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  • aoa,,nazish sohail sis...i m really i need of ur kind help..i m workikng lady..done engineering earlier and now mba markiting..i need ur Report OF Mezan BANK ..plzzzzzzzzz let it mail to me aT anbreenpmx@yahoo.com
    plzzzzzz....i m really i need..and will wait for ur reply ...JZAK ALLAH
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  • Commendable work done by you Nazish. can you kindly email me your report only if its ok with you. I cant access it completely over here . I need it in making my internship report. Waiting for your reply =)
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  • malik sahab i am sorry to say i m lil bit late. if you still need this project then write me @ foxyzash007@gmail.com
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  • hi........... thanks God boht mushkil sai signup howa. but still i facing difficulties in downloading this report.plzzzz NAZISH G plz, for god sake do something for me.i m a computer engneer, may be ap k kisi kam awon. unfortunately i have done MBA also, now the degree requirment is 8 monts internship crtificate and its reoport. so plzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz plz plz plz help me. my email address is 'malak_saifullah@yahoo.com' 03159170309
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  • thank you mr Inamullah for taking interest in my report. and giving me such a detailed comment :) from this i guess you liked my report :)
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    Internship report on mbl Internship report on mbl Document Transcript

    • September 06 2010 MEEZAN INTERNSHIP REPORT BANK Hajvery University Lahore | Nazish Sohail
    • InternshIp report Meezan Bank Limited Prepared By: NAZISH SOHAIL BBA HONS 106-862 hAJVerY UnIVersItY LAhore Page | 2
    • Acknowledgements MY FIRST AND FOREMOST HUMBLE GRATITUDE TO “ALLAH” THE ALMIGHTY FOR GIVING ME THE VALOR TO REMAIN DEDICATED TO MAKE THIS INTERNSHIP REPORT. Apart from it I take the opportunity to acknowledge the real efforts of: First, I would like to thank my university; HAJVERY UNIVERSITY LAHORE, for the valuable support and encouragement which it has given to me in the form of this internship program. Secondly, I am very greatful to Mr. Mustansar Ali, Branch Manager/VP, Meezan Bank, New Garden Town Lahore, for giving me the opportunity to be a part of this organization and to Mr. Tabasher Zaki Malhi, Manager Operations, for being so helpful and cooperative throughout my internship program. Likewise, I am indebted to Ms Rabia Aslam, Senior Officer-1, Ms Sana Islam, Senior Officer-2, Mr. Umar Javeid, Relationship Manager/ Credits Department, Mr Muneeb Ullah Khan, Manager Foreign Trade, and the entire team of Meezan Bank, NGT, for their support and the provision of valuable information which helped me a lot during my internship and in completion of this report. Page | 3
    • THE OPENING ‘In the name of Allah, The most Gracious, the most Merciful. All praise be to God alone, the Lord of all the worlds, the All-Merciful, the Ever Mercy-giving, the Master of the Day of Judgment. You alone we worship, and You alone we ask for help. Guide us on the Straight Path, The path of whom You have blessed, not of those who incur You anger, Nor of those who go astray.’ (Al-Fatihah 1: 1-7) Page | 4
    • Mustansar Ali -The Branch Manager- “The conventional definition of management is getting work done through people, but real management is developing people through work” (Agha Hassan Abedi) Page | 5
    • Tabasher Zaki Malhi Manager Operations Page | 6
    • Table of Contents Chapter 1 Executive Summary 12 Chapter 2 Introduction 15 i. Company Background 15 Chapter 3 3.1 Company Analysis 16 3.2 Operation Analysis 18 i. Business & Branch Network 18 3.3 Financial Analysis 20 I. Operational Analysis 21 II. Balance Sheet Analysis 24 III. Ratio Analysis 26 3.4 Human Resource Management- Assessment 39 I. Board of Directors 39 II. Management Team 39 III. Organizational Structure 41 IV. Shariah Board 42 V. Executive Committee 42 VI. Audit Committee 42 VII. Company Secretary 42 VIII. Advisory Board 42 IX. Legal Advisor 42 Page | 7
    • X. Auditors 42 3.5 Marketing Analysis 44 I. First P- Product 44 II. Second P- Price 46 III. Third P- Place 47 IV. Fourth P- Promotion 48 V. Fifth P- People 49 VI. Sixth P- Process 50 VII. Seventh P- Physical Evidence 50 Chapter 4 4.1 Environmental Analysis 52 I. Growth Rate Of The Entire Industry 52 II. Performance of Islamic Industry 53 4.2 Competition Analysis 55 I. Major Competitors 55 II. Their introduction 56 III. Their Market Shares 58 4.3 Technology Analysis 59 I. Technical Methods that Affect the Industry 59 II. Innovation 60 Chapter 5 How and why I have selected Meezan Bank? 62 I. Reasons for selecting MBL 62 II. Practical Application of the Subjects 63 Page | 8
    • Chapter 6 Brief on the Departments I worked during internship 65 and specific/leading contribution made I. Brief Introduction 65 II. Department Overview 65 Chapter 7 Problem Identification 67 I. Weakest areas of MBL’s Performance 67 Chapter 8 SWOT Analysis 69 Chapter 9 Conclusion & Recommendations 72 Chapter 10 References 76 Chapter 11 Appendices 77 Page | 9
    • Appendices Appendix A: Customer Services Department 77 Appendix B: Operations Department 79 Appendix C: Riba free term deposits offered by bank 83 Appendix D: Cash Department 87 Appendix E: Credits/Finance Department 88 Appendix F: Other Products Offered 89 Appendix G: Islamic Modes of Financing 91 Appendix H: Attachments 93 Page | 10
    • LIST OF ABBREVIATIONS MBL: Meezan Bank Limited NPL: Non Performing Loan SBP: State Bank of Pakistan ROA: Return on Assets ROE: Return on Equity EPS: Earnings per Share M: Million BOD: Board of Directors NGT: New Garden Town NPF: Non Performing Finance HR: Human Resources IBI: Islamic Banking Institutions DFI: Development Finance Institutions CAR: Credit Adequacy Ratio SME: Small Medium Enterprises FDR: Financing to Deposit Ratio Dept: Department L/C: Letter of Credit Page | 11
    • KYC: Know Your Customer Chapter 1 1. EXECUTIVE SUMMARY Internship is an integral part of our Bachelors of Business Administration (BBA) program. It provided me the opportunity to develop practical know how of concepts which before that were only in theoretical form. My internship in Meezan Bank Limited was full of learning regarding various aspect of banking. The report contains practical knowledge, which I gained during my stay at Meezan Bank Ltd. Banking sector of Pakistan has been transformed within last decade (CY2000-2009) from a sluggish and government-dominated sector to a much more agile, competitive and profitable industry. Speed and sequencing on banking sector transformation and its role in promoting economic growth is now a leading story of a sector success. Within Pakistan SBP offers the story of effective leadership as a regulator, change management and corporate governance. Outside Pakistan it is serving to offer rich lessons in what difference governance regulator can make and how bank restructuring and privatization can change the landscape of the industry. Meezan Bank limited is the pioneer Islamic Bank in Pakistan, and it has bright future forward. Meezan Bank Limited is a publicly listed company first incorporated on January 27, 1997. The Bank has an internationally renowned, very high caliber and pro-active Shariah Supervisory Board Page | 12
    • I did my eight weeks internship at Meezan Bank, Garden town branch, Lahore. This branch also serves as a Parent branch to other sub branch. During my internship I was rotated in different departments but my penetration was developed in CIBD (Corporate & Investment Banking Division). The work that I did during my internship at Meezan Bank primarily includes voucher checking, checking account opening pre-requisites, account opening backlog checking, analyzing the inward and outward clearing, maintaining return mail register, completion of pay order and demand draft register, zakat register maintenance, assisting the cheque book issuance department, know-how about the lockers available and the rules relating to them, analyzing the expenses incurred and maintain the records thereof. Assisting the officer concern for the creation of expense approval sheets, understand the working of credits department, and to assist the foreign trade wing. One of the strongest reasons for selecting this company-Meezan Bank- was that it is named after the Quranic word AL-MEEZAN which means BALANCE. Second most important thing that influenced me for the selection of this bank was that it has the privilege of being premiere Islamic bank in the Pakistan which is why it is the market leader among all the Islamic Banks. Banking sector owes a pivotal importance in the economy of any country through its variant functions. This basic motivator stressed me to join Meezan bank for Internship Training. Moreover, the experience and practice learned during this tenure also proved very helpful and facilitating in the forthcoming professional life. During my internship program I have discovered many of the courses, I studied at Hajvery University, were relevant to the work I have done during my internship at Meezan bank. Chief ones are financial management, banking practice & law, Page | 13
    • banking operations, database management system, and Uniform Customs & Practices 600 for the documentary credit respectively. The weakest area of performance that I identified during my internship program is the working of HR department. The main problem that I identified during my internship period was the lack of awareness about the exact job description of employees, undefined job tasks in operations, excessive documentations as per the policies making it extremely very difficult for the customers to avail their desired services and more crucial one was the lack of motivation at workplace. Meezan Bank limited has two major competitors namely Al-Baraka Islamic Bank B.S.C (E,C), Operations Pakistan and Bank Islami Pakistan Limited respectively. The market analysis and financial analysis of the competitors shows that the Meezan Bank limited is current market leader in the pie among the Islamic banks. Some of the suggestions in this report were that MBL should pursue aggressive marketing and advertising strategy, introducing job specific training to employees and adhering to the criteria laid out by the HR department for job advancements in complete faith and employee training sessions on regional level. All information in this report is based on my observations, interviews with the customers and the branch officers and practical involvement in different tasks during my internship at Meezan Bank. Page | 14
    • Chapter 2 2. INTRODUCTION 2.1 Meezan Bank Public Limited Type KSE: MEBL LSE: Industry Islamic Banking Founded Al-Meezan Investment Bank Limited Headquarters Karachi, Pakistan Murabaha, Ijarah, Diminishing Musharakah, ATM/Debit Card, Products Savings, Consumer Banking etc. Revenue 2007 PKR 1.4 billion Website www.meezanbank.com Vision: Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair just society for mankind. Mission Statement: Page | 15
    • To be a premier Islamic bank, offering a one-step shop for innovative value- added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders’ value through an organizational culture based on learning, fairness, respect for individual enterprise and performance. Chapter 3 3.1 Company Analysis Meezan Bank Limited is a publicly listed company first incorporated on January 27, 1997. It started operations as an investment banking license under SRO 585-(1)/87 in August of the same year. In January 2002 in an historic initiative the State Bank of Pakistan granted Meezan Bank the nation's first full fledged commercial banking license dedicated to Islamic Banking. And it's started working as commercial bank from 1st May 2002. Meezan Bank stands today at a noteworthy point along the evolution of Islamic Banking in Pakistan. The banking sector is showing a significant paradigm shift away from traditional means of business and is catering to an increasingly astute and demanding financial consumer who is also becoming keenly aware of Islamic Banking. Meezan Bank bears the critical responsibility of leading the way forward in establishing a stable and dynamic Islamic Banking system replete with dynamic and cutting-edge products and services. The MBL has made fundamental and significant progress forward and in doing so has established a strong and credible management team comprised of experienced professionals which have achieved a strong balance sheet with excellent operating profitability. Page | 16
    • MBL’s main shareholders are leading local and international financial institutions including • Pak Kuwait Investment Company (The only AAA rated financial entity in the country,) • The Islamic Development Bank of Jeddah • Shamil Bank of Bahrain, > Islamic Development Bank, Jeddah • Kuwait Awqaf Public Foundation • Saudi Pak Industrial and Agricultural Investment Company (Private) Limited. That in addition to their strength and stability adds significant value to the Bank through Board Representation and applied synergies. The Bank has an internationally renowned, very high caliber and pro-active Shariah Supervisory Board presided over by Justice (Retd.) Maulana Muhammad Taqi Usmani, a renowned figure in the field of Shariah, particularly Islamic Finance. He holds the position of Deputy Chairman at the Islamic Fiqh Academy, Jeddah and in his long and illustrious career has also served as a Judge in the Shariat Appellate Bench, Supreme Court of Pakistan. The Bank also has a resident Shariah advisor, Dr. Imran Usmani, who strictly monitors the regular transactions of the Bank. The board also includes Sheikh Essam M. Ishaq (Bahrain), and Dr. Abdul Sattar Abu Ghuddah (Saudi Arabia). At Meezan Bank, they strive to find commonalties with the conventional banking system with absolutely no compromise on Shariah rulings. The bank has developed an extraordinary research and development capability by combining investment bankers, commercial bankers, Shariah scholars and legal experts to develop innovative, viable, and competitive value propositions that not only meet the requirements of today's complex financial world, but do so with the world-class service excellence that our customers demand, all within the bounds of Shariah. Page | 17
    • Furthermore, the Bank has built a strong Information Technology and customer knowledge-based focus that continues to use state of the art technology and systems. The Bank's Corporate and Investment Banking business unit is geared towards nurturing and developing a long-term relationship with clients by understanding their unique financing requirements and providing Shariah compliant financing solutions across the horizon of corporate banking and structured finance. The Meezan Bank is also implementing robust and aggressive strategic and tactical initiatives on the consumer banking side. The Bank has a rapidly growing branch network across all major cities nationwide. Providing our customers accessibility and convenience is a prime target, within an atmosphere and culture of dedicated service and recognition of their needs. 3.2 Operations Analysis 3.2.1 Business & Branch Network The Meezan bank continued with aggressive branch expansion plan during 2009 and expanded to 201 branches including sub branches in 54 cities from 166 branches in 41 cities. This has further strengthened Meezan bank’s ability to create awareness and deliver Islamic banking products and services throughout the country. Page | 18
    • 250 120000 200 100000 150 80000 branches 60000 100 cities 40000 50 20000 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 (1) (2) Total deposits at December 31st 2009 crossed Rs 100 Billion compared to Rs 70 Billion for 2008, an increase of 43%, compared to the national average of 12.63%. In addition to a large branch network, Meezan bank also has an effective customer outreach programme that uses a team of Business Development Officers. The branch liability sales teams have done a great job and need to be complimented for their efforts. ---------------- Table 1: Branch Network (including sub branches Table 2: Deposits (rupees in millions The Bank is currently segmented into three Regions of Pakistan. The cities in which the Bank presently operates are as follows: Southern Region Central Region Northern Region Hub (Lasbela) Arifwala Abbottabad Hyderabad Bahawalpur Attock Karachi Burewala Dera Ismail Khan Mirpurkhas Chiniot Dina Nawabshah Daska Gujar Khan Page | 19
    • Quetta Dera Ghazi Khan Haripur Sakrand Faisalabad Havelian Sukkur Gojra Islamabad Tando Adam Gujranwala Jhelum Tando-Allah-Yar Gujrat Kohat Hafizabad Mansehra Jhang Mardan Kasur Muzaffarabad Khanpur Nowshera Khushab Peshawar Lahore Rawalpindi Lalamusa Swat Mandi Bahauddin Mian Channu Multan Okara Rahim Yar Khan Sadiqabad Page | 20
    • Sahiwal Sargodha Sheikhupura Sialkot 3.3 Financial Analysis Pakistan has continued to suffer from the fallout of the international financial crises that began in 2008. Since the inception of Meezan bank economic shocks were usual and banks are not exemption to these shocks. The instability of the economy has also affected the bank to some extent. Current year’s profit rating shows the managements’ effective policies and viability. The financial analysis is further classified into: • Operational analysis • Balance sheet analysis • Ratio analysis 3.3.1 Operational Analysis1 Despite the different economic conditions, Meezan Bank has achieved excellent results. Several historic milestones have been achieved in 2009. In operational analysis, we’ll mainly focus on advances, deposits, investments, earnings per share, loans and capital details respectively. These will be on primary focus and will be discussed in more details in the coming period. Page | 21
    • 2009 2008 Growth Branch Network 201 Branches 166 Branches 21% ↑ Deposits Rs. 100 Billion Rs. 70 Billion 43% ↑ Profit after taxation- bank Rs. 1.025 Billion Rs. 0.621 Billion 65% ↑ Profit after tax- consolidated Rs. 1.577 Billion Rs.0.213 Billion 640% ↑ Trade Finance Business Rs. 115 Billion Rs. 93 Billion 24% ↑ Financing/advances Rs. 44188 Billion Rs.39528Billion 15% ↑ Earnings per share 1.71 1.22 40% ↑ The branch network continued its momentum of growth in operational front. The branch network of the bank expanded from 166 to 201 in 54 cities by adding 35 new branches to the bank’s existing network. This achievement of establishing an extensive branch network within the span of 8 years enabled Meezan to consolidate its dominant its dominant position in Islamic banking sector. While the deposits and advances increased by 43% and 11% respectively. The bank enjoyed the profit before tax of Rs 1740 Billion as compared to the preceding year’s profit of Rs 992 Billion. The bank registered an impressive 65% increase in profit after taxation, from Rs 621 Million to Rs. 1025 Million. In addition, the consolidated profit after tax increased at the rate of 640% respectively. The bank has been cautious in increasing its financial portfolio due to the uncertain economic and political environments of the country. The total financial portfolio grew by only 15% during the year respectively. The bank’s equity stood at Rs. 9091Billion at the end of year 2009, increase of 32% over the previous year. Earnings per Share Page | 22
    • Due to increase in profitability, the earnings per share increased from Rs. 122 to Rs 1.71 per share, reflecting an increase of 40%. Dividend The board has recommended to issue 5% bonus shares (2008:8.6%) for year 2009 continuing the bank’s unbroken payout record since the date of listing on the stock exchange. This will increase the bank’s paid up capital to Rs 6.98 Billion Right Shares The paid up capital of bank was increased to 6.6 Billion during the year after taking into account the proceeds of the right issue of Rs 1.7 Billion approved by Rating Company, an affiliate of Japan Credit Ratings Company, maintained the Bank’s long term entity rating at A+ and upgraded the outlook from “stable” to “positive”. The short term rating has been maintained at A1. Future Outlook and Strategy The BOD devised a strategic plan in 2006 for the year 2007-2011. One of the key features of the plan was to aggressively grow the branch network to 200 branches by the end of 2010 which is already achieved. The highlights of the strategic plan for the period of 2010 to 2014 are to: • Improve systems and control • Maintain growth without any compromise on Shariah compliance • Continue to build the branch network • Sustained investment in technology • Focus on service quality • Improve staff training Page | 23
    • The bank will strive to build high quality financial portfolio. The bank is in the process of installing the latest T-24 technology to all of its branches. The deployment is in progress and the entire network will be switched to T-24 by the end of this year. 1. Financial Report 2009 3.3.2 Balance Sheet Analysis2 Page | 24
    • - 2. Annual Report 2009 Page | 25
    • The total assets for the year 2009 amounted to Rs. 124182 Million; financing of the bank had the share of Rs. 44189 Million, followed by the investments made by the bank of Rs. 23291 Million. The total liabilities of the bank amounted for Rs. 114998 Page | 26
    • Million for the year 2009, of which the total deposits and other accounts amounts to Rs. 1003331Million setting 92% of the total liabilities of Meezan bank. The shareholder’s equity remained 9091 Million in 2009 after the increase of 31% from 2008’s equity respectively. There was an increase of 26%, 9091M, in the share capital of Meezan bank as compared to the 2008’s figures (6341 M). 3.3.3 Ratio Analysis A ratio analysis is very important measure to judge the performance of an organization and to compare that performance ratio with previous year ratio and future of the position of the organization. In this portion we’ll analyze the important financial ratios of Meezan Bank, also the comparative results in yearly form are depicted to study the trend of ratios and reasons for increase or decrease shall be explained. Return on Equity Return on Equity = Net Profit after Tax / Stockholders’ Equity 2009 = (1025351/9090535) x 100 = 11.28% 2008 = (621187 / 6341097) x 100 = 9.80 % 2007 = (963501 / 5719910) x 100 = 16.84 % 2006 = (604251 / 4756409) x 100 = 12.70 % 2005 = (419455 / 2970940) x 100 = 14.12 % 20 15 10 ROE (%) 5 0 2009 2008 2007 2006 2005 ROE (%) 11.28 9.8 16.84 12.7 14.12 Page | 27
    • This ratio shows the profit earned by the company as a percentage of the amount of equity/ capital invested by the company in the business. I have analyzed last five years ROE to have a better understanding of the company’s ratio of investment in the business. In the year 2005, this ratio was 14 percent but this ratio seems to fluctuate in the later years. In the year 2007, this ratio improved to 16 percent but again in the year 2008 it is declined to about 10 percent. This is because the company has increased the amount of capital but the net profit after tax could not be increased according to that ratio. However in the year 2007, the ratio was increased to the maximum of all the previous years in spite of an increase in the stockholders’ equity. This is because the net profit was increased proportionately to that. However in the year 2009, the situation is not very bad the bank as compared to the last year’s ratio. There is a slight increase of 1.48% in the return on equity in the year 2009 which means the amount of profit increased. Return on Assets Return on Assets = Net Profit after Tax / Total Assets 2009 = (1025351/124181734) x 100 = 0.82 % 2008 = (621187 / 85276070) x 100 = 0.73 % 2007 = (963501 / 67178559) x 100 = 1.43 % 2006 = (604251 / 46438623) x 100 = 1.30 % 2005 = (419455 / 30675822) x 100 = 1.37 % Page | 28
    • 2 1.5 1 ROA (%) 0.5 0 2009 2008 2007 2006 2005 ROA (%) 0.82 0.73 1.43 1.3 1.37 Return on assets is the ratio that shows the percentage of net profit after tax to total assets. This ratio is also called the return on investments because investment by the company in the business is always in the form of different types of assets. This ratio of Meezan Bank Limited shows that the return earned by the bank on its total investments is fluctuating from year to year. This is because the bank has continuously increasing its investments in the total assets but against that investment the bank is not earning sufficient amount of profits. The situation is somewhat better in the year 2007 where because of highest of all the years’ profits, the return percentage is 1.43. The bank should consider the situation and should try to rectify this. Net Spread Margin Net Spread Margin = Net return on Loans and Advances / Total Assets 2009 = (3612968/124181734) x 100 = 2.7% Page | 29
    • 2008 = (2997559 / 85276070) x 100 = 3.52 % 2007 = (1685888 / 67178559) x 10 = 1.98 % 2006 = (1117229 / 46438623) x 100 = 1.66 % 2005 = (729831 / 30675822) x 100 = 2.38 % 4 3 2 Net Spread Margin (%) 1 0 2009 2008 2007 2006 2005 Net Spread Margin (%) 2.7 3.52 1.98 1.66 2.38 This ratio shows the gross earnings on financing less the return paid to the deposit holders as a percentage of total assets. This is some sort of gross profit ratio because the earning on financing is the main revenue of the bank where the return paid to deposit holders is the cost of those funds. Here this ratio shows that the situation was better in the year 2005 but in the year 2006 it is again declined. Then in the year 2007 it again became better while in the year 2008 surprisingly this ratio is the highest. Although the net profit after tax in this year is lesser than that of the previous years but this ratio shows that the bank has become efficient in its core operations and the problem lies with its other income and other expenses. Net Other Income Margin Net Other Income Margin = Net Other Income / Total Assets 2009 = (1597804 / 124181734) x 100 = 1.29 % Page | 30
    • 2008 = (707908 / 85276070) x 100 = 0.83 % 2007 = (1347893 / 67178559) x 100 = 2.01 % 2006 = (690561 / 46438623) x 100 = 1.49 % 2005 = (622151 / 30675822) x 100 = 2.03% 2.5 2 1.5 Net Other Income Margin (%) 1 0.5 0 2009 2008 2007 2006 2005 Net Other Income 1.29 0.83 2.01 1.49 2.03 Margin (%) Net other income margin is the percentage that shows the return earned by the bank from the sources other than its core operations. Keeping in view the intense competition among the banks today, a bank must seriously concentrate on the other sources because in this sheer competition a bank is not in a position to earn premium revenue on the finances provided. For Meezan Bank, this ratio shows that there have been the fluctuations in other income from year to year but the situation is very bad in the year 2008 where this ratio is the minimum of all the previous years. Due to this reason the overall performance of the bank declined that year. Earnings per Share Earnings per Share = Net Profit after Tax / Number of Shares Issued 2009 = (1025351/6650048) = Rs.1.71 per Share Page | 31
    • 2008 = (621187 / 492596.1) = Rs.1.26 per Share 2007 = (963501 / 377989.7) = Rs.1.96 per Share 2006 = (604251 / 377989.7) = Rs.1.88 per Share 2005 = (419455 / 203658.2) = Rs.1.46 per Share 2.5 2 1.5 Earnings Per Share 1 0.5 0 2009 2008 2007 2006 2005 Earnings Per Share 1.71 1.26 1.96 1.88 1.46 EPS is the ratio that measures how many rupees the company has earned against one ordinary share issued to the shareholders. The greater is the ratio, the better it would be. It is because the company will have the greater amount of profits per share to pay as dividend to the shareholders. This ratio is the most important ratio from the shareholders’ point of view because they also want to know that how much the company is going to pay them against the number of shares they are having. For Meezan Bank, this ratio improved from the year 2005 to the year 2007 with a little exception in 2005 but in the year 2009 there is a slight increase of Rs.1.71 per share which is because the company has issued bonus shares to its shareholders as a stock dividend. Stock Dividend Percentage 2009 = 5% Page | 32
    • 2008 = 8.6 % 2007 = 20 % 2006 = 10 % 2005 = 16 % 25 20 15 Stock Dividend Percentage 10 5 0 2009 2008 2007 2006 2005 Stock Dividend 5 8.6 20 10 16 Percentage Over the years from 2004 to 2008, the bank has been paying the stock dividend instead of cash dividend. Although this is not a good sign but we can say that since this is because of the consent of the shareholders that’s why it is compromise able. This ratio shows that the bank has been paying sufficient amount of dividend to the shareholders from the year 2005 to the year 2007 but in the year 2008 this ratio declined 11.4%. This was because in the year 2008, the bank had not earned a handsome amount of profits to justify the larger stock dividends. In the year 2009, the situation is lot more alarming the already declining dividend further declined to 5% which is not a good sign because the bank, as compared to last year’ profit rate, has earned growth of 65% in 2009 but still the amount of dividend is way too low. Page | 33
    • Market Price per Share 2009 = Rs.15.74 per Share 2008 = Rs.21.48 per Share 2007 = Rs.38.55 per Share 2006 = Rs.19.50 per Share 2005 = Rs.23.25 per Share 50 40 30 Market Price Per Share (Rs) 20 10 0 2009 2008 2007 2006 2005 Market Price Per Share 15.74 21.48 38.55 19.5 23.25 (Rs) The market price per share has been fluctuating from year to year but the overall impact on the market price is encouraging. However we suggest that the bank should stop paying stock dividends as this increases the number of shares in circulation and the ultimate result will be the decline in the market price. Price Earning Ratio Price Earning Ratio = Market Price per Share / Earnings per Share 2009 = 15.74 / 1.71 = 9.20 2008 = 21.48 / 1.26 = 17.03 2007 = 38.55 / 1.96 = 15.12 2006 = 19.50 / 1.88 = 10.51 2005 = 23.25 / 1.46 = 15.92 Page | 34
    • 20 15 10 Price Earning Ratio 5 0 2009 2008 2007 2006 2005 Price Earning Ratio 9.2 17.03 15.12 10.51 15.92 The price earnings ratio is commonly used to assess the owner’s appraisal of share value. This ratio measures the amount that investors are willing to pay for each rupee of company’s earnings. The level of this ratio indicates the degree of confidence that investors have in the firm’s future performance. The highest the P/ E ratio greater will be the investor confidence in the company. The figures calculated above show that the investors’ confidence in the company is increasing year by year as this ratio is increasing from earlier years to the later years. In the year 2006, this ratio was decreased but soon after that this ratio was improved in 2007 and became even better in 2008. Net Profit before Tax Margin 2009 = 14.87 % 2008 = 13.21 % 2007 = 21.43 % 2006 = 22.98 % 2005 = 30.42 % Page | 35
    • 40 30 20 Net Profit Before Tax (%) 10 0 2009 2008 2007 2006 2005 Net Profit Before Tax (%) 14.87 13.21 21.43 22.98 30.42 Net profit before tax margin represents the profit earned before tax as a percentage of gross revenue. The need to calculate this ratio is that the actual performance of the bank is measured before tax and not after tax. So this ratio shows that the profit earned by the bank increased in the year 2005 but in the later years this ratio continued to decline and in the year 2009 this ratio was only 14.87 percent but it was better as compared to that of year 2008. Net Profit after Tax Margin 2009 = 8.76 % 2008 = 8.27 % 2007 = 16.27 % 2006 = 17.80 % 2005 = 20.15 % Page | 36
    • 25 20 15 Net Profit After Tax (%) 10 5 0 2009 2008 2007 2006 2005 Net Profit After Tax (%) 8.76 8.27 16.27 17.8 20.15 Net profit after tax margin was about 21 percent in the year 2005 whereas it started decreasing gradually in the subsequent years. The main reason for this decrease in the net profit was increase in the other expenses and also because of an increase in the amount of taxation. Although the better measure for the efficiency of the management is the net profit before tax margin but since that profit is not on the disposal of the management so it is better to calculate the net profit after tax margin so that the disposable income of the organization should be measured. And this ratio shows that the efficiency of the organization is decreasing year by year. There is only 0.49% increase in the year 2009 which is not a good sign as this ratio shows the efficiency of the organization. Operating Expenses to Income 2009 = 72.15 % 2008 = 77.24 % 2007 = 71.21 % 2006 = 73.40 % Page | 37
    • 2005 = 67.71 % 80 75 70 Operating Expenses to Income (%) 65 60 2009 2008 2007 2006 2005 Operating Expenses 72.15 77.24 71.21 73.4 67.71 to Income (%) The operating expense to income ratio shows that the organization has been able to control its operating expenses over the year from 2005 to 2009. This ratio was 67.71 percent in the year 2005 and in the year 2009 it is ended with a little increase to 72.15 percent. In spite of the stability of this ratio the net profit margin of the bank declined to a considerable extent. This was because of an increase in the other expenses of the organization. So the bank should focus to decrease its operating expenses so that its net profit should be improved. Financing to Deposit Ratio-Net 2009 = 44.04 % 2008 = 51.62 % 2007 = 56.90 % 2006 = 65.68 % 2005 = 73.86 % Page | 38
    • 80 60 40 FDR (%) 20 0 2009 2008 2007 2006 2005 FDR (%) 44.04 51.62 56.9 65.68 73.86 Financing to deposit ratio is perhaps the most critical ratio for a commercial bank. This ratio represents the amount extended as a loan by a bank to its clients compared to deposits that the bank receives from its deposit holders. As per the definition of a commercial bank, the bank is an institution that receives money from those who have it spare and lends it to those who are in need of them. This ratio of Meezan Bank has been declining from the year 2005 to the year 2008. The bank should seriously consider this ratio because these are the core operations of the bank. If the bank could not fully utilize the funds received from the deposit holders it would have to suffer a loss of its net income. Book Value per Share Book Value per Share = Stockholders’ Equity / No. of Common Shares Issued 2009 = 9090M / 6650 M = Rs.1.36 per Share 2008 = 6341 M / 4925 M = Rs.1.29 per Share 2007 = 5720 M / 3779 M = Rs.1.95 per Share 2006 = 4763 M / 3779M = Rs.1.97 per Share Page | 39
    • 2005 = 3025 M / 2036 M = Rs.1.49 per Share 2.5 2 1.5 Book Value Per Share 1 0.5 0 2009 2008 2007 2006 2005 Book Value Per Share 1.36 1.29 1.95 1.97 1.49 Book value per share is the ratio that shows that how much value of assets the bank has to pay to its shareholders in the event of its winding up. If we compare the book value per share with the market value per share we see that although the book value per share is much lesser than the market value even then the shareholders are willing to pay much higher price for the share of the bank. It shows that the shareholders have confidence in the company that the company will the prosperous in the future. However since the market price has declined recently, therefore the company should take corrective actions so that the confidence of the shareholders should be maintained. 3.4 Human Resource Assessment 3.4.1 Board of Directors The Board of Directors of Meezan Bank are: • H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman) (Minister of Housing, Ministry of Housing, Kingdom of Bahrain) • Mr. Naser Abdul Mohsen Al-Marri (Vice Chairman) Page | 40
    • • Mr. Jassar Dakheel Al-Jassar • Mr. Rana Ahmed Humayun • Mr. Mohammed Azzaroog Rajab • Mr. Ahmed Abdul Rahim Mohamed • Mr. Nawal Ahmed • Mr. Alaa A. Al-Sarawi • Mr. Mian Muhammad Younis • Mr. Irfan Siddiqui (President & Chief Executive Officer) • Mr. Ariful Islam (Chief Operating Officer) 3.4.2 Management team The Meezan Team Meezan Bank is managed by a team of professional bankers committed to the cause of Islamic Banking. This single unifying factor unleashes the tremendous power of a dedicated and motivated team committed to fulfilling the Vision and Mission of this Bank. The business segments of the Bank are: • Corporate Banking • Investment Banking • Commercial Banking and SME • Consumer Banking • Treasury & Financial Institutions • Asset Management (managed through a subsidiary Al Meezan Investment Management Limited.) Page | 41
    • • Retail Banking is organized in seven regions across Pakistan, namely South-I Region, South-II Region, South-III Region, Lahore Region, Faisalabad Region, Multan Region, and North Region. 3.4.3 Organizational Structure Page | 42
    • 3.4.4 Shariah Board • Justice (Retd.) Muhammad Taqi Usmani Chairman • Dr. Abdul Sattar Abu Ghuddah • Sheikh Essam M- Ishaq • Dr.Muhammad Imran Usmani Page | 43
    • 3.4.5 Executive Committee • Naser Abdul Mohsen Al Marri • Zaigham Mahmood Rizvi • Mohammad Abdul Rehman Hussain 3.4.6 Audit Committee • Zaigham Mahmood Rizvi • Mohammad Abdul Rehman Hussain • Irfan Siddiqui 3.4.7 Company Secretary • Gohar Iqbal Shaikh 3.4.8 Advisory • Dr. Muhammad Imran Usmani Shariah Advisor • Zafar Aziz Osmani Human Resource Advisor 3.4.9 Legal Advisor • Rizvi, Isa, Afridi & Angell 3.4.10 Auditors • A.F. Ferguson & Co Page | 44
    • Everybody's saturated with the marketing hype of next-generation consoles. They are wonderful, but the truth is that they are as powerful as a high end PC is right now. John Carmack Marketing is not the art of finding clever ways to dispose of what you make. It is the art of creating genuine customer value." -Philip Kotler Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential. It pinpoints which segments the company is capable of serving best and it designs and promotes the appropriate products and services. Philip Kotler 3.5 Marketing Analysis Page | 45
    • In today’s highly competitive environment, marketing plays very important role and banks, like Meezan Bank Ltd, that has remarkable penetration in the market, need to use their market plan and strategies effectively to attract more customers. As we all know banking sector falls in the category of services. Process of Marketing is not confined to the marketing of products only. As of 2003, there is a major shift of attention noticed among the developed countries towards services sector. Unlike traditional 4 P’s of marketing, services marketing includes 3 additional P’s; Process, People, Physical evidence to take into account the special nature of services marketing. Therefore, I am going to apply the “7 P’s of Services” in order to analyze the marketing strategies adopted by Meezan Bank. 3.5.1 First P- Service Product Major Product Line: Now banking products has so much deepened that the customers have to do some basic analysis before pursuing any product. Keeping in view the intense competition and the diverse range of banking products available in the market, the product line offered at MBL is presented as under:  Riba Free Meezan Providence  Riba Free - Certificates of Islamic Investment  Riba Free - Monthly Musharakh Certificate  Riba Free - Dollar Saving Account  Riba Free - Rupee Saving Account  Riba Free - Current Account Page | 46
    •  Car Ijarah - Islamic Car Financing Meezan bank was established under the Islamic principles therefore the entire product portfolio is Shariah based. Financing is based on the following modes laid out by the Shariah Islamic Mode of Financing  Musharakh  Mudarbah  Murabah  Salam  Istisna  Ijarah Market Segments There are different market segment and strategies for different banks as per their top management to target but if we have to draw a generalized segment format for bankers, the segments would be: • Individuals • Salaried persons • Sole proprietor • Retailers ----------------------------------------------------------------------------------------------------------- • Detailed overview of the products offered is given in the Appendix A • Explanation of the Islamic Modes of financing is given in the Appendix G Page | 47
    • • SME’s • Corporate Bodies • Trusts • NGO’s • Autonomous and semi-autonomous bodies • Partnerships • Clubs • Societies • MNC’s Target Market: • All the religious sects. • Followers of Maulana Taqi Usmani • Age limit: 18- onwards • Middle class 3.5.2 Second P: Service Price Pricing is the crucial “P” of services marketing because it determines the revenue that a company’s services will earn. Pricing has several components and there are three basic criterion involved in pricing a service3: --------------------- Page | 48
    • 3. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill Publishing Company Limited • Cost- sum of all the costs • Competition- competitive pricing • Objectives- strategic considerations Pricing strategy devised at MBL is objectives based. The Meezan bank’s objectives are to increase its market share in the market. The prices set for its products and/or services are very economic and minimal in nature as compared to the other market players of Islamic banking category. 3.5.3 Third P: Place Many experts say that location is the key to successful marketing of services. This is because the customer is often present at the same place where the service “manufactured” and delivered. Customer research has shown that in many cases customers will choose a conveniently located supplier of services over the best service provider located far away. Therefore a captive audience of customers could be built up by a well located retailer of consumer goods, or a service4- bank. The placement in banking sector plays a vital role. The availability of branches in the business areas and in the areas where it is convenient for the customers to reach and get their desired banking services is very crucial. MBL has strategically designed the placement strategies in order to reach maximum number of customers. But the strategy is little flawed. ------------ Page | 49
    • 4. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill Publishing Company Limited There is a sum total of 37 branches5 running currently in Lahore city. In spite of this branch number, the branch network is weaker. The customer has to wait too long in order to get its desired service if his/her account is in some, lets say, MBL (XYZ) branch and he has tried to get services from, for instance, MBL (PQR)branch. Apart from this the location of branches is questionable. In some areas the branches are located closely e.g. NGT branch and Model town branch. Whereas in some locations the branches are located far away this may be a negative mark on the placement strategy of MBL. There are total of 209 branches operating within the 54 cities throughout the country. This is no doubt a good sign as compared to the branch network of Meezan Bank’s competitors. 3.5.4 Fourth P: Promotion Promotion is vital for any business. But many service businesses do not spend adequately on promotional activities. The ways through which Meezan Bank Promotes itself includes: • Electronic media • Print media Electronic Media Television is the best option to reach a wide audience in an instantaneous manner, not only because it is cost effective but also in terms of impact and visual appeal, television is the medium that has the best characteristics. ------------------------------ Page | 50
    • 5: Branch Network- Financial Report Television ads for MBL mainly try to emphasize the importance of Islamic Banking and the services it offers can help you in the time of need which is totally riba free. Various business channels, like business plus, and commercial channels, like Indus vision, displays the TV ads respectively. Another way through which Meezan Bank promotes itself electronically is through its website, which is designed in an effective manner with detailed information, so that visitors and the prospective customers can easily get know how about its available products and/or services. Print Media After the selective advertising in the television another medium used by Meezan bank to promote its products and services is Print media respectively. Print media loosely consists of major newspapers in the country and few business magazines. Moreover, Pamphlets are displayed at the branch level to promote forthcoming products to the potential customers respectively and sometimes billboards are used in the commercial areas. 3.5.5 Fifth P: People- Love Lock As most services are dependent on people to deliver them successfully, this element of “people” is considered to be a key to a service business. Like other services, businesses “people” plays very important role in the success of the banking industry. Page | 51
    • The employees at MBL are fully trained professionals who know how to deal with the messy customer. They are capable of handling stress involved in keeping large number of people (customers) happy while not losing their own temper. They are given suitable level of empowerment required to perform their various job related tasks. Apart from that they are continuously at on job training in the form of job rotation and job enrichment. Apart from this the employee turnover rate is very high because of the job dissatisfaction and the over burden of work. The salaries offered at MBL are another job dissatisfier that is leading to the high rate of employee turn over. 3.5.6 Sixth P: Service Process This P involves the number of backend or frontend processes involved in delivering the final Service to the end customers. In the banking industry, this P is of huge importance. The very successful example in banking industry is the SINGLE WINDOW CONCEPT. At MBL, the processes involved in the delivery of the service are little complex. In order to get the desired services, the customers have to wait too long. For instance, if someone wants to get the information about the TD’s the front desk people let him or her wait too long instead of guiding them to the officer concerned. This weak point should be overcome because it may become the reason of customer(s) to switch their bank. 3.5.7 Seventh P: Physical Evidence-Servicescape Servicescapes is a term used by two American researchers in the field of service marketing. Philip Kotler has used the term Atmospherics to describe the effect of Page | 52
    • servicescape. The service servicescape creates a mood, a longing, an attraction or a desire to visit the service provider, in the context of a service purchase. The feelings evoked in a customer can be affected by the physical aspects of the building housing the service provider, its ambiance, its level of cleanliness, the dress worn by the service provider’s employees, and even the number and type of customers present when he enters or avails of the service being provided. Servicescape or the design of the MBL branch (es) is carefully and strategically designed to attract the potential and actual customers. The atmospherics I have found at MBL, New Garden Town Branch, were little clumsy. The branch size was small and the traffic was heavy. This was one of the reasons of making the PROCESSES slow and keeping the customer(s) at WAIT. Apart from that the branch had many indoor plants, the well dressed staff, cleanliness and abaya worn by female staff creates Islamic impact and charisma for the new comers. Page | 53
    • Chapter 4 4.1 Environmental Analysis 4.1.1 Growth rate for the entire industry Overview The banking system effectively coped with several challenges emanated from the economic slowdown both at home and abroad due to strong resilience built over the years and effective regulatory and supervisory regime. According to the SBP’s quarterly performance review6 of the banking system for the quarter ended December 31, 2008 asset base of the banking system grew 2.6% over the quarter to reach Rs 5,653 Billion, well-supplemented by 3.6% and 7% growth in deposit and shareholder’s equity, respectively. The liquidity profile of the banking system remained constrained for most part of the quarter. However, post quarter statistics indicate a significant easing of the liquidity profile because of gradual increase in deposits and reduction in bank’s advances. Page | 54
    • The inline with the deterioration in macroeconomic indicators, the credit risk remained high during the quarter. However, satisfactory earnings enabled the system to cover these loan losses. The NPLs are covered by loan loss provisions to the extent of 75%, but on account of these increased loan provisions in absolute amounts, earnings of the banking system came under pressure and remained lower than the last couple of years. Return on assets (ROA) was 1.2% for the year 2008 vs 1.5% for 2007 and 2% for 2006. Overall solvency position of the banking system showed an improvement. ----------------- 6. The growth rate of entire banking industry is compositely gained from SBP’s quarterly performance review of the banking system for the quarter ended December 31 2008 and the 1st quarter ended March 31 2009 The Capital Adequacy Ratio (CAR) under Basel-II framework, which also accounts for the operational risk charge, improved to 12.2% (12.6% for commercial banks) due to fresh injection of equity and satisfactory earnings. The CAR improved to 13% jointly for banks and development finance institutions (DFIs). “Banking system shows strong resilience to unusual shock in major risk factors. This strength of the banking system largely came from the prudent regulatory and supervisory regime strengthening the risk management and governance standards in banks as well as the improved solvency positions7.” “Going forward, due to constrained economic environment both at home and globally, the credit risk, earnings and growth rates of the banking system are likely to remain under some strain in coming quarters,” the report anticipated. The banking system has gained stability over the last couple of years through sustained growth in asset and customer-base. Currently, a decline in the demand for credit from different sectors was witnessed. Banks, as a result, had to divest their asset mix Page | 55
    • from loans towards investments. Similarly, further tightening of monetary policy squeezed the surplus liquidity from the market. (SBP 1HFY08) 4.1.2 Performance of Islamic Industry8 The Islamic Banking Institutions (IBIs) maintained their profitability, though with slight deceleration during the quarter under review. However, growth in assets remained higher than that of the conventional banks, thus increasing share of IBIs in the system. --------------- 7. Business Recorder, March 24, 2009 8. SBP, Quarterly performance Review September 2009 The balance sheet composition with slight changes remained more or less stable during the quarter. On the asset side, significant increase was observed in investments and interbank lending, while financing portfolio contracted. Deposits of the Islamic Banking increased, despite a decline in deposit base of the banking system. ‘Due to financial institutions’ also increased marginally after declining over a couple of quarters. Deposit mix of Islamic banks, due to decline in deposits from financial institutions tilted toward the customer deposits. Analysis of uses of funds shows a consistent increase in investments of IBIs. During the quarter under review, investments registered a healthy growth of 21 percent. Most of the increase in investments resulted from 4th auction of GoP Ijara Sukuk of Rs 14.4 billion in September, 2009. Periodic issues of Ijarah Sukuk have contributed towards the resolution of key issue i.e. lack of alternative avenues for Islamic Page | 56
    • banks. So far GoP Ijara Sukuk of Rs 42.2 billion have been issued, which now represent 65 percent share in investments of the Islamic Banks. In line with general trend, Financing of Islamic banks decline by 4.7 percent in Sep-09 and its share in overall assets decreased to 41 percent. The composition of financing shows a substantial increase in share of Ijarah and a moderate increase in Istisna. Other modes of financing declined over the quarter, with considerable decline in Mudarbah and Salam. Group-wise analysis shows that decline in financing was more pronounced in IBIs. The financing portfolio of IBIs is concentrated in corporate and consumer with smaller shares of SMEs and commodity finance, while financing to agriculture is almost negligible. There is a strong potential for the IBIs to expand into SME and Agriculture sector. Keeping in view the potential and demand for Agri-finance and to promote Islamic Financing in this area, SBP has issued ‘Guidelines on Islamic Finance for Agriculture’. The liquidity position of IBIs improved over the quarter under review, as the decline in Financing and increase in deposit base led to further lowering in Financing to Deposits ratio (FDR). Increasing financing risk continues to pose challenge to IBIs. Increase in NPFs coupled with drop in financing led to deterioration in asset quality indicators. Since NPLs increased mainly in Loss category, which attract higher provisioning, provision coverage ratio improved over the quarter. Sector wise analysis shows that textile, chemical and individuals have the major share in financing. However, infection ratio is quite high for cement, electronics Page | 57
    • and individuals. While NPFs of individuals are generally adequately secured through collaterals, low infection ratio for textile sector vis-à-vis conventional banks reflects upon the better risk management of IBIs. The year to date profits of IBIs remained higher than the results of corresponding period of last year, though there was significant increase in provisioning for NPFs. However, Islamic banks saw a marginal decline in ROA due to shift in the mix of earning asset towards low-return assets. Incidentally, major part of IBIs profitability is coming from IBIs of conventional banks and a couple of Islamic banks. Islamic banks, therefore, need to improve on their operational efficiency for keeping their competitiveness in the industry in terms of both market share and profitability. 4.2 Competition Analysis 4.2.1 Major Competitors The augmentation in the banking industry, specifically Islamic banking segments, of Pakistan has directed to an increase in the number of banks both domestically and internationally to be established and create a competitive industry. For MBL its competitors come in the form of a mixture of domestic and international banks established in Pakistan. Meezan Bank limited feels that its major competitors are as follows: • Bank Islami Pakistan Limited • Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations • Dubai Islamic Bank Pakistan Limited • Dawood Islamic Bank Limited • Emirates Global Islamic Bank Page | 58
    • It claims that it has a cut throat competition with:  Bank Islami Pakistan Limited  Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations 4.2.2 Their Introduction 4.2.2.1 Bank Islami Pakistan Limited9 Bank Islami Pakistan Limited (“Bank Islami”) is located in Karachi, Sindh, Pakistan. Bank Islami Pakistan received an Islamic commercial banking license from State Bank of Pakistan on March 31, 2005. It is the first financial institution in Pakistan that is going to focus on Wealth Management as the core area of business. It intends to offer retail banking products, proprietary and third party product, and integrated financial ------------------ 9. http://www.bankislami.com.pk/about_us/ planning services. The Bank is expected to start its operations in the last quarter of year 2005. The epochal idea of Bank Islami was conceptualized by Jahangir Siddiqui & Company Limited and DCD Group in late 2003. Mr. Hasan A. Bilgrami was appointed as Adviser to the sponsors on March 16, 2004 to formalize the idea. He presented the concept paper of Bank Islami to sponsors on March 24, 2004. A detailed business plan was then prepared and a formal application was submitted to the State Bank of Pakistan on May 26, 2004. On September 26, 2005, Dubai Bank joined the Sponsors and became one of the founding shareholders of Bank Islami by investing 18.75% in the total Capital. 4.2.2.2 Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations10 Page | 59
    • Albaraka Banking Group is the biggest Islamic banking group listed on the Bahrain Stock Exchange in terms of capitalization. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Shari’ah. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.59 billion. With assets of US$11.2 billion, the Group has a wide geographical presence in the form of subsidiary banking Units in 12 countries, which in turn provide their services through more than 250 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank / Bahrain, Al Baraka Islamic Bank / Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Ltd / South Africa, 10. http://www.albaraka.com.pk/about/index.php Al Baraka Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/ Tunisia, The Egyptian Saudi Finance Bank/Egypt, Al Baraka Turk Participation Bank/Turkey, Albaraka Bank Syria (under establishment), and representative office, Indonesia. Currently operating with 29 branches in 17 major cities of the country, AIB offers a wide array of Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance, etc., catering to a diverse cross-section of the economy, including the Corporate, SME and Consumer sectors. Moreover, various Shari’ah compliant deposit schemes are available for customers to invest their funds in, along with a variety of other ancillary services such as online banking, ATM/debit card, safe deposit lockers and utility bill payments etc. Page | 60
    • 4.2.3 Their market shares There are many criteria on the basis of which we can assign the market share of the banks in the banking industry. Some calculate it on the basis of its deposits, while others on the basis of its customer base. Likewise some analysts calculate the market share on the basis of assets and equity one may have. Here I have used the data provided by the central bank i-e State Bank of Pakistan, for the calculation of market shares of MBL and its competitors. The report published by SBP “Quarterly performance Review September 2009” is used for overall values of banking sector. There can be different criteria for this calculation but I am considering the bank’s deposits and advances for this purpose. According to the latest calculations of SBP, advances of the Islamic banking sector stood at Rs133,745 Million, total customer deposits of the Islamic banking sector reached at Rs. 244,792 Million respectively. Name of the Banks Assets Advances Deposits Equity in millions Meezan 108,079 37,238 87,681 8,867 DIB Limited 32,607 20,019 25,451 5,262 Dawood Islamic Limited 13,777 4,664 7,370 5,051 Al Baraka 25,604 14,192 19,574 2,194 Bank Islami 29,094 7,248 22,861 4,823 Emirates global Islamic bank 20,185 9,739 14,820 3,659 Meezan Bank Limited is the first and largest Islamic Bank of Pakistan with a 204- branch network presence strategically spread across 54 major cities in the country. The Bank has a cumulative annual growth rate of 60% over a period of 5 Page | 61
    • years and currently enjoys 42% market share in the Islamic banking industry. Meezan Bank has established a strong and credible management team comprised of experienced professionals, which have achieved a strong balance sheet with excellent operating profitability, including a capital adequacy ratio that places the Bank at the top of the industry11. 4.3 Technology Analysis 4.3.1 Technical methods that affect the industry Technology is having a major impact on the banking industry. Direct deposits allow companies and governments to electronically transfer payments into various accounts. Debit cards, which may also be used as ATM cards, instantaneously deduct money from an account when the card is swiped across the machine at a stores’ cash register. Electronic banking by phone or computer allows customers to access information such as account balances and statement history, pay bills and transfer money from one account to another. ---------------- 11. www.meezanbank.com/NewsDetail.aspx?iNewsID=2 Advancements in technology have also led to improvements in the ways in which banks process information. The use of cheque imaging allows banks to store photographed cheques on the computer instead of paper files. Some of the technical methods that are used and affect the banking industry are as follows: • Availability and growing use of credit scoring software allows lending departments to approve loans in minutes, rather than days (already in use of American bankers). It is a perfect example of electronic Page | 62
    • decision maker; it can give relief to the credits department personnel by way of auto calculating the manual calculations by single click. • Computer networking within branch level is also eroding traditional barrier between financial service providers (bank) and technology firms which are ultimately boosting revenue for banking and telecom industry. 4.3.2 Innovation Innovation is a necessity in contemporary times, as it is becoming one of the reasons of competitive advantage in banking industry. It helps banks to compete in today’s highly technologically driven industry. Some of the innovations that the banking industry is looking forward are: • Advanced means of connectivity between branches through better and advanced software and hardware to maintain connections within banks in remote areas and during natural calamities in Pakistan. This includes better connection through WiFi or WiMax • Credit scoring software which allows lending departments to approve loans in minutes, it provides the major edge to credit officers in Pakistani scenario. • Information systems in banks that are more protected than prior to eliminate any probability of fraud and which are even more users friendly to help employees to use them not only to make key decisions but also satisfy customer need in a more well-timed manner. • Advancements in online transfer from inter branch to an even more helpful interbank transfers. • Automation of simple operations task that will not only improve efficiency but also reduce costs like stationary and courier services, like automation of cheque books etc. Page | 63
    • • Digital imaging of cheques is also an innovative technology for Pakistani bankers to follow and introduce paper free environment. • Banks in Pakistan are trying internet, mobile and telephone banking in its operations to major extent so that customer driven banking can be implemented. Chapter 5 5. How & Why I have selected Meezan Bank? 5.1 Reason for Selecting Meezan Bank Page | 64
    • Few decades back, people had no other option to go for except commercial banking. Some of the reasons for this are that at that time many people were ignorant of the Islamic values n principles regarding the interest –fixed- paid by the commercial banks. Secondly, even if they had any information or knowledge and exposure about the working of banks and the commercial banking they still had to do their transactions through them as there was not a single bank engaged in Islamic banking. With the passage of time many Islamic and shariah scholars laid fatwah on the mode of working of commercial banks and considered the fixed rate of profit and interest paid by them Haram (unlawful, prohibited). Today, due to the increased exposure, people are much more inclined to invest or deposit their money in the banks who are engaged in the Islamic banking. Due to this many banks has taken initiative to open the branches conducting Islamic banking. My reason for selecting Meezan bank is that, firstly, it is the pioneer Islamic bank in Pakistan which is formed on the principles of shariah. A wide range of products are developed and launched consolidating the Bank’s position as the premier Islamic Bank of the country. As in marketing, the pioneer in the market is said to be the market leader as more people are aware of the company In 2001, The Shariah Supervisory Board was established at Meezan Bank led by Justice (Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan sets criteria for establishment of Islamic commercial banks in private sector and subsidiaries and stand-alone branches by existing commercial banks to conduct Islamic banking in the country. Another reason for selecting Meezan is its connection with the Quran. The term Meezan is derived from the word Al-Meezan which means balance. Page | 65
    • The Islamic mode of banking is still an emerging market in Pakistan. It has a broad future waiting ahead in the Pakistani markets. The competition is multi-folded from last decade. Currently in this hyper competitive environment it’s the management, professional staff and services of Meezan Bank which has increased its worth multi folded. Like wise, the most notable reason for selecting Meezan Bank is the atmospherics of the organization. Based on the Islamic principles, female staff is required to wear abaya during the working hours of bank. This has inspired me a lot. You don’t have to worry about your dressing and about the nasty/ filthy eyes customers. The how part of the question is answered as: through word of mouth. 5.2 Practical Application of the Subjects Almost every course assigned to me in Hajvery was somehow or other relevant to the working of the company. Here is the list of some of the courses that are applicable or they are applied in real time in the banking environment. • Banking Practice & Law • Banking Operations • International Banking • Financial Management • Human Resource Management • Communication Skills • Accounting Page | 66
    • • Management Well some of the courses were applicable completely like accounting, management, banking operations, banking practice and law etc. while the others were applicable to some extent only. As most of the books we have studied during our degree program were written by the international authors so the procedures differed to some extent. Things taught to us were same but the way of its application or its essence was entirely different. Likewise few things appeared to be entirely bookish if we compare them with the practical environment of the organization. Chapter 6 Page | 67
    • 6. Brief on the Departments I worked during internship and specific/leading contribution made. 6.1 Brief introduction I did my eight week internship at Meezan Bank Limited New Garden Town Branch Lahore. This branch also serves as a Parent Branch of Model Town Branch. During internship I was rolled over in departments including accounts opening, remittance, cheque book issuing, foreign trade, assisting customer Care, but any penetration was developed in the Credits Department. The work that I did during my internship at Meezan Bank primarily includes voucher checking, checking account opening pre-requisites, account opening backlog checking, analyzing the inward and outward clearing, maintaining return mail register, completion of pay order and demand draft register, zakat register maintenance, assisting the cheque book issuance department, developed know- how about the lockers and the rules related to them, analyzing the expenses incurred and maintain the records thereof. Assisting the officer concern for the creation of expense approval sheets, understand the working of credits department, and to assist the foreign trade wing. 6.2 Department Overview CIBD (Corporate & Investment Banking Division) or Credits Department, this was the department which attracted me the most and due to my interest in finance I started penetrating in CIBD. A very brief overview of this department is that it tends to focus on the corporate lending and somewhat syndications also; indeed it covers the lending modes in corporate sector. Page | 68
    • This department is entirely dependent on some other departments for the sake of client’s verification and legal provisions. The lending cases starts at the lower level I-e, Relationship officer or Relationship Manager. The case is then forwarded to the Regional level and then the Head office for the final approval. Documents to be acquired from the prospective client while request of lending is received are attached in the appendix H. Chapter 7 7. Problem Identification Page | 69
    • The main problems I identified during my internship programs were: • The lack of awareness among the employees about the exact job description. • Undefined job tasks in operations • Lack of IT specialist at branch level. • Lack of common Room. • Lack of incentives, performance rewards etc. • The branch atmospherics sometimes creates low levels of customer satisfaction 7.1 Weakest area(s) of Meezan Bank’s Performance The weakest area of performance which I have identified during my eight week’s internship is Human Resource Department. HR is responsible for hiring and firing of the work force within the organization. Here at MBL the HR dept, I believe, needs lot more attention. A low salary, lack of motivation at workplace, little or no incentives is the crucial things affecting the performance of the employees. The employees are not given reasonable motivational add on which results the poor performance of the staff. This poor performance in the end badly affects the customers of the banks resulting unhappy customers and in extreme cases product and or service switchers Likewise, the policies settled by the company are little problematic as they involves excess documentation. Page | 70
    • Second weak area I have identified was the lack of proper Marketing on behalf of the Meezan Bank Limited. Today Competitive environment, Marketing is considered to be crucial for the success of any company or its products and/or services. Unfortunately marketing at meezan Bank has not achieved the level which is required for the better penetration of the company in today’s aggressive banking industry where every bank positions itself strategically from its competitor. Likewise, the increased level of costs; the cost of particular one branch is extremely very high that they have to take most of the times approvals from the head office or regional offices. Page | 71
    • Chapter 8 8. SWOT Analysis Meezan Bank being a quality organization strives to provide quality to all its stakeholders, customers, employees and environment. In Pakistan, it is operating in a very volatile economic and political environment. I have personally conducted interviews of some of the employees of the branch to do a SWOT analysis of MBL in the light of their experience in the banking field. My analysis, consolidated with theirs', is given below; Strengths –Internal • MBL has the privilege of being the first in the Islamic Banking sector which gives MBL a competitive edge over all other banks. • Having renowned Shariah Scholars, Backed up by the Kuwaiti sponsors who held vast knowledge of banking and have high networking and vast range of Islamic Products, MBL is enjoying major share in the market. • “Every branch is your own branch”, there are very nominal service charges deducted by the bank for its banking facilities. • There are many value added features in the products offered by the bank. ATM cards are provided with every account. Other features are present in the various products. The priority customers enjoy a much-pampered status at the bank. • The employees at the bank provide impeccable customer service to their customers. Page | 72
    • Weaknesses- Internal • Lack of proper marketing strategy. • Delayed performance of the departments. • High employee turnover rate. • Low salaries, low employee motivation at workplace. • 201 branches are opened so far but the networking within the branches needs to be worked out. • Excess liquidity. • Markets are not open from the point of view of investments. Being an Islamic bank it has to carefully examine the opportunities available to invest its money. • Lagging behind technologically wise as compared to the other banks. Opportunities-External • Increasing growth of the Islamic banking sector • MBL can capitalize its first mover’s advantage • Development of shariah compliant products • New markets to explore • It can establish Full fledged consumer banking menu in Pakistan • Opportunities are available in the remote area as compared to the big cities. Threats-External • Economic downfall of the country. Page | 73
    • • New entrants; There is an increasing competition in the Islamic banking sector • Minimum capital requirement • It may lag behind due to the aggressive marketing strategies adopted by its competitors • Acceptability of Islamic banking as it is still an emerging concept in Pakistan. • If the growth of the Islamic banking sector is an opportunity it is in the meanwhile threat as well. • Employee turnover rate may increase further if it is not controlled by the management by giving incentives. Page | 74
    • Chapter 9 9. Conclusion & Recommendations “The percent of interns converted to full time e6mployees has increase fro6m 35.6% in 2001 to 50.5% in 2008” (NACE, March 2008, P.5)12 Fundamental aspect of landing a good job is getting a good internship. In today's competitiveness, this is pretty tough to get a good internship. Internships provided you with the opportunity to get the feel of the real world environment. There are some things which cannot be taught in a class room and sometimes those are the most definitive skills that you will need in at workplace. I had the opportunity to work with one of the leading Islamic banks of the country. By and large, MBL is enjoying the position of a pioneer Islamic bank in Pakistan. There are currently six dedicated Islamic banks operating in Pakistan with a total of 475 branches. Having opened 35 new branches in 2009, Meezan bank has a network of 201 branches across 54 cities, making it the largest Islamic Banking Institution in the country, commanding a 42% share of the total dedicated Islamic Banking network in Pakistan. During my internship program I have studied the working of various departments and the products and/or services offered there to the end customers. The Page | 75
    • financial and operational analysis of MBL is somewhat satisfactory. The careful analysis of 7P’s of -------------------- 12. http://www.insightintodiversity.com/index.php? option=com_content&view=article&id=120:the-importance-of-internships-in-a- declining-economy-&catid=50:april-2009-issue&Itemid=109 services was not very encouraging. The element of “People”, “Process”, and “Physical Evidence” needs attention from the top management. “People” are the internal customers (employee) of the company. With which Processes and Physical Evidence is closely related (linked), that are overlooked in this service oriented organization. The employee turnover is very high which they have to cut down as they are losing a number of good trained employees due to its poor policies. During my internship period I have identified number of weak points that may erode the success factors of the organization in the future. As per my expertise, I am suggesting the following measures to overcome the very crucial bottlenecks to enhance the performance of every department and more specifically “People”. • First of all, I would I like to suggest that the bank must pursue a very aggressive marketing and advertising strategy so that it can create awareness in the general public about its Islamic products and services. Aggressive Marketing strategy is extremely very necessary in today’s cut throat competitive environment. For this purpose MBL must hire efficient marketing personnel to increase its market penetration. Page | 76
    • • Healthy Customer (internal & external) relationship must be developed in order to sustain its market leadership. • The employee turnover rate is way too high. There is a need of creating satisfaction among employees. They do not feel any attachment to the organization. There is a requirement for building up their loyalties so that the bank can curtail the dissatisfaction and turnover among employees. • Eroded Management/HR policies must be redefined. There is a lot of excessive paper work involved in the banking processes. The personnel in the bank should not be overstressed with workload. The workload is of a destructive level. At that level of load the employees loose all the comfort in their work and remain tense and frustrated. • Develop the healthy and sound competition between employees and bosses. Listen to the employees, effective surveys can be taken from them in this regard. Develop the system of internal control- performance and workforce satisfaction wise (internal audit). • Meezan bank does not provide job security to the employees. Mostly are hired on contractual basis. More people must be employed on permanent basis/ providing job security and satisfaction. • Employee motivation level is very low. There must be motivational add on’s ,which may be in the form of increased salaries, recognition, incentives scheme, appreciation, job security, recreational and informational trips, that may increase the employee motivation at work place which will ultimately Page | 77
    • become the source of customer satisfaction. The performance reward linkage should be making strong as it is said “A happy employee delivers more than he receives from the organization". The MBL should also try to make its employees happier. • Introduction of job specific training to the employees and adhering to the criteria laid out by the HR department for job advancements. There is no separate department for the training of new employees. There should be establishment of a separate department for the training of the new employee and experienced teaching staff should be hired for their training. • Active R&D should continuously try to gather information about the present actions of its competitors and expected future actions. So in this way more effective strategies can be formulated. • New schemes should be introduced and maximum privileges should be given to customer, so that to win money market. • The clumsy processes for providing the banking facilities to the end users must be properly managed in order to decrease the customer dissatisfaction and the waiting involved in getting their desired services. • A proper IT department should be established in all branches, with professionals having the knowledge to maintain a secured connection with other banks. Scheduled computer data backup should be done within the bank. Page | 78
    • "We have the duty of formulating, of summarizing, and of communicating our conclusions, in intelligible form in recognition of the rights of other free minds to utilize them in making their own decisions" - Ronald Fisher Chapter 10 10.1 Web References • www.meezanbank.com • www.sbp.org.pk • www.brecorder.com • www.albaraka.com.pk • www.bankislami.com.pk • www.ibp.com.pk • www.google.com.pk • www.learnislamicfinance.com 10.2 Documental References Page | 79
    • • Annual Report 2009 (MBL) • Annual Report 2009 (Bank Albraka) • Annual Report 2009 (Bank Islami) • Quarterly Performance Report 2009 (SBP) • Nargundkar, Rajendra (2007). Services Marketing, Tata McGraw Hill Publishing Company Limited • Brigham, F. Eugene, Ehrhardt C. Micheal (2003). Financial Management. (11th ed). McGraw Hill Publishing Company Limited Chapter 11 Appendix A: CUSTOMER SERVICES DEPARTMENT Account opening and closing is the function of customer services dept. The bank’s customers includes individuals (single or joint), firm (partnership/proprietorship), Autonomous corporations, Limited companies, Charitable Institutions, associations, Educational Institutions or local bodies. Products offered by this department: a) Riba Free Rupee Savings Account  Current account  Saving Account b) Riba Free Dollar Savings Account  Foreign Currency Account BASIC OF ACCOUNT OPENING Page | 80
    • Account opening is the basic and first relationship, which is established between Bank and the customer. In account opening extreme care has to be exercised in case of completion of account opening documentation. Whenever a client comes in the bank in order to open an account the first information that is given to him/her about the types of accounts, which can be opened, so far this purpose the client is given detailed information about the accounts and their respective profit rates. TYPE OF ACCOUNTS OPENED  CURRENT  SAVING  TERM DEPOSIT ACCOUNTS OF ILITERATE [Photo Account] These accounts can be opened individually or jointly. For men, the right hand thumb impression and for women, the left hand thumb impression is taken on account opening form. The customer is given advice to come to bank himself in order to withdraw any cash or deposit the cheque. Requirements:  Photocopy of NIC of Account Holder.  Two-three passport size photographs. Sub-categories of Accounts and the Basic Requirements are given in the Appendix____ THINGS TO BE CONSIDERED BEFORE OPENING AN ACCOUNT:  Verification of the customers’ credentials.  The suitability of the prospective customer.  State Bank’s rules and regulations.  The Bank’s own policy.  The prospective profitability of the relationship. i. PROCEDURES FOR ACCOUNT OPENING: Page | 81
    • First of all, after inquiring from the customer what type of account he/she wants to open, the account opening form is got filled from the customer and signed it. Along with the account opening form, the customer is also signed two Specimen Signatures Cards. After fulfilling all the formalities of account opening, the computer generated account number is given to the customer that is of special series depending on the type of account. REQUISITION SLIP A requisition slip is given to the customer to sign it so that the customer can get chequebook. Chequebook is issued after one day of receiving the requisition slip. ii. LETTER OF THANKS After opening the account “A Letter Of Thanks” is send to the customer in order to thank the customer for opening an account in the Bank. This letter tells all the information regarding his/her account, which are kept very confidential. iii. ACCOUNT OPENING REGISTER After an account is opened, an entry is made in the account opening register, which has the following columns:  Date  Account Number  Name & Address  Telephone Number  Initial Deposit Customer Services Officer enters the new account opened in computer and the Specimen signature Cards are also scanned so that whenever a cheque of the respective account comes for encashment, the signatures can be verified. Overall functions performed by Customer Services Department:  ACCOUNT OPENING  ACCOUNT CLOSING  GENERAL CLIENT DEALING Page | 82
    • Appendix B: OPERATIONS DEPARTMENT FUNCTIONS PERFOMED: a) CLEARING b) REMITTANCE CLEARING  Inward clearing  Outward clearing 2) INWARD CLEARING In the morning, the bank receives its own cheques, which have been presented by the customers in some other bank to be deposited in their account. NIFT provides the facility of bringing cheques for inward and also takes the cheques of outward clearing to other banks. The cheques received in inward clearing are the cheques drawn on bank and the bank has to pay for them. For this purpose the bank makes clearing in computer by checking the balances of the respective customer, if their balances are up to the mark then that cheque is cleared and the respective customer account is debited with the respective amount. If the balances are short then that cheque is bounced back to the related bank. Reasons for returning a cheque: • All required stamps of Clearing, Crossing and Endorsement are not present on cheques. • Cheque is post date. • Refer to drawer • Effects not cleared, may be presented again • Amounts in words and figures differ. If any of these reasons exists then that cheque is returned through NIFT and deducts Rs. 300 from customer’ account as cheque returned charges. Then the report of returning any cheque is sent through fax to the head office Karachi. After this put the entry in Cheque return register showing the following columns:  Date  Title of account  Account number  Cheque number  Bank and Branch name  Reason to return Page | 83
    • (ii) OUTWARD CLEARING: All the cheques of other banks which are deposited to MBL are presented in outward clearing. This is said as outward clearing because they are presented on the very next day after depositing a cheque. In outward clearing, the entry is made like: Customer Account Cr. State Bank of Pakistan Dr. This entry is made when we come to know about the clearing of all cheques, which are sent to other banks. (iii) SERVICES PROVIDED I. TRANSFER OF AMOUNT II. TELLING ACCOUNT BALANCES a) I. TRANSFER OF AMOUNT If a customer holds two accounts in the bank and he/she wants to transfer money from one account to other account, customer writes a cheque and fills deposit slip in which he/she writes account number to which amount is to be transferred. After making transfer entry in the computer, affix transfer stamp in the middle of the cheque, crossing on the upper left and bank’s endorsement stamp on the backside of the cheque. b) II. TELLING ACCOUNT BALANCES c) Whenever clearing officer receives phone call from the customer inquiring about his/her account balance after confirming the name, address and other information he tells the balance through computer. i) REMITTANCE a) Pay order b) Demand drafts c) Inward collection d) Outward collection a. a) PAY ORDER: Pay order is an order to pay money but this payment is to be made within city. In other words it can be said that the payee and the payer should be in one city. In pay order the payment can be made in: A) Cash Page | 84
    • B) Clearing C) Transfer 2) PROCEDURE: In case of pay order first of all the customer has to fill a pay order application form in favoring section: name, account number, amount, beneficiary name, address, etc. The data is entered in already set format of pay order in computer and pay order print out is taken. An authorized person and manager operations are signed pay order. The original copy of the pay order is given to the customer and carbon copy is kept with bank for office record. 3) b) DEMAND DRAFT An order to pay money to the payee who is residing outside the city. DD can be for a customer who may or may not have an account in the bank but the other person’s account must be maintained with the bank for which the payer has demanded the DD. i. c) INWARD COLLECTION When the bank receives cheques of any other bank from its any branch situated in the some other city, and then those have been dealt as inward collection. OTHER FUNCTIONS UNDER OPERATIONS DEPARTMENT CHEQUE BOOK ISSUANCE It is also the duty of department to issue a chequebook when an officer receives request from the customer. LOCKERS Lockers operations shall not be permitted under power of attorney of a customer. A customer wishing to allow another person or agent may be requested to open a new locker account under joint names and close the existing account. In offering this facility branches have to be selective and should provide lockers to the customers whose identity and integrity is verified, who should maintain account with the branch and have potential for deposits and other banking business. It is reiterated that honesty, creditability and good reputation of the customer is of utmost importance in the selection of customer for lockers. KEY FEATURES:  Available in selected branches  Available in 3 sizes  For all eligible Account Holders Page | 85
    •  Key security Deposit PKR 3000 Procedure  Application on Prescribed Form duly filled  Saving/Current Account with MBL  02 Passport size Photographs Charges  Key Deposit PKR 3000/  Small PKR 1000/Year  Medium PKR 1500/Year  Large PKR 2000/Year  Locker breaking charges Rs 3000 Cheque Books Handling  Application for New Cheque Book CHARGES  PKR 03/Leaf for Saving Account Cheque Book  PKR 01/Leaf for Current Account Cheque Book  PKR 01/Leaf for FCY Account Appendix C: RIBA FREE TERM DEPOSITS OFFERED BY BANK  Certificate of Islamic Investment  Monthly Mudarabah Certificates  Dollar Mudarabah Certificates  Meezan Amdan Certificates  Meezan Providence Certificate Certificate of Islamic Investment Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Page | 86
    • On agreeing to become a COII holder, the customer enters into a relationship, based on Mudarabah, with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah. Tenor  3 Months  6 Months  1 Year  2 Years  3 Years  5 Years Profit Payment Options 3 Months on maturity 6 months on maturity 1 year monthly or quarterly min investment 200K 2 year monthly or quarterly min investment 200K 3-5 year monthly or quarterly min investment 200K There will be different rate of profit according to the profit payment option and amount and tenor. Pre-mature encashment In case of pre mature encashment the profit rate will be calculated according to the completed tenor, if extra profit is paid that will be recovered  No pre-mature encashment penalty in MBL Payment of Premium Bank pay premium from its own share of profit to high depositors. Premium Rate 5M-9.99M 1% 10M-29.99M 1.25% 30M-49.99M 1.50% 50M+ 2% Karobari Munafa Account Page | 87
    • Riba-Free Karobari Munafa Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become an account holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.  Profit calculated on daily basis and paid monthly  No minimum balance requirement  No restriction on deposit/withdrawals  Free Cheque Books, Pay Orders and Online Banking  Dedicated Account/Relationship  High return for high depositors Monthly Mudarabah Certificates RibaFree Monthly Mudarabah Certificates is a flexible investment product which has been designed to give you a monthly return which is Halal. The minimum investment required is only Rs. 100,000 and you receive profit for each complete month of investment with the Bank. How Monthly Mudarabah Certificates works? Riba-Free Monthly Mudarabah Certificate (MMC) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a MMC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah. Features:  Minimum requirement of PKR 100K  Profit disbursement on maturity  Tire system for profit payment (Refer Rate Sheet)  No payment on premature encashment Dollar Mudarabah Certificates Page | 88
    • On agreeing to become a DMC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah. Requirements:  In USD only  Individuals and Corporate  Minimum investment 10K and above Tenor:  3Months  6Months  1Year  3Years Profit payment Options:  3Months Maturity  6Months Maturity  1year 6 Monthly or Maturity  3years 6 Monthly or Maturity Meezan Amdan Certificates The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an exceptionally high monthly profit designed especially for those individuals and corporations who are in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate with a variety of free packaged benefits. Working The Riba-Free Meezan Aamdan Certificate (MAC) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a MAC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah. Features: Page | 89
    •  Long Term Product  Tenor 5-1/2 years & 7 years  Profit 9.5% 10.50% (Last month)  For Individuals and Corporate  Minimum deposit PKR 100 K  (50K for old citizens and widows) Meezan Providence Certificate (MPC) A long-term investment product specially designed to cater to the needs of corporate and business concerns for purposes of investing their Provident, Pension and Gratuity Funds. How Meezan Providence Certificate works? Riba-Free Meezan Providence Certificate (MPC) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a MPC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers.  Min. deposit 01 Million Tenor  5 Years  7 Years Other options:  Provident and Pension Fund of large corporate  Premature encashment facility available Meezan Islamic Institution Deposit Account The Meezan Islamic Institution Deposit Account (MIIDA) is a unique product, tailored exclusively for Islamic Financial Institutions (IFIs). With MIIDA, any IFI now has the opportunity to manage excess liquidity in an immediate and profitable manner, by maintaining a checking account with Meezan Bank. All eligible Islamic Banks can enter into a Mudarabah relationship with Meezan Bank. Under this relationship, the respective Islamic Banks are the Investors (Rab ul Maal), and Meezan Bank is the Manager (Mudaarib) of the funds deposited by them. Meezan Bank allocates the funds received from the Islamic Banks to a deposit pool consisting of financing under Islamic modes that includes, but is not restricted to, Murabaha and Ijarah. Features: Page | 90
    •  For Islamic Financial Institutions deposit  To invest their access liquidity  Min. investment PKR 10 M and multiplies there of  Max investment 01 B Appendix D: CASH DEPARTMENT The cash department is the most important department of the bank. It receives cash from customers and then deposits it into the accounts of the customers and maintained their balances. In cash department following books are maintained.  Scroll book  Paying book  Cash balance book SCROLL BOOK When cash is received at the customer it is recorded in the scroll book. PAYING CASH BOOK The cashier makes entry in the paying cashbook when cash is paid. CASH BALANCE BOOK The consolidated figure of receipt and payment of cash is entered in cash balance book. Appendix E: CREDIT / FINANCE DEPARTMENT Islamic Financing for the following:  Corporate  SME  Personal Details are mentioned in Appendix ______ Easy Home Easy home works under the Diminishing Musharakah where customer participates with Meezan Bank in joint ownership. Page | 91
    • Easy Home finance is available for: Purchase  3-20 year  Max. Finance 85% Construction  2-20 year  Max. Finance 70% Renovation  2-7 year  Max Finance 85% Replacement  3-20 year Eligibility  Pakistani National  Age 25—65 (till maturity)  Professional Experience Salaried person:  2 year of consecutive experience in same industry  Min salary 20 k per month Business  3 years business experience  Min. business income Rs 50K per month Processing Charges  Businessmen Rs 12500  Salaried Person Rs 8500  (Up to Rs 4 M, 2000 Additional for above)  Time Frame 3-4 Weeks Car Ijara Ijara is a rental agreement under which bank purchase a vehicle and give the same on rent to customer Car Ijarah is Pakistan’s first "Interest Free" car financing based on the Islamic financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an interest-based transaction. Page | 92
    • Scope of Facility  Domestic Vehicle (Local made)  Commercial Vehicle (Local+Imported)  Used/Imported Vehicle (1st Transfer only) Rates offered: (For New) (For used)  3 year 14% 15%  4 year 15% 15.50%  5 year 16.50% 18% 1% higher than normal for commercial+imported+used vehicle Eligibility: • Pakistani National  Salaried individual, self-employed, professional or businessperson  Minimum 3 years of work/business/professional experience  6 month working with present employer  Net income exceeds three times of monthly rental Appendix F: OTHER PRODUCTS OFFERED On line Real Time ATM  Free ATM Card  Per Day Limit of PKR 20K  Rs 15 charges for use of other ATM Network  Acceptable at all ATM outlets  Debit card at Orix out lets (PKR 50k/Day) On line Real Time Facility  Absolutely free from all branches of MBL  Collection of Cheques absolutely free  Available to PKR current, saving & Karobari Munafa acc. Banking Facility at all MBL Branches for  Mon - Sat 9-5  Friday 9-12-30 & 3-5 Page | 93
    •  Saturday 9-12-30 24/7 Call Center 24/7 call center provides you access to a wide range of Tele-banking solutions and personalized banking service. Key Features  Check account balances  Instruct issuance of pay orders and demand drafts  Transfer funds between your own accounts  Order issuance of cheque book  Check transaction history of accounts  Receive information on MBL products and services  Issue stop payment instructions  Report loss of your cheque book  Request or change T-PIN  ATM PIN Re issuance  Report loss of ATM/Debit Card or cheque(s) Internet Banking Internet Banking allows having access to accounts regardless of where they may be in the world. Key Features  Balance inquiry  Statement viewing  Statement download  Cheque status  Cheque blocking  Pay order request  Complaint logging and follow-ups  Funds transfers between own accounts at MBL  Change of address request  Cheque book request Alerts and Notification by E-mail  Low/High balance alert  Credit/Debit transaction alert  Request resolution alert  Complaint resolution alert Future Features Page | 94
    •  Alerts by SMS/Fax  Utility bill payments  Inter bank funds transfers  Payment to nominated accounts at MBL  Standing orders for repeated payments Appendix G: Overview of Islamic Modes of Financing 1. Mudarbah (Passive Partnership) This is a contract between two parties: a capital owner (rabb-al-mal) and an investment manager (mudarib). Profit is distributed between the two parties in accordance with the ratio that they agreed upon at the time of the contract. Financial loss is borne by the capital owner; the loss to the manager being the opportunity cost of his own labor, which failed to generate any income for him. 2. Musharakh (Active Partnership) A musharakh contract is similar to that of the mudarbah, with the difference that in the case of musharakh both partners participate in the management and provision of capital and also share in the profit and loss. Profits are distributed between partners in accordance with agreed ratios, but the loss must be distributed in proportion to the share of each in the total capital. 3. Diminishing Partnership Page | 95
    • This is a contract between a financier (the bank) and a beneficiary, in which the two agree to enter into a partnership to own an asset, but on the condition that the financier will gradually sell his share to the beneficiary at an agreed price and in accordance with an agreed schedule. 4. Murabah (sales contract at a profit margin) Under this contract, the client orders an Islamic bank to purchase for him a certain commodity at a specific cash price, promising to purchase such commodity from the bank once it has been bought, but at a deferred price, which includes an agreed upon profit margin called markup in favor of the bank. 5. Ijarah (leasing) The subject matter in leasing contract is the usufruct generated over time by an asset, such as machinery, airplanes, ships or trains. This usufruct is sold to the lessee at a pre- determined price. The lessor retains the ownership of the asset with all the rights as well as the responsibilities that go with ownership. 6. Istisna Al-Istisna is a contract in which a party orders another to manufacture and provide a commodity, the description of which, delivery date, price and payment date are all set in the contract. According to a decision of the OIC Fiqh Academy, this type of contract is of a binding nature, and the payment of price could be deferred. Page | 96
    • 7. Salam Salam is a sales contract in which this price is paid in advance at the time of contracting, against delivery of the purchased goods/services at a specified future date. Not every commodity is suitable for a Salam contract. It is usually applied only to fungible commodities. AIMS-UK Islamic Banking & Finance | Online Certifications | Training & Consultancy Appendix H: Attachments • Accounts opening form. • L/C Form. • Locker opening form. • Labbaik travel Asan form. • Form M. • Form I. • Form R. • Term Deposit Form. • Remittance Application Form. • Profit Rate List. • Account Closure Request. • Customer Due Diligence form. • Stop Payment Request. • Sms Alerts Reques.t • KYC. • Locker insurance letter. Page | 97
    • • List of information required for funded/non funded facility. • Basic Documents Required for Account Opening. • Account Statement Request. • Undertaking for the difference of signatures. • Change of address and signatures. • Housewife/Retired Person/ Household Resident Declaration. • Activation of Dormant Account. • Cheque Book Application. • MBL News teller. Page | 98