2. 2
1.01 Origin of the report
This report has been arranged on the premise of experience gathered during the period of
internship from April 01, 2019 to Jun 20, 2019 in Al-Arafah Islami Bank ltd., Joydebpur
Branch. For preparing this report, I have also collect information from annual report and
Website of the Al-Arafah Islami Bank Ltd. I have presented my experience and findings
by using different charts and tables, which are presented in the analysis part.
1.02 Study methodology
The report was fully exploratory in nature. Data have been collected from both primary
and secondary sources.
1.02.1. Primary sources of data
Face to face conversation with the bank officers and staffs.
Informal conversation with the clients
Practical work exposures from different division of the bank.
Relevant files and documents as provided by the concerned officer.
1.02.2. Secondary sources of data
Annual report of Al-Arafah Islami Bank Ltd.-2018
Different papers of Al-Arafah Islami Bank.
Office file
Various books, articles, manuals etc.
Information about the organization from their company profile.
Web Sites of Bangladesh Bank, Islamic Development Bank, IBBL, Al-Arafah
Islami Bank etc.
Unpublished data.
Different text books.
3. 3
1.03 Scope of the study
During these three months internship program in Al-Arafah Islami Bank Ltd, Joydebpur
Brach, almost all the desks have been observed. For that purpose I needed to get
information from Al-Arafah Islami Bank Ltd. Head Office. But I was appointed into Al-
Arafah Islami Bank, Joydebpur branch. There I had to work in General banking,
Investment, Foreign Exchange desks as a routine work. I gathered information for my
report from Al-Arafah Islami Bank Head Office besides my routine work. It was difficult
to collect the information relevant my report, because the people of this Bank was so
busy with their duty that they cannot be able to give me much time. Here I try to cover
the activities and rules and regulation related to investment.
1.04 Objective the report
1.04.1. General objective
To gain practical experiences and view the application of theoretical knowledge
in the real life.
To acquire practical experience in different banking services of Al-Arafah Islami
Bank.
1.04.2. Specific objective
To submit a report for the fulfillment of my BBA program
Find out the overall branch banking
To gather comprehensive knowledge on overall banking functions and the
expectations of the customers regarding the service level of the bank.
To present an overview of Al-Arafah Islami Bank Ltd.
To study existing banker-customer relationship.
To identify the problems of financing by Al-Arafah Islami Bank Ltd.
This report has been prepared through extensive discussion with bank employees and
with the customers. While preparing this report, I had a great opportunity to have an in
depth knowledge of all the banking activities practiced by the Al-Arafah Islami Bank Ltd.
4. 4
1.05 Rationale of the study
As it is the question of every concerned people that, what is the difference between
conventional banking and the Islamic banking and as the Islamic banking are spreading
day by day in Bangladesh it is rationale to conduct the study.
Islamic banks can provide efficient banking services to the nation if they are supported
with appropriate banking laws and regulations. This will help them introducing PLS
modes of operations, which are very much conducive to economic development. It would
be better if Islamic banks had the opportunity to work as a sole system in an economy.
That would provide Islamic banking system to fully utilize its potential. This does not
mean that the survival of Islamic banks operating within the conventional banking frame
work is altogether threatened. Evidences from Bangladesh indicate that Islamic banks can
survive even within a conventional banking frame work by which over from PLS to trade
related modes of financing.
1.6 Limitations
The present study was not out of limitations. But as an intern it was a great opportunity
for me to know the banking activities of Bangladesh specially Al-Arafah Islami Bank.
Some constraints are as follows:
The main constraints of the study are inadequate access to information, which has
hampered the scope of analysis required for the study.
Due to time limitations many of the aspects could not be discussed in the present
report.
Every organization has their own secrecy that is not revealed to others. While
collecting data they did not disclose much information for the sake of
organizational confidentiality.
Since banks personals were very busy they could provide me very little time.
I carried out such a study for the first time so inexperience is one of the main
constraints of the study.
6. 6
2.01. History
The word „bank‟ comes from the Italian word „Banco‟ or „Banque‟. Banco or Banque
means a bench. In early stage money transaction activities was generally done by sitting
on the benches in a market. Somebody says the word „bank‟ comes from the German
word „bank‟ that means the joint stock fund. But now this word „bank‟ deals with the
money transaction that made in an institution by following some prescribed rules.
The development of a country depends on the economic condition of the country.
Attainment of the desired level of economic development is targeted by the developing
economics for a number of reasons viz. increasing population, scarce resources, high rate
of unemployment, technological backwardness, low level of standard of living, etc. the
process of economic development needs capital formation besides other structural
changes like improvement in skill and efficiency of manpower, better organization,
health and education system, etc. Capital formation is deemed as the most significant
variable of economic development. An efficient and well-organized financial system
contributes to the much- desired economic development through capital formation, which
can be divided into three stages viz., savings, financing and investment.
Banks play a dynamic role in the economic development of a nation. Schumpeter
regarded the banking system as one of the two key agents (the other being
entrepreneurship) in the whole process of development.
Historically, the focus of the commercial banking system was entirely short term,
providing only working capital and trade finance. But the areas of commercial banking
have been expected over time. In the universal banking system of Germany, commercial
banks are also an important source of investment finance. They function like investment
banks and provide underwriting and brokerage, and they also have considerable control
over firms both through their own equity holding and proxy votes for private investors,
and by appointing representatives on the boards of firms.
With the objective of achieving success here & hereafter by pursuing the way directed by
Allah and the path shown by His Rasul (SM), Al Arafah Islami Bank Ltd was established
(registered) as a private limited company on 18 June 1995. The inaugural ceremony took
place on 27 September 1995. The authorized capital of the Bank is Tk.5000.00 million
7. 7
and the paid up capital is Tk. 4677.28 million as on 31.12.2018. Renowned Islamic
Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of
paid up capital is being owned by indigenous shareholders.
The equity of the bank stood at Tk. 9647.45 million as on 31 December 2018, the
manpower was 1711 and the number of shareholders was 49,386. It has achieved a
continuous profit and declared a good dividend over the years. High quality customer
service through the integration of modern technology and new products is the tool of the
bank to achieve success. The bank has a diverse array of carefully tailored products and
services to satisfy customer needs.
The Bank is committed to contribute significantly to the national economy. It has made a
positive contribution towards the socio economic development of the country with 78
branches of which 21 is AD throughout the country.
2.02 Vision of the organization
To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the
growth of the national economy. To establish an interest free transaction in the economy.
2.03 Mission of the organization
The bank has change out the following corporate objectives in order to ensure smooth
achievement of its goals:
Achieving the satisfaction of Almighty Allah both here & hereafter.
Proliferation of Shariah Based Banking Practices.
Quality financial services adopting the latest technology.
Fast and efficient customer service.
Maintaining high standard of business ethics.
Balanced growth.
Steady & competitive return on shareholders' equity.
Innovative banking at a competitive price.
Attract and retain quality human resources.
Extending competitive compensation packages to the employees.
8. 8
Firm commitment to the growth of national economy.
Involving more in Micro and SME financing.
2.04 Corporate values
To have a strong customer focus and to build relationship based on integrity,
superior service and mutual benefit.
To strive for private and sound growth.
To work as a team to serve the best interests of the organization.
To work for continues business innovation and improvements.
To value and respect people and make decisions based on merit.
To provide recognition and reward on performance.
To value open and honest communication.
2.05 Hierarchy of the organization
The performance of the bank, during the period under review, is more significant
simultaneously in developments and achievements of continuous growth rate in all the
areas of banking operations. The Bank has successfully been marching ahead with its
prime business objectives by earning a pre tax profit of Tk. 668.24 million registering an
annual growth of 24.81% than that of the previous year. It has successfully mobilized Tk.
29690.12 million deposits from depositors and has arranged disbursement of Tk
29723.79 million as investment to 16,604 accounts as on 31st
December 2014 through its
30 Branches. The total income and expenditure of the Bank were Tk. 4387.26 million and
Tk. 2859.16 million respectively during the period under review. The achievements were
possible because of the service excellence of management team with support from a very
resourceful and skilled workforce rendering efficient and specialized services.
2.05.1. Capital:
Al-Arafah Islami Bank Ltd. (AIBL) was incorporated on 18 June, 1995 with authorized
capital of Tk.1000 million (100 Crore) and paid up capital of Tk.10.12 Crore paid up by
the Sponsors/Directors and Tk.10.12 Crore was offered to the public for subscribed
portion of public issue of shares The authorized capital of the Bank is Tk.5000.00 million
9. 9
and the paid up capital is Tk. 4677.28 million as on 31.12.2018. Renowned Islamic
Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of
paid up capital is being owned by indigenous shareholders.
The equity of the bank stood at Tk. 9647.45 million as on 31 December 2018, the
manpower was 1711 and the number of shareholders was 49,386. It has achieved a
continuous profit and declared a good dividend over the years. High quality customer
service through the integration of modern technology and new products is the tool of the
bank to achieve success. The bank has a diverse array of carefully tailored products and
services to satisfy customer needs.
2.05.1.1. Analysis of capital structure:
Capital structure of Al-Arafah Islami Bank has changed from year to year. The
components of the capital structure are paid-up capital; proposed issue of dividend, share
premium, statutory reserve, proposed cash dividend, retained earnings and other reserve.
2.05.1.2. Authorized and paid up capital of AIBL:
Authorized Capital (TK)
In Million
Year Paid Up Capital (Tk.) In
Million
5,000.00 2018 4,677.28
5,000.00 2017 1,798.95
2,500.00 2016 1,383.81
2,500.00 2015 1,153.18
2,500.00 2014 854.20
10. 10
0
10
20
30
40
50
60
70
80
90
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
East
West
North
2.05.2. Deposit:
Deposit is one of the principal sources of commercial banks and investment deposit is the
main stream of revenue in banking business. The total deposit of the bank stood at Tk.
52,973.97 million as on December 2018 against Tk. 38,355.50 million of the previous
year. This growth rate may be termed as remarkable achievement for the bank. The
present strategy is to increase the deposit base through maintaining competitive rates of
Profit and having low cost of funds.
11. 11
2.05.2.1. Deposit Position of AIBL:
Year Amount Of Deposit (Tk In
Million)
2018 52,973.97
2017 38,355.50
2016 29,690.12
2015 23,009.13
2014 16,775.34
2.05.3. Loans:
Short term and long term loans allowed to individual/ firms/ industries for a specific
purpose but a definite period and generally repayable by installments fall under this head
these types of lending are mainly allowed to accommodate financing under the
categories.
a). Large and Medium Scale Industries.
b). Small and Cottage Industries.
Very often term financing for agriculture and others are also included here.
2.05.4. Profit and operating results:
In year 2017 a growth in Profit before Tax was Tk. 1,589.24 million and in 2018 the
profit reached to 2,689.15 million. In 2017 and 2018 profit after tax was 858.99 and
1,816.14 respectively.
12. 12
2.05.5. Investment:
Total amount of investment of the Bank stood at Tk. 53,582.96 million as On December
31, 2018 as against Tk. 36,134.08 million as on December 31, 2017. Investments are the
core asset of a Bank. The Bank gives emphasis to acquire quality assets and does
appropriate lending risk analysis and follows all the terms and conditions of CRM (Credit
Risk Management) while approving commercial and trade investments to clients.
2.05.5.1. Investment Activities of AIBL:
Year Amount (TK In Million)
2018 53,582.96
2017 36,134.08
2016 27,742.57
2015 22,906.37
2014 17,423.19
13. 13
2.05.5.2. Investment (Shares & Securities):
The size of investment portfolio in 2018 is Tk. 2,178.83 million while it was Tk 1,502.00
in 2017. The portfolio comprises Islamic Investment Bond, Share and Prize Bonds.
Year Amount (TK In Million)
2014 2.00
2015 868.58
2016 1,090.23
2017 1,502.00
2018 2,178.83
14. 14
2.05.6. Import Business:
2.05.6.1. Handling the amount of Import Business:
Year Amount (TK in Million)
2018 55,934.10
2017 34,074.80
2016 32,685.13
2015 27,042.72
2014 18,821.40
15. 15
2.05.7. Export Business:
2.05.7.1 Handling the amount of Export Business:
Year Amount (TK in Million)
2018 32,042.40
2017 23,546.10
2016 20,176.64
2015 12,714.91
2014 9,142.70
16. 16
2.05.8. Foreign Remittance:
Foreign Remittance of the Bank stood at Tk. 4,431.90 million as of December 31, 2018
as against Tk. 2,832.28 million in 2017. Besides, the Bank has taken initiatives to make
Remittance Arrangements with some leading Exchange House at abroad.
2.06. Functions of Al-Arafah Islami Bank:
To maintain all types of deposit A/Cs.
To make investment.
To conduct foreign exchange business.
To conduct other Banking services.
To work for continues business innovation and improvements
2.07. Management of Al-Arafah Islami Bank:
For any financial and non- financial organization, management is the most valuable and
important resources of any kind of organization. And a well-organize management
provides the organization to reach its ultimate goal. Management means planning,
organizing, staffing, directing and controlling of all financial and non- financial resources
of an organization. Different aspect of management practice in Al-Arafah Islami Bank is
discussed below.
2.07.1. Planning
Al-Arafah Islami Bank has done its planning within the preview of the corporate plan.
The overall planning approach in Al-Arafah Islami Bank is top down. Each branch can
plan according to the goal imposed by the corporate level. It doesn‟t plan independently.
And Al-Arafah Islami Bank has a planning division. This department is mainly
responsible for the overall planning.
2.07.2. Organizing
17. 17
Al-Arafah Islami Bank is organized as per the existing business locations. It has 78
branches each of which is a separate entity. Each unit is responsible for own performance
and a senior vice president (SVP) followed by Manager Heads each. He is responsible for
the performance of their unit.
2.07.3. Staffing
The recruitment in Al-Arafah Islami Bank is done in two ways. One as a „probationary
officer‟ for the management program and it has a probation period of one year. Another
one is non-management level as „Trainee Officers‟. Probationary officer‟ is recruited in
officer category and their career path is headed towards different managerial jobs.
2.07.4. Directing and controlling
The management approach in Al-Arafah Islami Bank is top down. Information just seeks
through lower management layer. Works are designed in such a way that one cannot
leave without clearing the tasks as he is assigned for a day. Sitting arrangement in all
office is done in a way that the superior can monitor the subordinate all time. Budgeting,
rewarding, punishing, etc. are also practiced as control mechanism.
2.08. Human Resource practices in Al-Arafah Islami Bank:
Employees are the core resource of any organization. Without them, one cannot run their
organization. And human resources approach is concerned with the growth and
development of people toward higher level of competency, creativity and fulfillment. It
helps employees become better, more responsible person, and then it tries to create a
climate in which they may contribute to the limits of their improved abilities. It assumes
that expanded capabilities and opportunities for people will lead directly to improvements
in operating effectiveness. Essentially, the human resources approach means that better
people achieve better results.
2.09. Accounts opening Section
Account opening is the gateway for clients to enter into business with bank. It is the
foundation of banker customer relationship. This is one of the most important sections of
18. 18
a branch, because by opening accounts bank mobilizes funds for investment. Various
rules and regulations are maintained and various documents are taken while opening an
account. A customer can open different types of accounts through this department.
2.10. Types of Accounts with Terms and Conditions
2.10.1. Mudaraba Terms Savings Deposit:
Deposit in monthly installment @Tk.300/-, Tk.500/-, Tk.1000/-Tk.1500/- &
Tk.2000/- is obtained under the aforesaid scheme for a tenure of 5,8,10 and 12 years and
the same is withdrawal with
profit at the end of the tenure.
2.10.2. Monthly Profit based Term Deposit:
Under the above scheme, deposit of Tk. 1.00 lac and multiple thereof are accepted for a
term of 5 (five) years and the bank gave profit thereon Tk. 885 per month per lac and
proportionately on the rest amount of deposit under the category during the year under
review. The aforesaid rate shall, however, be adjustable at the close of calendar year on
finalization of accounts.
2.10.3. Monthly Hajj Deposit:
Hajj deposit at monthly installment from 1 (one) year to 20(twenty) years are accepted under the
above scheme to enable the account holder to perform Hajj out of the accumulated saving with
profit.
2.10.4. Onetime Hajj Deposit:
Under the above scheme, fixed amount of Hajj deposits are accepted from the clients for
particular term and as per rules profit is accumulated thereon per year in this regard. As and when
the fixed deposit is matured, Hajj expenses are defrayed by the same. Under the scheme, the
guardians may also open Hajj account to enable their successors to perform Hajj. Highest amount
of profit is paid in the above types of deposit by the bank.
2.10.5. Savings Investment Deposit:
Deposit under the scheme is accepted by monthly installment and after expiry of the
term; double amount of such savings is given as investment in feasible sectors by the
bank as per choice of the depositors without any collateral security. Any one by saving
19. 19
under the scheme can take business venture on utilization the amount saved under the
scheme as well as availing bank investment.
2.10.6. Marriage Savings Deposit:
Fixed monthly installment for a particular period is to be deposited to defray the expenses
of marriage and the bank allows double of saving or Tk.30,000/- which is higher as
investment to procure ornaments, furniture, fixture etc., repayable in 24 monthly
installment without any collateral security.
2.10.7. Savings Bond Deposit:
Under this scheme the bank has introduced saving bonds for Tk. 10,000/-, Tk.25,000/-
and Tk. 100,000/- for 3,5 and 8 years. After the completion of the tenure the deposit.
2.11. Account Opening procedure
Before opening of a currents or savings account, the following formalities must be
completed by the customer:
Submit application on the prescribed form.
Furnishing photographs- 2 (Two) copies.
Introduction by an account holder.
Putting specimen signatures in the specimen card.
Mandate, if necessary.
After fulfilling above formalities, opens an account for the client and provide the
customer with a pay-in-slip book and a checkbook in case of savings account and
currents account.
2.12. Documents required for opening account:
A. Current Account
In this kind of account a customer can deposit his money and can write one or more check to
withdraw their money. For doing this notice is not required. He can deposit it whenever he/ she
want to and also can withdraw it whenever he/ she want to.
20. 20
In The Name of Individual:
The client has to fill up a light green account opening form. Terms and conditions are printed on
the back of the form. The form contains the declaration clause, special instructions etc. two copies
of passport size photograph duly attested by the introducer are affixed with the form.
In Joint Name:
In this type, the formality is same as individual account, but in the special instruction clause,
either or „survivor‟ or „former or survivor‟ clause is marked.
Proprietorship:
In addition the customer has to submit the valid Trade License and Tax Paying Identification
Number (TIN) along with the application.
Partnership:
In case of partnership account, the bank asks for,
A copy of the partnership agreement (Partnership Deed)
A letter signed by all the partners containing the following particulars.
The name and addresses of all partners
The nature of the firm‟s business
The name of the partner authorized to operate the account in the name of the firm, including
the authority to draw, endorse and accepting the bills and mortgage and sell the properties
belonging to the firm.
Limited Company:
On having the desire to open an account from a limited company, an EXIM Bank Officer asks for
the following documents:
Registration Certificate from the Registrar of Joint Stock of Companies
Certificate of Incorporation
Certificate of Commencement of Business
Memorandum of Association
Articles of Association
Copies of Annual Accounts
Copies of the Board‟s resolution, which contains
a). The name of the persons who have been authorized to operate the bank account on
behalf of the company.
21. 21
b). the name of the persons who are authorized to execute documents with the bank on
company‟s behalf.
Societies, Clubs and Associations:
In case of these sorts of accounts Al-Arafah Islami Bank Ltd requires the following
documents:
Registration Certificate Under the Societies Registration Act, 1962
Copies of Memorandum, Articles of Association
Resolution of the Managing Committee.
Power of Attorney to Borro
Non-government Organization (NGO):
The account opening procedure is same but in exception is that the Registration
Certificate from the Social Welfare Department of Government must be enclosed with
the application.
Joint Account in The Name of Minor:
A minor cannot open an account in his own name due to the incapacity to enter into a
contract. He can open an account in Al-Arafah Islami Bank Ltd in Joint name of another
person who will be guardian of him.
B. Savings Bank Account:
This deposit is basically meant for small-scale savers. There is restriction on withdrawals
in a month. Heavy withdrawals are permitted only against prior notice. Interest is paid on
these types of accounts.
Short-term Deposit (STD):
In Short-term Deposit, the deposit should be kept for at least seven days to get interest.
The interest offered for STD is less than that of savings deposit. In Al-Arafah Islami
Bank Ltd various big companies, Organizations, Government Departments keep money
in STD accounts. Frequent withdrawal is discouraged and requires prior notice.
22. 22
Fixed Deposit:
They are also known as time liabilities or term deposits. These are deposits, which are
made with the bank for a fixed period specified in advance. The bank need not maintain
cash reserves against these deposits and therefore, the bank offers high are of interest on
such deposits.
In Al-Arafah Islami Bank Ltd, fixed deposit account is opened in two forms- Midterm
(MTD), which is less than one year & the other is Term Deposit, which is more than one
year.
Opening of Fixed Deposit Account:
The depositor has to fill an application form wherein he mentions the amount of deposit,
the period for which deposit is to be made & the name/ names is which the fixed deposit
receipt is to be issued. In case of a deposit in Joint name Al-Arafah Islami Bank Ltd. also
takes the instructions regarding payment of money maturity of the deposit. The banker
also takes the instructions regarding payment of money on maturity of the deposit. The
banker also takers the instructions regarding payment of money on maturity of the
deposit. The banker also taker specimen signatures of the depositors.
A fixed deposit account is then issued to the depositor acknowledging receipt of the sum
of money mentioned therein. It also contains the rate of interest & the date on which the
deposit will fall due for payment.
Payment of Interest:
It is usually paid on maturity of the fixed deposit. Al-Arafah Islami Bank Ltd calculates
interest at each maturity date and provision is made on that “Miscellaneous creditor
expenditure payable accounts” is debited for the accrued interest.
Encashment of F.D.R:
In case of premature FDR, Al-Arafah Islami Bank Ltd is not bound to accept surrender of
the deposit before its maturity date. In order to deter such a tendency the interest on such
a fixed deposit is made cut a certain percentage less a the agreed rate. Normally savings
bank deposit interest rate is allowed.
23. 23
Loss of FDR:
In case of a lost FDR, the customer is asked to record a GD (General Diary) in the nearest
Police Station. After that the customer has to furnish an Indemnity Bond to Al-Arafah
Islami Bank Ltd a duplicate FDR is then issued to the customer by the bank.
2.13. Deposit Section
Deposit is the lifeblood of a bank. From the history and origin of the banking system we
know that deposit collection is the main function of a bank is accepting deposit. The
deposits that are accepted by Al-Arafah Islami Bank like other banks may be classified in
to:
1. Demand Deposits
2. Time Deposits
A. Demand deposits:
These deposits are withdrawn able without notice, e.g. current deposits. Al-Arafah Islami
Bank accepts demand deposits through the opening of,
a) current account
b) Savings account
c) Call deposits from the fellow bankers
B. Time deposits:
A deposit which is payable at a fixed date or after a period of notice is a time deposit. Al-
Arafah Islami Bank Ltd accepts time deposits through Fixed Deposit Receipt (FDR),
Short Term Deposit (STD) and Bearer Certificate Deposit (BCD) etc.
While accepting these deposits, a contract is done between the bank and the customer.
When the banker opens an account in the name of a customer, there arises a contract
between the two. This contract will be valid one only when both the parties are competent
to enter into contracts. As account opening initiates the fundamental relationship & since
the banker has to deal with different kinds of persons with different legal status, Al-
24. 24
Arafah Islami Bank Ltd officials remain very much careful about the competency of the
customers.
2.14. Cash section
Banks, as a financial institution, accept surplus money from the people as deposit and give them
opportunity to withdraw the same by cheque, etc. But among the banking activities, cash
department play an important role. It does the main function of a commercial bank i.e. receiving
the deposit and paying the cash on demand. As this department deals directly with the customers,
the reputation of the bank depends much on it. The functions of a cash department are described
below:
2.14.1. Functions of Cash Department:
Cash
Payment
1. Cash payment is made only against cheque
2. This is the unique function of the banking system which is
known as “payment on demand”
3. It makes payment only against its printed valid Cheque
Cash
Receipt
1. It receives deposits from the depositors in form of cash
2. So it is the “mobilization unit” of the banking system
3. It collects money only its receipts forms
2.14.2. Cash packing:
After the banking hour cash is packed according to the denomination. Notes are counted
and packed in bundles and stamped with initial.
2.14.3. Allocation of currency:
Before starting the banking hour all tellers give requisition of money through “Teller
cash proof sheet”. The head teller writes the number of the packet denomination wise in
“Reserve sheet” at the end of the day; all the notes remained are recorded in the sheet.
25. 25
2.15. Local Remittance
Carrying cash money is troublesome and risky. That‟s why money can be transferred
from one place to another through banking channel. This is called remittance.
Remittances of funds are one of the most important aspects of the Commercial Banks in
rendering services to its customers.
2.15.1. Types of local remittance
Between banks and non banks customer
Between banks in the same country
Between banks in the different centers.
Between banks and central bank in the same country
Between central bank of different customers.
The main ways used by Al-Arafah Islami Bank Ltd for remitting funds are
Payment order ( PO)
Demand Draft ( DD)
Telegraphic Transfer (TT)
26. 26
So the basic three types of local remittances are discussed below
Points Pay Order Demand Draft TT
Explanatio
n
Pay Order gives
the payee the
right to claim
payment from the
issuing bank
Demand Draft is an order
of issuing bank on
another branch of the
same bank to pay
specified sum of money
to payee on demand.
Issuing branch
requests another
branch to pay
specified money to
the specific payee
on demand by
Telegraph
/Telephone
Payment
from
Payment from
issuing branch
only
Payment from ordered
branch
Payment from
ordered branch
Generally
used to
Remit
fund
Within the
clearinghouse
area of issuing
branch.
Outside the
clearinghouse area of
issuing branch. Payee can
also be the purchaser.
Anywhere in the
country
Payment
Process of
the paying
bank
Payment is made
through clearing
1. Confirm that the DD is
not forged one.
2.Confirm with sent
advice
3.Check the „Test Code‟
4.Make payment
1.Confirm issuing
branch
2.Confirm Payee
A/C
3.Confirm amount
4.Make payment
5.Receive advice
Charge
Only commission Commission + telex
charge
Commission +
telephone
27. 27
2.16. Clearing Section
According to the Article 37(2) of Bangladesh Bank Order 1972, the banks, which are the
member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear
the cheques drawn upon one another through the clearinghouse. This is an arrangement
by the central bank where every day the representative of the member banks gathers to
clear the cheques. Banks for credit of the proceeds to the customer‟s accounts accept
cheques and other similar instruments.
2.16.1. Procedures for Collection:
The following procedures are taken for collection,
“Payee’s A/C Credited” endorsement
Entries are given in the outward clearing
Register
“Clearing” seal is given Cheque
Cheques are sorted bank wise and entries
are given to the computer
Entries are given to the “Clearing House
Register”
Crossing of the cheques are done
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2.16.2. Procedure for Outward Bills for Collection:
2.17. Workings of this department:
Recording the transactions in the cashbook.
Recording the transactions in general and subsidiary ledger.
Preparing the daily position of the branch comprising of deposit
and cash.
Preparing the daily Statement of Affairs showing all the assets
and liability of the branch as per General Ledger and Subsidiary
Ledger separately.
Making payment of all the expenses of the branch.
Recording inters branch fund transfer and providing accounting treatment in
this regard.
Preparing the monthly salary statements for the employees.
Preparing the weekly position for the branch which is sent to the
Head Office to maintain Cash Reserve Requirement (C.R.R)
Depositing the cheque along with Deposit Slip
Crossing of the cheques are done indicating Principal
Branch as collecting bank
Endorsement “Payee’s A/C will be credited on
realization” is given
Entries are given in the outward clearing Register
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Preparing the monthly position for the branch which is sent to
the Head Office to maintain Statutory Liquidity Requirement
(S.L.R)
Make charges for different types of duties
Preparing the budget for the branch by fixing the target regarding profit and
deposit so as to take necessary steps to generate and mobilize deposit.
Checking of Transaction List
Recording of the vouchers in the Voucher Register.
Packing of the correct vouchers according to the debit voucher and the credit
voucher
2.18. Name of AIBL Branch:
Branch
Code
Name Branch
Code
Name
1 Motijheel 25 Amborkhana, Sylhet
2 Moulbi Bazar, Dhaka 26 Ati Bazar, Keranigonj
3 Laldighirpur, Sylhet 27 Barmi, Gazipur
4 Agrabad 28 Barura, Comilla
5 Khulna 29 Bhagyakul, Munshigonj
6 Rajshahi 30 Bhandaria, Pirojpur
7 Bogra 31 O.R.Nizam Road, CTG
8 Katungonj 32 Moulvibazar, Sylhet
9 Barisal 33 Choumohani
10 Sathkira 34 Comilla
11 Nawabpur 35 Jessore
12 Benapole 36 Dhanmondi
13 VIP Road, Dhaka 37 Mohammadpur, Dhaka
14 Corporate, Dhaka 38 Madhabdi
15 New Elephant Road 39 Pagla
16 Uttara Model Town 40 Rupuspur
17 Jublee Road 41 Joydebpur
18 North South Road 42 Mohammadpur, Dhaka
19 Banani, Dhaka 43 Narayangonj
20 Mirpur, Dhaka 44 Companigonj
21 Mymensingh 45 Gallai
22 Zindabazar, Sylhet 46 Islampur, Dhaka
23 Mouchak, Dhaka 47 Dilkusha, Dhaka
24 Syedpur 48 Badda, Dhaka
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3.01. SWOT Analysis
SWOT analysis is the detailed study of an organization‟s exposure and potential in
perspective of its strength, weakness, opportunity and threat. This facilitates the
organization to make their existing line of performance and also foresee the future to
improve their performance in comparison to their competitors. As though this tool, an
organization can also study its current position, it can also be considered as an important
tool for making changes in the strategic management of the organization.
3.02. Strengths:
Al-Arafah Islami Bank Ltd.has already established a favorable reputation in the
banking industry of the country. It is one of the leading private sector commercial
banks in Bangladesh. The bank has already shown a tremendous growth in the
profits and deposits sector.
Al-Arafah Islami Bank Ltd.has provided its banking service with a top leadership
and management position. The Board of Directors headed by its Chairman
Mr.Badiur Rahman is a skilled person in business world..Mr Ekramul Hoquethe
Managing Director of the bank management team. The top management officials
have all worked in reputed banks and their years of banking experience, skill, and
expertise will continue to contribute towards further expansion of the bank.
Al-Arafah Islami Bank Ltd.has already achieved a high growth rate accompanied
by an impressive profit growth rate in 2018. The number of deposits and the loans
and advances are also increasing rapidly.
Al-Arafah Islami Bank Ltd. has an interactive corporate culture. The working
environment is very friendly, interactive and informal. And, there are no hidden
barriers or boundaries while communicate between the superior and the
employees. This corporate culture provides as a great motivation factor among the
employees.
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3.03. Weakness:
The main important thing is that the bank has no clear mission statement and
strategic plan. The banks not have any long-term strategies of whether it wants to
focus on retail banking or become a corporate bank. The path of the future should
be determined now with a strong feasible strategic plan.
The bank failed to provide a strong quality-recruitment policy in the lower and
some mid level position. As a result the services of the bank seem to be Deus in
the present days.
The poor service quality has become a major problem for the bank. The quality of
the service at Al-Arafah Islami Bank is higher than the Dhaka Bank, Prime Bank
or Dutch Bangla Bank etc. But the bank has to compete with the Multinational
Bank located here.
Some of the job in Al-Arafah Islami Bank has no growth or advancement path. So
lack of motivation exists in persons filling those positions. This is a weakness of
Al-Arafah Islami Bank that it is having a group of unsatisfied employees.
In terms of promotional sector, Al-Arafah Islami Bank has to more emphasize on
that. They have to follow aggressive marketing campaign.
All of the branches of Al-Arafah Islami Bank are not authorized dealer. But some
of the important branches should get the authorized dealership.
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3.04. Opportunity:
In order to reduce the business risk, Al-Arafah Islami Bank has to expand their
business portfolio. The management can consider options of starting merchant
banking or diversify into leasing and insurance sector.
The activity in the secondary financial market has direct impact on the primary
financial market. Banks operate in the primary financial market. Investment in the
secondary market governs the national economic activity. Activity in the national
economy controls the business of the bank.
Opportunity in retail banking lies in the fact that the country‟s increased
population is gradually learning to adopt consumer finance. The bulk of our
population is middle class. Different types of retail lending products have great
appeal to this class. So a wide variety of retail lending products has a very large
and easily pregnable market.
A large number of private banks coming into the market in the recent time. In this
competitive environment Al-Arafah Islami Bank must expand its product line to
enhance its sustainable competitive advantage. In that product line, they can
introduce the ATM to compete with the local and the foreign bank. They can
introduce credit card and debit card system for their potential customer.
In addition of those things, Al-Arafah Islami Bank can introduce special corporate
scheme for the corporate customer or officer who have an income level higher
from the service holder. At the same time, they can introduce scheme or loan for
various service holders. And the scheme should be separate according to the
professions, such as engineers, lawyers, doctors etc.
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3.05. Threats:
All sustain multinational banks and upcoming foreign, private banks posse‟s
enormous threats to Al-Arafah Islami Bank. If that happens the intensity of
competition will rise further and banks will have to develop strategies to compete
against an on slough of foreign the banks.
The default risks of all terms of loan have to be minimizing in order to sustain in
the financial market. Because default risk leads the organization towards to
bankrupt. Al-Arafah Islami Bank has to remain vigilant about this problem so that
proactive strategies are taken to minimize this problem if not elimination.
The low compensation package of the employees from mid level to lower level
position threats the employee motivation. As a result, good quality employees
leave the organization and it effects the organization as a whole.
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4.01. Findings of the Study
a. Introduction is illustrated in chapter one. Here I have tried to find out the scope of
and the limitations of the study by discussing the background of the
Program. This is just an introductory discussion.
b. In chapter two I have tried to familiarize the organization with educated society.
c. In chapter three I tried to discuses in brief all types of AIBL Service.
d. Al-Arafah Islami Bank provides Islamic banking system.
e. Bangladesh is one of the less developed countries. So the economic development
of the country depends largely on the activities of commercial banks.
f. They have different types of products with attractive features.
g. Al-Arafah Islami Bank has test key arrangement with many banks for the
authorization of LC massage and for making payment
h. Investment and information of Deposit, investment and Asset of AIBL (2008)
i. For helps us taking decision about any kind of Investment and on what basis we
will take decision are discussed here.
j. Credit Information Bureau (CIB) of Bangladesh Bank helps to us detects any
defaulter client of any financial institution because all financial organizations send
their defaulter client list to the CIB.
k. Investment proposal with an angle. Here risk is firstly measured and on the basis
of calculated Risk investment proposal is rejected or accepted.
l. How to asses Different types of customer. It helps to select a good customer.
m. Problems & limitations of AIBL for making investment are discussed and I have
given recommendations for rectifying these problems
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4.02. Problems & Limitations
During collecting of information and data from AIBL & making report for this project the
following problems have been followed:
a. In general banking department they follow the traditional banking system.
The entire general banking procedure is not fully computerized.
b. Lack of variety of services is also a back of the general banking
department. The bank provides only some traditional limited services to its
clients.
c. Shariah Banking is a new phenomenon in our country. So most of their
people have no proper knowledge about the activities of the Shariah Bank
as well as its investment procedures, which hamper the large scope of
investments of Al-Arafah Islami Bank.
d. Decision making process is very lengthy and sometimes it creates
problems, which is unexpected to the customers. Most of the cases Head
Office control the decision making and it is centralized.
e. The total number of employees in comparison with needed is very short.
This is hampering the daily operation of the Bank. For an example,
Motijheel Branch General Banking is suffering from shortage of
employee.
f. Lack of proper explanation of records and document records keeping
system.
g. Charge documents are not properly maintained due to lack of knowledge.
h. In our country there are no prescribed Islamic banking guidelines from
bank authority (Bangladesh Bank).
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4.03. Recommendations
a. The entire department should be well informed regarding their goals and
objectives. It is essential to execute company objectives into individual target.
b. There must be a clear allocation of responsibilities authority and accountability.
c. A handsome number of qualified employees & staffs should be appointed very
soon for maintaining the normal flow of work.
d. Decision making power should be decentralized effectively so that business can
promptly be enhanced.
e. The bank should introduce more promotional activities.
f. Filing and record keeping system of the bank should be modernized .At present
operation system is partially computerized and on line banking should be started
very soon.
g. Effectiveness of credit policy largely depends on Bank‟s branch, divisional &
national level information system.
h. Effective implementation of credit policy and recovery tare depends on higher
educated, trained and skilled personnel. Bank should procure and develop such
types of employees for its credit wings.
i. The Bank should provide Islami Banking soft ware for Islami Banking Branch.
j. The bank has the provision of internship program but there is no organized
structure for the internship program. The bank can properly utilize the internees at
minimum cost.
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4.04. Conclusion
Al-Arafah Islami Bank ltd. is a non government commercial Bank in Bangladesh, which
started its business from 1995.I t is a unique combination of Shariah & Islamic banking.
Among non government commercial banks, Al-Arafah Islami Bank Ltd. is a milestone
for economic development. It has been playing an important role to eradicate the
unemployment problem in Bangladesh. Over 800 employees and 5500 shareholders are
getting benefit from this organization. But most of the people in our country have
misconception about Islamic banking specially Al-Arafah Islami Bank Ltd. & other
Islamic banks. They cannot find any difference in its operation between conventional
commercial Banks and Islamic Banks because they have no clear idea about the activities
as well as investment mechanism of Islamic banks.
The Bank is committed to run its activities as per Islamic Shariah and thus it has different
investment(credit) modes, different repayment schedules, different disbursement
procedure, different mark up system. And also has a different Credit(Investment) policy.
„Mark up‟ means adding some additional value after purchasing the goods but before to
Sell the same to another people. This system is accepted in Islamic Shariah because here
money is converted to goods.‟ Money begets money‟ is prohibited in Islamic Shariah.
People are getting more benefit from the dealings of Islamic banking because here
quarterly interest is not charged and there is no possibility of interest to be converted into
principal.
41. 41
Bibliography
AIBL, Working Manual for different departments.
WEB: www.aibl.com
Gupta, S.B. Monetary Economics: Institutions, Theory & Policy, S. Chand &
Company Ltd. New Delhi 1995.
AIBL Financial Report.
Different kinds of Broachers of the AIBL.
Credit Operational Manual of AIBL.
Several Booklets from AIBL.
Journal of Islamic Financial Services.
Discussion With the officers of AIBL at Gazipur Branch.
