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This report is one of the major parts of BBA Program offered by Northern University Bangladesh. In today’s world, education is not just limited to books and classrooms. Education now-a-days is understanding the real world and applying knowledge and education for the betterment of the society. So the Internship is such a way that helps to apply the knowledge and understanding of the courses and to use them in a practical field. Al-Arafah Islami Bank Limited gives me this opportunity to be engaged there to gather practical experience about the real business world and to observe different practical aspects of education. Northern University Bangladesh has goals to produce world-class graduates within the local environment, with knowledge and skills to provide leadership in enterprise, public service and welfare.
Internship of Department of Finance is a step towards fulfilling this commitment by giving the students an opportunity to get ready for the real world before they enter into it. A business report is defined as an orderly, objective communication of information that serves some business purpose. Therefore, in order to serve this business purpose a topic of the report has to be clearly stated. The topic that has been defined for studying in this report is in infinitive phase. It means that there are further scopes to improve and study on the topics that are discussed in this report. The topic has been defined as, “General Banking Activities of Al-Arafah Islami Bank Limited”. * Scope of this Study
Internship experience plays a vital role for every student to implement their theoretical knowledge and get a practical knowledge from any organization. A student can implement this internship experience in his future work area. Al-Arafah Islami Bank Limited gives me the opportunity for gathering practical experience and preparation of the report. Finally I prepared this report under the supervision of Mr. Md. Shoriful Islam, Senior Lecturer of Northern University, Bangladesh. * Objectives
There had been some objectives set forward in doing this report so that it can be determined what tasks to perform in the organization. These objectives were not influenced by thought or feeling. These objectives are described in the following: * Broad objective
To identify the major products of General banking practiced by Al-Arafah Islami Bank Ltd., Dhanmondi Branch and its competitive performance from the year 2007 to 2008. * Specific Objective
The prime objectives of the report are as follows:
* To know about Islami banking system in our country.
* To know about Al-Arafah Islami Bank Limtied.
* To identify the major General banking products of Al-Arafah Islami Bank Ltd. * To understand the General banking products used by the Dhanmondi Branch of Al-Arafah Islami Bank Ltd. * To focus features and conditions of general banking products Al-Arafah Islami Bank Ltd. * To identify and evaluate the financial and competitive performance general banking products from the year 2007 to 2008. * To make a bridge between the theories & practical procedures of banking day-to-day operations. * To make possible recommendations for the internship organization to improve the services & service range so that the department can cater to the needs and demands of customers. * Methodology
* Data collection method
A certain methodology was followed in order to fulfill the objectives of the report, making maximum utilization of the scopes and to avoid the limitations as much as possible to prepare the final outcome of this report. To prepare this report I mostly depend on the experience and secondary information because as an intern it was difficult for me to collect primary information. Al-Arafah Islami Bank Ltd. annual reports, Al-Arafah Islami Bank Ltd.product brochures, Al-Arafah Islami Bank Ltd., Dhanmondi Branch statement of affairs, Al-Arafah Islami Bank Ltd., Dhanmondi Branch monthly reports, Al-Arafah Islami Bank Ltd. website etc are the source of secondary information. * Data Analysis Method
In analyzing these data, I used MS-excel to classify the data and locate the pattern to sort out the data under different head and criteria. The statistical tools are used for in-depth ratio analysis. * Limitations of the report
There were a few limitations faced while reaching the objectives of this report. Some of these following limitations are apparent in this study: * Secondary Information: There was a lack of proper secondary information for Al-Arafah Islami Bank Ltd. and its products. Annual reports, policy guidelines, website and other related documents do not cover full and sufficient information. * Time Limitation: Within such a short period of time, it was not possible for me to study everything about Al-Arafah Islami Bank, Dhanmondi Branch. * Confidentiality: In order to guard the secrecy of the bank, Al-Arafah Islami Bank Ltd. is not interested to disclose some certain information required for this report. * Certainty: 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. * Understanding: There were some misunderstandings between me and the bank officials while searching the some required information. * Experience: There was lack of experience in collecting information, doing analysis and taking assessment of the related topics. However as time passed by many of these limitations faded.
* Introduction to Al-Arafah Islami Bank Ltd.
Al-Arafah Islami Bank Ltd. is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. Islamic ideology encourages us to succeed in life here& hereafter. 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.2500.00 million and the paid up capital is Tk. 1153.18 million as on 31.12.2007. 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. 2037.50 million as on 31 December 2007, the manpower was 1033 and the number of shareholders was 12013. 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 47 branches of which 17 is AD throughout the country. * History of AL-Arafah Islami Bank
Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to be successful both in our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of Al-Qur’an and lifestyle of Hazrat Muhammad (Sm.) for our supreme success. Al-Arafah Islami Bank started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Qur’an and Sunnah. A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the founder chairman of the bank.
His progressive leadership and continuous inspiration provided a boost for the bank in getting a foothold in the financial market of Bangladesh. A group of 13 dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah Islami Bank Ltd. has 53 braches and a total of 1080 employees (upto December 2008). Its authorized capital is Taka 2500 millions and the paid-up capital is Taka 1153.18 millions. Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh. * Vision
* Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh.
* Mission Statement
* Achieving the satisfaction of Almighty Allah both here and 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 and competitive return on shareholders’ equity.
* Innovative 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 and SME financing.
* Ours is a customer focused modern Islamic Banking making sound and steady growth in both mobilizing deposit and making quality Investment to keep our position as a leading Islami Bank in Bangladesh. * To Deliver financial services with the touch of our heart to retail’ small and medium scale enterprises as well as corporate clients through our branches across the country. * Our business initiatives are designed to match the changing trades and industrial needs of the clients. * Special Features of the Bank
As an Islami bank, we are singular in every positive aspect. We provide a bunch of state-of-art banking services within the wide bracket of shariah. We are unique with our products, strict with our principle and uncompromising with our honesty. Some of our special features that make us notable in Islami banking sector are as follows: * All activities of AIBL are conducted under an profit/loss based system according to Islamic Shariah to get the nation rid of Usury. * Its investment policies under different modes are fully Shariah compliant and well monitored by the board of Shariah Council. * During the year 2007, 70% of the investment income has been distributed among the Mudaraba depositors. * In 2008, AIBL has included online banking in its wide range of services. Bangladeshi software has been introduced in this feature to promote the local developers. * AIBL regularly arranges its AGMs (Annual General Meeting). Whenever needed EGMs (Extraordinary General Meeting) are also arranged.
* We regularly pay dividend to our valued shareholders. For the year of 2008, we declared 30% bonus dividend to our shareholders. * We believe in providing dedicated services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity. * The bank is committed towards establishing a welfare-oriented banking system to meet the needs of low income and underprivileged class of people. * The Bank upholds the Islamic values of establishment of a justified economic system through social emancipation and equitable distribution of wealth. * Following the Islamic traditions, it is assisting in the economic progress of the socially deprived people; in the creation of employment opportunities and in promotion of rural areas to ensure a balance development of the country. * The Bank believes in social and philanthropic activities and has established AIBL English Medium Madrasha and AIBL Library. More endeavors will inshallah follow in future. * Management Structure
A fourteen member Board of Directors are responsible for the strategic planning and overall policy guidelines of the bank. Further, there is an Executive Committee of the board to dispose of urgent business proposals. The Executive Committee is assembled by nine members. Besides, there is a tree member Audit Committee in the board to oversee compliance of major regulatory and operational issues. There is another eight member Shariah Council to accelerate, monitor, control, supervise and maintain the modes of Islamic banking system. Key issues are managed by a Management Committee headed by the CEO and Managing Director to facilitate rapid decisions. * Board of Directors
There are 14 members for the bank’s Board of Director. Of them eleven represent as the sponsors and general public, one senior official as Company Secretary and another one as the Shareholder Director. Managing Director is the ex-officio Director of the Board. * Shariah Board of Al-Arafah Islami Bank Ltd.
* Shariah Board
Scholars of high repute with extensive experience in law, economics and banking systems and specialising in law and finance as prescribed by Islamic Shariah make up the AIBL’s Fatwa & Shariah Supervision Board. The Board is appointed by the bank’s Board of Directors. The Shariah Board supervises the development and creation of innovative Shariah -compliant investment and financing products and services. The Board is empowered to issue fatwas on any matter proposed to it by different business units of the bank. The Shariah auditors ensure that all the transactions are carried out in strict compliance to Islamic principles of banking. This framework along with a stringent compliance to rules has made AIBL the pioneering organization to practice Islamic finance in true letter and spirit. The name AIBL has come to signify innovation, financial dynamism, leadership and above all a complete assurance that all the transactions are free from riba (interest). * The Board’s Role
The Fatwa & Shariah Supervision Board oversees the application of different aspects of Shariah in the Bank. It also ensures that all transactions are in strict compliance with the right of contradicting (fatwa) any violating procedures, if found. The Board of Directors is obligated to obey the fatwas, irrespective of whether a unanimous or a majority consensus secured the decision (clause of the Bank’s Memorandum & Articles of Association). Board meetings are held periodically or whenever the need arises. The rights of the Board are enshrined in Article Seven o the Bank’s Memorandum & Articles of Association (Clauses). * Important Duties of the Shariah Board
* As an expert source on Islamic Principles (including Fatwas), the Board through a representative, usually the General Secretary of the Board, supervises the Shariah compliance of all the transactions in the Bank. * To devote time and effort to devising more Shariah -compliant transactional procedures, templates and banking products that enable the Bank to adapt to market trends while maintaining a high competitive edge in deposit procedures, investments, and banking services. At the same time, the Board gives its opinion on proposed new templates, and banking transactions. * Analysing unprecedented situations that are not covered by fatwa, in the Bank’s transactional procedures or those reported by different departments, branches and even the customers. This is to ensure Shariah compliance before the Bank develops any new products or implements any new procedure.
* Analysing contracts and agreements concerning the Bank’s transactions, as submitted by the Chairman of the Board of Directors or any department/branch within the bank or requested by the Board itself so that Shariah compliance can be evaluated and maintained. * Ensuring Shariah compliance in the implementation of all banking transactions and correcting any breaches. * Analysing administrative decisions, issues and matters that require the Board’s approval. * Supervising Shariah training programmes for the Bank’s staff. * Preparing an annual report in the Bank’s balance sheet with respect to its Shariah compliance. The Fatwa & Shariah Supervision Board submits a complete annual report for the Board of Director, summarizing all the issues referred to the Board, as well as its opinion on the Bank’s transactional procedures. * AIBL’s Library
The AIBL’s library houses a vast collection of more than 4,000 books on Islamic Fiqh, law, economy, banking and Shariah , The library was primarily established with the aim of serving the Fatwa & Shariah Supervision Board’s research team and the AIBL staff. The facility is also accessible to the bank’s customers, researchers and students of higher education. * Shariah Supervisors
The Clause of the Bank’s Memorandum & Articles of Association requires the Board of Directors to appoint a Shariah Supervisor, responsible for monitoring all the Bank’s transactional procedures and assuring Shariah compliance. In current, there are six supervisors of Fatwa & Shariah Supervision Board. Also the General Secretary of the Fatwa & Shariah Supervision Board, the Shariah Supervisor handles queries about the Bank’s administration from staff members, shareholders, depositors and customers, liaises with the Shariah auditors and provides them with guidance. He submits reports and suggestions to the Fatwa & Shariah Supervision Board and to the Chairman of the Board of Directors. The position also calls for participation in the Bank’s training programs. * Shariah Auditing
The supervisory function forms a part of the Shariah Supervision procedures, its main task being to check Shariah compliance under the guidance of the Shariah Supervisor. The auditors continuously review the Bank’s transactional procedures to ensure adherence to the framework created by the Fatwa & Shariah Supervision Board. The Shariah auditors submit periodic reports to the Shariah Supervisor so as to monitor and maintain Shariah compliance. * Branches
Al-Arafah Islami Bank Ltd. has a strong network of branches to cover all the imperative investments, trade and commerce of the country. It has broadly established 47 are branches to cover the banking line through out the country. Of them only 17 are AD branches. Almost all the branches are equipped with computers, related software and professionally competent manpower in addition to facilitate the customer service with modern facilities and logistics. * Corporate Social Responsibilities
* Al-Arafah Islami Bank Foundation
The bank has a foundation launching philanthropic activities. Al-Arafah English Medium Madrasah and Al-Arafah Islami Bank Staff Welfare Fund are the major two wings for launching philanthropic activities. * Staff Welfare Fund
The Bank always kept a careful eye on the economic security and benefit of its staffs & officers. The Bank operates a contributory provident fund, a social security & benevolent fund and a gratuity fund for its employees. In the year 2007 Tk. 7.5 lac was paid to wife of late Mr. Shahidul Islam, AVP & former branch manager of Joydevpur Branch from bank’s social security & benevolent fund. Till now a total of Tk. 30 lac has been paid from the fund to the families of late officers & staffs of the bank. * Al-Arafah English Medium Madrasah
Al-Arafah English Medium Madrasah has been established by the Al-Arafah Bank
Foundation with a view to building next generation according to the ideals of peace and equality of Islam and to establishing banking and other aspects of life in the way of Islam. The prime aim of this madrasah is to contribute towards building human resource and in the broader sense to ensure human welfare. With the view Al-Arafah Islami Bank Foundation has established an English Medium Madrasah at Dhanmondi in 1999. Such institution upto ‘O’ level of its kind is for the first time in Bangladesh. * Dhanmondi Branch
Dhanmondi Branch was started in 15th December, 1998; to cover the huge and prospective customers from the area of Dhanmondi, Zigatola, Hagaribagh, Rayerbazar Satmasjid Road. It was estimated by them that there are numbers of saver and borrower groups those who are willing to have their economic services through an Islamic bank. Being the second Islamic bank of the country under Al-Arafah Islami Bank Ltd. opened the Dhanmondi Branch, as their 17th branch at Satmasjid Road, Dhanmondi, Dhaka. Now, there are twenty two employees. It is a non-ad branch. Which means it doesn’t directly deal with the foreign exchange transactions. It has a large office floor which can accommodate good number of customers comfortably. The branch has efficient human resources that can meet up customer’s needs. Order wise work load is distributed properly. Besides, interpersonal relationship is remarkable. Most noted strength is customer service. * Departments
As this is a non-ad branch, it offers the services of two departments:
* General banking
Management Hierarchy of Al-arafah Islami Bank Ltd.
Figure 2.1: Management Hierarchy of Al-arafah Islami Bank Ltd.
Name of the Company| Al-Arafah Islami Bank Ltd.|
Legal Identity| A public limited company registered in Bangladesh on 18 June 1995, under the Companies Act 1994 and enlisted in Dhaka Stock Exchange Ltd. & Chittagong Stock Exchange Ltd.| Nature of Business| Commercial Banking based on Al-Qur’an and Sunnah.| Registered Office| Head OfficePeoples Insurance Building (6th – 9th Floor)36, Dilkusha Commercial AreaDhaka-1000Bangladesh.| Telephone No.| 9567885, 9567819, 9569353, 9568007, 9560198, 7123255-7| Fax No.| 880-2-9569351|
SWIFT Code| ALAR BD DH* [* means Branch Code]|
E-mail| [email protected]|
Web Page| www.al-arafahbank.com|
Auditors| 1. Hoda Vasi Chowdhury & Co.Chatered AccountantsBMTC Bhaban, Level 8, 7-9, Karwan Bazar,Dhaka-1000Bangladesh. 2. Syful Samsul Alam & Co.Chatered AccountantsParamount Heights, Level – 6 (Box culvert Road)65/2/1, Purana PaltanDhaka-1000Bangladesh.|
Internship Duties & Responsibilities
My placement of internship was in the Dhanmondi Branch, Al-arafah Islami Bank Ltd., Dhaka. The tenure of my internship was three months. I started my internship from 02/07/2009. The Dhanmondi Branch, Al-arafah Islami Bank Ltd. was a Non-AD branch. Which means it doesn’t directly deal with the foreign exchange transactions. At the branch, I was appointed only for general banking but also the bank’s management allowed me to learn the basic about investment division. My day to day assignment was to receive cheques of customers, filing-up the cheques, filling the pay order forms and filling & verifying the accounts opening forms. Besides this, I spend a certain time in each of the general banking desks accept cash counters. A table is representing the desks of general banking activities done by me along with its related numbers of day at following. Desk/ Section| Time of existance|
Cheque Issue| I week|
Account Opening| 3 weeks|
Cheque Receiving & Clearing| 3 weeks|
Mudaraaba Term Deposit Receipt| 2 weeks|
Foreign Remittance| 1 week|
Pay Order, Demand Draft| 2 weeks|
General Banking Functions at Dhanmondi Branch
Financial institution/ 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 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
4.1. 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. 4.2.1. 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. * 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. 4.2.2. Functions of Cash Department
1. Cash payment is made only against cheque
2. Cash Payment
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. Cash Receipt
It receives deposits in form of cash
2. It collects money only its receipts forms.
4.2.3. Cheque Cancellation or Cash Payment Process
* Receiving Cheque by the employee in the cash counter
* Verification of the followings by the cash Officer in the computer section
* Date of the Cheque (present within 6 months from issue date) * 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
* Gives pay cash seal and sends to the payment counter
* Payment officers make payment
4.2. Account Opening
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. 4.3.4. 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: 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
* Authorized Officer accepts the application
* Minimum balance is deposited-only cash is accepted
* Account is opened and a cherub book and pay-in-slip book is given 4.3.5. 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
* Present and Permanent Address
* Date of birth and age
* 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
* Copy of Resolution of the Board of Directors
4.3.6. Dormant Account
If any account is inoperative for more than one year is called dormant account. To operate these accounts manager permission is necessary. 4.3.7. 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
4.3. 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(Outward Bills for Collection)| Cheques of other branch of Al-Arafah Islami Bank Ltd. within its clearing house area. | These cheques are directly sent to the 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 bankoutside 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 forCollection (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’sbranch account| | 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.| 4.4.8. 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. 18.104.22.168 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. * Transfer Cheque: Transfer Cheques are those cheques, which are collected and paid by the same branch of Al-Arafah Islami Bank Ltd. 4.4.9. 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. 22.214.171.124 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. 4.4. 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. 4.5.10. 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: 126.96.36.199 Moneygram
Moneygram is a money transfer medium/agent serves both domestic & international services. Its identification number consists 12 digits. 188.8.131.52 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
* Academic/ organization’s ID card
4.5.11. 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
184.108.40.206 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.
Charges of pay order are shown in bellow by a chart:
Amount of P.O.| Commission| VAT| Total|
1-100000| 20| 3| 23|
100001-500000| 30| 4| 34|
500001-1000000| 50| 8| 58|
1000001-Above| 100| 15| 115|
220.127.116.11 Demand Draft (DD)
This is an instrument through which customer’s money is remitted to another person/ firm/organization in outstation (Outside the clearing house area or from one district to another). Demand Draft Payment is made through the following process: * Confirm that the DD is not forged one.
* Confirm with sent advice.
* Check the “Test Code”
* Make payment
18.104.22.168 Telegraphic Transfer (TT)
This is a mode of transfer/remit customer’s money from a branch of one bank to another branch of the sane bank or to a branch of another bank (with prior arrangement between banks with the Telegraphic Transfer TT issuing branch) through telephonic message. The issuing branch used to send the message of such transfer to the drawer/payee branch through telephone adding certain code number or test number on the basis of text key apparatus developed by the concerned bank for its different branches. The payment process of Telegraphic Transfer (TT) is: * Confirm issuing branch
* Confirm payee A/C
* Confirm amount
* Make payment
* Receive advice
Various Types of Deposit Account
Al-Arafah Islami Bank Ltd. offers following types of deposit account: * Mudaraba Savings Deposit Account (MSD)
* Mudaraba Current Deposit Account (CD)
* Mudaraba Term Deposit Receipt Account (MTDR)
* Short Notice Deposit Account (SND)
* Installment Term Deposit (ITD)
a. Mudaraba Hazz Account
b. Mudaraba Pension Scheme
c. Mudaraba Lakhpoti Scheme
d. Mudaraba Millionaire Scheme
e. Mudaraba Kotipoti Scheme
f. Mudarab Double Deposit Scheme
4.6.12. Mudaraba Savings Deposit Account (MSD
To maintain smooth and certain life in future Mudaraba Savings Deposit Account is very suitable for middle class groups. The attributes of this are: * 500/- is the minimum amount of initial deposit.
* Client cannot withdraw money more than twice a week,
* The profit rate is 8% against MD account
For opening of this type of accounts following requirements are necessary: * The introducer must be attested photograph.
* The introducer must be account holder of Al-Arafah Islami Bank Ltd. 4.6.13. Al-Wadia Current Deposit Account
Al-Wadia Current Deposit Account facilitates the account holder to draw money at any times but no profit is given to the current account deposited money. This can be opened by any individual or joint or any name of proprietorship business, private limited company or public limited company, association, clubs, societies, trusts etc. Generally, current account is opened for businessman and traders for easy transaction. By taking this liability, Al-Arafah Islami Bank Ltd. takes a service charge of Tk. 100 for six months. 4.6.14. Mudaraba Term Deposit Receipt Account (MTDR) It’s a certain period deposited system, which is not repayable before the maturity date of a fixed period. Al-Arafah Islami Bank Ltd. offers higher rates of profit on such deposits. Usually customers are allowed to open this account for a certain period and the rate of profit in accordance with the terms of the deposit. The features of this scheme as follows: * Minimum balance: TK 10000.00
Particulars| 3 months| 6 months| 1 year|
Profit| 11.00%| 11.50%| 12.00%|
4.6.15. Short Notice Deposit Account (SND)
Short Term Deposit has following attributes:
* 6% profit rate against STD.
* No restriction over withdrawal of money
* 1000/- is the minimum balance.
4.6.16. Installment Term Deposit (ITD)
Installment Term Deposit (ITD) is a sure investment for a steady return. It can be opened for 5, 8, 10, or 12 years for Tk. 200, Tk. 300, Tk. 500, Tk. 1000, Tk. 1500 and Tk 2000. The savings amount is to be deposited any day of the month. If the depositor has a separate account in the bank for which a standing instruction can be given to transfer the monthly deposit in the schemes’ account. Incase of failure to make the monthly installment in the schedule time 5% on overdue installment amount will be charged. The lowest charge will be Tk. 10 and this will be added with the following monthly installment. After 3 years of savings in this schemed the depositor is eligible for a loan up to 80% of his deposited amount. * Highlights of the Scheme
* Mudaraba Lakhpoti Scheme
* Mudaraba Millionaire Scheme
* Mudaraba Kotipoti Scheme
22.214.171.124 Mudaraba Lakhpoti Scheme: For Mudaraba Lakhpoti
Scheme 3, 5, 8, 10, 12 year’s monthly installments are Tk. 2,375, Tk. 1,275, Tk. 670, Tk. 460 and Tk. 335 respectively and will get Tk. 1 lac. 126.96.36.199 Mudaraba Millionaire Scheme: For Mudaraba Millionaire Scheme 3, 4, 5, 6, 7, 10, 12, 15 and 20 year’s monthly installments are Tk. 23,950, Tk. 16,950, Tk. 12,750, Tk. 9,950, Tk. 8,000, Tk. 4,600, Tk. 3,345, Tk. 2,170 and Tk. 1,150 respectively and will get Tk. 10 million. 188.8.131.52 Mudaraba Kotipoti Scheme: This is the most popular & target oriented schemes. One can open for 3,4,5,6,7,10,12,15,18,20 years and have to pay (Monthly installment) Tk. 2,39,500, Tk. 1,69,500, Tk. 1,27,500, Tk. 99,500, Tk. 80,000, Tk. 46,000, Tk. 33,450, Tk. 21,485, Tk. 14,330 and Tk. 11,100 respectively and will get Tk. 1 crore. * Condition of these Schemes
* By filling up a form an account is opened.
* A non-transferable deposit receipt will provide to the customer after opening the account. * If the deposit is withdrawn before a 5-year term, then saving interest rate will be applicable and paid to the depositor. However, no in profit paid if the deposit is withdrawn within 1 year of opening the account and Monthly Income paid to the customer will be adjusted from the principal amount. * This scheme will be credited to the loan account until liquidation of the loan amount inclusive of profit. A depositor can avail loan up to 80% of the deposit amount under this scheme. 184.108.40.206 Mudaraba Double Deposit Scheme: Savings works as the very foundation of development. Savings is the prime source of business investment in a country. So it helps to build up capital. To create more awareness and motivate people to save, Al-Arafah Islami Bank Ltd. offers Mudaraba Double Deposit Scheme. Here people put their money for double return after 6years. * Conditions of the Scheme
* The deposit can be made in multiplies of TK. 10000.00. * This is 6 years period deposit. The deposit cannot be withdrawn at any time with in the maturity date.
Analysis & Findings
This chapter bases on graphical analysis of deposits for some general banking products of Dhanmondi Branch and their comparative situation from the year 2007 to 2008. * Total Deposit
Figure 5.1: Total Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From the above graph it is observed that total deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 25.27%. This growth is mostly influenced by the deposit accounts of Mudaraba Lakhapoti Deposit Scheme, Mudaraba Millionaire Deposit Scheme, Mudaraba Kotipoti Deposit Scheme and P/P Term Deposit Scheme. * Al-Wadia Current Deposit
Figure 5.2: Al-Wadia Current Deposit at Dhanmondi Branch in 2007 & 2008
Comments: From the above graph it is observed that total Al-Wadia current deposit of Dhanmondi branch decreased from 2007 to 2008 compare with 2007 about the decreasing rate is 2.86%. This is happened as the number of accounts had been decrease in 2008. * Mudaraba Saving Deposit
Figure 5.3: Mudaraba Savings Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Mudaraba Saving Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 17.41% and is a strength for the branch of Al-arafah Islami Bank Ltd. * Mudaraba Term Deposit (MTDR)
Figure 5.4: Mudaraba Term Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Mudaraba Term Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 23.30%. The year 2008 was a flourishing year for this scheme at Dhanmondi branch and no. of new accounts were also satisfactorily high. * Installment Term Deposit (ITD)
Figure 5.5: Installment Term Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Installment Term Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 23.58%. * Savings Investment Deposit (SID)
Figure 5.6: Savings Investment Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Savings Investment Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 3.53%. * P/P Term Deposit (PTD)
Figure 5.7: P/P Term Deposit at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total P/P Term Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 9.97%. * Monthly Hajj Deposit
Figure 5.8: Monthly Hajj Deposit Scheme at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Monthly Hajj Deposit of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 56.14% and respondents for this scheme was also frequent and good. * Special Pension Deposit Scheme
Figure 5.9: Special Pension Deposit Scheme at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Special Pension Deposit Scheme of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 35.29%. * Mudaraba Lakhopoti Deposit Scheme (MLDS)
Figure 5.10: Mudaraba Lakhopoti Deposit Scheme at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Mudaraba Lakhopoti Deposit Scheme of Dhanmondi Branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 204.81%. It was remarkable for this scheme, at its second year after lauching the Mudaraba Lakhopoti Deposit Scheme in Dhanmondi Branch, Al-arafah islami Bank Ltd. and the reason for that is the Islamic philosophy of the bank for deposit account profit. * Mudaraba Millionaire Deposit Scheme (MMDS)
Figure 5.11: Mudaraba Millionaire Deposit Scheme at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Mudaraba Millionaire Deposit Scheme of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 205.97%. It was also remarkable for this scheme, at its second year after lauching the Mudaraba Millionaire Deposit Scheme in Dhanmondi Branch, Al-arafah islami Bank Ltd. and the reason for general public awareness towards the Islamic philosophy of the bank for such deposit accounts. * Mudaraba Kotipoti Deposit Scheme (MKDS)
Figure 5.12: Mudaraba Kotipoti Deposit Scheme at Dhanmondi Branch in 2007 & 2008 Comments: From The above graph it is observed that total Mudaraba Kotipoti Deposit Scheme of Dhanmondi branch increased from 2007 to 2008 compare with 2007 about the increasing rate is 183.93%. Same type of comment goes for the Mudaraba Kotipoti Deposit Scheme like the other two fixed deposit schemes of the branch. *
Major Strength and Weakness Factors
Not surprisingly, in the competitive arena of marketing era it is must to analyze the major strength and weakness factors based on product, price, place and promotion of a financial institute like private bank. Strength and weakness includes the internal factors which are prevailing inside the concern/organization.
* Good banker-customer relationship.
* Online banking system.
* Islami Shariah based banking system.
* Energetic as well as smart work force.
* Competitive profit provider comparing with other Islamic bank.
* Strong financial position.
* Efficient administration
* Reluctance to ad campaign.
* Existing manual vouchers.
* Lack of consumer credit scheme.
* Manpower is not sufficient.
* Marketing policy is not well setup.
* Officers have limited experience and not enough trained * Many
inexpert and laggard assistant officers.
* The bank has no ATM service
* Insufficient number of deposit scheme and loan.
Conclusion & Recommendation
Islamic banking is now a reality in Bangladesh. It is functioning efficiently, smoothly and satisfactorily despite facing various internal and external threats. The economics of the country may be geared towards Islamic Principles and Teachings in order to realize the full potential of Islamic banks in the long run. However, in the short run, the Islamic banks can take a number of concrete steps to facilitate the Islamic banking in Bangladesh. This report will give a clear idea about the activities, function and operational strategies of Al-Arafah Islami Bank Limited. Al-Arafah Islami Bank Ltd. started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah.
During these 13 years of its operation, the bank had been widely acclaimed by the business community from small businesspersons to conglomerates for forward looking outlook and innovative financial solutions. The Dhanmondi Branch, of Al-Arafah Islami Bank Ltd. conducts general banking activities, investments. As it is a non-ad branch, it does not perform the full of the foreign exchange activities by its own. 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-arfah 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. There are a good number of shoping mall, food courts, small & medium factories in the area. So the branch can gladly introduce SME banking L/C and foreign exchange facilities.
Through my work experience at the Dhanmondi Branch, Al-arafah Islami Bank Ltd., I came across a few operational drawbacks – for which the following suggestions can be put forward. * The internal decoration of the branch has scope for much improvement * More employees should be appointed to manage the increasing customer pressure. * The behaviour of security guards must be improved. I have experienced some unwanted incidents that occurred through the carelessness of the guards. Sometimes clients also complain about their misbehaviour. * Leaflets containing AIBL’s product description should be made available at the branches. This will help the prospective customers to be informed about existing and new products, and reduce the hassle of counter staffs to describe new products. This will eventually result in increased employee productivity. * Upgrade Online Banking.
* Ensure high level customer service.
* Bank should introduce ATM system.
* Bank should introduce consumer credit scheme.
Furthermore, the customers also provided their own suggestions:
* Provision of car loans.
* Individual counters to provide one-stop service for cheque payments.
* More social involvement by AIBL such as providing student scholarship, creating more employment opportunities, rehabilitating the poor. If the stated recommendations are carried out and the government pays attention to the policy framework of the entire system, then that day would not be far when Bangladesh can proudly focus more on the Islamic banking system than the conventional banking system.
* Fabozzi, J. Frank “Foundation of Financial Markets and Institutions”, 6th Edition, Pearson Education. * Madhura, Jeff (2006) “Financial Markets and Institutions” 7th Edition, Thomson South-Western * Riaz, Md. and Alam, Shaiful, Md. and Shareef, Md. and Faisal, Md. (2002) “Discovering Finance – A Dictionary of Financial Jargons” 1st Edition, Prasnanir Publications * Zikmund, William G. “Business Research Method”. 6th Edition, Thomson Learning