Of
Al-Arafah Islami Bank Ltd (AIBL),
Bangladesh
Based on the study on 2010 Financial statement and business police
IUBAT
SUBMITTAD BY:
GROPE NAME: ONIKER PRANTOR
NAME
ID
PROGRAM
ASADUZZAMA
10202081
BBA
RIDOY
ADIBAZAMAN
10202085
BBA
MOSIUR
10202068
BBA
RAHMAN
FATEMA
10202065
BBA
CLASS
ROLL
AKHTER SIMA
Letter of Transmittal
2nd April, 2011
Md.Mustafizur Rahman
Faculty of (CBA)
School of Business Studies.
International University Of Business Agriculture and Technology.
Dear Sir,
Here is the report on titled the overall foreign exchange activities of Al-Arafah Islami Bank Ltd
(AIBL), Bangladesh-a comprehensive study. Prepared for you as a final report of the semester.
It took one month to prepare the report and we have tried to gather as much information as
possible within this limited time. Although the stipulated time is not enough to have in depth
knowledge about the real corporate world, this report give mi much insight in Islamic banking
practiced by the conventional banks like (AIBL).
I would like to thank you for giving us the opportunity to prepare this report under your sincere
guidance and cooperation.
Thank you,
Sincerely yours,
Acknowledgement
A lot of concentration, effort, responsibility and study have been involved in preparing this paper
into realty. In preparing a report one need a number of assistance and guidance from reliable
sources. This report also stands on the basis of such efforts. I have pleasure to express my
gratitude to my grope members. In preparing the report, I received active co-operation from the
VP responsible as a manager, 1st AVP Responsible as a second officer, Officer of Al-Arafah
Islami Bank (AIBL).I sincerely express my heart- felt gratitude to them for their co-operation,
which helped me to conduct and complete this report. They have provided us some important
books on banking and some books on marketing and finance sharing, consent and given some
advice of making a research report. However this report suffers from many shortcomings.
Moreover, I have exerted my best effort in preparing this report. We seek excuse for the errors
that might have occurred in spite of my best efforts.
Executive summary
TABLE OF CONTENTS
Page
Title Flyi
Title Page.ii
Letter of transmittaliii
Acknowledgementiv
Executive Summary.v
1.1
1.2
1.3
1.4
1.5
2.1
2.2
2.3
2.4
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
INTRODUCTION..1
Origin of the report.
Objective of the study..
Scope of the study
Methodology.
History of Al-Arafah Islami Bank Limited
Aims and Objective
Mission and Vision of AIBL.
Commitments.
MANAGEMENT OF AIBL
Planning
Organizing
Staffing.
Directing.
Controlling
Distribution of Branch..
The Financial position of AIBL.
AIBL Product Service ..
3.9.1Genenral Banking..
3.9.1 Foreign Exchange..
3.9.2 Services of the bank
3.9.3 Products of AIBL.
4.0 Banking system in Bangladesh
4.1 Corporate Information..
4.2 Financial Analysis of Al-Arafah Islami Bank ..
4.3 Performance of AIBL....
4.4 Progressive Analysis of AIBL..
4.4.1 Capital..
4.4.2 Deposit..
4.4.3 Investment
5
INTRODUCTION:
2. Origin of the Report:
To submit a brief description about the performance of Al-Arafah Islami Bank Ltd.
To understand the various services the bank offers and to understand the mechanism
of the services.
Al- Arafah
To suggest remedial measurement for the improvement of the whole process of the
Al- Arafah Islami Bank Ltd.
To formulate recommendations that could add value to the service of Al- Arafah Islami
Bank Ltd.
5. Scope of the Report
This report helps me to understand the clear real-time experience about the total management of
AIBL. It helps me to understand, how the bank manages its total processes. It also helps me to
understand how they deal with the customers as well as the foreign policy of their bank like- the
process of doing LC and export & import etc.
6. Information Needs
In order to conduct this research project and fulfill the research objectives the following
information will be required:
Information about Al Arafah Islami Bank Limited
Information about the facility provided by AIBL
Information about the job characteristics
Information about compensation and benefits policy
General information about the employees of AIBL
General information about motivation concepts
Information about the different wings of PB & head office of AIBL
Information about the expectation of the employees of AIBL
To know the financial performance of the bank
To know the work of general banking system of the bank
Methodology: A Research may be conducted either exploratory or conclusive. Based upon the
research topic and environment scenario I have decided to conduct exploratory research. To
conduct the research I have collected two types of data.
8. Sources of data
I have collected both primary and secondary data. I collected Secondary data from prior records
of AIBL.
I have collected primary information by interviewing employees, managers via the process
assigned by AIBL, observing various organizational procedures, structures, directly
communicating with the customers.
a. Primary Source of Information
When searching in the field directly to collect data was called primary sources of data. I
collected data from primary sources using the following method:
a. Observation method
b. Interview method
Now mention some primary points: Open ended and close ended questions
Personal experience gained by visiting, different desks
Personal investigation with bankers
Face to face communication with employees of the AIBL.
b. Secondary Sources of Data
The secondary data had been collected from the MIS of HSBC. To clarify different secondary
sources such as office memo, operating manuals, circulation & publication used by the
HSBC in this regard.
With the objective of achieving success in the life here and hereafter following the way directed
by the Holy Quran and the path shown by Rasul (SM) Al Arafah Islami Bank Ltd was
established (registered) as a public limited company on 18 June 1995. 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. In compliance with the new provision, Al Arafah
bank has raised its capital and reserve from Tk. 2245 million in the year 2007 to Tk 3049.34
million in 2008 by declaring 30% stock dividend out of the profit of the 2008. The paid up
capital of the bank has stood at Tk. 1383.81 million at 31st December 2008.
Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank.
100% of paid up capital is being owned by local shareholders. In 2008 the bank earned a net
profit before tax & provision of Tk. 1,528.10 million which is 102.08% higher than the previous
year. The bank is listed in the two
STOCK EXCHANGEs
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
11
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, baimuajjal 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.
. Objectives of AIBL:
Al-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the objectives t
implement and materialize the economic and financial principles of Islamic in the banking arena.
The objectives of AIBL are not only to earn profit, but also to do good and welfare to the people.
The main objectives of AIBL are listed below
economic up liftmen
To play a vital role in human development and employment generation
To contribute towards balances growth and development of the country through
investment operations particularly in the less developed areas
To contribute in achieving the ultimate goal of Islamic economic System.
10. Corporate Culture:
This bank is one of the most disciplined Banks with a distinctive corporate culture. Here they
believe in shared meaning, shared understanding and shared sense making. Their people can see
and understand events, activities, objects and situation in a distinctive way. They mould their
manners and etiquette, character individually to suit the purpose of the Bank and the needs of the
customers who are of paramount importance to us. The people in the Bank see themselves as a
tight knit team/family that believes in working together for growth. The corporate culture they
belong has not been imposed; it has rather been achieved through their corporate conduct
3. Mission:
12
13
For any financial and non-financial organization, Management are the most valuable and
important resources of any kind of organization. And, a well-organize management provides the
organization to reach its ultimate goal. Management means planning, organizing, staffing,
directing and controlling of all financial and non-financial resources of an organization. Different
aspects of management practice in AIBL are discussed below.
Planning
AIBL has done its planning within the preview of the corporate plan. The overall planning
approach in AIBL is top to bottom. Each branch can plan according to the goal imposed by the
corporate level. It doesnt plan independently. And, AIBL has a planning sector. This department
is mainly responsible for the overall planning.
Organizing
AIB is organized as per the existing business locations. It has fifty branches, each of which is a
separate entity. Each unit is responsible for its own performance and each is headed at least by a
Senior Assistant Vice President (SAVP) in designation followed by Manager (Operations). He is
directly responsible for the performance of their unit. Within each branch, it is organized
functionally.
Staffing
The recruitment in AIBL is done in two ways. One as a Provisional Officer for the
management program and it has a probation period of two years. Another one is nonmanagement level as Trainee Officers. Provisional Officers are recruited in officer category
and their career path is headed towards different managerial jobs.
Directing
The management approach in AIBL is top-down or authoritative. Each information seeks through
lower management layer. Works are designed in such a way that one cannot leave without
clearing the tasks as he is assigned for a day. Sitting arrangement in all offices is done in a way
that the superior can monitor the subordinate all time. Manager (HOB) and Manager Operation
all time watch the operation of the bank through CC camera. Security is maintained properly.
Budgeting, rewarding, punishing, etc. are also practiced as control mechanism.
Controlling
14
AIBL does not believe in the traditional banking. It tries to increase and maintain its market
share in the private banking sector through two types of control techniques:
Feedback Control
Feedback control technique monitor outputs of a process and feed into the system to obtain
desired outputs. On the other hand feed forward control technique monitor inputs into a process
to ascertain weather these are as planned or not. If they are not, the inputs are changed in order to
get the desired result.
20. Distribution of Branches:
AIBL started its working at 161; Motijheel C/A with a Branch named Motijheel Branch on 27 th
September, 1995 was the first & main Branch of AIBL and has been operating throughout the
country. The Head Office of the Bank was situated at the same holding of Motijheel Branch since
its establishment but from 11 January, 2007 it has started its working at its own premises 36,
Dilkusha (6th, 7th, 8th & 9th floor), Dhaka-1000. The age of the Bank is only 11 years and during
this short period of time, the Bank has established total 46 Branches over the country and made a
smooth network inside the country. The number of Branches as Division wise is mentioned in the
following table:
Division
No. of Branches
Dhaka Division
24
Chittagong Division
11
Rajshahi Division
Khulna Division
Sylhet Division
Barisal Division
Total
50
15
b. Foreign Exchange:
Letter of Credit Issue
Letter of Credit Advise
Bill of Negotiation
Foreign Remittance
c. Services of the Bank:
ATM Card Service
Online Banking
Lookers Service
d. Products of AIBL:
Cash management
Wire transfer
Automated clearinghouse (ACH) transaction
Bill presentment and payment
16
Balance inquiry
Funds transfer
Downloading transaction information
Loan applications
Investment activity
Other value-added services
12. The Banking System in Bangladesh
The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4
nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic
private banks, 11 foreign banks (including 2 Islamic Bank) and 28 non-bank financial institutions
including 1 Central bank. The financial system also embraces insurance companies, stock
exchanges and co-operative banks. The financial sector of Bangladesh is dominated by the
commercial bank. A number of national, private, foreign, specialized commercial bank and nonbanking financial institutions having a network of correspondents and branches are operating all
over the country and abroad to center to the people and business of the country. After the reform
program, the financial institutions are more systematic and borrowing and lending through
formal markets is increasing. Apart from normal commercial banking, banks are now providing
consumer credit scheme, and financing in industrial credit and development project. Electronic
commerce gives the banking industry a real competitive edge. The banking industry of our
country has started its journey soon after the liberation war in 1971. The early 70s, immediately
after liberation, banking industry started its journey without any participation of the private
sector in a very restrictive financial system. In early 80s few privet commercial banks were
allowed to start functioning. Due to lack of experience and absence of supervisory as well as
controlling environment, 1st generation private banks faced various problems in the next few
years. During the late 80s and early 90s, with the passage of Financial Sector Reform program,
Banking Regulation Structure suggested by BIS and followed by developed countries began to
start incorporation into the banking regulations of Bangladesh. The following table shows a few
snap shots that indicates a brief history of the banking industry of Bangladesh.
2. Corporate Information:
17
Chairman
Badiur Rahman
Vice Chairman
Managing Director
M A Samad Sheikh
Company Secretary
Md Moffazzal Hossain
Legal Status
Principal Activity
Commercial Banking
Registered Office
Date of Registration
18 June 1995
Opening ceremony
27 September 1995.
Authorized Capital
2500.00 million.
Paid up capital
1383.81 million
100%
Equity
2705.74 million
Number of Branches
50
Deposit
29690.13 million
Investment
29723.37 million
Number of manpower
1080
Number of shareholders
12013.
Phone
18
Fax
880-2-9569351
SWIFT
ALARBDDH
aibl@al-arafahbank.com
Website
www.al-arafahbank.com
Slogan
Logo
2005
2006
2007
2008
Authorized Capital
1000.00
2500.00
2500.00
2500.00
Paid up Capital
677.94
854.20
1153.18
1383.81
Reserve Fund
542.22
835.98
1091.95
905.33
Shareholders Equity
1220.16
1690.18
2037.50
2705.74
19
Deposit
11643.66
16775.34
23009.13
29690.12
Investment
11474.41
17423.19
22906.37
29723.79
Import
12631.60
1882.14
27042.72
32685.13
Export
4932.90
914.27
12714.91
20176.64
Total Income
1452.68
2172.48
2955.61
4387.26
Total Expenditure
904.48
1202.71
2199.43
2859.16
548.20
855.47
756.18
1528.09
262.90
470.02
347.31
668.24
Income Tax
215.10
385.45
235.53
590.66
Total Assets
15336.89
21368.17
30182.32
39158.44
Fixed Assets
208.00
215.11
334.48
396.76
387.80
550.24
30.12
48.29
4.89
26.00%
35%
20%
30%
No. of Shareholders
5402
4487
12013
10664
Number of Employees
771
912
1033
1080
Number of Branches
41
46
46
50
19
20
23
22
20
29723.79
29690.12
23009.1
22906.4
17423.2
16775.3
Shareholders Equity
10108.3
8150.16
Deposite
957.26 348.891220.16
2004
Investment
11643.7
11474.4
548.2
2005
1690.18
969.77
2037.5
2006
756.18
2007
2705.74
1528.1
2008
21
Bank declared 26.00% bonus dividend for the year 2005. As a result the paid up capital of the
bank stood at taka 85.42 million as at 31st December, 2006.
b. Reserved Fund
The total balance of the reserve fund stood at Tk. 835.94 million in the current year against Tk.
542.22 million compared to previous year 2005. In this fund, the bank experienced a growth rate
of 54.18%.s
c. Capital Adequacy
The Bangladesh Bank has fixed the ratio of capital adequacy against Risk-Weighted Assets at
9.00% in place of 8% in the month of September 2002. In 2002, the amount of total equity of the
bank was 41.57 core taka, which stood at Tk. 104.27 core in the year 2004 & taka 1309.56 cores
in the year 2005.This year it stood at taka 183.04 cores. At 31 December 2006, the capital
adequacy ratio of the bank is 10.71% against 12.17% at the same period of 2004.
39158.44
30182.32
12874.61
2004
15336.89
2005
21368.16
2006
2007
2008
22
year, the amount of total deposit was 11643.66 million taka in this area the growth rate is
44.07%.
Deposit Mix
16775.33
Amount
(Million
Taka)
11643.66
10022.33
7012.12
2004
1
Year
8013.25
2005 2006
2
2007 2008
4
Year
Hire-Purchase
Under
Shirkatul Melk
28%
Bai-Muajjal
49%
Quard
1%3%
0%
0% 0%
16%
Bai-Salam
Mudaraba
Musharaka
Total
23
Industrial
Commercial
25%
Real Estate
Transport
51%
4%
1%3%2%
Agriculture
16%
Others
Total
24
Investment Mix
Amount
in
(Million
Taka)
17423.19
11474.41
Year
2005
2006
2007
2008
3
Year
25
32685.1
27042.7
20176.6
18821.4
Total Import
Total Export
12714.9
12631.6
9337.49
3639.34
2004
9142.7
4932.9
2005
2006
2007
2008
26
Direct Impact
ii)
Indirect Impact
a. Direct Impact
Direct impacts are the immediate economic effects resulting from the banks financial
transactions. Banks direct contribution to the economy resulted in the creation of employment
opportunities, payment of tax to the government and maximization of shareholders wealth.
b. Indirect Impact
Indirect impacts are the spill over economic effects that occur through Banks normal course of
operations. Banks generate indirect impact by addressing the deficiency of capital in the
economy by mobilizing deposit and channeling the same to prospective investors.
Through catering financial services, the Bank helped distribute the wealth among all the
stakeholders for example shareholders received dividend, depositors and investors got profit,
employees received compensation and other benefits, the under privileged reaped benefits out of
CSR while the government government earned tax revenue.
At the end of 2008, the Bank mobilized total deposits of BDT 29,723.79 million as investment to
different sectors of the economy. Apart from these, the Bank performed significant import and
export business.
D. Functions of Al-Arafah Islami Bank Ltd.
Functions of AIBL:
Islamic banks render almost similar services to their customers conventional banks do.
Like a conventional bank, AIBL also accepts deposits from customers and advances
loans. AIBL also acts as a custodian of its customers and performs all foreign
transactions on behalf of them. AIBL perform mainly three different types of functions.
27
General Banking
Customer
Relation
Desk-1
Customer
Relation
Desk-2
Cash
Clearing
Dispatch
(Nonoperating)
1. Buildup relation
with clients.
2. Account
opening
(operating)
Current A\C
Saving A\C
MSTD
MMSS
MHD
MED
3. Account
Closing
4.Issue cheque
book
5.Posting of
opening &
closing
accounts.
6.Proper
maintaining
of KYC
form &
other
1.
1. Buildup relation
With clients.
2. Account
opening (nonoperating)
FDR
Profit giving
voucher issue of
FDR
4. Remittance:
Pay Order
TT
DD
3.
1.
Cheque receives
for collection.
2. Cheque, PO,
DD, TT receive
for transfer.
3. Nikash
maintaining,
printing & copy
and validation
print.
4. LBC issue &
receive.
5. OBC issue &
receive.
6. IBCA/IBDA
issue & receive.
7. Preparing salary
sheet.
8. Issue
expenditure
voucher.
9. Different
statement
preparation
for Head
1.
Receiving &
payment of
cash.
2. Signature
verifying.
3. Accounts
checking of
funds
sufficiency
for any
payment.
4. Maintaining
share
transactions.
5. Providing
income tax
certificate.
6. Solvency
certificate.
1.
2.
3.
Provides
documents
sending with
date &
number.
Receive
documents
from courier.
Sends
documents
through
courier.
Financial institutions especially banks play a very important role in foreign exchange transaction
of a country. Mainly transactions with overseas counties of imports, exports and foreign
remittance are the main function of the Foreign Exchange department.
Foreign exchange refers to the process or mechanism by which the currency of one country is
converted into the currency of another country. Foreign exchange is the means and methods by
which rights to wealth in a country's currency are converted into rights to wealth in another
country's currency Foreign Exchange Department plays significant roles through providing
different services for the customers. Opening or issuing letters of credit is one or the important
services provided by the banks.
1. Opening LC in AIBL:
There are several factors for what customers come to this bank to open LC. The procedures,
techniques, facilities, services and other factions for opening LC are stated details as follows:
a. Letter of Credit:
A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the
instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking
that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain
conditions mentioned in the letter have been complied with.
b. Parties of the L/C
Importer
Issuing Bank
Confirming Bank
Advising or Notifying It is the bank through which the L/C is advised to the
Bank
Negotiating Bank
It is the bank, which negotiates the bill and pays the amount
of the beneficiary. The advising bank and the negotiating
bank may or may not be the same. Sometimes it can also be
confirming bank.
Accepting Bank
Reimbursing Bank
c. Issuing Bank
The Issuing Bank or the Opening Bank is one which issues the credit i.e. undertakes,
independent of the undertaking of the applicant: to make payment provided the terms and
conditions of the credit provides for sight payment, or at with. The payment may be at sight if the
credit provides for sight payment or at maturity dates if the credit provides for deferred payment.
Especially the issuing bank should satisfy himself on the credit worthiness of the applicant. The
credit application must be in accordance with the Uniform Customs and practices for
Documentary Credit (UCPDC) LC publication no. 500 edition of 1993.
d. Advising Bank
The Advising Bank advises the credit to the beneficiary authenticating the genuineness of the
credit. The advising bank is generally situated in the country/place of the beneficiary.
e. Confirming Bank
A confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby,
undertaking the responsibility of payment / negotiation / acceptance under the credit in addition
to that of the issuing bank. A confirming bank normally docs so if requested by the issuing bank.
When the creditworthiness of the issuing bank is in doubt, beneficiary's bank may request the
issuing bank to give additional confirmation by another bank. It is said Add Confirmation in
practices.
f. Negotiating Bank
30
A Negotiating Bank is the hank nominated or authorized by the issuing bank to pay, to incur a
deferred payment liability, to accept drafts or to negotiate the credit.
g. Reimbursing Bank
A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement of
negotiation / acceptance / payment lodged with it by the negotiating bank or accepting bank. It is
normally the bank with which the issuing bank has account from which payment is to be made.
Reimbursement claims in foreign exchange business settled by the Uniform Rules for
Reimbursement (URR)ICC publication no. 525.
2. Import Business:
Import trade in Bangladesh is controlled under the Import and Export control Act 1950.
Authorized Dealer Banks will import the goods into Bangladesh following the import policy,
public notice, F.E. circular and other instructions from competent authorities from time to time.
Import payments during 2007-08 amounted to US$ 21600 million (27.30% of GDP) compared to
US$ 17157 million (25.10% of GDP) in 2006-07 showing an increase of 26.0% in 2007-08
compared to 16.30% increase in 2006-07. The significant increase in the overall volume of
imports stemmed from imports of capital goods, consumer & intermediate goods, and imports by
EPZs.
The Year Wise Import as Follows:
Year
2002
2003
2004
2005
2006
2007
Import
5559.27
5162.51
7698.29
9337.49
12631.60
18821.40
Business
31
32
The duplicate copy of the LC needs to release the goods from the customs. And the bank
supplies this document to the party to release their goods from the custom.
The bank has to inform about the LC and goods to the Bangladesh Bank in Foreign Exchange
Regulation Act, 1947 form (IMP). And then the LC is closed.
C.prosediors Prepare a L/C
To prepare a L/C the branch takes care on the following points:
L/C Number
Shipment date
Presentation period
Applicant
Beneficiary
Advising Bank
Amount
Availability
Documents required
Payment
UCP
Bill of lading
Bill of Exchange
Pre-shipment Inspection
Data content
Special conditions
3. Export Business:
The goods and services sold by Bangladesh to foreign households, businessmen and Government
are called export. The export trade of the country is regulated by the Imports and Exports
(control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and
after shipment of goods. The exports from Bangladesh are subject to export trade control
exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI
& E). No exporter is allowed to export any commodity permissible for export from Bangladesh
unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The
ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms
and other documents connected with exports.
33
2002
2524.63
2003
1894.77
2004
3075.52
2005
3639.34
2006
4932.90
2007
9142.70
L/C value shall not exceed the admissible percentage of net FOB value of relative Master
L/C.
The import L/C is opened for 75% of the value of Export L/C.
Arrangements are such that export L/C matures first then out of this export profit, import
L/C is paid out.
35
If all the documents are in order then the bank purchase the documents. Several things
should be checked at the time of purchasing.
How much back-to-back and PC (packing Credit) facility the client has taken.
After taking all these charges, the rest amount is paid to the client and a FDBP account is
opened.
Foreign documentary bills for collection signifies that the exporter will received payment only
when the issuing bank gives payment. The exporter submits duplicate EXP from and commercial
invoice subsequently.
4. Foreign Remittance
Foreign remittance plays a significant role in a banking system though economy system of a
country. Like other Al-Arafah Islami Bank Ltd also have a department of foreign exchange
dealing. Mostly US dollar, Euro, British pound and other remittances like Australian dollar,
Canadian dollar, Malaysian ringgit and currencies of Middle East have been dealing here. Other
Al-Arafah Islami Bank Ltd buys and sells all regular kinds of foreign currencies though foreign
exchange department is not available in all the branches of Al-Arafah Islami Bank Ltd.
a. Outward Remittance:
On March 24, 1994 Bangladesh Taka was declared convertible for current international
transaction. As a result remittance becomes more liberalized. Outward remittance include sale of
Foreign Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose.
Traveler's Cheque
36
Travelers Cheque (TC) is an instrument for a specific amount of widely accepted foreign
currencies, issued in favor of Travelers/ Visitors to carry foreign exchange for meeting heir
expenses in abroad.
Traveler's cheque may be in different currencies, such as US Dollar, Pound Starling, Japanese
Yen, Saudi Riyal, Canadian Dollar, French Frank, German Marks, and Swiss Frank etc. But
traveler's cheque is not issued in this branch.
Issuance of Outward DD and TT :
ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or
foreign nationals as per their entitlement. But foreign TT and DD are not issued in this branch.
b. Inward Remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc.
but also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes,
TC, DD and similar instrument for protecting the bank from probable loss as well as safety of the
bank officials concerned. But this type of purchase is not done in this branch.
c. Collection of Foreign Currency Instrument: Principal Branch collects foreign remittance
through the following instruments on behalf of their customer
Money Gram
Express money
Instant cash
Placid express
Remit master
Bank reputation AIBL has already established a favorable reputation in the banking industry of
the country with its significant business growth. With in a period of 14 years, AIBL has already
established a firm footing in the banking sector having tremendous growth in the profits and
deposits. All these have leaded them to earn a reputation in the banking field.
Corporate Culture
AIBL has an interactive corporate culture. Unlike other local organization, AIBLs working
environment is very friendly, interactive and informal. There are no hidden barriers or boundaries
while interactive among the superior or the subordinate. The environment is also lively and since
the nature of the banking job itself is monotonous and routine, AIBLs lively work environment
boosts up the sprit and motivation of the employees.
Team Work at Mid level & Lower level
At AIBLs mid level and lower level management, there are often team works. Many jobs are
performed in-groups of two or three in order to reduce the burden of the workload and enhance
the process of completion of the job. People are eager to help each other and people in general
are devoted to w
Quality: Al-Arafah Islami Bank strives to endow its customers with appreciable quality in every
service it provides. Customer satisfaction claims the highest priority, as it should be in any
service-oriented organization.
Adaptability :Al-Arafah Islami Bank draws its strength from the adaptability and dynamism it
possesses. It has quickly adapted to world class standard in terms of banking services. Al-Arafah
Islami Bank has also adopted state of the art technology to connect with the world for better
communication to integrate facilities.
Efficient Management
All the levels of management are solely directed to maintain a culture for the betterment of the
quality of the service and for developing a brand image in the market through the organizations
wide team approach and horizontal communication system.
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In Foreign Exchange Department they follow the traditional banking system. The entire
Foreign Exchange procedures are not fully computerized.
Service personnel are working under pressure because they have to deal with large number of
customer every day.
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Technology that AIBL is using for their banking system is not updated. Now there is some
international bank in Bangladesh, they are very fast and very up dated.
The Al-Arafah Islami bank is too much centralized. For each and every work, branch office
has to get permission from the head office. The head office tightly controls each and every
branch
Lack of information to get and sitting arrangement in the branch is a trouble for the
customers.
Advertising and promotion are the weak point of Al-Arafah Islami Bank Ltd. AIBL does not
have any effective marketing activities. Others banks have betters marketing strategy.
Al-Arafah Islami Bank Ltd has less amount of foreign exchange business compare to other
Banks.
2. Recommendations:
The fast pace of growth in the Islamic financial sector and the emergence of conventional finance
companies offering Islamic products and services has brought critical attention to key issues
facing this sector. Some of the core issues identified after analyzing this report that Al-Arafah
Islami Bank Limited should give lots of attention in many sectors, which are given below.
Increased market transparency is needed to enhance credibility and increase consumer
confidence. The application of relevant international accounting standards will enhance
transparency of Islamic financial institutions and the comparability of financial
statements. At this stage, Islamic product standards and accounting practices are not yet
accepted globally.
Increased education is needed to ensure that the Shariah standards are understood and
accepted across the industry by regulators, international organizations, and the private
sector.
Foreign exchange department should be fully computerized and reduce the paper based
work to make it more smooth and faster.
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AIBL should give the highest attention on recovery of bad things related to opening
LC. This concerns the worst image of the Bank to the clients
AIBL should utilize "Internship Program" as one kind of promotion policy to encourage
its present and potential customers/clients. Because, young generations are the vital post of
our economy. To do so this Bank should provides facilities to the internees through
proper placement and practical operations as well as job certainty to those who bring
introduced themselves the best performers in doing their particulars.
3. Conclusion:
The concept of Islami Banking is several decades old. The third attempt to establish an Islamic
Financial Institution took place in Pakistan in the late 1950s with the establishment of a local
Islami Bank in a rural area (Wilson 1995. After 45 years, Islamic Banking system is established
in Bangladesh as a financial institution that is named Al-Arafah Islami Bank Limited.
Al-Arafah Islamic Bank Limited is a Bank which operates its activities according to Quaran and
Sunnah. Its banking activities based on profit \ loss sharing. It does not create any illegal
pressure on client.
On the other hand, every client is not 100% honest. So they are taking investment from AIBL
and after maturity, they are showing loss on that project intentionally. So AIBL is losing some
profits from their investment. For this reason, Al-Arafah Islami Bank Limited has closed its bai mechanism. Now it is not providing investment under this mechanism.
Threats of Al-Arafah Islami Bank Limited are - at this time, many financial institutions have
commenced their financial activities according to Islamic shariah. This type of organization will
create more competition in the financial market. So it is a threat for Al-Arafah Islami Bank
Limited.
Although it is facing some problem, it has a bright future and day-by-day it is enhancing its
financial activities over the country. Many organizations are following to AIBL and they are
starting their business based on Islamic shariah in the economy of Bangladesh.
After all, Al-Arafah Islami Bank is increasing its reputation day after day through providing
various sorts of innovative product and service. Moreover, AIBL,s customer services and
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management are also being enhanced. Foreign Direct Investment Department will be fully
computerized soon.
H. Appendix Part:
1. Bibliography
Ivancevich, John M., and Steven J. Skinner. Business for the 21st Century. Boston: Irwin,
2003.
Kotler, Philip. Marketing Management. 9th ed. New Delhi:
Prentice-Hall, 1999.
Kinnear, Thomas C., and James R. Taylor. Marketing Research: An Applied Approach. 5th ed.
New Delhi: McGraw Hill, 2003.
Annual Report, Al-Arafah Islami Bank Limited, 2008 - Published by AIBL.
A Journal of Islamic Banking Published by AIBL
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