ACKNOWLEDGEMENT

All praises for Allah, the Omnipresent, Omnipotent and Omniscient, who has
enabled us to complete the report work as well as to submit term paper.

We feel it a proud privilege to declare our profound respect, deepest sense of

intense gratitude, heartfelt indebtedness and kind regards to our reverend teacher
and supervisor Lecturer, Shuvabrata Saha, Department of Accounting and
Information Systems, Comilla University, for his genial encouragement, scholastic
guidance, boundless co-operation, constructive advice and intellectual instructions
during our report work and immense help in successful completion of the term
paper.

We especially grateful to Mr. A .K. M. Fakrul Islam, Manager of Al-Arafa Islami

Bank, Comilla Branch, for helping us of taking interviews of different bankers.
We express our earnest sense of respect to all the bankers of Al-Arafa Islami
Bank, Comilla Branch, for their valuable co-operation, inspiration and
encouragement during the whole report work.

We would like to express heartfelt indebtedness to our beloved parents, sisters and
brothers for their never ending prayer, encouragement, sacrifice and dedicated
efforts to educate us to this level which can never be forgotten.

The Authors

EXECUTIVE SUMMARY

This report has prepared as a requirement of The theories and practices of

banking course. The report is based upon the Firsthand knowledge of banking
activities. This Report will help us know about overall banking activities of
AIBL. The report will also focus on total Banking activities and performance
analysis of AIBL.

Primary data has been collected from branch and Secondary sources of data have
been collected & used to gather information in this report. The report has analyzed
the overall banking activities & financial performance for the term of last two
financial years.

The aim of the study is to provide a clear notion about the firsthand knowledge on
overall banking activities which will assist us to gather knowledge and enrich our
selves on banking activities to face on growing demand of job market.

ORIENTATION OF THE STUDY

Introduction:
Financial Institutions historically have been distinguished by the types of services they
provide. In recent years Financial Institutions have diversified their services by creating new
subsidiaries that perform additional services or by merging with other types of financial
institutions .Al-Arafah Islami Bank Ltd was incorporated in Bangladesh as a one of the leading
islami banking company. We have studied about the overall activities of AIBL. This has given
us the opportunity to know more on different aspects of the banking system.

Objectives of the study:

Objectives regarding this study are as follows:

To understand the environment, functions and management of AIBL.

To gather firsthand knowledge about banking activities.
To know about the service products of AIBL.
To fulfill academic requirement.
To identify major strengths of AIBL in retail products in respect to other bank.

Methodology:
For preparing this paper, we used both Primary and Secondary data.
Primary data
Most of the necessary information has been collected by from the personal observation
and one to one discussion with the relevant officials. Throughout the tenure of our study, we
observed the activities of different departments and that gave us a great opportunity to collect
information and learn more.
Secondary data
The details of the bank and the selected department have been collected from secondary
sources. The relevant information of this bank has been collected from annual reports, web
pages and other published documents
Scope of the study:
In spite of limitations we also enjoyed some facilities to complete our term paper. The
employees whose held a responsible post in all the departments helped us lot. They gave us all
essential data and conversed with us. Our honorable course teacher Shuvabrata Saha also helped
us a lot. He gave us guidelines how to prepare our Term Paper more attractive and perfect. This
bank has given us the opportunity to observe the banking environment for the first time indeed.
We got an opportunity to gather knowledge different departments of the bank.

Limitations:
Although it has been tried on the level best to make this report based on facts and
complete information available, there are some limitations that are inevitable. They are
following:
The main obstacle while preparing this report was time. In spite of being busy with the
banking activities, the AIBL officials have tried their level best to co-operate with us, but
it wasnt enough to highlight everything deeply.
Confidentiality of information was another barrier that hindered the study.

Why we choose AIBL?

Islami Banking System is becoming more and more attractive day by day to peoples
irrespective of nations, religious, colors and species. More than 300 Banks & financial
institutions are serving Islami banking throughout the world. At present in our country 7 full
fledged Islamic Banks are working successfully. And other traditional banks have Islami
Banking Wings conducting Shariah based banking activities. Recent Development of
Bangladesh Government Islamic Investment Bond (BGIIB) is the milestone for shariah based
banking practices in Bangladesh. In our country, Al-Arafah Islami Bank Limited is a renowned
shariah based islami bank. According to CRAP, there are 7 A category banks in our country.
Among them AIBL is in number 7. Thats why we choose Al-Arafah Islami Bank Limited.

OVERALL BANK IDENTITY

Historical Background Of Bank:
With the objective of achieving success in life here & hereafter following the way
directed by the Holy Quran and the path shown by Rasul (SM) Al ArafahIslami Bank Ltd was
established (registered) as a public limited company on 18 June 1995. The inaugural ceremony
took place on 27 September 1995.
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. The equity of the bank
has stood at Tk. 11,989.11 million as on 31 December 2011, the manpower was 1,807 and the
number of shareholders was 54,386. It has achieved a continuous profit and declared a good
dividend over the years. High quality customer service through the integration of modern
technology and new products is the tool of the bank to achieve success. The bank has a diverse
array of carefully tailored products and services to satisfy customer needs. The Bank is
committed to contribute significantly to the national economy. It has made a positive
contribution towards the socio economic development of the country with 88 branches ofwhich
21 is AD throughout the country.
They are pledge-bound to convert the Bank into aIslami Bank on global standard which
will be dynamic in actions, progressive in ideas, honest in dealings, correct in judgment,
futuristic in attitude, fair in approach, polite in behavior and devoted to high quality service to
customers. Their aims are for boosting modern management, advancedtechnology, good
profitability and steady growth transparency. They are also firmly committed to disclosure and
compliance to shariah and regulatory authorities. Today the bank is an agile organization which
promotes innovation, encourages improvement, values sense of urgency and develops people
who accept challenges and turns them into opportunities.
Vision:
To be a pioneer in Islami Banking in Bangladesh and contribute
Significantly to the growth of the national economy.
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 service.
Maintaining high standard of business ethics.
Balanced growth.
Steady & competitive return on shareholders' equity.
Innovative 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.
Involving more in Micro and SME financing.
5

Commitments:
It is a customer focused modern Islamic Banking making sound and steady growth in
both mobilizing deposit and making quality Investment to keep its position as a leading
Islami Bank in Bangladesh.
To deliver financial services with the touch of their heart to retail, small and medium
scale enterprises, as well as corporate clients through their branches across the country.
Their business initiatives are designed to match the changing trade & industrial needs of
the clients.

Special Features of Al-Arafah Islami Bank Ltd.:

All activities of the bank are conducted according to Islamic Shariah where profit is the
legal alternative to interest.
The bank's investment policy follows different modes approved by Islamic shariah based
on the Qur'an & Sunnah.
The bank is committed towards establishing welfare oriented banking system, economic
upliftment of the low-income group of people, create employment opportunities.
According to the need and demand of the society and the country as a whole the bank
invests money to different 'Halal' business. The bank participates in different activities
aiming at creating jobs, implementing development projects of the government and
creating infrastructure.
The bank is committed to establish an economic system resulting in social justice and
equitable distribution of wealth. It is committed to bring about changes in the
underdeveloped rural areas for ensuring balanced socio economic development of the
country through micro credit program and financing of SME's as well.
According to Mudaraba system, the depositors are the partners of the investment income
of the bank. About 70% of the investment income is distributed among the Mudaraba
depositors.
To render improved services to the clients imbued with islamic spirit of brotherhood,
peace and fraternity and by developing an institutional cohesion.
The bank is contributing to economic and philanthropic activities. AIBL English
Medium Madrasah and AIBL library patronize by the Bank are two such examples.

BRANCH IDENTITY

The branch identity with the following matter:

Starting Time: Comilla Branch of AIBL is established on 29th November, 1998.
Name of the Manager: Mr. A. K. M. Fakrul Islam.
Joining Date of Manager: 3rd December 2009.
Objectives of the Branch:
1) To achieve the positive economic value added each year.
2) To be the market leader in customer satisfaction
3) To be one of the financial institutions in Comilla.
Banking Hour: Service Hour: 10 am to 4 pm, Working Hour: 1 pm to 6 pm.
Technology: This branch is fully connected with internet. The bank performs all activities
through the Software named Ababil millimum.
Number of Employee: At present, there are 22 employees who engaged in this branch.
Number of Transaction: The average daily amount of transaction is about 500. The average
daily payment is about 1.5 corer and average daily received is about 1.5 corer.

ACTIVITIES OF BANK
Generally all activities of bank are performed under three sections. These are discussed bellow
in detailed-

Activities of Bank
1) Generral
banking

2) Deposit

3)Investment

4)Clearing

1) General Banking: General banking consists of three major sections. These are-

General Banking

A ) Cash

B) Foreign
remittance

a) Receive

b)Payment

C) Foreign
exchange

I.
II.
III.
IV.

Cash
Draft(cash)
Every bill
(cash)
FDR (cash)

I.
II.
III.
IV.

Cheques
Draft
Every bill
FDR

A) Cash section:
In cash sections all kinds of cheques, draft, bill, FDR, are debited and credited here.
Generally banks refer the cash sections in general people .In cash department people deposit
their money and withdraw their money when they needed. And banks are liable to pay the
money on clients demand. Bank provides their best security of deposited money. It is
mentionable that all money and assets of this bank are under insurance policy. In this branch
daily average number of transactions is about 300, and the amount of transactions is 2.5 cores to
3 cores.
Generally cash department consists of two major parts:
a) Receive:
In receive section all kinds of cash receive are credited to clients account. Before
crediting bank examines some conditions which is signed by clients at the time of
opening that account. These conditions are Amount of deposit will not be exceeds signed amount.
If the depositors deposit money exceed signed amount then bank examine the
source of income.
Any amount deposit in the account of OSAMA BIN LADEN and AL-QUEDA
NETWORK would not be credited here.
If the deposit amount exceeds tk. 7, 00,000 then bank prepare CTR (cash
transaction report) which is sent to central bank.
If the bank suspect that this deposit amount is under suspicious transaction then
bank prepare a STR (Suspicious Transaction Report) which is sent to central
bank through head office.
According banking Act. 1991,if any fake note is identified by receiver then bank
should inform the police station, but in considering the clients reputation bank
generally not Inform police station, but they destroy these notes.
It is mentionable that, the total amount of deposit of this branch is 150 cores. And daily
average receive is 1.5 to2 cores.
b) Payment:
Payment section is the main part of cash department. Payment section performs all kinds of
activities of debiting client accounts. In payment section bank pay all kinds of cheques, bill,
draft, FDR, etc. payment procedure is completed by following steps1) At first clients submit their cheques to verifying officer.
2) Verifying officer verify the following mattersIn case of Bearer cheques:

Name
Date
Amount in digits
Amount in written
10

 Check amount to be same in digit and written

Check account balance
Signature.
In case of order cheques:

Name of bearer authorized by account holder

Date
Amount in digits
Amount in written
Check amount to be same in digit and written
Check account balance
Signature.

In case of draft, bill, FDR:

Assume draft, bill, FDR as bearer cheques bank verify all necessary condition which is
mentioned in case of bearer cheques. If the account holder bears the cheque then in the place of
name self have to be written. In other cases the name of the bearers.
3) After verifying these cheque are transfer to the casher.
4) Cashier records it payment register and pay the amount to the customer.
Cheques: Cheques are two types:
1. General cheque
2. Cross cheque
Cross cheque: Bank has some consideration when cashier payment the cross cheque. Generally
cross cheque means the transfer balance of one account to another account .The consideration
are given below:

Account name
Pay To
Amount
Account Holder Signature
If the above condition are fulfilled then bank transfer the balance from one account to
another account.
Dishonor of cheque: From the following reason cheque are dishonor which are given below:
Stale cheque:If the cheque is not present to the bank within 6 month from the date of
issue.
If mismatching between digits and written amounts.
If the signature is overwriting.
If the mention amount is not satisfied by the balance of depositors account.
Post cheque: Post cheque is kind of cheque which is not payment by the bank because of some
specific defects.
11

Cash register: Cash register maintains the following register:

Receive register
Payment register
cash closing register
Vault register
Stamp register
Cash in register for office
Cash in register for others.

Report submit: Report submit is necessary if the daily client amount is more than 700000 and
weekly amount is more than Tk10,00,000 and total monthly statement is prepared by this branch
and these report transfer to the head office and head office transfer the Central Bank. At
payment section the, the average daily total payment is nearby 1.5 core.
Cheque lost: If the client cheque is lost then client should inform the bank and bank take
necessary against losing cheque..
B) Foreign Exchange:
Generally AIBL do not perform the activities of foreign exchange directly .AIBL perform
foreign exchange through with other branches nearby Dhaka and Chittagong if any client want
to purchase or exchange something.
C) Foreign Remittance:
AIBL provides these services on demand of customer .In bank when provide remittance to
customer bank also verify customer signature and signature is correct bank pay the amount

Foreign Remittance Service @ AIBL

Service
Anexpress
Aftab Currency
Bangladesh
Money
Transfer(BMT)
Eldorado
Kushiara
KS
Money Gram
Orchid Money Gram(OMT)
Ria

Digit
02(Alphabet)+9 Digits
13 Digits
BMT+5 Digits

Alphabet(02)+ O5 Digits
05 Digits
08 Digits
06 Digits
02 Digits Of The Country
Code + 10 Digits
Xpress Money
16 Digits
Western Union
10 Digits
Transmit
International Money Ltd.
12

Account
Necessary
Not Necessary
Necessary

Online
Yes
No
Yes

Not Necessary
Not Necessary
Not Necessary
Not Necessary
Not Necessary
Not Necessary

No
Yes
No
Yes
Yes
Yes

Not Necessary
Not Necessary
Not Necessary

Yes
Yes
No

2)Deposit Section:
In deposit section, banks receive the money of client under various account & term and
provide highest security of deposit.

This bank receives money through by following deposit scheme and provides various facilities
to withdraw money.
Product name
Al-Wadeah Current Deposit
MUDARABA SAVINGS DEPOSIT
MUDARABA SAVINGS DEPOSIT (STAFF)
MUDARABA SAVINGS DEPOSIT (STUDENT)
MUDARABA SAVINGS DEPOSIT (FARMER/FREEDOM FGIHTER)
Mudaraba Short Notice Deposit

Profit rate
0%
4%
4%
4%
4%
3.5%

MTDR
Product Name
MUDARABA 03 MONTH TERM DEPOSIT
MUDARABA 06 MONTH TERM DEPOSIT
MUDARABA 12 MONTH TERM DEPOSIT
MUDARABA 24 MONTH TERM DEPOSIT
MUDARABA 36 MONTH TERM DEPOSIT
MUDARABA 01 MONTH TERM DEPOSIT
MUDARABA PROFIT PAYABLE TERM DEPOSIT 5 YEARS (PTD)
MUDARABA PROFIT PAYABLE TERM DEPOSIT 2 YEARS (PTD)
MUDARABA PENSION DEPOSIT SCHEME(PDS):05 YEARS
MUDARABA PENSION DEPOSIT SCHEME(PDS):02 YEARS
MUDARABA PENSION DEPOSIT SCHEME(PDS):03 YEARS
MUDARABA 6 YEARS DBDS
MUDARABA 7.6 YEARS DBDS
MUDARABA 9 YEARS DBDS
13

Profit rate
12.5%
12.5%
12.5%
12.5%
12.5%
12.5%
13.33%
13.33%
12.6%
12.6%
12.6%
-

Product Name
MUDARABA 05 YEARS ITD
MUDARABA 08 YEARS ITD
MUDARABA 10 YEARS ITD
MUDARABA 12 YEARS ITD
MUDARABA 02 YEARS ITD
MUDARABA 03 YEARS ITD
MUDARABA 10 YEARS ITD
MUDARABA 12 YEARS ITD
MUDARABA 05 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 06 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 10 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 12 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 13 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 15 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 18 YEAR HAJJ DEPOSIT (MHD)
MUDARABA 20 YEAR HAJJ DEPOSIT (MHD)
MUDARABA PENSION SCHEME: 5 YEARS
MUDARABA PENSION SCHEME: 10 YEARS
MUDARABA PENSION SCHEME: 15 YEARS
MUDARABA PENSION 3 YEARS LDS
MUDARABA PENSION 5 YEARS LDS
MUDARABA PENSION 8 YEARS LDS
MUDARABA PENSION 10 YEARS LDS
MUDARABA PENSION 12 YEARS LDS
MUDARABA PENSION 3 YEARS MDS
MUDARABA PENSION 4 YEARS MDS
MUDARABA PENSION 5 YEARS MDS
MUDARABA PENSION 6 YEARS MDS
MUDARABA PENSION 7 YEARS MDS
MUDARABA PENSION 10 YEARS MDS
MUDARABA PENSION 12 YEARS MDS
MUDARABA PENSION 15 YEARS MDS
MUDARABA PENSION 20 YEARS MDS
MUDARABA PENSION 3 YEARS KDS
MUDARABA PENSION 6 YEARS KDS
MUDARABA PENSION 10 YEARS KDS
MUDARABA PENSION 12 YEARS KDS
MUDARABA PENSION 15 YEARS KDS
MUDARABA PENSION 18 YEARS KDS
MUDARABA PENSION 20 YEARS KDS
14

Profit Rate
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%
12%

 They also offer special Deposit Scheme for Student (Minor) Account, Freedom Fighter
Account, Farmer Account. The account opening procedure is as like as other account. But
the initial opening amount is 100 taka. They don not charge any service charge against these
accounts. On maturity they get 12% profit. But before maturity if they close the account they
get 4% profit. In case of minor account after their 18 age their accounts are automatically
converted into normal accounts.

Deposit Section

Account Opening

Active ATM Card

Current A/C

Savings A/C

Fixed A/C

15

Account Opening Procedure (Current & Savings)

1. Collecting Application Form:
The interested client first collect application form from the fornt desk or account opening
desk.
2. Filling Up The Application form & Its information:
After submitting the required document the interested client get a application form &
according to the officer direction he has to fill up the application form. The form
contains the following information :

name of the account

name of the account holder

types of account
types of organization
currancy (taka,dollar,euro)
declaration of maintence of account (single,jointly,any one)
name of account holder if more than one
client's other aaccount ( if any)
introducer's information(name,acc. no. id no. telephone no. signature along with date )
initial deposite (minimum 500 for current, 100 for savings)
organization's address
trade licence no.
register authority & country
source of finance
commencement & signature

16

17

Specimen Of Application

Form

3. Specimen signature:
To maintain bank account specially to withdraw money or for identification of clients the
specimen card is very important. To open an account after filling up the application form
the clients give three specimen signature in the form. Here applicant gives signature as
like as signature he gives in the application form. Applicant

4. Attachment of Required document:

Person
ID card/passport/legal document
chairman certificate/birth certificate

as

Organization
Trade
license,
memorandum,
article of association, deed

Two color photographs of account

holder attested by introducer

Two color photographs of account

holder attested by introducer

One color photograph

attested by account holder

One color photograph of nomine

attested by account holder.

of

nomine

18

5. Submission of Application Form:

After attachment of required documents with the application form the applicant submit
the form to the respective officer. Getting this form the officer Scan the form to verify &
give entry to their central database& issue an account no to the account holder. The
officer also open an online bank account on the same account number for the account
holder.
6. Collecting Deposit receipt & Paying Primary Deposit:
Getting the permission of opening account the applicant collect the deposit receipt & pay
initial deposit in the bank counter to his issued account number. The initial amount is
different for different types of accounting. The initial amount for Current A/C is
Tk.1000, for Saving A/C is Tk.100.
7. Receiving Cheque Book:
With the receiving of the initial deposit the account opening procedure comes to end.
After this the officer issue cheque book on clients name to operate his account.

Method of Opening Fixed Account:

1. Collection, fill-up & submission of application:
To open a fixed account the applicant has to maintain almost same procedure. The
applicant collects form & fill- up the form. After filling up the form applicant submit it to
the officer. Here nominee is an important issue. So, the applicant must mention the name
& percentage of share of profit. The nominee gets profit in absence of the applicant after
maturity of the fixed deposit.
2. Collecting fixed deposit receipt:
If bank grant the application the applicant deposit the amount mentioned in application &
give the fixed deposit receipt. The receipt contain the amount of money, time of fixed
deposit, rate of profit& other information. The receipt number is considered as clients
account number.

19

20

Specimen Of Fixed Account Application Form

ATM Service:
AIBL has ATM service around the country. They issue the ATM card along with the
opening of new account. But the existing account holders who do not have ATM card can get
the card by filling up the ATM application form. There are some information about ATM card1. The loss of Bangladesh shall govern all the terms and conditions mentions in this form
2. AIBL will accept application for issuance of fast cash ATM card service on prescribed
from dully filled in and signed by authorized signatories of the account only(subject to
verification ).
3. The ATM card is, and will at all times, be the property of the bank and shall be returned
to the bank unconditionally and immediately upon the banks request. the bank reserves
the right to cancel / withdraw at any time without prior notice or to renew at its direction,
the ATM / or any services thereby offered at any time.
4. The bank reserves the right to vary, modify and add to these terms and conditions and
levy charges at any time , without notice and without assign any reason whatsoever.
5. The bank shall debit the designated account for the amount withdrawn from any
automated teller machine (ATM) / point of sale (POS) or any other payment gateway in
Bangladesh by the use of card..
6. The card holder will have to maintain sufficient funds in his/her account, in order to
facilitate continuity of service. This account will be debited with the amount of any
withdrawal and / or other transaction effected by the use of ATM card as well as the
related charges there to the banks tariff.
7. Inconsideration of issuing the card, the card holder undertakes to indemnify the bank
against all losses, claims, actions, proceeding, demands, damages, costs and expenses
incurred or sustained by the bank whatever nature and howsoever arising out of or in
connection with the issuance or use of the card, provided that the bank acts in good faith.
8. The card and pin are issued to the cardholder entirely at cardholders own risk and the
bank shall bear no liability whatsoever for any financial loss, any other loss, or damaged
whatsoever caused this issue whether directly or indirectly.
9. The Bank reserve the right to disclose, in strict confidence, to other institutions, such
information concerning the card holders account as may be necessary or appropriate in
connection with its participation in any Electronic Fund Transfer Network.

Chairman Mr. Badiur Rahman inaugurated the commercial launching ceremony of AIBL's
ATM/Debit card known as the 'Fast Cash' card
21

3)Investment Section:
AIBL dont provide any cash amount to the client. It provides loan to client as a form of
Investment in various sectors.

TABLE: Details of investment scheme (At a glance)

Sl
No.

01.

02.

Product
Name

Commercial
BAIMUAZZAL Investment
(GENERAL
)
Socio
Economic
Development
of Rural poor
BAIMUAZZAL
(GSIS)

03.

BAIMUAZZAL
(MEIS)

04.

BAIMUAZZAL
(CIS)

05.

Sector

BAIMUAZZAL
(SEIS)

Yes

Investment
Income
Range
Rate
12%
-

No

11%

50, 000-5, 00,

000(Beginning),
extend-7,
00,
000
(
in
continuing)

No

11%

Yes

10-11%

Consumer
Income Level

No

11%

Client
Security
Qualifications

1.Legal Entity
2.Naturee of
Business
3.Colletaral
1.Own capital
2.Nature
of
business
3.One
year
continuity
4.Halal
product
5.One Grantor
(blood
connected)
Medium
1.Own capital
Enterprise
2.Nature of
Business
3.One
year
continuity
4.Halal
product(except
gold & parlor)
5.Two Grantor
(blood
connected)
Consumer
1.Profession
Commodities 2.Income level
3.Other
income source
Small
1.Own capital
Enterprise
2.Nature
of
business
3.One
year
continuity
22

06.

4.Halal
Product(except
gold & parlor)
5.One grantor
(blood
connected)
1.Legal Entity Yes
2.Naturee of
Business
3.Colletaral
1.Legal Entity Yes
2.Naturee of
Business
3.Colletaral

H.P.S.M.
(LONG
TERM)

07.

H.P.S.M.
(SHORT
TERM)

08.

QUARD
AGAINST
TDR

Real Estate,
Big Vehicle,
Machineries,
House Loan
Real Estate,
Car
Loan,
Hospital &
Other
Services
Fixed
FDR Account Yes
Deposit
Holder
Receipt

N/A

An agro-project financed by Al-Arafa-Islami Bank-Limited

23

80% of FDR

Investment Procedure
STEP: 1

OPEN AN ACCOUNT

STEP: 2

PROPOSAL FOR LOAN

STEP: 3

RECEIVE DOCUMENTS OF COLLERAL/SECURITIES

STEP: 4

VALUATION OF SECURITIES/ COLLETERAL*

STEP: 5

TRANSFER TO HEAD OFFICE

STEP: 6

SANCTIONED BY HEAD OFFICE

STEP: 7

ACCEPTENCE BY CUSTOMER

STEP: 8

CONVET COLLETARAL INTO MORTGAGE

STEP: 9

STAMPING

STEP: 10

DISBURSMENT

*In terms of valuing securities/ collaterals the value of the security should be minimum 1.5
times more than the proposed investments limit.

INVESTMENT RECOVERY PROCEDURE

The bank authority takes the following steps for recovering loan:
1. Over telephone reminder,
2. Officially reminder by letter,
3. Remind by physical presence.
If the client cannot pay the loan amount within maturity date then the bank considers it as a bad
debt. Then the bank takes the following steps respectively:
1. Legal notice,
2. Auction notice (security based investment),
3. Legal notice to grantor (without security based investment),

24

4)Clearing Department
Clearing house is the place where respective of the banks is the sane locality meet each
day at an agreed time to exchange cheques, drafts and similar items on each other and to settle
the resulting balance.In Bangladesh Bangladesh Bank perform as central bank as well as
clearing house. Where Bangladesh Bank has no branch there Sonali Bank Ltd. performs as
clearing house on behalf of Bangladesh Bank. Al-Arafah Islami Bank Ltd. uses both Manual &
Automated Data Base System. By this way they settle the outward & inward cheques.
Manual System:
For settlement the officers visit Sonali Bank Ltd., Corporate Branch, Comilla with the
cheques& their list in the morning at 11.00 a.m. He delivers the cheques to the officers of
respective banks. Similarly he also receives the cheques drawn on his branch from the
officers of the other banks.
Then, the officials returns to their respective bank to meet again in the afternoon at 3.00
p.m. to return any dishonored cheques drawn on his branch from the officers of other
banks.
The officials of each bank computes the final balance payable or receivable by his
branch from other banks after taking into accounts the various amounts of receipts &
payments.
The final settlement is effected by the supervisor of the clearing house by debiting & crediting
the account of their clients banks.
Automated Data Base System:
Clearing House does not now mean a place because it has become automated. Now
officials get the facility on online setting on their own braches & settle the inter banking
transitions. In automated data base system the branch receives the image of cheques. They use
UB machine to justify the cheques they receive in their branch drawn on other banks. Then they
send their cheques to a character readable machine are called MICR (Megnated Ink Character
Reader). In every cheque there are some code numbers which they cannot understand normally.
But MICR can read this code after scanning these cheques& all information about these cheques
on their computer screen. They have to show their cheque within 12:30 p.m. to 5:00 p.m. to
central bank.

25

PERFORMANCE ANALYSIS OF AIBL

Current Ratio:

Current Ratio

2.57

1.109

100%

50%

0%
Current Ratio

2011
2.57

2010
1.109

Interpretation: The current ratio is a popular financial ratio used to test a company's liquidity
(also referred to as its current or working capital position) by deriving the proportion of current
assets available to cover current liabilities. In theory, the higher the current ratio, the better.
From this graph it shows that AIBLs current ratio is increasing year to year. This implies that
they have short-term assets (cash, cash equivalents, marketable securities, receivables and
inventory) which are readily available to pay off its short-term liabilities (notes payable, current
portion of term debt, payables, accrued expenses and taxes).
Debt ratio:
38.7

Debt Ratio

89.3

100%

50%

0%
Debt Ratio

2011
38.7

2010
89.3

Interpretation: The debt ratio compares a company's total debt to its total assets, which is used
to gain a general idea as to the amount of leverage being used by a company. A low percentage
means that the company is less dependent on leverage, i.e., money borrowed from and/or owed
to others. The lower the percentage, the less leverage a company is using and the stronger its
equity position. In general, the higher the ratio, the more risk that company is considered to have
taken on. From this ratio, AIBL has decreasing percentage of debt ratio but year to year but the
decreasing pattern is very high.

26

Loan Ratio:

Loan Ratio
33.02
100%
80%
60%
40%
20%
0%

2011
33.02

Loan Ratio

2010
0

Interpretation: The loan ratio indicated the extent to which assets are devoted to loans as
opposed to other assets including cash, securities, and equipment and so on. This is taken as a
percentage of total assets. From this ratio we see that AIBL had high loan ratio in 2011 but in
2010 they did not take any loan.

Profit Margin Ratio:

Profit Margin
57.47

62.43

100%
80%
60%
40%
20%
0%
Profit Margin Ratio

2011
57.47

2010
62.43

Interpretation: It measures the relation between sales and profit. It is calculated by dividing
net income by the operating revenues of the bank. A high profit margin ratio is a sign of good
management. Here we see that AIBL had a increasing profit margin in 2010. But in 2011 it had
low profit margin.

27

Return on Assets:

Return on Assets

5.85
5

0.95
0

Return on Assets

2011
5.85

2010
0.95

Interpretation: This ratio indicates how profitable a company is relative to its total assets. The
return on assets (ROA) ratio illustrates how well management is employing the company's total
assets to make a profit. The ROA ratio is calculated by comparing net income to total assets, and
is expressed as a percentage. From the graphs ROA ratio has increased every year to year. That
implies higher the return; the more efficient management is in utilizing its asset base.

Return on Equity:

Return on Equity
9.55

8.91

100%
80%
60%
40%
20%
0%
Return on Equity

2011
9.55

2010
8.91

Interpretation: The return on equity implies the return that a firm generates against its common
equity. So, it is very important to increase return on equity. Here return on equity is higher in
2011 than 2010. So, in the year 2011 investment in AIBL is safe and increase net worth of the
bank, value of the share and reputation than 2010.

28

Earning per Share:

Earning Per Share Ratio

3.73

4.14

100%
80%
60%
40%
20%
0%
Earning Per Share Ratio

2011
3.73

2010
4.14

Interpretation: Earnings per share are generally considered to be the single most important
variable in determining a share's price. It is also a major component used to calculate the priceto-earnings valuation ratio. From the graph, we can compare the EPS from previous years and it
indicates the rate of growth AIBLs earnings is not decreasing. That is well.

Price to Earning Ratio:

Price to Earning Ratio(in million)

16.15

10.13
100%
80%
60%
40%
20%
0%
Price to Earning Ratio(in
million)

2011

2010

10.13

16.15

Interpretation: The price/earnings ratio (P/E) is the best known of the investment valuation
indicators. The P/E ratio has its imperfections, but it is neverthelessthe most widely reported and
used valuation by investment professionals and the investing public. The average P/E ratio for
the broad market has been reduced from 16.15 to 10.15.

29

Cost Income Ratio:

Cost Income Ratio

0.1
0.05
0
2011
2010

Cost Income Ratio

2011
0.095

2010
9E-05

Interpretation: Cost Income Ratio compares The Companys Operating Expense to its
Operating Income. The lower

Progress Analysis:

Interpretation: At the end of 2011, the number of depositors stood at 508,798 and the
accumulated deposit was Tk.82,186.98 million. The total number of investors stood at 67,117
and total investment extended to them was Tk. 77,714.95 million. During the year 2011 the total
income was Tk. 11,332.59 million and total expenditure was Tk. 7,005.81 million. At the end of
the year the profit before tax and provision stoodTk.4, 326.78 million.
30

CORPORATE SOCIAL RESPONSIBILITY

CSR is an integral part of their corporate culture and ethics. They respond positively in every
sphere of Social activities. They are delivering innovative solution to their valued customer and
in the same manner they are also helping different areas of social activity through their CSR
activities. As a Shariah based financial institute, the Bank never forget its responsibilities to the
society. 'AIBL School Students Scholarship' to the poor meritorious students is one of the great
examples. To enhance social service as part of corporate social responsibility, the Bank has
facilitated farmers & freedom fighters to open savings accounts with special facilities of giving
profit on daily balance and not realization Account Maintenance Fee from those accounts. The
Bank has also originated School Banking to open savings accounts of school students (minor)
with same facilities as offered to farmers and freedom fighters in operating their savings
accounts. During the year 2011 they accomplished different humanitarian and social activities
which include allocation of fund Tk.2.07 Corer. Besides, they have taken a program to develop
manpower and make them self employed as well as assisting them for employment in abroad.
Besides these due to responsibility to the society, the bank distributed Solar Panels to poor
families in the rural areas, distributed blankets among the poor inhabitants of northern districts
of the country, donated life saving Blood Bags to Bangladesh Thalassemia Hospital, arranged
blood donation program for Thalassemia patients.

31

FINDINGS
1. As Islami Banking is becoming more & more attractive day by day to peoples
irrespective of nations, religious, colors & species thats why AIBL is becoming popular.
2. As AIBL is based on shariah thats why it cant invest in all profitable sectors like other
commercial banks do. It doesnt do anything against Islami shariah.
3. AIBL has acquired first position for preventing money londering.
4. AIBL doesnt have one stop service.
5. In comilla AIBL has only one ATM Booth, which is not sufficient.
6. Comilla Branch is not involved with foreign exchange directly.
7. The rate of profit on investment and the rate of profit on deposit is not constant &
fluctuate time to time.
8. AIBL provides evening banking service.
9. AIBL doesnt practice offshore banking.
10. In current year(2012), AIBL comilla branch has already achieved 4.5 crore out of 5 crore
which has been targeted by the branch manager.

CONCLUSION
The success of bank depends on service delivery to its customer. Now, so many banks in our
country have emerged to cater to the needs of customer but most of the banks in Bangladesh are
used to conventional banking system. In this case, AIBL is exception in this trend. From the
overall discussion, we found that AIBL provides various services to satisfy their customer. We
have included the overall banking identity, branch identity, banking activities and we also
calculate performance analysis of AIBL through ratio analysis. Finally, at the end of our
discussion, we see that although they have some limitations but AIBL can overcome those
limitations by removing all the weakness to develop the product effectively & grab more
opportunity hidden in the banking industry & the bank should also increase the strength with
their solid brand image, experience and skills of the employees. With their strength AIBL can
also reduce the threats existing in the market.

32

APPENDIX
Appendix-1:
Current Ratio
Item
Current
Ratio

Formula
Current
asset/current
liabilities.

2011
7249796303/28195830
77=2.57

2010
4067349286/3665822832
=1.109

2011
2819583077/7285422839
=38.7%

2010
3665822832/4104967444
=89.3

Appendix-2:
Debt Ratio
Item
Debt
Ratio

Formula
Total
Debt/Total
Asset

Appendix-3:
Loan Ratio
Item
Loan
Ratio

Formula
2011
2010
(Net loan/Total (2405755505/7285422839 Nill
assets)*100
)*100=33.02%

Appendix-4:
Profit Margin Ratio
Item
PMR

Formula
2011
(Net
(70936900/742573298)*
Income/Operati 100=.095%
ng Income)*100

2010
(60575/62691955)*100=.0
0009%

Appendix-5:
Return on Assets
Item
Return
On
Asset

Formula
(Net
income/Total
assets)*100

2011
(426695150/7285422839
)*100=5.85%

33

2010
(39144612/4104967444)*
100=.95

Appendix-6:
Return on Equity
Item
Return
On
Equity

Formula
2011
(Net income/Total (426695150/44658397
62)*100=9.55%
shareholders
equity)*100

2010
(34144612/439144612)*
100=8.91%

Appendix-7:
Earning Per Share
Item
Earning
Per Share

Formula(in millions)
2011
(Earning Available for 3.73
Share Holder/No. of
Share)*100

2010
4.14

Appendix-8
Share Holder Equity on Total Asset
Item
Formula
2011
SHEOT (Share Holder (4465839762/7285422839
A
Equity/Total
)*100=61.30%
Asset)*100

2010
(439144612/4104967444)
*100=10.69%

Appendix-9:
Price to Earnings Ratio
Item

Formula(in
millions)

2011

2010

PTER

Market Price Per 37.80/3.73=10.13

Share/Earning Per
Share

66.8/4.14=16.15

Appendix-10:
Cost Price Ratio
Item

Formula(in
millions)

2011

2010

Cost
Price
Ratio

Operating
Expenses/Operating
Income

70936900/745132
98=.095

60657/62691955=
.00009

34

Reference
AIBLs Annual Report -2011
Official web side of AIBL
Documents Supplied by The AIBL Officials of Comilla Branch.

Special Thanks To
A.K.M. Fakrul Islam-Branch Manager( AL-Arafah Islami Bank
Limited, Comilla Branch).
Md. Fazle Mahmud Khondoker Senior Executive Officer &
Power User, Accounts Departments.
Md. Sadekur Rahman- Front Desk Officer
Md. Rafiqul Islam- Principle officer & Investment In-charge

35