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AN INTERNSHIP REPORT ON

AN INTERNSHIP REPORT ON “Financial Performance Analysis of AL- Arafah Islami Bank Ltd.” Prepared by Jinnat

“Financial Performance Analysis of AL-Arafah Islami Bank Ltd.”

Prepared by

Jinnat ara Nezum. BBA (7 th ) Major in HRM ID# B093852

INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG

DHAKA CAMPUS

S C H O O L

O F

B U S I N E S S

INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG DHAKA CAMPUS S C H O O L O F B U

AN INTERNSHIP REPORT ON

“Financial Performance Analysis of AL-Arafah Islami Bank Ltd.”

Prepared For:

Mamun Abdul Kayeum Asst. Prof. & Co-Ordinator of BBA Uttara University

Prepared By:

Jinnat ara Nezum. BBA (7 th ) Major in HRM

Md. Mahbub Alom Pathan.

ID# M20521111010 (7 TH ) Major in Finance BBA

INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG

DHAKA CAMPUS

May 26 th , 2009

Mr. Mamun Abdul Kayeum Assistant Professor & Co-Ordinator Faculty: BBA Uttara University (UU).

Subject: Seeking permission to submit Internship Report on Al-Arafah Islami Bank Limited.

Dear Sir,

  • I am pleased to submit my Internship Report on Financial Performance Analysis of

AL-Arafah Islami Bank Ltd.” which was prepared from the job experience in AL-Arafah Islami Bank Ltd. Joydebpur Chowrasta Branch, Gazipur. I am submitting this report in order to fulfill the requirement of the course. I had the opportunity to gain more ideas and insights about Organizational structure and customer services.

  • I had also to learn and work a lot to know the overall Banking and accumulate the relevant data to prepare this report. I express my deep gratitude to you for giving me scope and assist me to prepare this report properly.

I

trust you will find it nice.

Yours sincerely

.

Md. Mahbub Alom Pathan. ID# M20521111010 (7 TH ) Major in Finance BBA

Acknowledgement

First of all, I would like to express my deeply gratitude to the almighty Allah for fruitfully prepare this internship report. It is my practical work as well as my responsibility to perform my jobs.

  • I acknowledge the contribution of my honorable teacher and internship supervisor Mr.

Mamun Abdul Kayeum, for his guidance in conducting the study and writing the report. He has been gracious enough to take time out from his schedule for giving me all the necessary assistance through out the entire internship period. Without his help this report might not have been a comprehensive one.

  • I would like to express my sincerest thanks the very first persons of AL-ARAFAH ISLAMI BANK LTD. to whom I would like to express my gratitude to M.Mohiuddin Sharifi (Manager) received me as an intern at AL-ARAFAH ISLAMI Bank.

  • I also like to thanks Md. Mozahed Hossain (Second Manager), Md. Mahfuzul Haque

(Officer) in charge ( G.B), Md. Khalilur Rahman (Officer), Mr. Lalon Sheik in charge

(Foreign Exchange) who helped me by making understand many banking terms work procedure in Joydebpur Chowrast Branch of AIBL.

But I would like give special thanks M. Mohiuddin Sharifi (Manager) who was frankly, dynamic and helped me seriously and given me his valuable time during my internship program. Some time I did interfere in their most important work by asking many questions for my internship purpose and they were very polite and willing to answers my questions with patience. Finally, a silent flow of gratitude is for most adorned Parents, Brother, Brother-in-law, and Sisters, whose dreams and blessings are always with me.

Executive Summary

The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank Ltd. This program helps me a lot to learn about the practical situation of a financial as well as also assist to implement my theoretical knowledge into practical realistic environment. In the age of modern civilization Bank is playing its spending role to keep to the economic activity. In fact there is hardly any aspect of development activity whether state inspired or otherwise where Bank do not have a major role to play. Bank provides means and mechanism of transferring command over resources from those who have an excess of income over expenditure to those can make use of the same for adding to the volume of productive capital. There are large numbers of small saver with small amount of saving who are generally reluctant to invest their surplus income because of their lack of adequate knowledge about complicated investment affaires. The Bank provide them with the safety, liquidity and profitability by means of different saving media offering varying degrees of mix liquidity, return and safety of saving.

I have equally faced co operation and many obstacles simultaneously. I hope this report would be able portray the status of “General Banking, Investment and Foreign Exchange Operation of AIBL”. My efforts will meaningful if this report serves the purpose effectively.

I have faced many Challenges in different steps of banking procedure. I also tried to

overcome every case. All the banking activities from my personal point of view presented in this report. Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the Bangladesh Bank. It follows the rules and regulations prescribed by the Bangladesh by the Bangladesh Bank for scheduled commercial Banks.

TABLE OF CONTENTS

Chapter

Contents

Page No.

     
  • 1. Introduction Part

   
 
  • 1.1. Introduction

 
 
  • 1.2. Origin of the report

 
 

1.3.Background of the study

 
 
  • 1.4. Objective of the report

 
 
  • 1.6. Methodology

 
 
  • 1.6.1. Source of data

 
 
  • 1.6.2. Primary data

 
 
  • 1.6.3. Secondary data

 
 
  • 1.7. Limitation of the report

 
  • 2. Organization Part

   
 
  • 2.1. Historical background of the study

 
 
  • 2.2. Board of director

 
 
  • 2.3. Managing director

 
 
  • 2.4. Central Executive of the Bank

 
 
  • 2.5. Shariah council of the Bank

 
 
  • 2.6. Organization Structure of the Bank

 
 
  • 2.7. Special feature of the Bank

 
 
  • 2.8. Pledges & commitments of the sponsor

 

directors of the Bank

 
 
  • 2.9. Structure of the Branch

 
 

2.10.

SWOT Analysis

 
 

2.11.

Branch location

 

3. Project Part

   
 

3.1.

Introduction

 
 

3.2.

General Banking

 
   

3.2.1.

Introduction

 
   

3.2.2.

Account opening section

 
   

3.2.2.1.

Current account

 
   

3.2.2.2.

Saving account

 
   

3.2.2.3.

Monthly saving scheme

 
   

3.2.2.4.

Muduraba MDS

 
   

3.2.2.5.

Muduraba LDS

 
   

3.2.2.6.

Muduraba KDS

 
   

3.2.3.

Cash Section

 
   

3.2.3.1.

Cash receiving procedure

 
   

3.2.3.2.

Cash payment procedure

 
   

3.2.4.

Deposit section

 
   

3.2.4.1. Remittance section

 
 

3.3.

Accounts Section

 
   

3.3.1.

Tasks of accounts department

 
 

3.4.

Investment section

 
   

3.4.1.

Investment scheme

 
 

3.5.

Foreign Exchange

 
   

3.5.1.

Letter of credit (L/C)

 
   

3.5.2.

Types of (L/C)

 
   

3.5.3.

Requirement paper for opening L/C

 
   

3.5.4.

Important particular for L/C opening register

 
   

3.5.5.

Important particular for column of Bill

 
   

3.5.6.

Back to Back L/C

 
   

3.5.7.

Foreign Exchange remittance

 
     
     
     
     
     
     
     
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1.1.

Introduction

In recent years Financial Institutions have diversified their services by creating new subsidiaries that perform additional services or by merging with other types of financial institutions. The result has been the creation of financial conglomerates, composed of various units offering specialized services. Diversification also offers benefits to financial institutions. Through this internship program, I come to know about the organization structure, problems, prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd. I was not only learned about the activities and operations of correspondent Bank, but also gathered some knowledge about the basic business of the banking in first three month for the purpose to build up my career. As a student of finance department in Uttara University of Bangladesh, I have earned theoretical knowledge, which is not exactly same with the practical business environment. The company internship program applied by the faculty of Business study helps us to have practical experience and it’s reporting also.

1.2. Origin of the report

The report entitled “Financial Performance Analysis of Al-Arafah Islami Bank Limitedwhat has been prepared for the completion of the B.B.A of the Dept. of Business, Uttara University of Bangladesh. It is possible to gather theoretical knowledge passing through books but it is insufficient to acquire practical experience. We collect data to know about unknown factors, we can have accurate knowledge about the factors by analyzing data.

  • 1.3. Background of the study

This study is made to fulfill to the partial requirement of the BBA program. As the internee was assigned in the “Financial Performance Analysis of Al-Arafah Islami Bank Limitedduring the internship period, practical knowledge has been gathered on the sector. And as observation is the main task of the division, the report is aimed to work on that topic. Practical work situation is sometime may different from what is learn theoretically. Through the business processes are based on theory, the application has to be different to meet the requirement of a situation. The “Financial Performance Analysis of Al-Arafah Islami Bank Limited” has been observed practically and presented in this report to observe the real situation.

  • 1.4. Objective of the Report

The broad objective of the study is to expose the banking activities as a financial purpose. This report is designed to know more about the overall banking systems of the aforesaid bank/branch and analyze the ratio of the organization and identify the financial conditions of organization. More specifically, the topic is selected to identify the following objectives:

To identify the system of Banking Activities.

To observed the internal control system of Al-Arafa Islami Bank Limited.

To identify the financial strength of the institution.

To see the document maintained by the sections.

To know, how the banks invest in other organization and their interest rate and

also know how way bank generate profit. Analysis the financial statement.

Identify the Islamic bank comparable of the other Bank.

  • 1.5. Scope of the Report

In organization part, the report generates an overview of the AL-Arafah Islami Bank Limited. But it was so difficult if Mamun Abdul Kayeum, assistant professor and coordinator of BBA and M. Mohiuddin Sharifi, (Manamer, AIBL) does not help to generate information. The scope of the report is restricted in to the collection record and disbursement that process the financial data of the Al-Arafah Islami Bank Limited. But it was not possible for me to collect any information of payroll and planning and cash management as their activities are highly confidential.

  • 1.6. Methodology

The proposed study will be constructed through an exploratory research. Various aspects of research methodology are given bellow

  • 1.6.1. Source of Data

Both primary and secondary data has been used in making the report thought more emphasis was given on primary source of data in order to carry out the objectives of the report.

  • 1.6.2. Primary Data

Primary data has been collected through interviewing and with the help of questionnaire, which has been enclosed at Appendix-1 and I also used my observation to gather knowledge of Islami Banking system of Al-Arafah Islami Bank Limited. Most of the questions are opened ended to get a details idea about the project. I also generate information to communicate the officer in different position. Selected position was

Manager, Second Manager, Senior Officers, Officer of Al-Arafah Islami Bank Limited also the advisor of the institution.

1.6.3. Secondary Data

Secondary data means the Existing primary data that was collected by someone else or for a purpose other than the current one.

Sources can be classified as:

Paper-based sources books, journals, periodicals, abstracts, indexes, directories, research reports, conference papers, annual reports, internal records of organizations, newspapers and magazines.

Electronic sourceson-line databases, Internet, and broadcasts.

1.7. Limitation of the Report

Like any other report, this one also has some limitation. I know that bank and banking as well as Islami banking is very widely functions, all of the business department. In this

report

I

have

tried

to

use

more

information

as

possible.

Some financial data are

confidential and private for the organization, which prevents to explore some areas of the project. Collecting data from the busy employees of the Al-Arafah Islami Bank Limited through interview and questionnaire was another hard task. And more information is strictly private and most confidential, which are not possible to add in the report.

confidential and private for the organization, which prevents to explore some areas of the project. Collecting
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2.1. Historical Background of the Study

Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with limited liability by shares. It started business on 27 September of that year with an authorized capital of Tk 1,000 million. At inception, its paid up capital was Tk 101.20 million divided into 101,200 ordinary shares of Tk 1,000 each. 23 sponsors of the bank subscribed the total issued capital. In 2000, the paid up capital of the bank increased to Tk 253 million, of which Tk 126.50 million were paid by the promoters/sponsors and Tk 126.50 million by the general public. The bank is listed in the two STOCK EXCHANGEs of the country and has offered 126,000 shares for subscription and trading by the public. Al- Arafah Bank is an interest-free shariah bank and its modus operandi is substantially different from those of regular commercial banks. The bank however, renders all types of

commercial banking services under the regulation of the Bank Companies Act 1991. It conducts its business on the principles of musharaka, bai-murabaha, bai-muajjal and hire purchase transactions. A Shariah Council of the bank maintains constant vigilance to ensure that the activities of the bank are being conducted according to the precepts of Islam.

It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the country. Its shariah principalities application is the better then another bank.

Short History of the bank:

Date of Incorporation

18th June 1995

Date of formal Inauguration

27th September 1995

Authorized capital

Tk 250.00 Crore.

Paid-up Capital

Tk 138.38 Crore

Statuary Reserve

Tk 73.13 Crore

Number of branches

50 (Fifty)

Number of Employees

1091 (02/12/08)

2.2. Board of Director

The board consists of 12 (Twelve) directors. The numbers of the board of Directors of the bank hold very respectable position in the society. They are from highly successful group and Industrial group of Bangladesh. It is mentionable that the whole members of the Directors board of the bank carried a special carrier i.e. they are Hajji and they already committed `the whole activities in the bank will be as a Ibadah’. Jb. Al-Hajj Md. Badiur Rahman is the Chairman of the board while Jb. Al-Hajj Md. Harun-ur-Rashid is the vice

President & the Company secretary is Jb. Md. Mofazzal Hossain (the Executive Vice President of the bank).

  • 2.3. Managing Director

Jb. Md. Abdus Samad Sk. is the Managing Director of the bank who is a renowned & dynamic banker of Bangladesh. Jb. A.T.M Harunur Rashid Chodhury is the Additional Managing Director & Jb.Ihsanul Aziz is the Deputy Managing Director of the bank.

  • 2.4. The Central Executives of the bank

Sl

Name of the executives

Designation

01

Jb. Md. Abdus Samad Sk.

Managing Director

02

Jb. A.T.M Harunur Rashid Chodhury

Additional Managing Director

03

Jb. Ihsanul Aziz

Deputy Managing Director (1)

04

Jb. Md. Mofazzal Hossain

Company secretary (EVP)

05

Jb. Md. Rafiul Alam

Executive Vice President

06

Jb. ASM Mozurul Alam

Executive Vice President

07

Jb. Mohd Abdul Jalil Miah

Executive Vice President

08

Jb. ANM Abdus Shahid

Senior Vice President

09

Jb. Md. Emdadul Haque

Senior Vice President

10

Jb. Yakub Md. Faruque

Senior Vice President

11

Jb. Md. Mominul Haque Bhuyan

Senior Vice President

12

Jb. Md. Rezaur Rahman

Senior Vice President

  • 2.5. Shariah Council of the bank

The board of the Shariah Council of the bank consists of 8 (Eight) persons. The numbers of the Council hold very respectable position in the society. They are carrying high skilled and learned accordingly Quaran and Hadith and the honorable chairman of the council is high respectable `Alim-e-Din’ of the country. The members of the council Jb. Mufti Ruhul Amin, Jb. Moulana Abdul Basit Barkatpuri, Jb. Moulana Mukhlesur Rahman, Jb. Mufti

Moinul Islam & Secretary General Jb. Md. Abdur Rahim Khan are also high learned persons and they also obtained highest degree from Alia Madrasha. And another member of the council carried a special carrier i.e. Jb. AL-Hajj AZM Samsul Alam is retired Secretary of the Ministry of the Religion affairs of the Government and retired Director General of `Islamic Foundation of Bangladesh’ and Jb. AL-Hajj Badiur Rahman is Chairman of the Board of the Directors. They are Hajji and they already committed to `the whole activities in the bank

will be as Ibadah’.

The list of the Shariah Council as hereunder:

Sl

Name of the board

Designation

01

Jb. Mufti Abdur Rahman

Chairman

02

Jb. Mufti Ruhul Amin

Member

03

Jb. Moulana Abdul Basit Barkatpuri

Member

04

Jb. Moulana Mukhlesur Rahman

Member

05

Jb. Mufti Moinul Islam

Member

06

Jb. AL-Hajj AZM Samsul Alam

Member

07

Jb. AL-Hajj Badiur Rahman

Member

08

Jb. Md. Abdur Rahim Khan

Secretary (CC)

2.6. Organizational Structure of the Bank:

Chairman

Chairman

Chairman

Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President Senior Vice President Vice President Assistant Vice President Senior Principal Officer Principal Officer Senior Officer Officer Junior Officer Assistant Officer

Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Executives
Executives

Deputy Managing Director

Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President
Non-Executives
Non-Executives
Vice Chairman Board of Directors Managing Director Additional Managing Director Deputy Managing Director Executive Vice President

2.7. Special Features of the Bank

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. Here are some special features of us that make us notable in Islami banking sector. All activities of AIBL are conducted under a 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 2009, 70% of the investment income has been distributed among the Mudaraba depositors.

In 2010, 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 2007, we declared 20% 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.

2.8. Pledges & Commitments of the Sponsor Directors of the bank:

The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and commitments in the name of Allah. Such categorical commitments have never been made by the promoters of any bank in Bangladesh or anywhere in the subcontinent, to our knowledge. These pledges and commitments have been included in the Memorandum and Articles of Association (Article 159) of Al-Arafah Islami Bank Ltd. (pp65-71) incorporated with Bangladesh Bank, Registrar of joint Stock Companies, Securities and Exchange Commission, etc.

Let us have a look at some of these commitments, titled “Agreements, Pledges and Commitments of the Promoters, Sponsors and Directors of Al- Arafah Islami Bank Ltd.”

  • 2.8.1. Objectives of the Sponsors

“We declare that Al-Arafah Islami Bank has not been set up with the objectives of economic welfare and financial benefit of the sponsors and Promoters in this world, on the country, we are desirous of our welfare in the next world and Nazat in akhirat (hereafter) which could be achieved more by rendering credit services by the sponsors and

bankers to others than any service to themselves.”

  • 2.8.2. Misuse of Power and Undue Advantages

“We shall not try to avail undue advantages of any kind from the bank for ourselves, or for

firms, companies, institutions in which we have financial or other interests. The facilities which are legal, just and due to us that we shall avail of should be transparent and known

to the Board of Directors leaving little scope for misunderstanding.”

Motivating Spirit of Qurbani “We are determined to rise above Nafsaniyyat of self-service and have come forward

imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the

sponsors.”

  • 2.8.3. Inspiration for Qurbani of Nafsaniyyat or self-interest

“The Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of

sacrifices and Qurbani of the family of Hazrat Ibrahim (A.), and which was rekindled by our beloved prophet Muhammad (S.) and Sahaba -i- Keram and thereafter by the Sufisaints who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of

the world, Particularly to this region.”

  • 2.8.4. Clean Banking is ‘Ibadah’

We agree to conduct clean banking under patronization of the government, and firmly

believe that the association with this bank would be nothing but ‘Ibadah’ and that we shall

act accordingly.

  • 2.8.5. Environment of Al-Arafah Islami Bank

“Al-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S.), of our faith and conviction, our values and attitudes towards life and that the entire environment of Al- Arafah Islami Bank shall be in conformity with Sunnah, simple in style, noble and rich in thought, but dynamic and far- reaching in impact, exemplary in efficiency and service to the customers.

  • 2.8.6. Sunnah of Keeping Deposit as ‘Amanah’

“We firmly and solemnly pledge and promise to hold the deposits and other fund at our disposal as ‘Amanah’ and sacred trust keeping in mind the Sunnah of our beloved prophet

Mohammad(S.) who would hold the money and materials deposited with him even by the infidels in great trust for which he earned the title of “Al-Ameen”.

  • 2.8.7. Grouping and Lobbing

“We shall not indulge in grouping and lobbying most particularly, in financial matters and

banking business for the personal interest of anybody. We shall not take informal decisions among ourselves on the agenda of the meeting

before the meeting is held. In other words, we agree to discuss the issues of agenda of any

meeting concerning the business of the bank and take decisions in the meeting.”

  • 2.8.8. Responsibility to Depositors

“We are conscious that the deposit of our clients might be more than 90% of the disposable loans and credit and we shall put priority on their interest over that of

shareholders or directors.”

  • 2.8.9. Employment Policy:

“We agree that all recruitment be made on merit and rules. All employees after

employment must conform to Faradh and Wajib within the time determind, but not exceeding two years. As regards, confirmation and promotion of officers and staff, adherence to Faradh and

wajib shall be kept in view along with merit and performance.” Freedom from Nepotism and Districtism “We are totally committed not to indulge overtly or covertly in any kind of

nepotism or favoritism due to relationship, friendship, acquaintance, regionalism, districtism or locality as regards to loan facilities or employment or any other aspect

directly or indirectly.”

2.8.10. Bases of Conscience of Directors

“We do hereby promise and pledge that in addition to the laws, regulations in force in the

country, we shall be bound to and abide by the dictates of our conscience based on faith

and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat

Muhammad (S.)”.

We seek your Dua and prayer to Allah Subhanahu Wa-Ta’ala to keep us firm on the commitments and pledges, we the promoters, sponsors and directors collectively agreed and signed on 05-06-1995.

2.9. Structure of the Branch

M a n a g e r
M a n a g e r
2 n d O f f i c e r In-charge, In-charge, In-charge, General Banking Investment
2 n d O f f i c e r
In-charge,
In-charge,
In-charge,
General Banking
Investment
Foreign Exchange
Dispatch
Custome
Remittance
Custome
Disburs
Recovery
(DD,TT,PO)
r
r relation
ement
Cash
Accounts
Clearing
Import
Export
Deptt.
(IBP)
Foreign
Received, Payment
& do transaction
Received, Payment
& do transaction
Remittance
(Inward)
Received, Payment &
do transaction
One stops customer service
One stops customer service

23

  • i. 2.10. SWOT Analysis of the Al-Arafah Islami Bank Ltd.

SWOT analysis means the analysis of Strength, Weakness, Opportunity and Threats of the company. Strength and Weakness is internal subject. Opportunity and Threats is subject to external. It is happen frequently within the organization to assess own self through SWOT analysis. With this Bank can find their Strength and Weakness, as well as they can formulate their strategy by analyzing the opportunity in the society.

Strength: Weakness:      Corporate Identity. Branch image Strongly Communication with other Branch.
Strength:
Weakness:
Corporate Identity.
Branch image
Strongly Communication with
other Branch.
Linkages with international
organization.
Broadly business in our
country.
Coordination of different
department.
Decision making process.
Lack of marketing activities.
Lack of maintain properly
documentation.
Lack of communication.
Lack of Employees
SWOT
Opportunity:
Threats:
With GDP growth, the
served product demand may
increase.
May increase the new
branch.
May increase Global
network.
Market competition may
increase.
Decrease competitive
advantage.
Branch image go down
because of employees turnover.
Not available skill employees in

Figure: SWOT Analysis of AL-Arafah Islami Bank Ltd.

2.11. AIBL 46 Branch-Location all over Bangladesh

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3.1. Introduction

The Banking Industry in Bangladesh is one characterized by strict regulation and monitoring from the central governing body, the Bangladesh Bank. The chief concern is that currently there are far too many banks for the market to sustain. As a result, the market will only accommodate only those banks that can transpires the most competitive and profitable ones in the future.

There are four nationalized commercial banks (NCB), 5 specialized banks, 11 foreign banks, 4 Islamic banks and 26 domestics’ private banks, currently operating in Bangladesh. Among them The Al-Arafah Islami Bank Limited is one of the best leading private commercial bank in Bangladesh. Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with limited liability by shares. It started business on 27 September of that year with an authorized capital of Tk 1,000 million. At inception, its paid up capital was Tk 101.20 million divided into 101,200 ordinary shares of Tk 1,000 each. 23 sponsors of the bank subscribed the total issued capital. The bank’s schemes are becoming very popular in the country. To understand the scenario of modern banking system in Bangladesh and economic scale which are related with banking, Al-Arafah Islami Bank Ltd. is one of the examples. I have found an opportunity to study the Financial Performance Analysis of Al- Arafah Isl Bank Ltd. through the internship program of UU.

This banking system can be allotment in different section. Those Ares-

General Banking

Account Section

Investment section.

Foreign Exchange.

Bank is a one of the financial institution that is doing business by money. Bank received money from the customer and providing loan at a high interest rate. Like other

commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business

including introduction of a wide range of saving and credit products, rattail Banking and professional management. But the AL-ARAFAH ISLAMI Bank Ltd, emphasize its functions in export and import trade handling and financing of export oriented industrious and reduces in the balance in the balance of payment of the country. Its also have to maintain Islami Sharih activities. “Local Bank Global Network” The World AL-ARAFAH ISLAMI Bank implies the meaning of its operation. Through it is a new type of Bank in Bangladesh; it is familiar with so many countries in the world such as Export Import Bank of United states, Export Import Bank of Japan. Despite it is a local Banking. To achieve the desire goal, it has intention to pursuit of excellence at stages with acclimate of continuous improvement. Because it believes, the line of excellence is never ending.

3.2. General Banking

3.2.1. Introduction

The general Banking Department doses the most important and basic of the Banks. All other departments are liked with this departments are liked with this department. It also plays a vital role in deposit mobilization of the branch. AL-ARAFAH ISLAMI Bank is Provides different types of accounts locker facilities and special types of saving Scheme, under General Banking. For proper function and excellent customer services this department is divided into various sections namely as follow:

Accounts opening sections

Cash sections.

Deposit sections.

Bill and clearing sections.

FDR sections.

Accounting sections.

3.2.2. Accounts Opening Section

This section deals with opening of different types of accounts. It is also deals with issuing of books and different deposit books to the different accounts openers. A customer can open different types of accounts through this department such as:

Al-Wadia Current Deposit (CD) A/c.

Mudaraba Savings Deposit (MSD) A/c.

Mudaraba Tern Deposit (MTD) A/c.

Mudaraba Short Notice Deposit (SND) A/c.

Mudaraba Monthly Profit Tern Deposit (PTD) A/c.

Mudaraba Installment Tern Deposit (ITD) A/c.

Mudaraba Tern Hajj Deposit (THD) A/c.

Mudaraba Monthly Hajj Deposit (MHD) A/c.

Mudaraba Monthly Investment Scheme Deposit (SID) A/c.

Mudaraba Marries Investment Deposit Scheme (MIS) A/c.

Foreign Currency Deposit (FCD) A/c.

Mudaraba Pension Deposit Scheme (PDS) A/c.

Mudaraba Cash Waqf Deposit Scheme (CWD) A/c.

Mudaraba Lakhopati Deposit (LDS) A/c.

Mudaraba Millennium Deposit (MDS) A/c.

Mudaraba Kutipati Deposit (KDS) A/c.

Mudaraba Pension Deposit (MPS) A/c.

Mudaraba Double Benefit Deposit (DBS) A/c.

Mudaraba Triple benefits Deposit (TBS) A/c.

Requirements of opening an account:

There are some requirements that have to be completed for opening an Account.

  • 3.2.2.1. Current Account

Current Account is an account where the account holders can make numerous transactions with in a working day. There is no restriction on the number and the amount of with drawls from the current within availability of funds. As the Banker is under the obligation to repay this deposit on demand on interest is paid in this account. Generally, current Account is opened for Business and trades for easy transaction. But a person can open CD Account for special purpose. Requirement for the different types of Accounts holders are discussed.

i. Proprietorship firm:

There is a different account opening from for the proprietorship firm by the AL-ARAFAH ISLAMI Bank Ltd. For this account, a customer must need to submit the papers with the from:

  • Photograph.

  • Signature and Rubber- stamp seal of the client.

  • And introducer of AL-ARAFAH ISLAMI Bank Ltd. Introducer must be account holder.

  • Chairmen certificate of the proprietor.

  • Trade license.

  • Voter ID Card

Current deposit account is opened with neither a sum of nor less than 1000. The

introducer must attest photographs.

ii. Partnership firm:

There is a different account opening from for the proprietorship firm. Interaction for running an account is giving in this. The following documents are required to open this type of accounts.

  • Photograph.

  • Signature and Rubber-stamp seal of the service receiver.

  • Chairman certificate of the partners.

  • And introducer of AL-ARAFAH ISLAMI Ltd. Introducer must be CD Account holder.

  • Trade license.

  • Partnership deed registered by Notary public.

  • Partnership letter along with address and signature.

  • Voter ID Card

Current deposit Account is opened with neither a sum of nor less than Tk. 2000. The photographs must attested by the introducer.

iii. Limited company:

A separate account from is used for limited company. There are two kinds of limited company public company and private limited company. The Bank always takes precautions for opening this type of accounts. Several documents are submitted by the clients, which should be checked carefully by the Bank to be legally in a safe position. Requirements to open an account are as follows:

iii. a. Private limited company:

  • Photograph.

  • Signature and Rubber- stamp of the client.

  • Chairman certificate of the owner.

An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd. Introducer must be CD account holder.

Trade license

Certified copy of memorandum and articles of association.

Incorporation Certificate.

Membership Certificate.

Memorandum.

iii. b. Public limited company:

Photograph.

Signature and Rubber- stump seal of the client.

Chairman certificate of the directors.

An introducer of AL-ARAFAH ISLAMI Bank Ltd. Introducer must be CD account holder.

Trade license.

Certificate of Incorporation.

Certificate copy of memorandum and articles of association.

List of directors as per return of joint stock Company with signature.

Certificate of commencement of business.

 

iv. Club society:

The following document duly completed shall be obtained from the customer at the time of current deposit account of Association/Club/Charity/Trust/Society etc.

Photograph.

Signature and Rubber-stamp seal of the client.

An introducer of AL-ARAFAH ISLAMI Bank Ltd. Introducer must be CD account holder.

  • Chairman certificate of the client.

  • Certified true copy of constitution/By-laws/Trust deed/Memorandum and articles of association.

  • Certified of registration of the association/Club/Charity/Trust/Society (For inspection and returned only certified.)

  • List of members of the Governing body/Executive committee of the Association /Club/Charity/Trust/Society with their address.

  • Exact of resolution of the Association/Club/Charity/Trust/Society for opening the account and authorization for its operation duly certified by the chairman sectary of the Association/Club/Charity / Trust/ Society. Etc.

  • 3.2.2.2. Saving Account (individual/joint)

Saving account (SB) is meant for the people of the lower and middle classes who wish to save part of their income to meet future needs and intended to earn an income from their saving. For opening of this type of accounts the following requirements are necessary:

  • Photographs attested by the introducer.

  • Chairman certificate of the account holder.

  • An introducer of AL-ARAFAH ISLAMI Bank Ltd. Introducer must be CD account holder. For joint of saving deposit and short-term deposit (STD) are as follows.

SL. NO

Name of Account

Interest rate

1

Saving Deposit

4%

2

Short term Deposit(SND)

5%

  • 3.2.2.3. Monthly Saving Scheme (MSS):

It is project of AL-ARAFAH ISLAMI Bank, which is a Scheme like DPS. The slogan of this

Scheme is “securing your future with case. A small saving to day will provide you comfort tomorrow.”

i. Saving period and monthly installment rate:

The saving period is for5, 8, 10, or 12 years. Monthly installment rate is Tk. 500, Tk. 2000, or Tk. 5000.

ii. Monthly installment deposit:

  • The saving amount is to be deposit with in the 10 th of every month. In case of holidays the deposit amount is to be made on the following date.

  • The deposits may also be made in advance.

  • The depositor instruction can be giving to transfer the monthly deposit in the Scheme’s account.

  • In case the deposit falls to make the monthly installment in time there will be no charge added with the following month’s installment.

iii. Withdrawal

  • Generally, withdrawal is not advised before a five- year term, but if it is withdrawn before the above term, then interest will be paid saving rate. However, no interest will be paid if the deposit is withdrawn within one year of opening the account.

  • Incase the depositor to withdraw between the 5,8,10, or 12 year period then full interest will be paid for a completed term and saving rate will applicable for the fractional period.

iv. Loan advantage:

After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up to 80% of his deposited amount. In that case, interest rates on the loan will be applicable as per prevailing rate at that time.

Reasons for disqualification from this Scheme:

  • If the depositor fails to pay three installments in a raw, then he will be disqualified from this Scheme and interest will be applicable as mentioned in withdrawal clause.

  • If the depositor fails to five installments in a raw after completion of 5 years term then the Bank reserve the right to close the account and interest will be paid as mentioned in withdrawal clause.

  • In case of death of the depositor the Scheme will case to function. The amount will be handed over to the nominee of the deceased depositor. In case of absence of the nominee the bank will hand over the accumulated amount to the successor of the deceased.

Rule:

  • A from has to be filled at the time of opening the account. NO introduction is needed but attested photographs are advised.

  • The depositor can select any of the installment accounts. Which can not be subsequently changed?

  • Incase of minors the guardians may open and supervise the account in his favors.

  • A single person can open more then one account for saving under several installment rates.

  • The accumulated deposit with interest will be returned within one month of completion of a term.

  • The depositor should notify the bank immediately of any change of address.

  • The government tax will be deducted from the interest accumulated in this Scheme.

  • If necessary, at the request of the depositor, the Scheme can be transferred to different branches of the same bank.

  • The bank reserves the right to change the rules and regulations of the Schemes as and when deemed necessary.

v. Monthly Installment Statement Charge:

Years

Monthly

Monthly

Monthly

Monthly

Installment

Installment

Installment

Installment

(Tk)

(Tk)

(Tk)

(Tk)

 

500

1000

2000

5000

5

39041

78082

  • 156164 390411

 

8

74202

148404

  • 296809 742024

 

10

105095

210190

  • 420380 1050952

 

12

144461

288923

  • 577847 1444618

 

vi. Monthly Income Scheme (Steady Money)

Bangladesh is a developing country. But in our country opportunity of investment is very low. People of our country always try to save their excess money and there looking for where they can deposit the money. According to their demand AL-ARAFAH ISLAMI Bank

started this money income Scheme. A monthly income Scheme their really makes good sense an investment for steady return.

Vii. Highest of the Scheme:

  • Minimum deposit Tk. 2, 39500.

  • Higher Monthly Income for higher deposits.

  • The Scheme is for three year period.

  • Monthly income will be created to the depositor’s account on the fifth of each month.

  • After three years the Account holder would received Tk 10000000.00

Viii. Objectives of the Scheme

  • An account is to be opined by filling up a form.

  • The Bank provides to the customer a deposit receipt after opening the account. This receipt is non- transferable.

  • If the deposit is withdrawn before a five years term, then saving interest rate will be applicable and paid to the depositor. However, no interest will be paid if the deposit is withdrawn within one year of opening the account and monthly income paid the customer will be adjusted from the principal amount.

3.2.2.4. Muduraba Millionaire Deposit Scheme-

Year

Monthly Deposit Amount

Matured Amt.

 
  • 3 23950

1000000

 
  • 4 16950

1000000

 
  • 5 12750

1000000

6

9950

1000000

7

8000

1000000

10

4600

1000000

12

3345

1000000

15

2170

1000000

20

1150

1000000

  • 3.2.2.5. Muduraba Lakhapati Deposit Scheme-

 

Year

Monthly Deposit Amount

Matured Amt.

3

2375

100000

5

1275

100000

8

670

100000

10

460

100000

12

335

100000

  • 3.2.2.6. Muduraba Kotipoti Deposit Scheme-

 

Year

Monthly Deposit Amount

Matured Amt.

3

239500

10000000

4

169500

10000000

5

127500

10000000

6

99500

10000000

7

80000

10000000

10

46000

10000000

12

33450

10000000

15

21485

10000000

18

14330

10000000

20

11100

10000000

3.2.3 Cash Section

Cash section of any Bank plays a vital role in general banking procedure. Because it is deals with the most liquid assets. There are several counter works simultaneously in cash section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch. There are also some electronic counting machines by which a huge amount of case money can be counted within a few minutes.

3.2.3.1. Cash receiving procedure:

The work of case receiving counter is examining deposit slips. Depositor user the prescribed deposit slip supplied by the Bank for deposit cash, draft, cheque, pay order etc. In all types of deposits teller must cheek the following things:

  • The slip has been properly filled up.

  • The title of the account and its umber.

  • The amount in figure and in words is same.

  • Instrument signed by the depositor.

After checking all these things the teller will accept the cash, cheque, draft, pay order etc. Against deposit slip, the teller will please the cash in the drawer account to

denominations. The teller will place signature affix “cash receipt, rubber stamp seal” and

record in the cash received register book against the account number, at the end of this

procedure, the cash officer passes the deposits slip to the computer section for posting

purpose and returns the customer’s copy.

Accounting treatment:

Date

Particulars

Debit

Credit(Tk.)

 

Cash A/C

Dr.

Xxx

Xxx

To Customer’s A/C

3.2.3.2. Cash payment procedures

Precaution:

In order to safeguard the position the paying Banker has to observe the following

precaution before honoring the cheque:

  • A cheque must look whether it is an opened or closed cheque.

  • The paying officer should see whether the cheque is drowning on his branch.

  • He must see if the cheque is postdated .A letter must not pay post- dated cheque.

  • The officer must carefully see the apparent tenor of the cheque. If it is mutilated of materially altered then the officer must not honor it.

  • The offer must compare the signature of the cheque with the signature of the specimen signature card.

  • The officer must verify the regularity of the endorsement.

  • The officer may allow overdue against a cheque if prior arrangement is done with the bank.

Padding a cheque:

After verifying the above mentioned things the offer to make payment by putting ‘pay cash’ seal the cash officer make it clear to pay. The cash officer gives the cash amount to

the holder and record in the cash paid register. Account treatment:

Date

Particulars

Debit(Tk)

Credit(TK)

 

Customer A/C Dr. To Cash A/C

Xxx

Xxx

3.2.4. Deposit Section:

The function of the deposit is very important. It is fully computerized. The officer of the deposit section maintains account numbers for different account number of all the customers of the Bank. They are used different code numbers for different account. By this section a depositor/drawer can know what is the present position of his/her account. The officer makes posting three types of transactions such as cash, clearing and transfer. This section performs the following tasks.

Post all kinds of transactions.

Provide on demand report.

Claque maintenance.

Preparation of day transaction position.

Preparation of closing monthly transaction.

3.2.4.1. Remittance Section

Banks have a wide network of branches over the country and offer various kinds of remittance of the public. The main instrument used by the AL-ARAFAH ISLAMI Bank of remittance of funds is:

  • a. Payment order

  • b. Demand Draft (DD)

c. Telegraphic Transfer (TT) d. On-Line Transfer.

  • a. Demand Draft (DD)

It is an instrument containing an unconditional order of one Bank to another to pay a certain amount of money to the named or order the amount therein on demand. DD is very munching popular instrument for remitting money from one corner of a country to another. Commission for DD is 0.1% of the principle amount.

  • b. Accounting treatment

(DD by Cheque/cash)

Date

Particulars

Debit(Tk.)

Credit(Tk.)

 

Cheque/Cash A/c

Dr.

Xxx

 

To Demand Draft

Xxxx

To DD commission A/c

Xxxx

  • C. Different between pay order and demand draft

There are some different between pay order and demand draft, which are:

  • In case of demand draft both the payee need to have account. But there is no certain rule for pay order.

  • PO is used in the same clearing area. DD is used for all kinds. DD can not be done in the same clearing area.

  • DD is drawn on a certain Bank officer. But there is no certain rule for PO.

d. Telegraphic Transfer (TT)

Telegraphic transfer is the quickest method of transferring funds from one place of another. Sometimes the remitter wants that the money to be available to the payee immediately. In that case bankers are requested to remit the fund telegraphically. Here the remitter bears the additional charge of telex/telephone. Charge for TT is 0.15% of the principal amount and the addition charge telex/telephone is Tk. 30.00 In case of TT both the parts must have accounted.

3.3. Account Section:

This is a very much crucial department for each branch of a commercial Bank. Recodes of all the trisection of every department are here as will as with order respective branches. Accounting department verifies all financial amounts and contents of transaction. If any discrepancy arises regarding any transaction this department report to the concerned department.

3.3.1. Tasks of accounts department:

Accounts department plays vital role in commercial banking. In privet banking sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd. Performs its tasks properly. The activities of account section are as follows:

o

Record all transaction in the cash book.

o

Record all transaction in the general subsidiary ledger.

o

Prepare daily fund function, weekly position, period statement of affairs etc.

o

o

Prepare necessary statement for reporting purpose. Make salary statement and pay salary.

Branch to branch fund remittance and support for accounting treatment. Budgeting for branch. Make charges for different types of duties.

o

o

  • 3.4. Investment Section

Investment means the commitment of funds to one or more assets that will be held over some future time period.All activities of the Al-Arafah Islami Bank are conducted on an interest-free system according to Islamic Shariah. It invests all of its surplus funds on the basis of the trade mode of financing ensuring buying and selling of halal commodities and on a profit and loss sharing basis. A fixed percentage of income derived from investment of mudaraba deposits is distributed to the mudaraba deposit holders. The investment of the bank is supervised strictly so that no investment becomes overdue with consequential loss of investment income.

3.4.1 Investment Scheme in AIBL

Bai-Mudaraba

Bai-Musharaka

Bai-Murabaha (C.C Pledge)

Bai-Muajjal (Commercial& Real State) (CC Hypothecation).

Bai-Salam

Bai-Istesna

Izara-bil-Bai

Bai-Murabaha Trust Receipt

Hire Purchase Sirkatul Milk (Real State)

Hire Purchase Sirkatul Milk (HPSM)

Consumer Investment Scheme (CIS)

Small Enterprise Investment Scheme (SEIS)

Mosjid-Madrasha Investment Scheme (MIS)

Agriculture & Rural Small Investment Scheme etc.

Bai-Mudaraba

Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital). Profit is shared between the two sides as per pre-agreed ratio.

Bai-Musharaka

Under this mode the Bank and clients jointly participate in a project, in a scheme or project. Profit is shared between the Bank & the concerned client as per pre-agreed ratio. On the other hand loss is shared according to capital ratio.

Bai-Murabaha

These modes are applicable for working capital finance. Under these schemes bank purchases goods / raw materials as per requirement of the client. In case of Bai-Murabaha bank receives the sales proceed on deferred payment basis. On the other hand in case of Bai-Murabaha Bank receives the sale price at the time of delivery of the goods / raw materials. Before handing over the goods / raw materials the bank generally keeps the same in its custody under pledge. Finally, I can say that Bai-Murabaha Purchase and sale of commodities as per requests by clients permissible under shariah regulations.

Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate collateral

Bai-Salam (advance sale) - buying of goods from producers/suppliers on payment in advance after entering into a firm contract and receipt of their delivery at a future specified date

Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity participation by both the bank and the client and handing them over to the client on installment sale rental basis;

Sector of Investment

Islamic Banking Wing of the bank finances in all sectors i.e., Industry, business, Agriculture, Real Estate etc. if purpose of the investment is permissible under Islamic Shariah.

Limit of Investment

Investment is offered to the extent of single borrower exposure limit as fixed by the Bangladesh Bank from time to time.

  • 3.5. Foreign Exchange

As more than one currency is involved in foreign trade, it gives rise to exchange of currencies which is known as “Foreign Exchange’. The term `foreign exchange’ has three principal meanings firstly it is a term used referring to the currencies of the other countries in terms of any single one currency. To a Bangladeshi Dollar, Pound Starling etc. are foreign currencies and as such foreign exchange. Secondly, the term also commonly refer to some interments used in international trade, such as bill of exchange, Drafts Travels cheque (TC) and other means of international remittance. Thirdly, the terms foreign exchange is also quite of ten referred to the balance in foreign currencies held by a country. In terms of section 2 (d) of the foreign exchange regulations 1947, as adopted in Bangladesh, Foreign Exchange means foreign currencies and includes any instruments drawn, accepted made or issued under clause (13) of article 16 of the Bangladesh Bank Order 1972, all the deposits, Investments and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign country. In exercise of the power conferred by section 3 of the foreign exchange regulation 1947, Bangladesh Bank issues license to the schedule bank to deal with exchange. These banks are known a “Authorized Dealers’. Licenses are also issued by Bangladesh Bank to persons

or firms to exchange foreign currencies, instruments such as T.C, currency Notes & Coins. They are known as “Authorized Money Changers’.

3.5.1. Definition of Letter of Credit (L/C)

A Letter of Credit (L/C) is an undertaking by a bank on behalf of its clients to pay a certain amount of money to a certain person/seller on the fulfillment of the terms and conditions as laid down in the L/C. Since the agreed conditions include, amongst other things, the

presentation of some specified Documents, letter of Credit is called “Documentary Letter of Credit”. *The Uniform Customs and Practices for Documentary Credit (UCPDC)

published by International Chamber of Commerce (ICC) publication No. 500 & 600 defined

documentary credit].

3.5.2. Types of L/Cs

Documentary Credit may be classified as hereunder:

  • A) Revocable &

  • B) Irrevocable.

As per payment also Documentary Credit may be classified as follows:

Revocable Letter of Credit

I) At sight & II) Deferred.

A revocable letter of credit is a credit which can be amended or cancelled by the issuing

bank at any time without prior notice to the seller.”

Irrevocable Letter of Credit

An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since it cannot be amended or cancelled without the agreement of all parties thereto), provided that the stipulated documents are presented and the terms & conditions are satisfied by the seller. An irrevocable letter of credit can be either confirmed or unconfirmed

depending on the desire of the seller. This sort of credit is always preferred to revocable

letter of credit”.

At Sight letter of credit

A letter of credit which is would be made payment when the documents received by

beneficiary/Exporter within seven working days.”

Deferred Letter of Credit

A letter of credit which will be made payment in later, it may be either 60 (Sixty) days, 90

(Ninety) days, 120 (One Hundred Twenty) days nor 160 days; and which are paid as per

acceptance made by the beneficiary bank’’.

3.5.3. Requirement of papers/documents

  • 3.5.3.3. Before opening of the L/c. the party/Importer must be submitted

the documents/papers:

Valid Trade License of the firm

Valid IRC/ERC (issued by the CCI&E)

Tax Identification Number (TIN) certificate.

VAT registration certification

Membership certificate issued by chamber of commerce.

Bank solvency certificate.

Photograph of the Importer.

  • 3.5.3.2. At the time of L/c opening

Client’s written application in his firms letter head

L/C application & agreement form (F-101) duly stamped & filled & signed by the Importer.

LCA form duly filled with HS code & signed (F-180)

IMP form duly signed & sealed (F-113)

Indent/Pro-forma Invoice duly accepted by the Importer

Insurance cover note with money receipt

Necessary charge documents duly stamped & signed by the importer.

One advance dated cheque which is covering the L/c value.

Necessary another charge documents duly stamped & signed by the importer (in case of banks investment)

3.5.3.3.

By using Books/Register

L/c opening Register (to written all necessary information of the L/c) (B-37)

Liability & security register (for contingent liability & cash security/margin (B-63)

Inward Foreign bills register (for lodgment-retirement of the shopping documents & record) (B-38)

Ledger balance book (for monthly balancing of liability & security) (B-37)

3.5.4. Important Particulars/Column of L/c opening register (B-37)

Date of L/c opening

L/c Numbering

Name of the importer with address

IRC Number

Amount of L/c (in local & foreign currency)

% of Margin/Cash Security.

Name of the Beneficiary & address

Commodity

Country of Origin of goods to be imported

Mode of dispatch (by mail/SWIFT/TLX)

Name of the foreign correspondents

Tenor of the bills

License No.

Date of amendment

Date of Shipment

Date of expiry of the L/c

Recovers

Amount of Margin held

Commission, Vat, Postage, FCC, Cable Charge etc.

Initials

Remarks.

3.5.5. Important particulars/ Column of Bills/Lodgment Register

Date Received From,

Drawn on,

Amount: in FC,

Exchange Rate, Eqvt BTK,

Tenor,

Due Date,

No. of Docs

Drafts

No of BL/AWB/TR invoice & others

Name of the carrier: BL/TR/AWB No + Date,

Merchandise

Date of arrived

Date of goods cleared

Initials

Remarks.

3.5.6. Definition of Back to Back L/C.

Back to back letter of credit, a new L/C (an Import L/c) is opened on the basis of an original L/C (an Export L/c). Under the back to back concept, the seller as the beneficiary of the

first L/C offers it is a `security’ to the advising bank for the issuance of the second L/c. The

beneficiary of the back to back L/C may be located inside or outside the original beneficiary’s country. In case of a back to back L/C, no cash security (no margin) is taken by the bank; Bank liens the first L/C. In case of back to back L/C the drawn bill is usage/time bill. In Al-Arafah Islami Bank Limited AD branches papers/documents required for opening of back to back L/C as hereunder:

Back to back L/C is one same of pre-shipment finance to Export oriented Industries. Received a letter of credit from abroad. BB L/C generally opened on differed payment basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight.

3.5.7. Foreign Exchange Remittance

Remittance means sending of fund. The word remittance we understand sending/transferring of fund through a bank from one place to another which may be within the country or between two countries, one in to be abroad is called foreign remittance. ``Foreign Remittance’’ means purchase and sale of freely convertible foreign currencies as admissible ``Foreign Exchange Regulations Act-1947’’ and ``Guideline for Foreign Exchange Transaction VOL. 1&2’’ of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. Foreign Remittance will be classified as hereunder:

A) Inward foreign remittance which will be through TT, MT, FDD, PO, TC, Foreign Currencies Notes etc.

i)

Family maintenance

ii)

Indenting commission

iii)

Donation

iv)

Gift

v)

Foreign Investment

vi)

Export proceeds

vii)

Others

  • B) Outward foreign remittance, which will be as hereunder:

    • a) Foreign Telegraphic Transfer (FTT)

    • b) Foreign Mail Transfer (FMT)

    • c) Foreign Demand Draft (FDD)

    • d) Travels Cheques (TC)

    • e) Foreign Currencies Notes.

    • f) Others

iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will
iv) Gift v) Foreign Investment vi) Export proceeds vii) Others B) Outward foreign remittance, which will

4.1. Introduction:

A financial institution that is licensed to deal with money and its substitutes by the accepting time and demand deposit, making loans, and investing in security. The Bank generates profits from the different in the interest rate charged and paid. Banks also may offer investment and insurance product which they were once prohibited from selling. All of the Banks position we can shortly summarize in the financial statement. So, financial statement is very important as a financial institution. An investor invests the money into the Banks or other institution is looking the organization financial statement.

4.2. Types of financial Statement

There are three types of Financial Statement. That are-

  • Balance Sheet.

  • Income Statement (Profit & Loss Account)

  • Cash flow Statement

  • Statement of owner Equity

4.2.1. Balance Sheet

Balance sheet or statement of financial position is a summary of a person's or organization's balances. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a snapshot of a company's financial condition. [1] Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time.

A company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

AL-ARAFAH ISLAMI BANK LTD. BALANCE SHEET As at 30 th June 2008

Particular

June-2008

December-2007

PROPERTY & ASSETS

   

CASH

   
     

Cash in Hand (Including foreign Currencies)

298,320,990

381,766,435

Balance with Bangladesh Bank & Sonali Bank

1,611,564,596

1,637,443,244

(Including foreign Currencies)

1,909,885,586

2,019,209,679

     

BALANCE WITH OTHER BANKS & FINANCIAL INSTITUTIONS

   

In Bangladesh

3,841,720,333

2,437,841,149

Outside Bangladesh

418,767,924

245,142,485

 

4,260,488,257

2,682,983,634

     

MONEY AT CALL ON SHORT NOTICE

-

-

     

INVESTMENTS

   
     

Government

900,000,000

800,000,000

Others

122,564,190

68,583,386

 

1,022,564,190

868,583,386

INVESTMENT & ADVANCES

   
     

-

Murabaha, Bai-Muazzal, Hire Purchase etc.

 

25,019,788,538

 

21,116,394,966

Bills Purchased and Discounted

 

2,083,343,835

 

1,789,972,964

TOTAL INVESTMENT

 

27,103,132,373

 

22,906,367,930

     

Fixed Assets including Premises, Furniture & Fixture

 

372,292,657

 

334,476,460

Other Assets

 

1,775,469,060

 

1,370,702,317

Non-Banking Assets

 

-

 

-

TOTAL ASSETS

 

36,443,832,122

 

30,182,323,406

     

LIABILITIES & CAPITAL

   
     

LIABILITIES

   
     

Borrowing from other Banks, Financial Institutions and agents

 

2,680,000,000

 

1,320,000,000

     

DEPOSITS AND OTHER ACCOUNTS :

   
     

Al-Wadia Current Accounts & Other Accounts

 

3,227,406,729

 

3,097,906,953

Mudaraba Savings Deposit

 

3,987,237,105

 

3,932,227,170

Mudaraba Short Notice Deposit

 

870,061,313

 

761,766,781

Mudaraba Term Deposit

 

13,779,831,791

 

11,233,591,127

Mudaraba Special Deposit

 

4,391,874,776

 

3,629,539,263

Bills Payable

 

429,032,463

 

354,096,993

Bearer Certificate of Deposit

 

-

 

-

Total Deposit

 

26,685,444,177

 

23,009,128,287

     

OTHER LIABILITIES

 

4,643,882,995

 

3,815,696,649

     

CAPITAL/SHAREHOLDER'S EQUITY

   
     

Paid up Capital

 

1,383,810,480

 

1,153,175,400

Statutory Reserve

 

731,252,590

 

586,886,597

Exchange Equalization

 

2,057,198

 

2,057,198

Asset Revaluation Reserve

 

64,603,248

 

64,603,248

Profit and Loss Surplus Account

 

252,781,434

 

230,776,027

TOTAL SHAREHOLDER'S EQUITY

 

2,434,504,950

 

2,037,498,470

     

TOTAL LIABILITY AND SHARE HOLDER'S EQUITY

 

36,443,832,122

 

30,182,323,406

     

OFF BALANCE SHEET ITEMS

   
     

Contingent Liabilities :

   

Acceptance and endorsement

 

-

 

-

Letters of Guarantee

 

890,945,926

 

601,880,518

Letters of Credit

 

7,893,692,015

 

3,860,037,680

Bills for Collection

 

364,626,744

 

198,760,887

Other Contingent Liabilities

 

-

 

-

Total

9,149,264,685

4,660,679,085

Less, Margin

666,317,498

773,194,261

 

8,482,947,187

3,887,484,824

Other Commitments :

-

-

TOTAL

8,482,947,187

3,887,484,824

Table: Balance Sheet of AIBL.

4.2.2. Income Statement (Profit & Loss Account)

Income statement, also called profit and loss statement (P&L) and Statement of Operations, is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, is transformed into the net income (the result after all revenues and expenses have been accounted for). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.

AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT

For the Period Ended June 30, 2008

Particular

June-2008

June-2007

Growth

INCOME & EXPENDITURE

Taka

Taka

%

Investment Income

1,662,607,141

993,527,975

67.34%

       

Profit paid on Deposit and Borrowing

(1,008,720,053)

(789,966,577)

27.69%

Net Investment Income

653,887,088

203,561,398

221.22%

       

INCOME FROM COMMISSION,EXCHANGE & OTHERS

     

Commission, Exchange and Brokerage

361,686,864

281,718,309

28.39%

Income from Investment in Share /Securities

26,493,001

-

0.00%

Other operating Income

46,494,726

48,992,796

-5.10%

Total = (a + b)

434,674,591

330,711,105

31.44%

       

Total operating Income (A)

1,088,561,679

534,272,503

103.75%

       

Salary and allowances & Contribution to P.F

209,112,318

171,839,950

21.69%

Managing Director Salary & Allowances

2,400,000

1,600,000

50.00%

Directors and Sharia Council fees & Expenses

2,094,811

2,852,231

-26.56%

Rents, Taxes, Insurance, Lighting etc.

33,464,614

31,807,762

5.21%

Postage, Telegram, Telephone & Stamps etc

9,505,914

6,139,031

54.84%

Law charges

1,031,457

1,317,948

-21.74%

Depreciation & Repairs to the Banks Properties

2,641,617

2,907,821

-9.15%

Stationery, Printing, Advertisement etc.

7,139,920

8,385,842

-14.86%

Other Expenses

20,714,063

24,104,615

-14.07%

Total operating expenses (B)

288,104,714

250,955,200

14.80%

       

Profit/(loss) before provision and tax C = (A - B)

800,456,965

283,317,303

182.53%

       

Provision against Investment & Off-balance sheet exposures

78,627,000

150,278,053

-47.68%

Provision for against decreasing value of Investment

-

-

-

Other Provision

-

-

-

       

Total provision ( D )

78,627,000

150,278,053

-47.68%

       

Total Profit/ (Loss) before Taxes E = (C - D)

721,829,965

133,039,250

442.57%

       

Provision for Taxation

324,823,484

59,867,662

442.57%

Net Profit after Tax

397,006,481

73,171,587

442.57%

Retainned Earning Brought forward

140,947

30,592

360.73%

Profit available for appropriation

397,147,428

73,202,179

442.53%

       

Appropriations :

     

Statutory Reserve

144,365,993

26,607,850

442.57%

 

144,365,993

26,607,850

442.57%

Retained earning Carried forward

252,781,435

46,594,329

442.52%

       

Earning per Share (EPS) ( Tk. 100)

28.69

6.35

352.14%

Table: Income Statement (Profit & Loss Account)of AIBL.

4.2.3. Cash Flows Statement

A cash flow statement or statement of cash flows is a financial statement that shows how changes in balance sheet and income accounts affect cash and cash equivalents, and

breaks the analysis down to operating, investing, and financing activities. As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7) is the International Accounting Standard that deals with cash flow statements.

People and groups interested in cash flow statements include:

Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate expenses Potential lenders or creditors, who want a clear picture of a company's ability to repay Potential investors, who need to judge whether the company is financially sound Potential employees or contractors, who need to know whether the company will be able to afford compensation

AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT

As at 30 June, 2008

N/A

Particular

June-2008

June-2007

 

Cash flows from operating activities

   
       
 

Profit received in cash

1,650,938,035

993,527,975

 

Profit paid by cash

(1,008,720,053)

(789,966,577)

 

Income from Investment

26,493,001

-

 

Fees & Commission received in cash

361,686,864

281,718,309

 

Recoveries of loans previously written off

11,669,106

-

 

Cash paid to employees

(211,512,318)

(173,439,950)

 

Cash paid to suppliers

(6,067,237)

(5,565,286)

 

Income taxes paid

(200,000,000)

(300,000,000)

 

Received from other operating activities

46,494,726

48,992,796

 

Paid for other operating activities

(70,525,159)

(71,949,963)

 

Operating profit before changes in operating assets and liabilities

600,456,966

(16,682,696)

       
 

Increase/(Decrease) in Operating assets and liabilities

   
 

Statutory deposits

-

-

 

Purchase-sale of trading securities

(53,980,804)

-

 

Investment and advances to other banks

-

-

 

Investment and advances to customers (other than Banks)

(4,196,764,443)

(2,417,163,436)

 

Other assets

(404,766,743)

(108,794,222)

 

Deposits from other banks

1,360,000,000

(41,700,000)

 

Deposits from customers (other than Banks)

3,676,315,890

3,911,668,683

 

Other liabilities account of customers

-

-

 

Trading liabilities

624,735,860

446,325,718

A

Net Cash received from operating activities

1,605,996,726

1,773,654,047

       
 

Cash flows from investing activities

   
 

Proceeds from sale of securites

-

-

 

Payments for purchases of securities

(100,000,000)

(600,000,000)

 

Purchase of property, plant and equipment

(37,816,197)

(33,433,977)

 

Sales proceeds of Fixed assets

-

-

 

Purchase-sale of subsidiary

   

B

Net cash used in investing activities

(137,816,197)

(633,433,977)

       
 

Cash flows from financing activities

   
 

Increase in Exchange Equalization Account

-

-

 

Increase in Share Capital

-

-

 

Dividend paid

   

C

Net cash received from financing activities

-

-

       

D

Net (decrease)/ increase in cash (A+B+C)

1,468,180,529

1,140,220,070

 

Effects of exchange rate changes on cash and cash-equivalents

-

-

       

E

Opening cash and cash-equivalents

4,702,193,314

2,781,899,413

       

F

Closing cash and cash-equivalents (D+E)

6,170,373,843

3,922,119,483

Table: Cash Flows Statement of AIBL.

4.2.4. Statement of Owners Equity

Owners Equity is a Financial statement showing the beginning balance, additions to and deductions from, and the ending balance of the shareholders' equity account, for a specified period. It also called the statement of shareholders equity.

The Statement of Owner's Equity shows the change in owner's equity during a given time period. It lists the owner equity balance at the beginning of the period, additions and subtractions to the balance, and the ending balance. Additions come from owner investments and income; subtractions from owner withdrawals and losses.

4.2.5. AIBL at a Glance

Capital, Reserves, Deposit, Investment & Profit-Loss (Position) of AIBL as hereunder:

Particulars

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Authorized

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

1000.00

2500.00

2500.00

capital

Paid-up Capital

 

101.20

  • 101.20 253.00

101.20

253.00

   

253.00

 
  • 253.00 586.96

    • 253.00 854.20

  • 506.00 677.94

   

1153.18

Reserve Fund

---

2.48

25.32

55.66

145.56

 

303.12

 
  • 219.55 488.00

    • 322.62 835.98

  • 231.89 542.22

   

1091.95

Deposit

 

1305.63

  • 201.45 4534.74

2256.65

   
  • 7307.59 7879.18

  • 6415.79 8643.27

 
  • 7463.00 11643.66

10108.28

   
  • 16775.33 23009.13

Investment

12.48

779.16

1745.54

2259.76

   
  • 3793.71 7571.54

    • 3728.41 5079.20

 
  • 6403.60 11474.41

8150.16

   
  • 17423.19 22906.37

Import

---

1030.20

3222.45

  • 5279.50 5555.51

   
  • 5979.90 7698.29

    • 5559.27 5162.51

     
  • 9337.49 27042.72

12631.60

18821.40

 

Export

---

83.60

592.12

 
  • 1103.00 2304.21

 
  • 3313.20 3075.52

    • 2524.63 1894.77

     
  • 3699.34 12714.91

4932.90

9142.70

 

Total

Income

1.37

50.98

196.17

 
  • 322.98 800.35

534.76

752.19

 

835.42

   
  • 987.68 2172.48

    • 1120.85 1452.68

 

2955.61

Total Exp.

3.35

46.29

128.93

 
  • 240.39 678.84

464.30

598.45