Professional Documents
Culture Documents
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Internship Report
Submitted to: Sohani Islam Lect%rer &e'artment of B%siness Administration #tamford (niversit) Bangladesh
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Submitted by: *d. A+%l $ossain I& o. , BBA -./ -/1-0 Batch 1 ./th2 #ection-A &e'artment of B%siness Administration #tamford (niversit) Bangladesh
Internship Report
&ear #ohani *adam I here+) s%+mit the internshi' re'ort on the to'ic Foreign Exchange Activities of Al-Arafah Islami Bank td!"" intended to f%lfill the 'artial re6%irement of m) BBA 'rogram. It 7o%ld +e diffic%lt for me to get the 7ork done 7itho%t )o%r 'ro'er s%'ervision 8 g%ideline. I tried m) +est to 7ork sincerel) to cover all as'ects regarding the matter. !ho%gh I faced some limitations in 're'aring this re'ort2 I have thoro%ghl) en5o)ed in 're'aring this internshi' re'ort2 7hich has contri+%ted significantl) to m) %nderstanding on the essentials and im'ortant 'ractical kno7ledge. I therefore ho'e that the re'ort 7ill f%lfill the re6%isite o+5ectives that )o% 7anted to get done +) me.
9hecked 8 signed :::::::::::.. Sohani Islam Foreign exchange activities of AIBL Page14
Internship Report I& o. , BBA -./ -/1-0 Batch 1 ./th2 #ection A &e't of B%siness Administration #tamford (niversit) Bangladesh
Students Declaration
I here+) declare that the re'ort of internshi' namel) Foreign Exchange Activities of Al-Arafah Islami Bank td!"
B) me after the com'leting of ; <three= months of internshi' 7ith Al-Arafah Islami Bank td at #e$ Ele%hant &oad Branch and a com'rehensive st%d) of the existing activities of Al-Arafah Islami Bank Ltd and its im'lementation.
I also declare that this 'a'er is m) original 7orked and 're'ared for academic '%r'ose 7hich is a 'art of BBA and the 'a'er ma) not +e %sed in act%al market scenario.
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*d. A+%l $ossain I& o. , BBA -./ -/1-0 Batch 1 ./th2 #ection A &e't of B%siness Administration #tamford (niversit) Bangladesh
Internship Report
Supervisors Declaration
I here+) declare that the concerned re'ort entitled Foreign Exchange Activities of Al-Arafah Islami Bank td!" is an original 7ork +) 'd! Abul (ossain) bearing I* #o: BBA +,- +-.+/ *a5or in Finance2 &e'artment of B%siness Administration2 #tamford (niversit) Bangladesh2 com'leted his internshi' %nder m) s%'ervision and s%+mitted for the 'artial f%lfillment of the re6%irement of the degree of Bachelor of B%siness Administration <BBA= at #tamford (niversit) Bangladesh.
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Internship Report
!his is to certif) that2 'd! Abul (ossain a st%dent of BBA 'rogram2 +earing I* #o: BBA+,-+-.+/) *a5or in Finance2 &e'artment of B%siness Administration2 and #tamford (niversit) Bangladesh has com'leted the internshi' re'ort titled Foreign Exchange Activities of Al-Arafah Islami Bank Ltd. s%ccessf%ll) %nder m) s%'ervision.
#%'ervisor
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9O !E !#
Ackno7ledgement Exec%tive s%mmar) 9$AP!E" O E3 I !"O&(9!IO 1.1 Introd%ction 1.. Origin of the re'ort 1.; "ationale of the #t%d) 1.4 Acron)ms 8 a++reviations 1.0 *ethodologies 1.> #o%rce of &ata 1.? O+5ective of the st%d) 1./ Limitations of the st%d) 111 14 10 10 1> 1? 1/ 1/ 14 14
9$AP!E" !@O3 BA9AB"O( & OF AIBL ..1 Cision of AIBL ... *ission of AIBL ..; *arketing #trategies $istor) of AIBL ..4 $istor) of AIBL ..0#'ecial feat%res of AIBL ..> *anagement of AIBL ..>.1 $ierarch) of the exec%tive +od) ..? 9or'orate c%lt%re 8 9#" ../ @orkforce of e7 Ele'hant "oad +ranch ..4 Information technolog) of AIBL ..1- 9lassification of +ankDs 'rod%cts ..11 #ervices 'rovided +) AIBL ..1. Bro7th of AIBL
..1 .1 .1 .. .; .; .4 .0 .0 .0 .> ./ ;1
9$AP!E" !$"EE3 I &(#!"E OCE"CIE@ ;.1 Blo+al econom) ;.1.1 Blo+al com'etitors ;.1.. #ocio-economic Phenomena ;..Bangladesh econom) ;...1 Banking sector ;.... Im'ort sit%ation ;...; Ex'ort sit%ation ;...4 Ex'ort 'olic)
;> ;? ;? ;? ;/ ;4 ;4 441
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9$AP!E" FO("3 FO"EIB EF9$A BE &ICI#IO OF AIBL 4.1 Foreign exchange o'erations 4.. Im'ort
4; 44 44
Internship Report 4...1 Im'ort registration certificate <I"9= 4.... F%nctions of Im'ort section 4...; Letter of credit <LG9= 4...;.1 Parties to the LG9 4...;.. *echanism of LG9 o'eration 4...;.; Amendment of LG9 4...4 Pa)ment 'roced%re of im'ort doc%ments 4.; Ex'ort 4.;.1 Ex'ort o'eration 4.;.. Back-to-+ack LG9 4.;.; egotiation of ex'ort doc%ments 4.4 Foreign remittance 4.4.1 "emittance 'roced%res of foreign c%rrenc) 4.0 *iscellaneo%s services +) the de'artment 4.> "isk in foreign exchange +%siness 40 40 4> 4> 4? 4/ 0. 0; 04 00 0> 0? >. >4 >0
9$AP!E" FICE3 FO"EIB EF9$A BE PE"FO"*A 9E A ALE#I# 0.1 $istorical 'erformance OF AIBL 0.. Foreign exchange 'erformance over time 0...1 Ass%m'tions to the anal)sis 0.... List of +anks selected for com'arison 0...; Bro7th statistics in Foreign exchange +%siness 0...4 Aggregate 'erformance of the selected +anks 0...0 #ector 7ise com'arison 0...> "egression anal)sis 0...? #ta+ilit) of Ex'ort and Im'ort B%siness of AIBL 0.; F%t%re 'ros'ects of the +ank 0.4 Pro+lems in the +%siness sector 0.0 9ritics of Islamic Banking 0.> #%+5ective 5%dgments 0.? Performance in other sectors 9$AP!E" #IF3 PE"FO"*A 9E OF AIBL >.1 Financial $ighlights >.. Bro7th of AIBL >.; Performance of the +ranch >.4 Anal)sis of &ata >.0 #@O! Anal)sis >.> Findings and anal)sis 9$AP!E" #ECE 3 "E9O**E &A!IO # 8 9O 9L(#IO #
>> >? >4 >4 ???1 ?0 ?/ //1 /. /; /0 /> /? // 4. 4; 4> 1-; 1-> 1-/ 1-4 11. 11;
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Internship Report
Acknowledgement
At the ver) +eginning2 I 7o%ld like to thank m) honora+le teacher 8 s%'ervisor of m) internshi' 'rogram Sohani Islam! I am ver) m%ch 'leased to offer m) thanks and gratit%de to the $"& of Al-Arafah Islami Bank td for giving me the o''ort%nit) to 7ork 7ith the +ank in its e7 Ele'hant "oad Branch. I 7o%ld also like to give thanks to *d. Ati6%r "ahman-Assistant <Cice 'resident= 8 *anager2 *d. Ea+id%l $a6%e <Princi'al Officer=2 *d. Bolam H%dd%s <Princi'al Officer= 8 Investment In charge2 *d. #harif%l Alam <#enior Officer=2 *d. Hamr%l $%da <#enior Officer=2 *d. A+%l Aalam AIad2 *d. *am%n%r "ahman2 #harif $asan2 *d A A Al-*am%n2 *d. *%naem $a6%e and *d. $anif *ollah of e7 Ele'hant "oad Branch to hel' me thro%gho%t m) internshi' 'rogram. I also give a s'ecial thanks to all the 'ersonnel of Islami Bank td for hel'ing me to collect data. e7 Ele'hant "oad Branch of Al-Arafah
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Internship Report
Executive summar
!his internshi' re'ort is a 'artial re6%irement for the Bachelor of B%siness Administration 'rogram. !he re'ort is +ased on >0 da)s <. nd J%ne to .nd A%g%st .--4= 7orking ex'erience on Al-Arafah Islami Bank Limited <AIBL=. I 7as assigned in the e7 Ele'hant "oad Branch2 &haka of AIBL. !his re'ort gives a clear idea of the activities2 o'eration strategies and the 'erformance of AIBLDs foreign exchange activities !here are several varia+le taken for anal)sis of the re'ort 7hich are n%m+er of letter of credit o'ening2 irrevoca+le letter of credit2 commission on foreign exchange2 vol%me of im'ort2 +ack-to-+ack LG92 foreign doc%mentar) +ills for '%rchase2 ex'ort finance2 vol%me of ex'ort2 foreign c%rrenc) de'osit etc2 exchange gain2 foreign remittance. !he data has +een collected from 'rimar) 8 secondar) so%rces. Primar) so%rces are gro%' disc%ssion2 'ractical 7ork ex'erience2 case st%d) 8 intervie7. #econdar) #o%rces are &#E li+rar)2 several +ooks and 'eriodicals related to the +anking sector2 Bangladesh BankDs re'ort2 &ifferent circ%lar sent +) the head office of AIBL2 Ann%al "e'ortDs of AIBL and other 'rivate +anks. !he anal)sis of AIBLDs 'erformance in foreign exchange transactions has +een cond%cted +ased on the trend anal)sis2 factor anal)sis 8 9om'arative Anal)sis in 7hich recent 'erformance in foreign exchange transactions of AIBL 7ith other selected +anks.
!he re'ort consists of six 'arts. !he first 'art descri+es the introd%ctor) matters of a formal re'ort 7hich incl%des acron)ms 8 a++reviations2 rationale of the st%d)2 limitations etc.
!he second 'art gives a concise descri'tion of the organiIation. !hese incl%de origin 8 eval%ation of AIBL2 Islami +anking s)stem2 conce'ts 8 'rinci'les etc. !o their 'oint of vie7 1 Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to be successful both in our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of Al-Quran and lifestyle of Ha rat Muhammad !sm." for our supreme success. Al-Arafah Islami Bank <AIBL= started its 5o%rne) in 1440 7ith the said 'rinci'les in mind and to introd%ce a modern +anking s)stem +ased on Al-H%rDan and #%nnah. A gro%' of noted Islamic scholar2 economist2 7riter and ex-+%rea%crat of Bangladesh Bovt. *r. A. K. *. #hams%l Alam is the fo%nder chairman of the Bank. $is 'rogressive leadershi' and contin%o%s ins'iration 'rovided a +oost for the +ank in getting a foothold in the financial market of Bangladesh .A gro%' of .> dedicated and noted Islamic Personalities of Bangladesh are the mem+er of exec%tive co%ncil of the Bank. Al-Arafah Islami Bank Ltd. <AIBL= has 4> Branches and 1-;; em'lo)ees <as on &ecem+er .--?=. Its a%thoriIed ca'ital is .0-- million !k and 'aid %' ca'ital is taka 110; million !k.
!he third 'art gives a +rief descri'tion of macroeconomic environment incl%ding the financial sector of Bangladesh 8 foreign exchange activities +) the co%ntr). !he econom) of Bangladesh has once again faced a great challenge mainl) for the devastating nat%ral and other catastro'hes com+ined 7ith 'olitical %ncertainties2 a+olition of 6%ota regime of read)made garments ind%stries2 a+normal 'rice-hike of im'orted commodities incl%ding oil 'osed great challenges for the economies.
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Internship Report #ome +rief foreign exchange information of the co%ntr) is- Ex%orts 0,++1-+23: (#L 1.1??./> mn2 Im%orts 0,++1-+23: (#L 1?10>./- mn2 4rade *eficit: (#L 44?/.4- mn2 Foreign Exchange &eserve: (#L 0014.>- mn) &emittances: (#L ;44?.;. mn.
!he fo%rth 'art of the re'ort anal)Ies the theoretical as'ects of foreign exchange transactions of AIBL. !here are three kinds of foreign exchange transactions- Ex'ort2 Im'ort 8 "emittance. Foreign exchange +%siness starts 7ith a Letter of 9redit <LG9=. !he 'art also descri+es vario%s terms %sed in foreign exchange +%siness like +ack-to-+ack LG92 FOB2 %nderstanding2 shi'ment2 LI*2 L!" etc. According to im'ort and ex'ort control act2 140-2 the officer of the chief controller of im'ort and ex'ort 'rovides the registration <I"9= to the im'orter. After o+taining this2 this 'erson has to sec%re a letter of credit a%thoriIation <L9A= from Bangladesh Bank and then a 'erson +ecomes a 6%alified im'orter. $e is the 'erson 7ho re6%ests or instr%cts the o'ening +ank to o'en an LG9. he is also called o'ener or a''licant of the credit. AIBL is an a%thoriIed dealer <A&= to o'erate foreign exchange transaction. @ith the legal formalities the +ank serves the c%stomers 7ith ex'ort2 im'ort 8 remittance services. In the 'rocess of 'roviding remittance service it sells and +%)s foreign c%rrenc)2 the conversation of one c%rrenc) into another takes 'lace at an agreed rate of exchange 2 7hich than Banker 6%ote one for +%)ing and another for selling. !here are vario%s t)'es of Income of the Bank in Foreign Exchange #ector.
!he main concentration of the re'ort is in fifth 'art. In this 'art the 'erformance of the +ank has +een assessed in the foreign exchange +%siness. !he anal)sis 7as done 7ith some stated 'rinci'les 7hich are some s'ecific ass%m'tions. !he ass%m'tions 7ere 1 !he re'orted financial data are free from error 8 +ias +eca%se there 7ere no sco'es of the st%d) is to verif) the data Anal)sis 8 findings are valid %' to June 2007 +eca%se the other data are not availa+le !he data sho7n of .--/ are estimated fig%res I have selected +anks 7ith the follo7ing classification criterion o o o Local commercial +anks <P9B= Foreign +anks <FB= Bovt.Ds s'ecialiIed +anks
!he +anks selected are ass%med to +e the re'resentatives of +anking sector of o%r co%ntr) #elected +anks are - &haka Bank Ltd.2 ational Bank Ltd.2 AB Bank Ltd.2 #tandard 9hartered Bank2 $#B92 9iti Bank . A.2 #onali Bank Ltd. 8 Basic Bank Ltd. Page14 !he gro7th statistics sho7s that the economic do7nt%rn in .--0 8 .--/ infl%enced the 7hole +anking ind%str).
Internship Report In the com'arative anal)sis it 7as revealed that 1 Al-Arafah Islami Bank is lagging +ehind com'ared to the other +anks in foreign exchange business! B%t the +ank has a consistent 'erformance 7ith the trend of ind%str)Ds 'erformance !he remittance +%siness for Al-Arafah Islami Bank is significantl) lo7er than the other local com'etitors. !his can +e a ca%se of c%stomer foc%s Gmarket segment of the +ank !he +ank has a h%ge amo%nt of loan incentives for ex'ort 8 im'ort +%siness com'ared to other 'erformances in foreign exchange activities !he +ank 'rovides com'arativel) higher loan facilities in ex'ort 8 im'ort +%siness $o7ever2 a +rief 'erformance overvie7 on de'osit 8 investment division of the +ank revealed that the +ank is heavil) concentrating on de'osit schemes. @ith the advantage of religio%s +elief hence Islamic Banking conce't2 the +ank is getting an edge 7ith de'osit schemes 7hich is a strong s%ccess factor of the +ank.
!he 7orking environment of AIBL is ver) cond%ctive and friendl). Altho%gh the) donDt maintain strict hierarchical 'rotocol among the staffs the environment is m%ch more relaxed 8 eas). !he staffs are s'ecialiIed in their res'ective fields. Each of them 7orks on their o7n and there is close s%'ervision from the to'. !he motivation of the em'lo)ees comes from the ver) sense of res'onsi+ilit). !he sixth 'art ends %' the re'ort 7ith ma5or findings 8 com'lementar) remarks. !he h%man reso%rces division is lacking of ens%ring modern inde'endent 7ork environment as women are especially discouraged to 5oin the +ankDs 7orkforce. $o7ever2 to their vie72 the) donDt like to see 7omen as 7orking o%tside the home as Islami #hariah doesnDt.
@ith all anal)sis 8 5%dgments2 I have tried to eval%ate the 'erformance of AIBL in foreign exchange activities. I ex'ress m) heartiest gratit%de to all the 'arties related to make the 7ork done.
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Internship Report
Chapter One
Introduction
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!.! Introduction
Banking system occupies an important place in a nation's economy A !anking institution is indispensa!le in a modern society Financial institutions are very much essential for the overall development of a country "specially !anks play an important role in the field of promotion of capital# encouragement of entrepreneurship# generation of employment opportunities etc $arket economy or free economy is %idely used&concept a!out the present economy of Bangladesh 'he country adopted the concept in the late seventies %ith the privati(ation of significant num!er of enterprises 'he practices of free market economy started from the eighties %ith the changing of the %orld economy A num!er of initiatives %ere taken from the nineties to increase the competition and efficiency in money market# relaxation of un%anted rules and regulations# improvement of loan related la% and other situations and improve the financial !ase of the !anks of the country In recent times the !anking sector over the %orld has !een undergoing a lot of changes due to deregulation# technological innovation# glo!ali(ation etc Banking sector in Bangladesh is lagging !ehind in adopting these changes
'he internship program is re)uired course for the students %ho are completing BBA from the *epartment of Business Administration in the faculty of !usiness studies of +tamford ,niversity Bangladesh It is a - credit hour program %ith duration of t%o months +tudents %ho have completed all the re)uired courses are eligi!le for this program In the internship program I %as attached to the Al&Arafah Islami Bank Limited for one and half months *uring this period I have learned ho% the organi(ation %orks and ho% it manages its credit
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Internship Report
'his report is on the !asis of the course re)uirement of BBA .rogram in the Department of
Business Administration of +tamford ,niversity Bangladesh 'heoretical kno%ledge %ill !e little important unless it is applica!le in practical aspects As some practical experience is re)uired after the completion of BBA program from as part of course re)uirement# I %as assigned to the Al-Arafah Islami Bank Ltd&/e% "lephant Road Branch for 01 %orking days from 2nd 3une 2445 to 2nd August 2445 'he report is prepared on the !asis of 04 days practical experience at Al-Arafah Islami Bank Ltd !AI#$" that helped a lot to learn a!out the practical situation of a financial institution and implement theoretical kno%ledge in corporate %ork environment For a country like Bangladesh the foreign exchange activities are ma6or indicators of national economy 'o o!serve 7 reali(e the movement of foreign exchange I choose the !ank8s foreign exchange department for my internship paper %ith my supervisor8s consent I tried here to analy(e ela!orately the facts related to foreign exchange activities
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Internship Report
IRC L9C LCA LI$ L'R $' /OC OBC .A* .C .I .O .'R +B +O* +'* 'C 'I/ ''
Import registration Certificate Letter of Credit Letter of Credit Authori(ation Loan against Imported $erchandise Loan against 'rust Receipts $ail 'ransfer /o O!6ection Certificate Out%ard Bills for Collection .ayment against *ocuments .acking Credit .erforma Invoice .ay&Order .ayment against 'rust Receipt +avings Bank +ecured Overdraft +hort 'erm *eposit 'raveler8s Che)ue 'ax Identification /um!er 'elegraphic 'ransfer
!.+ ,ethodologies
'o meet the o!6ectives of the study I8ve applied various )ualitative 7 )uantitative techni)ues like statistical tools 7 soft%are and other relevant methods Formal and oral discussion# direct o!servation# )uestioning clients and printed papers of the !ank %ere found useful
Internship Report
;o%ever the !ank %as a tough source of data as they lack of a useful %e!site 7 some excuse of confidentiality
'$ecific #*2ective0
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'o o!serve the foreign exchange operation of AIBL and their services revie% the techni)ues used !y the !ank to make it lucrative
Internship Report
An analysis and discussion of foreign exchange services of the !ank 'o evaluate of the present performance of the !ank regarding foreign exchange 'o search the pro!lems of this !ranch of AIBL *etermining the dra%!acks of the existing foreign exchange system Recommending some guidelines to improve the effectiveness of foreign exchange services
'he financial statements %ere up to 244?# recent data %ere not pu!lished yet $acroeconomic data are also unavaila!le after 244? @ithin such a short period of time# it %as not possi!le for me to study everything a!out Al&Arafah Islami Bank# /e% "lephant Road Branch 'he officers are so much !usy that they cannot properly co&operate %ith me# %hich is a pro!lem Bank8s policy of not disclosing some data and information for o!vious reason# %hich could !e very much useful +ometimes the officials %ere reluctant to give proper information regarding their activities !ecause they felt hesitation and am!iguity to give data and information Lack of personal kno%ledge and experience Lack of a useful %e!site of the !ank
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".% 6o attain the a*ove vision and mission AIBL follow the following
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,arketing 'trategies0
Internship Report
'he main strategy of the !ank is using Islami Banking +ystem to attract its market .roviding efficient customer service $aintaining corporate and !usiness ethics Being trusted repository of customers8 and their financial advices $aking its products superior and re%arding to the customers *isplay team spirit and professionalism +ound capital !ase "nhancement of shareholders %ealth Fulfilling its social commitments !y expanding its charita!le and humanitarian activities .roviding high )uality financial services in export and import trade Building tight personal relationship %ith customers and clients 'aking less promotional activities and emphasi(ing on relationship marketing
'he e)uity of the !ank stood at 'E 24-? million Crore as on -C *ecem!er 244D# the manpo%er are C4-- and num!er of shareholders are C24C-
Internship Report
'he Bank conducts its !usiness on the principles of $usaraka# Bai&mua((al# and hire purchase transactions approved !y Bangladesh Bank /aturally# its modes and operations are su!stantially different from those of other conventional commercial Bank 'here is a +hariah council in the Banks %ho maintains constant vigilance to ensure that the activities of the !ank are !eing conducted on the precepts of Islam 'he +hariah council consists of prominent ,lema# reputed# Bankers# reno%ned la%yers and eminent "conomist
All activities of the !ank are conducted according to Islamic +hariah %here profit is the legal alternative to interest 'he !anks investment policy follo%s different modes approved !y Islamic +hariah !ased on Auran 7 +unnah 'he !ank is committed to%ards esta!lishing %elfare oriented !anking system# economic upliftment of the lo%&income group of people# create employment opportunities According to the needs and demands of the society and the country as a %hole the !ank invests money to different ;alal !usiness 'he !ank participates in different activities aiming at creating 6o!s# implementing development pro6ects taken !y the government and developing infrastructure 'he !ank is committed to esta!lish an economic system through social 6ustice and e)ual distri!ution of %ealth It is committed to !ring a!out changes in the underdeveloped rural areas for ensuring !alanced socioeconomic development of the country through micro credit program According to $udara!a system# the depositors are the partners of the investment income of the !ank *uring the period under revie%# ?4G of the investment income has !een distri!uted among the $udara!a depositors
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'o render improved services to the clients im!ued %ith Islamic spirit of !rotherhood# peace and fraternity and !y developing an institutional cohesion
Internship Report
'he !ank is contri!uting to economic and philanthropic activities side !y side AIBL "nglish $edium $adrasah and AIBL li!rary are among mention %orthy
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Currently the !ank is operating %ith F0 !ranches scattered over the country 'he detailed !ranch name 7 geographical locations are provided !y graph>
Internship Report
'he !ank has a friendly %ork environment %hich is not usual in other commercial !anks ;o%ever the efficiency of the employees 7 a strict corporate protocol is not present in the !ank 'he people in the Bank see themselves as a tight knit team9family that !elieves in %orking
Internship Report
together for gro%th 'he corporate culture has developed has not !een imposedH it has rather !een achieved through their Corporate conduct
'hariah Board0
+hariah Council of AIBL consists of 1 mem!ers speciali(ed in Fi)hul $uamalat :Islamic Commercial La%< according to guidelines given !y the Bangladesh Bank to ensure %hether all !anking operations are transacted in accordance %ith Islami +hariah i e Aur8an# +unnah# I6ma# and I(tihad In the year 244? the +hariah Council has complied various decisions taken !y the council on different matters at different times under the caption IIslami Banking +hariah /itimala :C551& 2440< and prepared a +hariah $anual and pu!lished %hich is first of its kind in Bangladesh +hariah Council advices every!ody concerned to comply %ith +hariah re)uirements and render all out efforts to increase the standard of service rendered to the clients
Internship Report
'he Bank has a Foundation launching philanthropic activities Al&Arafah "nglish $edium $adrasah and Al&Arafah Islami Bank Li!rary are ma6or t%o %ings for launching philanthropic activities
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5roducts
&e'osits
Advances
International +anking
9ons%ltanc)
*iscellaneo%s
F%nd oriented
on-f%nd oriented
!erms B%arantees2 loans2 9lean Letter loans2 ofBills credit. disco%nting2 Pre shi'ment2 Post shi'ment2 Lines of credit- #ec%red2 %nsec%red2 Overdraft.
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'he importance of mo!ili(ations of savings for the economic development of our country can hardly !e over emphasi(ed @e considered savings and deposits as life!lood of the !ank $ore the deposit# greater is the strength of the !ank 'he !ank intends to launch various ne% savings scheme %ith prospect of higher return duly supported !y a %ell&orchestrated system of customer services 'he !ank %ould cater to the credit needs of individuals as %ell as corporate clients Initial it %ill emphasi(e on trade finance# %hich %ould !e short term and self&li)uidating in nature Considering the importance of foreign trade in our national life# financing and handling of export 7 import !usiness and also handling of foreign remittance !usiness %ould !e given top most priority $oreover the !ank operates all of its activities under the rules and regulations of Islamic +hariah 'he services provided !y the Al&Arafah Islami Bank Ltd are given !ello%> &
Bank services
Beneral +anking
9reditGadvance
Foreign exchange
&ifferent acco%nts o'en2 iss%es of &&. !!. PO2 9learing2 F&2 &ifferent #cheme etc.
#O& Beneral loan2 $o%se +%ilding loan2 Lease finance2 $ire '%rchase2 99 h)'o2 #taff loan2 99# etc.
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Figure in ,illion 6k. 'l. =o. 4C 42 44F 41 40 4? 4D 45 C4 C4 CC C2 C/articulars Authori(ed Capital .aid&up Capital Reserve Fund *eposits Investment Import "xport .rofit !efore 'ax and .rovision .rofit after 'ax and .rovision 'otal Assets "arnings per +hare *ividend /um!er of "mployees /um!er of Branches "??( C444 44 1D0 50 FDD 50 C4C4D 2D DC14 C0 5--? F5 -0-5 -F -FD D5 C1F ?0 C2D?F 0C 20 -0 Bonus C1 14G D4F4 "??+ C444 44 0?? 5F 1F2 22 CC0F- 00 CCF?F FC C20-C 04 F5-2 54 1FD 24 202 54 C1--0 D5 -D ?D Bonus 20G ??C FC "??2144 44 D1F 24 D-1 5D C0??1 -C?F2- C5 CDD2C F4 5CF2 ?4 505 ?? F?4 42 2C-0D C0 11 42 Bonus -1G 5C2 F0 "??1 2144 44 CC1- CD C45C 51 2-445 C22540 -? 2?4F2 ?2 C2?CF 5C ?10 CD -F? -C -4CD2 -2 -4 C2 Bonus 24G C4-F0
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".!".! .e$osit
Internship Report
'he total deposit of AIBL is increasing sharply 'he total deposit of !ank %as 'k 2-445 Cmillion at -Cst *ecem!er 244? as against 'k C0??1 -- million at -C st *ecem!er 2440 recording gro%th of -? C0G of %hich 'k 0D1 14 million %as !ank deposit and general deposit %as 22-2- 0- million 'k 'he graph sho%s that the deposit collection rate is dramatically increasing year to year>
".!"." Investment
'he investment of the Bank stood at 'k 22540 -? $illion as on -C st *ecem!er 244? as against 'k C?F2- C5 $illion in the previous year sho%ing an increase !y -C F?G 'he gro%th of Investment from 244F to 244? sho%n graphically# graph sho%s that every year the !ank earns a huge amount of income from Investment account
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'he Bank earned operating profit of 'k ?10 CD million during this year 244? !efore the pre&tax profit of the !ank during the year 2440 %as 'k 505 ?? million and thus the !ank attained negative gro%th of 22 42G in respect of operating profit 'he gro%th of operating profit for the year 244F to 244? graphically given !elo% .olitical unrest# economic recession and many other factors !adly affected they total !anking sector# so that it earn lo%er profit than the previous year PROFIT GROWTH
1000
Million Taka
7 . 6 9 9 . 8 4 3 2 . 8 4 5 8 1 . 6 5 7
500 0
OP R!TI"G PROFIT
2004
2005
Year
2006
2007
".!".( .ividend
'he Bank has !een paying *ividend every year since C55D 6ust after conversion of a pu!lic limited company 'he Board of *irectors of the Bank recommend 24G stock dividend in the year 244?# %hich is lo%er than the previous year !ecause of lo%er operating profit *ividend for different years sho%n !elo% graphically>
$i%i&en& Ra'e
40.00# 30.00#
# $i%i&en&
# 6 2
# 5 3 # 0 . 5 1 # 0 2
$I(I$ "$
2004
2005
2006
Year
2007
".!".+ Ex$ort
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'he total export earnings in 244F %ere 'k -0-5 -F $illion and in 244? it %as 'k C2?CF 5C $illion +o it is seen that the export earnings %as - F5 times in 244? than 244F It is also depicted from the figure
".!".- Im$ort
'he total Import earning in 244F %as 'k 5--? F5 $illion and in 244? it %as 'k 2?4F2 ?2 $illion +o it is seen that the Import earnings %as 2 5 times in 244? than 244F It is also depicted from the figure
>
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'he total num!er of human resources in 244F %as ??C and in 244? it %as C4-- +o num!er of employees in AIBL has increased !y 202 employees from the year 244F to 244?# %hich is sho%n !elo% graphically>
".!".4 Branches
'he total num!er of Branches in 244F %as F4 and in 244? it %as F0 +o num!er of Branches in AIBL has increased !y 0 Branches from the year 244F to 244?# !ut in 244? there %ere no addition of Branches# this is sho%n !elo% graphically>
0 4
1 4
4 6
6 4
-ran./e2
2006
2007
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Chapter 'hree
Industry Overvie%
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"very firms operation is connected %ith the %orld# as a !ank it more affected !y glo!al economy Financial performance# )uality# price etc of =lo!al Competitors +ocio&economic .henomena Foreign "xchange Rate
Internship Report
'he economy of Bangladesh has once again faced a great challenge mainly for the devastating natural and other catastrophes com!ined %ith political uncertainties# a!olition of )uota regime of readymade garments industries# a!normal price&hike of imported commodities including oil posed great challenges for the economies +ide !y side# the inflationary trend across the glo!al economy together %ith the apprehension of sluggish gro%th further deepened the challenge Basic Information0 :urrenc 0 'aka :'k < 3./ at :urrent /rice 0 'k F0?F 5? !illion :,+L 0D 41 !illion< Annual $er ca$ital 3./ 0 ,+L FD2 3./ growth rate at 8!>>+@>-9 constant $rice 0 0 1C percent Agricultural growth rate at constant $rice 0 2 51 percent Industrial@,fg growth rate 8A of 3./9 0 CC C5 percent Large ) ,edium scale Industr 0 CC 10 percent 'mall scale Industr 0 C4 2D percent 'ervice sector growth0 rate of 3./ at current $rice 0 C2 F1 percent Inflation rate 8!" month average9 0 D 01 percent .omestic savings rate of 3./0 24 F0 percent =ational savings rate of 3./0 25 C1 percent Investment rate of 3./0 2F -- percent Ex$orts 8"??--?190 ,+L C2C?? D0 mn Im$orts 8"??--?190 ,+L C?C10 D4 mn 6rade .eficit 0 ,+L F5?D 54 mn Foreign Exchange &eserve 0 ,+L 11CF 04 mn &emittances 0 ,+L -FF? -2 mn Foreign Investment0 .irect0 ,+L 20-mn /ortfolio0 ,+L FD mn Bank rate0 1 4 per cent Broad ,one 8,"90 2224F2 04 crores 6otal =o. of Limited :o. /u*lic Limited :o0 -1#444 /rivate Limited :o.0 2-#444
Foreign exchange activities of AIBL Page14
Internship Report
/rinci$le Industries 0 =arments# .harmaceuticals# 'extiles# .aper# $anufacturing# /e%sprint# Fertili(er# Leather and Leather goods# +ugar# Cement# Fish processing# +teel 7 Chemical industries etc ,a2or ex$ort items0 =arments# 'ea# 3ute# Fro(en shrimps# Leather products# /e%sprint# paper# /aphtha# ,rea# etc /rinci$le im$orts0 Fuel# Rice# @heat# Cotton 7 'extile# .etroleum products# Fertili(er# +taple fi!ers# yarn etc
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Internship Report Bear C55?&C55D C55D&C555 C555&2444 2444&244C 244C&2442 2442&244244-&244F 244F&2441 2441&2440 2440&244? 6otal Ex$ort CDDC- 4F 2-FC0 -D 21F5C C4 2DDCD 12 -FD1D ?F -F-00 CF -?5C1 F1 FFD2? 22 1-2-- 5? ?4?F0 -1 3rowth 4 44G 2F F?G D D0G C- 41G 24 50G &C FCG C4 --G CD 2-G CD ?1G -2 54G
6k in :rore
Bear
Total Export Linear (Total Export)
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'he principal o!6ectives of the export policy are as follo%s N 'o achieve optimum national gro%th through increase of exports to regional and international markets 'o narro% do%n the gap !et%een the country8s export earning and import payment through achievement of the export targets 'o undertake timely steps for production of exporta!le goods at a competitive price %ith a vie% to expand the existing market# 'o take the highest advantage of entering into the post ,ruguay li!erali(ed and glo!ali(es international market 'o make our exporta!le items more attractive to the market through product diversification and )uality improvement 'o esta!lish !ack%ard linkage industries 'o simplify export procedures 'o develop an export infrastructure 'o develop trained human resources in the export sector
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.rovide assistance through developing necessary num!ers of product development councils for increased product of export itemsH .rovide market intelligence to producers and exporters on product demands and prices in markets a!roadH Offer increased institutional facilities through trading and export houses to encourage exportH Offer assistance in esta!lishing seal of )uality organi(ation or similar organi(ations to ensure )uality of export items in re)uired casesH Offer assistance in esta!lishing IBangladesh International Ar!itration CentreK or similar organi(ations for prompt settlement and disposal of 'rade disputesH Offer assistance to producers for development of product designs and use of modern technologyH Offer assistance to ena!le exporters getting ac)uainted %ith the strategies and methods of countries %hich attained remarka!le success in export trading and highlight the exportersH and
Internship Report
Organi(e single country export fair for Bangladeshi products a!road and offer assistance to exporters in participating trade fairs in different countries
Ex$ort Incentives0 Income tax exemption for export earning> ,nder the income tax la% other than the o%ners of factories not registered in Bangladeshi# all exporters %ill get 14G exemptions in their income taxes
"xemption in insurance premium Bond facilities for export oriented industries Facilities for duty free import of capital machineries for export & oriented industries 'he export&oriented industries %ill get the advantage of importing C4 percent spare parts of their capital machineries %ithout duty in every t%o years .roviding alternative facilities to export&oriented local textiles and R$= other than duty&!ond or duty&dra%&!ack 'ax holiday 7 *uty&dra%&!ack scheme
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Foreign exchange is the means and methods !y %hich rights to %ealth in a country's currency are converted into rights to %ealth in another country's currency In !anks %hen %e talk of foreign
Internship Report
exchange# %e refer to the general mechanism !y %hich a !ank converts currency of one country into that of another Foreign "xchange *epartment :F"*< is the international department Bangladesh Bank issues license to scheduled !anks to deal %ith foreign exchange 'hese !anks are kno%n as Authori(ed *ealers If the !ranch is authori(ed dealer in foreign exchange market# it can remit foreign exchange from local country to foreign countries +o AL&ARAFA;&I+LA$I Bank# .rincipal !ranch is an authori(ed dealer 'here are three kinds of foreign exchange transaction> A< Import B< "xport C< Remittance
(." Im$ort
'o import# a person should !e competent to !e and importer According to Import and "xport Control Act# C514# the Office of Chief Controller of Import and "xport provides the registration :IRC< to the importer In an international !usiness environment# !uyers and sellers are generally unkno%n to each other +o seller of goods al%ays seeks security for the payment of his exported goods Bank gives export guarantee that it %ill pay for the goods on !ehalf of the !uyer if the !uyer does not pay 'his guarantee is called Letter of Credit 'hus the contract !et%een importer and exporter is given a legal shape !y the !anker !y 'Letter of Credit
Internship Report
of foreign exchange like medicineH reading materials etc can !e imported %ithout registration !y the users %ithin monetary limit *ocuments to !e re)uired for Import Registration Certificate are as follo%s O Income Registration Certificate /ationality Certificate Certificate from Cham!ers of Commerce and Industry Registered 'rade Association Bank +olvency Certificate Copy of 'rade License Re)uisite fees
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.efinition0 A letter of credit is a letter issued !y a !ank :kno%n as the opening or the issuing !ank< at the instance of its customer :kno%n as the opener< addressed to a person :!eneficiary< undertaking that the !ills dra%n !y the !eneficiary %ill !e duly honored !y it :opening !ank< provided certain conditions mentioned in the letter gave !een complied %ith
;ho a$$lies for L@: It is the !ank %hich opens9issues a L9C on !ehalf of the importer It is the !ank# %hich adds its confirmation to the credit and it# is done at the re)uest of issuing !ank Confirming !ank may or may not !e advising !ank
Advising or =otif ing It is the !ank through %hich the L9C is advised to the exporters 'his Bank !ank is actually situated in exporter's country It may also assume the role of confirming and 9 or negotiating !ank depending upon the condition of the credit =egotiating Bank It is the !ank# %hich negotiates the !ill and pays the amount of the !eneficiary& 'he advising !ank and the negotiating !ank may or may not !e the same +ometimes it can also !e confirming !ank It is the !ank on %hich the !ill %ill !e dra%n :as per condition of the credit< ,sually it is the issuing !ank It is the !ank# %hich %ould reim!urse the negotiating !ank after getting payment & instructions from issuing !ank
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Indenter
Im'orter <B%)er=
9ontract 9 on fir m ati on of LG 9
Ex'orter <#eller=
Iss%e of LG9
Iss%ing Bank
For7ard doc%ments
*akes 'a)ment
Pa)ing +ank
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Pa ) me nt
Pa) men t
Internship Report
For engaging in international trade# even trader must !e first registered %ith the Chief Controller of Import and "xport By paying specified registration fees to the CCI7"& the trader %ill get IRC9"RC :Import9"xport Registration Certificate<# to open L9C %ith !ank# this IRC is must
'te$ " - .etermination terms of credit0 P 'he terms of the letter of credit are depending upon the contract !et%een the importer and exporter 'he terms of the credit specify the amount of credit# name and address of the !eneficiary and opener# tenor of the !ill of exchange&period and mode of shipment and of destination# nature of credit# expiry date name and num!er of sets of shipping documents etc
'te$ % - /ro$osal for #$ening of L@:0 'o have an import LC limit an importer su!mits an application to department to AL& ARAFA;&I+LA$I Bank 'he proposal contains the follo%ing particulars>
Full particulars of the !ank account /ature of !usiness Re)uired amount of limit .ayment terms and conditions =oods to !e imported Offered security Repayment schedule
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'te$ ( - A$$lication * im$orter to the *anker to o$en letter of credit0 P For opening L9C# the importer is re)uired to fill up a prescri!ed application form provided !y the !anker along %ith the follo%ing documents>
C L9C Application form 2 Filled up LCA form - *emand .romissory /ote F pro&forma invoice 1 'ax Identification num!er 0 Import registration certificate
? Authority to de!it account D Filled up amendment re)uest Form 5 I$. form C4 Insurance cover note and money receipt CC $em!ership certificate C2 Rate fluctuation undertaking
'te$ + - #$ening of L@: * the *ank for the o$ener0 P P P 'aking filled up application form from the importer Collects credit report of exporter from exporter's country through his foreign correspondence there Opening !ank then issues credit !y air mail9'"L"Q9+@IF' follo%ed !y L9C advice as asked !y the opener through his foreign correspondent or !ranch as the case may !e# at the place of !eneficiary 'he advising !ank advises the L9C to the !eneficiary on his o%n form %here it is addressed to him or merely hand over the original L9C to the !eneficiary if it is so addressed
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1 A certificate stating that each packet C4 +hipment Certificate contains the description of goods over the packet
'te$ 1 - Lodgment of .ocuments * the o$ening Bank from the negotiating *ank0 After receiving the documents# the opening !anker scrutini(es the documents If any discrepancy found# it informs the importer If importer accepts the fault# then opening !ankers call importer retiring the document At this time many thing can happen 'hese are indicated in the follo%ing>
C .iscre$anc found *ut the im$orter acce$ts & /o pro!lem occurs in lodgment
C .iscre$anc found and im$orter not agreed to acce$t - In this case# importer protest and send !ack all the documents to the exporter and re)uest his to make in the specified manner ;ere !anker is not !ound to pay !ecause the documents send !y exporter is not in accordance %ith the terms of L9C C .ocuments are #D *ut im$orter is willing to retire the documents & In this case !ank is o!ligated to pay the price of exported goods +ince importer did not pay for !ill of exchange# this payment !y !ank is one kind of credit to the importer and this credit in !anking is kno%n as .A*
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C Ever thing is #.D. *ut im$orter fails to clear goods from the $ort and reEuest *ank to clear& In this case !anks clear the goods and takes delivery of the same !y paying customs duty
Internship Report
and sales tax etc +o# this expenditure is de!ited to the importer's account and in !anking it is called LI$
'te$ 4 F &etirement0 'he importer receives the intimation and gives necessary instruction to the !ank for retirement of the import !ills or for the disposal of the shipping document to clear the imported goods from the customs authority 'he importer may instruct the !ank to retire the documents !y de!iting his account %ith the !ank or may ask for L'R :Loan against 'rust Receipt<
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After opening of L9C some time's alteration to the original terms and conditions !ecome necessary 'hese amendments involve changes in> a ,nit price ! "xtension of validity o the L9C c *ocumentary re)uirements etc +uch amendments can !e affected only if all the concerned parties agree i e the !eneficiary# the importer# the issuing !ank and the advising !ank For any amendment the importer must re)uest the issuing !ank in %riting duly supported !y revised indent9proforma invoice 'he issuing !ank then advises the re)uired amendment to the advising !ank L9C amendment commission including postage is charged to the clients A9C
Loan against 6rust &ecei$ts 8L6&9 Advance against a 'rust Receipt o!tained from the Customers are allo%ed to only first class tested parties %hen the documents covering an import shipment or other goods pledged to the Bank as security are given @ithout payment ;o%ever# for such advances prior permission9sanction from ;ead Office must !e o!tained 'he customer holds the goods or their sale&proceeds in trust for the Bank# till such time# the loan allo%ed against the 'rust Receipts is fully paid off 'he 'rust Receipt is a document that creates the Banker's ;en on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien
Loan against Im$orted ,erchandise 8LI,9 Advance :Loan< against the security of merchandise imported through the Bank may !e allo%ed either on pledge or hypothecation# of goods# retaining margin prescri!ed or their Landed Cost# depending on their categories and Credit Restriction imposed !y the Bangladesh Bank Bank shall also o!tain a letter of undertaking and indemnity from the parties# !efore getting the goods cleared through LI$ Account
Page14 Foreign exchange activities of AIBL
Internship Report
'his is the most sensitive task of the Import *epartment the officials have to !e very much careful %hile making payment 'his task constitutes the follo%ing>
.ate of /a ment ,sually payment is made %ithin seven days after the documents have !een received If the payment is !ecome deferred# the negotiating !ank may claim interest for making delay
/re$aring 'ale ,emo A sale memo is made at B C rate to the customer As the ' ' 7 O * rate is paid to the I*# the difference !et%een these t%o rates is exchange trading Finally# an Inter Branch "xchange 'rading Credit Advice is sent to I*
&eEuisition for the Foreign :urrenc For arranging necessary fund for payment a re)uisition is sent to the International *epartment
6ransmission of ,essage $essage is transmitted to the correspondent !ank ensuring that payment is !eing made
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(.% Ex$ort
Gnderstanding 'he goods and services sold !y Bangladesh to foreign households# !usinessmen and =overnment are called export 'he export trade of the country is regulated !y the Imports and "xports :control< Act# C514 'here are a num!er of formalities# %hich an exporter has to fulfill !efore and after shipment of goods 'he exports from Bangladesh are su!6ect to export trade control exercised !y the $inistry Of Commerce through Chief Controller of Imports and "xports :CC 7 "< /o exporter is allo%ed to export any commodity permissi!le for export from Bangladesh unless he is registered %ith CCR 7 " and holds valid "xport Registration Certificate :"RC< 'he "RC is re)uired to !e rene%ed every year 'he "RC num!er is to !e incorporated on "Q. forms and other documents connected %ith exports 'he formalities and procedure are enumerated as follo%s> !. #*taining ex$orts L:0 'o get export LC form exporter issued !y the importer ". 'u*mission of ex$ort documents0 "xporter has to su!mit all necessary documents to the collecting !ank after shipping of goods %. :hecking of ex$ort documents0 After getting the documents !anker used to check the documents as per LC terms (. =egotiation of ex$ort documents0 If the !ank accepts the document and pays the value draft to the exporter and for%ard the document to issuing !ank that is called a negotiating !ank If the !ank does !uy the LC then the !ank normally acts as collecting !ank +. &ealiHation of $roceeds0 'his is the period %hen the issuing !ank has reali(ed the payment -. &e$orting to the Bangladesh *ank0 As per instruction !y Bangladesh !ank the !ank has to report to respective department of Bangladesh !ank !y mentioning latest payment 1. Issue to $roceeds realiHation certificate 8/&:90 Bank has to issue proceeds reali(ation certificate of export LC to the supplier 9 exporter for getting cash assistance
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As an advising *ank It receives documents from the foreign importer and hands it over to the exporter +ometimes it adds confirmation on the L9C on re)uest from the Opening Bank By adding confirmation# it assumes the responsi!ility to make payment to the exporter
As =egotiating Bank It negotiates the !ills and other shipping documents in favor of the exporter 'hat is S it collects the proceeds of the export&!ill from the dra%er and credits the exporter's account for the same Collection proceed from the export !ill is deposited in the !ank's /O+'RO account in the importer's country +ometimes the !ank purchases the !ills at discount and %aits till maturity of the !ill @hen the !ill matures# !ank presents it to the dra%er to encash it In our country "xport and Import operation of !ank is very much related %ith one another !ecause of use of Back to Back and maturity of payment for Back&to&Back L9C is set in such that it can !e paid out of export proceeds
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.ocuments &eEuired for #$ening a Back-to-*ack L@:0 In AL&ARAFA;&I+LA$I Bank .rincipal Branch# follo%ing papers9 documents are re)uired for opening a !ack&to&!ack L/CC $aster L9C 2 Jalid Import Registration Certificate :IRC< and "xport Registration Certificate :"RC<
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- L9C Application and LCAF duly filled in and signed F .roforma Invoice or Indent 1 Insurance Cover /ote %ith money receipt 0 I$. Form duly signed In addition to the a!ove documents# the follo%ings are also re)uired to export oriented garment industries %hile re)uesting for opening a !ack&to&!ack L9C & C 2 'extile .ermission Jalid Bonded @arehouse License
Auota Allocation Letter issued !y the "xport .romotion Bureau :".B< in favor of the applicant for )uota items
:heck list of ex$ort L@: Follo%ing defective points are usually found in the $aster L9C +o# these points are so much carefully checked !y the !ank officials 'hese are> C /ame of the Advising Bank 2. /ame of 'ransferring Bank - Form of *oc credit> P /ame of Issuing Bank P *ocumentary Credit /o And issuing date P *ate of shipment P "xpiry date and place F 1 0 ? D Applicant9 for order of9 On Account Beneficiary9 Favoring Amount Availa!ility of Credit .artial shipment9 'ransshipment
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Internship Report
C4 Category CC *escription of goods> P Item P 'otal Aty P ,nit price C2 B9L Clause C- Reim!ursement clause CF ,C.*C Clause C1 /et FOB value
/a ment of *ack to *ack L@:0 In case !ack to !ack as 04&54&C24&CD4 days of maturity period# deferred payment is made .ayment is given after reali(ing export proceeds from the L9C issuing !ank
L@: under E#F0 P "xporter development Fund is created !y Bangladesh Bank to give encourages to the exporter in Bangladesh P =enerally Back&to&Back L9C is ,sance L9C that is here !ill of exchange is paya!le after some maturity date say 54 or C24 days after the date of acceptance9negotiation But some foreign seller may re)uire sight payment ;ere import L9C matures first In that case Bangladesh Bank gives the fund to the !ank to pay the price of imported goods in favor of the local purchaser of ra% materials @hen export proceeds come# first Bangladesh Bank loan to the importer is ad6usted and remaining part goes to the importer of ra% materials
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Internship Report
/resentation of ex$ort documents for negotiation@ /urchase0 After shipment exporter su!mits the follo%ing documents to AL&ARAFA;&I+LA$I Bank for negotiation
Page14 Foreign exchange activities of AIBL
P Bill of exchange
Internship Report
P Bill of Lading P Invoice P Insurance .olicy9Certificate P Certificate of Origin P Inspection Certificate P Consular Invoice P .acking List P Auality Control Certificate P = + . certificate
Foreign documentar *ills for collection 8F/B:90 Al&Arafah Islami Bank for%ards the documents for collection due to the follo%ing reasons# U If the documents have discrepancies U If the exporter is a ne% client F*BC signifies that the exporter %ill receive payment only %hen the issuing !ank gives payment AL&ARAFA;&I+LA$I Bank make regular follo%&up %ith the L9C opening Bank in case of any delay in getting payment
'ettlement of Local Bills0 C 'he settlement of local !ills is done in the follo%ing %ays &
2 'he customer su!mits the L9C to AL&ARAFA;&I+LA$I Bank along %ith the documents to negotiate
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- AL&ARAF;&I+LA$I Bank official scrutini(es the documents to ensure the conformity VVith the terms and conditions
Internship Report
F 1
'he documents are then for%arded to the L9C opening !ank 'he L9C issuing !ank gives the acceptance and for%ards an acceptance letter
0 .ayment is given to the customer on either !y collection !asis or !y purchasing the document
,ode of $a ment of ex$ort *ill under L@:0 As per ,C.*C 144# C55- revision there are four types of credit 'hese are as follo%sH U 'ight /a ment :redit0 In a +ight .ayment Credit the !ank pays the stipulated sum immediately against the exporter's presentation of the documents I A .eferred $a ment :redit0 In deferred payment# the !ank agrees to pay on a specified future date or event# after presentation of the export documents /o !ill of exchange is involved .ayment is given to the party at the rate of * A 04&54&C24&CD4 as the case may !e But the ;ead office is paid at ' ' clean rate 'he difference !et%een the t%o rates us the exchange trading for the !ranch U Acce$tance credit0 In acceptance credit# the exporter presents a !ill of exchange paya!le to him and dra%n at the agreed tenor :that is# on a specified future date or event< on the !ank that is to accept it 'he !ank signs its acceptance on the !ill and returns it to the exporter 'he exporter can then represent it for payment on maturity Alternatively he can discount it in order to o!tain immediate payment I =egotiation :redit0 In /egotiation credit# the exporter has to present a !ill of exchange paya!le to him in addition to other documents that the !ank negotiates
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Internship Report
transactions the foreign currencies are like am other commodities offered for sales and purchase# the cost :convention value< !eing paid !y the !uyer in home currency# the legal tender
Inward Foreign &emittance0 In%ard remittance covers purchase of foreign currency in the form of foreign ' ' # * *# and !ills# ' C etc sent from a!road favoring a !eneficiary in Bangladesh .urchase of foreign exchange is to !e reported to "xchange control *epartment of Bangladesh !ank on Form&C #utward Foreign &emittance0 Out%ard remittance covers sales of foreign currency through issuing foreign ' ' *rafts# 'ravelers Check etc as %ell as sell of foreign exchange under L9C and against import !ills retired ;orking of this de$artment C 2 F 1 0 Issuance of 'C# Cash *ollar 9.ound Issuance of F**# F'' 7 purchasing# .ayment of the same .assport endorsement "ncashment certificate&
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F9C Account opening 7filing Opening of "xport FC retention Auota A9C7 maintain
Internship Report
? D 5
$aintenance of ledger of Cash *ollar# FC *eposit A9C 7 'C $aintain FBC register 7follo% up FBC Opening of +tudent file 7$aintain
C4 .reparation of all related statement# Joucher 7 posting CC .reparation of @eekly# $onthly Bearly +tatement for Bangladesh Bank return timely C2 Attending all related correspondence to other Bank or Institutions ,odes0 'he remittance process involves the follo%ing four modes Cash +ell Remittance *ollar9 .ound Bank sells *ollar 9 .ound for using in a!road !y the purchaser 'he maximum amount of such sell is mentioned in the Bangladesh Bank pu!lication of 'Converti!ility of 'aka for Currency 'ransactions in Bangladesh8
.urchase
Bank can purchase dollar from resident and non & resident Bangladeshi and Foreigner $ost dollars purchased comes from reali(ation of "xport Bill of "xchange
'raveler's Che)ue
Issue of 'C 'C is useful to traveler a!road Customers can encase the 'C in a!road from the dra%ee !ank 'C is alternative to holding cash and it provides !etter security than holding cash in hand
Buying of If any unused leaf of 'C is surrendered !ank !uys it from the customer 'C All payments are made in local currency Banks generally !uy only those 'C 'elex 'ransfer Out%ard '' It remits fund !y tested '' via its foreign correspondence !ank in %hich it is maintaining its /O+'RO Account
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It also makes payment according to telegraphic message of its Incoming foreign correspondence !ank from the corresponding JO+'RO Account Foreign *emand *raft Bank issue *emand *raft in favor of purchaser or any other according to# instruction of purchaser 'he payee can collect it for the dra%er !ank in %hich the Issuing !ank of *emand *raft holds its /O+'RO Account Bank also makes payment on ** dra%n on this !ank !y its foreign correspondence !ank through the JO+'RO Account
In these processes of remittance# !ank must have to make profit as a !usiness institution .rofit is made in t%o %ays> C 2 Commission charged *ifference in the !uying and selling rate
'tudent File0 +tudents %ho are desirous to study a!road can open file in the Bank By opening this file# !ank assures the remittance of funds in a!road for study
F.: Accounts> Foreign Currency Accounts opened in the names of Bangladeshi nationals or persons of Bangladeshi origin %orking or self &employed a!road can no% are maintained as long as the account holders desires
&F:.0 +tands for Resident Foreign Currency Accounts .ersonsT ordinary resident in Bangladesh may maintain foreign currency accounts %ith foreign exchange !rought in at a!road Balance of such accounts is freely remitta!le a!road
Page14 Foreign exchange activities of AIBL
Internship Report
Formalities for o$ening foreign currenc 8F:9 Account0 'he A* may %ithout prior approval of the Bangladesh Bank open Foreign Currency :FC< account in the name of> C 2 Bangladesh national residing a!road Foreign nationals residing a!road9 in Bangladesh and also foreign firms
- Registered a!road and operating in Bangladesh and a!stract foreign missions and their expatriate employees F Resident of Bangladesh nationals %orking %ith the foreign 9 international organi(ation operating in Bangladesh provided their salary in paid in foreign currency Foreign exchange earned through !usiness doves or service rendered in Bangladesh cannot !e put into these accounts /o payment in foreign currency :FC< may !e made to any resident in Bangladesh out of the foreign currency :FC< account All citi(ens of Bangladesh and other persons are residing to Bangladesh %ho !ecame the o%ner of any foreign currency :FC< /a$ers reEuired0 Application duly !illed in and signed .hotograph :t%o copies< .assport photocopy @ork permit from !oard investment :In case of foreign nationals<
Internship Report
F< &isk of frauds in goods0 Contracted to !uy cement !ut got sand 'he a!ove risks trade common to inland trade as also the foreign trade 'here are some risk %hich are peculiar to foreign exchange !usiness 1< Exchange risk0 "xchange of currencies can cause loss to some parties N seller or !uyer due to the inherent risk of exchange rate fluctuation 0< Failure of foreign *anks0 It may !e possi!le that the foreign !ank may not !e a!le to pay the e)uivalent due to !ank failures ?< 'udden changes in $olicies0 'his is referred to as political risk "xchange control regulation# import export policies and trade regulation are changed overnight %hich %ill put the parties in difficulties
Chapter Five
Foreign "xchange .erformance Analysis
Page14 Foreign exchange activities of AIBL
Internship Report
;ere is a sum of historical performance of AIBL> Figure in ,illion 6k. 'l. =o. 4C 42 44F 41 40 4? 4D 45 C4 C4 CC C2 /articulars Authori(ed Capital .aid&up Capital Reserve Fund *eposits Investment Import "xport .rofit !efore 'ax and .rovision .rofit after 'ax and .rovision 'otal Assets "arnings per +hare *ividend /um!er of "mployees "??( C444 44 1D0 50 FDD 50 C4C4D 2D DC14 C0 5--? F5 -0-5 -F -FD D5 C1F ?0 C2D?F 0C 20 -0 Bonus C1 14G D4"??+ C444 44 0?? 5F 1F2 22 CC0F- 00 CCF?F FC C20-C 04 F5-2 54 1FD 24 202 54 C1--0 D5 -D ?D Bonus 20G ??C "??2144 44 D1F 24 D-1 5D C0??1 -C?F2- C5 CDD2C F4 5CF2 ?4 505 ?? F?4 42 2C-0D C0 11 42 Bonus -1G 5C2 "??1 2144 44 CC1- CD C45C 51 2-445 C22540 -? 2?4F2 ?2 C2?CF 5C ?10 CD -F? -C -4CD2 -2 -4 C2 Bonus 24G C4-Page14
Internship Report
C-
/um!er of Branches
F4
FC
F0
F0
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Internship Report
+ponsor9*irector F5 CC
=ovt 4
Institute 4
Foreign 4
.u!lic 14 D5
".+ 7 /AJ of 2440 is derived from company's ne%ly ad6usted Face Jalue
Address of the :om$an 0 Address> Rahman $ansion# C0C# $oti6heel# C9A# *haka & C444 Contact .hone> Fax> "mail9@e! Address> :DD42< ?C2-211&? DD & 42 & 5105-1C %%% al&arafah com
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Internship Report
:omments0 In the a!ove ta!le %e see that the gro%th in foreign exchange sector is negative !oth in the selective !anks 7 AIBL at "??+ ) "??4 +o %e can say that the macroeconomic varia!les like political turmoil# glo!al economic situations are responsi!le factors for the do%nturn
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:omments0 ;ere %e see that a deep do%nturn in the year 2441 7 244D 'his is !ecause of political 7 other macroeconomic varia!les
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:omments0
Foreign exchange activities of AIBL
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"xport operation of AIBL is significantly lo%er than other counterparts !ut consistent %ith the ups 7 do%ns
:omments0 Import operation of AIBL is also significantly lo%er than other counterparts !ut consistent %ith the ups 7 do%ns
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:omments0 Remittance operation of AIBL is significantly lo%er than other counterparts and inconsistent %ith the ups 7 do%ns 'hey are much %eaker in the remittance !usiness
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=ote0 Comparison !et%een AIBL 7 individual category %ise !anks are given in appendixC
6ax
and
,odel C
& 00C:a<
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Anova 8*9
,odel C
df C 2 -
F C 114
'ig. --5:a<
a< .redictors> :Constant<# Import !< *ependent Jaria!le> .rofit :oefficients 8a9
$odel C :Constant< Import ,nstandardi(ed Coefficients B CC? C00 4CC +td "rror C01 0C5 445 +tandardi(ed Coefficients Beta 00C ?4? C 2F1 11--5 t +ig
Inter$retation0 By coefficient of correlation :R<# %e can measure association !et%een export and profit after tax or import and profit after tax Basically it provides the direction either positive or negative of the correlation 'he advantage of the coefficient of correlation is that it provides a measure of the strength of the correlation 7 it gives the true direction of the correlation :W or &< !ut only the s)uare root of the strength of the correlation As %e kno%# the value -! represents a perfect negative correlation that means %hen one increases# the other decreases in exactly the same proportion 'he value K! represents %hen one increases# the other increases in exactly the same proportion 'he value ? represents a lack of correlation ;ere correlation coefficient (R) of import & profit is '.))* 'his clearly indicated the movement direction of the t%o varia!les R of import is ?.--! %hich is moderately positively correlated says that If import !usiness increases 6k. ! then profit after tax %ill !e increased !y 6k. ?.-Page14
R2 value of 4 F-? indicates that a!out F- ?G of variations in the AIBL8s profits can !e explained !y its import operations Finally the results are significant at -- 5 G significance level
Foreign exchange activities of AIBL
Internship Report
$odel C
R ?CC:a<
R +)uare 140
Anova 8*9
+um of +)uares 205C4 --F 202D0 FC0 1-C50 ?14
$odel C
df C 2 -
F 2 4F?
+ig 2D5:a<
:oefficients 8a9
$odel C :Constant< "xport ,nstandardi(ed Coefficients B C-F 15C 42+td "rror C-F 1-0 4C0 +tandardi(ed Coefficients Beta ?CC C 444 C F-C F22 2D5 t +ig
Inter$retation0 R of export is ?.1!! %hich is moderately positively correlated says that If import !usiness increases 6k. ! then profit after tax %ill !e increased !y 6k. ?.1! R2 value of 4 140 indicates that a!out 14 0G of variations in the AIBL8s profits can !e explained !y its export operations Finally the results are significant at 2D 5 G significance level
Page14 Foreign exchange activities of AIBL
Internship Report
$odel C
R D1F:a<
R +)uare ?25
$odel C
df 2 C -
F C -F?
+ig 124:a<
:oefficients 8a9
$odel C :Constant< "xport Import ,nstandardi(ed Coefficients B -1F ?-2 C?1 & 4DC +td "rror 2D4 --0 C05 454 +tandardi(ed Coefficients Beta 1 FF&F ?11 C 201 C 4F4 & 54D F20 FDD 1-C t +ig
Inter$retation0 R of export is ?.4+( %hich is moderately positively correlated says that If import 7 export !usiness increases 6k. ! then profit after tax %ill !e increased !y 6k. ?.4+ R2 value of ?.1"> indicates that a!out 1".>A of variations in the AIBL8s profits can !e explained !y its com!ined operations of import 7 export Finally the results are significant at +" A significance level
Page14 Foreign exchange activities of AIBL
Internship Report
"??( Im$ort 5--? Ex$ort -0-5 /rofit after 6ax C11 and /rovision
"??CDD2C 5CFF?4
:5 F1 5G 1F FG
:Amount in Crore< :orrelaton8Im$ortJ /rofit9 :orrelation8Ex$ortJ /rofit9 Average8Im$ort9 Average8Ex$ort9 ?.--!4?"1 4 ?C2C01? C051D ?04?
Inter$retation0 +ta!ility in foreign exchange !usiness is influenced !y several international and domestic factors Factors that influenced in foreign exchange !usinesses are N exchange rate# !argaining po%er of exporter and importer# country8s political distur!ance# competitiveness of !anking sector and other macro economic factors For measuring sta!ility of export and import !usiness of "QI$ Bank# %e have calculated +tandard deviation :+*< and Coefficient of variation :CJ< %hich is relative measures of standard deviation ;ere %e see#
+tandard deviation in import !usiness of AIBL is 'k ??DD C41 millions and Coefficient of Jariation is F1 5G On the other hand export !usiness standard deviation is 'k FC-0 5C? millions %ith CJ of 1F FG +o %e can say that the export import operation is not sta!le for the !ank at a satisfactory level
Page14 Foreign exchange activities of AIBL
Internship Report
Lack of latest or improved technologies and skilled manpo%er for operating foreign exchange !usiness Lack of sophisticated soft%are for Islamic !anking solution is a great pro!lem in modern !anking era Lack of legal Islamic frame%ork for conducting foreign exchange !usiness In conventional !anking system foreign currency is considered as goods not as currency and its value fluctuate continuously %hich is not in accordance %ith Islami frame%ork
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*ue to a!sence of =overnment +hariah !oard# many aspect of Islamic financing techni)ue remains unsolved such as in case of delay of payment of post import
Internship Report
Banks deal %ith documents not %ith goods But according to Islam# !ank should deal %ith goods +o# today8s !anking system is contradictory to Islami +hariah AIBL cannot sho% the interest as income received from /ostro A9C %hich means Local Bank8s account %ith a Foreign Bank For reserving funds at /ostro A9C# foreign !anks give - to 1G interest for using this currency Because interest is strictly prohi!ited in Islam# AIBL don8t take it rather it is contri!uted to the Ban !oundation Back%ard linkage is a pro!lem for foreign exchange !usiness %hich is related to !ack to !ack L9C Back%ard linkage refers to those small industries that support the large industry
'here are some critics regarding most of these saying that it8s not !ut a flattery ;ere %e can see some critics of Islamic Banking system>
'hough the popularity not%ithstanding# critics of Islamic economics have not !een
sparing It has !een attacked for its alleged Tincoherence# incompleteness# impracticality# and irrelevanceHK driven !y Tcultural identityT rather than pro!lem solving Others have dismissed it as Ta hodgepodge of populist and socialist ideas#T in theory and Tnothing more than inefficient state control of the economy and some almost e)ually ineffective redistri!ution policies#T in practice
Page14 Foreign exchange activities of AIBL
Internship Report In a political and regional context %here Islamist and ulema claim to have an opinion
a!out everything# it is striking ho% little they have to say a!out this most central of human activities# !eyond repetitious pieties a!out ho% their model is neither capitalist nor socialist +o far %ithstanding critic of the Islamic financial practice pertains to its product8s structure Interest&!earing :Ri!a< and speculation&involving :=harar< trading are clearly prohi!ited !y explicit canonical texts .resuma!ly all the financial structures of all the Islamic products should !e interest and speculation free /evertheless# some ne% empirical studies hypothesi(e that IIslamic finance products8 structure is !ased on the Islamic prohi!itionsH ho%ever# these products8 risk management is still !ased on revoking the underlying prohi!itionsK 'he most prominent case here is Islamic financial market products such as# inter alia# +alam and Istisna8 these products are used are hedging methods for the Islamic !onds +ukuk 'here have !een some innovations that try to avoid falling in interest&!ased and9or speculation !ased transactions .arallel +alam and synthetics are the most recent In Bangladesh# many allegations have !een dra%n on Islami +haraih !ased !anks8 activities like funds 'here are several foundations like I Islami Bank FoundationK has severe allegations of exploiting money in political purposes in the name of "elfare pro#ects or corporate social responsi$ilit%.
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'he study of Al&Arafah Islami Bank Ltd8s foreign exchange activities has revealed the follo%ing a!out the !ank&
Internship Report
'he !ank is performing in the !ottom&line compared to its competitors 'hey haven8t developed any A'$ 7 Online services %hich is the main reason for customers8 dissatisfaction to the !ank Foreign remittance inflo%s 7 outflo%s are very poor compared to other selected !anks
'he !ank has a !iasness in ;R* %hich un%elcome female %orkforce in the !ank 'he employees of the !ank lack of skills 7 excellence !ecause of recruiting system8s insta!ility 7 lack of transparency 'he soft%are that the !ank is using is very unsophisticated 7 hampers operations very often 'he !ank normally target the lo%er segment of the market 7 those %ho are not used to sophisticated !anking service !ecause of illiteracy 'he !ank is heavily depended on deposit schemes for doing !usiness 'he I' infrastructure is not satisfactoryH they don8t have a usa!le %e!site In foreign exchange department it is re)uired to communicate %ith foreign !anks fre)uently and )uickly 'o make the process easy modem communication media for example e&mail# Fax and %in fax# Internet etc should !e used more fre)uently But the !ank doesn't have mass use of this medium of communication In some cases the num!er of employee engaged in rendering specific services is insufficient "mployees are exposed to customer excessively %hich is an o!stacle in systematic and prompt service
Although the deposit 7 investment sectors are !eyond the scope of our analysis# I further revie%ed the performances in these sectors !riefly 'he study revealed that
Internship Report
'he !ank is heavily concentrating on various deposit schemes as they have a strategic advantage over the conventional commercial !anks !ecause of Islami +hariah #ased #an,in-. @ith the deposit scheme !usiness the !ank can invest the funds at a higher rate %hereas they pay a lo%er percentage of return compared to the conventional !anks 'he religious aspects of our local customers are also helpful to the !ank to accumulate a huge amount of funds as $uslims are religiously avoiding to take interest rather profit sharing to their vie% 'heir market segment is also an important factor %hich covers the lo%&end customers %ho are not usual in other conventional !anks
.e$osit0
'he total deposit of AIBL is increasing sharply 'he total deposit of !ank %as 'k 2-445 Cmillion at -Cst *ecem!er 244? as against 'k C0??1 -- million at -C st *ecem!er 2440 recording gro%th of -? C0G of %hich 'k 0D1 14 million %as !ank deposit and general deposit %as 22-2- 0- million 'k 'he graph sho%s that the deposit collection rate is dramatically increasing year to year>
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Investment
Internship Report
'he investment of the Bank stood at 'k 22540 -? $illion as on -C st *ecem!er 244? as against 'k C?F2- C5 $illion in the previous year sho%ing an increase !y -C F?G 'he gro%th of Investment from 244F to 244? sho%n graphically# graph sho%s that every year the !ank earns a huge amount of income from Investment account
Investment Growth
Million Taka 20000 10000 0 2004 2005 Year 2006 2007
9 . 3 2 4 7 1
7 3 . 6 0 9 2
30000
#$erating /rofit
'he Bank earned operating profit of 'k ?10 CD million during this year 244? !efore the pre&tax profit of the !ank during the year 2440 %as 'k 505 ?? million and thus the !ank attained negative gro%th of 22 42G in respect of operating profit 'he gro%th of operating profit for the year 244F to 244? is graphically given !elo% .olitical unrest# economic recession and many other factors !adly affected they total !anking sector# so that it earn lo%er profit than the previous year PROFIT GROWTH 8 1 . 6 5 7
1000
6 . 0 5 1 8
INVE S TME NT
. 7 4 1 2 . 8 4 5 7 . 6 9
Million Taka
500
9 . 8 4 3
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3eneral *anking o$erations 'he starting point of all the !anking operations is =eneral Banking It is an important department for all !anks !ecause it provides services to the customers day&to&day Front *esk is the important for general !anking Customers give their deposits and meet their demand for cash !y honoring Che)ues 'he customer opens ne% accounts# remit funds# issues !ank drafts and pay orders etc 'here are various sections in this department# %hich are as follo%s> & C< Cash +ection 2< Accounts Opening +ection -< Che)ue Clearing +ection F< Remittance +ection A detailed operation of general !anking division is given in the appendix2
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C42 FD 0? F 04 D5 Investment Achieved 2C CC C? ?5 C? ?4 Ex$ort Achieved 25 & & Im$ort Achieved 24 40 C2 1 CF C5 /rofit Earned C C5 -0 2 442
0D -2G 0? F4G C4C 14G Achieved in /ercentage F2 22G FF 22G CC4 01G Achieved in /ercentage CFD 1-G & & Achieved in /ercentage C44 -CG FC ?G 5F 0FG Earned in /ercentage CC 50G C4- CFG C44 C4G
14 F4 C0 Ex$ort 6arget
24 -4 C1 /rofit 6arget
C4 -1 2
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Chapter +ix
.erformance of AIBL
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Internship Report /ro$ert ) Assets :ash In hand :including foreign currency< Balance %ith central !ank 7 other !anks %4!J1--J(%+ C#0-?#FF-#2FF "J?!>J"?>J-1> Balance with other *anks and financial institution In Bangladesh Outside Bangladesh 2#F-?#DFC#CF5 2F1#CF2#FD1 "J-4"J>4%J-%( ,one at call ) short notice Investment in share and +ecurities =ovt Others Investments =eneral Investment etc Bills .urchased 7 *iscount 2C#CC0#-5F#500 C#?D5#5?2#50F ""J>?-J%-1J>%? /remises ) fixed assets Others assets /on Banking Asset 6otal assets --F#F?0#F04 C#-?4#?42#-C? &&&&&& %?J!4"J%"%J(?C1#1?C#?00#-14 C#D1C#F2-#FCC !1J("%J!4>J1-! 2C1#C41#01C 1442F-1-&&&&&& "!J%-4J!-4J!(" &&&&&& 4-4J+4%J%4D44#444#444 0D#1D-#-D0 C#44C#D25#D0? 2F#0C0#545 !J?"-J((-J11&&&&&& "J???J??? &&&&&& 2#444#444 "%"J?44J-4" C#12-#-0-#510 !J1++J(+"J-%4 "??1 "??-
Lia*ilities ) :a$ital
"??1
"??-
Borrowing
from
other
*anks
financial
!J%"?J???J???
&&&&&&
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Lia*ilities0
.e$osits ) other Accounts Al&@adia Current Account $udara!a +aving deposit $udara!a +hort notice deposits $udara!a 'erm deposit $udara!a +pecial deposits -#45?#540#51-#5-2#22?#C?4 ?0C#?00#?DC CC#2--#15C#C2? -#025#1-5#202#FF-#C5D#FD0 -#-5-#DD5#242 FD5#F1-#C-F ?#D?F#52?#D22 2#-??#2-1#255
Bills .aya!le
-1F#450#55"%J??>J!"4J"41
Others Lia!ilities 'otal Lia!ilities :a$ital shareholders eEuit > .aid up capital Asset Revaluation Reserve +tatutory reserves "xchange ")uali(ation Retain "arning 6otal share holder eEuit 6otal lia*ilities ) shareholder eEuit
-#DC1#050#0F5 "4J!((J4"(J>%-
Internship Report
Commission# exchange 7 !rokerage Income from Investment in +hare 9+ecurities Other operating Income
-1F#--4#-CF &&&&& CC0#?1F#51C (1!J?4+J"-+ !J%+"J1-1J>+1 21-#40F#F11 -#D?5#D4F F4#-12#C41 2#?CC#055 C-#15?#2C4 C44#444 C1#D40#02D 2#044#444 5#115#D?1 FC#-20#F51 %4"J>>4J"1! >->J1->J-4CCF#-44#444 &&&&& !!(J%??J??? 4++J(->J-4-DF#42-#524 C#F2?#-04 %4+J(+!J"4? (1?J?!4J(?1 ??#12Page14
6otal o$erating Income +alaries 7 allo%ances *irectors and +haria Council fees and expenses Rent# taxes# insurance# lighting 7 traveling Legal expenses .ostage# stamp# telegram 7 telephone Auditors8 fee *epreciation and Repairs +alary 7 Allo%ance to the $anaging *irector +tationery# printing 7 advertisement Other expense 6otal #$erating Ex$enses /rofit *efore 6ax and $rovision .rovision Lia!ilities against Investment and Contingent
!J%"-J>4?J+-1 F44#FC5#412 1#-0-#0C2 00#-D5#F04 1#C24#521 C1#54F#-FC 244444 C5#0??#401 F#-44#444 C-#C2?#41F F4#25D#?01 +1?J4??J"1% 1+-J!4?J">( C?-#--0#0-0 &&&&& !1%J%%-J-%+4"J4(%J-+4 -1F#FDF#2FF :CCD#51F#?12< "%+J+">J(>" %(1J%!(J!--4#15-
Other .rovision 6otal $rovision .rofit9Loss !efore tax Current tax *eferred 'ax /rovision for 6axation =et /rofit@Loss after tax Retained .rofit !rought for%ard
+tatutory Reserve
CC0#10D#?-2 !!-J+-4J1%"
"%?J11-J?"1 %?.!"
/articulars Authori(ed Capital .aid up Capital /et .rofit After tax +hareholders8 e)uity *eposits Investments Fixed Assets
Internship Report
"xposure "arnings .er +hare :".+< $arket Jalue .er +hare .rice "arnings Ratio Book Jalue .er +hare Return On Asset :ROA< Return On ")uity :RO"< Return On Investment :ROI<
"??+
"??(
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"arnings per share has !een calculated in accordance %ith BA+&--> I"arning per +hare :".+<K ,arket 5alue $er share 8"??49 M -#-5- ?1 'aka
-J???.?? +J???.?? (J???.?? %J???.?? "J???.?? !J???.?? ?.?? "??4 "??1 "??"??+ "??( "??%
Fig
ure".-
"??? !4?? !-?? !(?? !"?? !??? 4?? -?? (?? "?? ? "??4 "??1 "??"??+ "??( "??%
/rice Earnings &atio 8"??49 M :.rice of +tock 9 ".+< M :FD1F ?19C42 10<
Page14 Foreign exchange activities of AIBL
Internship Report
M 2- DC
&eturn #n Asset
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&eturn on EEuit 8"??49 M :/et profit9 'otal +hare ;olders ")uity< M :F45#1-1#11?92#F1-#11?#C10< M -4 D0G
?.!4 ?.!?.!( ?.!" ?.! ?.?4 ?.??.?( ?.?" ? "??4 "??1 "??"??+
&#E
"??(
"??%
&eturn on Investment 8"??49 M :Income from Investment9'otal Investment< M :524# D--C5F - 9 CF# F11# ?D4C-F< M ? FDG
4.??A 1.??A -.??A +.??A (.??A %.??A ".??A !.??A ?.??A "??4 "??1
&#I
"??-
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!J"??.?? !J???.?? 4??.?? -??.?? (??.?? "??.?? ?.?? "??4 "??1 "??"??+ "??( "??%
%??? "+?? "??? !+?? !??? +?? ? "??4 "??1 "??"??+ "??( "??%
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Internship Report
6otal Assets0
1???? -???? +???? (???? %???? "???? !???? ? "??4 "??1 "??"??+
6otal Assets
"??(
"??%
.e$osits0
"??(
"??%
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Internship Report
!-??? !(??? !"??? !???? 4??? -??? (??? "??? ? "??4 "??1 "??"??+
Investments
Inve s t m e n t s
"??( "??%
Figure".!- Investments
C14 C44 04
C42 FD 0? F 04 D5
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Internship Report
Investment 6arget 244? 2440 2441 14 F4 C0 Ex$ort 6arget 244? 2440 2441 24 & & Im$ort 6arget 244? 2440 2441 24 -4 C1 /rofit 6arget 244? 2440 2441 C4 -1 2 Investment Achieved 2C CC C? ?5 C? ?4 Ex$ort Achieved 25 & & Im$ort Achieved 24 40 C2 1 CF C5 /rofit Earned C C5 -0 2 442 Achieved in /ercentage F2 22G FF 22G CC4 01G Achieved in /ercentage CFD 1-G & & Achieved in /ercentage C44 -CG FC ?G 5F 0FG Earned in /ercentage CC 50G C4- CFG C44 C4G
'he Bank8s deposit collection rate is )uite %ell such as in 2441 and 244? It collected 'k C42 FD# 0? F and 04 D5 cores respectively although management targeted 'k C14# C44 and 04
Internship Report
cores respectively But it could not achieve its target in 2440 and 244? !ecause "conomic recession# political and for many other reasons But in 2441 it achieve C4C 14G of its target 'he collection of deposit is gradually increasing 'hat is sho%n !y the graphically representation
-.(." Investment0 'he Branch made more investment than its target in 2441 In 2441 its investment target %as C0 Crore %hereas its achievement %as C? ?4 In 2440 its target %as F4 Crore# !ut achievement %as C? ?5 In 244? it has achieved F2 22G of its total target 'he investment is gradually increasing 'hat is sho%n !y the graphically representation
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Internship Report
-.(.% Ex$ort0 AIBL /e% "lephant Road !ranch is less export oriented in 244? it has an export target of 24 lac only %hereas it has achieved 25 lac export %hich is CFD 1-G of target
-.(.(Im$ort0 In 2441 the AIBL /e% "lephant Road Brach has achieved 5F 0D Gof its import target Its target %as C1 crore %here its achievement %as CF C5 crore In 2440 and 244? Its import target %as -4 and 24 crore respectively %here its achievement %as C2 1C and 24 40 crore respectively Achievement percentage in 2440 and 244? %as FC ?G and C44 -CG respectively
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Internship Report
-.(.+ /rofit0 'he profit earning capacity of the !ranch is not good 'his !ranch is failed to fulfill the targeted profit in 244? Its target %as C4 crore %here it achieved only C C5 crore# %hich is CC 50G of its target 'he !ranch achieved C44 C4G and C4- CFG of its target 2441 7 2440 respectively ;igh operating expense is the %orst condition of profit 'he graph sho%s ho% year to year the !ranch earned its profit
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Internship Report
Internal Factors
External Factors
#trength
@eakness
O''ort%nit)
!hreats
In +@O' analysis t%o factors act as prime movers Internal factors %hich are prevailing inside the concern %hich include +trength and %eakness On the other hand another factor is external factors %hich act as opportunity and threat
-.+.! 'trength0 ,sage of faster .C Bank soft%are $em!ership %ith +@IF' =ood !anker&customer relationship Online !anking system Islami +hariah !ased Banking system "nergetic as %ell as smart %ork force Competitive .rofit provider comparing %ith other Islamic Bank +trong Financial .osition "fficient administration -.+." ;eakness0 Reluctance to ad campaign
Page14 Foreign exchange activities of AIBL
Internship Report
Lack of consumer credit scheme $anpo%er is not sufficient $arketing policy is not %ell setup Limited num!er of !ranches in its net%ork Officers have limited experience and not enough trained $any inexpert and laggard assistant officers 'he !ank has no A'$ service Insufficient num!er of deposit +cheme and loan
-.+.% #$$ortunit 0 ;uge !usiness area Introducing consumer credit scheme =ro%th of sales volume Introducing !ranch !anking through online *evelop relations and correspondence %ith foreign !anks $ore concentrated Banking !ased on Islamic +hariah Fe% Competitors practicing Islamic Banking
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-.+.( 6hreats0
Internship Report
Bangladesh Bank has no %ell esta!lished Islami Banking Rules *ifferent classic services of other !anks "ntrance of ne% private commercial !anks Boung# energetic# dynamic# talent and smart %ork force of competitors =ovt imposes high rate of taxes and JA' .olitical unrest and "conomic recession Illegal !usiness operation !y the some clients
Internship Report
P P
Its marketing strategy is not %ell designed "xisting ;uman Resources are not sufficient for AIBL 'hey have to recruit more skilled employees
/um!er of Branches are not satisfactory# AIBL have to give more emphasi(e on increasing num!er of Branches
P P
Recruitment and selection process is a time consuming and lengthy process and irregular 'he %hole activities of AIBL is not computeri(ed# still there exist manual record keeping system
P P P P P
+ometimes Islami +hariah is not properly follo%ed 3o! security is lo%er in AIBL Insufficient training program for the employees +lo%er in moderni(ation comparing %ith its competitors 'he %orking environment in any !ranch is not congenial 7 appropriate 'he %orking desk provides sound pollution It looks like a hall room
'he modern technology is not used in the recruitment and selection process 'he !ackdated methods are using for selection till today
+alary structure of AIBL is satisfactory comparing %ith other Islamic Banks# the pension policy and the payment of pension to the employees are very fair and transparent
P P
'he transfer and promotion process is fair !ut the promotion is not faster Loan facilities are very attractive to the employees of AIBL
Page14 Foreign exchange activities of AIBL
Internship Report
$ost of the policies are !ackdated Only the authority amends the policy !ut preserve the old policy
'here is no policy to !uild up harmonious relationship among the employees 'he employees cannot protest the in6ustice of the authority !ecause the pure trade union is a!sent there
P P
'he record keeping system is also !ackdated# not follo%ed computeri(ed system properly +ecurity system of many !ranches is not sufficient
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Internship Report
Chapter +even
Recommendation 7 Conclusion
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1.! /ro$osals
Internship Report
'he overall analysis revealed that Al&Arafah Islami Bank Ltd is not so much sophisticated in !orei&n E'c(an&e Business. 'o overcome the pro!lems in the foreign exchange activities I %ould like to offer fe% proposals & Concentrate on the high&end customers %ith a ne% advertising 7 marketing effort Increase the skilled employees !y revising the recruitment process "liminate the !ias against female %orkforce "sta!lish corporate !ehavior 7 maintain chain of protocol in every section of the !anks activities "sta!lish a sophisticated I'&division !y revising current pro!lems "sta!lish A'$ net%ork immediately !ecause %ithout A'$ net%ork the !ank can8t retain customers in near future One of the !usiness strategies is promotion +uccessful !usiness depends ho% they can promote their products or services to the customer In this connection to improve the !usiness status !ank should introduce more promotional programs Female %orkforce could !e e)ually treated to gro% up a descent corporate culture Foreign exchange department should !e fully computeri(ed that the exchange process %ould !e convenient for !oth the !ankers and the clients
*elegation of authority should !e made enough to make the speed of providing service fast 'he !ank should consider the customer complaint For providing that service# !ank can launch Customer )er*ice Department %hich is a!sent in the !ank 'he Bank should reexamine the salary structure of the employees %hich may attract fresher and help to improve the productivity of existing employees 'he !ank has to increase the num!er of Authori(ation *ealership :A*< license in order to give more services to the clients
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1." &ecommendation0
Internship Report
P P P P P P P P P P
AIBL should concentrate in increasing its profit earning capacity It should develop effective marketing strategy to attract ne% customers Raising the capital# statutory reserve and increase the investment 'he num!er of !ranches should !e increased "xpand and diversify customer !ase ,pgrade Online Banking Recruit more skilled employees regularly Bank should introduce independent X$arketing *epartment8 .ersonal relationship should !e !uild %ith the customers Customers are the heart of the organi(ation 'hey should provide more space in the office and if possi!le they should have some entertainment facility
P P
'he employee of the !ranch should !e trained continuously Fe% !ranches are not under online !anking system# so all the !ranches should confirm on line !anking system
$ore meetings# seminars# symposiums and get&together should !e organi(ed !y the Branches to develop the a%areness among the clients of the Bank a!out Islamic Banking and its advantages
P P P P P
"nsure sta!le dividend "nsure high level customer service 'he Bank should follo% Islami +haria strictly in every of its operation
Page14 Foreign exchange activities of AIBL
Bank should introduce A'$ system +hould introduce one&stop service centre
Internship Report
Bank should keep their annual report# !rochure# !ulletin etc availa!le to provide their customer
P P
Bank should introduce consumer credit scheme Bank should increase their office space and take more care in interior decoration
P P
Bank should introduce independent X$arketing *epartment8 +ome ne% investment schemes are to !e introduced for socio&economic development and %elfare of the distressed humanity
Finally the Bank should has the vision to automate its all operations and functionalities and should !e committed to achieve the goal to !e a lead Bank in the country !oth in service and in technical aspect and to fulfill the re)uirements of mass people
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Internship Report
1.% :onclusion0
'he financial sector of our country is largely depended on !anking sector Over the decade the !anking !usiness has !een rising to the top of all In this competitive !anking !usiness environment# only excellent services are expected to sustain in the industry Although the gro%th of the !ank %as satisfactory over previous years# the gro%th in foreign exchange !usiness is not satisfactory "specially in remittance !usiness# the !ank is lagging !ehind %ith other !anks 'he target customers of the !anks are lo%&end segment of the market 7 the I' sector of the !ank is very poor 'o retain customers 7 attract ne% customers# the !ank has to esta!lish A'$ net%ork immediately !ecause people no% %ant to !ank even at midnight 'he study of the foreign exchange activities of Al&Arafah Islami Bank Ltd has facilitated me %ith experiencing a vast practical kno%ledge of !anking operation 7 corporate %ork environment
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Bi*liogra$h ) A$$endix
Internship Report
Bi*liogra$h
Annual report C555&244? Bangladesh economic revie%# vol&244? Bangladesh economic revie%# vol&2440 Bangladesh economic revie%# vol&2441 Bangladesh economic revie%# vol&244F Bangladesh economic revie%# vol&244Banking sector overvie%# 244-&244?H pu!lished !y Bangladesh Bank *haka +tock "xchange :*+"< li!rary $anuals 7 circulars of Al&Arafah Islami Bank
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A$$endix
!. Banking sector wise com$arison0
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Internship Report
Pro,i'
500.00
Observe Exponential
400.00
300.00
200.00
0.00
3000.00
6000.00
9000.00
12000.00
15000.00
53or'
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Pro,i'
500.00
Observe Exponential
400.00
300.00
200.00
10000.00
15000.00
20000.00
25000.00
I*3or'
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Internship Report
3eneral *anking o$erations0 'he starting point of all the !anking operations is =eneral Banking It is an important department for all !anks !ecause it provides services to the customers day&to&day Front *esk is the important for general !anking Customers give their deposits and meet their demand for cash !y honoring Che)ues 'he customer opens ne% accounts# remit funds# issues !ank drafts and pay orders etc 'here are various sections in this department# %hich are as follo%s> & 1< Cash +ection 0< Accounts Opening +ection ?< Che)ue Clearing +ection D< Remittance +ection
!9 :ash 'ection0 'he most vital and important section of the !ranch is Cash *epartment It deals %ith all kinds of cash transactions 'his department starts the day %ith cash in vault "ach day some cash that is opening cash !alance are transferred to the cash officers from the cash vault Opening cash !alance is added !y cash receipts and payments 'he figure is called closing !alance 'his !alance is then added to the vault 'his is the final cash !alance figure for the !ank at the end of any particular day
B##D' ,AI=6AI=E. BB 67I' 'E:6I#= Jault Register Cash Receipt Register Cash .ayment Register Rough Jault Register Cash Balance Book > It keeps account of cash !alance in vault in the !ank
> Cash receipt in %hole of the day is recorded here > Cash payments are made in a day are entered here > Cash calculation for final entry in vault register is done here as any error and correction here is not accepta!le # > Balance here is compared %ith vault register If no difference is found# indicates no error
Local &emittance0
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Internship Report
@hen money is sending from one place to another place for the customer is another important service of !anks In addition# this service is an important part of country8s payment system For this service# people# especially !usinesspersons can transfer funds from one place to another place very )uickly 'here are five kinds of techni)ues for remitting money from one place to another place 'hese are> C< *emand *raft 2< 'elegraphic 'ransfer -< 'elephone 'ransfer F< .ay Order +ele&rap(ic and +elep(one +ransfer (++) are almost the same# !oth are them are kno%n as '' in short
/a #rder0 .ay order gives the payee the right to claim payment from the issuing !ank It is payment from issuing !ranch only @ithin the clearinghouse area of issuing !ranch# .ayment is made through clearing .emand .raft0 'his is an instrument through %hich customer8s money is remitted to another person9 firm9organi(ation in outstation :Outside the clearing house area< from a !ranch of one !ank to an outstation !ranch of the same !ank or to a !ranch of another !ank :%ith prior arrangement !et%een that !ank %ith the issuing !ranch< 660 'his is a mode of transfer 9 remittance of customer8s money from a !ranch of one !ank to another !ranch of the sane !ank or to a !ranch of another !ank :%ith prior arrangement !et%een those !anks %ith the '' issuing !ranch< through telephonic message 'he issuing !ranch used to send the message of such remittance 9transfer to the dra%er9payee !ranch through telephone adding certain code num!er or test num!er on the !asis of text key apparatus developed !y the concerned !ank for its different !ranches
Page14 Foreign exchange activities of AIBL
Internship Report
5arious 6 $es #f de$osit account AIBL Bank offers follo%ing types of deposit account> I II III IJ J JI JII JIII IQ Q QI $udara!a Current *eposit Account :C*< $udara!a +avings *eposit Account :$+*< $udara!a 'erm *eposit Receipt Account :$'*R< +hort /otice *eposit Account :+/*< Installment 'erm *eposit :I'*< $udara!a ;a(( Account $udara!a .ension +cheme $udara!a Lakhpoti +cheme $udara!a milliner +cheme $udara!a Eotipoti +cheme $udara! *ou!le *eposit +cheme
$udara!a Eotipoti +cheme> 'his is the most popular 7 target oriented schemes One can open for -#F#1#0#?#C4#C2#C1#CD#24 years and have to pay :$onthly installment< 2#-5#1449& C#05#1449& C#2?#1449& 55#1449& D4#4449& F0#4449& --#F149& 2C#FD19& CF#--49& CC#C449& respectively and %ill get Ccorror $udara!a milliner +cheme> For $udara!a milliner +cheme -#F#1#0#?#C4#C2#C1#24 year8s monthly installments are 2-#5149& C0#5149& C2#?149& 5#5149& D#4449& F#0449& -#-F19& 2#C?49& C#C149& respectively and %ill get C4million $udara!a Lakhpoti +cheme> For $udara!a Lakhpoti +cheme -#1#D#C4#C2 year8s monthly installments are 2#-?19& C#2?19& 0?49& F049& --19&9& respectively and %ill get Clak
Conditions of the +cheme C< By filling up a form an account is opened 2< A non&transfera!le deposit receipt %ill provide to the customer after opening the account -< If the deposit is %ithdra%n !efore a 1&year term# then saving interest rate %ill !e applica!le and paid to the depositor ;o%ever# no in profit paid if the deposit is %ithdra%n %ithin C year of opening the account and $onthly Income paid to the customer %ill !e ad6usted from the principal amount F< 'his scheme %ill !e credited to the loan account until li)uidation of the loan amount inclusive of profit A depositor can avail loan up to D4G of the deposit amount under this scheme +9 ,udara*a .ou*le .e$osit0 +avings %orks as the very foundation of development +avings is the prime source of !usiness investment in a country +o it helps to !uild up capital 'o create more a%areness and motivate people to save#
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Internship Report
Al&Arafah Islami Bank offers $udara!a *ou!le *eposit ;ere people put their money for dou!le return after 0years :onditions #f 6he 'cheme0 'he deposit can !e made in multiplies of 'E C4444 44 'his is 0 years period deposit 'he deposit cannot !e %ithdra%n at any time %ith in the maturity date Al&Arafah monthly deposited ;a(( account> .ension scheme
:learing .e$artment0 Che)ues clearing section of Al&Arafah Islami Bank Ltd receives che)ue# demand drafts and pay orders of their clients ,pon the receipt of the instrument the che)ue clearing section examines> @hether the paying !ank %ithin *haka city @hether the paying !ank outside *haka city @hether the paying !ank of their o%n !ranch
6he /a ing Bank within .haka :it 0 'he che)ues clearing section of Al&Arafah Islami Bank Ltd # /e% "lephant Road Branch sends Inter Branch *e!it Advice :IB*A< to the head office on the receiving day of the instruments 'he main !ranch takes those instruments to the clearinghouse on the follo%ing day If the instruments are dishonored# ;ead Office of Al&Arafah Islami Bank Ltd sends IB*A to the Al& Arafah Islami Bank Ltd # /e% "lephant Road !ranch 6he /a ing Bank of 6heir #wn Branch0 'he che)ue clearing section of Al&Arafah Islami Bank Ltd # /e% "lephant Road !ranch sends out%ard !ills for collection :OBC< to the concerned paying !ranch to get Inter Branch Credit Advice :IBCA< from the paying !ranch If the paying !ranch dishonors the instrument# the paying !ranch returns it to the Al&Arafah Islami Bank Ltd # /e% "lephant Road !ranch descri!ing %hy the instrument is dishonored
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Internship Report
Lia*ilities ) :a$ital
"??1
"??-
!J%"?J???J???
&&&&&&
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Lia*ilities0
.e$osits ) other Accounts Al&@adia Current Account $udara!a +aving deposit $udara!a +hort notice deposits $udara!a 'erm deposit $udara!a +pecial deposits -#45?#540#51-#5-2#22?#C?4 ?0C#?00#?DC CC#2--#15C#C2? -#025#1-5#202#FF-#C5D#FD0 -#-5-#DD5#242 FD5#F1-#C-F ?#D?F#52?#D22 2#-??#2-1#255
Bills .aya!le
-1F#450#55"%J??>J!"4J"41
Others Lia!ilities 'otal Lia!ilities :a$ital shareholders eEuit > .aid up capital Asset Revaluation Reserve +tatutory reserves "xchange ")uali(ation Retain "arning 6otal share holder eEuit 6otal lia*ilities ) shareholder eEuit
-#DC1#050#0F5 "4J!((J4"(J>%-
Internship Report 9+ecurities Other operating Income CF-#-DD#5D1 1!"J(-!J+41 6otal o$erating Income +alaries 7 allo%ances *irectors and +haria Council fees and expenses Rent# taxes# traveling Legal expenses .ostage# stamp# telegram 7 telephone Auditors8 fee *epreciation and Repairs +alary 7 Allo%ance to the $anaging *irector +tationery# printing 7 advertisement Other expense 6otal #$erating Ex$enses /rofit *efore 6ax and $rovision .rovision against Contingent Lia!ilities Other .rovision 6otal $rovision .rofit9Loss !efore tax Current tax *eferred 'ax /rovision for 6axation =et /rofit@Loss after tax Retained .rofit !rought for%ard Investment and insurance# lighting 7 !J%"-J>4?J+-1 F44#FC5#412 1#-0-#0C2 00#-D5#F04 1#C24#521 C1#54F#-FC 244444 C5#0??#401 F#-44#444 C-#C2?#41F F4#25D#?01 +1?J4??J"1% 1+-J!4?J">( C?-#--0#0-0 &&&&& !1%J%%-J-%+4"J4(%J-+4 -1F#FDF#2FF :CCD#51F#?12< "%+J+">J(>" %(1J%!(J!--4#15CC0#?1F#51C (1!J?4+J"-+ !J%+"J1-1J>+1 21-#40F#F11 -#D?5#D4F F4#-12#C41 2#?CC#055 C-#15?#2C4 C44#444 C1#D40#02D 2#044#444 5#115#D?1 FC#-20#F51 %4"J>>4J"1! >->J1->J-4CCF#-44#444 &&&&& !!(J%??J??? 4++J(->J-4-DF#42-#524 C#F2?#-04 %4+J(+!J"4? (1?J?!4J(?1 ??#12Page14
+tatutory Reserve
CC0#10D#?-2 !!-J+-4J1%"
"%?J11-J?"1 %?.!"
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