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Research Project Report on Bank Alfalah

Companys Introduction
Bank Alfalah Limited was incorporated on June 21st, 1992 as a public limited
company under the Companies Ordinance 1984. Its banking operations commenced
from November 1, 1992. The bank is engaged in commercial banking and related
services as defined in the Banking companies ordinance, 1962. The Bank is currently
operating through 274 branches in 74 cities, with the registered office at B.A.
Building, I.I. Chundrigar, Karachi. Since its inception, as the new identity of H.C.E.B
after the privatization in 1997, the management of the bank has implemented strategies
and policies to carve a distinct position for the bank in the market place.
Strengthened with the banking of the Abu Dhabi Group and driven by the
strategic goals set out by its board of management, the Bank has invested in
revolutionary technology to have an extensive range of products and services. This
facilitates its commitment to a culture of innovation and seeks out synergies with clients
and service providers to ensure uninterrupted services to its customers. They perceive
the requirements of our customers and match them with quality products and service
solutions. During the past five years, bank emerged as one of the foremost financial
institution in the region endeavoring to meet the needs of tomorrow today.
Credit rating:
PACRA, a premier rating agency of the country, has rated the bank AA (double A),
Entity Rating for long term and A1+ (A one plus) for the short term. These ratings
denote a very low expectation of credit risk, strong capacity for timely payment of
financial commitments in the long term and by highest capacity for timely repayment in
the short term, respectively. The ratings of first and second and third unsecured listed
and subordinated TFC issues of PKR 650 million, PKR 1,250 million and Rs.1, 325
million have been maintained at AA- (Double A minus).
Vision
To be the premier organization operating locally & internationality that provides the
complete range of financial services to all segments under one roof.
Mission
To develop & deliver the most innovative products, manage customer experience,
deliver quality services that contributes to brand strength, establishes a competitive
advantage and enhances profitability, thus providing value to the stakeholders of the
bank.
Islamic Banking

The thrust for Islamic Banking is founded on the desire to submit to the Divine
Instructions on all transactions, particularly those involving exchange of money for
money. However, it would be quite unfair to limit Islamic Banking to elimination of
Riba only.
Riba is but one of the major undesirable elements of an economic transaction, the
others being Gharar (uncertainty) and Qimar (speculation). While elimination of
these objectionable aspects in a transaction is indeed a critical aim of Islamic banking
system, it is by no means its ultimate objective.
At the heart of Islamic Banking is a system of commercial transactions that not only
provides Halal modes of commercial transactions by avoiding that which is obnoxious
and objectionable, but also fosters ethical, fair and just practices.
Riba
It has been argued in vain for long in some circles that the prohibition in Islam is that of
excessive interest only. Or that it is the interest on consumptive loans that has been
forbidden and as such loans extended for commercial purposes are entitled to an excess
over the principal amount lent. Such tendentious arguing fails to give due
understanding to verses 278 and 279 of Surah Al-Baqarah (quoted below).
O ye who believe! Be afraid of Allah and give up what remains (due to you)
from Riba (usury) (from now onwards) if you are (really) believers! 2:278
And if you do not do it, take notice of war from Allah and His Messenger!
But if you repent, you shall have your capital sums 2:279
However, this does not mean that Islam prohibits any gain on principal sums. In Islam,
profit is the recognized reward for capital. When capital employed in permissible
business yields profit that is excess over capital becomes the rightful and just claim of
the owner of the capital. As a corollary, the risk of loss also rests exclusively with the
capital and no other factor of production is expected to incur it.
A Perspective:
The history of Islamic banking from its recorded inception is less than 40 years old.
From a humble beginning in a small village in Egypt in the late 60s, it has spread to the
four corners of the world. By normal standards in a time span that is less than half a
century it could have hardly been expected to establish foothold in Muslim world, let
alone make its presence felt in Muslim-minority countries. Yet such has been its
phenomenal rate of growth that not only is it taking firm roots in its homestead, but is
also attracting genuine interest among the standard bearers of conventional banking
and in wraps of land where Muslims are a small minority only.
Still there is much ground left to cover. In Pakistan, Islamic Banking is less than 3% of
the Banking sector. Even in the Gulf States, where it has a larger footprint, in no single
country is the volume of Islamic banking more than a third of the entire sector.
Many blame Islamic Bankings small share against conventional banking to a smaller
portfolio of products. A standard complaint against Islamic banks is that they do not
have the same variety of financial instruments as found in conventional banking.
Though valid to an extent, this popular jeremiad needs to be seen in the perspective of
Islamic Bankings brief history against more than two centuries of conventional banking
adopted in full force across the globe, its competition against an entrenched system of
banking and the constraints within which it must operate.

Notwithstanding, Islamic banking is still growing at more than twice the growth rate of
conventional banking worldwide, and while it may not have the latters excess of
financial products, its range of Islamic financial products is steadily increasing.

Mission Statement:

Alfalah Islamic Banking

To practice Islamic banking in its desired spirit that unfolds its true economic potential
resulting in prosperity to our customers and commercial rewards to our sponsors and
our employees.
Establishment of Alfalah Islamic banking:
Alfalah Islamic Banking is compliment to the farsightedness of the Banks Sponsor and
Management. They started to think about Islamic Banking way back in the year 2002.
There were only two Islamic banks (Mezan Bank Limited and Al Baraka Islamic Bank)
operating in the country at that time and state bank of Pakistan was yet to formulate a
comprehensive road map and regulatory framework for Islamic financial institutions.
Alfalahs largest Islamic Banking network among all the commercial banks of the
country is a tribute to the futuristic approach of the sponsors who extended their full
commitment for its development.
Origin:
Islam negates the concept of using money as a commodity. Alfalah Islamic Banking,
therefore, aims to move towards a Riba free banking system based on risk--sharing,
owning and selling of goods. It prefers parties involvement in the process of trading,
renting and rent sharing. The basis of Islamic Banking traces its origin to the advent of
Islam 1400 years ago, though its organized application took place just a few decades
ago. Nevertheless, Islamic Banking has been quick in establishing itself on a global scale.
In 1993, the industry was reported to be valued US$ 80 billion by the International
Association of Islamic Banks. Since then total assets of the industry have grown to US$
260 billion. It is worth mentioning that 12% of the worlds population represents a
potential market for Islamic banking products. Bank Alfalah initiative in the Islamic
banking is the boldest by any commercial bank in Pakistan. It demonstrates a kind of
dedication that is required to help Islamic banking evolve as a viable financial
alternative to mainstream conventional banking.
Branch Network
LAHORE
Gulberg Main Branch
Y-Block Branch
McLeod Road Branch, Lahore
New Garden Town Branch, Lahore
Johar Town, Branch

KARACHI
Unitower Branch, Karachi
Shahrah-e-Faisal, Karachi
RAWALPINDI / ISLAMABAD
Rawalpindi Cantt Branch
Islamabad Branch
Gujranwala Branch
Multan Branch
Sialkot Branch
Faisalabad Main Branch
PMC Branch Faisalabad
Peshawar Branch
BALANCE SHEET

ASSETS
cash/balances with treasury
banks

2006

2007

2008

2009

27859360

29436378

32687335

35056012

balances with other banks


Lending to financial
institutions

12731952

18380738

21581043

22722639

12456653

3452059

3315500

14947435

Investments

56502210

88491564

75973238

99159957

149999325

171198992

10502990

11922324

13773293

14492194

5633051

6013097

9869367

14649380

Advances
operating fixed assets
differed tax assets
other assets

TOTAL

191790988 188042438

275685541 328895152 348990764 389070055

LIABILITIES
bills payable

3091135

4138243

3452031

3766144

Borrowing

8394130

21230697

13690222

20653921

deposits and other accounts

239509391

sub-ordinate loans
liab against assets sbj to fin
lease

3222106

3220858

2571169

7570181

deferred tax liabilities

1921338

1379809

208456

179851

other liabilities

7305496

9531860

11291280

10006786

TOTAL

263443596 312675308

331946025

366936635

Net Assets

12241945 16219844

17044739

22133420

share capital

273173841 300723858

324759752

5000000

6500000

7995000

13491536

Reserves

2749533

2414833

3166056

3587969

unappropriated profit
Surplus on revaluation of
assets

2823072

4851840

3447467

2690728

1669340

5453171

2436216

2363160