Meezan Bank is Pakistan's first and largest Islamic bank. It has expanded rapidly, growing its branch network to 201 branches across 54 cities. Total deposits have increased 43% to over Rs. 100 billion as of 2009. The bank aims to establish Islamic banking as the preferred system through innovative Shariah-compliant products and services while optimizing stakeholder value. It has a highly qualified Shariah board and seeks to find common ground with conventional banking within Islamic principles.

1. September 06 2010
MEEZAN
INTERNSHIP REPORT
BANK
Hajvery University Lahore | Nazish Sohail

2. InternshIp report
Meezan Bank Limited
Prepared By:
NAZISH SOHAIL
BBA HONS
106-862
hAJVerY UnIVersItY LAhore
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3. 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.
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4. 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)
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5. 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)
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6. Tabasher Zaki Malhi
Manager Operations
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7. 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
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8. 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
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9. 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
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10. 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
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11. 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
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12. 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
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13. 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,
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14. 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.
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15. 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:
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16. 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.
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17. 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.
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18. 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.
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19. 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
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20. 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
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21. 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.
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22. 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
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23. 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
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24. 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
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25. -
2. Annual Report 2009
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26. 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
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27. 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
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28. 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 %
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29. 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%
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30. 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 %
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31. 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
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32. 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%
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33. 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

34. 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
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35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

41. • 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

42. • 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

43. 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

44. 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

45. 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

46. 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

47.  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

48. • 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

49. 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

50. 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

51. 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

52. 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

53. 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

54. 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

55. 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

56. 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

57. 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

58. 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
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59. 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
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60. 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

61. 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

62. 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
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63. 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.
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64. • 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
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65. 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.
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66. 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
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67. • 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
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68. 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.
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69. 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
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70. 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.
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71. 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.
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72. 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.
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73. 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.
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74. • 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.
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75. 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
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76. 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.
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77. • 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
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78. 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.
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79. "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
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