Internship Report

THE BANKING PRACTICES AND GENERAL BANKING FUNCTIONS
UNDER AL-ARAFAH ISLAMI BANK LTD BANGLADESH
by
Samiul Haque
ID: 0930163
An Internship Report Presented in Partial Fulfillment
of the Requirements for the Degree
Bachelor of Business Administration
INDEPENDENT UNIVERSITY, BANGLADESH
November 2012

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The Banking practices and General Banking Functions under Al-Arafah Islami Bank Ltd
THE BANKING PRACTICES AND GENERAL BANKING UNDER AL-
ARAFAH ISLAMI BANK LTD BANGLADESH
by
Samiul Haque
ID: 0930163
has been approved
November 2012
Saquib Shahriar
Lecturer, Finance
School of Business
Independent University, Bangladesh

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Letter of Transmittal
November 27, 2012
To,
Mr. Saquib Shahriar,
Lecturer,Finance
School of Business,
Independent University,Bangladesh.
Dear Sir,
It is my pleasure to submit my internship report titled “The Banking practices and General Banking
Functions under Al-Arafah Islami Bank Ltd” that has been prepared to fulfill my degree requirement. I put
my best effort to follow the instructions of you in preparing this report. The internship program was very
much valuable to me as it helped me to gain experience from practical field. While preparing this report I
went through extensive literature survey and interviewed with the bank officials and customers. It was a
great learning experience for me. I tried to the maximum competence to meet all the dimensions
required from this report.
I am, therefore, grateful to you for your kind cooperation in this report. I hope the report will satisfy you.
Sincerely yours,
Samiul Haque.
ID-0930163

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Acknowledgements
I convey my deep gratitude to Mr Saquib Shahriar, Lecturer of Finance, School of Business,
Independent University, Bangladesh (IUB) for being a cooperative and highly helpful advisor and
providing me with proper guidance in completing my Internship report, as a part of the
mandatory requirement for the Bachelor of Business Administration Undergraduate Program. I
would also like to thank my Country Manager and supervisors at Al-Arafah Islami Bank Ltd
Bangladesh for being given the opportunity to experience internship at a distinguished bank.

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TABLE OF CONTENTS
Page
Introduction 3
Problem Statement 7
Purpose of the Study and Limitations 7
Literature Review 9
General Banking Functions 15
Type of Services 27
Methodology 32
Recommendations 38
Conclusion 41
Reference 43
Appendix and Result 46

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Executive Summary
Aim:
The objectives of my study is to know the banking practices and general banking
functions done under Al –Arafah Islamic bank Ltd and about what level the customers
are assured by competence, courtesy, credibility and security by the bank and its
employees
Methods:
During my study, I used different techniques; i.e. face to face interview, deskwork in
different departments and the structured questionnaire to assessing the customer
satisfaction of Al –Arafah Islamic bank Ltd (Dhanmondi Branch).
Conclusion:
The data that obtained from the survey was than analyzed and interpreted by using
statistical tools. From the interpretation of survey result, a number of findings and
recommendations were suggested that may help the organization to take necessary steps
to improve their service and get more satisfied customers.
Significance:
This has kind of research are rarely done before, hence research on the functions of the
Al-Arafah Islami Bank will help provide access and insight into how Al-Arafah Islami
Bank functions and operate within this country and pave the way for future researchers in
this field.

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Introduction
Al –Arafah Islamic bank Ltd was established as a private limited company on 18 June 1995. The
inaugural ceremony took place on 27 September 1995. 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.
Al –Arafah Islamic bank Ltd 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. As SME has emerged as a thrust sector. Al –
Arafah Islamic bank Ltd also considers it important to extend and enhance finance for the same.
Keeping this idea in the forefront, the bank has prepared an integrated policies, methods and
procedures for SME investment.
As a part of my under graduation program, I have completed my internship in a renowned
financial institution named ―Al –Arafah Islamic bank Ltd‖. Throughout the period of my
internship, I had been working in several departments. The report will reveal the background of
the company, description of the loans, findings and recommendations based on the experience
gathered.
Mission
 Achieving the satisfaction of Almighty Allah both here & hereafter.
 Proliferation of Shariah Based Banking Practices.
 Quality financial services adopting the latest technology.

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 Fast and efficient customer services.
 Maintaining high standard of business ethics.
 Balanced growth.
 Steady & competitive return on shareholders‘ equity.
 Innovation banking at a competitive price.
 Attract and retain quality human resources.
 Extending competitive compensation packages to the employees.
 Firm commitment to the growth of national economy.
 Involving more in Micro & SME financing.
Vision:
 To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the
growth of the national economy.
 To improve Banker- Customer relationship through improving customer service.
 To develop new and innovate product/service through integration of technology and
policy and principle.
Commitments:
 Al –Arafah Islamic bank Ltd is a customers focused modern Islamic Banking
making sound and steady growth in both mobilizing deposit and making quality
Investment to keep our position as a leading Islamic bank in Bangladesh.

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 To deliver financial services with the touch of our heart to retail, small and
medium scale enterprises, as well as corporation clients through our branches
across the country.
 Al –Arafah Islamic bank Ltd business initiatives are designed to match the
changing trade & industrial needs of the clients.
AIBL’s Products and Services:
Al-Arafah Islami Bank Limited is providing many product and services to satisfy their customers. For that
reason, AIBL has made significant progress in all areas of its operations within a short period of time,
such as deposit mobilization, credit management, remittance handling and foreign exchange and trade.
AIBL offers variety of products and services to the customers which are picked up below:
a. General Banking:
 Current Account
 Saving A/C
 STD (Short Term Deposit) A/C
 Fixed Deposit Account
 1 Months Fixed Deposit
 Foreign Currency A/C
b. Foreign Exchange:
 Letter of Credit Issue
 Letter of Credit Advise
 Foreign Documentary Bill Purchase (FDBP)

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 Foreign Documentary Bill Collection (FDBC)
 Bill of Negotiation
 Foreign Remittance
c. Services of the Bank:
 ATM Card Service
 Online Banking
 Lookers Service
d. Products of AIBL:
 Cash management
 Wire transfer
 Automated clearinghouse (ACH) transaction
 Bill presentment and payment
 Balance inquiry
 Funds transfer
 Downloading transaction information
 Loan applications
 Investment activity
 Other value-added services

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Problem statement
During collecting of information and data from AIBL & making report for this project I got an
assumption that the bank decision making process is very lengthy and sometimes it creates
problems, which is unexpected to the customers. In most of the cases Head Office controls the
decision making and it is centralized. The total number of employees in comparison with needed
is very short and that is hampering the daily operation of the bank. There is also lack of proper
explanation of records and document records keeping system
Purpose of the Study
Objectives regarding this study are as follows:
Understanding the environment, functions and management of AIBL.
To learn banking more thoroughly
To fulfill academic requirement
To identify major strengths and weaknesses of AIBL in retail products in respect to other
banks.
To recommend for the successful operation of the services offered by AIBL.

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Limitations
Objective of the practical orientation program is to have practical exposure for the student.
Although this research was carefully prepared, there are still some unavoidable limitations and
shortcomings listed below:
The bank confidentially keeps the data.
The data and information related with the topic was not easily available.
Supply of more practical and contemporary data is another out coming.
This suffers from a narrow data range for analysis.
The data seems insufficient may be suffering from take of reliability to some extent.
Communication gap between the related officials and me.
There was some sort of differences between the data collected from different sources of
information of the same topic.
Lack of Co-operation: As the bank officials are so much busy that it difficult for them to
co-operate with me, which is also a constraint for this report.
In some cases officers were reluctant in supplying relevant information, which hampers
the authenticity of the report to a certain extent.
Due to confidentiality of management, some shortcoming may be available in the Paper. It
could not properly disclosed because in some cases.

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Literature Review
The banking industry of Bangladesh is a mixed one comprising nationalized, private and foreign
commercial banks. Many efforts have been made to explain the performance of these banks.
Understanding the performance of banks requires knowledge about the profitability and the
relationships between variables like market size, bank‘s risk and bank‘s market size with
profitability. But today banking function has moved beyond that. This study is only a scratch on
the surface of what can be called a shift towards marketing approach. But it is inevitable that
changes are occurring. Indeed, the performance evaluation of commercial banks is especially
important today because of the fierce competition. Since marketing has always been recognized
as crucial function in a company, banking industry has fully used it for their own benefit. Usually
marketing communications are associated with the word‖ marketing‖, but this association is
wrong. Marketing is more sophisticate science. It can be virtually divided in two parts: marketing
strategy and marketing mix (4P). Marketing strategy usually is associated with segmentation,
targeting and positioning. Marketing tactics usually are associated with 4P or product, price,
promotion and place. In the context of marketing we should also mention marketing research,
marketing performance, consumer behavior, branding, etc. Anyway the main elements are
marketing strategy and marketing tactics.
Strategic Marketing - Segmentation & Positioning

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Increasing competition and diversity of service development in banking and financial services[s-
not needed] sector pressures the banks to become increasingly responsive to
market considerations in terms of segmentation, management and market strategies, internal and
external infrastructure, their use of information technology and their ability to innovate and
differentiate (Zineldin, 1996). Both market segmentation and positioning are vital issues in
marketing theory and practice. Positioning is an attempt to distinguish the bank from its
competitors along real dimensions in order to be the most preferred bank for a certain market
segment or prospect (Zineldin, 1996). As theory, market segmentation is the process of dividing a
market into distinct groups of individuals or organizations, who share one or more similar
responses to some elements of the marketing mix. Market segmentation can lead to insights about
the basic process of consumer behavior. Market positioning also plays imperative role in market
strategy by analyzing the market to segment the customers‘ requirements based on competitive
advantages (Kotler, 1994;Zineldin, 1996). Therefore, effective positioning reflects how customer
perceives the products; factors make the customers satisfied and whether customers behave
differently with different factors while choosing a bank.
Gap Of Perceived Service Quality And Post Purchase Behavior:
Studies on satisfaction of the customers in financial service sectors have been well known among
the academicians since the mid of 80s‘. Parasuraman et al. (1988) opened a new window of
research in service quality by establishing SERVQUAL model. Their model has been replicated
in many countries with multi-dimensional sectors, and found close to a big success. Since,
customer satisfaction has close relationship with customer retention especially in markets that are

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highly competitive and saturated like financial services(Lopez et al. 2007); it is necessary to
continuously monitor changes in satisfaction among different segments of customers. The most
common interpretations reflect the notion that satisfaction is a feeling which results from a
process of evaluating what was received against that expected, the purchase decision itself and
the fulfillment of needs or want(Armstrong & Kotler, 1996; Berkowitz et al.1999).
Kotler (1999) also noted that‘s satisfaction is a function of perceived performance and
expectations which identifies feelings of a person resulting from comparing a product‘s perceived
performance in relation to his or her expectations. For most companies and businesses, obtaining
feedback from customers and clients is essential. It provides them with a glimpse into what they
are doing right, what they are doing wrong, as well as ways in which operations and relationships
could be improved. But obtaining and organizing this feedback in a way it can easily be sorted
and delivered to the right people within the company can often be challenging.
Service Quality Dimensions
Since a conceptual model concerning perceived service quality was proposed by Parasuraman et
al. (1988), service quality dimensions have become an area of interest in marketing research
(Bolton & Drew, 1991b; Brown & Swartz, 1989; Carman, 1990;Cronin & Taylor, 1992, 1994;
Parasuraman et al., 1988, 1994; Teas, 1993, 1994; Zeithaml et al., 1996). One of the important
issues related to service quality is the dimensions of service quality, and the measurement tool,
SERVQUAL developed by Parasuraman et al.(1988) has been the starting point of the
controversy in this area. Parasuraman et al. (1988)identify five quality dimensions that link
specific service characteristics to consumer expectations of quality.

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These five basic dimensions are reliability, responsiveness, assurance, empathy, and tangibles.
Reliability
Reliability is defined as the ability to perform the promised service dependably and accurately
(Parasuraman et al., 1988). Reliability involves consistency of performance and dependability. It
means that the firm performs the service right first time. It also means that the firm honors its
promises. Specifically it involves accuracy in billing, keeping records correctly, and performing
the service at the designated time (Parasuraman, Zeithaml, & Berry, 1985).
Responsiveness
Responsiveness is defined as the willingness to help customers and provide prompt service
(Parasuraman et al., 1988). It concerns the willingness or readiness of employees to provide
services. Responsiveness involves timeliness of service like posting a transaction slip
immediately, returning a phone call quickly, giving prompt service, and setting up appointments
quickly. According to Zeithaml et al. (1990), responsiveness refers to the motivation to help
(internal) customers and provide prompt service to them.

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Assurance
Parasuraman et al. (1988) defined assurance as the knowledge and courtesy of employees and
their ability to convey trust and confidence.
Assurance involves trustworthiness, believability, honesty.
It involves having the customer‘s best interests at heart. Contributing to credibility includes
company name; company reputation; personal characteristics of the contact personnel; how much
a hard sell is employed in interactions with the customer (Parasuraman et al., 1985).
Empathy
According to Parasuraman et al. (1988), empathy is defined as caring and individualized attention
provided to customers. Empathy refers to graciousness, respect, consideration,and friendliness of
contact personnel including receptionists, telephone operators, etc.It includes consideration for
the consumers‘ property, clean and neat appearance of the contact personnel.
Tangibles
Tangibles are the physical facilities, equipment, and appearance of personnel in
services(Parasuraman et al., 1988). It includes all the physical evidence of the service like the
facilities, appearance of personnel, tools or equipment used to provide the service, physical
representations of the services (e.g. statements), and even other customers.
Tangibles of service are the tangible facets of the service facility (equipment, signage, employee
appearance, etc.) or the man-made physical environment, popularly known as the ―servicescapes‖
(Sureshchandar, Rajendran, & Anantharaman, 2003).

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Customer Satisfaction is so important…
Customer satisfaction measures how well a company's products or services meet or exceed
customer expectations. These expectations often reflect many aspects of the company's business
activities including the actual product, service, company, and how the company operates in the
global environment. Customer satisfaction measures are an overall psychological evaluation that
is based on the customer's lifetime of product and service experience. "Effective marketing
focuses on two activities: retaining existing customers and adding new customers. Customer
satisfaction measures are critical to any product or service company because customer
satisfaction is a strong predictor of customer retention, customer loyalty and product repurchase.
Post Purchase Evaluation
Post purchase is one the most popular approach That is used to both produce meaningful and
useful findings. Satisfaction feedback is obtained from the individual customer at the time of
product or service delivery (or shortly afterwards). This type of satisfaction survey is typically
used as part of a CRM (customer relationship management system) and focuses on having a long
term relationship with then individual customer
Historical Banking Approach
Historically, state of marketing in Bangladeshi banks was not satisfactory, but there is a rational
explanation of such a situation. Banks or any other financial institutions didn‘t only lack
knowledge, but also lacked the real incentive to make it happen. Since the money demanded was
significantly lower than the money supplied, there was no increased pressure to use sophisticated
marketing methods. Historical banking approaches were falling behind in the following areas-

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Customer orientation -
signifies banks were lacking sufficient understanding of target buyers to be able to create superior
value for them continuously. Thus they didn‘t understand the customer‘s entire value chain. It
also develops through time and under the influence of internal and market trends
Competitor orientation -
means that a the banks refused to look at the short-term strengths and weaknesses and long term
capabilities and strategies of both the key current and the key potential competitors. Moreover,
Survey shows that marketing and customer service functions were being integrated –they
considered customer services to be part of their marketing strategy as financial institutions
concentrate on customer retention during the economic downturn.
General Banking Functions
Financial institutions intermediary that mediates or stands between ultimate borrowers and
ultimate lenders is knows as banking financial institution. Banks perform this function in two
ways- taking deposits from various areas in different forms and lending that accumulated amount
of money to the potential investors in other different forms. General banking department aids in
taking deposits and simultaneously provides some ancillaries services.
General banking is the front-side banking service department. It provides those customers who
come frequently and those customers who come one time in banking for enjoying ancillary
services. In some general banking activities, there is no relation between banker and customers
who will take only one service form bank. On the other hand, there are some customers with who

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bank are doing its business frequently. It is an important department for all banks because it
provides day-to-day service to the customers. Front Desk is the important for general banking.
Customers give their deposits and meet their demand for cash by honoring cheques. Besides this
a customer opens new accounts, remit funds, issues bank drafts and pay orders etc. There are
various sections in this department, which are as follows: -
Cash Section
Accounts Opening Section
Cheque Clearing Section
Remittance Section
1. Cash Section
The most vital and important section of the branch is Cash Department. It deals with all kinds of
cash transactions. This department starts the day with cash in vault. Each day some cash that is
opening cash balance are transferred to the cash officers from the cash vault. Opening cash
balance is adjusted by cash receipts and payments. This figure is called closing balance. This
balance is then added to the vault. This is the final cash balance figure for the bank at the end of
any particular day. There is an important clause and duty practiced by the branch is to refund the
principal amount that exceeds more than Tk. 1 crore at the principle branch of the bank.
Books Maintained By This Section
Vault Register: It keeps account of cash balance in vault in the bank.
Cash Receipt Register: Cash receipt in whole of the day is recorded here.
Cash Payment Register: Cash payments are made in a day are entered here.

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Rough Vault Register: Cash calculation for final entry in vault register is done here as any error
and correction here is not acceptable
Cash Balance Book: Balance here is compared with vault register. If no difference is
found, indicates no error.
Functions of Cash Department
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.
1. It receives deposits in form of cash
2. It collects money only its receipts forms.
Cheque Cancellation or Cash Payment Process
Step 1
Receiving Cheque by the employee in the cash counter
Verification of the followings by the cash Officer in the computer section
Step 2
Date of the Cheque (present within 6 months from issue date)
Cash Receipt
Cash Payment

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Issued from this branch
Amounts in figure and sentence written does not differ
Signature of the drawer does not differ
Cheque is not torn or mutilated
Step 3
Gives pay cash seal and sends to the payment counter
Step 4
Payment officers make payment
2.Account Opening Section
Account opening section is an important factor for banks because customer is the main source of
bank. Selection of customer is another important factor. Bank‘s success and failure largely
depends on their customers. If customer is not good then may create fraud and other problems by
their account with bank and thus destroy goodwill of banks. Therefore, bank must be conscious in
selecting its customer. For this reason Al-Arafah Islami Bank Ltd. keep key information system.
Accounts Opening Process
Recently, Bangladesh Bank has been declared, designed and enforced a unique format of form for
every banks. This format should hold the important document in a same manner and process
respectively for different kind of accounts. Al-Arafah Islami Bank Ltd. is not different from this
practice. Accounts opening process can be as follows:

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Step 1
Receiving filled up application in bank‘s prescribed form mentioning what type of
account is desired to be opened.
The form is filled up by the applicant himself/ herself
Two copies of passport size photographs from individual are taken and in case of firms
photographs of all partners are taken
Officer are taken information from customer by key information system
Step 2
Applications must submit required documents
Applications must sign specimen signature sheet and give mandate
Introducer‘s signature and accounts number-verified by legal officer
Step 3
Filling & signing up KYC or Know Your Customer Form
Filling & signing up Owner Information Form
Step 4
Authorized Officer accepts the application
Step 5
Minimum balance is deposited-only cash is accepted
Step 6
Account is opened and a cherub book and pay-in-slip book is given

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Information Collected to Open Account
Accounts opening information that is collected by the Al-Arafah Islami Bank Ltd. varies for each
type of account.
Individual
→ Name
→ Present and Permanent Address
→ Date of birth and age
→ Nationality
→ Tax Information Number (TIN- if available )
→ Passport or certificate provided by the employer
→ Photograph of the account holder
→ One photograph of the nominee duly attested by the account holder.
→ Nominee declaration form
→ Money laundering leaflet
Partnership Firm
→ All the required information mentioned for Individual Accounts; along with,
→ Copy of Partnership Dead
→ Mandate from the partners is essential – indicating who will operate the account
Limited Company
→ All the required information mentioned for Individual Accounts; along with,
→ Certificate of Incorporation
→ Copy of Memorandum and Article of Association
→ Certificate of Commencement

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→ Copy of Resolution of the Board of Directors
Dormant Account
If any account is inoperative for more than one year is called dormant account. To operate these
accounts manager permission is necessary.
Transfer of Account
An account can be transferred from branch to branch and only from the same bank. Following
steps are considered for this purpose:
Application in written to the Manager of the account maintaining branch
Manager sends a request to the manager of the desired branch of depositors
Sends original Account opening application and specimen signature sheet with the
balance remained in the account at he sent Manager‘s request
New account is opened at desired branch
Cheque Clearing
Bank receives all kinds of cheque in favor of the client for clearing. When cheque is received it is
necessary to endorse it and cross it specially.
Types of Cheque Explanation Clearing Process
Inward Clearing
Cheque
Cheque received from the
clearing house of Al-
Arafah Islami Bank Ltd.
Party‘s A/c…Dr.
Al-Arafah Islami Bank Ltd. General A/c…Cr.
OBC Cheques of other branch of These cheques are directly sent to the

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(Outward Bills for
Collection)
Al-Arafah Islami Bank Ltd.
within its clearing house
area.
respective branch and request them to sent
IBCA. When it comes, then customer‘s A/c is
credited for the cheque.
Clearing Cheque Cheques another bank
within Al-Arafah Islami
Bank Ltd. clearing house
area.
These cheques are sent to clearing house via
Dhanmondi Branch. When drawee bank honor
the cheques, then the account of cheque
depositors are credited.
Outward Clearing Cheques for another bank
outside the clearing area
If any branch of Al-Arafah Islami Bank Ltd.
exists within the clearing house area of
drawee bank then Al-Arafah Islami Bank Ltd.
send the cheque to that branch of Al-Arafah
Islami Bank Ltd. and sends IBCA to it.
Inward Bills for
Collection (IBC)
From other branch of Al-
Arafah Islami Bank Ltd.
These cheques are settled by IBCA, i.e.
debiting depositor‘s account and crediting
sender‘s branch
From another bank outside
the clearing house
These cheques are settled debiting depositor‘s
account and sending DD, MT, TT in favor of
sender‘s bank.

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3.Clearing Department
Cheques clearing section of Al-Arafah Islami Bank Ltd. receives cheque, demand drafts and pay
orders of their clients. Upon the receipt of the instrument the cheque clearing section examines
three types of payment modules.
Whether the Paying Bank within Dhaka City: The cheques clearing section of Al-Arafah
Islami Bank Ltd., Dhanmondi Branch sends Inter Branch Debit Advice (IBDA) to the
head office on the receiving day of the instruments. The main branch takes those
instruments to the clearing house on the following day. If the instruments are dishonored,
Head Office of Al-Arafah Islami Bank Ltd. sends IBDA to the Al-Arafah Islami Bank
Ltd., Dhanmond Branch.
Whether the Paying Bank of their own branch: The cheque clearing section of Al-Arafah
Islami Bank Ltd., Dhanmond Branch sends Outward Bills for Collection (OBC) to the
concerned paying branch to get Inter Branch Credit Advice (IBCA) from the paying
branch. If the paying branch dishonors the instrument, the paying branch returns it to the
Al-Arafah Islami Bank Ltd., Dhanmond Branch describing why the instrument is
dishonored.
Types of Cheque Collected by Clearing Department:
Local Bills Collection Cheques (LBC): Local bills collection cheques are those cheques,
which are collected and paid by two different branches of a bank situated in the same
city.
Outward Bills Collection Cheque (OBC): OBC cheques are those cheques, which are
collected and paid by two different branches of same or different bank situated in the
outstation.

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Transfer Cheque: Transfer Cheques are those cheques, which are collected and paid by
the same branch of Al-Arafah Islami Bank Ltd.
Clearing House
Clearing House is an arrangement under which member banks agree to meet, through their
representatives, at an appointed time and place to deliver instruments drawn on the other and in
exchange, to receive instruments drawn on them. The net amount payable or receivable as the
case may be, is settled through an account kept with the controlling bank.
Types of Clearing
Outward Clearing: Outward clearing means when a particular branch receives
instruments drawn on the other bank within the clearing zone and those instruments for
collection through the clearing arrangement is considered ad outward clearing for that
particular branch.
Inward Clearing: When a particular branch receives instruments, which drawn on them
and sent by other member bank for collection are treated as inward clearing.
4.Remittance
Sending money from one place to another through some charges is called remittance. To pa or
receive money of customers in the form of remittance from one place to another, from one person
to another inside and outside the national boundary is an earning source of every bank.
Dhanmondi Branch, Al-Arafah Islami Bank Ltd. operates both the foreign and local remittance to
serve it‘s customers. In addition, this service is an important part of country‘s payment system.
Through this service, people can transfer their funds from one place to another place very
quickly.

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Foreign Remittance
Foreign remittance is to send money of customers from one place to another, from one person to
another outside the national boundary. Though Dhanmondi Branch, Al-Arafah Islami Bank Ltd.
is a non-ad branch, it can able to serve the customers by receiving and paying their incoming
foreign remittance in the form of local currency. Foreign remittance is received by the bank via
some internationally authorized agents. There are two medium of agent for foreign remittance at
Dhanmondi Branch, Al-Arafah Islami Bank Ltd.; they are:
Moneygram
Moneygram is a money transfer medium/agent serves both domestic & international services. Its
identification number consists 12 digits.
Eldorado
Eldorado is another money transfer agent serves only international services. Its identification
number consists 17 digits.
The agents are identified by a serial number which has been supplied by the sender to receiver of
customer. After digit identification the dealing also verifies the receiver‘s name with documents
of sender and e-mail of the agent. Verifying that, send an e-mail to the agent and transfer the
amount to the cash department for payment. Any one of the documents required to identify the
receiver are as follows:
National ID card
Voter ID card
Salary Statement
Statement of tuition fees

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Academic/ organization‘s ID card
Local Remittance
Sending money of customers in the form of remittance from one place to another, from one
person to another inside and outside the national boundary is another earning source of every
bank. As being a non-ad branch Dhanmondi Branch of Al-Arafah Islami Bank Ltd. only operates
the local remittance to serve the customers. In addition, this service is an important part of
country‘s payment system. Through this service, people can transfer their funds from one place to
another place very quickly. There are several techniques for collecting local remittance. These
are:
Demand Draft (DD)
Telegraphic Transfer (TT)
Pay Order
Pay Order
Pay order gives the payee the right to claim payment from the issuing bank. It is payment from
issuing branch only within the clearing house area of issuing branch. Payment is made through
clearing.
Examine gentility of the pay order.
Enter into Pay Order register and give contra entry
Debit, if the fund is sufficient then it is OK for payment.

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Type of Services
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.
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.
Monthly Haj 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.
Onetime Haj 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.

32
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 under the scheme can take business
venture on utilization the amount saved under the scheme as well as availing bank investment.
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.
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 depo
Investment:
The Total investment of the bank stood at Tk.5079.21 million against Tk.3728.41 million during
the corresponding period of last year. The percentage of increase is 36.23% as against 13.00% in
banking sector. The bank extends investments to the clients under the following modes of
investment under Islamic Shariah:

33
Bai-Murabaha or simply Murabaha:
The terms ―Bai-Murabaha‖ have derived form Arabic words Bai and Ribhum. The word ―Bai‖
means purchase and sale and the word ‗Ribhum‘ means an agreed upon profit. So Bai-Murabaha
means sale for an agreed upon profit. It may be defined as a contract between a Buyers and a
Seller under which the seller sells certain specific goods permissible under Islamic Shariah and
the word Law of the land to the Buyer at a cost plus and agreed upon profit payable today or on
some date in the future in lump-sum or by installments. The profit may be either a fixed sum or
based on a percentage of the price of the goods.
Musharaka:
The word Musharaka is derived from the Arabic word Sharikah meaning partnership. Islamic
jurists point out that the legality and permissibility of Musharakah is based on the injunctions
of the Holy Qura‘n, Sunnah and Ijma (consensus) of the scholars.
Musharaka transaction may be conducted in the following manner:
One, two or more entrepreneurs approach an Islamic Bank to request the financing required
for a project. The bank, along with other partners, provides the necessary capital for the
project. All partners including the Bank have the right to participate in the project. The profit
is distributed according to an agreed ratio. However, losses are shared in exactly the same
proportion in which the different partners have provided the finance for the project.

34
Mudarabah:
The term Mudarabah refers to a contract between two parties in which one party supplies
capital to the other party for the purpose of engaging in a business activity with the
understanding that any profits will be shared in a mutually agreed upon. Losses, on the other
hand, are the sole responsibility of the provider of the capital. The first party provides capital
and the other party provides the expertise with the purpose of earning lawful profit (approved
by Islamic law) which will be shared in a mutually agreed upon proportion.
Bai-Muajjal:
The term ‗Bai‘ and ‗Muajjal‘ are derived from the Arabic words ‗Bai‘ and ‗Ajal‘ where ‗Bai‘
means purchase and sale and ‗Ajal‘ means a fixed time or a fixed period. So Bai-Muajjal is a
sale for which payment is made at a future fixed date or within a fixed period. In short, it is a
sale on Credit. It is basically a contract between a buyer and seller under which the seller sells
certain specific goods, permissible under Shariah and law of the country to the buyer at an
agreed fixed price payable at a certain fixed future date in lump-sum or in fixed installments.
SWOT ANALYSIS
Strengths
Cooperation with each others
Fewer default loans.
Membership with SWIFT.
Good banker-customer relationship.
Energetic work force

35
Weakness
Reluctance to add campaign.
Some inexpert and laggard assistant officers.
Existing manual vouchers.
Shortage of Branch.
Lack of consumer credit scheme. Entrance of
new private Banks. Not enough Efficient
administration.
Weak in marketing.
Opportunity
Huge business area.
Introducing ATM card. Growth sales
volume.
Introducing any branch banking through
online.
Threats
Different services of FCB‘S (ex: Phone
Banking )
Different classic services of Foreign Banks..

36
Methodology
The findings from the survey can be listed under following two head-
1.Quantitative findings 2.Qualitative findings
Quantitative Findings
The quantitative findings that are found by analyzing the general banking sector customers
response through SERVQUAL instrument are as follows-
50 customers were surveyed as sample (from the population size of almost two thousand) under
the study to measure the satisfaction level of the general banking customers of Al-Arafah Islami
Bank Ltd (Dhanmondi Branch). The demographic information of samples is as follows:
SI no. GENDER FREQUENCY PERCENTAGE CUMULATIVE
PERCENTAGE
1 Male 46 92% 92
2 Female 4 8% 100

37
From the analysis above it is showed that, among the fifty (50) respondents there is only four(4)
female customers which is short in number in compare with forty six (46) male. This result says
that, the bank provide less attention to female customers and as well as there have no any separate
service desk for them.
The survey result of age group distribution indicates that, young and old age customers is only
10% and 4% respectively which is less than other two age group. It is happened because of lack
of prompt service.

38
Result from profession distribution it is shown that there is only 2% students who visit the bank.
This number is small rather than other profession. It is because of less or no product or service for
students.
Ability of employees to perform promised service dependently & accurately-According to
customers‘ response, performance of all the dimensions listed under Reliability head(acting
according to promises, sincerity in problem solving, performing the service right at the first time,
providing service at the promised time & insistence on error free record)are quite. So, the
employees are able to perform promised services dependently and accurately.

39
Responsiveness of employees to satisfy customers-According to customers response, statements
under Responsiveness head (guidance at entrance, prompt service, willingness to help, seeking
pardon for late) are satisfactory.
Assessing General Banking Customer Satisfaction Level at AIBL:
Satisfactory, there is a large number of customers who says that guidance at entrance and seek
pardon for making wait is average that it is neither satisfactory nor dissatisfactory.
Assurance of competency, courtesy, credibility & security-From customers‘ point of view, all
dimensions listed under ―Assurance head (employees behavior in still confidence in customers,
safe felling in transactions, consistent good courtesy of employees & having decent knowledge of
employees in answering customers queries)are quite satisfactory. So, on average the customers
are assured enough by competence, courtesy, credibility and security of the employees and the
bank.
Tangible appearances in satisfying customers-Customers of the bank are well satisfied with all
types of tangible appearances (equipments, materials, physical facilities &employees) inside the
bank. And these factors made the tangible dimension to stand top among all other dimensions.
Performance in personal care, understanding customers & offered banking hour-From the survey
result it is found that ―the employees of AIBL have the short interest of customers in their heart‖.
Other statements of Empathy dimensions such as service charges and individual interest is
satisfactory from the customer point of view. So, from the quantitative analysis it is found that
although in some dimensions customers are not properly satisfied, the overall result is pointing to
a satisfactory level of customers satisfaction at Al-Arafah Islami Bank Limited, Dhanmondi
Branch. There are some points where it needs to improve performance to increase the level of

40
customer satisfaction. These are-holding best interest of customer, provide service as promised,
providing information exactly when service will be provided, providing quick service, response
timely to customers, etc.
Qualitative Findings
The key informants believe that the customers can be made more satisfied by providing them
quick service. They also think that most of the customers deal with lower level officers of
general banking and SME department. Customers of the bank are increasing day by day. It will
not be possible to serve customers then as they serve today. To make provide them prompt
service without creating any queue more employees are needed under General Banking
department. This will help them to carry on every day time consuming works like voucher sorting
properly and thus there will be no pending works. They also believe that as the bank provides
online services, it should use a better internet service or make contact with such a better internet
service provider which can help the employees to provide quick and smooth service to the valued
customers.
The Questionnaire/ Instrument
I have followed the process of face to face interview in measuring the customer satisfaction level
of general banking sector becauseit was convenient for me,as I have passed so much time at the
bank during my internee program. The information collection was performed
by using RATER or SERVQUAL Instrument . In the mid-80s, Parasuraman, Zeithaml and Berry
(1988, 1991) conducted extensive studies in different industries and developed the SERVQUAL

41
instrument: a22-item scale with a set of service quality dimensions to quantify a customer‘s
assessment of a company‗s service quality. Five key dimensions of service quality — reliability,
responsiveness, assurance, empathy and tangibles — have been identified and form the
foundation on which a lot of other studies on service quality have been built. By the early-90s the
authors had refined the model to the useful acronym RATER.
SERVQUAL is widely recognized and used, and it is regarded as applicable to a number of
industries, including the banking industry (Yavas, Bilgin, Shemuell, 1997).Nyeck, Morales,
Ladhari, and Pons (2002) stated the SERVQUAL measuring tool―remains the most complete
attempt to conceptualize and measure service quality (p.101). The main benefit to the
SERVQUAL measuring tool is the ability of researchers to examine numerous service industries
such as healthcare, banking, financial services, and education (Nyeck, Morales, Ladhari, & Pons,
2002).
The SERVQUAL instrument has been the predominant method used to measure consumers‘
perceptions of service quality. It has five generic dimensions or factors of service quality that are
stated as follows (Van Iwaarden et al., 2003):
Reliability: Ability to perform the promised service dependably and accurately
Assurance (including competence, courtesy, credibility and security): Knowledge and
courtesy of employees and their ability to inspire trust and confidence
Tangibles: Physical facilities, equipment and appearance of personnel;
Empathy(including access, communication, understanding the customer):Caring and
Individualized attention that the firm provides to its customers;
Responsiveness: Willingness to help customers and provide prompt service.

42
Using this RATER/SERVQUAL instrument I have collected customers‘ degree of agreement
with 20 different statements categorized under 5 major dimensions. These five dimensions
indicate various influencing forces in satisfying customers. The parameters covered by this
RATER/ SERVQUAL instrument are as follows:
The Rating Scale
Customer responses have been recorded by using 5 point Likert Scale or Technique where the
customer were asked to evaluate each statement to rate their degree of agreements or
disagreements with each of 20 statements. These degrees of agreements or disagreements were
plotted on the 5 point Likert Scale where point 1indicates ―Strongly Disagree and point 5
indicates ―Strongly Agree with the statement.
Recommendations
Use of Marketing Research:
The management of Al-Arafah Islami Bank Ltd should regularly execute marketing research in
order to keep a regular track of satisfaction levels. A simple research whether on the phone or
face-to-face interview or consumer survey keep the management informed about the changing
attitude of the customers and thus they can minimize the gap between the customer expectation
and the management perceptions of customer expectations. For example, the calling center can
call up their customer or when they arrive in the bank, ask them about the services they are being

43
provided and how they can improve it or what measure should take regarding the quality
improvement.
Complaint Management:
Al-Arafah Islami Bank Ltd should actively manage the complaints of various customers and
encourage customers to give feedback about the services. Through complaint solicitation the
management can collect and document complaints of customers, then use that information to
identify dissatisfied customers, correct individual problems where possible common service
failure points. And also critical incidents studies as it's powerful and vivid in eliciting customer
requirements, in the service encounter level and through this the researcher emerges with a list of
desirable and undesirable employee behaviors. This helps the management to train the employee
on the facets where they need improvement and learning.
Offering Priority Service:
Indeed, convenience and personal service is what consumers wanted from the banks serving
small communities, as they had only few branches. Historically bankers didn‘t know customers
well, this lead to a significant drop of customer acquisition. This has compelled the modern banks
to know each customer by name, not to be left out; the larger commercial banks today are
emphasizing customer service. Many of the big banks like HSBC, SCB are offering priority
service which was absent previously. If customers walk into the lobby of almost any major bank
today, they will see a desk or window for priority services or special bank customers. Traditional
bankers had never thought about priority services. They simply welcomed customers to come to
their banks and open accounts. Today At some banks, customers are assigned a personal banker
who will handle all of their bank transactions directly. Some preferred customers at BANK can

44
receive a sticker on their cheques, which allows them to avoid standing on line and instead walk
right up to a teller that handles special-service clients. This is what was lacking previously.
Establish more rural branches & Increase ATM booths:
Now a day‘s bank is pretty faithful financial institution. Even village people are realizing the
importance of bank. So Al-Arafah Islami Bank Ltd can spread their branches to rural areas more
intensively. It will definitely increase the market share of Al-Arafah Islami Bank Ltd. Al-Arafah
Islami Bank Ltd has to increase its ATM booth, especially in the major city. Its major competitors
have huge number of ATM booth. To attract more depositors it has to do this.They must take
necessary footstep to lessen the amount of time they are requiring currently.
Efficiency of the staffs:
According to the customer perception, the major problem of the traditional service is the
consistency of the efficiency of the staffs. In order to analyze the efficiency there are a number of
factors that have been taken into consideration. Some of these factors are responsiveness,
attentiveness, helpfulness, ability to provide speedy and correct service, respect and courtesy
towards customers etc. Al-Arafah Islami Bank Ltd CDA Avenue Branch has hundreds of
customers daily and to be efficient with each of the customer in an equal way is rather
impossible. Again, measuring efficiency for Walk in Service is not an easy task. However, it was
done through personal survey of complete observation of employees throughout the internship
period and by a survey of questionnaire to the customers. An attempt was to consider the answers
of the customers who visit the bank for more than two times a month because only they would be
able to determine and know the efficiency of the employees in a better way. To be an efficient
employee in the bank, they need to be responsive to customer demand, attentive to the customer‘s

45
query, helpful and courteous with the customer, having ample knowledge about the customer‘s
problems, and providing service in a quick and right way the very first time. These are a few
factors analyzed to get a proper analysis of the first objective. Some were determined with the
observation method and some as mentioned earlier with the questionnaire method.
Conclusion
Al-Arafah Islami Bank ltd. 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 can not 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 is 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. It can not take part in call money market.
Mudaraba, Musharaka are another mode of investment in Islamic Banking.

46
The fund of bank strongly depends on deposits and it is has a big influence through the number
and amount of deposit. Dhanmondi Branch, Al-Arafah Islami Bank Ltd. has a better opportunity
to have a huge deposit accounts to increase it fund from the savers unit Rayer Bazar, Zigatola and
Hagaribagh. Credit card and ATM cards can play an important role in capturing the unutilized
money. The bank has to give huge concentration on better customer service and satisfaction.

47
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Results and Discussion
Survey Form
Please show the extent to which you believe AIBL (Al-Arafah Islami Bank) has the feature
described in the statement. Write number that best shows your perceptions.

51
1. When AIBL promises to do something by a certain time, it does so__________
a. Strongly disagree
b. Disagree
c. Average
d. Agree
e. Strongly agree
2. When you have a problem,employees give appropriate solution of your problems so
__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
3. Your bank completes your transactions rapidly__________
b. Disagree
c. Average
d. Agree
e. Strongly agree

52
4. AIBL insists on error free records. __________
b. Disagree
c. Average
d. Agree
e. Strongly agree
5. Guidance at the entrance of the branch is satisfactory.__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
6. Employees in AIBL give you prompt service.__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
7. Employees in AIBL are always willing to help you.__________

53
b. Disagree
c. Average
d. Agree
e. Strongly agree
8. Employees in AIBL pardon for making you wait__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
9. The behavior of employees in AIBL installs confidence in you__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
10. You feel safe in your transactions with AIBL__________

54
b. Disagree
c. Average
d. Agree
e. Strongly agree
11. Employees in AIBL area consistently courteous with you.__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
12. Employees in AIBL have the knowledge to answer your questions.__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
13. Service charges of AIBL are reasonable as comparatively to other banks..__________
b. Disagree
c. Average

55
d. Agree
e. Strongly agree
14. AIBL has your best interests at heart...__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
15. The employees of AIBL understand your specific needs...__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
16. AIBL has operating hours convenient to all its customers..__________
b. Disagree
c. Average
d. Agree
e. Strongly agree

56
17. AIBL has employees who give you personal attention..__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
18. Employees in AIBL are never too busy to respond to your request__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
19. The employees of AIBL understand your specific needs..__________
b. Disagree
c. Average
d. Agree
e. Strongly agree
20. AIBL has your best interest at heart.__________

57
b. Disagree
c. Average
d. Agree
e. Strongly agree
Statement 1: When AIBL promises to do something by a certain time, it does so.
o Explanation: The above statement denotes the degree of keeping promises by the
bank with a certain period of time.
o Survey Result: The summary of the survey result of this statement is shown by the
following table.

58
o Interpretation of the Result: From the above result it is seen that the mean value is
4.34. That means customers are satisfied with the performance against the
promises made by AIBL. The mode value represents that most of the respondents
strongly agree with the above statement. So, on this point of fulfilling
promises customers are seemed to be satisfied since the mean is beyond the cut-off
point of 4.00.
o Result on Likert Scale:
An identical approach would be followed for the rest of the questions.

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