extract of the resolution of the board/general meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/Managing Director of the company.

List of Director/Authorized officer along with designation and specimen signature who will operate the account. Photograph of the signatories and all Directors. Photocopy of passport (first 5 pages). Photocopy of national ID. Copy of the valid trade license. Directors particulars. Transaction Profile Income Tax Certificate.

7.3.6 Special Caution or the documents from the Account opener of the following types: Partnership Firm Partnership deed must be taken Mandate from the partners is essential, Public Limited Company Indicating who will operate the account Certificate of Incorporation Copy of Memorandum and Articles of Association Certificate of Commencement Private Limited Company Copy of Resolution of the Board of Directors Certificate of Commencement is not necessary Certificate of Incorporation Copy of Memorandum and Articles of Association Copy of Resolution of the Board of Directors 7.3.7 Thanks Letter: After initial deposits the banker doesn't issue cheque at the same time. Bank sends Thanks Letter to thanking the account openers to open accounts in its branch. This letter treats customers as honorable persons as well as it create good faith and relationship with, the bank. But most important thing of this letter that it is one kind of technique to verify the validity of the customers given information. Because, when the registered letter is returned because of 43

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wrong information about their name or addresses, it can not be explained that there is a possibility of fraudulent. And then banker must have to stop the accounts and issue of the cheques. 7.3.8 Cheque Book Issue: Bank provides a cheque book one day after requisition. The name of account holder, account number and cheque number are printed on the book and leaves. Bank usually issue cheque book containing 20 leaves for savings account, 50 leaves for current account. A charge for cheque book is Tk.3.00 per leaf. So, Tk.60.00 charged for 20 leaves cheque book and Tk.150.00 for 50 leaves cheque book. 7.3.9 Cheque: A cheque is an unconditional order of the drawer in writing bearing a date, to the banker maintaining his account to pay on demand, to a named person, his order or bearer, a certain specified sum of money, expressed in both figures and words. Parties to Cheque There are three parties are available to a cheque. They are Drawer, Drawee, and Payee. Drawer: Drawer is the person who draws the cheque i.e. the depositor of money in the bank. Drawee: Drawee is the drawer's banker on whom the cheque has been drawn. Payee: Payee is the person who is entitled to receive the payment of a cheque. When a cheque is drawn 'pay to self or 'pay cash' the payee is the drawer, his endorsee or bearer, as the case may be depending on the form in which it is drawn namely, order or bearer. A cheque is Payable forthwith on production and no presentment thereof is required as in the case of a bill of exchange or pro note. The payee or endorsee who is in possession of a cheque or the bearer thereof is the holder. A holder becomes a holder is due course when he possesses the instrument for consideration, before it became over-due and without notice that the title of his transferor was defective. 7.3.10 Conditions of cash/ cheque deposit:


A Rare Combination of Shariah and Modern Banking

The pay-in- slip shall not be treated as valid until is duty sealed and signed by the authorized officers of the bank. Besides, it is only a memorandum of deposit of item(s) described therein The cheque shall be deposited by crossing only After deposit of cash, the depositor should make sure that the authorized officer has signed and stamped the carbon copy/duplicate copy of the deposit slip. If otherwise, that must immediately be brought to the notice of the head of the branch Deposit slip folio should be exclusively used for bankwise/branchwise deposit of cheques and cash The depositor must put his or her signature on the deposit slip in the space provided for After deposit of cash/cheque the carbon/duplicate copy of the deposit slip should be retained for future In receiving the cheques or any other instrument for deposit including cheques drawn AIBL or other banks, the bank acts only as the depositors collecting agent and assumes no responsibility for the realization of such item(s). if payment of the amount of any item is not received by the bank for any reason whatsoever such amount will be charged back to the depositors account including incidental charges. All items for deposit are accepted by the bank on the understanding that the depositor assumes full responsibility for the genuineness, validity and correctness of all signatures and endorsements appearing thereon The account holder should get computer print out of the account statement on monthly or quarterly basis and should reconcile the entries with the carbon copy of the deposit book. Any discrepancy must be reported immediately to the branch

7.3.11 Bank Account Statement & Certificates


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All types of bank statements and certificates such as solvency certificates, income tax certificates, B.O. certificates etc. are issued by the bank on favor of the customers. As per customers instruction the bank dispatch the account statement/advice to his/her/their address. Moreover, on customers request, bank provides statement and certificates related to the account. 7.3.12 Account Closing Account closing is also done by account opening section. The customer may close his/her/their account(s) at any time giving notice to the bank. Similarly, the bank on genuine ground may close customer(s) account giving reasonable notice for the action or without any notice if the conduct of the account is not satisfactory to the bank or any reason(s) whatsoever. In either case, bank will realize a closing charge from the customers account. The usual closing charge is Tk. 300 + 15% VAT. But, the closing charge of account within three months of opening is Tk.500 + 15% VAT. To close an account: Account holder requires applying in a specific form with full signature. He/she/they must surrender the unused leaves/cheque book provided by the bank. Verification of signature and approval by operation head. Close the account.

On closure of the account, the bank will pay the credit balance (if any) of the account and any profit due to the customer(s). The customer(s) shall surrender the unused cheque books/leaves along with the requisition slip and other materials (if any) supplied by the bank for operation of the account. 7.3.13 Account Transfer Account opening section also transfers account to from one branch to another on customers request. The steps are: Application for account transfer The customer(s) shall surrender the unused cheque books/leaves along with the requisition slip and other materials (if any) supplied by the bank for operation of the account. Verification of signature and approval of operation head. 46

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Inform the respective branch. Forward the documents. Close the account.

7.3.14 Local Remittance Section Remittance of funds Remittance of funds means transfer of remitted funds to a particular person or his order in a particular branch of the same Bank or on other banks with which it may have agency arrangement. This facility is available to the customers of a bank as well as non-customers. Modes of Remittance Various modes have been evolved by the banks for remittance of funds from one place to another. Generally the banks in three ways affect such remittance, namely: Demand Draft (DD) Mail Transfer (MT) Telegraphic Transfer (TT)

7.14.1 Demand Draft A banker's demand draft (DD) is an unconditional order of the banker's one office to another to pay to the named person or order the amount mentioned therein on demand. The remitter of funds can purchase a banker's draft making the amount payable to anyone including himself. If the draft is not crossed, the payee can draw the amount in cash upon production of the same to the drawee office with satisfactory evidence of his/her identity or can draw the money by depositing it to his/her account there or any other banker. The draft being payable to certain particular person or order the banker must satisfy himself as to the title of the person presenting it for receiving the payment. The banker is discharged from liability only by payment in due course.

7.14.2 Mail Transfer Advice Where the remitter desires the banker to remit the funds to the payee instead of purchasing a draft himself, the banker does it through a Mail Transfer Advice. The transfer is so called as the 47

A Rare Combination of Shariah and Modern Banking

advice is dispatched to the paying office by ordinary mail. The payee must have an account with the paying office as the amount remitted in such a manner, is meant for credit to the payee's account and not for cash payment. 7.14.3 Telegraphic Transfer Sometimes the remitter of the funds requires the money to be available to the payee immediately. In that case, the banker is requested by him to remit the funds telegraphically. Such a remittance is effected by the banker through a coded telegram attested by secret check signal, on receipt of which the paying office pay the amount to the payee in cash through a telegraphic payment order or credit his account, as the case may be. It is also in practice with the banker to purchase telegraphic transfers from another banker of first class standing up to a certain specified limit under prior arrangement detailing the terms and conditions. This selling of telegraphic transfer is resorted to by the latter banker when he or she faces shortage of funds locally. The news of purchase and receipt of reimbursement by the respective office are required to be conveyed to the concerned receiving and purchasing office telegraphically in view of larger amounts being generally involved. But, the Local Remittance Section of AIBL performs the following functions: Pay order (PO) Bills Collection MTDR

AIBL has online banking facility; DD, MT and TT are not practiced now. 7.14.4 Pay Order (P.O) Issued by a branch of the banks is, technically speaking, not a mode of remittance. It appears to be a remittance to the local creditor. A Pay Order is not a negotiable instrument and hence it can neither be endorsed nor crossed like a bankers Draft or Cheque. PO is called the Managers Cheque because it never bounces. It has no time limit for its validity like six months for cheques. The PO application form is stored as a record and at the same time a PO issuing register is maintained. If cash makes the payment, then the application form is stored by Cash section. And when the payment is made through cheque or debiting customers account, then the application form is stored by Remittance section. 48

A Rare Combination of Shariah and Modern Banking

Banks provide remittance facility to transfer funds by charging a commission. Commissions charged for remittance vary from bank to bank. But VAT charged by the government is same for all the banks. Usually, VAT is 15 percent of the commission charged by a particular bank. The commissions charged by AIBL and VAT on these commissions are given below: Amount (in taka) 1 - 10000 1,0001 500,000 500001 Above Commission (in taka) 20 30 100 VAT (15% on Commission) 3.00 5.00 15.00

Figure: PO commission rate and VAT of AIBL. Issuance of PO Application in prescribed form Receiving cash deposit, cheque or debiting customers account Writing PO without alteration Check and signed by two authorized officer. Handover to customer with acknowledgement Entry into PO issuing register Preserve the application form.

During issuance, two authorized officer signs the PO. After their signature, they use a P.A. number for preventing fraud and forgery. Issuance of Duplicate PO Application with reason Verify the signature with the original application form. Ensure PO amount not paid. Obtain indemnity bond

Issuance of duplicate PO 49

A Rare Combination of Shariah and Modern Banking

Note in register and application form Message to the branches. Preservation of application and indemnity bond. Payment of PO

Usually it is payable at the issuing branch itself. Due to their online service, any other branch of AIBL all over Bangladesh can pay PO purchased from any branch. For purchasing PO, a customer has no need to have an account. But for encashment, it is necessary to have an account in the bank. Because PO is only payable to payee i.e. the instrument is Account payee. Stop Payment of PO Application with reason Signature verification Ensure PO amount not transferred to the payee Obtain indemnity bond Issuance of duplicate PO Note in register and application form Message to the branches. Preservation of application and indemnity bond Cancellation and Refund of PO

If the payment of this order has not been completed and refund is requested, AIBL will endeavors to notify the appropriate office, branch, correspondent or agent to cancel the transaction. The cancellation process in brief is as below: Application with instrument Signature verification 50

A Rare Combination of Shariah and Modern Banking

Ensure PO amount not transferred to the payee Confirmation about duplicate issue Obtain cancellation charge Note in PO register and application form Cancellation of instrument.

7.14.5 Bills Collection AIBL collects the payment of cheques deposited by their customers. Usually, inter-branch collection is made through online, but inter-bank collections are made through Clearing House. Process of collection When a branch receives cheques for collection, they can collect it directly through the Clearing House or through other branches. Each branch has a zone for collection. If the cheques of different banks received from customers are within their clearing zone, they collect it directly through their Clearing Section. But if the cheques are outside their zone, they forward these cheques to another branch of that area with forwarding slip named for collection. This is called Outward Bills Collection (OBC). The process of forward cheques to other branches i.e. OBC is as below: Receiving cheques from cash section and entries are made to OBC register. Then, stamp OBC on cheques with OBC serial number. Crossing and Endorsement. Confirmation of endorsement by authorized signature. Making a forward slip narrating the number of cheques, total amount and account number to which the amount is to be credited. Attach forwarding slip and cheques only and make a copy of them. Send the cheques with forwarding slip to respective branch. 51

A Rare Combination of Shariah and Modern Banking

Preserve copy of forwarding slip and cheques with customers depository slip.

In the same way, when a branch receives cheques or bills for collection from other branches of AIBL then the branch in whose favor the bills are sent, collects bills for those branches. This is called Inward Bills Collection (IBC). The step-by-step collection process of IBC may be stated as below: Receiving the cheques for collection. Making DAD (Deposit Awaiting Disposal) Entries. Making Bills section entries. Crossing and Endorsement Confirmation of endorsement by authorized signature. Send to the Clearing Section. Send a message to depositors whose cheques are dishonored. Making debit and credit vouchers for honored cheques and stored.

7.14.6 Clearing Clearing is the process by which an individual cheque/ instrument is exchanged between collecting and paying Bank within the same station through Central Bank mechanism. In the stations where there is no Branch of Bangladesh Bank, the clearing is done through Sonali Bank. The claim on a particular Bank and that Banks claim on other Bank are settled through Clearing House mechanism. Each member Bank has an account with Central Bank and either it owes or some Bank owes to it shall be settled through that account. Clearing operation is centralized at clearing Branch i.e. Branch maintaining account with Bangladesh Bank for clearing purpose. Clearing Process: Cheques for clearing can be classified into two classes. One is the Same day cheques and other one is Normal day cheques.


A Rare Combination of Shariah and Modern Banking

Same Day Cheque: Cheques those are required to be cleared through the clearing house on the same day, at which it is sent for clearing, are called the Same day cheques. Prerequisites of same day cheques are Face value of cheque should be above 5 lacs. Paying banks should be within Motijheel area (5km around the central bank).

Normal day Cheque: On the other hand, cheques those are required to be cleared through clearing house on the next day at which it is sent for clearing are called the Normal day cheques. Normal day cheques send to head office, next day they are send to clearing house. It takes one more day for clearing than same day cheques. Clearing house arranged twice in a day in morning and after launch. In morning, 1st house starts at 9:30 a.m. and clears the normal day cheques. 2nd house starts at 11:30 a.m. and clears the same day cheques. After launch, the dishonored cheques are returned to the collecting banks. This is called Return House that starts at 2:30 p.m. The steps are as below: Receiving the cheques for collection. Making computer (Clearing and Online deposit) Entries. Making a branch and bank wise summary and attach it with cheques of respective banks. Send to the head office.

During computer posting, the cheques deposited by customers of a branch itself, credits the customers account. But this amount is not included in available balance of that account. This credit is called Shadow Credit. If deposited cheques are honored, the customers accounts will be auto credited by central clearing of the bank. Sometimes, a branch collects cheques for other branch or deposited by account holder of another branch. Then, the collecting branch credits (shadow) their own DAD account. If cheques are honored, then collecting branch credits customers account directly by debiting their DAD account. If deposited cheques are dishonored, the customers accounts will be auto debited by central clearing of the bank. 53

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7.14.7 MTDR Income Tax Income tax charged by the government when the MTDR matures. Income tax rate is 10 percent of the interest received by the customer. Excise Duty on MTDR Excise duty is charged once in a year and in the beginning of the year. First excise duty charged on the principal amount of MTDR. From next year, it is charged on the present value of MTDR. A table shows the amount of excise duty as below: Deposited Amount (in Taka) Up to 20,000 20,001 to 1,00,000 1,00,001 to 10,00,000 10,00,001 to 1,00,00,000 1,00,00,001 to 5,00,00,000 Above 5,00,00,000 Process of Issuing MTDR Application in prescribed form. Receiving cash deposit, cheque or debiting customers account. Obtaining two passport size photographs (One of the purchasers and one of the nominees). Writing MTDR without alteration. Check and signed by two authorized officer. Handover to customer with acknowledgement. Entry into MTDR issuing register and computer. Preserve the application form. Excise Duty (in Taka) Nil 120 350 1,000 5,000 10,000

The process of issuing a MTDR may be stated as below:

The application form has two parts. One is account opening form and another is personal information form. If the purchaser already has an account in AIBL, he or she needs not to fill 54

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up the account opening form. He or she only required to fill up the personal information form. One can purchase MTDR in single name or joint names. In case of joint purchaser, each purchaser required to fill up one personal information form. If the purchaser has no account, then bank opens an account for the customer. If the customer gives cash or cheque to AIBL to purchase MTDR, bank can issue MTDR then and then. But if the cheque is of other banks, then the FDR is issued after the cheque has been honored which usually takes 2-3 days. There is no guideline about the minimum required amount to purchase MTDR. A client can purchase MTDR worth of any amount. But in practice, banks will prefer minimum 50,000 taka for purchasing MTDR. Payment of MTDR Premature Encashment

Payment of MTDR may be made before maturity or after maturity. If encashment request is received within 30 days of issuing date, the purchaser will not receive any interest on it. Moreover, following charges will be subtracted from the principal amount: Premature charge Excise Duty charges, rest amount is given to the client. If encashment request is received after 30 days of issuing date to any date before maturity, the purchaser will receive interest at savings profit (6%) on it. But he/she has to pay the stated premature encashment charges. Matured Encashment After maturity, a purchaser can apply for payment of MTDR. He/she can take either entire amount i.e. principal amount plus profit or only the profit. If the purchaser wishes to draw only the profit earned, this profit can be paid in cash or transfer to customers account. If the purchaser wants entire amount, he/she should submit the instrument to the bank. The payment process in brief is given below: Instrument received with two signatures on back side. 55 : : 300 taka. 45 taka Based on principal amount. VAT (15% on P. charge):

For any premature encashment these charges are taken by the bank. After subtracting all the

A Rare Combination of Shariah and Modern Banking

Signature verification from MTDR application form. Calculation of total amount to be credited to customer after subtracting income tax and excise duty.

Payment is made by transfer to account of customer or cash. For cash payment, a debit voucher is issued for payment of interest credited.

Entry in MTDR issuing register and made customer account nil. Mark paid on application form and MTDR issuing register. Renewal of MTDR

The MTDR renewal is done after its maturity if purchasers will not apply for encashment of MTDR. During renewal, profit obtained as prescribed rate is added to principal amount. Then income tax and excise duty is subtracted from the amount obtained earlier. The balance amount will be the new principal amount for renewal. It should be noted that, income tax is charged on each maturity when client receives profit and excise duty charged once in a year and at the beginning of that year. If the customer only takes the profit earned on maturity, the principal amount will be the initial MTDR amount. Renewal entries are made in the MTDR issuing register and then it is posted to the computer. The computer has automated software for MTDR renewal, which provides a date wise list of MTDRs with profit at the beginning of each month. According to that list, renewal of MTDRs is made on that day. The renewal entries are posted to the computer only if the purchaser will not apply for encashment of MTDR and apply only for profit earned on maturity date. For paid MTDR, no computer entry is made. 7.14.8 Foreign Remittance: Foreign remittance is to send money of customers from one place to another, from one person to another outside the national boundary. Though Dakkhin khan branch, Al-Arafah Islami Bank Ltd. is a non-ad branch, it can able to serve the customers by receiving and paying their incoming foreign remittance in the form of local currency. Foreign remittance is received by the bank via some internationally authorized agents. There are many medium of agent for foreign remittance at Dakkhin khan branch, Al-Arafah Islami Bank Ltd. They are 56

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Moneygram:- Moneygram is a money transfer medium/agent serves both domestic & international services. Its identification number consist 8 digits. Eldorado:- Eldorado is another money transfer agent serves only international services. Its identification number consist 7 digits.

The agents are identified by a serial number which has been supplied by the sender to receiver of customer. After digit identification the dealing also verifies the receivers name with documents of sender and e-mail of the agent. Verifying that, send an e-mail to the agent and transfer the amount to the cash department for payment. Any one of the documents required to identify the receiver are as follows: National ID card Voter ID card Salary Statement Statement of tuition fees Academic/ organizations ID card

Another medium of agent for foreign remittance are Money Transfer, RIA, Kushiara, ANE etc



A Rare Combination of Shariah and Modern Banking


First of all, I was asked to work in different sections of General Banking. Here we dealt with new customers who wanted to get information about the branch and will to deal with the branch. This is a very interesting department because here we met people of different types and deal with them accordingly. In this section, I observed the following functions: 8.1.1 Dispatch Section: In dispatch section main job is keep record on inward and outward document. If any document came into bank for various purposes from different organization or bank head office or another branch but also if any document ,application go outward from bank these all the record are included in dispatch section (example : foreign exchange application, document letter of credit, joining application , a/c reopening, A/c closing ( ITD, MTD e.t.c) . In this section particularly I work done very well. 8.1.2 Issuance of Demand Draft (DD) / Pay Order (P.O) A demand draft is provided to the client in whom he has to specify that on which bank it is drawn. The amount both in words and figures is written on the demand draft. Pay order is only payable to payee. In this section I know how to write PO and what is this process. 8.1.3 Bills Remittance Department: It is most important and interesting department. This section deals with the transfer of money from one branch to another branch. Nearly six drafts issued daily from this department. Here I know the amount transferred and what is the procedure. This department also deals with T.T. transfer of money. 8.1.4 Foreign Remittance Department: In this department one person send money in Bangladesh from outside of the national boundary, customer come to the officer and give a PIN number. If Pin number is right bank pay the customer those amount. My work of this department is fill up the form and collect national ID card and other necessary papers. 8.1.4 Deposit Department: Deposit department deals with current, saving fixed accounts for a long period. In current account the bank does not offer any interest you can deposit or withdraw any amount during 58

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banking hours. In Fixed account people normally of old age are more interested because they get a lump sum amount every month as a markup or interest. These accounts are normally for one month to seventy two month. 8.1.5 Cash Collection: In cash counter I used to collect cash from customers that they used to deposits in Saving Accounts. 8.1.6 Assisting Customers to Open Bank Account: I used to help customers to fill up the account opening form. Also provided information regarding the types of papers they need to open a particular account. 8.1.7 Providing Cheque: Customers who open new bank account have entitled to receive a cheque book after one week of account opening. I used to collect account number from them, verified it and issue a new cheque for them.



A Rare Combination of Shariah and Modern Banking

During my internship period at Al Arafah Islami Bank limited I have observed the system following by the bank. By observing the system I have identified some problem of Al Arafah Islami Bank limited. The findings are as follows: AL-Arafah Islami Bank has a sound Management System. Efficient Administration, Accountable Corporate Governance, Experienced Senior Management, Proficient Relationship between Management and Employee, Training and Development of the Employees and overall success are the man potency of the Bank. Strong financial performance such as Capital adequacy, Liquidity position, Asset Quality, are at standard level which gives the bank as top position of Islami Banking services In our country, maximum Islami Bank and Conventional Bank introduced the product number mid 1990's. It is growing rapidly because; the product has the potentiality of earning huge profit to the banks. But the product has not developed in structure and statute. AL-Arafah Islami Bank Limited has been offering several types of deposit schemes (Conventional also) by which people have got some opportunity to save their small money and banks also able to earn more for themselves and for their customers. Comparatively AL-Arafah Islami Bank offers maximum number of deposit schemes. Most of the private sector banks are offering small number of deposit schemes. By which AL-Arafah Islami Bank is successful to capture and retain large number of customers. Though Bangladesh is a Muslim country, maximum people have no real Islamic knowledge and Islamic finance. So, people easily go to other conventional bank for their services. There are many illiterate clients of AIBL. Has not enough strong market policy Promotional activities are very poor There is no customer care section 60

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Though AIBL using banking software but its processing very slow Shortage of officers

Though conducting this study I have acquired some practical knowledge about banking system and other relevant matters. Now I would like to provide some recommendation, which may be helpful to promote the performance of Al Arafah Islami Bank Ltd. SWOT analysis shows with what types of weaknesses the Al Arafah Islami Bank Ltd. Based on the SWOT analysis some recommendations are given below: Decisions from Professionals: To achieve goal of an organization like bank, organization have to depend on the decision that are made by professional bankers, who have great knowledge and experience in their field. Organization should not take any adventurous decisions based on the unprofessional person's opinion. It ensures the bank take decision on the point, not over the point. Co-operative Decision: To take a decision Al Arafah Islami Bank Ltd. and its branches have to introduce co-operative decision making system, where each staff will give their opinion regarding the problem to solve it. This system can help the bank to take best decision. Advance Security System: To secure the branch from any types of threats like robbery, thief, and loss from fire etc., the branch has to install security camera, adequate fire defensive instrument and other security system. That will give confidence and trust in the mind of customers. Strong Promotional Activities: To create a brand image in the mind of the people, the bank has to take strong promotional activities as soon as possible. Aggressive Strategy: Remove the defensive strategy from the mind and take aggressive strategy is the best decision for AIBL and its branches. Because, defensive strategy does not make the bank leader of this sector, only it can help the bank to survive. 61

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Introduce R&D Division: Introduction of Research and Development Division (R&D Division) will be a best decision for this organization. Because, this division can especially help the bank to create not only new deposit and loan products but also other new services by research in the field, which will give the organization competitive advantage over its competitors. Differentiated Marketing: Al-Arafah Islami Bank Limited practices mass marketing. This is not appropriate for targeting all market segments. The bank needs to identify and then build up communication strategies based on those needs about Islamic financing To establish Customer welfare -oriented Banking System: Customers are the hearts of the organization. They should provide more space in the office and if possible, they should have some entertainment facility. Each branch should be decorated with Electronic Display Board, which will show that which table is performing what function and now, whom is serving? The branches should be decorated with proper Sound System facility, which will be helpful to communicate with the clients or customers more easily. This system will decrease the confusedness of the customer, which ultimately will increase the efficacy of customer service. Al-Arafah Islami Bank Limited should try to continuous improvement of the quality of human resources. So, Management should manage continuous training & motivation. Al-Arafah Islami Bank Limited should try to satisfy customer with the price charged. Most of the customers are 25-50 years old. Al-Arafah Islami Bank Limited should target these customers about their investment for here & hereafter.


A Rare Combination of Shariah and Modern Banking


Reports: Annual Report of AIBL, 2010 Annual report of AIBL 2011

Web Sites:

Newspaper Face to face conversation with employees & clients