The Overall Financial Activities Of Al-Arafah Islami Bank Ltd (AIBL), Bangladesh

Based on the study on 2010 Financial statement and business police

IUBAT

The Overall Financial activities of Al-Arafah Iislami Bank Ltd (AIBL),Bangladesh

SUBMITTED TO:
MD. MUSTAFIZUR RAHMAN Faculty of (CBA) BUS 201

SUBMITTAD BY: GROPE NAME: ONIKER PRANTOR NAME ID PROGRAM EMAIL CLASS ROLL
ASADUZZAMAN RIDOY ADIBAZAMAN MOSIUR RAHMAN FATEMA AKHTER SIMA 10202065 BBA 10202085 10202068 BBA BBA 10202081 BBA

Letter of Transmittal 2nd April, 2011 Md.Mustafizur Rahman Faculty of (CBA) School of Business Studies. International University Of Business Agriculture and Technology. Dear Sir, Here is the report on titled the overall foreign exchange activities of Al-Arafah Islami Bank Ltd (AIBL), Bangladesh-a comprehensive study. Prepared for you as a final report of the semester. It took one month to prepare the report and we have tried to gather as much information as possible within this limited time. Although the stipulated time is not enough to have in depth knowledge about the real corporate world, this report give mi much insight in Islamic banking practiced by the conventional banks like (AIBL). I would like to thank you for giving us the opportunity to prepare this report under your sincere guidance and cooperation. Thank you, Sincerely yours,

Acknowledgement A lot of concentration, effort, responsibility and study have been involved in preparing this paper into realty. In preparing a report one need a number of assistance and guidance from reliable sources. This report also stands on the basis of such efforts. I have pleasure to express my gratitude to my grope members. In preparing the report, I received active co-operation from the VP responsible as a manager, 1st AVP Responsible as a second officer, Officer of Al-Arafah Islami Bank (AIBL).I sincerely express my heart- felt gratitude to them for their co-operation, which helped me to conduct and complete this report. They have provided us some important books on banking and some books on marketing and finance sharing, consent and given some advice of making a research report. However this report suffers from many shortcomings. Moreover, I have exerted my best effort in preparing this report. We seek excuse for the errors that might have occurred in spite of my best efforts.

TABLE OF CONTENTS

Page

Title Flyi Title Page.ii Letter of transmittaliii Acknowledgementiv Executive Summary.v 1.0 INTRODUCTION..1 1.1 Origin of the report. 1.2 Objective of the study.. 1.3 Scope of the study 1.4 Methodology.

2.0 History of Al-Arafah Islami Bank Limited 2.1 Aims and Objective 2.2 Mission and Vision of AIBL. 2.3 Commitments. 3.0 MANAGEMENT OF AIBL 3.1 Planning 3.2 Organizing 3.3 Staffing. 3.4 Directing. 3.5 Controlling 3.6 Distribution of Branch.. 3.7 The Financial position of AIBL. 3.8 AIBL Product Service ..
3.9.1Genenral Banking.. 3.8.1 Foreign Exchange.. 3.8.2 Services of the bank
5

3.8.3 Products of AIBL.

4.0 Banking system in Bangladesh

4.1 Corporate Information.. 4.2 Financial Analysis of Al-Arafah Islami Bank .. 4.3 Performance of AIBL.... 4.4 Progressive Analysis of AIBL.. 4.4.1 Capital.. 4.4.2 Deposit.. 4.4.3 Investment 4.4.4 Grameen & Small Medium Enterprise (SME) Scheme.. 4.4.5 International Trade 4.4.6 Investment Income.

4.5 . Economic Impact Analysis of AIBL:.

5.0 Functions of Al-Arafah Islami Bank Ltd ..

5.1 Foreign Exchange of Al-Arafah Islami Bank Ltd . 5.2 Opening LC in AIBL: .. 5.3 Import Business:.. 5.4 Export Business:. 5.5 Procedure of preparing L/C 5.6 Back to Back L/C:. 5.7 Features of Back to Back L/C 5.8 Foreign Documents Bills for Collection (FDBC):.

6.0 Performance Analysis of AIBL.

6.1 Al-Arafa Islami Bank Ltd: SWOT Analysis. 6.1.1 Strengths. 6.1.2 Weaknesses. 6.1.3 Opportunities. 6.1.4 Threats. 7.0 ENDING PART PF THE REPORTE. 7.1 Findings and Analysis. 8.1 Recommendations
6

9.1 Conclusion 10.0Appendix.. 10.1Bibliography

INTRODUCTION: 2. Origin of the Report:

This report is a comprehensive study prepared as a requirement for the completion of the BBA Program of IUBAT- International University of Business Agriculture and Technology. The primary goal of report is to provide an opportunity for translation of theoretical conceptions in real life situation. We are placed in enterprises, organizations, research institutions as well as development projects. The program covers a period of 3 months comprehensive study about the Products and works of Al Arafah Islamic Bank Limited in Bangladesh. The comprehensive study about the Products and works of Al Arafah Islamic Bank and other Traditional Banks in Bangladesh prepared under the guidance of our faculty member Tanvir H DeWan. As a requirement for the completion of the program we need to submit this report, which would include an overview of the Products of the Banks

was attached with and elaboration of the project we were supposed to conduct during the study period. 4. Objectives of the Study: The objective of the internship program is to familiarize students with real business situation, to compare them with the business theories and at last stage make a report on assign task. Objectives regarding this study are as follows: a. General Objectives: The general objective of this report is to fulfill the requirement of internship report.
To earn practical experience and knowledge about the banking operations and corporate functions performed by Al- Arafah Islami Bank Limited. b. Specific Objectives:

To submit a brief description about the performance of Al-Arafah Islami Bank Ltd. To make a general evaluation of AIBL activities among different professionals. To understand the various services the bank offers and to understand the mechanism of the services. To analyze the Ratio of the bank to evaluate the performance To identify the strengths and weakness, opportunities and threats of Al- Arafah Islami Bank Ltd. To know about the conventional banking and their operation. To know about the Islamic banking and their operation. To suggest remedial measurement for the improvement of the whole process of the AlArafah Islami Bank Ltd. To formulate recommendations that could add value to the service of Al- Arafah Islami Bank Ltd. 5. Scope of the Report This report helps me to understand the clear real-time experience about the total management of AIBL. It helps me to understand, how the bank manages its total processes. It also helps me to understand how they deal with the customers as well as the foreign policy of their bank like- the process of doing LC and export & import etc.

6. Information Needs In order to conduct this research project and fulfill the research objectives the following information will be required: Information about Al Arafah Islami Bank Limited Information about the facility provided by AIBL Information about the job characteristics Information about compensation and benefits policy General information about the employees of AIBL General information about motivation concepts Information about the different wings of PB & head office of AIBL Information about the expectation of the employees of AIBL To know the financial performance of the bank To know the work of general banking system of the bank Methodology: A Research may be conducted either exploratory or conclusive. Based upon the research topic and environment scenario I have decided to conduct exploratory research. To conduct the research I have collected two types of data. A) Primary Data and B) Secondary Data. A sample survey was conducted to collect primary data using two pre-designed survey instruments from concerned groups following an appropriate sample design.

8. Sources of data
I have collected both primary and secondary data. I collected Secondary data from prior records of AIBL. I have collected primary information by interviewing employees, managers via the process assigned by AIBL, observing various organizational procedures, structures, directly communicating with the customers. a. Primary Source of Information When searching in the field directly to collect data was called primary sources of data. I collected data from primary sources using the following method:

a. Observation method b. Interview method Now mention some primary points: Open ended and close ended questions Personal experience gained by visiting, different desks Personal investigation with bankers Face to face communication with employees of the AIBL. b. Secondary Sources of Data The secondary data had been collected from the MIS of HSBC. To clarify different secondary sources such as office memo, operating manuals, circulation & publication used by the HSBC in this regard.

(1). Internal Sources 1. Bank's Annual Report 2. Group Business Principal manual 3. Group Instruction Manual & Business Instruction Manual 4. Prior research report 5. Any information regarding the Banking sector.

(2). External Sources 1. Different books and periodicals related to the banking sector 2. Bangladesh Bank Report 3. Newspapers.

Previous reports and journals relevant to the banking industry Other published documents of Bangladesh Bank Relevant AIBL paper and published documents. Annual reports of 2006, 2007.

9. Data collection procedures:

10

The following procedures have been used to collect data with the respective instruments for conducting the research paper. a. Collection of Primary data: For collecting primary data personal interview technique have been used through a set of organized and structured questionnaire with mostly close-ended and open-ended questions as the instruments. 70 employees at different levels of Al Arafah Islami Bank Limited are interviewed through formal and informal way. b. Collection of Secondary data: In order to collect the secondary data different related printed materials like corporate profile, annual report 2007-2008 and the official web site has been followed. Moreover, various library sources like textbooks (Organizational Behavior, Business Research, and Basic Business Communication) also have been used. 10. Data Processing & Analysis After collecting all the required data, question area has been coded and data processing has been done according to the employees personal information, experience, preference, satisfaction level etc. for analyzing purpose. MS Word had been used to prepare graphical graphs have been interpreted accordingly. 11. Limitation of the Report Time frame for the research is very limited. Large-scale research is not possible due to constraints and restrictions posed by the organization. The research only covers the employees of Uttara Model Town Branch, Dhaka. The survey was limited to the employees of General banking and Foreign Exchange Division. Respondents were busy as well as reluctant to go through the process of questionnaire. The respondents sometimes did not agreeable in providing accurate statistics and information representation and the

. Historical Background of Al Arafah Islami Bank:

11

With the objective of achieving success in the life here and hereafter following the way directed by the Holy Quran and the path shown by Rasul (SM) Al Arafah Islami Bank Ltd was established (registered) as a public limited company on 18 June 1995. It started business on 27 September of that year with an authorized capital of Tk 1,000 million. At inception, its paid up capital was Tk 101.20 million divided into 101,200 ordinary shares of Tk 1,000 each. 23 sponsors of the bank subscribed the total issued capital. In 2000, the paid up capital of the bank increased to Tk 253 million, of which Tk 126.50 million were paid by the promoters/sponsors and Tk 126.50 million by the general public. In compliance with the new provision, Al Arafah bank has raised its capital and reserve from Tk. 2245 million in the year 2007 to Tk 3049.34 million in 2008 by declaring 30% stock dividend out of the profit of the 2008. The paid up capital of the bank has stood at Tk. 1383.81 million at 31st December 2008. Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is being owned by local shareholders. In 2008 the bank earned a net profit before tax & provision of Tk. 1,528.10 million which is 102.08% higher than the previous year. The bank is listed in the two
STOCK EXCHANGEs

of the country and has offered 126,000

shares for subscription and trading by the public. Al-Arafah Bank is an interest-free shariah bank and its modus operandi is substantially different from those of regular commercial banks. The bank however, renders all types of commercial banking services under the regulation of the Bank Companies Act 1991. It conducts its business on the principles of musharaka, bai-murabaha, baimuajjal and hire purchase transactions. A Shariah Council of the bank maintains constant vigilance to ensure that the activities of the bank are being conducted according to the precepts of Islam. . Objectives of AIBL: Al-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the objectives t implement and materialize the economic and financial principles of Islamic in the banking arena. The objectives of AIBL are not only to earn profit, but also to do good and welfare to the people. The main objectives of AIBL are listed below To conduct interest free banking To establish participatory banking instead of banking on debtor creditor relationship
12

 To invest through different modes permitted under Islamic Shariah To accepts deposits on profit loss sharing basis To establish as welfareoriented banking system To extend co-operation to the poor, the helpless and the low income group for their economic up liftmen To play a vital role in human development and employment generation To contribute towards balances growth and development of the country through investment operations particularly in the less developed areas To contribute in achieving the ultimate goal of Islamic economic System. 10. Corporate Culture: This bank is one of the most disciplined Banks with a distinctive corporate culture. Here they believe in shared meaning, shared understanding and shared sense making. Their people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate conduct 3. Mission: Achieving the satisfaction of Almighty Allah both here & hereafter. Proliferation of Shariah Based Banking Practices. Quality financial services adopting the latest technology. Fast and efficient customer services. Maintaining high standard of business ethics. Balanced growth. Steady & competitive return on shareholders equity. Innovation banking at a competitive price. Attract and retain quality human resources. Extending competitive compensation packages to the employees. Firm commitment to the growth of national economy.
13

 Involving more in Micro & SME financing. 4. Vision: To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of the national economy. To improve Banker- Customer relationship through improving customer service. To develop new and innovate product/service through integration of technology and policy and principle. 5. Commitments: Ours is a customers focused modern Islamic Banking making sound and steady growth in both mobilizing deposit and making quality Investment to keep our position as a leading Islamic bank in Bangladesh. To deliver financial services with the touch of our heart to retail, small and medium scale enterprises, as well as corporation clients through our branches across the country. Our business initiatives are designed to match the changing trade & industrial needs of the clients. d. MANAGEMENT OF AIBL: For any financial and non-financial organization, Management are the most valuable and important resources of any kind of organization. And, a well-organize management provides the organization to reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling of all financial and non-financial resources of an organization. Different aspects of management practice in AIBL are discussed below. Planning AIBL has done its planning within the preview of the corporate plan. The overall planning approach in AIBL is top to bottom. Each branch can plan according to the goal imposed by the corporate level. It doesnt plan independently. And, AIBL has a planning sector. This department is mainly responsible for the overall planning. Organizing AIB is organized as per the existing business locations. It has fifty branches, each of which is a separate entity. Each unit is responsible for its own performance and each is headed at least by a
14

Senior Assistant Vice President (SAVP) in designation followed by Manager (Operations). He is directly responsible for the performance of their unit. Within each branch, it is organized functionally. Staffing The recruitment in AIBL is done in two ways. One as a Provisional Officer for the management program and it has a probation period of two years. Another one is nonmanagement level as Trainee Officers. Provisional Officers are recruited in officer category and their career path is headed towards different managerial jobs. Directing The management approach in AIBL is top-down or authoritative. Each information seeks through lower management layer. Works are designed in such a way that one cannot leave without clearing the tasks as he is assigned for a day. Sitting arrangement in all offices is done in a way that the superior can monitor the subordinate all time. Manager (HOB) and Manager Operation all time watch the operation of the bank through CC camera. Security is maintained properly. Budgeting, rewarding, punishing, etc. are also practiced as control mechanism. Controlling AIBL does not believe in the traditional banking. It tries to increase and maintain its market share in the private banking sector through two types of control techniques:

Feed Forward Control Feedback Control

Feedback control technique monitor outputs of a process and feed into the system to obtain desired outputs. On the other hand feed forward control technique monitor inputs into a process to ascertain weather these are as planned or not. If they are not, the inputs are changed in order to get the desired result. 20. Distribution of Branches: AIBL started its working at 161; Motijheel C/A with a Branch named Motijheel Branch on 27 th September, 1995 was the first & main Branch of AIBL and has been operating throughout the country. The Head Office of the Bank was situated at the same holding of Motijheel Branch since its establishment but from 11 January, 2007 it has started its working at its own premises
15

36, Dilkusha (6th, 7th, 8th & 9th floor), Dhaka-1000. The age of the Bank is only 11 years and during this short period of time, the Bank has established total 46 Branches over the country and made a smooth network inside the country. The number of Branches as Division wise is mentioned in the following table:
Division Dhaka Division Chittagong Division Rajshahi Division Khulna Division Sylhet Division Barisal Division Total No. of Branches 24 11 4 4 6 1 50

21. AIBLs Products and Services: Al-Arafah Islami Bank Limited is providing many product and services to satisfy their customers. For that reason, AIBL has made significant progress in all areas of its operations within a short period of time, such as deposit mobilization, credit management, remittance handling and foreign exchange and trade. AIBL offers variety of products and services to the customers which are picked up below: a. General Banking: Current Account Saving A/C STD (Short Term Deposit) A/C Fixed Deposit Account 1 Months Fixed Deposit 3 Months Fixed Deposit 6 Months Fixed Deposit 12 Months Fixed Deposit Foreign Currency A/C b. Foreign Exchange: 16

 Letter of Credit Issue Letter of Credit Advise Foreign Documentary Bill Purchase (FDBP) Foreign Documentary Bill Collection (FDBC)

Bill of Negotiation Foreign Remittance c. Services of the Bank: ATM Card Service Online Banking Lookers Service d. Products of AIBL: Cash management Wire transfer Automated clearinghouse (ACH) transaction Bill presentment and payment Balance inquiry Funds transfer Downloading transaction information Loan applications Investment activity Other value-added services 12. The Banking System in Bangladesh The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4 nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic private banks, 11 foreign banks (including 2 Islamic Bank) and 28 non-bank financial institutions including 1 Central bank. The financial system also embraces insurance companies, stock exchanges and co-operative banks. The financial sector of Bangladesh is dominated by the commercial bank. A number of national, private, foreign, specialized commercial bank and nonbanking financial institutions having a network of correspondents and branches are operating all over the country and abroad to center to the people and business of the country. After the reform
17

program, the financial institutions are more systematic and borrowing and lending through formal markets is increasing. Apart from normal commercial banking, banks are now providing consumer credit scheme, and financing in industrial credit and development project. Electronic commerce gives the banking industry a real competitive edge. The banking industry of our country has started its journey soon after the liberation war in 1971. The early 70s, immediately after liberation, banking industry started its journey without any participation of the private sector in a very restrictive financial system. In early 80s few privet commercial banks were allowed to start functioning. Due to lack of experience and absence of supervisory as well as controlling environment, 1st generation private banks faced various problems in the next few years. During the late 80s and early 90s, with the passage of Financial Sector Reform program, Banking Regulation Structure suggested by BIS and followed by developed countries began to start incorporation into the banking regulations of Bangladesh. The following table shows a few snap shots that indicates a brief history of the banking industry of Bangladesh. 2. Corporate Information: Name of the Bank Chairman Vice Chairman Managing Director Company Secretary Legal Status Principal Activity Registered Office Date of Registration 1st Branch opening Opening ceremony Al Arafah Islami Bank Limited Badiur Rahman Alhajj Mir Ahmad Sowdagar M A Samad Sheikh Md Moffazzal Hossain Private Limited Company Commercial Banking Peoples Insurance Building 36, Dilkusha C/A, Dhaka-1000 18 June 1995 Motijheel branch, Dhaka 27 September 1995.
18

Authorized Capital Paid up capital Local Partnership of Capital Equity Number of Branches Deposit Investment Number of manpower Number of shareholders Phone Fax SWIFT E-mail Website Slogan Logo

2500.00 million. 1383.81 million 100% 2705.74 million 50 29690.13 million 29723.37 million 1080 12013. 9567885, 9567819, 9569353, 9568007 880-2-9569351 ALARBDDH aibl@al-arafahbank.com www.al-arafahbank.com A rare combination of Shariah & modern banking

C. Financial Analysis of Al-Arafah Islami Bank 1. Al-Arafah Islami Banks Business Position: 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
19

doctrine of Al-Quran and lifestyle of Hazrat Muhammad (Sm.) for our supreme success. AlArafah Islami Bank started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah. A group of 13 dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah Islami Bank Ltd. has 46 braches and a total of 1033 employees (as of December 2007). Its authorized capital is Taka 2500 millions and the paid-up capital is Taka 1153.18 millions. (In million taka) Particulars Authorized Capital Paid up Capital Reserve Fund Shareholders Equity Deposit Investment Import Export Total Income Total Expenditure Profit before Tax Profit after Tax 2005 1000.00 677.94 542.22 1220.16 11643.66 11474.41 12631.60 4932.90 1452.68 904.48 548.20 262.90 2006 2500.00 854.20 835.98 1690.18 16775.34 17423.19 1882.14 914.27 2172.48 1202.71 855.47 470.02 2007 2500.00 1153.18 1091.95 2037.50 23009.13 22906.37 27042.72 12714.91 2955.61 2199.43 756.18 347.31 2008 2500.00 1383.81 905.33 2705.74 29690.12 29723.79 32685.13 20176.64 4387.26 2859.16 1528.09 668.24

20

Income Tax Total Assets Fixed Assets Earning per share (Taka) Profit Earning Ratio Dividend per share No. of Shareholders Number of Employees Number of Branches Manpower per Branch

215.10 15336.89 208.00 387.80

385.45 21368.17 215.11 550.24 4.89

235.53 30182.32 334.48 30.12

590.66 39158.44 396.76 48.29

26.00% 5402 771 41 19

35% 4487 912 46 20

20% 12013 1033 46 23

30% 10664 1080 50 22

a. Performance of AIBL at a glance: The overall performances of AIBL are picked up as follows through graphical representation. (In Million Taka)

21

29690.12 29723.79 23009.1 22906.4

Shareholders Equity Deposite Investment Profit before Tax & Provision

16775.3 10108.3 11643.7 8150.16 11474.4

17423.2

957.26

1220.16 348.89

548.2

1690.18

2037.5 969.77

2705.74 756.18

1528.1

2004

2005

2006

2007

2008

Fig: Performance of AIBL 2. Progressive Analysis of AIBL: At the end of current year, the number of depositors stood at 243,273 and the amount of deposit has accumulated to Tk. 16775.33 million. The total numbers of investors are 13213 and total investment extended to them was a sum of Tk. 17423.19 million. The bank has earned Tk. 2172.48 million and incurred an expense of Tk. 1202.71 million in the current year. At the end of the year the profit before tax has stood Tk. 855.74 million which is 78.97% more than Tk. 478.00 million pre-tax income of the last year. a. Capital The Bank company act 1991 which passed in March, 2003 includes a provision of raising the capital to a new level of Tk. 100 core for the commercial banks. In compliance with the new provision, the bank has raised its capital from Tk. 41.58 core in the year 2002 to Tk. 85.56 core in 2003 by issuing a right share against each of existing shares in the year 2003 and declared 16% bonus dividend from the profit of the year 2003. The bank again declared 15.20% bonus dividend from the profit 2004.as a result, the paid up capital of the bent stood at taka 67.79 million as at 31st December, 2005.

22

Bank declared 26.00% bonus dividend for the year 2005. As a result the paid up capital of the bank stood at taka 85.42 million as at 31st December, 2006. b. Reserved Fund The total balance of the reserve fund stood at Tk. 835.94 million in the current year against Tk. 542.22 million compared to previous year 2005. In this fund, the bank experienced a growth rate of 54.18%.s c. Capital Adequacy The Bangladesh Bank has fixed the ratio of capital adequacy against Risk-Weighted Assets at 9.00% in place of 8% in the month of September 2002. In 2002, the amount of total equity of the bank was 41.57 core taka, which stood at Tk. 104.27 core in the year 2004 & taka 1309.56 cores in the year 2005.This year it stood at taka 183.04 cores. At 31 December 2006, the capital adequacy ratio of the bank is 10.71% against 12.17% at the same period of 2004.

39158.44 30182.32 21368.16 15336.89 12874.61

2004

2005

2006

2007

2008

Fig: Total Assets (In Million Taka) d. Deposit The total deposit of the bank was Tk. 16775.33 at 31st December, 2006, of which bank deposit was Tk. 611.72 million and general deposit was Tk. 843.40 core. At the same time in the last year, the amount of total deposits was Tk. 16163.61 million taka. At the same time in the last

23

year, the amount of total deposit was 11643.66 million taka in this area the growth rate is 44.07%.

Deposit Mix

16775.33 11643.66 10022.33 8013.25 7012.12 2004 1 2005 2 2006 3 Year 2007 4 2008 5

Amount (Million Taka) Year

Fig: Deposit Mix e. Investment At the end of year 2006, the amount of investment of the bank was Tk. 793.28 core in comparison to Tk. 17423.19 million in comparison to tk.11474.41 million of the last year 2005.The amount of investment has increased 5948.78 million taka within this period, which is around 5184%.
Bai-Murabha

Mode wise Investment: 31-12-2007

Hire-Purchase Under Shirkatul Melk 28% Bai-Muajjal 49% 1%3% 0% 0% 0% 16% Bai-Salam Mudaraba Musharaka Quard

Total

24

Fig: Mode Wise Investment

Sector wise Investment

Industrial

25%

Commercial Real Estate Transport

51% 16% 4% 1% 3%2%

Agriculture Others

Total

Fig: Sector Wise Investment f. Grameen & Small Medium Enterprise (SME) Scheme An investment product Grameen and Small Investment is in operation. The objective of this project is to introduce Shariah based banking system in rural and village area, creating employment through financing to low income group, build up savings attitude, improvement of living standard of rural low income mass people, creating opportunity to carry out Islamic lifestyle by way of alleviating poverty and at the same time to make other financially established by investing in small investment project. Initially this scheme was introduce in three branches of AIBL i.e. Gallai, Comilla, Ruposhpur, Srimongol and Companigong Comilla. There is a plan to expend this project gradually in other rural branches.

25

Investment Mix
Amount in (Million Taka)

17423.19 11474.41

Year

6030.25 2004 1

7045.8 7500.25 2005 2 2006 3 Year 2007 4 2008 5

Fig: Investment Mix g. International Trade At the year of 2006, the bank experienced satisfactory growth in the foreign trade. At the end of 2005, the total amount of foreign trade (Export, Import and Remittance) was Tk. 18020.10 million; which has increased at 60.18% to reach Tk. 28865.00 million in 2006. The total export of the bank was Tk.4932.90 million in 2005, which has increased at 85.34% growth rate to reach Tk. 9142.70 million in 2006, whereas the national growth was 85.34% during the same period. Similarly the amount of import has increased from Tk. 12631.60 million of 2005 to Tk. 18821.40 million in 2006, experiencing a growth rate of 49.80%. Last year the amount of remittance through the bank was Tk. 455.60 million, which grows to Tk. 900.90 million in the current year.

26

32685.1 27042.7

18821.4 12631.6 9337.49 3639.34 4932.9 9142.7 12714.9

20176.6
Total Import Total Export

2004

2005

2006

2007

2008

Fig: Total Import & Export (In Million Taka) h. Investment Income The total investment of the bank was Tk.17423.09 million at 31st December of 2006. The total income generated from this investment is Tk. 1701.40 million9.33 which is 80.32% of the total income. At the corresponding period of 2002, this income was Tk. 78.32 of the total income. m. Risk Management of AIBL The risk of Al-Arafah Islami Bank limited is defined as the possibility of losses, financial or otherwise. The risk management of the Bank covers 5 (five) Core risk Areas of banking i.e. Credit risk management, foreign exchange risk management, Assets Liability Management, prevention of money laundering and establishment of Internal Control and Compliance. The prime objective of the risk management is that the Bank takes well calculative business risks while safeguarding the Bank's capital, its financial resources and profitability from various risks. In this context, the Bank takes steps to implement the guidelines of Bangladesh Bank. The failure may result from unwillingness of the counter party of decline in his/her financial condition. Therefore, Bank's credit risk management activities have been designed to address all these issues.

27

3. Economic Impact Analysis of AIBL: Economic impact can be defined as any increase or decrease in productive potential of an economy. By analyzing the economic impact we can understand how a bank adds value to the society. Economic impacts can be broadly categorized as: i) ii) Direct Impact Indirect Impact

a. Direct Impact Direct impacts are the immediate economic effects resulting from the banks financial transactions. Banks direct contribution to the economy resulted in the creation of employment opportunities, payment of tax to the government and maximization of shareholders wealth. b. Indirect Impact Indirect impacts are the spill over economic effects that occur through Banks normal course of operations. Banks generate indirect impact by addressing the deficiency of capital in the economy by mobilizing deposit and channeling the same to prospective investors. Through catering financial services, the Bank helped distribute the wealth among all the stakeholders for example shareholders received dividend, depositors and investors got profit, employees received compensation and other benefits, the under privileged reaped benefits out of CSR while the government government earned tax revenue. At the end of 2008, the Bank mobilized total deposits of BDT 29,723.79 million as investment to different sectors of the economy. Apart from these, the Bank performed significant import and export business. D. Functions of Al-Arafah Islami Bank Ltd. Functions of AIBL: Islamic banks render almost similar services to their customers conventional banks do. Like a conventional bank, AIBL also accepts deposits from customers and advances loans. AIBL also acts as a custodian of its customers and performs all foreign transactions on behalf of them. AIBL perform mainly three different types of functions.
28

1. General Banking Activities of AIBL: General Banking activities of AIBL are performed through the following areas:

General Banking

Customer Relation Desk-1

Customer Relation Desk-2 (Non-operating)

Clearing

Cash

Dispatch

1. Buildup relation with clients. 2. Account opening (operating) Current A\C Saving A\C MSTD MMSS MHD MED 3. Account Closing

1. Buildup relation With clients. 2. Account opening (nonoperating)

FDR
3. Profit giving voucher issue of FDR 4. Remittance: Pay Order TT DD 1.

4. Issue cheque book 5. Posting of opening & closing accounts. 6. Proper maintaining of KYC form & other necessary 7. documents.

1. Cheque receives for collection. 2. Cheque, PO, DD, TT receive for transfer. 3. Nikash maintaining, printing & copy and validation print. 4. LBC issue & receive. 5. OBC issue & receive. 6. IBCA/IBDA issue & receive. 7. Preparing salary sheet. 8. Issue expenditure voucher. 9. Different statement preparation for Head office & Bangladesh Bank. 10. Preparing SBS-1 & SBS-3

1. Receiving & payment of cash. 2. Signature verifying. 3. Accounts checking of funds sufficiency for any payment. 4. Maintaining share transactions. 5. Providing income tax certificate. 6. Solvency certificate.

1. Provides documents sending with date & number. 2. Receive documents from courier. 3. Sends documents through courier.

E. Foreign Exchange of Al-Arafah Islami Bank Ltd.

29
1. 2.

Foreign Exchange Department of AIBL: Financial institutions especially banks play a very important role in foreign exchange transaction of a country. Mainly transactions with overseas counties of imports, exports and foreign remittance are the main function of the Foreign Exchange department. Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country's currency are converted into rights to wealth in another country's currency Foreign Exchange Department plays significant roles through providing different services for the customers. Opening or issuing letters of credit is one or the important services provided by the banks. 1. Opening LC in AIBL: There are several factors for what customers come to this bank to open LC. The procedures, techniques, facilities, services and other factions for opening LC are stated details as follows: a. Letter of Credit: A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter have been complied with. b. Parties of the L/C Importer Issuing Bank Who applies for L/C It is the bank which opens/issues a L/C on behalf of the importer. Confirming Bank It is the bank, which adds its confirmation to the credit and it is done at the request of issuing bank. Confirming bank may or may not be advising bank.

30

Advising or Notifying It is the bank through which the L/C is advised to the Bank exporters. This bank is actually situated in exporters country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit. Negotiating Bank It is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank. Accepting Bank It is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank. Reimbursing Bank It is the bank, which would reimburse the negotiating bank after getting payment instructions from issuing bank.

c. Issuing Bank

The Issuing Bank or the Opening Bank is one which issues the credit i.e. undertakes, independent of the undertaking of the applicant: to make payment provided the terms and conditions of the credit provides for sight payment, or at with. The payment may be at sight if the credit provides for sight payment or at maturity dates if the credit provides for deferred payment. Especially the issuing bank should satisfy himself on the credit worthiness of the applicant. The credit application must be in accordance with the Uniform Customs and practices for Documentary Credit (UCPDC) LC publication no. 500 edition of 1993. d. Advising Bank The Advising Bank advises the credit to the beneficiary authenticating the genuineness of the credit. The advising bank is generally situated in the country/place of the beneficiary. e. Confirming Bank A confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby, undertaking the responsibility of payment / negotiation / acceptance under the credit in
31

addition to that of the issuing bank. A confirming bank normally docs so if requested by the issuing bank. When the creditworthiness of the issuing bank is in doubt, beneficiary's bank may request the issuing bank to give additional confirmation by another bank. It is said Add Confirmation in practices. f. Negotiating Bank A Negotiating Bank is the hank nominated or authorized by the issuing bank to pay, to incur a deferred payment liability, to accept drafts or to negotiate the credit.

g. Reimbursing Bank A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement of negotiation / acceptance / payment lodged with it by the negotiating bank or accepting bank. It is normally the bank with which the issuing bank has account from which payment is to be made. Reimbursement claims in foreign exchange business settled by the Uniform Rules for Reimbursement (URR)ICC publication no. 525. 2. Import Business: Import trade in Bangladesh is controlled under the Import and Export control Act 1950. Authorized Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E. circular and other instructions from competent authorities from time to time. Import payments during 2007-08 amounted to US$ 21600 million (27.30% of GDP) compared to US$ 17157 million (25.10% of GDP) in 2006-07 showing an increase of 26.0% in 2007-08 compared to 16.30% increase in 2006-07. The significant increase in the overall volume of imports stemmed from imports of capital goods, consumer & intermediate goods, and imports by EPZs. The Year Wise Import as Follows: Year Import 2002 5559.27 2003 5162.51 2004 7698.29 2005 9337.49 2006 12631.60 2007 18821.40

32

Business

Import Busine ss

6 17%

1 16%

1 2 3 4 5 6

5 17%

2 16%

4 17%

3 17%

Fig: 1.1 Performance of Import Business a. Process to Open a L/C If a party comes to open a LC at this branch then the following requirement is requireda. Current A/C b. Registration Certificate /IRC c. TIN /VAT certificate d. Insurance Cover Note e. Indeed / Invoice f. LCA(Letter of Credit Authorization) agreement form g. Foreign Exchange Regulation Act, 1947 form (IMP) Other payment of the partya. Insurance cover note with payment order commission and vat b. Margin (% of LC value) Then the bank opens the LC and sent to the beneficiarys bank. In case of foreign LC, the documents are sent through swift Then the exporter or beneficiary sent the goods and beneficiary bank sent document which refers that the party has sent the goods.

33

 And this issuing bank has to pay to the beneficiarys bank. For this the branch sent the payment amount to the HOID (Head Office International Division) and the HOID pays this amount through NOSTRO A/C of the bank. The duplicate copy of the LC needs to release the goods from the customs. And the bank supplies this document to the party to release their goods from the custom. The bank has to inform about the LC and goods to the Bangladesh Bank in Foreign Exchange Regulation Act, 1947 form (IMP). And then the LC is closed. C.prosediors Prepare a L/C To prepare a L/C the branch takes care on the following points: L/C Number Date and place of expiry Presentation period Beneficiary Amount Tenure of the draft Payment Bill of lading Pre-shipment Inspection Special conditions Part-shipment and Trans shipment 3. Export Business: The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh
34

Place and date of issue Shipment date Applicant Advising Bank Availability Documents required UCP Bill of Exchange Data content Authenticity of the credit Port of shipment and port of destination

unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports.

The Year Wise Export as Follows: Year Export Business 2002 2524.63 2003 1894.77 2004 3075.52 2005 3639.34 2006 4932.90 2007 9142.70

Export business

6 17%

1 16%

1 2 3 2 16%

5 17% 4 17% 3 17%

4 5 6

Fig: 1.2 Performance of Export Business a. Back to Back L/C: A back to back mechanism involves two separate L/C. One is master export L/C and another is back to back L/C. On the strength of Master L/C, Bank issues Back to Back L/C. Back to Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling. It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.
35

Features of Back to Back L/C: An Import L/C to procure goods /raw materials for further processing. It is opened based on Export L/C. It is a kind of Export Finance. Export L/C is at Sight but back to Back L/C is at insurance. No margin is required to open Back to back L/C Application is registered with CCI&E Applicant has bonded warehouse license. L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C. Insurance period will be up to 180 days. The import L/C is opened for 75% of the value of Export L/C. Here L/C issued against the lien of export L/C. Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out. (1) Documents Required for Opening a Back-to-back L/C: In Al-Arafah Islami Bank Ltd Principal Branch, following papers/ documents are required for opening a back-to-back L/C1. Master L/C 2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC) 3. L/C Application and LCAF duly filled in and signed 4. Performa Invoice or Indent. 5. Insurance Cover Note with money receipt. 6. IMP Form duly signed. In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C 1. Textile Permission. 2. Valid Bonded Warehouse License. (2) Procedure for Foreign Documentary Bill Purchase (FDBP):
36

If all the documents are in order then the bank purchase the documents. Several things should be checked at the time of purchasing. How much back-to-back and PC (packing Credit) facility the client has taken. After taking all these charges, the rest amount is paid to the client and a FDBP account is opened.

(3) Foreign Documents Bills for Collection (FDBC): Al-Arafah Islami Bank Ltd forwards the documents for collection due to the following reasons: If the documents have discrepancies If the exporter is new client The banker is in doubt.

Foreign documentary bills for collection signifies that the exporter will received payment only when the issuing bank gives payment. The exporter submits duplicate EXP from and commercial invoice subsequently.
4. Foreign Remittance

Foreign remittance plays a significant role in a banking system though economy system of a country. Like other Al-Arafah Islami Bank Ltd also have a department of foreign exchange dealing. Mostly US dollar, Euro, British pound and other remittances like Australian dollar, Canadian dollar, Malaysian ringgit and currencies of Middle East have been dealing here. Other Al-Arafah Islami Bank Ltd buys and sells all regular kinds of foreign currencies though foreign exchange department is not available in all the branches of Al-Arafah Islami Bank Ltd. a. Outward Remittance: On March 24, 1994 Bangladesh Taka was declared convertible for current international transaction. As a result remittance becomes more liberalized. Outward remittance include sale of Foreign Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose. Traveler's Cheque Travelers Cheque (TC) is an instrument for a specific amount of widely accepted foreign currencies, issued in favor of Travelers/ Visitors to carry foreign exchange for meeting heir expenses in abroad.
37

Traveler's cheque may be in different currencies, such as US Dollar, Pound Starling, Japanese Yen, Saudi Riyal, Canadian Dollar, French Frank, German Marks, and Swiss Frank etc. But traveler's cheque is not issued in this branch. Issuance of Outward DD and TT : ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or foreign nationals as per their entitlement. But foreign TT and DD are not issued in this branch. b. Inward Remittance: The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc. but also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes, TC, DD and similar instrument for protecting the bank from probable loss as well as safety of the bank officials concerned. But this type of purchase is not done in this branch. c. Collection of Foreign Currency Instrument: Principal Branch collects foreign remittance through the following instruments on behalf of their customer Money Gram Express money Instant cash Placid express Remit master

2. SWOT ANALYSIS of AIBL SWOT analysis facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization. a. STRENGTHS: Bank reputation AIBL has already established a favorable reputation in the banking industry of the country with its significant business growth. With in a period of 14 years, AIBL has already

38

established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have leaded them to earn a reputation in the banking field. Corporate Culture AIBL has an interactive corporate culture. Unlike other local organization, AIBLs working environment is very friendly, interactive and informal. There are no hidden barriers or boundaries while interactive among the superior or the subordinate. The environment is also lively and since the nature of the banking job itself is monotonous and routine, AIBLs lively work environment boosts up the sprit and motivation of the employees. Team Work at Mid level & Lower level At AIBLs mid level and lower level management, there are often team works. Many jobs are performed in-groups of two or three in order to reduce the burden of the workload and enhance the process of completion of the job. People are eager to help each other and people in general are devoted to w Quality: Al-Arafah Islami Bank strives to endow its customers with appreciable quality in every service it provides. Customer satisfaction claims the highest priority, as it should be in any service-oriented organization. Adaptability :Al-Arafah Islami Bank draws its strength from the adaptability and dynamism it possesses. It has quickly adapted to world class standard in terms of banking services. Al-Arafah Islami Bank has also adopted state of the art technology to connect with the world for better communication to integrate facilities. Efficient Management All the levels of management are solely directed to maintain a culture for the betterment of the quality of the service and for developing a brand image in the market through the organizations wide team approach and horizontal communication system.

39

Human Resource Expertise One of the key-contributing factors behind the success of Al-Arafah Islami Bank is its HR who is highly trained and most competent in their own respective fields. Al-Arafah Islami Bank provides its employees with training both in-house and outside job. Financial Strength Al-Arafah Islami Bank is a financially sound company. As a result customers feel comfortable and more secure while dealing with the bank. Its already established its position in the banking industry of Bangladesh. They achieved a high growth rate accompanied by an impressive profit growth rate in 2006. The number of deposits and the loans and advances are also increasing rapidly from year to year.\ b. WEAKNESSES Limited Workforce Al-Arafah Islami Bank has very limited human resources compared to its financial activities. There are not many people to perform most of the tasks. As a result many of the employees are burdened with extra workloads and works late hours without any overtime facilities. This might cause high employee turnover that will prove to be too costly to avoid. Liquidity Crisis Average asset quality and tight liquidity position is another weakness of Al-Arafah Islami Bank Limited. Banks asset quality is not up to the standard as SCB or CITI N.A. or Prime Bank. Sometimes the bank faces liquidity crisis especially during the period of vacation which needs to be checked by the bank otherwise the bank will be in deep trouble in near future.

Lack of Qualified System Operators Currently AIBLs Head office and in the Branches, there are system operators who do not have any background academic knowledge on computer applications. As a result they frequently make mistakes in the preparation of various computerized statements. At the same time, computer operators do not have the skill to carry out their activities. Above all its MIS is still on primary
40

stage which needs to be modified as soon as possible to compete in the market. c. OPPORTUNITIES Government support Government of Bangladesh has provided its full support to the banking sector for a sound financial status of the country, as it is becoming one of the vital sources of employment in the country now. Such government concern will facilitate and support the long-term vision for AlArafah Islami Bank. Evolution of Online Banking Emergence of e-banking will open more scope for Al-Arafah Islami Bank to reach the clients not only in Bangladesh but also in the global area. It will also facilitate wide area network in between the buyer and the production unit of Al-Arafah Islami Bank Ltd. to smooth operation to meet the desired need with least deviation. Diversification AIBL can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting client service in its merchant banking division. Product line proliferation In this competitive environment AIBL can expand its product line to enhance its Sustainable Competitive Advantage (SCA). As a part of its product line proliferation, AIBL can concentrate more on SME & Agro based industrial loan because these two sectors have huge potential. d. THREATS Multinational Banks: The emergence of the multinational banks and their rapid expansion poses a potential threat to the new PCBs. Due to the booming energy sector, more foreign banks are expected to arrive in Bangladesh. Moreover, the already existing foreign banks such as Standard Chartered are now pursuing an aggressive branch expansion strategy. These banks are establishing more branches countrywide and are expected to get into for operation soon. Since the foreign banks have tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of
41

grabbing the lucrative clients. Upcoming Banks: The upcoming private local banks can also pose a threat to the existing PCBS. It is expected that in the next few years more local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to complete against an on slaughter of foreign banks. Mergers and acquisitions: The worldwide trend of mergers and acquisition in financial institutions is causing concentration in power in the industry and competitors are increasing in power in their respective areas. Contemporary Banks: The contemporary banks of AIBL such as Dhaka Bank, Prime Bank, Eastern Bank and DutchBangla Bank are its major rivals. Prime Bank and others are carrying out aggressive campaign to attract lucrative corporate clients as well as big time depositors. AIBL should remain watchful about the steps take by these banks as these will in turn affect AIBL strategies. Political Instability: Unstable political situations cause great distraction in the otherwise smooth flow of business. Sudden Hartals and other political programs sometimes present problems for the employees (esp. female employees) in commuting to and from the office. Political instability also promotes a weak law and order system leading to an increase in crime rate in the society. This might also be considered as a potential external threat for a financial institution. G. Ending Part of the Report: 1. Findings of the Study: Some findings of Al-Arafah Islami Bank Limited, Uttara Model Town Branch are given below In Foreign Exchange Department they follow the traditional banking system. The entire Foreign Exchange procedures are not fully computerized. Service personnel are working under pressure because they have to deal with large number of customer every day.
42

Technology that AIBL is using for their banking system is not updated. Now there is some international bank in Bangladesh, they are very fast and very up dated. The Al-Arafah Islami bank is too much centralized. For each and every work, branch office has to get permission from the head office. The head office tightly controls each and every branch

Lack of information to get and sitting arrangement in the branch is a trouble for the customers. Advertising and promotion are the weak point of Al-Arafah Islami Bank Ltd. AIBL does not have any effective marketing activities. Others banks have betters marketing strategy. Al-Arafah Islami Bank Ltd has less amount of foreign exchange business compare to other Banks. Lack of competitiveness in product and service innovation.

2. Recommendations: The fast pace of growth in the Islamic financial sector and the emergence of conventional finance companies offering Islamic products and services has brought critical attention to key issues facing this sector. Some of the core issues identified after analyzing this report that AlArafah Islami Bank Limited should give lots of attention in many sectors, which are given below. Increased market transparency is needed to enhance credibility and increase consumer confidence. The application of relevant international accounting standards will enhance transparency of Islamic financial institutions and the comparability of financial statements. At this stage, Islamic product standards and accounting practices are not yet accepted globally.

Increased education is needed to ensure that the Shariah standards are understood and accepted across the industry by regulators, international organizations, and the private sector. Foreign exchange department should be fully computerized and reduce the paper based work to make it more smooth and faster.
43

 A robust regulatory and supervisory framework is necessary to maintain financial stability and growth of Islamic finance as a viable, resilient, and sustainable sector. The unique characteristics of Islamic banking operations and Islamic financial instruments require the development of a regulatory-supervisory framework that adequately addresses the requirements of this industry. The authority of AIBL should exert pressure on Government bodies to run proper and sufficient application of Islamic banking laws in Bangladesh. At the beginning time of opening of Letter of Credit, every officer should check the required documents very carefully whether there is any mistake or not. Inclusion of more subjects based on the Quran and Sunnah in the Training courses of the Islami Bank Training & Research Academy in order to develop human resources having morally. Arrangement of monthly /quarterly training courses /workshops for the clients should be selected by the Branches in order to promote Foreign Exchange activities of the desired level. To fulfill the vision of "mass banking" this Bank should provide more foreign exchange and other sorts of facilities to new customers/new entrepreneurs /new businessmen/ new companies etc. AIBL should give more emphasize on their marketing effort and try to increase their sales force. AIBL should try to attend different type of target customers. AIBL should Introduce Islami Debit and Credit Cards as soon as possible. They should carryout more promotional activities to make clients aware about their offers. It was observed that, AIBL is absent in TV, Print Media, Bill Boards, and Sponsorships etc. The Bank should advertise about itself and its offers so that it can attract more customers that will increase the business volume of the bank.

44

 AIBL should give the highest attention on recovery of bad things related to opening LC. This concerns the worst image of the Bank to the clients AIBL should utilize "Internship Program" as one kind of promotion policy to encourage its present and potential customers/clients. Because, young generations are the vital post of our economy. To do so this Bank should provides facilities to the internees through proper placement and practical operations as well as job certainty to those who bring introduced themselves the best performers in doing their particulars. 3. Conclusion: The concept of Islami Banking is several decades old. The third attempt to establish an Islamic Financial Institution took place in Pakistan in the late 1950s with the establishment of a local Islami Bank in a rural area (Wilson 1995. After 45 years, Islamic Banking system is established in Bangladesh as a financial institution that is named Al-Arafah Islami Bank Limited.

Al-Arafah Islamic Bank Limited is a Bank which operates its activities according to Quaran and Sunnah. Its banking activities based on profit \ loss sharing. It does not create any illegal pressure on client. On the other hand, every client is not 100% honest. So they are taking investment from AIBL and after maturity, they are showing loss on that project intentionally. So AIBL is losing some profits from their investment. For this reason, Al-Arafah Islami Bank Limited has closed its bai mechanism. Now it is not providing investment under this mechanism. Threats of Al-Arafah Islami Bank Limited are - at this time, many financial institutions have commenced their financial activities according to Islamic shariah. This type of organization will create more competition in the financial market. So it is a threat for Al-Arafah Islami Bank Limited. Although it is facing some problem, it has a bright future and day-by-day it is enhancing its financial activities over the country. Many organizations are following to AIBL and they are starting their business based on Islamic shariah in the economy of Bangladesh. After all, Al-Arafah Islami Bank is increasing its reputation day after day through providing various sorts of innovative product and service. Moreover, AIBL,s customer services and
45

management are also being enhanced. Foreign Direct Investment Department will be fully computerized soon. H. Appendix Part: 1. Bibliography Ivancevich, John M., and Steven J. Skinner. Business for the 21st Century. Boston: Irwin, 2003. Kotler, Philip. Marketing Management. 9th ed. New Delhi: Prentice-Hall, 1999. Kinnear, Thomas C., and James R. Taylor. Marketing Research: An Applied Approach. 5th ed. New Delhi: McGraw Hill, 2003. Annual Report, Al-Arafah Islami Bank Limited, 2008 - Published by AIBL. A Journal of Islamic Banking Published by AIBL

46