financial performance analysis of al arafa bank ltd
TRANSCRIPT
1
AN INTERNSHIP REPORT
ON
ldquoFinancial Performance Analysis of AL-Arafah Islami Bank Ltdrdquo
Prepared by
Jinnat ara Nezum BBA (7th) Major in HRM ID B093852
2
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
DHAKA CAMPUS
S C H O O L O F B U S I N E S S
AN INTERNSHIP REPORT
ON
ldquoFinancial Performance Analysis of
AL-Arafah Islami Bank Ltdrdquo Prepared For Mamun Abdul Kayeum Asst Prof amp Co-Ordinator of BBA Uttara University
Prepared By Jinnat ara Nezum BBA (7th) Major in HRM
3
Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG DHAKA CAMPUS
May 26th 2009 Mr Mamun Abdul Kayeum Assistant Professor amp Co-Ordinator Faculty BBA Uttara University (UU) Subject Seeking permission to submit Internship Report on Al-Arafah Islami Bank
Limited Dear Sir I am pleased to submit my Internship Report on ldquoFinancial Performance Analysis of
AL-Arafah Islami Bank Ltdrdquo which was prepared from the job experience in AL-Arafah
Islami Bank Ltd Joydebpur Chowrasta Branch Gazipur I am submitting this report in order
to fulfill the requirement of the course I had the opportunity to gain more ideas and
insights about Organizational structure and customer services
I had also to learn and work a lot to know the overall Banking and accumulate the relevant
data to prepare this report I express my deep gratitude to you for giving me scope and
assist me to prepare this report properly
4
I trust you will find it nice Yours sincerely Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
Acknowledgement
First of all I would like to express my deeply gratitude to the almighty Allah for fruitfully
prepare this internship report It is my practical work as well as my responsibility to
perform my jobs
I acknowledge the contribution of my honorable teacher and internship supervisor Mr
Mamun Abdul Kayeum for his guidance in conducting the study and writing the report
He has been gracious enough to take time out from his schedule for giving me all the
necessary assistance through out the entire internship period Without his help this report
might not have been a comprehensive one
I would like to express my sincerest thanks the very first persons of AL-ARAFAH ISLAMI
BANK LTD to whom I would like to express my gratitude to MMohiuddin Sharifi
(Manager) received me as an intern at AL-ARAFAH ISLAMI Bank
I also like to thanks Md Mozahed Hossain (Second Manager) Md Mahfuzul Haque
(Officer) in charge ( GB) Md Khalilur Rahman (Officer) Mr Lalon Sheik in charge
(Foreign Exchange) who helped me by making understand many banking terms work
procedure in Joydebpur Chowrast Branch of AIBL
5
But I would like give special thanks M Mohiuddin Sharifi (Manager) who was frankly
dynamic and helped me seriously and given me his valuable time during my internship
program Some time I did interfere in their most important work by asking many questions
for my internship purpose and they were very polite and willing to answers my questions
with patience
Finally a silent flow of gratitude is for most adorned Parents Brother Brother-in-law and
Sisters whose dreams and blessings are always with me
Executive Summary
The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank
Ltd This program helps me a lot to learn about the practical situation of a financial as well
as also assist to implement my theoretical knowledge into practical realistic environment
In the age of modern civilization Bank is playing its spending role to keep to the economic
activity In fact there is hardly any aspect of development activity whether state inspired
or otherwise where Bank do not have a major role to play
Bank provides means and mechanism of transferring command over resources from those
who have an excess of income over expenditure to those can make use of the same for
adding to the volume of productive capital There are large numbers of small saver with
small amount of saving who are generally reluctant to invest their surplus income because
of their lack of adequate knowledge about complicated investment affaires The Bank
provide them with the safety liquidity and profitability by means of different saving media
offering varying degrees of mix liquidity return and safety of saving
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
2
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
DHAKA CAMPUS
S C H O O L O F B U S I N E S S
AN INTERNSHIP REPORT
ON
ldquoFinancial Performance Analysis of
AL-Arafah Islami Bank Ltdrdquo Prepared For Mamun Abdul Kayeum Asst Prof amp Co-Ordinator of BBA Uttara University
Prepared By Jinnat ara Nezum BBA (7th) Major in HRM
3
Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG DHAKA CAMPUS
May 26th 2009 Mr Mamun Abdul Kayeum Assistant Professor amp Co-Ordinator Faculty BBA Uttara University (UU) Subject Seeking permission to submit Internship Report on Al-Arafah Islami Bank
Limited Dear Sir I am pleased to submit my Internship Report on ldquoFinancial Performance Analysis of
AL-Arafah Islami Bank Ltdrdquo which was prepared from the job experience in AL-Arafah
Islami Bank Ltd Joydebpur Chowrasta Branch Gazipur I am submitting this report in order
to fulfill the requirement of the course I had the opportunity to gain more ideas and
insights about Organizational structure and customer services
I had also to learn and work a lot to know the overall Banking and accumulate the relevant
data to prepare this report I express my deep gratitude to you for giving me scope and
assist me to prepare this report properly
4
I trust you will find it nice Yours sincerely Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
Acknowledgement
First of all I would like to express my deeply gratitude to the almighty Allah for fruitfully
prepare this internship report It is my practical work as well as my responsibility to
perform my jobs
I acknowledge the contribution of my honorable teacher and internship supervisor Mr
Mamun Abdul Kayeum for his guidance in conducting the study and writing the report
He has been gracious enough to take time out from his schedule for giving me all the
necessary assistance through out the entire internship period Without his help this report
might not have been a comprehensive one
I would like to express my sincerest thanks the very first persons of AL-ARAFAH ISLAMI
BANK LTD to whom I would like to express my gratitude to MMohiuddin Sharifi
(Manager) received me as an intern at AL-ARAFAH ISLAMI Bank
I also like to thanks Md Mozahed Hossain (Second Manager) Md Mahfuzul Haque
(Officer) in charge ( GB) Md Khalilur Rahman (Officer) Mr Lalon Sheik in charge
(Foreign Exchange) who helped me by making understand many banking terms work
procedure in Joydebpur Chowrast Branch of AIBL
5
But I would like give special thanks M Mohiuddin Sharifi (Manager) who was frankly
dynamic and helped me seriously and given me his valuable time during my internship
program Some time I did interfere in their most important work by asking many questions
for my internship purpose and they were very polite and willing to answers my questions
with patience
Finally a silent flow of gratitude is for most adorned Parents Brother Brother-in-law and
Sisters whose dreams and blessings are always with me
Executive Summary
The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank
Ltd This program helps me a lot to learn about the practical situation of a financial as well
as also assist to implement my theoretical knowledge into practical realistic environment
In the age of modern civilization Bank is playing its spending role to keep to the economic
activity In fact there is hardly any aspect of development activity whether state inspired
or otherwise where Bank do not have a major role to play
Bank provides means and mechanism of transferring command over resources from those
who have an excess of income over expenditure to those can make use of the same for
adding to the volume of productive capital There are large numbers of small saver with
small amount of saving who are generally reluctant to invest their surplus income because
of their lack of adequate knowledge about complicated investment affaires The Bank
provide them with the safety liquidity and profitability by means of different saving media
offering varying degrees of mix liquidity return and safety of saving
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
3
Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG DHAKA CAMPUS
May 26th 2009 Mr Mamun Abdul Kayeum Assistant Professor amp Co-Ordinator Faculty BBA Uttara University (UU) Subject Seeking permission to submit Internship Report on Al-Arafah Islami Bank
Limited Dear Sir I am pleased to submit my Internship Report on ldquoFinancial Performance Analysis of
AL-Arafah Islami Bank Ltdrdquo which was prepared from the job experience in AL-Arafah
Islami Bank Ltd Joydebpur Chowrasta Branch Gazipur I am submitting this report in order
to fulfill the requirement of the course I had the opportunity to gain more ideas and
insights about Organizational structure and customer services
I had also to learn and work a lot to know the overall Banking and accumulate the relevant
data to prepare this report I express my deep gratitude to you for giving me scope and
assist me to prepare this report properly
4
I trust you will find it nice Yours sincerely Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
Acknowledgement
First of all I would like to express my deeply gratitude to the almighty Allah for fruitfully
prepare this internship report It is my practical work as well as my responsibility to
perform my jobs
I acknowledge the contribution of my honorable teacher and internship supervisor Mr
Mamun Abdul Kayeum for his guidance in conducting the study and writing the report
He has been gracious enough to take time out from his schedule for giving me all the
necessary assistance through out the entire internship period Without his help this report
might not have been a comprehensive one
I would like to express my sincerest thanks the very first persons of AL-ARAFAH ISLAMI
BANK LTD to whom I would like to express my gratitude to MMohiuddin Sharifi
(Manager) received me as an intern at AL-ARAFAH ISLAMI Bank
I also like to thanks Md Mozahed Hossain (Second Manager) Md Mahfuzul Haque
(Officer) in charge ( GB) Md Khalilur Rahman (Officer) Mr Lalon Sheik in charge
(Foreign Exchange) who helped me by making understand many banking terms work
procedure in Joydebpur Chowrast Branch of AIBL
5
But I would like give special thanks M Mohiuddin Sharifi (Manager) who was frankly
dynamic and helped me seriously and given me his valuable time during my internship
program Some time I did interfere in their most important work by asking many questions
for my internship purpose and they were very polite and willing to answers my questions
with patience
Finally a silent flow of gratitude is for most adorned Parents Brother Brother-in-law and
Sisters whose dreams and blessings are always with me
Executive Summary
The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank
Ltd This program helps me a lot to learn about the practical situation of a financial as well
as also assist to implement my theoretical knowledge into practical realistic environment
In the age of modern civilization Bank is playing its spending role to keep to the economic
activity In fact there is hardly any aspect of development activity whether state inspired
or otherwise where Bank do not have a major role to play
Bank provides means and mechanism of transferring command over resources from those
who have an excess of income over expenditure to those can make use of the same for
adding to the volume of productive capital There are large numbers of small saver with
small amount of saving who are generally reluctant to invest their surplus income because
of their lack of adequate knowledge about complicated investment affaires The Bank
provide them with the safety liquidity and profitability by means of different saving media
offering varying degrees of mix liquidity return and safety of saving
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
4
I trust you will find it nice Yours sincerely Md Mahbub Alom Pathan ID M20521111010 (7TH) Major in Finance BBA
Acknowledgement
First of all I would like to express my deeply gratitude to the almighty Allah for fruitfully
prepare this internship report It is my practical work as well as my responsibility to
perform my jobs
I acknowledge the contribution of my honorable teacher and internship supervisor Mr
Mamun Abdul Kayeum for his guidance in conducting the study and writing the report
He has been gracious enough to take time out from his schedule for giving me all the
necessary assistance through out the entire internship period Without his help this report
might not have been a comprehensive one
I would like to express my sincerest thanks the very first persons of AL-ARAFAH ISLAMI
BANK LTD to whom I would like to express my gratitude to MMohiuddin Sharifi
(Manager) received me as an intern at AL-ARAFAH ISLAMI Bank
I also like to thanks Md Mozahed Hossain (Second Manager) Md Mahfuzul Haque
(Officer) in charge ( GB) Md Khalilur Rahman (Officer) Mr Lalon Sheik in charge
(Foreign Exchange) who helped me by making understand many banking terms work
procedure in Joydebpur Chowrast Branch of AIBL
5
But I would like give special thanks M Mohiuddin Sharifi (Manager) who was frankly
dynamic and helped me seriously and given me his valuable time during my internship
program Some time I did interfere in their most important work by asking many questions
for my internship purpose and they were very polite and willing to answers my questions
with patience
Finally a silent flow of gratitude is for most adorned Parents Brother Brother-in-law and
Sisters whose dreams and blessings are always with me
Executive Summary
The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank
Ltd This program helps me a lot to learn about the practical situation of a financial as well
as also assist to implement my theoretical knowledge into practical realistic environment
In the age of modern civilization Bank is playing its spending role to keep to the economic
activity In fact there is hardly any aspect of development activity whether state inspired
or otherwise where Bank do not have a major role to play
Bank provides means and mechanism of transferring command over resources from those
who have an excess of income over expenditure to those can make use of the same for
adding to the volume of productive capital There are large numbers of small saver with
small amount of saving who are generally reluctant to invest their surplus income because
of their lack of adequate knowledge about complicated investment affaires The Bank
provide them with the safety liquidity and profitability by means of different saving media
offering varying degrees of mix liquidity return and safety of saving
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
5
But I would like give special thanks M Mohiuddin Sharifi (Manager) who was frankly
dynamic and helped me seriously and given me his valuable time during my internship
program Some time I did interfere in their most important work by asking many questions
for my internship purpose and they were very polite and willing to answers my questions
with patience
Finally a silent flow of gratitude is for most adorned Parents Brother Brother-in-law and
Sisters whose dreams and blessings are always with me
Executive Summary
The report is prepared on the basis of practical experiences at AL-ARAFAH ISLAMI Bank
Ltd This program helps me a lot to learn about the practical situation of a financial as well
as also assist to implement my theoretical knowledge into practical realistic environment
In the age of modern civilization Bank is playing its spending role to keep to the economic
activity In fact there is hardly any aspect of development activity whether state inspired
or otherwise where Bank do not have a major role to play
Bank provides means and mechanism of transferring command over resources from those
who have an excess of income over expenditure to those can make use of the same for
adding to the volume of productive capital There are large numbers of small saver with
small amount of saving who are generally reluctant to invest their surplus income because
of their lack of adequate knowledge about complicated investment affaires The Bank
provide them with the safety liquidity and profitability by means of different saving media
offering varying degrees of mix liquidity return and safety of saving
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
6
I have equally faced co ndash operation and many obstacles simultaneously I hope this report
would be able portray the status of ldquoGeneral Banking Investment and Foreign Exchange
Operation of AIBLrdquo My efforts will meaningful if this report serves the purpose effectively
I have faced many Challenges in different steps of banking procedure I also tried to
overcome every case All the banking activities from my personal point of view presented
in this report
Al- Arafah Islami Bank Limited is schedule commercial Bank is registered by the
Bangladesh Bank It follows the rules and regulations prescribed by the Bangladesh by the
Bangladesh Bank for scheduled commercial Banks
TABLE OF CONTENTS
Chapter Contents Page No
1 Introduction Part
11 Introduction
12 Origin of the report
13Background of the study
14 Objective of the report
16 Methodology
161 Source of data
162 Primary data
163 Secondary data
17 Limitation of the report
2 Organization Part
21 Historical background of the study
22 Board of director
23 Managing director
24 Central Executive of the Bank
25 Shariah council of the Bank
26 Organization Structure of the Bank
27 Special feature of the Bank
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
7
28 Pledges amp commitments of the sponsor directors of the Bank
29 Structure of the Branch
210 SWOT Analysis
211 Branch location
3 Project Part
31 Introduction
32 General Banking
321 Introduction
322 Account opening section
3221 Current account
3222 Saving account
3223 Monthly saving scheme
3224 Muduraba MDS
3225 Muduraba LDS
3226 Muduraba KDS
323 Cash Section
3231 Cash receiving procedure
3232 Cash payment procedure
324 Deposit section
3241 Remittance section
33 Accounts Section
331 Tasks of accounts department
34 Investment section
341 Investment scheme
35 Foreign Exchange
351 Letter of credit (LC)
352 Types of (LC)
353 Requirement paper for opening LC
354 Important particular for LC opening register
355 Important particular for column of Bill
356 Back to Back LC
357 Foreign Exchange remittance
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
8
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
9
11 Introduction
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 The result has been the creation of financial conglomerates composed of
various units offering specialized services Diversification also offers benefits to financial
institutions
Through this internship program I come to know about the organization structure
problems prospects and operational procedures of AL-ARAFAH ISLAMI Bank Ltd I was not
only learned about the activities and operations of correspondent Bank but also gathered
some knowledge about the basic business of the banking in first three month for the
purpose to build up my career
As a student of finance department in Uttara University of Bangladesh I have earned
theoretical knowledge which is not exactly same with the practical business environment
The company internship program applied by the faculty of Business study helps us to have
practical experience and itrsquos reporting also
12 Origin of the report
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
10
The report entitled ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
what has been prepared for the completion of the BBA of the Dept of Business Uttara
University of Bangladesh It is possible to gather theoretical knowledge passing through
books but it is insufficient to acquire practical experience We collect data to know about
unknown factors we can have accurate knowledge about the factors by analyzing data
13 Background of the study
This study is made to fulfill to the partial requirement of the BBA program As the internee
was assigned in the ldquoFinancial Performance Analysis of Al-Arafah Islami Bank Limitedrdquo
during the internship period practical knowledge has been gathered on the sector And as
observation is the main task of the division the report is aimed to work on that topic
Practical work situation is sometime may different from what is learn theoretically
Through the business processes are based on theory the application has to be different to
meet the requirement of a situation The ldquoFinancial Performance Analysis of Al-Arafah
Islami Bank Limitedrdquo has been observed practically and presented in this report to
observe the real situation
14 Objective of the Report
The broad objective of the study is to expose the banking activities as a financial purpose
This report is designed to know more about the overall banking systems of the aforesaid
bankbranch and analyze the ratio of the organization and identify the financial conditions
of organization More specifically the topic is selected to identify the following objectives
To identify the system of Banking Activities
To observed the internal control system of Al-Arafa Islami Bank Limited
To identify the financial strength of the institution
To see the document maintained by the sections
To know how the banks invest in other organization and their interest rate and
also know how way bank generate profit
Analysis the financial statement
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
11
Identify the Islamic bank comparable of the other Bank
15 Scope of the Report
In organization part the report generates an overview of the AL-Arafah Islami Bank
Limited But it was so difficult if Mamun Abdul Kayeum assistant professor and
coordinator of BBA and M Mohiuddin Sharifi (Manamer AIBL) does not help to generate
information The scope of the report is restricted in to the collection record and
disbursement that process the financial data of the Al-Arafah Islami Bank Limited But it
was not possible for me to collect any information of payroll and planning and cash
management as their activities are highly confidential
16 Methodology
The proposed study will be constructed through an exploratory research Various aspects
of research methodology are given bellow
161 Source of Data
Both primary and secondary data has been used in making the report thought more
emphasis was given on primary source of data in order to carry out the objectives of the
report
162 Primary Data
Primary data has been collected through interviewing and with the help of questionnaire
which has been enclosed at Appendix-1 and I also used my observation to gather
knowledge of Islami Banking system of Al-Arafah Islami Bank Limited Most of the
questions are opened ndashended to get a details idea about the project I also generate
information to communicate the officer in different position Selected position was
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
12
Manager Second Manager Senior Officers Officer of Al-Arafah Islami Bank Limited also
the advisor of the institution
163 Secondary Data
Secondary data means the Existing primary data that was collected by someone else or for
a purpose other than the current one
Sources can be classified as
Paper-based sources ndash books journals periodicals abstracts indexes directories
research reports conference papers annual reports internal records of
organizations newspapers and magazines
Electronic sourcesndashon-line databases Internet and broadcasts
17 Limitation of the Report
Like any other report this one also has some limitation I know that bank and banking as
well as Islami banking is very widely functions all of the business department In this
report I have tried to use more information as possible Some financial data are
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
13
confidential and private for the organization which prevents to explore some areas of the
project Collecting data from the busy employees of the Al-Arafah Islami Bank Limited
through interview and questionnaire was another hard task And more information is
strictly private and most confidential which are not possible to add in the report
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
14
21 Historical Background of the Study
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 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 12650 million were paid by the promoterssponsors and Tk
12650 million by the general public The bank is listed in the two STOCK EXCHANGEs of the
country and has offered 126000 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
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
15
commercial banking services under the regulation of the Bank Companies Act 1991 It
conducts its business on the principles of musharaka bai-murabaha bai-muajjal 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
It is mentionable that Al-Arafah Islami Bank Limited is one of the largest Islami bank of the
country Its shariah principalities application is the better then another bank
Short History of the bank
Date of Incorporation 18th June 1995
Date of formal Inauguration 27th September 1995
Authorized capital Tk 25000 Crore
Paid-up Capital Tk 13838 Crore
Statuary Reserve Tk 7313 Crore
Number of branches 50 (Fifty)
Number of Employees 1091 (021208)
22 Board of Director
The board consists of 12 (Twelve) directors The numbers of the board of Directors of the
bank hold very respectable position in the society They are from highly successful group
and Industrial group of Bangladesh It is mentionable that the whole members of the
Directors board of the bank carried a special carrier ie they are Hajji and they already
committed `the whole activities in the bank will be as a Ibadahrsquo Jb Al-Hajj Md Badiur
Rahman is the Chairman of the board while Jb Al-Hajj Md Harun-ur-Rashid is the vice
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
16
President amp the Company secretary is Jb Md Mofazzal Hossain (the Executive Vice
President of the bank)
23 Managing Director
Jb Md Abdus Samad Sk is the Managing Director of the bank who is a renowned amp
dynamic banker of Bangladesh Jb ATM Harunur Rashid Chodhury is the Additional
Managing Director amp JbIhsanul Aziz is the Deputy Managing Director of the bank
24 The Central Executives of the bank
Sl Name of the executives Designation
01 Jb Md Abdus Samad Sk Managing Director
02 Jb ATM Harunur Rashid Chodhury Additional Managing Director
03 Jb Ihsanul Aziz Deputy Managing Director (1)
04 Jb Md Mofazzal Hossain Company secretary (EVP)
05 Jb Md Rafiul Alam Executive Vice President
06 Jb ASM Mozurul Alam Executive Vice President
07 Jb Mohd Abdul Jalil Miah Executive Vice President
08 Jb ANM Abdus Shahid Senior Vice President
09 Jb Md Emdadul Haque Senior Vice President
10 Jb Yakub Md Faruque Senior Vice President
11 Jb Md Mominul Haque Bhuyan Senior Vice President
12 Jb Md Rezaur Rahman Senior Vice President
25 Shariah Council of the bank
The board of the Shariah Council of the bank consists of 8 (Eight) persons The numbers of
the Council hold very respectable position in the society They are carrying high skilled
and learned accordingly Quaran and Hadith and the honorable chairman of the council is
high respectable `Alim-e-Dinrsquo of the country The members of the council Jb Mufti Ruhul
Amin Jb Moulana Abdul Basit Barkatpuri Jb Moulana Mukhlesur Rahman Jb Mufti
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
17
Moinul Islam amp Secretary General Jb Md Abdur Rahim Khan are also high learned persons
and they also obtained highest degree from Alia Madrasha And another member of the
council carried a special carrier ie Jb AL-Hajj AZM Samsul Alam is retired Secretary of the
Ministry of the Religion affairs of the Government and retired Director General of `Islamic
Foundation of Bangladeshrsquo and Jb AL-Hajj Badiur Rahman is Chairman of the Board of the
Directors They are Hajji and they already committed to `the whole activities in the bank
will be as Ibadahrsquo
The list of the Shariah Council as hereunder
Sl Name of the board Designation
01 Jb Mufti Abdur Rahman Chairman
02 Jb Mufti Ruhul Amin Member
03 Jb Moulana Abdul Basit Barkatpuri Member
04 Jb Moulana Mukhlesur Rahman Member
05 Jb Mufti Moinul Islam Member
06 Jb AL-Hajj AZM Samsul Alam Member
07 Jb AL-Hajj Badiur Rahman Member
08 Jb Md Abdur Rahim Khan Secretary (CC)
26 Organizational Structure of the Bank
Chairman
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
18
Vice Chairman
Board of Directors
Managing Director
Additional Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Principal Officer
Senior Officer
Officer
Junior Officer
Assistant Officer
27 Special Features of the Bank
Executives
Non-Executives
Deputy Managing Director
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
19
As an Islami bank we are singular in every positive aspect We provide a bunch of state-of-
art banking services within the wide bracket of shariah We are unique with our products
strict with our principle and uncompromising with our honesty Here are some special
features of us that make us notable in Islami banking sector
All activities of AIBL are conducted under a profitloss based system according to
Islamic Shariah to get the nation rid of Usury
Its investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council
During the year 2009 70 of the investment income has been distributed among
the Mudaraba depositors
In 2010 AIBL has included online banking in its wide range of services Bangladeshi
software has been introduced in this feature to promote the local developers
AIBL regularly arranges its AGMs (Annual General Meeting) Whenever needed
EGMs (Extraordinary General Meeting) are also arranged
We regularly pay dividend to our valued shareholders For the year of 2007 we
declared 20 bonus dividend to our shareholders
We believe in providing dedicated services to the clients imbued with Islamic spirit
of brotherhood peace and fraternity
The bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people
The Bank upholds the Islamic values of establishment of a justified economic
system through social emancipation and equitable distribution of wealth
Following the Islamic traditions it is assisting in the economic progress of the
socially deprived people in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
20
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIBL Library More endeavors will inshallah follow
in future
28 Pledges amp Commitments of the Sponsor Directors of the
bank
The sponsors and promoters of Al-Arafah Islami Bank Ltd made a few firm pledges and
commitments in the name of Allah Such categorical commitments have never been made
by the promoters of any bank in Bangladesh or anywhere in the subcontinent to our
knowledge
These pledges and commitments have been included in the Memorandum and Articles of
Association (Article 159) of Al-Arafah Islami Bank Ltd (pp65-71) incorporated with
Bangladesh Bank Registrar of joint Stock Companies Securities and Exchange
Commission etc
Let us have a look at some of these commitments titled ldquoAgreements Pledges and
Commitments of the Promoters Sponsors and Directors of Al- Arafah Islami Bank Ltdrdquo
281 Objectives of the Sponsors
ldquoWe declare that Al-Arafah Islami Bank has not been set up with the objectives of
economic welfare and financial benefit of the sponsors and Promoters in this world on
the country we are desirous of our welfare in the next world and Nazat in akhirat
(hereafter) which could be achieved more by rendering credit services by the sponsors and
bankers to others than any service to themselvesrdquo
282 Misuse of Power and Undue Advantages
ldquoWe shall not try to avail undue advantages of any kind from the bank for ourselves or for
firms companies institutions in which we have financial or other interests The facilities
which are legal just and due to us that we shall avail of should be transparent and known
to the Board of Directors leaving little scope for misunderstandingrdquo
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
21
Motivating Spirit of Qurbani
ldquoWe are determined to rise above Nafsaniyyat of self-service and have come forward
imbued with the spirit of Qurbani and sacrifice and to build up a model credit institution in
which selfish Nafsaniyyat shall not be cultured on the mere pretext of majority view of the
sponsorsrdquo
283 Inspiration for Qurbani of Nafsaniyyat or self-interest
ldquoThe Promoters and sponsors of Al- Arafah Islami Bank are imbued with the spirit of
sacrifices and Qurbani of the family of Hazrat Ibrahim (A) and which was rekindled by our
beloved prophet Muhammad (S) and Sahaba -i- Keram and thereafter by the Sufisaints
who made supreme sacrifices and Qurbani for preachings of Deen of Allah to all corners of
the world Particularly to this regionrdquo
284 Clean Banking is lsquoIbadahrsquo
We agree to conduct clean banking under patronization of the government and firmly
believe that the association with this bank would be nothing but lsquoIbadahrsquo and that we shall
act accordingly
285 Environment of Al-Arafah Islami Bank
ldquoAl-Arafah Islami Bank shall bear the mark of the Sunnah of our prophet Muhammad (S)
of our faith and conviction our values and attitudes towards life and that the entire
environment of Al- Arafah Islami Bank shall be in conformity with Sunnah simple in style
noble and rich in thought but dynamic and far- reaching in impact exemplary in efficiency
and service to the customers
286 Sunnah of Keeping Deposit as lsquoAmanahrsquo
ldquoWe firmly and solemnly pledge and promise to hold the deposits and other fund at our
disposal as lsquoAmanahrsquo and sacred trust keeping in mind the Sunnah of our beloved prophet
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
22
Mohammad(S) who would hold the money and materials deposited with him even by the
infidels in great trust for which he earned the title of ldquoAl-Ameenrdquo
287 Grouping and Lobbing
ldquoWe shall not indulge in grouping and lobbying most particularly in financial matters and
banking business for the personal interest of anybody
We shall not take informal decisions among ourselves on the agenda of the meeting
before the meeting is held In other words we agree to discuss the issues of agenda of any
meeting concerning the business of the bank and take decisions in the meetingrdquo
288 Responsibility to Depositors
ldquoWe are conscious that the deposit of our clients might be more than 90 of the
disposable loans and credit and we shall put priority on their interest over that of
shareholders or directorsrdquo
289 Employment Policy
ldquoWe agree that all recruitment be made on merit and rules All employees after
employment must conform to Faradh and Wajib within the time determind but not
exceeding two years
As regards confirmation and promotion of officers and staff adherence to Faradh and
wajib shall be kept in view along with merit and performancerdquo Freedom from Nepotism
and Districtism ldquoWe are totally committed not to indulge overtly or covertly in any kind of
nepotism or favoritism due to relationship friendship acquaintance regionalism
districtism or locality as regards to loan facilities or employment or any other aspect
directly or indirectlyrdquo
2810 Bases of Conscience of Directors
ldquoWe do hereby promise and pledge that in addition to the laws regulations in force in the
country we shall be bound to and abide by the dictates of our conscience based on faith
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
23
and trust on Allah and expectation of Shafayat from our beloved prophet Hazrat
Muhammad (S)rdquo
We seek your Dua and prayer to Allah Subhanahu Wa-Tarsquoala to keep us firm on the
commitments and pledges we the promoters sponsors and directors collectively agreed
and signed on 05-06-1995
29 Structure of the Branch
M a n a g e r
2 n d O f f i c e r
In-charge Investment
In-charge General Banking
Dispatch Custome
r
Service
Remittance (DDTTPO)
Cash
Deptt
Custome
r relation
Disbursement
Import
Recovery
Received Payment amp do transaction
Export
(IBP)
Foreign
Remittance
(Inward)
Accounts
Received Payment amp
do transaction
Clearing
Received Payment amp do transaction
One stops customer service
In-charge Foreign Exchange
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
24
i 210 SWOT Analysis of the Al-Arafah Islami Bank Ltd
SWOT analysis means the analysis of Strength Weakness Opportunity and Threats of the
company Strength and Weakness is internal subject Opportunity and Threats is subject to
external It is happen frequently within the organization to assess own self through SWOT
analysis With this Bank can find their Strength and Weakness as well as they can
formulate their strategy by analyzing the opportunity in the society
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
25
Figure SWOT Analysis of AL-Arafah Islami Bank Ltd
211 AIBL 46 Branch-Location all over Bangladesh
Strength
Corporate Identity
Branch image
Strongly Communication with
other Branch
Linkages with international
organization
Broadly business in our
country
Weakness
Coordination of different
department
Decision making process
Lack of marketing activities
Lack of maintain properly
documentation
Lack of communication
Lack of Employees
Opportunity
With GDP growth the
served product demand may
increase
May increase the new
branch
May increase Global
network
Need to increase employees
For additional demand
market may
increased(ATM service)
Threats
Market competition may
increase
Decrease competitive
advantage
Branch image go down
because of employees turnover
Not available skill employees in
the branch
SWOT
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
26
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
27
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
28
31 Introduction
The Banking Industry in Bangladesh is one characterized by strict regulation and
monitoring from the central governing body the Bangladesh Bank The chief concern is
that currently there are far too many banks for the market to sustain As a result the
market will only accommodate only those banks that can transpires the most competitive
and profitable ones in the future
There are four nationalized commercial banks (NCB) 5 specialized banks 11 foreign banks
4 Islamic banks and 26 domesticsrsquo private banks currently operating in Bangladesh
Among them The Al-Arafah Islami Bank Limited is one of the best leading private
commercial bank in Bangladesh
Al-Arafah Islami Bank incorporated in Bangladesh as a banking company in 1995 with
limited liability by shares It started business on 27 September of that year with an
authorized capital of Tk 1000 million At inception its paid up capital was Tk 10120
million divided into 101200 ordinary shares of Tk 1000 each 23 sponsors of the bank
subscribed the total issued capital The bankrsquos schemes are becoming very popular in the
country To understand the scenario of modern banking system in Bangladesh and
economic scale which are related with banking Al-Arafah Islami Bank Ltd is one of the
examples I have found an opportunity to study the Financial Performance Analysis of Al-
Arafah Isl Bank Ltd through the internship program of UU
This banking system can be allotment in different section Those Ares-
General Banking
Account Section
Investment section
Foreign Exchange
Bank is a one of the financial institution that is doing business by money Bank received
money from the customer and providing loan at a high interest rate Like other
commercial Banks AL-ARAFAH ISLAMI Bank performs all traditional Banking business
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
29
including introduction of a wide range of saving and credit products rattail Banking and
professional management But the AL-ARAFAH ISLAMI Bank Ltd emphasize its functions
in export and import trade handling and financing of export oriented industrious and
reduces in the balance in the balance of payment of the country Its also have to maintain
Islami Sharih activities
ldquoLocal Bank Global Networkrdquo The World AL-ARAFAH ISLAMI Bank implies the meaning of
its operation Through it is a new type of Bank in Bangladesh it is familiar with so many
countries in the world such as Export Import Bank of United states Export Import Bank of
Japan Despite it is a local Banking To achieve the desire goal it has intention to pursuit
of excellence at stages with acclimate of continuous improvement Because it believes
the line of excellence is never ending
32 General Banking
321 Introduction
The general Banking Department doses the most important and basic of the Banks All
other departments are liked with this departments are liked with this department It also
plays a vital role in deposit mobilization of the branch AL-ARAFAH ISLAMI Bank is Provides
different types of accounts locker facilities and special types of saving Scheme under
General Banking For proper function and excellent customer services this department is
divided into various sections namely as follow
Accounts opening sections
Cash sections
Deposit sections
Bill and clearing sections
FDR sections
Accounting sections
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
30
322 Accounts Opening Section This section deals with opening of different types of accounts It is also deals with issuing
of books and different deposit books to the different accounts openers A customer can
open different types of accounts through this department such as
Al-Wadia Current Deposit (CD) Ac
Mudaraba Savings Deposit (MSD) Ac
Mudaraba Tern Deposit (MTD) Ac
Mudaraba Short Notice Deposit (SND) Ac
Mudaraba Monthly Profit Tern Deposit (PTD) Ac
Mudaraba Installment Tern Deposit (ITD) Ac
Mudaraba Tern Hajj Deposit (THD) Ac
Mudaraba Monthly Hajj Deposit (MHD) Ac
Mudaraba Monthly Investment Scheme Deposit (SID) Ac
Mudaraba Marries Investment Deposit Scheme (MIS) Ac
Foreign Currency Deposit (FCD) Ac
Mudaraba Pension Deposit Scheme (PDS) Ac
Mudaraba Cash Waqf Deposit Scheme (CWD) Ac
Mudaraba Lakhopati Deposit (LDS) Ac
Mudaraba Millennium Deposit (MDS) Ac
Mudaraba Kutipati Deposit (KDS) Ac
Mudaraba Pension Deposit (MPS) Ac
Mudaraba Double Benefit Deposit (DBS) Ac
Mudaraba Triple benefits Deposit (TBS) Ac
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
31
Requirements of opening an account
There are some requirements that have to be completed for opening an Account
3221 Current Account
Current Account is an account where the account holders can make numerous
transactions with in a working day There is no restriction on the number and the amount
of with drawls from the current within availability of funds
As the Banker is under the obligation to repay this deposit on demand on interest is paid
in this account Generally current Account is opened for Business and trades for easy
transaction But a person can open CD Account for special purpose Requirement for the
different types of Accounts holders are discussed
i Proprietorship firm
There is a different account opening from for the proprietorship firm by the AL-ARAFAH
ISLAMI Bank Ltd For this account a customer must need to submit the papers with the
from
Photograph
Signature and Rubber- stamp seal of the client
And introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be account holder
Chairmen certificate of the proprietor
Trade license
Voter ID Card
Current deposit account is opened with neither a sum of nor less than 1000 The
introducer must attest photographs
ii Partnership firm
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
32
There is a different account opening from for the proprietorship firm Interaction for
running an account is giving in this
The following documents are required to open this type of accounts
Photograph
Signature and Rubber-stamp seal of the service receiver
Chairman certificate of the partners
And introducer of AL-ARAFAH ISLAMI Ltd Introducer must be CD Account holder
Trade license
Partnership deed registered by Notary public
Partnership letter along with address and signature
Voter ID Card
Current deposit Account is opened with neither a sum of nor less than Tk 2000 The
photographs must attested by the introducer
iii Limited company
A separate account from is used for limited company There are two kinds of limited
company ndash public company and private limited company The Bank always takes
precautions for opening this type of accounts Several documents are submitted by the
clients which should be checked carefully by the Bank to be legally in a safe position
Requirements to open an account are as follows
iii a Private limited company
Photograph
Signature and Rubber- stamp of the client
Chairman certificate of the owner
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
33
An introducer of AL-ARAFAH ISLAMI Bank of Bangladesh Ltd Introducer must be
CD account holder
Trade license
Certified copy of memorandum and articles of association
Incorporation Certificate
Membership Certificate
Memorandum
iii b Public limited company
Photograph
Signature and Rubber- stump seal of the client
Chairman certificate of the directors
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
Trade license
Certificate of Incorporation
Certificate copy of memorandum and articles of association
List of directors as per return of joint stock Company with signature
Certificate of commencement of business
iv Club society
The following document duly completed shall be obtained from the customer at the
time of current deposit account of AssociationClubCharityTrustSociety etc
Photograph
Signature and Rubber-stamp seal of the client
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account
holder
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
34
Chairman certificate of the client
Certified true copy of constitutionBy-lawsTrust deedMemorandum and articles
of association
Certified of registration of the associationClubCharityTrustSociety (For
inspection and returned only certified)
List of members of the Governing bodyExecutive committee of the Association
ClubCharityTrustSociety with their address
Exact of resolution of the AssociationClubCharityTrustSociety for opening the
account and authorization for its operation duly certified by the chairman sectary
of the AssociationClubCharity Trust Society Etc
3222 Saving Account (individualjoint)
Saving account (SB) is meant for the people of the lower and middle classes who wish to
save part of their income to meet future needs and intended to earn an income from their
saving For opening of this type of accounts the following requirements are necessary
Photographs attested by the introducer
Chairman certificate of the account holder
An introducer of AL-ARAFAH ISLAMI Bank Ltd Introducer must be CD account holder
For joint of saving deposit and short-term deposit (STD) are as follows
SL NO Name of Account Interest rate
1 Saving Deposit 4
2 Short term Deposit(SND) 5
3223 Monthly Saving Scheme (MSS)
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
35
It is project of AL-ARAFAH ISLAMI Bank which is a Scheme like DPS The slogan of this
Scheme is ldquosecuring your future with case A small saving to day will provide you comfort
tomorrowrdquo
i Saving period and monthly installment rate
The saving period is for5 8 10 or 12 years Monthly installment rate is Tk 500 Tk 2000
or Tk 5000
ii Monthly installment deposit
The saving amount is to be deposit with in the 10th of every month In case of
holidays the deposit amount is to be made on the following date
The deposits may also be made in advance
The depositor instruction can be giving to transfer the monthly deposit in the
Schemersquos account
In case the deposit falls to make the monthly installment in time there will be no
charge added with the following monthrsquos installment
iii Withdrawal
Generally withdrawal is not advised before a five- year term but if it is withdrawn
before the above term then interest will be paid saving rate However no interest
will be paid if the deposit is withdrawn within one year of opening the account
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
36
Incase the depositor to withdraw between the 5810 or 12 year period then full
interest will be paid for a completed term and saving rate will applicable for the
fractional period
iv Loan advantage
After 3 years of saving in this Scheme the depositor (in an adult) is eligible for a loan up
to 80 of his deposited amount In that case interest rates on the loan will be applicable
as per prevailing rate at that time
Reasons for disqualification from this Scheme
If the depositor fails to pay three installments in a raw then he will be disqualified
from this Scheme and interest will be applicable as mentioned in withdrawal
clause
If the depositor fails to five installments in a raw after completion of 5 years term
then the Bank reserve the right to close the account and interest will be paid as
mentioned in withdrawal clause
In case of death of the depositor the Scheme will case to function The amount will
be handed over to the nominee of the deceased depositor In case of absence of
the nominee the bank will hand over the accumulated amount to the successor of
the deceased
Rule
A from has to be filled at the time of opening the account NO introduction is needed
but attested photographs are advised
The depositor can select any of the installment accounts Which can not be
subsequently changed
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
37
Incase of minors the guardians may open and supervise the account in his favors
A single person can open more then one account for saving under several installment
rates
The accumulated deposit with interest will be returned within one month of
completion of a term
The depositor should notify the bank immediately of any change of address
The government tax will be deducted from the interest accumulated in this Scheme
If necessary at the request of the depositor the Scheme can be transferred to
different branches of the same bank
The bank reserves the right to change the rules and regulations of the Schemes as and
when deemed necessary
v Monthly Installment Statement Charge
Years Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
Monthly
Installment
(Tk)
500 1000 2000 5000
5 39041 78082 156164 390411
8 74202 148404 296809 742024
10 105095 210190 420380 1050952
12 144461 288923 577847 1444618
vi Monthly Income Scheme (Steady Money)
Bangladesh is a developing country But in our country opportunity of investment is very
low People of our country always try to save their excess money and there looking for
where they can deposit the money According to their demand AL-ARAFAH ISLAMI Bank
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
38
started this money income Scheme A monthly income Scheme their really makes good
sense an investment for steady return
Vii Highest of the Scheme
Minimum deposit Tk 2 39500
Higher Monthly Income for higher deposits
The Scheme is for three ndash year period
Monthly income will be created to the depositorrsquos account on the fifth of each
month
After three years the Account holder would received Tk 1000000000
Viii Objectives of the Scheme
An account is to be opined by filling up a form
The Bank provides to the customer a deposit receipt after opening the account
This receipt is non- transferable
If the deposit is withdrawn before a five years term then saving interest rate
will be applicable and paid to the depositor However no interest will be paid if
the deposit is withdrawn within one year of opening the account and monthly
income paid the customer will be adjusted from the principal amount
3224 Muduraba Millionaire Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 23950 1000000
4 16950 1000000
5 12750 1000000
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
39
6 9950 1000000
7 8000 1000000
10 4600 1000000
12 3345 1000000
15 2170 1000000
20 1150 1000000
3225 Muduraba Lakhapati Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 2375 100000
5 1275 100000
8 670 100000
10 460 100000
12 335 100000
3226 Muduraba Kotipoti Deposit Scheme-
Year Monthly Deposit Amount Matured Amt
3 239500 10000000
4 169500 10000000
5 127500 10000000
6 99500 10000000
7 80000 10000000
10 46000 10000000
12 33450 10000000
15 21485 10000000
18 14330 10000000
20 11100 10000000
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
40
323 Cash Section
Cash section of any Bank plays a vital role in general banking procedure Because it is deals
with the most liquid assets There are several counter works simultaneously in cash
section of AL-ARAFAH ISLAMI Bank Joydebpur Chowrasta branch There are also some
electronic counting machines by which a huge amount of case money can be counted
within a few minutes
3231 Cash receiving procedure
The work of case receiving counter is examining deposit slips Depositor user the
prescribed deposit slip supplied by the Bank for deposit cash draft cheque pay order etc
In all types of deposits teller must cheek the following things
The slip has been properly filled up
The title of the account and its umber
The amount in figure and in words is same
Instrument signed by the depositor
After checking all these things the teller will accept the cash cheque draft pay order etc
Against deposit slip the teller will please the cash in the drawer account to
denominations The teller will place signature affix ldquocash receipt rubber stamp sealrdquo and
record in the cash received register book against the account number at the end of this
procedure the cash officer passes the deposits slip to the computer section for posting
purpose and returns the customerrsquos copy
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
41
Accounting treatment
Date Particulars Debit Credit(Tk)
Cash AC Dr To Customerrsquos AC
Xxx Xxx
3232 Cash payment procedures Precaution
In order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque
A cheque must look whether it is an opened or closed cheque
The paying officer should see whether the cheque is drowning on his branch
He must see if the cheque is postdated A letter must not pay post- dated cheque
The officer must carefully see the apparent tenor of the cheque If it is mutilated of
materially altered then the officer must not honor it
The offer must compare the signature of the cheque with the signature of the
specimen signature card
The officer must verify the regularity of the endorsement
The officer may allow overdue against a cheque if prior arrangement is done with
the bank
Padding a cheque After verifying the above mentioned things the offer to make payment by putting lsquopay
cashrsquo seal the cash officer make it clear to pay The cash officer gives the cash amount to
the holder and record in the cash paid register
Account treatment
Date Particulars Debit(Tk) Credit(TK)
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
42
Customer AC Dr
To Cash AC
Xxx
Xxx
324 Deposit Section The function of the deposit is very important It is fully computerized The officer of
the deposit section maintains account numbers for different account number of all the
customers of the Bank They are used different code numbers for different account By
this section a depositordrawer can know what is the present position of hisher account
The officer makes posting three types of transactions such as cash clearing and transfer
This section performs the following tasks
Post all kinds of transactions
Provide on demand report
Claque maintenance
Preparation of day transaction position
Preparation of closing monthly transaction
3241 Remittance Section
Banks have a wide network of branches over the country and offer various kinds of
remittance of the public The main instrument used by the AL-ARAFAH ISLAMI Bank of
remittance of funds is
a Payment order
b Demand Draft (DD)
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
43
c Telegraphic Transfer (TT)
d On-Line Transfer
a Demand Draft (DD)
It is an instrument containing an unconditional order of one Bank to another to pay a
certain amount of money to the named or order the amount therein on demand DD is
very munching popular instrument for remitting money from one corner of a country to
another Commission for DD is 01 of the principle amount
b Accounting treatment
(DD by Chequecash)
Date Particulars Debit(Tk) Credit(Tk)
ChequeCash Ac Dr
To Demand Draft
To DD commission Ac
Xxx
Xxxx
Xxxx
C Different between pay order and demand draft
There are some different between pay order and demand draft which are
In case of demand draft both the payee need to have account But there is no
certain rule for pay order
PO is used in the same clearing area DD is used for all kinds DD can not be done in
the same clearing area
DD is drawn on a certain Bank officer But there is no certain rule for PO
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
44
d Telegraphic Transfer (TT)
Telegraphic transfer is the quickest method of transferring funds from one place of
another Sometimes the remitter wants that the money to be available to the payee
immediately In that case bankers are requested to remit the fund telegraphically Here
the remitter bears the additional charge of telextelephone Charge for TT is 015 of the
principal amount and the addition charge telextelephone is Tk 3000 In case of TT both
the parts must have accounted
33 Account Section
This is a very much crucial department for each branch of a commercial Bank
Recodes of all the trisection of every department are here as will as with order respective
branches Accounting department verifies all financial amounts and contents of
transaction If any discrepancy arises regarding any transaction this department report to
the concerned department
331 Tasks of accounts department
Accounts department plays vital role in commercial banking In privet banking
sector accounts department of AL-ARAFAH ISLAMI Bank Bangladesh Ltd Performs its tasks
properly
The activities of account section are as follows
o Record all transaction in the cash book
o Record all transaction in the general subsidiary ledger
o Prepare daily fund function weekly position period statement of affairs etc
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
45
o Prepare necessary statement for reporting purpose
o Make salary statement and pay salary
o Branch to branch fund remittance and support for accounting treatment
o Budgeting for branch
Make charges for different types of duties
34 Investment Section
Investment means the commitment of funds to one or more assets that will be held over
some future time periodAll activities of the Al-Arafah Islami Bank are conducted on an
interest-free system according to Islamic Shariah It invests all of its surplus funds on the
basis of the trade mode of financing ensuring buying and selling of halal commodities and
on a profit and loss sharing basis A fixed percentage of income derived from investment
of mudaraba deposits is distributed to the mudaraba deposit holders The investment of
the bank is supervised strictly so that no investment becomes overdue with consequential
loss of investment income
341 Investment Scheme in AIBL
Bai-Mudaraba
Bai-Musharaka
Bai-Murabaha (CC Pledge)
Bai-Muajjal (Commercialamp Real State) (CC Hypothecation)
Bai-Salam
Bai-Istesna
Izara-bil-Bai
Bai-Murabaha Trust Receipt
Hire Purchase Sirkatul Milk (Real State)
Hire Purchase Sirkatul Milk (HPSM)
Consumer Investment Scheme (CIS)
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
46
Small Enterprise Investment Scheme (SEIS)
Mosjid-Madrasha Investment Scheme (MIS)
Agriculture amp Rural Small Investment Scheme etc
Bai-Mudaraba
Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital)
Profit is shared between the two sides as per pre-agreed ratio
Bai-Musharaka
Under this mode the Bank and clients jointly participate in a project in a scheme or
project Profit is shared between the Bank amp the concerned client as per pre-agreed ratio
On the other hand loss is shared according to capital ratio
Bai-Murabaha
These modes are applicable for working capital finance Under these schemes bank
purchases goods raw materials as per requirement of the client In case of Bai-Murabaha
bank receives the sales proceed on deferred payment basis On the other hand in case of
Bai-Murabaha Bank receives the sale price at the time of delivery of the goods raw
materials Before handing over the goods raw materials the bank generally keeps the
same in its custody under pledge Finally I can say that Bai-Murabaha Purchase and sale of
commodities as per requests by clients permissible under shariah regulations
Bai-Muajjal - cost plus sale of the commodity on deferred payment basis against adequate
collateral
Bai-Salam (advance sale) - buying of goods from producerssuppliers on payment in
advance after entering into a firm contract and receipt of their delivery at a future
specified date
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
47
Ijara bil-bai (hire purchase sirkatul meelk) - purchase of durable items on equity
participation by both the bank and the client and handing them over to the client on
installment sale rental basis
Sector of Investment
Islamic Banking Wing of the bank finances in all sectors ie Industry business Agriculture
Real Estate etc if purpose of the investment is permissible under Islamic Shariah
Limit of Investment
Investment is offered to the extent of single borrower exposure limit as fixed by the
Bangladesh Bank from time to time
35 Foreign Exchange
As more than one currency is involved in foreign trade it gives rise to exchange of
currencies which is known as ldquoForeign Exchangersquo The term `foreign exchangersquo has three
principal meanings firstly it is a term used referring to the currencies of the other
countries in terms of any single one currency To a Bangladeshi Dollar Pound Starling etc
are foreign currencies and as such foreign exchange Secondly the term also commonly
refer to some interments used in international trade such as bill of exchange Drafts
Travels cheque (TC) and other means of international remittance Thirdly the terms
foreign exchange is also quite of ten referred to the balance in foreign currencies held by a
country
In terms of section 2 (d) of the foreign exchange regulations 1947 as adopted in
Bangladesh Foreign Exchange means foreign currencies and includes any instruments
drawn accepted made or issued under clause (13) of article 16 of the Bangladesh Bank
Order ndash1972 all the deposits Investments and bill of exchange expressed or drawn in
Bangladesh currency but payable in any foreign country
In exercise of the power conferred by section 3 of the foreign exchange regulation 1947
Bangladesh Bank issues license to the schedule bank to deal with exchange These banks
are known a ldquoAuthorized Dealersrsquo Licenses are also issued by Bangladesh Bank to persons
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
48
or firms to exchange foreign currencies instruments such as TC currency Notes amp Coins
They are known as ldquoAuthorized Money Changersrsquo
351 Definition of Letter of Credit (LC)
A Letter of Credit (LC) is an undertaking by a bank on behalf of its clients to pay a certain
amount of money to a certain personseller on the fulfillment of the terms and conditions
as laid down in the LC Since the agreed conditions include amongst other things the
presentation of some specified Documents letter of Credit is called ldquoDocumentary
Letter of Creditrdquo The Uniform Customs and Practices for Documentary Credit (UCPDC)
published by International Chamber of Commerce (ICC) publication No 500 amp 600 defined
documentary credit]
352 Types of LCs
Documentary Credit may be classified as hereunder
A) Revocable amp
B) Irrevocable
As per payment also Documentary Credit may be classified as follows
I) At sight amp
II) Deferred
Revocable Letter of Credit
A revocable letter of credit is a credit which can be amended or cancelled by the issuing
bank at any time without prior notice to the sellerrdquo
Irrevocable Letter of Credit
An irrevocable letter of credit constitutes a definite undertaking of the issuing bank (since
it cannot be amended or cancelled without the agreement of all parties thereto) provided
that the stipulated documents are presented and the terms amp conditions are satisfied by
the seller An irrevocable letter of credit can be either confirmed or unconfirmed
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
49
depending on the desire of the seller This sort of credit is always preferred to revocable
letter of creditrdquo
At Sight letter of credit
A letter of credit which is would be made payment when the documents received by
beneficiaryExporter within seven working daysrdquo
Deferred Letter of Credit
A letter of credit which will be made payment in later it may be either 60 (Sixty) days 90
(Ninety) days 120 (One Hundred Twenty) days nor 160 days and which are paid as per
acceptance made by the beneficiary bankrsquorsquo
353 Requirement of papersdocuments
3533 Before opening of the Lc the partyImporter must be submitted
the documentspapers
Valid Trade License of the firm
Valid IRCERC (issued by the CCIampE)
Tax Identification Number (TIN) certificate
VAT registration certification
Membership certificate issued by chamber of commerce
Bank solvency certificate
Photograph of the Importer
3532 At the time of Lc opening
Clientrsquos written application in his firms letter head
LC application amp agreement form (F-101) duly stamped amp filled amp signed by the
Importer
LCA form duly filled with HS code amp signed (F-180)
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
50
IMP form duly signed amp sealed (F-113)
IndentPro-forma Invoice duly accepted by the Importer
Insurance cover note with money receipt
Necessary charge documents duly stamped amp signed by the importer
One advance dated cheque which is covering the Lc value
Necessary another charge documents duly stamped amp signed by the importer (in
case of banks investment)
3533 By using BooksRegister
Lc opening Register (to written all necessary information of the Lc) (B-37)
Liability amp security register (for contingent liability amp cash securitymargin (B-63)
Inward Foreign bills register (for lodgment-retirement of the shopping documents
amp record) (B-38)
Ledger balance book (for monthly balancing of liability amp security) (B-37)
354 Important ParticularsColumn of Lc opening register (B-37)
Date of Lc opening
Lc Numbering
Name of the importer with address
IRC Number
Amount of Lc (in local amp foreign currency)
of MarginCash Security
Name of the Beneficiary amp address
Commodity
Country of Origin of goods to be imported
Mode of dispatch (by mailSWIFTTLX)
Name of the foreign correspondents
Tenor of the bills
License No
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
51
Date of amendment
Date of Shipment
Date of expiry of the Lc
Recovers
Amount of Margin held
Commission Vat Postage FCC Cable Charge etc
Initials
Remarks
355 Important particulars Column of BillsLodgment Register
Date Received From
Drawn on
Amount in FC
Exchange Rate Eqvt BTK
Tenor
Due Date
No of Docs
Drafts
No of BLAWBTR invoice amp others
Name of the carrier BLTRAWB No + Date
Merchandise
Date of arrived
Date of goods cleared
Initials
Remarks
356 Definition of Back to Back LC
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
52
Back to back letter of credit a new LC (an Import Lc) is opened on the basis of an original
LC (an Export Lc) Under the back to back concept the seller as the beneficiary of the
first LC offers it is a `securityrsquo to the advising bank for the issuance of the second Lc The
beneficiary of the back to back LC may be located inside or outside the original
beneficiaryrsquos country In case of a back to back LC no cash security (no margin) is taken
by the bank Bank liens the first LC In case of back to back LC the drawn bill is
usagetime bill In Al-Arafah Islami Bank Limited AD branches papersdocuments required
for opening of back to back LC as hereunder
Back to back LC is one same of pre-shipment finance to Export oriented Industries
Received a letter of credit from abroad BB LC generally opened on differed payment
basis from 60 (Sixty) days sight to 120 (One hundred Twenty) days sight
357 Foreign Exchange Remittance
Remittance means sending of fund The word remittance we understand
sendingtransferring of fund through a bank from one place to another which may be
within the country or between two countries one in to be abroad is called foreign
remittance
``Foreign Remittancersquorsquo means purchase and sale of freely convertible foreign currencies as
admissible ``Foreign Exchange Regulations Act-1947rsquorsquo and ``Guideline for Foreign
Exchange Transaction ndash VOL 1amp2rsquorsquo of the country Purchase of foreign currencies
constitutes inward foreign remittance and sale of foreign currencies constitutes outward
foreign remittance
Foreign Remittance will be classified as hereunder
A) Inward foreign remittance which will be through TT MT FDD PO TC
Foreign Currencies Notes etc
i) Family maintenance
ii) Indenting commission
iii) Donation
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
53
iv) Gift
v) Foreign Investment
vi) Export proceeds
vii) Others
B) Outward foreign remittance which will be as hereunder
a) Foreign Telegraphic Transfer (FTT)
b) Foreign Mail Transfer (FMT)
c) Foreign Demand Draft (FDD)
d) Travels Cheques (TC)
e) Foreign Currencies Notes
f) Others
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
54
41 Introduction A financial institution that is licensed to deal with money and its substitutes by the
accepting time and demand deposit making loans and investing in security The Bank
generates profits from the different in the interest rate charged and paid Banks also may
offer investment and insurance product which they were once prohibited from selling
All of the Banks position we can shortly summarize in the financial statement So
financial statement is very important as a financial institution An investor invests the
money into the Banks or other institution is looking the organization financial statement
42 Types of financial Statement
There are three types of Financial Statement That are-
Balance Sheet
Income Statement (Profit amp Loss Account)
Cash flow Statement
Statement of owner Equity
421 Balance Sheet
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
55
Balance sheet or statement of financial position is a summary of a persons or
organizations balances Assets liabilities and ownership equity are listed as of a specific
date such as the end of its financial year A balance sheet is often described as a snapshot
of a companys financial condition[1] Of the four basic financial statements the balance
sheet is the only statement which applies to a single point in time
A company balance sheet has three parts assets liabilities and ownership equity The
main categories of assets are usually listed first and are followed by the liabilities The
difference between the assets and the liabilities is known as equity or the net assets or the
net worth or capital of the company and according to the accounting equation net worth
must equal assets minus liabilities
AL-ARAFAH ISLAMI BANK LTD BALANCE SHEET
As at 30th June 2008
Particular June-2008 December-2007
PROPERTY amp ASSETS
CASH
Cash in Hand (Including foreign Currencies) 298320990 381766435 Balance with Bangladesh Bank amp Sonali Bank 1611564596 1637443244 (Including foreign Currencies) 1909885586 2019209679 BALANCE WITH OTHER BANKS amp FINANCIAL INSTITUTIONS In Bangladesh 3841720333 2437841149 Outside Bangladesh 418767924 245142485 4260488257 2682983634 MONEY AT CALL ON SHORT NOTICE - - INVESTMENTS Government 900000000 800000000 Others 122564190 68583386 1022564190 868583386
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
56
INVESTMENT amp ADVANCES - Murabaha Bai-Muazzal Hire Purchase etc 25019788538 21116394966 Bills Purchased and Discounted 2083343835 1789972964 TOTAL INVESTMENT 27103132373 22906367930 Fixed Assets including Premises Furniture amp Fixture 372292657 334476460 Other Assets 1775469060 1370702317 Non-Banking Assets - -
TOTAL ASSETS 36443832122 30182323406 LIABILITIES amp CAPITAL LIABILITIES Borrowing from other Banks Financial Institutions and agents 2680000000 1320000000 DEPOSITS AND OTHER ACCOUNTS Al-Wadia Current Accounts amp Other Accounts 3227406729 3097906953 Mudaraba Savings Deposit 3987237105 3932227170 Mudaraba Short Notice Deposit 870061313 761766781 Mudaraba Term Deposit 13779831791 11233591127 Mudaraba Special Deposit 4391874776 3629539263 Bills Payable 429032463 354096993 Bearer Certificate of Deposit - - Total Deposit 26685444177 23009128287 OTHER LIABILITIES 4643882995 3815696649 CAPITALSHAREHOLDERS EQUITY Paid up Capital 1383810480 1153175400 Statutory Reserve 731252590 586886597 Exchange Equalization 2057198 2057198 Asset Revaluation Reserve 64603248 64603248 Profit and Loss Surplus Account 252781434 230776027 TOTAL SHAREHOLDERS EQUITY 2434504950 2037498470
TOTAL LIABILITY AND SHARE HOLDERS EQUITY 36443832122 30182323406 OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement - - Letters of Guarantee 890945926 601880518 Letters of Credit 7893692015 3860037680 Bills for Collection 364626744 198760887 Other Contingent Liabilities - -
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
57
Total 9149264685 4660679085 Less Margin 666317498 773194261 8482947187 3887484824 Other Commitments - - TOTAL 8482947187 3887484824
Table Balance Sheet of AIBL
422 Income Statement (Profit amp Loss Account)
Income statement also called profit and loss statement (PampL) and Statement of
Operations is a companys financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out is
transformed into the net income (the result after all revenues and expenses have been
accounted for) The purpose of the income statement is to show managers and investors
whether the company made or lost money during the period being reported
AL-ARAFAH ISLAMI BANK LIMITED INCOME STATEMENT
For the Period Ended June 30 2008
Particular June-2008 June-2007 Growth INCOME amp EXPENDITURE Taka Taka
Investment Income 1662607141 993527975 6734
Profit paid on Deposit and Borrowing (1008720053) (789966577) 2769
Net Investment Income 653887088 203561398 22122
INCOME FROM COMMISSIONEXCHANGE amp OTHERS Commission Exchange and Brokerage 361686864 281718309 2839
Income from Investment in Share Securities 26493001 - 000 Other operating Income 46494726 48992796 -510
Total = (a + b) 434674591 330711105 3144
Total operating Income (A) 1088561679 534272503 10375
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
58
Salary and allowances amp Contribution to PF 209112318 171839950 2169
Managing Director Salary amp Allowances 2400000 1600000 5000
Directors and Sharia Council fees amp Expenses 2094811 2852231 -2656
Rents Taxes Insurance Lighting etc 33464614 31807762 521
Postage Telegram Telephone amp Stamps etc 9505914 6139031 5484 Law charges 1031457 1317948 -2174 Depreciation amp Repairs to the Banks Properties 2641617 2907821 -915 Stationery Printing Advertisement etc 7139920 8385842 -1486 Other Expenses 20714063 24104615 -1407 Total operating expenses (B) 288104714 250955200 1480
Profit(loss) before provision and tax C = (A - B) 800456965 283317303 18253
Provision against Investment amp Off-balance sheet exposures 78627000 150278053 -4768
Provision for against decreasing value of Investment - - - Other Provision - - -
Total provision ( D ) 78627000 150278053 -4768
Total Profit (Loss) before Taxes E = (C - D) 721829965 133039250 44257
Provision for Taxation 324823484 59867662 44257 Net Profit after Tax 397006481 73171587 44257 Retainned Earning Brought forward 140947 30592 36073 Profit available for appropriation 397147428 73202179 44253
Appropriations Statutory Reserve 144365993 26607850 44257 144365993 26607850 44257 Retained earning Carried forward 252781435 46594329 44252
Earning per Share (EPS) ( Tk 100) 2869 635 35214
Table Income Statement (Profit amp Loss Account)of AIBL
423 Cash Flows Statement
A cash flow statement or statement of cash flows is a financial statement that shows how
changes in balance sheet and income accounts affect cash and cash equivalents and
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
59
breaks the analysis down to operating investing and financing activities As an analytical
tool the statement of cash flows is useful in determining the short-term viability of a
company particularly its ability to pay bills International Accounting Standard 7 (IAS 7) is
the International Accounting Standard that deals with cash flow statements
People and groups interested in cash flow statements include
Accounting personnel who need to know whether the organization will be able to
cover payroll and other immediate expenses
Potential lenders or creditors who want a clear picture of a companys ability to
repay
Potential investors who need to judge whether the company is financially sound
Potential employees or contractors who need to know whether the company will
be able to afford compensation
AL-ARAFAH ISLAMI BANK LIMITED CASH-FLOWA STATEMENT
As at 30 June 2008
NA Particular June-2008 June-2007
Cash flows from operating activities
Profit received in cash 1650938035 993527975 Profit paid by cash (1008720053) (789966577) Income from Investment 26493001 - Fees amp Commission received in cash 361686864 281718309 Recoveries of loans previously written off 11669106 - Cash paid to employees (211512318) (173439950) Cash paid to suppliers (6067237) (5565286) Income taxes paid (200000000) (300000000) Received from other operating activities 46494726 48992796
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
60
Paid for other operating activities (70525159) (71949963)
Operating profit before changes in operating assets and liabilities 600456966 (16682696)
Increase(Decrease) in Operating assets and liabilities
Statutory deposits - - Purchase-sale of trading securities (53980804) - Investment and advances to other banks - -
Investment and advances to customers (other than Banks) (4196764443) (2417163436)
Other assets (404766743) (108794222) Deposits from other banks 1360000000 (41700000) Deposits from customers (other than Banks) 3676315890 3911668683 Other liabilities account of customers - - Trading liabilities 624735860 446325718 A Net Cash received from operating activities 1605996726 1773654047
Cash flows from investing activities Proceeds from sale of securites - - Payments for purchases of securities (100000000) (600000000) Purchase of property plant and equipment (37816197) (33433977) Sales proceeds of Fixed assets - -
Purchase-sale of subsidiary B Net cash used in investing activities (137816197) (633433977)
Cash flows from financing activities
Increase in Exchange Equalization Account - -
Increase in Share Capital - -
Dividend paid
C Net cash received from financing activities - -
D Net (decrease) increase in cash (A+B+C) 1468180529 1140220070
Effects of exchange rate changes on cash and cash-equivalents - -
E Opening cash and cash-equivalents 4702193314 2781899413
F Closing cash and cash-equivalents (D+E) 6170373843 3922119483
Table Cash Flows Statement of AIBL
424 Statement of Owners Equity
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
61
Owners Equity is a Financial statement showing the beginning balance additions to and
deductions from and the ending balance of the shareholders equity account for a
specified period It also called the statement of shareholders equity
The Statement of Owners Equity shows the change in owners equity during a given time
period It lists the owner equity balance at the beginning of the period additions and
subtractions to the balance and the ending balance Additions come from owner
investments and income subtractions from owner withdrawals and losses
425 AIBL at a Glance
Capital Reserves Deposit Investment amp Profit-Loss (Position) of AIBL as hereunder
Particulars 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Authorized capital
100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 250000 250000
Paid-up Capital 10120 10120 10120 25300 25300 25300 25300 25300 50600 58696 67794 85420 115318
Reserve Fund --- 248 2532 5566 14556 21955 30312 32262 23189 48800 54222 83598 109195
Deposit 20145 130563 225665 453474 641579 730759 787918 746300 864327 1010828 1164366 1677533 2300913
Investment 1248 77916 174554 225976 379371 372841 507920 640360 757154 815016 1147441 1742319 2290637
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
62
Import --- 103020 322245 527950 555551 597990 555927 516251 769829 933749 1263160 1882140 2704272
Export --- 8360 59212 110300 230421 331320 252463 189477 307552 369934 493290 914270 1271491
Total Income
137 5098 19617 32298 53476 75219 80035 83542 98768 112085 145268 217248 295561
Total Exp 335 4629 12893 24039 46430 59845 67884 41576 68134 77196 90448 120271 219943
Shareholders Equity
10120 10393 12909 30927 29986 32607 36572 67148 73789 95726 122016 169018 203750
Profit b Tax -198 469 6281 8206 7047 6700 3948 13681 30634 34889 54820 96977 75618
Income tax --- 172 2403 2872 2466 2345 1382 5776 10396 15700 21510 38545 23553
Profit a Tax -198 005 2607 3693 3170 3015 1953 5071 12706 15476 26290 47002 34731
Dividend --- --- 2500 1500 1200 1200 750 2000 1600 1550 2600 3500 2000
Total assets 51980 241291 383325 674948 774604 858595 925377 875933 1088682 1287461 1533689 2136816 3018232
Fixed asset 513 1989 3705 4786 5035 5244 5854 11483 12623 19517 20800 21510 33448
EPS -1966 049 25760 14596 18104 17214 10143 31242 25110 26367 38780 55024 63012
No of Shareholders
23 23 23 7604 6319 5849 5778 5557 5584 5379 5402 4487 12013
No of employees
54 171 320 427 664 674 659 670 685 803 771 912 1033
No of Branch 5 10 20 30 35 37 40 40 40 40 41 46 46
Employee per Branch
11 17 16 14 19 18 16 17 17 20 19 20 23
43 Analysis of the Financial Statement
Financial analysis refers to an assessment of the viability stability and profitability of a
business sub-business or project
Financial analysts often assess the firms
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
63
1 Profitability - its ability to earn income and sustain growth in both short-term and long-
term A companys degree of profitability is usually based on the income statement which
reports on the companys results of operations
2 Solvency - its ability to pay its obligation to creditors and other third parties in the long-
term
3 Liquidity - its ability to maintain positive cash flow while satisfying immediate
obligations
4 Stability- the firms ability to remain in business in the long run without having to
sustain significant losses in the conduct of its business Assessing a companys stability
requires the use of the income statement and the balance sheet as well as other financial
and non-financial indicators
431 Ratio Analysis
Ratio analysis means the relationship between two numbers We can use ratio analysis to try to tell us whether the business
1 is profitable
2 has enough money to pay its bills
3 could be paying its employees higher wages
4 is paying its share of tax
5 is using its assets efficiently
6 has a gearing problem
7 is a candidate for being bought by another company or investor
432 Profitability Ratio
1 Profit margin on sales (2008) = Sales
NetIncome Net income= 397006481 Sales=653887088
= 0607148
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
64
= 6
Profit margin on sales (2007) = 0359457 Net income- 73171587 Sales= 203561398
= 4
Comments
This ratio indicates that how much the profit turns against on sales The Industrial average ratio is 5 On this organization profit margin ratio is 6 The organization profit turn over is better then 2007
2 Return on asset (ROA-2008) =TotalAsset
NetIncome Net Income= 397006481 Total Asset=36443832122
= 0010894 = 109
Return on asset (ROA-2007) =TotalAsset
NetIncome Net Income=73171587 Total Asset=30182323406
= 0002424 = 024
Comments
An indicator of how profitable a company is relative to its total assets ROA gives an
idea as to how efficient management is at using its assets to generate earnings The
industrial average ratio is 9 But both ratios are lower then the industrial ratio
3 Return on Equity (ROE-2008) =yTotalEquit
NetIncomeNet Income=397006481TotalEquity= 2434504950
=0163075
=1631
Return on Equity (ROE-2007) =yTotalEquit
NetIncomeNet Income=73171587 Total Equity= 2037498470
= 0035912 =359
Comments
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
65
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporations profitability by revealing how much profit a company
generates with the money shareholders have invested In FY 2008 is higher then FY 2007
4 Basic Earning Power (BEP-2008) = TotalAsset
EBITEBIT-800456965 Total Asset=36443832122
= 0021964
= 220
Basic Earning Power (BEP-2007) = TotalAsset
EBIT EBIT-283317303 Total Asset=30182323406
= 0009387 = 094
Comments
A businesss ability to generate profit from conducting its operations Earnings power is
used to analyze stocks to assess whether the underlying company is worthy of investment
Possessing greater long-term earnings power is one indication that a stock may be a good
investment Earning power2008 is better then 2007 So company are increase investment
power day by day
433 Solvency Ratio
1 Debt-Asset Ratio Debt Ratio (2008) =TotalAsset
TotalDebt Total debt=34009327172 Total
asset=36443832122
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
66
= 0933198
=9332
Debt-Asset Ratio Debt Ratio (2007) =TotalAsset
TotalDebt Total debt= 28144824936 Total
Asset=30182323406
= 0932494 = 9325
Comments
A ratio that indicates what proportion of debt a company has relative to its assets The
measure gives an idea to the leverage of the company along with the potential risks the
company faces in terms of its debt-load The industrial average ratio is 40
2 Debt-Equity Ratio (2008) =yTotalEquit
TotalDebt Total debt=34009327172 Total Equity= 2434504950
= 139697096 =139697
Debt-Equity Ratio (2007) =yTotalEquit
TotalDebt Total debt= 28144824936 Total Equity= 2037498470
= 1381342138 = 138134
Comments
A measure of a companys financial leverage is calculated by dividing its total liabilities by stockholders equity It indicates what proportion of equity and debt the company is using to finance its assets
434 Liquidity Ratio
1 Current Ratio (2008) = bilityCurrentLia
etCurrentAssCurrent Asset= 27103132373 Current Liability=
26685444177
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
67
= 1015652 = 102 1
Current Ratio (2007) = bilityCurrentLia
etCurrentAss Current Asset=22906367390 Current Liability=
23009128287
= 0995534
=11 Comments A liquidity ratio that is measures a companys ability to pay short-term obligations It also
known as liquidity ratio cash asset ratio and cash ratio The industrial average ratio
is 21 So this company ratio is very effective
2 Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 1015652
=102 1
Quick Ratio Acid test Ratio (2008) = bilityCurrentLia
InventoryetCurrentAss
= 0995534
=11
Comments
The quick ratio is more conservative than the current ratio The quick ratio measures a
companys ability to meet its short-term obligations with its most liquid assets The higher
the quick ratio is the better the position of the company But this company has no
inventory The ideal ratio is 11
435 Stability Ratio
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
68
1 Fixed Asset Turnover Ratio (2008) =FixedAsset
Sales Sales= 653887088 Fixed Asset= 372292657
= 1756379224 = 17564
Fixed Asset Turnover Ratio (2007) =FixedAsset
Sales Sales= 203561398 Fixed Asset= 334476460
=0608597083
= 6089
Comments
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Fixed Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its fixed assets
2 Total Asset Turnover Ratio (2008) =TotalAsset
Sales Sales= 653887088 Total Asset= 36443832122
=0017942325 =179
Total Asset Turnover Ratio (2007) =TotalAsset
Sales Sales= 203561398 Total Asset= 30182323406
= 0006744391
=067
Comment
An accounting measure used to quantify a firms effectiveness in extending credit as well
as Asset The Total Asset turnover ratio is an activity ratio measuring how efficiently a
firm uses its assets
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
69
44 My Findings
Data analysis and interpretation based on questionnaire and interviews on the customersclients 1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd
Table 1 (About environment of AL-ARAFAH ISLAMI Bank)
SL No Comments No of person Percentage
1 Very Good 35 35
2 Good 60 60
3 Fair 5 5
4 Poor 0 0
Total 100 100
Interpretation From the data analysis we can see most of the clients agreed that banking environment of
AL-ARAFAH ISLAMI Bank is good Some people committed it is very good and a few said
that itrsquos fair
2 Employees are always ready to help the customers Do you agree
SL No Comments No Of person Percentage
1 Yes 95 95
2 No 0 0
3 Some times 5 5
Total 100 100
Interpretation Analysis shows that most of the customer agreed that employees are always ready to
help They are very cooperative
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
70
3 Do you think customer is getting more facilities here in comparison with other bank
SL No Comments No Of person Percentage
1 Yes 60 60
2 No 0 0
3 Not all cases 40 40
Total 100 100
Interpretation From the analysis it is found that customers are getting more facilities comparing to other
bank At the same time a large number of clients expressed that in some specific cases
such as interest rate etc They are getting more facilities but not all sectors of banking
service
3 What is your suggestion to improve the service quality of Al-Arafah Islami bank ltd In order to improve the service quality customer expressed different opinion in
their point of view I can summarize their opinion which is the gist of their suggestions
They have of take some more steps to improve the service quality Each department of the
Banks should computerized the cash transaction process would be easier and very prompt
that it would take a very short time More branches should be opened in Dhaka City and
other cities of his country They will have customer credit Scheme and other Scheme that
will help the customer It is badly needed to provide modern Banking services such as
Credit Card ATM card Visa card etc AL-ARAFAH ISLAMI Bank is providing better service
comparing to other privet Banks But there are almost 52 Bank in our country In the near
future some new banks are going to be opened So in order to complete in the market AL-
ARAFAH ISLAMI Bank should be have to improve their service They should increase their
manpower and will have to improve their service quality and provide more facilities
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
71
4 Finding in different sections of the Bank I found that all the sections of the Bank are facing lack of manpower as a general
problem In general banking department they follow the traditional banking system The
entire general Banking procedure is not fully computerized As a result some processes for
example collection money from the deposit take a long time to perform I think that is
manpower and computer problem Thatrsquos why the service is not prompt as the customerrsquos
demand Lack of variety of services is also a drawback of the general Banking area of the
AL-ARAFAH ISLAMI Bank of Bangladesh Ltd As result Bank is falling behind in competition
In comparative area other bank use modern technology more effective software and
different service (ATM SME) and other social activities If the bank wants to create
competitive advantage they need to provide Modernecommerce service
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
72
45 Recommendations
Banking is service oriented marketing Its business profit depends on its
service quality Thatrsquos why the authority always should aware about their
service quality
To provide service to the customer it is necessary to have a trained team of
an organization of an institution For this reason the Bank should recruit
more fresh bright and energetic person
Bank should offer Bank is launching ldquoCustomer Credit Schemerdquo AL-ARAFAH
ISLAMI Bank is failing to launch this kin of Scheme The management can
undertake such sort of Schemes and earn more profit
As soon as possible the Bank should stat more benches in Dhaka City as well
as the other cities of the country
Now a dayrsquos world is going very fast Now most of the Bank opens online
customer service system So in order to compete in the world market they
should adopt online Banking system
The recruitment process of the Bank is very length an expensive The bank
should select the employee by reducing the lengthy process
In general banking department it is necessary to implement modern
Banking process instead of tradition system The department should be
more computerized
The loan sanction process should be easier that the clients can feel
convenient to take loan from the Bank
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
73
To make exchange process more prompt the authority should use modern
communication system such as E-mail Fax win Fax Internet etc
46 Conclusion
It is cleared that the success of a bank depends on improved service delivery to its
customers Al-Arafah Islami Bank Ltd has an achieved success among its peer group within
a short span of time with its professional and dedicated team of management having long
experience commendable knowledge and expertise in conversion with modern banking
With all its resources the management of the Bank firmly believes that the bank would be
able to encounter problem that may arise both at micro and macro economic levels The
Management of the bank is maintaining an efficient portfolio in order to have a healthy
growth and retain customer satisfaction AL-ARAFAH ISLAMI Bank is engaged in modern
banking It is expected that AL-ARAFAH ISLAMI Bank by its efficient Asset and liability
management will be able to maintain its trend of growth and thus overcome the threat
Neither AL-ARAFAH ISLAMI bank nor any other commercial bank can effectively combat
risk However AL-ARAFAH ISLAMI Bank having small and targeting niche markets is likely
to be less affected by restrictive monetary and or fiscal policy The Management of the
Bank is planning to meet the required capital adequacy withering the stipulated time
frame and a loan and advance policy that expected the loan loss provisioning in future will
be within tolerable limit having little material impact on future profitability as well as net
worth Although AL-ARAFAH ISLAMI bank is yet to fully automated and it is proceeding
aggressively to enhance its technology level As AL-ARAFAH ISLAMI bank is performing
good in traditional general banking and there is a good demand for Islamic Banking and
the opining if then (The management) that the performance of the Bank is getting much
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
74
better than past With their strengths the bank (Al-Arafah Islami Bank Limited) can also
reduce the threats existing in the market We also call to almighty Allah whole works and
activities grant as an Ibadat
I wish and hope that in future AL-ARAFAH ISLAMI Bank will be Number one commercial
Bank in Bangladesh
Reference
Fundamentals of financial Management- Eugne F Brigham Joel F Houston ( 10th
Edition)
Accounting Principle-Weygandt Kieso Kimmel ( 7th Edition)
Annual Report of Al-Arafah Islami Bank Ltd
Web Service- wwwgooglecom
Fundamental of corporate finance- Stephen A Ross Randolph W Westerfield
Bradford D Jordan (6th Edition)
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
75
Appendix-1
Survey Questionnaire for Internship Report On
ldquoFinancial Performance Analysis of The Al-Arafah Islami Bank Limitedrdquo
(A requirement of Uttara University for fulfillment of BBA Course)
1 What is your opinion about the banking environment of AL-ARAFAH ISLAMI bank Ltd A Good B Very Good C Fair D Poor
2 How long are you Banking with The AL-ARAFAH ISLAMI bank Ltd
A 1-3 Months B 4-6 Months C 6-12 Months D
2More years
3 How frequently you come to the Bank
A 5 daysWeek B 4 or Less daysweek C Oncemonth D 2 to 3
timesmonth
4 What is the main reason for choosing The AL-ARAFAH ISLAMI bank Ltd
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
76
A Pricing B Daily follows up C Global acceptance D Service
quality
E Cost Effective F Brand Image G Convenient Location
5 Employees are always ready to help the customers Do you agree
A Yes
B No
If yes then answer the following question
I How satisfied are you about the customer service of The AL-ARAFAH ISLAMI bank
Ltd
A High B Average C Low D Very Poor
II How much time (minutes) taken by the officials to provide required services
A 5 to 15 minutes B 16 to 25minutes C 26 to 35 minutes D 36 minutes or more
III How do you want to rank The AL-ARAFAH ISLAMI bank Ltd
A First-Classed B Second-classed C Third-classed D Fourth
If No then answer the following question
I What problems do you face with The AL-ARAFAH ISLAMI bank Ltd
A Lack of cooperation B Lack of product knowledge CAL-ARAFAH ISLAMI
bank policies D Lack of support from the top management
E Others
II Did you ever complaint about any problemspoor services of the Bank
A Yes
B No
III Did any problems resolved by the Bank for your complete satisfaction
A Yes by the company or its representative
B Yes by me or someone outside the company
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
77
C No
Products facilities related questions
1 What types of financial product facilities you are getting Please mention name
A Deposit Name----------------------------------
B Loan Credit Name----------------------------------
2 How did you learn about this product
A TelevisionRadio
B InternetWebsite
C Newspaper Magazine
D FriendRelative
E Other helliphelliphelliphelliphellip
3 Please rate your overall judgment about the quality our productsservices
A High quality
B Average
C Low quality
4 The standards of productsservices compared to other Banks of this type are A Much improved
B About the same
C poorer
D very poor
5 How satisfied are you with the interest rates of the financial product
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services
78
A Very Dissatisfied
B Dissatisfied
C Satisfied
D Very Satisfied
6 How often are you recommend our product to your family friends amp colleague
A Very often
B Not frequently
C Donrsquot recommend
If you are not satisfied and donrsquot recommend our products to others then please
comments about how we can improve your satisfaction with our products and services