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Internship Report

On
The Investment and Comprehensive Performance Analysis of
commercial Bank. A case Study of Al-Arafah Islami Bank Ltd.

Prepared For:
Abdullah Iftikhar

Lecturer

School of Business Studies

Southeast University

Prepared By:
Md. Fayshal Hossan Miazy

ID: 2009110000038
Batch: 22nd Major in Finance
Program: BBA
Southeast University

Date of Submission: 12th May, 2013


Internship Report

On

The Investment and Comprehensive Performance Analysis of commercial


Bank. A Case study of Al-Arafah Islami Bank Ltd

Prepared For:

Abdullah Iftikhar
Lecturer
School of Business Studies

Southeast University

Prepared By:

Md Fayshal Hossan Miazy

ID# 2009110000038

BAtch: - 22 mAjor- FinAnce


nd

ProgrAm: - BBA

Date of Submission: 12 May, 2013

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Internship Report
on

The Investment and Comprehensive


Performance Analysis of Commercial Bank.
A Case Study of Al- Arafah Islami Bank
Ltd.

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Abbreviation

SN

01 AIBL Al-Arafah Islami Bank Ltd

02 SJIBL Shahjalal Islami Bank Ltd

03 SIBL Social Islami Bank Ltd

04 FSIBL First Security Islami Bank Ltd

05 EBL Exim Bank Ltd

06 A/C Account

07 ROA Return on Assets

08 ROE Return on Equity

09 ROD Return on Deposit

10 ROI Return on Investment

11 AVP Assistance Vice- President

12 SDUS Disbursed to Saving Deficit Units

13 SSU Savings Surplus Units

14 L/C Letter of Credit

15 CIB Credit Information Bureau

16 HDS Household Durables Scheme

17 ISD Investment Scheme for Doctors

18 SEIS Small Enterprise Investment Scheme

19 REIP Real Estate Investment Program

20 AIIS Agricultural Implement Investment Scheme

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Dedication

Dedicate to my respected parents, family members

&

My respected teachers.

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Letter of Transmittal
12 May, 2012

Abdullah Iftikhar

Lecturer
School Of Business Studies
Southeast University
Subject: Submission of Internship Report.
Dear Sir,
This is my pleasure to submit my internship report on “The Investment and
Comprehensive Performance Analysis of Commercial Bank, A Case study of Al-Arafah
Islami Bank Ltd” It was a great opportunity for me to acquire knowledge and experience in
respect of functions, procedures and operational mechanism of a commercial bank based on
Islami Shariah while working in Al-Arafah Islami Bank, Khilkhet Branch. This report
contains three (03) parts- first part contains organizational overview and the investment of
Al-Arafah Islami Bank, second part contains comprehensive performance analysis among
five Islami Banks (Al-Arafah Islami Bank, Shahjalal Islami Bank, Social Islami Bank, First
Security Islami Bank and Exim Bank), and third or final part contains Research part, which
covered with clients view analysis.

I believe that the knowledge and experience I have gathered during my internship period will
immensely help me in my future professional life.

I therefore, request your favor to accept my Internship Report.

Yours Sincerely

---------------------------

Md Fayshal Hossan Miazy

ID# 2009110000038

BBA. 22nd Batch. Major- Finance

Southeast University
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Declaration of Supervisor

This is certifying that Md. Fayshal Hossan Miazy ID: 2009110000038, student of Southeast
University, School of Business BBA program has completed the internship report titled “The
Investment and Comprehensive Performance Analysis of Commercial Bank, A Case
study of Al-Arafah Islami Bank Ltd” successfully under my supervision. To the best of my
knowledge and as per his declaration the internship report is an authentic work on the issue
and has not been submitted to anywhere for awarding any degree.

I wish his every success in life.

Supervisor

----------------------

Abdullah Iftikhar

Lecturer

School of Business Studies

Southeast University

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Declaration of Student

I hereby declare that the report of internship namely “The Investment and Comprehensive
Performance Analysis of Commercial Bank, A Case study of Al-Arafah Islami Bank
Ltd” by me after completing three (03) month of internship in Al-Arafah Islami Bank at
Khilkhet Branch and comprehensive study of the overall Investment & Performance Analysis
of Al-Arafah Islami Bank .

I also declare that this report is my original worked and prepared for academic purpose which
is a part of BBA program.

------------------------------------

Md Fayshal Hossan Miazy

ID# 2009110000038

BBA. 22nd Batch. Major- Finance

Southeast University

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ACKNOWLEDGEMENT

At first I would like to express my deepest gratitude to Almighty Allah for giving me the
strength and the ability to finish the task and submit the internship report within the planned
time. Then I am very much grateful to the Al-Arafah Islami Bank Limited (AIBL) Khilkhet
Branch for providing me the opportunity to complete my internship.

First of all I am deeply indebted to our honorable Dean Prof. Sirajuddaula Shaheen, then my
Internship Supervisor Abdullah Iftekhar Lecturer, School of Business Studies, Southeast
University for his whole hearted supervision to me during Internship period. Without his
support and encouragement this Internship report I can’t submit it due time.

My heartiest gratitude goes to Mr. Md. Sharif Chowdhury, Assistant Vice-President &
Manager of Al-Arafah Islami Bank Limited (AIBL), Khilkhet Branch for giving me
permission for my internship in his organization & valuable advice and suggestions to
complete the report in an appropriate manner.

My special thanks to Mr. Shah Alam, PO & second manager AIBL, Khilkhet Branch and also
grateful to Mr. Kazi Md. Abul Hashem PO, Mr. Md. Jasim Uddin, Investment In charge,
Nazmul Senior Field officer, Omar Faruq, Md. Shohel & Ibrahim Khalil (Executive Officer)
for providing me assistance, provide necessary information, and advice which can help me to
complete my internship report.

I am also grateful to all the staffs and all the officers of the Al-Arafah Islami Bank Limited
(AIBL), Khilkhet Branch.

Finally I would like thank my all friends, honorable Teachers, my respected Parents & other
family members for giving me help in every stage.

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Executive Summary
Investment is the main part of the bank. This report contains handy information about
investment of profit base bank. The first chapter of this report is introduction where contain
statement of the profit, objective, methodology, limitation of the report. In the second
chapter introduces the overview of AIBL introduces background, vision, mission, board of
director, management structure of AIBL shariah board of the bank AIBL, special feature of
AIBL and Al-Arafha Islamic Bank limited micro finance. In the third chapter focused all
about investment of AIBL. Invest by mainly three mechanisms which describe in
theoretical background. There are two types of investment. Sector –wise investment &
Mode-wise investment. They are Bai-mechanism, Leasing mechanism & Share mechanism.
AIBL commonly Bai-mode. Sometimes they use Leasing-mechanism. It is the discussion
part about various special terms what I use in this report and various mode of investment.
They also invested in Household Durable Scheme, Real Estate Investment Program etc.
The fourth chapter is the main part where includes product and services of AIBL. In this
chapter give briefly description about all product and services of AIBL. In this part I am
hardly try to all information about product and services of Al-Arafah Islamic bank
including deposit product of AIBL, financial product, account operation of AIBL, the
functions of AIBL, online general banking service and other activities of AIBL. AIBL on
investment, such as the problems of Mudaraba is lack of govt. support, uncertain cost of
capital, the problems of Musharaka lack of expertise persons, lack of legal frame –work of
Islami Banking in Bangladesh. The problem of Ijarah is: disposing the asset, when the asset
is no longer be needed, uncertainty about the total life of the asset etc. AIBL should initiate
different investment modes according to diverse needs of clients by conducting huge
research and study etc.

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Table of Contents
Chapter Particulars Page
No.

Introduction 01-08

1.1Introduction 01

1.2 Background of the Report 02

1.3 Origin of the report 02

1.4 Objective of the report 03-04

1.5 Scope of the study 04


01
1.6 Methodology of the study 05

1.6.1 Primary data 05

1.6.2 Secondary data 05

1.7 Sampling 05

1.7.1 Population 05-06

1.7.2 The Sample Units 06

1.7.3 The Sampling Frame 06

1.7.4 The Sampling Design 06

1.7.5 The Sample Size 06

1.7.6 The Sampling Plan 06

1.7.7 Some Important Facts About The overall 06


Survey

1.8 Benefit of the report 07

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1.9 Limitations of the study 07-08

Organizational Overview 09-31

2.1 Organizational Overview of Al-Arafah Islami 10


Bank Ltd

2.2 Historical Background of Al-Arafah Islami 10-11


Bank Limited

2.3 AIBL Profile 11-12


02
2.4 Vision& Mission of AIBL 12-13

2.4.1 Vision 12

2.4.2 Mission 12-13

2.5 Objectives of AIBL 13

2.6 Other objective of Al Arafah Islami Bank 13-14


includes

2.7 Commitments 14

2.8 AIBL at a Glance 14-15

2.9 CORE VALUES 16

2.10 Special Features of the Bank 16-17

2.11 Board of Directors of AIBL 18-19

2.12 Management of AIBL 20-21

2.13 Shariah Board of AIBL 21-22

2.14 Members of AIBL's Fatwa & Shariah 22

2.15 The Board's Role 22

2.16 Important Duties of the Shariah Board 23

2.17 SHARIAH SUPERVISORS 24

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2.18 SHARIAH AUDITING 24

2.19 SWIFT CODES of AIBL 24-25

2.20 AIBL’S LIBRARY 26

2.21 Corporate Social Responsibilities of AIBL 26-27

2.22 AIBL Khilkhet Branch 27

2.23 Organogram of Al-Arafah Islami Bank Ltd. 28


Khilkhet Branch, Dhaka

2.24 Operating activities of Khilkhet branch 29-31

Theoretical Framework for Investment 32-62

3.1 Investment 33

3.2 Introduction of Investment Division 33

3.3 Investment Assessment 34

3.4 Mode of Investment 35

3.5 Trading modes (Bai-Mechanism) 36

3.5.1 Bai-Murabaha 36

3.5.2 Bai  Muajjal 36

3.5.3 Bai- Salam 36


03
3.5.4 Bai-Istishna 37

3.6 Leasing mode (Ijarah mechanism) 37

3.6.1 Ijarah Muntahia Bittamleak (Hire Purchase) 37

3.6.2 Hire Purchase Under shirkatul Melk 38

3.7 Share Mechanism 38-39

3.7.1 Mudaraba 39-40

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3.7.2 Musharaka 40

3.8 Others 41

3.8.1 Quard 41

3.8.2 Uzrat Bill Wakala 41

3.9 PROCESS OF INVESTMENT 42

3.10 Investment Growth 42-45

3.11 Documentation 46-47

3.12 Investment Principles 48-49

3.13 Guide Lines by Bangladesh Bank 49-50

3.14 Guideline for Sanctioning Investment by 51


Bangladesh Bank & Head Office

3.15 Special Scheme under Investment 52

3.15.1 Household Durables Scheme (HDS) 52-53

3.15.2 Investment Scheme for Doctors (ISD) 53-54

3.15.3 Small Enterprise Investment Scheme 54-55


(SEIS)

3.15.4 Real Estate Investment Program (REIP) 55-56

3.15.5 Transport Investment Scheme (TIS) 57

3.15.6 Car Investment Scheme (CIS) 58-59

3.15.7 Agricultural Implement Investment 59-60


Scheme (AIIS)

3.15.8 Micro Industries Investment Scheme 60-61


(MIIS)

3.16 Process of Investment 62

Performance Analysis 63

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4.1 Theoretical Review 64

04 4.2 Ratio Analysis 64-68

4.3 Time Series Analysis 69-92

4.4 Comparative Analysis among Five Islami 93-104


Banks

Research Part 105-132

05 5.1 The Questionnaire 106

5.2 Clients view Analysis 106-132

SWOT Analysis 133-135

6.1 SWOT Analysis in AIBL 134-135

6.2 Strengths 134

06 6.3 Weaknesses 134

6.4 Opportunities 134

6.5 Threats 135

Findings, Recommendations and Conclusion 136-142

7.1 Summary of Findings 137

07 7.2 Problems & Limitations 138

7.3 Recommendations 138-141

7.4 Conclusion 141-142

References 143

Appendix 144-157

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CHAPTER-1

INTRODUCTION

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1.1 Introduction

The term “Islamic banking” refers to a system of banking or banking activity that is
consistent with Islamic law (Shariah) principles and guided by Islamic economics. In
particular, Islamic law prohibits usury, the collection and payment of interest, also commonly
called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that
are considered unlawful, or haraam (such as businesses that sell alcohol or pork, or
businesses that produce media such as gossip columns or pornography, which are contrary to
Islamic values).

Islamic banking has the same purpose as conventional banking: to make money for the
banking institute by lending out capital. But that is not the sole purpose either. The basic
principle of Islamic banking is based on risk-sharing which is a component of trade rather
than risk-transfer which is seen in conventional banking. Islamic banking introduces concepts
such as profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah),
cost plus (Murabahah), and leasing (Ijar).

In an Islamic mortgage transaction, instead of lending the buyer money to purchase the item,
a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while
allowing the buyer to pay the bank in installments. The goods or land is registered to the
name of the buyer from the start of the transaction. This arrangement is called Murabahah.

An innovative approach applied by some banks for home loans, called Musharaka al-
Mutanaqisa, allows for a floating rate in the form of rental. The bank and borrower form a
partnership entity, both providing capital at an agreed percentage to purchase the property.
The partnership entity then rents out the property to the borrower and charges rent. The bank
and the borrower will then share the proceeds from this rent based on the current equity share
of the partnership.

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1.2 Background of the Report:

A develop banking sector plays a vital role for financial stability of a country. In the BBA
program, the internship is one of the vital parts, which has to be done by every student .the
internship program provides an opportunity for the students to minimize the gap between
theoretical and practical knowledge and will help in practical life. I got this great opportunity
to perform my internship program in the Al-Arafah Islami Bank Ltd. I have completed
internship program based on theoretical and practical knowledge.

Through this report an individual can expect to have a good knowledge about the service
quality between the Supporting Desk Officers and Front Desk Officers (CRO). I have tried
my level best to put more emphasis on the SME loan and the service quality level between
the Front Desk Officers and the Supporting Desk Officers since it was the topic of my
internship program. This report is to be used only for the academic purpose. I have collected
all the necessary and relevant data from various primary, secondary and tertiary sources.
After three months long hard labor, it has become possible for me to make the report
comprehensive and factual. The data is truly and strictly confidential and no one can use its
components in full or partial. I would like to give thanks to everyone who has helped and
encouraged me in the process of preparing this report.

1.3 Origin of the report

The BBA internship program is a mandatory requirement for the students who are graduating
from the BBA programme of Southeast University, Department of Business Administration.
In the internship program, I was attached to a host organization named ' Al-Arafah Islami
Bank Ltd ' Khilkhet branch for 12 weeks. During this period I learned how the host
organization works with the help of the internal supervisor. As a result I have decided to
make a report on "The Investment and Comprehensive Financial Performance Analysis
of Al-Arafah Islami Bank Ltd ".

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1.4 Objective of the report

The objective of this study is to have a clear concept and some practical experience about
Financial Statement Analysis Systems of an organization. However, we had some textbook
knowledge but had little in real life, practice so ever.

This report is designed to know more about the overall banking Systems of the United
Commercial Bank Limited and analyze the ratio of this organization and identify the financial
condition of this organization. In addition, the study seeks to achieve the following
objectives:

To identify the level of customer satisfaction of AIBL.

To recommend ways of improving the service standard that accommodates a rapidly


growing customer volume.

To find out what are the major factors that hamper satisfaction among General
banking service in AIBL.

To examine the activities of the loans and advanced department.

To see if inclusion of some necessary product or documentation feature that is


currently absent, or improvement of some existing facility can act to increase
customer satisfaction.

To submit a report, for the fulfillment of my BBA practical.


The main objective of this report is to find out the “The Investment and
Comprehensive Performance Analysis of Al-Arafah Islami Bank Limited.”.
To gather comprehensive knowledge on overall banking functions and the
expectations of the customers regarding the service level of the bank.
Identify the factors contributing to the attractive and operative performance of the
local branch of the bank.

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To make a study of the facts in order to arrive at certain conclusion about overall
banking operation.
Identify the main objectives of AIBL Investment Disbursement.
To find out the sector in which AIBL provides Investment.
To evaluate financial affairs of the Bank
To visualize the quantitative and qualitative aspects of AIBL
To identify policy recommendations for further improvement
To evaluate the performance of AIBL with others four Islami bank.

1.5 Scope of the study

The report will be limited to the level of customer satisfaction in the investment and
performance analysis of AIBL. The focus of this report will be only on the investment and
financial performance analysis of AIBL. The report is developed on the basis of my work in
general banking with AIBL, Khilkhet Branch. In spite of limitation I also got some facility to
complete my internship report. The employees whose held a responsible post in the entire
department helped me lot. They gave me all essential data and conversation with me. My
university internship supervisor also helped me a lot. He gave me a guidelines how to prepare
my report more attractive and perfect. This bank has given me the opportunity to observe the
banking environment for the first time indeed. I got an opportunity to gather experience by
working in the different departments of the branch under the supervision of different
departmental heads.

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1.6 Methodology of the study

I have got all the relevant information from my working experience with AIBL, their Annual
report, some circular, various brochures, AIBL web site and such. Some information is taken
from some of my friends.

1.6.1 Primary data:

The primary data of this report is the information, which is gathered from
AIBL while I worked with them.

1.6.2 Secondary data:

The secondary data of this report are collected from AIBL Annual report, and
also some reports from which I got idea about the way of writing a report.

Secondary Sources: Secondary data are collected in the following ways:

Data gathered within the organization itself.


Data gathered from Texts
Internet sources.
General reports.
Annual reports
Official documents
Credit manual and foreign exchange manual of the bank.

1.7 SAMPLING:

1.7.1 POPULATION:
The population in the research is mainly the branch customer and employees this population
has been selected mainly because we are conducting the survey on the perception about the
matter amongst the branch customer and employees.

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1.7.2 THE SAMPLE UNITS:
The sampling unit in case of this research consists of the branch customer and employees

1.7.3 THE SAMPLING FRAME:


The sampling frame usually contains a list of elements from which the sample is drawn. The
survey has been conducted at different levels of customers coming to the branch such as
Priority customer, Excel Customer, Corporate customer And so on. And also the different
levels of employees in the branch.

1.7.4 THE SAMPLING DESIGN:


The sample design used in this case is random sampling method. When taking the random
sampling into consideration there is always a chance that error might occur. This happens
when there is a difference in the sampling that is done during the course of the survey.
There are different types of sampling that can be done. In the case 0f our report we have also
used stratified sampling.

1.7.5 THE SAMPLE SIZE:


The sample size in my case is 25 customers of the different level of clients in the Khilkhet
branch.

1.7.6 THE SAMPLING PLAN:


We have gathered the data based on the focus group interview and experience survey through
the questionnaire.

1.7.7 SOME IMPORTANT FACTS ABOUT THE OVERALL SURVEY:


• The Speed of data collection: moderate to fast
• The respondent’s cooperation: Moderate

1.8 Benefit of the report

As a student, I have learned about a bank; I also have learned the report writing, as a great
deal of theory is included in this report. It will be also benefited for the people who are
interested to know about AIBL.

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1.9 Limitations of the study
The present study was not out of limitations. But as an internee it was a great opportunity for
me to know the banking activities in Bangladesh especially of AL-ARAFAH-ISLAMI Bank.
Some constraints are appended bellow:

The main limitation for conducting this report is time limitation and resources. Three months
is not enough to understand all the activities of a bank and how they handle their clients. Lack
of experience has also acted a constraint for the exploration of the topic.

Following are the Limitations:

Limitation of time was one of the most important factors to collect data. A longer time
period would have ensured a much better result for the study findings.
Every organization has its own secrecy that is not revealed to others. While collecting
data i.e. interviewing the credit officials they did not discuss much information for the
sake of confidentiality of the Bank.
Due to lack of experience, there is a chance of having some mistake in the report
though best effort has been applied to avoid any kind of mistake.
Lack of depth of knowledge, lack of experience in collecting information and
analytical ability for writing such report.
There were some misunderstanding between me and the bank officials while
searching the some required information.

The main constraint of the study is inadequate access to information.


Due to time limitations many of the aspects could not be discussed in the report.
The employees did not disclose much information for the sake of the confidentiality
of the organization.
Since the bank personals were very busy, they could provide me very little time.
The clients were too busy to provide me much time for interview.
Though I have prepared many reports before, I had no experience of internship. So
inexperience is one of the main constraints of the study.
Lack of social awareness about the modern and competitive banking system.
Lack of cooperation with others

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CHAPTER-2

ORGANIZATIONAL
OVERVIEW

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2.1 Organizational Overview of Al-Arafah Islami Bank Ltd
Al-Arafah Islami Bank Ltd. as the name implies a newly formed commercial bank in
Bangladesh. It has been incorporated in Dhaka, Bangladesh as a public limited company and
its Head Office of the Bank is located at, 36, Dilkusha(6-9 Floor) C/A Dhaka-1000,
Bangladesh C/A, Dhaka- 1000.

In the world of consumerism the business organization of the world strive for the consumers
satisfaction as a number one business strategy whatever may be the product of the
organization, either service or non service. Service is the product of bank. There is a saying
that customer service starts rights right from the stairs of the bank building. The guard at the
door is first person pep resents of the bank, receives a customer with wishes in smiling face.

2.2 Historical Background of Al-Arafah Islami Bank Limited

Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to be successful


both in our mortal & 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 Ltd was established (registered) as a private limited company, under
the Company Act, 1994 on 18 June 1995 for providing modern banking system based on Al-
Qur’an and Sunnah. The inaugural ceremony of Al-Arafa Islami Bank Ltd (AIBL) took place
on 27 September 1995and AIBL started journey with 5 branches. Now AIBL operates 92
branches in Bangladesh.[1]

Al-Arafah Islami Bank is an interest free Shariah Bank of Bangladesh rendering all types of
commercial banking services under the regulation of the Bank Company Act, 1991. The
Bank conducts its business on the principles of Musaraka, Bai‑Murabaha, Bai‑Muazzal and
Hire Purchase transactions approved by Bangladesh Bank. Naturally, its modes and
operations are substantially different from those of other

conventional commercial banks. There is a Shariah Council in the Bank who maintains
constant vigilance to ensure that the activities of the Bank are being conducted on the
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precepts of Islam. All activities of the Bank are conducted according to Islamic Shariah
where profit is the legal alternative to interest.

2.3 AIBL Profile

With the objective of achieving success here & hereafter by pursuing the way directed by
Allah and the path shown by His Rasul (SM), Al Arafah Islami Bank Ltd was established
(registered) as a private limited company on 18 June 1995. The inaugural ceremony took
place on 27 September 1995. The authorized capital of the Bank is Tk.5000.00 million and
the paid up capital is Tk. 4677.28 million as on 31.12.2010. Renowned Islamic Scholars and
pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is
being owned by indigenous shareholders.

The equity of the bank stood at Tk. 9647.45 million as on 31 December 2010, the manpower
was 1711 and the number of shareholders was 49,386. It has achieved a continuous profit and
declared a good dividend over the years. High quality customer service through the
integration of modern technology and new products is the tool of the bank to achieve success.
The bank has a diverse array of carefully tailored products and services to satisfy customer
needs.

The Bank is committed to contribute significantly to the national economy. It has made a
positive contribution towards the socio economic development of the country with 78
branches of which 21 is AD throughout the country.

Since its establishment, AIBL opened 5 branches in 1995, 5 in 1996,10 in 1997, 10 in 1998, 5
in 1999, 2 in 2000, 3 in 2001, 1 in 2005, & 5 in 2006 i.e. at the end of 2006 the Bank Branch
reaches to 46.Total number of employees of the Bank was 771 in 1995 and reached to 912 in
2006.

Al-Arafah Islami Bank Ltd. has 101 branches and a total of 2500 employees the authorized
capital of the Bank is Tk.5000.00 million and the paid up capital is Tk. 4677.28 million as on
(31.December.2010). 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.

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Al-Arafah Islami Bank Ltd. was established not only to earn profit and to develop economy
of the country but also it had an ultimate goal to get reward in the Heaven by banning interest
in business. Since its commencement the Bank has been trying to achieve this goal. The
Islam loving people specially who are not interested with interest, should help this Bank
giving deposit and taking investment from this Bank.

2.4 Vision& Mission of AIBL

2.4.1 Vision

To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of


the national economy.

2.4.2 Mission

Achieving the satisfaction of Almighty Allah both here & hereafter.


Proliferation of Shariah Based Banking Practices.
Quality financial services adopting the latest technology.
Fast and efficient customer service.
Maintaining high standard of business ethics.
Balanced growth.
Steady & competitive return on shareholders' equity.
Innovative banking at a competitive price.
Attract and retain quality human resources.
Extending competitive compensation packages to the employees.
Firm commitment to the growth of national economy.
Involving more in Micro and SME financing.

2.5 Objectives of AIBL

From time immemorial Banks principally did the function of moneylenders or “Mohajans”
but the function and scope of modern banking are now-a-days very wide and different. They
accept deposits and lend money like their ancestors, nevertheless, their role as catalytic agent
of economic development encompassing wide range of services is very important. Business
commerce and industries in modern times cannot go without banks. There are people
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interested to abide by the injunctions of religion in all sphere of life including economic
activities. Human being is value oriented And social science is not value neutral. Al arafah
islami bank believes in moral and material development simultaneously. Interest or Usury has
not been appreciated and accepted by the tawrat of Prophet Moses, the Bible of Prophet Jesus
and the Quran of Hazarat Muhammad (SM). Effort are there to do banking without interest
Al Arafa islami bank limited avoids interest in all its transactions and provides all available
modern banking services to its client and want to contribute in both moral and material
development of human being. No sustainable material well being is possible without spiritual
development of mankind. Only material well being should not be the objective of
development. Socio economic justice and brotherhood can be implemented better in a God-
fearing society.

2.6 Other objective of Al Arafah Islami Bank includes:

To establish interest-free and welfare oriented banking system.

To establish a modern banking system for all kinds of people.

To help in poverty alleviation and employment generation.

To contribute in sustainable economic growth.

To eradicate the poverty and to do social services by establishing Schools,


Madrashas, University, Hospitals, Public Library etc.

To establish the relationship between bank and customer as partnership Basis.

Finally to achieve ultimate goal

2.7 Commitments
Ours is a customer focused modern Islamic Banking 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 trade & industrial needs of

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the clients.

2.8 AIBL at a Glance


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
We present some data on the bank below:
(In million taka)
Particulars 2004 2005 2006 2007 2008
Authorized Capital 1000.00 1000.00 2500.00 2500.00 2500.00
Paid up Capital 586.99 677.94 854.20 1153.18 1383.81
Reserve Fund 488.00 542.22 835.98 1091.95 905.33
Shareholders’ Equity 957.26 1220.16 1690.18 2037.50 2705.74
Deposit 10108.28 11643.66 16775.34 23009.13 29690.12
Investment 8150.16 11474.41 17423.19 22906.37 29723.79
Import 9337.49 12631.60 1882.14 27042.72 32685.13
Export 3639.34 4932.90 914.27 12714.91 20176.64
Total Income 1120.85 1452.68 2172.48 2955.61 4387.26
Total Expenditure 771.96 904.48 1202.71 2199.43 2859.16
Profit before Tax 348.89 548.20 855.47 756.18 1528.09
Profit after Tax 158.76 262.90 470.02 347.31 668.24
Income Tax 157.00 215.10 385.45 235.53 590.66
Total Assets 12874.61 15336.89 21368.17 30182.32 39158.44
Fixed Assets 195.17 208.00 215.11 334.48 396.76
Earnings per share
263.68 387.80 550.24 30.12 48.29
(Taka)

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Profit Earning Ratio 4.89
Dividend per share 15.5% 26.00% 35% 20% 30%
Bonus
No. of Shareholders 5379 5402 4487 12013 10664
Number of Employees 803 771 912 1033 1080
Number of Branches 40 41 46 46 50
Manpower per Branch 20 19 20 23

2.9 CORE VALUES

For customers-
To become most caring Bank- by providing the most courteous and efficient service in every
area of our business.
For employees-
By promoting the well- being of the members of the staff.
For our shareholders-
By ensuring fair return on their investment through generating stable profit.
For our community-
By assuming our role as a social responsible corporate entity in a tangible manner through
close adherence to national policies.

2.10 Special Features of the Bank:

Al-Arafah Islami Bank is singular in every positive aspect. The Bank provides a bunch of
state-of-art banking services within the wide bracket of shariah. It is unique with its products,
strict with its principle and uncompromising with its honesty. Here are some special features
of AIBL that make it notable in Islami banking sector:

All activities of the bank are conducted according to Islamic Shariah where profit is
the legal alternative to interest.
The bank‟s investment policy follows different modes approved by Islamic shariah
based on the Quran and Sunnah.
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The bank is committed towards establishing welfare oriented banking system and
creates employment opportunities.
According to the need and demand of the society and the country as a whole the bank
invests money to different „Halal‟ business. The bank participates in different
activities aiming at creating jobs, implementing development projects of the
government and creating infrastructure.
The bank is committed to establish an economic system resulting in social justice and
equitable distribution of wealth. It is committed to bring about changes in the
underdeveloped rural areas for ensuring balanced socio economic development of the
country through micro credit program and financing of SMES as well.
According to Mudaraba system, the depositors ate the partners of the investment
income of the bank. About 70% of the investment income is distributed among the
Mudaraba depositors.
To render improved services to the clients imbued with Islamic spirit of brotherhood,
peace and fraternity and by developing an institutional cohesion.
The bank is contributing to economic and philanthropic activities. AIBL English
Medium Madrasah and AIBL library patronize by the Bank are two such examples.

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2.11 Board of Directors of AIBL:

Badiur Rahman Sarker Mohammad Shameem Alhajj Md. Harun-ar-Rashid


Chairman Iqbal Khan
Vice Chairman Director

Alhajj Nazmul Ahsan Khaled Alhajj Abdul Malek Mollah Alhajj Hafez Md. Enayetullah
Director Director Director

Alhajj Abdul Moktadir Alhajj Ahamedul Haque Alhajj Abdus Samad


Director Director Director

Alhajj Abu Naser Mohammad Alhajj Abdus Salam Alhajj Niaz Ahmed
Yeahea Director Director
Director

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Engr. Kh. Mesbahuddin Ahmed Mohammed Emadur Rahman Md. Rafiqul Islam
Director Director Director

Anwar Hossain Dr. Momtaz Uddin Ahmed Brigadier General M A Malek


Director Director (Retd)
Director

Ekramul Hoque Md. Ashik Hossain


Ex-Officio Director Director

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2.12 Management of AIBL

::: Managing Director :::

Ekramul Hoque
Managing Director

::: Deputy Managing Director :::

Md. Rafiqul Islam Khondoker Nayeemul Kabir Md Mofazzel Hossain


Deputy Managing Director Deputy Managing Director Deputy Managing Director

Kazi Towhidul Alam Md. Golam Rabbani


Deputy Managing Director Deputy Managing Director

Page 34 of 168
::: Executive Vice President :::

Md. Mominul Haque Md. Fazlul Karim Muhammed Nadim ACA


Bhuiyan Executive Vice President Executive Vice President
Executive Vice President

Md. Mahmoodul Haque Syed Masodul Bari


Executive Vice President Executive Vice President

2.13 Shariah Board of AIBL

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
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(interest).

2.14 Members of AIBL's Fatwa & Shariah


Supervision Board are:

Mufti Abdur Rahman Mufti Ruhul Amin


Chairman Member

Moulana Abdul Basit Barkatpuri Mufti Muinul Islam


Member Member

Alhaz A Z M Shamsul Alam Md. Abdur Rahim Khan


Member Secretary

Badiur Rahman
Member (By Holding of Position)

2.15 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).

2.16 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.

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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.
Analyzing 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.
Analyzing 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.
Analyzing 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.

2.17 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.

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

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and to the Chairman of the Board of Directors. The position also calls for participation in the
Bank's training programmes.

2.18 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.

2.19 SWIFT CODES of AIBL

01. Head Office 02. Motijheel Branch 03. Moulvi Bazar Branch
SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH ALAR BD DH 066 ALAR BD DH 067

04. Nawabpur Road Branch 05. Corporate Branch 06. VIP Road Branch
SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH 074 ALAR BD DH 075 ALAR BD DH 077

07. Banani Branch 08. Bogra Branch 09. Agrabad Branch


SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH 079 ALAR BD DH 071 ALAR BD DH 069

10. Khatungong Branch 11. Jubilee Road Branch 12. Khulna Branch
SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH 072 ALAR BD DH 076 ALAR BD DH 068

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13. Rajshahi Branch 14. Laldighirpar Branch 15. Saidpur Branch
SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH 073 ALAR BD DH 070 ALAR BD DH 078

16. Dilkusha Branch 17. New Elephant Road 18. Uttara Model Town Branch
Branch
SWIFT Code SWIFT Code
ALAR BD DH 080 SWIFT Code ALAR BD DH 082
ALAR BD DH 081

19. Jatrabari Branch 20. Dhanmondi Branch 21. North South Road Branch
SWIFT Code SWIFT Code SWIFT Code
ALAR BD DH 083 ALAR BD DH 084 ALAR BD DH 085

22. Gulshan Branch


SWIFT Code
ALAR BD DH 086

2.20 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.

2.21 Corporate Social Responsibilities of AIBL

Al-Arafah Islami Bank Foundation :


The Bank has a Foundation launching philanthropic activities. Al-Arafah Islamic International
School & College and Al-Arafah Islami Bank Library are major two wings for launching

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philanthropic activities.

Al-Arafah Islamic International School & College:

Al-Arafah Islamic International School & College 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 Islamic International School & College 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 Al-Arafah Islamic International School & College at Dhanmondi in
1998. Such institution upto O level of its kind is for the first time in Bangladesh.

Al-Arafah Islami Bank Library :


Library is the carrier & reservoir of knowledge. Al-Arafah Islami Bank has shown that other than
generating profit, it can also contribute significantly in the field of providing good source of
knowledge by establishing a public library at 32, Topkhana Road, Chittagong Bhaban (1st floor),
Dhaka, thus strengthening social development. It is situated in a sound, healthy surroundings. It
harbors 23,000 books of reference for the researchers, students, professionals, bankers,
physicians, engineers, politicians, writers or journalists, even for the kids. It is open to all from the
year 2000 and well located & accessible to everybody. It procured some exceptional collection of
books on religion, economics, banking, computer science, business administration, sociology,
English & Arabic language and juvenile literature in Bangla, English, Urdu & Arabic, which are
very rare.

2.22 AIBL Khilkhet Branch

Al-Arafah Islami Bank Limited opened its khilkhet branch 29-11-2010 to cover the huge &
prospective customer from the area of khilkhet. Md. Sharif Chowdhury is the Assistant vice
president (AVP) & he is the manager of khilkhet branch. It has a large office which can
accommodate good number of customer comfortably. This branch doesn’t deal large foreign
exchange transaction. The branch has efficient human resources that can meet up customer’s
needs. Order wise work is distributed properly.

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2.23 Organogram of Al-Arafah Islami Bank Ltd. Khilkhet Branch, Dhaka

AVP & Manager


Md. Sharif Chowdhury

Senior Executive Officer (SEO)


Md. Shah Alam

GB Incharge Investment Incharge Cash Incharge


Senior Executive Officer (SEO)
Principle Officer (PO) Executive Officer (EO)
Md. Joshim Uddin
A

Executive Officer (EO) Executive Officer (EO)


Investment Officer
Md. Omar Faruq ASM Salauddin Bahar
Naimur Rahman

EO of Foreign Exchange Officer


Executive Officer (EO) Md. Abdul Khalek Md. Abdur Rahim
Md. Shohel

Senior Field Supervisor Officer


Md. Nazmul Haque Md. Ishfaque Kabir
Officer
Md. Ibrahim Khalil
Field Assistant Officer
Md. Kamal Hossain Md. Saidul Islam

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2.24 Operating activities of Khilkhet branch

Function of AIBL may be divided into four categories


i. General banking activities
ii. Investment banking activities
iii. Foreign exchange activities
iv. Others activities.

These functions are discussed briefly as below:

General banking activities

General banking activities is the heart of banking. Here money collection procedure occurs.
General banking activities are discussed briefly as below:

a. Cash Receive: Cash section is include general banking activities. Cash section is very
important for deposit mobilization.

b. Cash Payment: General banking section close various kinds account and cash payment is
made from this section.

c. A/c opening: In this section various kinds of account is opened. Those are Mudaraba A/c,
Al-wadia Current A/c, Mudaraba sort notice deposit A/c Mudaraba terms deposit A/c,
Installment terms deposit A/c, Hajj deposit A/c etc.

d. Cheque Issue: General banking section issue cheque book. Chequebook is very important
for money transaction.

e. A/c Closing: Various type of A/cs are closed in this section

f. Clearing activities: In this section all clearing instrument send to Bangladesh Bank /
Sonali Bank Clearing house and after completing clearing process clearing amount of are
credit to concerned accounts.
g. Deposit Mobilization: Deposit mobilization is the main function of general banking
section. Actually all section are engaged in deposit mobilization but deposit mobilization
procedure are done this section. Mainly deposit are collection from savings surplus units
(SSU) and loan or credit is disbursed to saving deficit units (SDUS).
h. Bill Collection: AIBL collect bill on behalf on various institution or enterprise from their
customers. For example electric bill, Telephone bill, Gas bill, Mobile bill etc.

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i. Investment Activities: Almighty creature said in his holy Quran that “Ahallahul baia and
harramahu Riba” that means Allah permitted trading and forbidden interest” Islamic bank is a
financial institution whose statutes rules and procedures expressly state its commitment to the
principles of islamic shariah and to the banning of the receipts and payment of interest in on
any of its operations.
So Islami bank always avoids interest and emphasizes on profit business. Islami bank
financing product is Murabaha, Bai-Muazzal, Ijara, Salam, and Istisna, Out of these various
debt based financing products. The most popular are Murabaha and Bai-Muazzal.

Investment activities AIBL are discussed as below:

Disbursed financed to the business firms and persons: The most important
function of an Islami bank is disbursed finance to industries and business firm or
persons.
Disbursed leased finance to various industries: Islami bank disbursed leased
finance to various industries. Lease finance may be two types operating lease and
financial lease.
Issue bank Guarantee: AIBL issue bank guarantee on behalf or its clients. In this
way banks helps a business firm to run their business smoothly.
Foreign exchange activities:

Foreign exchange is another important department for banking service the functions of
foreign exchange section are as below:

L/C issue: A letter of credit is a conditional undertaking of payment, a letter by the


importers bank to the exporter that the bills if drawn as per terms and conditions are
strictly complied with will be honor on presentation.
AIBL issue L/C on behalf of its clients and its very important for foreign exchange
transaction.
Bill negotiation: AIBL issues export L/C and negotiate the export bill.
Foreign remittance: Foreign exchange deportment plays a vital role for foreign
remittance. Foreign exchange department maintain various “Nostro” and “Vastro” A/c

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all over the world. Its keeps correspondence with foreign banks. Foreign exchange or
foreign transaction done through these nostro and vostro A/c.

Others activities:

Banks play important role for development of a country. Others function of a bank are as
below:
Provide information to Bangladesh bank and others institution and that information is
important for policy making.
To help the Bangladesh Bank and govt. for implementation fiscal and monitory
policy.
Provide valuable information as well as opinion to its clients for their business firm.
Providing local facilities to safe keeping peoples valuable assets.

Page 44 of 168
CHAPTER-3

THEORITICAL
FRAMEWORK FOR
INVESTMENT

Page 45 of 168
3.1 Investment:

Investment means transaction between two parties in which one (the creditor or lender)
supplies money, goods, services or securities in return for a promised future payment by the
other (the debtor or borrower). Such transaction normally includes the payment of interest to
the lender but AL-Arafah Islami Bank Limited always avoids interest and emphasizes on
profit-based business. Investment may be extended by the public or private institutions to
finance business activities, agricultural operation, consumer expenditures or government
projects. "Investment" means any such modes of financing which Islamic Bank does in
accordance with principles of Shariah or as per the Shariah approved modes like Mudaraba,
Musharaka, Bai-Murabaha, Bai-Muajjal, Istisna, Lease, Hire-purchase under Shirkatul Melk,
etc.

3.2 Introduction of Investment Division:

AL-ARAFAH ISLAMI Bank Ltd is a new generation bank. It is committed to provide high
quality financial services/products to contribute to the growth of GDP of the country through
stimulating trade & commerce, accelerating the pace of industrialization, boosting up export,
creating employment opportunity for the educated youth, poverty alleviation, raising standard
of living of limited income group and over all sustainable socio-economic development of the
country. In achieving the aforesaid objective of the bank, investment operation of the bank is
of paramount importance as the greatest share of total revenue of the band is generated from
it, maximum risk is centered in it and even the very existence of band depends on prudent
management of its investment portfolio. The failure of a commercial bank is usually
associated with the problem in investment portfolio and is less often the result of shrinkage in
the value of other assets. As such investment portfolio not only features dominant in the
assets structure, it is critically important to the success of the bank also. In view of the above
this investment policy and control guidelines of the bank has been prepared which is subject
to amendment, revision, readjustment and refinement from time to time as may be warranted
by the change of circumstances due to passage of time to suite the requirement of the bank.

3.3 Investment Assessment:

Relationship Manager(s) \ Investment Officer(s) shall conduct a thorough assessment of

Page 46 of 168
investment requirement before recommending any new proposal.
There after all investment at least annually at the time of renewal and enhancement. The
assessment procedure shall include the following issues:
1. Mode of Investment
2. Investment limit
3. Purpose of investment
4. Rate of profit
5. Primary Security
6. Collateral Security- its acceptability, its coverage, its control and genuine etc
7. Margin
8. Repayment capacity and repayment schedule
9. Period of investment
10.Other terms and conditions in case of necessity.

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3.4 Mode of Investment:

Page 48 of 168
3.5 Trading modes (Bai-Mechanism)

3.5.1 Bai-Murabaha
Bai-Murabaha may be defined as Contractual buying and selling at a mark-up profit. In this
case, the client requests the Bank to purchase certain goods for him. The Bank purchases the
goods as per specification and requirement of the client. The client receives the goods on
payment of the price which includes mark-up profit as per contract. Under this mode of
investment the purchase/ cost price and profit are to be disclosed separately.

3.5.2 Bai  Muajjal

Bai-Muajjal is a contract between a buyer and a 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 within a fixed period by
fixed installments. The seller may also sell the goods purchased by him as per order and
specification of the buyer.

In Bank's perspective, Bai-Muajjal is treated as a contract between the Bank and the Client
under which the bank sells to the Client certain specified goods, purchased as per order and
specification of the Client at an agreed price payable within a fixed future date in lump sum
or by fixed installment.

3.5.3 Bai- Salam

Bai- Salam means advance purchase. It is a mode of business under which the buyer pays the
price of the goods in advance on the condition that the goods would be supplied / delivered at
a particular future time. The seller supplies the goods within the fixed time.

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3.5.4 Bai-Istishna

A contract executed between a buyer and a seller under which the seller pledges to
manufacture and supply certain goods according to specification of the buyer is called Istisna.
An Istisna agreement is executed when a manufacturer or a factory owner accepts a proposal
placed to him by a person or an Institution to produce/manufacture certain goods for the latter
at a certain negotiated price.

Here, the person giving the order is called Mustasni, the receiver of the order is called Sani
and the goods manufactured as per order is called Masnu.

An order placed for manufacturing or producing those goods which under prevailing customs
and practice are produced or manufactured will be treated as Istisna contract.

3.6 Leasing mode (Ijarah mechanism)

3.6.1 Ijarah Muntahia Bittamleak (Hire Purchase)

Under this mode, the bank purchases vehicles, machineries and instruments, building,
apartment etc. and allowed clients to use those on payment of fixed rents in installments with
the ultimate objective to sell the asset to the client at the end of the rental period . The client
acquires the ownership/ title of the assets/ properties subject to full payment/ adjustment of
all the installments.

3.6.2 Hire Purchase Under shirkatul Melk

Definition

Hire purchase under shirkatul Melk is a special type of contract which has been developed
through practice. Actually, it is a synthesis of three contracts: Shirkat, Ijarah and sale. Shirkat
means partnership. Shirkatul Melk means share an ownership. When two or more persons
supply equity, purchase an asset, own the same jointly, and share the benefit as per agreement

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and bear the loss in proportion to their respective equity, the contract is called Shirkatul
contract.

Stages of Hire Purchase under Shirkatul Melk

Thus Hire Purchase under Shirkatul Melk Agreement has got three stages:

Purchase under joint ownership.


Hire and
Sale and /or transfer of ownership to the other partner Hirer.

Hire Purchase under Shirkatul Melk through gradually transfer (sale) of legal
title/ownership of the hired asset/property

Under this type certain .asset / property' is purchased with equal or unequal equity
participation and owned jointly by the parties -the Bank and the Client. The Bank's share /
portion of the asset is hired out to tile Client partner against fixed rent/rentals per unit of time
for a fixed period with a promise that the Hire Bank will sell or transfer the ownership of its
portion to the Client Hirer gradually part by part in proportion to the consideration paid. So
that the Hire's portion of the asset on payment of the total price at the end of the hire period.

Under this system the total price of the hired property / asset should be determined and
divided over the period of hire contract (per unit of time) so that the Hirer in addition to the
payment of fixed rent /rentals may pay gradually the proportionate consideration of the total
price of the hired property or asset to acquire proportionate ownership of the same part by,
part and become full owner of the hired asset at the end of the hire period.

It should be noted that there should be a separate sale contract for payment / acquisition of
each share (per unit of time as per hire deal) / part of asset sold to the Hirer and the amount of
rent should be decreased proportionately with decrease of Hire's ownership and increase of
Hirer's ownership on the property/asset.

If, for any reason, the hire contract is revoked prior to the payment I transfer of full title to the
Hirer, the Hirer will share that part of the title to the hired property which has been

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transferred to him against payment made by him and the remaining part will be shared by the
Hire Bank. If any loss arises to the Bank after the sale of Bank's share to the property / asset
that shall be recouped from the Client / Client's security. In our Bank, we shall be following
this type of Sale Contract in Hire Purchase under Shirkalul Melk.

3.7 Share Mechanism

3.7.1 Mudaraba

Definition
It is a from of partnership where one party provides the fund while the other provide the
expertise, labor and the letter referred to at the Mudarib any profits accrued are shared
between the two parties on a pre –agreed basis, while capital loss in exclusively born by the
partner providing the capital.

Important Features:

Bank supplies capital as Sahib- al –Mall and client invest if in the business with his
experience.
The client maintains administration and management.
Profit is divided as per agreement.
Bank bears the actual loss alone.
Client cannot take another investment for that specific business without the
permission of the Bank.
3.7.2 Musharaka

The term Shirkat and Musharakah have been derived from Arabic words “Shairkah” and
“Sharika.” The word shirkah means a partnership between more than one partner. Thus the
ward “Musharaka” and “Shirkat” means a partnership established between two or more
partners for purpose of a commercial venture participate both in the capital and management
where the profit may be shared between the partners as per agreed upon ratio and the loss. If
any incurred, is to be borne by the partners at per capital /equity ratio.
In case of investment “Musharaka” meaning a partnership between the bank and the client for
a particular business in which both the bank and client provide capital at an agreed upon ratio

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and bear the loss, if any in proportion to their respective equity. Bank may move itself with
the selected client for conducting any Shariah permissible business under Musharaka mode.

Important Features:

The investment client will normally run manage the business.


The bank shall take part in the policy and decision making as well as overseeing
(supervision and monitoring) the operation s of the business of the client. The bank
may appoint suitable personal(s) to run the manage the business and to maintain
books of accounts of the business property.
As the investment client shall manage the enterprise, the bank may more share of
profit to him than that of his proportion capital contribution.
Loss, if any, shall be shared on the basis of capital ratio.

3.8 Others
3.8.1 Quard

It is a mode to provide financial assistance/ loan with the stipulation to return the
principal amount in the future without any increase thereon.

3.8.2 Uzrat Bill Wakala

Murabaha Post Import (MPI)

The importers apply for investment facility against imported goods after shipment for
payment of the invoice values of the goods to the seller/supplier including custom duty, VAT
and other expenses. In such a case, Islamic banks allow a Bai-Murabaha investment facility
under single deal concept. It is so called as the Letter of Credit. Bills and the handling of
Post-shipment are settled under one agreement while opening the letter of credit for
importing the goods.

Page 53 of 168
3.9 PROCESS OF INVESTMENT

PROCESS OF INVESTMENT

 Applicant applies for the Investment in the


prescribed form of the bank describing the types and
purpose of loan.

1. Collecting credit information about the applicant to


determine credit worthiness of the borrower.
Source of
2. Personal investigation, confidential report of other
bank, head office, branch, and chairman of
commerce.
3. CIB (central information bureau)
a. Evaluation of compliance with its lending
policy
b. Evaluating the proposed security.

• Then bank prepare a Investment proposal which


contains terms and conditions of loan for approval
of ManagerTakes the necessary papers and
signatures from borrower.

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3.10 Investment Growth

Investment Growth (Tk. In Millions)


Year 2012 2011 2010 2009 2008

Investment &
Advances 106764.55 77062.73 53800.79 37636.09 28832.80

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Investment Growth

The investment of the bank has stood at BDT 77714.95 million as on 31 st December 2011 as
against BDT 53582.96 million in the previous year showing a net increase by 45.04%. The
investment portfolio of the bank is well diversified and covers a broad spectrum of business
and industries including readymade garment, textile, edible oil, ship scrapping, steel and
engineering, chemical, pharmaceuticals, cement, telecommunication, construction,
healthcare, education, transport and investment under consumer scheme. The bank has geared
up effort to improve the recovery rate of disbursed investment and also taken adequate
measures for converting the classified investment into performing assets. As a result,
classified investment of the bank could be kept at low level for below the national average. It
is 0.95% in this bank as on 31 st December 2011. The bank gives top-most priority to the
creation of quality assets and does appropriate risk grading while approving commercial,
trade and project investment to different Clients.

Sector wise Investment in 2012

Sector Taka in Million

Agriculture, Fishing and Forestry 793.48


Industry 24274.6
Construction 3450.99
Water works and Sanitary Service 320.28
Transport and Communication 3435.77
Storage 48.04
Trade Finance 46500.49
Miscellaneous 5196.92
Total (Including profit receivable) 83626.57
Less Unearned Profit On Investment 5925.62
Total 106764.55

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3.11 Documentation

A. Customer analysis:
 Capital structure of the company
 Authorized capital and paid up capital
 Reserve and retained earnings
 Share holdings of the share holders
 Management team
 Group and affiliate companies
 Ability to comply investment convent
 Security
 Ability and integrity
B. Industry analysis:
 Contribution to GDP of the concern industry
 Key risk factors of the industry
 Growth of the industry
 Domestic market of the industry
 International market of the industry
C. Supplier \ Buyer analysis:
Domestic
International
Potentiality of the buyer or supplier
Strength and weakness of the buyer or supplier
D. Historical Financial analysis:
Minimum three years Financial Statement (FSS) analysis
Guarantor (s) \ Corporate guarantor (s) Financial Statement analysis
Quality and sustainability of the borrower’s
Cash flow statement
Strength of the borrower’s balance sheet
Leverage
Profitability
E. Project Financial Performance:

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Where term investment facilities are being proposed in favor of any new industrial unit an
expertise team comprising RM. Engineer in the concern field and financial analyst, the team
will prepare a feasibility study as per current industrial policy.
F. Account Conduct:
Trade payment
Cheques payment
Timely payments
Irregular payment
Banks investment payment with profit
Excess over limit drawings
Excess over DP drawing
Banks commission and charges payment
G. Mitigating Factor:
Margin
Volatility
High debt load ( Leverage\Gearing )
Overstocking or debtor issues
Repaid growth, acquisition or expansion
Management changes or succession issues
Customer or Supplier concentration
Lack of transparency or industry issues.
H. Investment Structure:
Amount of investment
Tenors of investment
Justification of investment
Based on the project repayment ability installment to be determined

3.12 Investment Principles:


The Principle of lending is a collection of certain accepted time tested standards, which
ensure the proper use of loan fund in a profitable way and its timely recovery. Different
authors describe different principles for sound lending.
1. Safety
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2. Security
3. Liquidity
4. Adequate yield
5. Diversity

Safety:
Safely should get the prior importance in the time of sanctioning the loan. At the time of
maturity the borrower may not will or may unable to pay the loan amount. Therefore, in the
time of sanctioning the loan adequate securities should be taken from the borrowers to
recover the loan. Banker should not sacrifice safety for profitability. AL-ARAFH-ISLAMI
Bank Ltd. exercises the lending function only when it is safe and that the risk factor is
adequately mitigated and covered. Safety depends upon:
The security offered by the borrower: and
The repaying capacity and willingness of the debtor to repay the loan with interest.
Liquidity:
Banker should consider the liquidity of the loan in time of sanctioning it. Liquidity' is
necessary to meet the consumer need.
Security:
Banker should be careful in the selection of security to maintain the safety of the loan.
Banker should properly evaluate the proper value of the security. If the estimated value is less
than or equal to loan amount, the loan should be given against such securities. The more the
cash near item the good the security. In the time of valuing the security, the Banker should be
more conservative.

Adequate Yield:
As a commercial origination, Banker should consider the profitability. So banker should
consider the interest rate when go for lending. Always Banker should fix such an interest rate
for its lending which should be higher than its savings deposits interest rate. To ensure this
profitability Banker should consider the prospect of the project.
Diversity:
Banker should minimize the portfolio risk by putting its fund in the different fields. If Bank
put its entire loan able fund in one sector it \\ill increase the risk. Banker should distribute its
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loan able fund in different sectors. So if it faces any problem in any sector it can be covered
by the profit of another sector

3.13 Guide Lines by Bangladesh Bank


Guideline of processing investment (According to Bangladesh Bank & Head Office):
Enter the Application in the “Investment Proposal Received and Disposal Register (B-53) and
allot a Serial Number to it.
Examine shariah permissibility of the goods. Reject the proposal outright, if not
permitted by Islamic Shariah.

Check-up Credit Restriction Schedule of Bangladesh Bank and Head Office Current
Investment Policy Guidelines.

Visit the Business establishment of the Client. Talk to the business and important
personalities of the locality to ascertain the Honesty, Integrity and Business dealings
of the Client.

Request for confidential report of the client from local Bank Branches. Confident
Report from Credit Information Bureau (CIB) of Bangladesh Bank through Head
Office Investment Division as per Instruction Circular of Head Office in this Regard.
Obtain Financial Statement/Balance Sheet of the Client for the last three consecutive
years for Investment Proposals of Tk. 50.00 lac or above as per Head Office
Instruction.

Inspect Land, Building, other Assets and Properties proposed to be Mortgaged or


Hypothecated.

Forward Documents, Title Deeds and other relevant Papers to approve Lawyer of the
Bank for examination and furnishing his opinion.

Obtain Lawyers Opinion as per clause No. 8.02.

Please study the following carefully and note down the actual findings in the
Appraisal Form against each item :

Effective demand, price of the goods, short or long-term duration, quality and other
specifications of the goods, availability, etc. of the sand or projected goods.

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Where sale price of the goods is payable by the client at specified future date in lump
sum or installments as per proposal.
For Bai-Murabaha Commercial and Bai Murabaha Industrial Investment, prepare
Appraisal Report on F-167B. For appraisal Bai-Murabaha agriculture and For Bai-
Murabaha Import use special Appraisal Form devised for each of those, if any,
otherwise F-167B providing the available/required supplementary information. In
course of preparation of the appraisal report please ensure incorporation of all
information of all information, particulars figures and statistics in Appraisal Form
correctly with special attention to the following: Contact primarily with the
producers/sellers/suppliers of the goods in the market, study the market price and
work out the purchase and sale prices of the goods as per guidelines.

3.14 Guideline for Sanctioning Investment by Bangladesh Bank & Head Office

On completion of Appraisal as provided herein above, of the Proposal is found viable,


issue Sanction Advice (F-188) if it is within the business power of the Branch
mentioning all the terms and condition is duplicate to the Client and endorse copies to
Zonal and Head Offices retaining one copy in the Client’s file duly accepted by the
Client.

If the proposal is not within the Discretionary Power of the Branch, the Branch shall
with Appraisal Report on F-167A and F-167B to Zonal Office/Head Office.

If the proposal is within the Business Power of the Zonal Office, Zonal Office shall
accord Approval /Regret the Proposal.
If the proposal is not within the Business of the Zonal Office shall forward the
proposal to Head Office with their views and recommendations.

On receiving the proposal and the Appraisal Report along with supporting papers
Head Office will either approve or Regret.

If the Branch/the Zonal Office /Head Office, the branch will issue the Sanction advice
(F-188) with a copy to Zonal Office /Head Office duly recorded in /Facility
Sanctioned Register (B-119) with authority to the investment Client for the limit.
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Open file Client-wise, affixing the Fixed Number allotted to him as per Limit Register
(B-117) and Client’s name, address, telephone number be recorded prominently in
the inner side of the investment File for easy tracing in case of need.

In case of investment to the existing Client, obtain required papers, document with the
past performance and outstanding liabilities of the Client, if any and process of
sanction the proposal as per instruction laid down here-in-above after due evaluation
or study.
In case of investment the bank follows this requirement. Sometime it may be miss uses but
almost the bank follows the respective guideline.
.
3.15 Special Scheme under Investment

3.15.1 Household Durables Scheme (HDS)

Objective

To increase standard of living and quality of life of the fixed income group by extending
them investment facilities to purchase household articles.

Target Group

Permanent Officials of Govt. / Semi-Govt. / Autonomous Body / Corporations / Banks & FIs
/ Defense Forces / Madrasah / School / College / University Teachers / Businessmen / House
owners of Metropolitan & other District Head Quarters / Professionals (Doctors / Engineers /
Lawyers etc.) / Existing clients / Wage Earners / University / Medical Students / Officials of
renowned Private Firms.

Nature of Goods / Items

Electronics & electrical goods, Motor cycle / Bi-cycle, Furniture / Fixtures, Ornaments,
Instruments / Equipments for Medical & Engineering students etc.

Mode of Investment

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Bai-Muajjal

Period of Investment

Maximum 1-years

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment

For All Metropolitan Cities Tk.0.30 million


For Districts & Municipalities Tk.0.20 million
Others Tk.0.10 million

Age of Clients

Service holders : 2-yrs unexpired service


Other than service holders : Minimum 27-years & Maximum 65 years

How to Apply

Application Form shall have to be collected from nearest Branch of Islami Bank Bangladesh
Ltd.

3.15.2 Investment Scheme for Doctors (ISD)

Objective

i. To help unemployed qualified doctors to go for self-employment


ii. To provide latest medical equipments to specialist doctors to extend modern medicare
facilities throughout the country.

Target Group

Doctors (MBBS), Dentist (BDS),Homeopath,Unani, Ayurbed Doctors


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Nature of Goods / Items

X-ray/ ECG/Pathological & other equipments/Apparatus/Modern medical equipments/ other


accessories.

Mode of Investment

Bai-Muajjal / HPSM (item wise).

Period of Investment

Maximum 5-years

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment
For All Metropolitan Cities: Tk.1.50 million
For Districts: Tk.1.00 million
For Thana / Municipalities: Tk.0.70 million

How to Apply

Application Form shall have to be collected from nearest Branch of Islami Bank Bangladesh
Ltd.

3.15.3 Small Enterprise Investment Scheme (SEIS)

Objective

i. To help the educated unemployed youths of rural and urban areas for self-employment.
ii. To provide investment to small businessmen and entrepreneurs.

Target Group

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Jobless young people / small traders / small & cottage industries / service sector with a valid
trade license.

Nature of Goods / Items

Dairy, beef fattening, fishery, poultry & duckery,live stock farming,


workshop,tailoring,garments sweetmeat, grocery,stationery, electrical and electronics, shoes,
cloths, laundry, small restaurant etc.

Mode of Investment
Bai-Muajjal

Period of Investment

Maximum 1-year in Bai-Muajjal & Maximum 2-years in HPSM.

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment

For All Metropolitan Cities : Tk.0.50 million


For Districts & Municipalities : Tk.0.30 million
Others : Tk.0.20 million

How to Apply

Application Form shall have to be collected from nearest Branch of Islami Bank Bangladesh
Ltd.

3.15.4 Real Estate Investment Program (REIP)

Objective

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i. To ease the housing problem in the urban areas.
ii. To make arrangement for comfortable accommodation of the fixed income group.

Target Group

Land lords, service holders, businessmen, professionals, expatriates etc.

Nature of Goods / Items

Construction of building, purchase of flats / ready made building, extension / renovation of


house, installation of lift, generator, sub station etc.

Mode of Investment

Bai-Muajjal

Period of Investment

Maximum 15-years

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment

a)For Construction, up to 60% but not to exceed Tk.10.00 million


b) For purchase of Flat / Apartment up to 50% but not to exceed Tk.7.50 million.
c) For purchase of Ready-made House, up to 50% but not to exceed Tk. 10.00 million.

Age of Clients

Maximum 65-years.

How to Apply

Application Form shall have to be collected from nearest Branch of Islami Bank Bangladesh
Ltd.

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3.15.5 Transport Investment Scheme (TIS)

Objective

i. To ease the existing transportation problem.


ii. To ensure speedy economic growth and development of the country particularly the
expansion of trade, commerce & industry.

Target Group

Persons, businessmen, firms having proven experience in transport business,


Official/Commercial use by the business firms & industries,established clinic & hospitals etc.

Nature of Goods / Items

Bus, Truck, Minibus, Double Decker, Private Car, Micro Bus, Jeep, Auto Rickshaw, Pick up
Van, Human Hauler, Baku, Vessel etc.

Mode of Investment

Bai-Muajjal

Period of Investment

3 to 5 years

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

How to Apply

Application Form shall have to be collected from nearest Branch of Al Arafha Islami Bank
Bangladesh Ltd.

3.15.6 Car Investment Scheme (CIS)

Objective

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To help a section of the officials, business houses and business executives and established
professionals for movement in discharging their duties and responsibilities punctually and
efficiently.

Target Group

Permanent officials, teachers, businessmen, house owners, professionals, existing clients of


IBBL,wage earners etc.

Nature of Goods / Items

Reconditioned / Brand new Private Car / Micro / Jeep / Auto Rickshaw etc.

Mode of Investment

Hire Purchase under Shirkatul Melk (HPSM)

Period of Investment

Maximum 4-years for reconditioned car and 5-years for brand new cars.

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment

Tk.2.00 million for reconditioned and Tk.3.00 million for brand new car.

Age of Clients

Minimum 21 years, Maximum 65 years.

How to Apply

Application Form shall have to be collected from nearest Branch of Al Arafha Islami Bank
Bangladesh Ltd.

3.15.7 Agricultural Implement Investment Scheme (AIIS)

Objective

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i. To provide power tillers, power pumps, shallow tube wells, thresher machines etc. on easy
terms to unemployed rural youths for self-employment.
ii. To the farmers to help augment production in agriculture sector.

Target Group

Educated / uneducated farmers & persons / youths.

Nature of Goods / Items

Power Tiller / Power pump / Deep / Shallow tube well / Thresher machine / Combined
harvester / Tractor / Rice transplanter / USG making Machine / Drum Seeder / Agro
processing machinery & equipments etc.

Mode of Investment

Bai-Muajjal

Period of Investment

Maximum 1-year for Bai-Muajjal & Maximum 2-years for HPSM.

Rate of Return

18.00% or rate to be determined by the Bank from time to time.

Amount of Investment

Maximum Tk.0.30 million.

How to Apply

Application Form shall have to be collected from nearest Branch of Al Arafha Islami Bank
Bangladesh Ltd.

3.15.8 Micro Industries Investment Scheme (MIIS)

Objective

i. To create wider base for industries as well as to encourage establishment of micro-


industries in different areas of the country.
ii. To create potential entrepreneurs.
iii. Diversification of Bank investment port-folio.
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Target Group

Engineering diploma / Degree holders / Technical persons.

Nature of Goods / Items

Food & agriculture / plastic & rubber/ forestry & furniture / dairy product processing /
engineering/ leather / chemicals / textiles / recycling / service electrical accessories / paper
product / handicrafts industries / computer technology industries /manufacturing of garments
/ sewing and other machines for tailoring etc.

Mode of Investment

Bai-Murabaha

Period of Investment

Maximum 1-year for Bai-Murabaha & Maximum 3-years for HPSM (excluding gestation
period).

Rate of Return

14.50% or rate to be determined by the Bank from time to time.

Amount of Investment

For All Metropolitan cities : Up to Tk.1.50 million


For Districts & Municipalities : Up to Tk.1.00 million
Others :Up to Tk.0.50 million
How to Apply
Application Form shall have to be collected from nearest Branch of Islami Bank Bangladesh
Ltd.

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3.16 Process of Investment:

Process of Investment
Heads Characteristics
Application Applicant applies for the Investment in the prescribed form of the bank
describing the types and purpose of loan.

Sanction 1. Collecting credit information about die applicant to determine the


credit worthiness of the borrower. Sources of information
2. Personal Investigation, Confidential Report from other bank. Head
Office/Branch/Chamber of Commerce,
3. CIB (Central Information Bureau) report from Central Bank.
i. Evaluation of compliance with its lending policy,
ii. Evaluating the proposed security.
4. LRA is must for the loan exceeding one crore - as ordered by
Bangladesh Bank.

5. If everything is in accordance the loan is sanctioned


Documentation Then bank prepare a Investment proposal which contains terms and
conditions of loan for approval of Ra or Manager

Takes the necessary papers and signatures from borrower

Disbursement An Investment Account is opened. Where customer A/C--------Dr.

Respective Loan A/C --------------------------------------- Cr.

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CHAPTER-4

PERFORMANCE
ANALYSIS

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4.1 Theoretical Review:

4.2 Ratio Analysis

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas. The ratios are categorized as
Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios,
Profitability Ratios, and Market Value Ratios.

Ratio Analysis as a tool possesses several important features. The data, which are provided
by financial statements, are readily available. The computation of ratios facilitates the
comparison of firms which differ in size. Ratios can be used to compare a firm's financial
performance with industry averages. In addition, ratios can be used in a form of trend
analysis to identify areas where performance has improved or deteriorated over time.

Because Ratio Analysis is based upon accounting information, its effectiveness is limited by
the distortions which arise in financial statements due to such things as Historical Cost
Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firm's performance and to identify areas
which need to be investigated further.

Short-term Solvency or Liquidity Ratios

Short-term Solvency Ratios attempt to measure the ability of a firm to meet its short-term
financial obligations. In other words, these ratios seek to determine the ability of a firm to
avoid financial distress in the short-run. The two most important Short-term Solvency Ratios
are the Current Ratio and the Quick Ratio.

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Loan-To-Deposit Ratio - LTD'

A commonly used statistic for assessing a bank's liquidity by dividing the banks total loans
by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage.
If the ratio is too high, it means that banks might not have enough liquidity to cover any
unforeseen fund requirements; if the ratio is too low, banks may not be earning as much as
they could be.

Profitability Ratio

Profitability ratios show a company's overall efficiency and performance. We can divide
profitability ratios into two types: margins and returns. Ratios that show margins represent
the firm's ability to translate sales dollars into profits at various stages of measurement.
Ratios that show returns represent the firm's ability to measure the overall efficiency of the
firm in generating returns for its shareholders.

Return on Assets

The Return on Assets ratio is an important profitability ratio because it measures the
efficiency with which the company is managing its investment in assets and using them to
generate profit. It measures the amount of profit earned relative to the firm's level of
investment in total assets. The return on assets ratio is related to the asset management
category of financial ratios.

The calculation for the return on assets ratio is: Net Income/Total Assets = _____%. Net
Income is taken from the income statement and total assets is taken from the balance sheet.
The higher the percentage, the better, because that means the company is doing a good job
using its assets to generate sales.

Return on Equity

The Return on Equity ratio is perhaps the most important of all the financial ratios to
investors in the company. It measures the return on the money the investors have put into the
company. This is the ratio potential investors look at when deciding whether or not to invest
in the company. The calculation is: Net Income/Stockholder's Equity = _____%. Net

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income comes from the income statement and stockholder's equity comes from the balance
sheet. In general, the higher the percentage, the better, with some exceptions, as it shows that
the company is doing a good job using the investors' money.

Return on Deposit (ROD)

The return on debt (ROD) can be expressed as the quantification of a company’s performance
or net income as allied to the amount of debt issued by the company. Putting it other way, the
return on debt refers to the amount of profit generated for every dollar held by a company in
debt. As stated by Investopedia, the return on debt is an intricate financial modeling skill
rather than being a commonly used financial reporting factor. Moreover, companies carrying
a significant amount of debt relating to capital and/or assets are more prone to economic
downturns during a decline in earnings and credit measures might be tightened.

Leverage Ratio /Capital Structure Ratio

A mix of a company's long-term debt, specific short-term debt, common equity and preferred
equity. The capital structure is how a firm finances its overall operations and growth by using
different sources of funds.
Debt comes in the form of bond issues or long-term notes payable, while equity is classified
as common stock, preferred stock or retained earnings. Short-term debt such as working
capital requirements is also considered to be part of the capital structure.

Equity-to-Assets Ratio

The equity-to-assets ratio is one of many financial ratios used to determine the financial
health and long-term profitability of a corporation. It is often used by investors to determine
whether the corporation's shares are a safe investment. Though important, the equity-to-assets
ratio should be used only with other financial ratios to determine a corporation's overall
financial health.

Efficiency Ratio

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In banking, a ratio of expenses to revenue. For example, if a bank spends $10 million and
makes $15 million in a given month, its efficiency ratio is .67. Banks desire a lower
efficiency ratio because this means that the bank is making considerably more than it is
spending and is therefore on sound fiscal footing. One way to conceptualize the efficiency
ratio is to say it is the measure of what a bank must spend in order to make one dollar. In the
above example, the bank must spend 67 cents.

Ratios that are typically used to analyze how well a company uses its assets and liabilities
internally. Efficiency Ratios can calculate the turnover of receivables, the repayment of
liabilities, the quantity and usage of equity and the general use of inventory and machinery.

Operational Efficiency

A market condition that exists when participants can execute transactions and receive
services at a price that equates fairly to the actual costs required to provide them. An
Operationally-efficient market allows investors to make transactions that move the market
further toward the overall goal of prudent capital allocation, without being chiseled down by
excessive frictional costs, which would reduce the risk/reward profile of the transaction.

Asset utilization ratio

The asset utilization ratio measures management's ability to make the best use of its assets to
generate revenue. This is particularly meaningful in a manufacturing, where fewer capital
assets are used to produce products.
The asset utilization ratio is calculated by dividing total sales by the net book value of the
capital assets. Once calculated, this ratio can then be compared to benchmark industry
standard ratios, or it can be compared to ratios of other comparable businesses.

Total Expenses to Total Assets

Total Expenses to Total Assets is the ratio between total Expense and total assets. It
provides information regarding total costs involved annually for investment funds. The costs
include expenses like legal fees, management fees, and other operational expenses. Total
Expense Ratio is also called as Expense Ratio.

Total expense ratio = Total expense / Total assets

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The Expense helps in measuring the fund’s assets which are sold or used to manage the
expenses relating to the fund. The output is expressed as a percentage and is calculated on a
yearly or annual basis.

Credit Risk Ratio

The risk of loss of principal or loss of a financial reward stemming from a borrower's failure
to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a
borrower is expecting to use future cash flows to pay a current debt. Investors are
compensated for assuming credit risk by way of interest payments from the borrower or
issuer of a debt obligation.

Credit risk is closely tied to the potential return of an investment, the most notable being that
the yields on bonds correlate strongly to their perceived credit risk.

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4.3 Time Series Analysis:

01. Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment to Deposit Ratio 89.43% 93.47% 99.46% 98.12% 97.11%

Analysis:

In this ratio, I can analysis that the ratio of investment to deposit has increased in 2010 which
compare in more than from 2008 to 2012. On 2012, investment to deposit Ratio is a lower
than another year.

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Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 84.91% 104.17% 117.70% 123.69% 114.73%

Social Islami Bank 87.48% 88.48% 88.58% 88.30% 86.33%

First Security Islami Bank 92.10% 93.98% 97.58% 95.65% 102.22%

Exim Bank 107.30% 99.51% 104.15% 95.89% 98.17%

Analysis:

As Loan or Investment to Deposit Ratio, I can analysis to comaper between Shahajalal Islami
Bank, Social Islami Bank, First Security Islami Bank and Exim bank. So that on 2009
Shahjalal Islami Bank is higher than another year. On 2010, Social Islami Bank is the biggest
rate than another year. First Security Islami Bank compares their investment to deposit ratio
is high 2008 than another year. And the Exim Bank is increasing from 2008 to 2012. So that
the ratio of Exim bank on 2012 is 107.30%.

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Investment to Assets Ratio

Year 2012 2011 2010 2009 2008


Investment to Assets Ratio 72.96% 74.44% 71.38% 77.57% 77.56%

Analysis:

In this ratio analysis, I can see that the ratio of investment to Assets Ratio is greater on 2009
than another year. So that the best ratio of investment to Assets Ratio is 77.57%

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Investment to Assets Ratio

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 77.26% 80.09% 80.80% 80.52% 77.22%

Social Islami Bank 70.73% 70.08% 72.02% 69.76% 69.79%

First Security Islami Bank 78.02% 80.75% 86.42% 84.58% 84.60%

Exim Bank 89.69% 82.66% 87.46% 84.96% 82.59%

Analysis:
In 2010 Shahjalal Islami Bank is higher than another year. On 2010, Social Islami Bank is
the biggest rate than another year. First Security Islami Bank compares their investment to
deposit ratio is high 2010 than another year. And the Exim Bank is the best rate on 2012. So
that the ratio of Exim bank on 2012 is 89.69%

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Return on Assets

Year 2012 2011 2010 2009 2008


Return on Assets (ROA) 1.31% 1.71% 2.36% 1.77% 1.80%

Analysis:

In this ratio, I can analysis that the ratio of Return on Assets has increased in 2010 which
compare in more than from 2008 to 2012. On 2012, Return on Assets is a lower than another
year.

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Return on Assets (ROA)

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 0.95% 1.09% 2.63% 1.82% 1.85%

Social Islami Bank 1.29% 1.28% 1.17% 1.08% 0.68%

First Security Islami Bank 0.59% 0.64% 0.86% 0.68% 0.33%

Exim Bank 1.63% 1.55% 3.07% 2.03% 1.60%

Analysis:
Exim bank Return on assets (ROA) is higher than others three Islami banks. Then 2 nd position
exist social Islami bank. First security Islami bank’s ROA position is very low than others
three Islami banks.

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Return on Equity

Year 2012 2011 2010 2009 2008


Return on Equity (ROE) 15.45% 18.47% 22.72% 24.10% 24.70%

Analysis:

In this ratio, I can analysis that the ratio of return on equity (ROE) has decreased in 2012
which compare in more than from 2008 to 2009, 2010 & 2011. So ROE are decreased by
every year.

Page 85 of 168
Return on Equity (ROE)

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 13.63% 14.76% 30.71% 21.73% 22.68%

Social Islami Bank 13.48% 11.51% 15.31% 12.14% 10.82%

First Security Islami Bank 13.45% 12.89% 13.99% 11.41% 4.11%

Exim Bank 14.38% 13.87% 27.86% 25.22% 21.98%

Analysis:

From the diagram I can analysis to comaper between Shahajalal Islami Bank, Social Islami
Bank, First Security Islami Bank and Exim bank. So that on 2012 Exim Bank ROE is higher
than another three Islami banks. All four Islami banks ROE are very close to one another.

Page 86 of 168
Return on Deposits

Year 2012 2011 2010 2009 2008


Return on Deposits (ROD) 1.61% 2.15% 3.29% 2.24% 2.25%

Analysis:

In this ratio, I can analysis that ratio has increased in 2010 which compare in more than from
2008 to 2012. On 2012, Return on Deposits Ratio is a lower than another year.

Page 87 of 168
Return on Deposits (ROD)

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 1.05% 1.42% 3.83% 2.79% 2.75%

Social Islami Bank 1.59% 1.62% 1.43% 1.37% 0.84%

First Security Islami Bank 0.69% 0.74% 0.97% 0.77% 0.40%

Exim Bank 1.95% 1.86% 3.66% 2.29% 1.90%

Analysis:

As Return on Deposits, I can analysis to comaper between Shahajalal Islami Bank, Social
Islami Bank, First Security Islami Bank and Exim bank. On 2012, Exim Bank is best and
First Security Islami Bank is lowest position.

Page 88 of 168
Equity to Assets Ratio

Year 2012 2011 2010 2009 2008


Equity to Assets Ratio 8.49% 9.27% 10.38% 7.35% 7.28%

Analysis:

In this ratio, I can analysis that has increased in 2010 which compare in more than from 2008
to 2012. On 2008, this Ratio is a lower than another year.

Page 89 of 168
Equity to Assets Ratio

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 6.99% 7.38% 8.56% 8.36% 8.17%

Social Islami Bank 9.56% 11.15% 7.61% 8.89% 6.26%

First Security Islami Bank 4.37% 4.95% 6.16% 5.97% 8.13%

Exim Bank 11.34% 11.15% 11.03% 8.06% 7.29%

Analysis:

As this ratio, I can analysis to comaper those banks. I can see that the Exim Bank position is
better than another bank activity.

Page 90 of 168
Deposits to Assets Ratio

Year 2012 2011 2010 2009 2008


Deposits to Assets Ratio 81.58% 79.64% 71.77% 79.06% 79.86%

Analysis:

In Deposits to Assets ratio, I can analysis that has increased in 2012 which compare in more
than from 2008 to 2012. On 2010, Deposits to Assets Ratio is a lower than another year.

Page 91 of 168
Deposits to Assets Ratio

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 90.99% 76.89% 68.65% 65.10% 67.31%

Social Islami Bank 80.85% 79.20% 81.30% 79.01% 80.85%

First Security Islami Bank 84.72% 85.91% 88.57% 88.42% 82.76%

Exim Bank 83.59% 83.07% 83.97% 88.61% 84.13%

Analysis:

As this Ratio, I can analysis to comaper between those banks. So that on 2012 Shahjalal
Islami Bank is higher than another year. On 2010, Social Islami Bank lowest position than
another bank.

Page 92 of 168
Operating Efficiency

Year 2012 2011 2010 2009 2008


Operating Efficiency 32.49% 28.66% 29.59% 34.43% 29.67%

Analysis:

In this ratio, I can analysis that the ratio of investment to deposit has increased in 2009 which
compare in more than from 2008 to 2012. On 2011, this Ratio is a lower than another year.

Page 93 of 168
Operating Efficiency

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 25.82% 35.26% 27.26% 30.02% 22.09%

Social Islami Bank 31.82% 33.22% 37.77% 38.04% 39.04%

First Security Islami Bank 48.00% 41.90% 42.28% 43.45% 66.90%

Exim Bank 39.90% 38.61% 23.50% 28.35% 29.05%

Analysis:

As operating Efficiency Ratio, I can analysis to comaper between those Banks. So that on
2012 first Security Islami Bank is higher than another year and Shahjalal Islami bank is
lowest position.

Page 94 of 168
Asset Utilization

Year 2012 2011 2010 2009 2008


Asset Utilization 9.65% 8.67% 5.63% 8.25% 9.30%

Analysis:

In this ratio, I can analysis that the ratio of assets Utilization has increased in 2012 which
compare in more than from 2008 to 2012. On 2010, assets Utilization Ratio is a lower than
another year.

Page 95 of 168
Asset Utilization

Year 2012 2011 2010 2009 2008


Shahjalal Islami Bank 8.54% 9.43% 8.14% 9.39% 9.60%

Social Islami Bank 9.16% 8.20% 7.04% 7.70% 9.17%

First Security Islami Bank 10.28% 9.62% 8.72% 9.06% 10.06%

Exim Bank 9.71% 10.10% 8.50% 9.78% 9.61%

Analysis:

As Asset Utilization Ratio, I can analysis to comaper between those Banks on 2012; First
Security Islami Bank is higher rate and the second position is Exim Bank on 2012.

Page 96 of 168
Total Expenses to Total Assets

Year 2012 2011 2010 2009 2008


Total Expenses to Total Assets 1.45% 1.42% 1.76% 1.87% 1.73%

Analysis:

In this ratio, I can analysis that ratio has increased in 2009 which compare in more than from
2008 to 2012. On 2011, Total Expenses to Total Assets Ratio is a lower than another year.

Page 97 of 168
Total Expenses to Total Assets

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 0.92% 1.52% 1.68% 1.49% 1.16%

Social Islami Bank 1.64% 1.63% 1.80% 1.63% 1.69%

First Security Islami Bank 1.38% 1.26% 1.39% 1.20% 1.23%

Exim Bank 2.11% 1.92% 1.60% 1.51% 1.51%

Analysis:

As total Expenses ot total Assets Ratio, I can analysis to comaper for 2012 that Exim bank is
higher than another. And Social Islami Bank is second position.

Page 98 of 168
Operating Income to Total Assets

Year 2012 2011 2010 2009 2008


Operating Income to Total Assets 4.46% 4.95% 5.96% 5.44% 5.84%

Analysis:

In this ratio, I can analysis that ratio has increased in 2010 which compare in more than from
2008 to 2012. On 2012, investment to deposit Ratio is a lower than another year.

Page 99 of 168
Operating Income to Total Assets

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 3.57% 4.32% 6.16% 4.95% 5.27%

Social Islami Bank 5.14% 4.91% 4.77% 4.30% 4.33%

First Security Islami Bank 2.88% 3.01% 3.28% 2.77% 1.83%

Exim Bank 5.30% 4.96% 6.81% 5.33% 5.19%

Analysis:

Above the Exim bank operating profit rate is higher than other three islami banks. In 2012
their operating profit rate is 5.30%, that is better than other three islami banks.

Page 100 of 168


Equity to Investment Ratio

Year 2012 2011 2010 2009 2008


Equity to Investment Ratio 11.64% 12.45% 14.54% 9.47% 9.38%

Analysis:

In this ratio, I can analysis that the ratio of Equity to Investment Ratio is higher in 2010
which compare in more than from 2008 to 2012. On 2008, Equity to Investment Ratio is a
lower than another year.

Page 101 of 168


Equity to Investment Ratio

Year 2012 2011 2010 2009 2008

Shahjalal Islami Bank 9.04% 9.22% 10.60% 10.38% 10.58%

Social Islami Bank 13.52% 15.91% 10.57% 12.75% 8.98%

First Security Islami Bank 5.60% 6.13% 7.13% 7.06% 9.61%

Exim Bank 12.64% 13.49% 12.62% 9.49% 8.83%

Analysis:

In the equity to investment Ratio, I can comapare among Shahajalal Islami Bank, Social
Islami Bank, First Security Islami Bank and Exim bank. So that First Security Islami Bank
equity is lower than other three Islami banks.

Page 102 of 168


4.4 Comparative Analysis among Five Islami Banks

01. Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 89.43% 93.47% 99.46% 98.12% 97.11%

Shahjalal Islami Bank 84.91% 104.17% 117.70% 123.69% 114.73%

Social Islami Bank 87.48% 88.48% 88.58% 88.30% 86.33%

First Security Islami Bank 92.10% 93.98% 97.58% 95.65% 102.22%

Exim Bank 107.30% 99.51% 104.15% 95.89% 98.17%

Analysis:

On loan or investment to Deposits Ratio, I can analysis to compare those banks that on 2009
Shahjalal Islami Bank best position to anther banks. And second position is Al-Arafah Islami
Bank and rate is 98.12%

Page 103 of 168


02. Investment to Assets Ratio

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 72.96% 74.44% 71.38% 77.57% 77.56%

Shahjalal Islami Bank 77.26% 80.09% 80.80% 80.52% 77.22%

Social Islami Bank 70.73% 70.08% 72.02% 69.76% 69.79%

First Security Islami Bank 78.02% 80.75% 86.42% 84.58% 84.60%

Exim Bank 89.69% 82.66% 87.46% 84.96% 82.59%

Analysis:

On Loan or Investment to Assets Ratio, I can analysis to compare those banks that on 2012
Exim Bank best position to anther banks. And third position is Al-Arafah Islami Bank for the
loan or investment to Assets ratio. So that loan to assets ratio is 77.96% on 2012.

Page 104 of 168


03. Return on Assets

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 1.31% 1.71% 2.36% 1.77% 1.80%

Shahjalal Islami Bank 0.95% 1.09% 2.63% 1.82% 1.85%

Social Islami Bank 1.29% 1.28% 1.17% 1.08% 0.68%

First Security Islami Bank 0.59% 0.64% 0.86% 0.68% 0.33%

Exim Bank 1.63% 1.55% 3.07% 2.03% 1.60%

Analysis:

On Return on Assets Ratio, I can analysis to compare those banks that on 2010 Exim Bank
best position to anther banks. And third position is Al-Arafah Islami Bank.

Page 105 of 168


04. Return on Equity

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 15.45% 18.47% 22.72% 24.10% 24.70%

Shahjalal Islami Bank 13.63% 14.76% 30.71% 21.73% 22.68%

Social Islami Bank 13.48% 11.51% 15.31% 12.14% 10.82%

First Security Islami Bank 13.45% 12.89% 13.99% 11.41% 4.11%

Exim Bank 14.38% 13.87% 27.86% 25.22% 21.98%

Analysis:

On Return on Equity Ratio, I can analysis to compare those banks that on 2010 Shahjalal
Islami Bank best position to anther banks. And Third position is Al-Arafah Islami Bank.

Page 106 of 168


05. Return on Deposits (ROD)

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 1.61% 2.15% 3.29% 2.24% 2.25%

Shahjalal Islami Bank 1.05% 1.42% 3.83% 2.79% 2.75%

Social Islami Bank 1.59% 1.62% 1.43% 1.37% 0.84%

First Security Islami Bank 0.69% 0.74% 0.97% 0.77% 0.40%

Exim Bank 1.95% 1.86% 3.66% 2.29% 1.90%

Analysis:

On Return on Deposit Ratio, I can analysis to compare those banks that on 2010 Shahjalal
Islami Bank and Exim Bank is best position to anther banks. And second position is Al-
Arafah Islami Bank.

Page 107 of 168


06. Equity to Assets Ratio

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 8.49% 9.27% 10.38% 7.35% 7.28%

Shahjalal Islami Bank 6.99% 7.38% 8.56% 8.36% 8.17%

Social Islami Bank 9.56% 11.15% 7.61% 8.89% 6.26%

First Security Islami Bank 4.37% 4.95% 6.16% 5.97% 8.13%

Exim Bank 11.34% 11.15% 11.03% 8.06% 7.29%

Analysis:

On Equity to Assets Ratio, I can analysis to compare those banks that on 2012 Exim Bank
best position to anther banks. And second position is Al-Arafah Islami Bank

Page 108 of 168


07. Deposits to Assets Ratio

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 81.58% 79.64% 71.77% 79.06% 79.86%

Shahjalal Islami Bank 90.99% 76.89% 68.65% 65.10% 67.31%

Social Islami Bank 80.85% 79.20% 81.30% 79.01% 80.85%

First Security Islami Bank 84.72% 85.91% 88.57% 88.42% 82.76%

Exim Bank 83.59% 83.07% 83.97% 88.61% 84.13%

Analysis:

Deposits to assets Ratio, I can compare those banks Al-Arafah Islami Bank is better position
than another bank.

Page 109 of 168


08. Operating Efficiency

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 32.49% 28.66% 29.59% 34.43% 29.67%

Shahjalal Islami Bank 25.82% 35.26% 27.26% 30.02% 22.09%

Social Islami Bank 31.82% 33.22% 37.77% 38.04% 39.04%

First Security Islami Bank 48.00% 41.90% 42.28% 43.45% 66.90%

Exim Bank 39.90% 38.61% 23.50% 28.35% 29.05%

Analysis:

First security Islami bank’s operating efficiency better than other four Islami banks. Al-
Arafah Islami bank exist in the fourth position.

Page 110 of 168


09. Asset Utilization

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 9.65% 8.67% 5.63% 8.25% 9.30%

Shahjalal Islami Bank 8.54% 9.43% 8.14% 9.39% 9.60%

Social Islami Bank 9.16% 8.20% 7.04% 7.70% 9.17%

First Security Islami Bank 10.28% 9.62% 8.72% 9.06% 10.06%

Exim Bank 9.71% 10.10% 8.50% 9.78% 9.61%

Analysis:

First security Islami bank show more utilizes their assets than other four Islami banks. From
2010 Al- Arafah Islami bank’s asset utilization ratio are increased.

Page 111 of 168


10. Total Expenses to Total Assets

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 1.45% 1.42% 1.76% 1.87% 1.73%

Shahjalal Islami Bank 0.92% 1.52% 1.68% 1.49% 1.16%

Social Islami Bank 1.64% 1.63% 1.80% 1.63% 1.69%

First Security Islami Bank 1.38% 1.26% 1.39% 1.20% 1.23%

Exim Bank 2.11% 1.92% 1.60% 1.51% 1.51%

Analysis:

According to the chart/ figure Shahjalal Islami bank total expenses are low than other four
Islami banks. Al- Arafah Islami bank also minimize their cost.

Page 112 of 168


11. Operating Income to Total Assets

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 4.46% 4.95% 5.96% 5.44% 5.84%

Shahjalal Islami Bank 3.57% 4.32% 6.16% 4.95% 5.27%

Social Islami Bank 5.14% 4.91% 4.77% 4.30% 4.33%

First Security Islami Bank 2.88% 3.01% 3.28% 2.77% 1.83%

Exim Bank 5.30% 4.96% 6.81% 5.33% 5.19%

Analysis:

From 2008 to 2012 Exim bank operating profit is better than other four Islami banks. But Al-
Arafah Islami bank are exist in the 2nd position. Social Islami bank is also good position.

Page 113 of 168


12. Equity to Investment Ratio

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 11.64% 12.45% 14.54% 9.47% 9.38%

Shahjalal Islami Bank 9.04% 9.22% 10.60% 10.38% 10.58%

Social Islami Bank 13.52% 15.91% 10.57% 12.75% 8.98%

First Security I. Bank 5.60% 6.13% 7.13% 7.06% 9.61%

Exim Bank 12.64% 13.49% 12.62% 9.49% 8.83%

Analysis:

From above figure I saw that first security islami bank equity to investment is lower than
others four islami banks. So their equity are decreasing every year. But Al-Arafah islami
bank equity are also decreasing every year.

Page 114 of 168


CHAPTER-5

RESEARCH PART

Page 115 of 168


5.1 The Questionnaire
I have followed the process of face to face interview in measuring the customer satisfaction
level of general banking sector because it 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.
5.2 Clients view Analysis:

01. What is your opinion about the AIBL’s Khilkhet Branch?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Very Good 21 84% 84%

02. Good 2 8% 92%

03. Average 2 8% 100%

Total 25 100%

Interpretation:
84% clients say that AIBL’s khilkhet branch are very good, 8% are viewed good and 8%
good.

Page 116 of 168


02. Do you think AIBL’s Khilkhet Branch location is better place?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 17 68% 68%

02. Neutral 8 32% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
In the data, after analysis I saw that 68% clients are viewed that AIBL’s Khilkhet branch
location is better place, and 32% are neutral.

Page 117 of 168


03. What is your opinion about the banking environment of AIBL’s Khilkhet Branch?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Very Good 7 28% 28%

02. Good 16 64% 92%

03. Average 2 8% 100%

Total 25 100%

Interpretation:
28% clients say that bank environment of AIBL’s Khilkhet branch are very good, 64%
express their opinion good..

Page 118 of 168


04. Employees are always ready to help or co-operate the customers? What do you
think?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Strongly Agree 8 32% 32%

02. Agree 17 68% 100%

03. Disagree 0 0% 100%

Total 25 100%

Interpretation:
32% clients say that employees are always ready to help their customer and 68% are agree.

Page 119 of 168


05. Do you think customers are getting more facilities here in comparison with other
banks?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 13 52% 52%

02. Average 12 48% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
52% clients say that customer are getting more facilities here compare with other banks, 48%
are average.

Page 120 of 168


06. How do the employees behave with the customers?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Very Cordial 5 20% 20%

02. Cordial 18 72% 92%

03. Satisfactory 2 8% 100%

Total 25 100%

Interpretation:
From the data, 20% clients say that employees behave with very cordial, 72% clients
say that employees behave cordial.

Page 121 of 168


07. Do you think Al-Arafah Islami Bank AIBL should increase their branch?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 20 80% 80%

02. Neutral 4 16% 96%

03. No 1 4% 100%

Total 25 100%

Interpretation:
80% clients express their opinion is that AIBL should increase their branch for customer
demand.

Page 122 of 168


08. Do you think Al-Arafah Islami Bank is using modern technical equipment?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 4 16% 16%

02. Need Modification 17 68% 84%

03. No 4 16% 100%

Total 25 100%

Interpretation:
From the information 68% clients say that AIBL should use modern equipment.

Page 123 of 168


09. What is your opinion about AIBL Automated Teller Machine?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Very Good 2 8% 8%

02. Good 16 64% 72%

03. Neutral 7 28% 100%

Total 25 100%

Interpretation:
64% clients view their opinion AIBL’s ATM is good, and 28% are neutral.

Page 124 of 168


10. Do you think Al-Arafah Islami Bank’s Automated Teller Machine (ATM) is very
flexible and faster?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 1 4% 4%

02. Average 23 92% 96%

03. No 1 4% 100%

Total 25 100%

Interpretation:
92% are not very much satisfied about their ATM. AIBL should improve their ATM.

Page 125 of 168


11. Do you think Al-Arafah Islami Bank (AIBL) should increase their ATM Booth for
customer demand?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 24 96% 96%

02. Neutral 1 4% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
96% clients view their opinion AIBL should increase their ATM booth for their customer
demand.

Page 126 of 168


12. Do you think AIBL are providing prompt service in cash section?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 3 12% 12%

02. Should be very fast 22 88% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
From the above diagram, 88% clients express their opinion is that cash section should be very
fast.

Page 127 of 168


13. How much you satisfied to operate your account in this branch?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Very satisfied 3 12% 12%

02. Satisfied 21 84% 96%

03. Average 1 4% 100%

Total 25 100%

Interpretation:
12% clients are very satisfied to operate their A/C in this branch, 84% are satisfied, and 4%
are average.

Page 128 of 168


14. AIBL’s Vision is to be a pioneer in Islami banking in Bangladesh and contribute
significantly to the growth of the national economy. Do you agree about their vision?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Strongly Agree 5 20% 20%

02. Agree 19 76% 96%

03. Neutral 1 4% 100%

Total 25 100%

Interpretation:
20% clients are strongly agree eith with their vision, 76% clients are agree with their vision,
and 4% cients are neutral.

Page 129 of 168


Investment
15. Do you think Al-Arafah Islami Bank (AIBL) investment policies are not very strict?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 5 20% 20%

02. Neutral 18 72% 92%

03. No 2 8% 100%

Total 25 100%

Interpretation:
From the above diagram, 20% clients saw that AIBL investment policies are not very strict,
72% are neutral and 8% are no.

Page 130 of 168


16. Do you think Al-Arafah Islami Bank (AIBL) investment rate (profit rate) is lower
than others Banks?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 4 16% 16%

02. Neutral 17 68% 84%

03. No 4 16% 100%

Total 25 100%

Interpretation:
In the above data, 16% clients view their opinion AIBL profit rate is lower than others banks,
68% are neutral and 16% are no.

Page 131 of 168


17. What is your opinion about AIBL investment sanction policy?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Easy 6 24% 24%

02. Neutral 17 68% 92%

03. Tough 2 8% 100%

Total 25 100%

Interpretation:
From the above information, 24% clients are expressed that AIBL investment policy is
easy,68% are neutral and 8% veiw their opinion tough.

Page 132 of 168


18. Do you think AIBL Investment repayment policy is very easy?

Total Respondent-25
No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 8 32% 32%

02. Neutral 15 60% 92%

03. No 2 8% 100%

Total 25 100%

Interpretation:
In the AIBL investment repayment policy, 32% clients are votted yes,60% are votted neutral
and 8% are no. so I can say that AIBL investment repayment policy are not very easy.

Page 133 of 168


Locker
19. Do you feel safe to keep your precious Ornament in AIBL’s this branch?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 16 64% 64%

02. Neutral 9 36% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
From above this data 64% clientsexpress their opinion yes, 36% are neutral.

Page 134 of 168


Social Responsibility
20.Al-Arafah Islami Bank (AIBL) has four (4) major Corporate Social Responsibilities
like, Al-Arafah Islami Bank Foundation, Al-Arafah Islamic International School &
College, Al-Arafah Islami Bank Library and Al-Arafah Islami Bank Kidney Dialosis
Center. Do you think AIBL should increase more Corporate Social Responsibilities?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 25 100% 100%

02. Neutral 0 0% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:

After collecting information from clients I saw that 100% clients want AIBL should increase
their social responsibility.

Page 135 of 168


21. Recently AIBL paid financial help to the BDR mutiny affected family. Do you think
AIBL should increase these types of social responsibilities?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 24 96% 96%

02. Neutral 1 4% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
After collecting information from clients I saw that 96% clients want AIBL should
increase their social responsibility.

Page 136 of 168


22. Al-Arafah Islami Bank Ltd. will donate Tk.25,000 and A Day’s Salary of the
employees to each of deceased families in Savar Tragedy. Do you think AIBL should
more help for their rehabilitation?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative


Percentage

01. Yes 24 96% 96%

02. Neutral 1 4% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
After collecting information from clients I saw that 96% clients want AIBL should increase
their social responsibility.

Page 137 of 168


23. Al-Arafah Islami Bank Ltd. donated Tk. 3.0 million to Bangladesh Olympic
Association for organizing 8th Bangladesh Game-2013. Do you think AIBL should
organize more sporting events?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Yes 21 84% 84%

02. Neutral 4 16% 100%


03. No 0 0% 100%

Total 25 100%

Interpretation:
After collecting information from clients I saw that 84% clients want AIBL should increase
their social responsibility. And 16% are neutral.

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24. Al-Arafah Islami Bank Ltd. donates ‘Ambulance’ to Chittagong University Medical
Center, Kurmitula High School & Khilkhet Areas People and Al-Arafah Islami Bank
Limited provides scholarship to the poor and meritorious students. What is your
opinion about this social responsibility?

Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Should increase 25 100% 100%

02. Neutral 0 0% 100%

03. No 0 0% 100%

Total 25 100%

Interpretation:
After collecting information from clients I saw that 100% clients want AIBL should
increase their social responsibility.

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Account Types:
Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage Cumulative


(%) Percentage

01. Mudaraba Savings Deposit 16 64% 64%


(MSD)

02. Al-Wadiah Current Deposit 9 36% 100%


(CD)

03. Others 0 0% 100%

Total 25 100%

Interpretation:
After collecting information I saw that 64% are Mudaraba Saving Deposit (MSD)
holder and 36% clients are Al- Wadiah Current Deposit (CD) holder.

Page 140 of 168


Clients Types:
Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. Male 17 68% 68%


02. Female 8 32% 100%

Total 25 100%

Interpretation:
Before interpretation I saw that 68% male that means 17 clients and 32% or 8 female are
participate in the questionnaire.

Page 141 of 168


Clients Age:
Total Respondent-25

No. Comments Interviewees

No. of Persons Percentage (%) Cumulative Percentage

01. 20-25 10 40% 40%


02. 26-30 8 32% 72%

03. 31-35 5 20% 92%

04. 36 and above 2 8% 100%

Total 25 100%

Interpretation:
From the diagram I saw that different ages clients aere involved in the questionnaire.
Most of 40% are the aged 20-25.

Page 142 of 168


CHAPTER-6

SWOT ANALYSIS

Page 143 of 168


6.1 SWOT Analysis in AIBL:
Every organization is composed of some internal strengths and weaknesses and also has
some external opportunities and threats in its whole life cycle.

6.2 Strengths:

AIBL provides its customer excellent and consistent quality is every service.

AIBL is financially sound company.

AIBL utilizes state of the art technology to ensure consistent quality and operation.

AIBL provides its works force an excellent place to work

AIBL already achieved a good will among the cli

AIBL has research and training division.

6.3 Weaknesses:

AIBL lacks well trained human resource in some area.

AIBL lacks aggressive advertising.

The procedure of credit facility is to long compare to other banks.

Employees are not motivated in some areas.

6.4 Opportunities:

Emergence of on line banking will open more scope for AIBL.

AIBL can introduce more innovative and modern customer service.

Many branches can be opened in local remote area as its high demand.

AIBL can recruit experienced, efficient and knowledgeable officers and staffs as it
offers good working environment.

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6.5 Threats:

The worldwide trend of mergers and acquisition in financial institutions is causing


problems.

Frequency taka devaluation and foreign exchange rate fluctuation is causing problem.

Lots of new banks are coming in the scenario with new service.

Local competitors can capture huge market share by offering similar products

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CHAPTER-7

FINDING,
RECOMMENDATION
AND
CONCLUSION

Page 146 of 168


7.1 Summary of Findings:

The three (03) months internship program has been going to be finished through writing a
report. During the time of internship I have tried with my best to acquire theoretical and
practical knowledge Banking business and the Management of Credit. Being an employee of
Al- Arafah Islami bank Ltd.

Chapter-1: Introduction is illustrated in chapter one. Here I have tried to find out the history
of Islamic Banking System, background of the report, scope and the limitations of the study
by discussing the background of the program. This is just an introductory discussion.

Chapter-2: In chapter two I have tried to describe organizational overview and as well as
Khilkhet Branch. This chapter major part are History of AIBL, overview, Profile of AIBL,
vision, mission & objectives, specials features, Management, directors, Shariah board,
AIBL’s at a glance

Chapter-3: This chapter covered by investment. This Chapter for helps us taking decision
about any kind of Investment and on what basis we will take decision are discussed here.

Chapter-4: In this chapter are covered by Performance analysis among five Islami banks;
such as Al-Arafah Islami Bank, Shahjalal Islami Bank, Social Islami Bank, first Security
Islami Bank and Exim Bank. In this chapter I try to analysis among five Islami Banks.

Chapter-5: This Chapter are Research Part, where includes clients views and analysis.

Chapter-6: This Chapter includes SWOT analysis. That means Strengths, Weakness,
Opportunities, and Threats.

Chapter-7: Chapter ten is a concluding part of this report. Here problems & limitations of
AIBL for making investment are discussed and I have given recommendations for rectifying
these problems

7.2 Problems & Limitations:

Page 147 of 168


During collecting of information and data from AIBL & making report for this project the
following problems have been followed:

i) Decision making process is very lengthy and sometimes it creates problems, which is
unexpected to the customers. Most of the cases Head Office control the decision making and
it is centralized.

ii) The total number of employees in comparison with needed is very short. this is hampering
the daily operation of the Bank. For an example, Motijheel Branch General Banking is
suffering from shortage of employee.

iii) Lack of proper explanation of records and document records keeping system

7.3 Recommendations:

Decision Making: Decision making power should be decentralized effectively so that


business can promptly be enhanced.

Number of Employees: A handsome number of qualified employees & staffs should


be appointed very soon for maintaining the normal flow of work.

Records keeping system: Filing and record keeping system of the bank should be
modernized .At present operation system is partially computerized and on line
banking should be started very soon.

Effective information system: Effectiveness of credit policy largely depends on


Bank’s branch, divisional & national level information system.

Development of manpower: Effective implementation of credit policy and recovery


tare depends on higher educated, trained and skilled personnel. Bank should procure
and develop such types of employees for its credit wings.

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
Page 148 of 168
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 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 its 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.

Page 149 of 168


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
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
Page 150 of 168
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 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.

7.4 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 cannot find any
difference in its operation between conventional commercial Banks and Islamic Banks
because they have no clear idea about the activities as well as investment mechanism of
Islamic banks.
The Bank is committed to run its activities as per Islamic Shariah and thus it has different
investment(credit) modes, different repayment schedules, different disbursement procedure,
different mark up system. This system is accepted in Islamic Shariah because here money is
converted to goods. ‘Money begets money ‘is prohibited in Islamic Shariah. People are
getting more benefit from the dealings of Islamic banking because here quarterly interest is
not charged and there is no possibility of interest to be converted into principal. It cannot take
part in call money market. Mudaraba, Musharaka are another mode of investment in Islamic
Banking.

The fund of bank strongly depends on deposits and it is has a big influence through the
number and amount of deposit. Khilkhet Branch, Al-Arafah Islami Bank Ltd. has a better
opportunity to have a huge deposit account to increase it fund. Credit card and ATM cards

Page 151 of 168


can play an important role in capturing the unutilized money. The bank has to give huge
concentration on better customer service and satisfaction.

Page 152 of 168


References:

www.google.com

www.alarafahislamibank.com

www.shahjalalislami bank.com

www.socialislami bank.com

www.firstsecurityislami bank.com

www.eximbank.com

www.wikipedia.org/ratioanalysis.com

www.bangladeshbank.com

Page 153 of 168


Appendix:

Questionnaire

Annual Report

Al-Arafah Islami Bank- 2012,2011,2010,2009,2008

Shahjalal Islami Bank- 2012,2011,2010,2009,2008

Social Islami Bank- 2012,2011,2010,2009,2008

First Security Islami Bank- 2012,2011,2010,2009,2008

Exim Bank- 2012,2011,2010,2009,2008

Excel Sheet

Al-Arafah Islami Bank

Shahjalal Islami Bank

Social Islami Bank

First Security Islami Bank

Exim Bank

Page 154 of 168


Appendix:

Al-Arafah Islami Bank Ltd


(AIBL)
01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment & Advances 106764549924 77062729728 53800794063 37636084793 28832800206
Customer Deposit 119380245882 82447188444 54093354204 38355496820 29690121157
Investment to Deposit Ratio 89.43% 93.47% 99.46% 98.12% 97.11%

02. Investment to Assets Ratio


Investment & Advances 106764549924 77062729728 53800794063 37636084793 28832800206
Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Investment to Assets Ratio 72.96% 74.44% 71.38% 77.57% 77.56%

Profitability Ratio
01.Return on Assets (ROA)
Net Income After Tax 1919529161 1772056340 1776992595 858987708 668353316
Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Return on Assets (ROA) 1.31% 1.71% 2.36% 1.77% 1.80%

02.Return on Equity (ROE)


Net Income After Tax 1919529161 1772056340 1776992595 858987708 668353316
Total Equity 12425743720 9593269560 7821213220 3564728466 2705740759
Return on Equity (ROE) 15.45% 18.47% 22.72% 24.10% 24.70%

03.Return on Deposits (ROD)


Net Income After Tax 1919529161 1772056340 1776992595 858987708 668353316
Total Deposit 119380245882 82447188444 54093354204 38355496820 29690121157
Return on Deposits (ROD) 1.61% 2.15% 3.29% 2.24% 2.25%

Leverage Ratio/ Capital Structure


Ratio
01.Equity to Assets Ratio
Stockholders’ Equity 12425743720 9593269560 7821213220 3564728466 2705740759

Page 155 of 168


Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Equity to Assets Ratio 8.49% 9.27% 10.38% 7.35% 7.28%

02.Deposits to Assets Ratio

Total Deposit 119380245882 82447188444 54093354204 38355496820 29690121157


Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Deposits to Assets Ratio 81.58% 79.64% 71.77% 79.06% 79.86%

Efficiency Ratio
01.Operating Efficiency
Year 2012 2011 2010 2009 2008
Total Operating Expenses 2119050842 1468752165 1328555555 908465434 644587565
Total Operating Income 6522954739 5123964635 4489198267 2638293982 2172687425
Operating Efficiency 32.49% 28.66% 29.59% 34.43% 29.67%

02.Asset Utilization
Total Revenues 14119185337 8974091781 4243934714 4004536370 3456338527
Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Asset Utilization 9.65% 8.67% 5.63% 8.25% 9.30%

03.Total Expenses to Total Assets

Total Expenses 2119050842 1468752165 1328555555 908465434 644587565


Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Total Expenses to Total Assets 1.45% 1.42% 1.76% 1.87% 1.73%

04.Operating Income to Total Assets

Total Operating Income 6522954739 5123964635 4489198267 2638293982 2172687425


Total Assets 146334812318 103518725256 75374365400 48515787384 37177221276
Operating Income to Total Assets 4.46% 4.95% 5.96% 5.44% 5.84%

Credit Risk Ratio


01.Equity to Investment Ratio

Total Equity 12425743720 9593269560 7821213220 3564728466 2705740759


Total Investment 106764549924 77062729728 53800794063 37636084793 28832800206
Equity to Investment Ratio 11.64% 12.45% 14.54% 9.47% 9.38%

Page 156 of 168


Shahjalal Islami Bank Ltd (SJIBL)
Ratio Analysis
Liquidity Ratio
01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment & Advances 101365816573 85884380910 63668927504 47441407393 34062963068

Customer Deposit 119380245882 82447188444 54093354204 38355496820 29690121157


Investment to Deposit Ratio 84.91% 104.17% 117.70% 123.69% 114.73%

02. Investment to Assets Ratio

Investment & Advances 101365816573 85884380910 63668927504 47441407393 34062963068


Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Investment to Assets Ratio 77.26% 80.09% 80.80% 80.52% 77.22%

Profitability Ratio
01. Return on Assets
Net Income After Tax 1249721591 1168443400 2072340363 1070568293 817709533
Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Return on Assets 0.95% 1.09% 2.63% 1.82% 1.85%

02. Return on Equity


Net Income After Tax 1249721591 1168443400 2072340363 1070568293 817709533
Total Equity 9166514321 7916792730 6748349330 4926633268 3605440674
Return on Equity 13.63% 14.76% 30.71% 21.73% 22.68%

03. Return on Deposits


Net Income After Tax 1249721591 1168443400 2072340363 1070568293 817709533
Total Deposit 119380245882 82447188444 54093354204 38355496820 29690121157
Return on Deposits 1.05% 1.42% 3.83% 2.79% 2.75%

Page 157 of 168


Leverage Ratio/ Capital Structure Ratio
01. Equity to Assets Ratio

Stockholders’ Equity 9166514321 7916792730 6748349330 4926633268 3605440674


Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Equity to Assets Ratio 6.99% 7.38% 8.56% 8.36% 8.17%

02. Deposits to Assets Ratio

Total Deposit 119380245882 82447188444 54093354204 38355496820 29690121157


Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Deposits to Assets Ratio 90.99% 76.89% 68.65% 65.10% 67.31%

Efficiency Ratio
01. Operating Efficiency
Year 2012 2011 2010 2009 2008
Total Operating Expenses 1209856154 1632504338 1322254120 875597545 513191258
Total Operating Income 4684978491 4630395237 4850963364 2916761866 2322991357
Operating Efficiency 25.82% 35.26% 27.26% 30.02% 22.09%
02. Asset Utilization
Total Revenues 11205890801 10107768588 6416784885 5530882252 4236170670
Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Asset Utilization 8.54% 9.43% 8.14% 9.39% 9.60%

03. Total Expenses to Total Assets

Total Expenses 1209856154 1632504338 1322254120 875597545 513191258


Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Total Expenses to Total Assets 0.92% 1.52% 1.68% 1.49% 1.16%

04.Operating Income to Total Assets

Total Operating Income 4684978491 4630395237 4850963364 2916761866 2322991357


Total Assets 131195295861 107228861656 78800401984 58920895401 44109502922
Operating Income to Total Assets 3.57% 4.32% 6.16% 4.95% 5.27%

Credit Risk Ratio


01.Equity to Investment Ratio

Total Equity 9166514321 7916792730 6748349330 4926633268 3605440674


Total Investment 101365816573 85884380910 63668927504 47441407393 34062963068
Equity to Investment Ratio 9.04% 9.22% 10.60% 10.38% 10.58%

Page 158 of 168


Social Islami Bank Ltd (SIBL)
Ratio Analysis
Liquidity Ratio
01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment & Advances 75877571407 59149933930 39730010937 27891243942 20804761536

Customer Deposit 86737059990 66852551081 44850768353 31588160397 24099823370


Investment to Deposit Ratio 87.48% 88.48% 88.58% 88.30% 86.33%

02. Investment to Assets Ratio

Investment & Advances 75877571407 59149933930 39730010937 27891243942 20804761536


Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Investment to Assets Ratio 70.73% 70.08% 72.02% 69.76% 69.79%

Profitability Ratio
01. Return on Assets
Net Income After Tax 1382942452 1083419151 643019720 431522723 202068294
Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Return on Assets 1.29% 1.28% 1.17% 1.08% 0.68%

02. Return on Equity


Net Income After Tax 1382942452 1083419151 643019720 431522723 202068294
Total Equity 10256782442 9412206799 4198774541 3555754821 1867360314
Return on Equity 13.48% 11.51% 15.31% 12.14% 10.82%

03. Return on Deposits


Net Income After Tax 1382942452 1083419151 643019720 431522723 202068294
Total Deposit 86737059990 66852551081 44850768353 31588160397 24099823370
Return on Deposits 1.59% 1.62% 1.43% 1.37% 0.84%

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Leverage Ratio/ Capital Structure Ratio
01. Equity to Assets Ratio

Stockholders Equity 10256782442 9412206799 4198774541 3555754821 1867360314


Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Equity to Assets Ratio 9.56% 11.15% 7.61% 8.89% 6.26%

02. Deposits to Assets Ratio

Total Deposit 86737059990 66852551081 44850768353 31588160397 24099823370


Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Deposits to Assets Ratio 80.85% 79.20% 81.30% 79.01% 80.85%

Efficiency Ratio
01. Operating Efficiency
Year 2012 2011 2010 2009 2008
Total Operating Expenses 1754254623 1377456279 994462017 653337029 504342309
Total Operating Income 5512232156 4146254649 2633090142 1717643034 1291706859
Operating Efficiency 31.82% 33.22% 37.77% 38.04% 39.04%

02. Asset Utilization


Total Revenues 9824127595 6922205589 3886183280 3078976824 2732256352
Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Asset Utilization 9.16% 8.20% 7.04% 7.70% 9.17%

03. Total Expenses to Total Assets

Total Expenses 1754254623 1377456279 994462017 653337029 504342309


Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Total Expenses to Total Assets 1.64% 1.63% 1.80% 1.63% 1.69%

04.Operating Income to Total Assets

Total Operating Income 5512232156 4146254649 2633090142 1717643034 1291706859


Total Assets 107280652775 84406179099 55168540937 39980819472 29808880564
Operating Income to Total Assets 5.14% 4.91% 4.77% 4.30% 4.33%

Credit Risk Ratio


01.Equity to Investment Ratio

Total Equity 10256782442 9412206799 4198774541 3555754821 1867360314


Total Investment 75877571407 59149933930 39730010937 27891243942 20804761536
Equity to Investment Ratio 13.52% 15.91% 10.57% 12.75% 8.98%

Page 160 of 168


First Security Islami Bank Ltd (FSIBL)
Ratio Analysis
Liquidity Ratio
01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment & Advances 101217621308 73444329788 54983257725 40577900806 26427627177

Customer Deposit 109905568871 78145045008 56344959167 42423092722 25854541500


Investment to Deposit Ratio 92.10% 93.98% 97.58% 95.65% 102.22%

02. Investment to Assets Ratio

Investment & Advances 101217621308 73444329788 54983257725 40577900806 26427627177


Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Investment to Assets Ratio 78.02% 80.75% 86.42% 84.58% 84.60%

Profitability Ratio
01.Return on Assets (ROA)
Net Income After Tax 761863499 580161847 548600731 326837749 104282064
Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Return on Assets 0.59% 0.64% 0.86% 0.68% 0.33%

02.Return on Equity (ROE)


Net Income After Tax 761863499 580161847 548600731 326837749 104282064
Total Equity 5664479782 4500173333 3920011486 2865410755 2538573006
Return on Equity 13.45% 12.89% 13.99% 11.41% 4.11%

03.Return on Deposits (ROD)

Net Income After Tax 761863499 580161847 548600731 326837749 104282064


Total Deposit 109905568871 78145045008 56344959167 42423092722 25854541500
Return on Deposits 0.69% 0.74% 0.97% 0.77% 0.40%

Leverage Ratio/ Capital Structure Ratio


01.Equity to Assets Ratio
Stockholders Equity 5664479782 4500173333 3920011486 2865410755 2538573006
Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Equity to Assets Ratio 4.37% 4.95% 6.16% 5.97% 8.13%

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02.Deposits to Assets Ratio

Total Deposit 109905568871 78145045008 56344959167 42423092722 25854541500


Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Deposits to Assets Ratio 84.72% 85.91% 88.57% 88.42% 82.76%

Efficiency Ratio
01.Operating Efficiency
Year 2012 2011 2010 2009 2008
Total Operating Expenses 1792725352 1146191070 881607207 576795959 383179206
Total Operating Income 3734683955 2735752917 2085207938 1327633708 572782959
Operating Efficiency 48.00% 41.90% 42.28% 43.45% 66.90%

02.Asset Utilization
Total Revenues 13339668730 8747763443 5547047795 4348674553 3141799470
Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Asset Utilization 10.28% 9.62% 8.72% 9.06% 10.06%

03. Total Expenses to Total Assets

Total Expenses 1792725352 1146191070 881607207 576795959 383179206


Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Total Expenses to Total Assets 1.38% 1.26% 1.39% 1.20% 1.23%

04.Operating Income to Total Assets

Total Operating Income 3734683955 2735752917 2085207938 1327633708 572782959


Total Assets 129733173088 90956640861 63619797799 47978552952 31239393418
Operating Income to Total Assets 2.88% 3.01% 3.28% 2.77% 1.83%

Credit Risk Ratio


01.Equity to Investment Ratio

Total Equity 5664479782 4500173333 3920011486 2865410755 2538573006


Total Investment 101217621308 73444329788 54983257725 40577900806 26427627177
Equity to Investment Ratio 5.60% 6.13% 7.13% 7.06% 9.61%

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Exim Bank Ltd
Ratio Analysis
Liquidity Ratio
01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Investment & Advances 137728233264 107353392276 98888938494 70799443910 56531698310

Customer Deposit 128356969591 107881205901 94949400069 73835461825 57586991798


Investment to Deposit Ratio 107.30% 99.51% 104.15% 95.89% 98.17%

02. Investment to Assets Ratio

Investment & Advances 137728233264 107353392276 98888938494 70799443910 56531698310


Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Investment to Assets Ratio 89.69% 82.66% 87.46% 84.96% 82.59%

Profitability Ratio
01.Return on Assets
Net Income After Tax 2504268751 2009372842 3476007955 1694095372 1096627046
Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Return on Assets 1.63% 1.55% 3.07% 2.03% 1.60%

02.Return on Equity
Net Income After Tax 2504268751 2009372842 3476007955 1694095372 1096627046
Total Equity 17414562145 14484224847 12474852005 6717211671 4989201956
Return on Equity 14.38% 13.87% 27.86% 25.22% 21.98%

03.Return on Deposits
Net Income After Tax 2504268751 2009372842 3476007955 1694095372 1096627046
Total Deposit 128356969591 107881205901 94949400069 73835461825 57586991798
Return on Deposits 1.95% 1.86% 3.66% 2.29% 1.90%

Leverage Ratio/ Capital Structure Ratio


01.Equity to Assets Ratio
Stockholders Equity 17414562145 14484224847 12474852005 6717211671 4989201956
Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Equity to Assets Ratio 11.34% 11.15% 11.03% 8.06% 7.29%

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02.Deposits to Assets Ratio

Total Deposit 128356969591 107881205901 94949400069 73835461825 57586991798


Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Deposits to Assets Ratio 83.59% 83.07% 83.97% 88.61% 84.13%

Efficiency Ratio
01.Operating Efficiency
Year 2012 2011 2010 2009 2008
Total Operating Expenses 3245126421 2488290474 1810108689 1258972608 1030942700
Total Operating Income 8134165421 6444113523 7703898077 4440754020 3549331785
Operating Efficiency 39.90% 38.61% 23.50% 28.35% 29.05%

02.Asset Utilization
Total Revenues 14912456122 13122774352 9606185898 8147113948 6575384481
Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Asset Utilization 9.71% 10.10% 8.50% 9.78% 9.61%

03.Total Expenses to Total Assets

Total Expenses 3245126421 2488290474 1810108689 1258972608 1030942700


Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Total Expenses to Total Assets 2.11% 1.92% 1.60% 1.51% 1.51%

04.Operating Income to Total Assets

Total Operating Income 8134165421 6444113523 7703898077 4440754020 3549331785


Total Assets 153562923237 129871124163 113070981888 83329339048 68446464000
Operating Income to Total Assets 5.30% 4.96% 6.81% 5.33% 5.19%

Credit Risk Ratio


01.Equity to Investment Ratio

Total Equity 17414562145 14484224847 12474852005 6717211671 4989201956


Total Investment 137728233264 107353392276 98888938494 70799443910 56531698310
Equity to Investment Ratio 12.64% 13.49% 12.62% 9.49% 8.83%

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Comparative analysis

01.Loan or Investment to Deposit Ratio

Year 2012 2011 2010 2009 2008


Al-Arafah Islami
Bank 89.43% 93.47% 99.46% 98.12% 97.11%
Shahjalal Islami
Bank 84.91% 104.17% 117.70% 123.69% 114.73%
Social Islami Bank 87.48% 88.48% 88.58% 88.30% 86.33%
First Security Islami
Bank 92.10% 93.98% 97.58% 95.65% 102.22%
Exim Bank 107.30% 99.51% 104.15% 95.89% 98.17%

02. Loan or Investment to Assets Ratio

Year 2012 2011 2010 2009 2008


Al-Arafah Islami
Bank 72.96% 74.44% 71.38% 77.57% 77.56%
Shahjalal Islami
Bank 77.26% 80.09% 80.80% 80.52% 77.22%
Social Islami Bank 70.73% 70.08% 72.02% 69.76% 69.79%
First Security Islami
Bank 78.02% 80.75% 86.42% 84.58% 84.60%
Exim Bank 89.69% 82.66% 87.46% 84.96% 82.59%

03. Return on Assets (ROA)

Year 2012 2011 2010 2009 2008


Al-Arafah Islami
Bank 1.31% 1.71% 2.36% 1.77% 1.80%
Shahjalal Islami
Bank 0.95% 1.09% 2.63% 1.82% 1.85%
Social Islami Bank 1.29% 1.28% 1.17% 1.08% 0.68%
First Security Islami
Bank 0.59% 0.64% 0.86% 0.68% 0.33%
Exim Bank 1.63% 1.55% 3.07% 2.03% 1.60%
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04. Return on Equity (ROE)

Year 2012 2011 2010 2009 2008


Al-Arafah Islami
Bank 15.45% 18.47% 22.72% 24.10% 24.70%
Shahjalal Islami
Bank 13.63% 14.76% 30.71% 21.73% 22.68%
Social Islami Bank 13.48% 11.51% 15.31% 12.14% 10.82%
First Security Islami
Bank 13.45% 12.89% 13.99% 11.41% 4.11%
Exim Bank 14.38% 13.87% 27.86% 25.22% 21.98%

05. Return on Deposits (ROD)

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 1.61% 2.15% 3.29% 2.24% 2.25%
Shahjalal Islami Bank 1.05% 1.42% 3.83% 2.79% 2.75%
Social Islami Bank 1.59% 1.62% 1.43% 1.37% 0.84%
First Security Islami Bank 0.69% 0.74% 0.97% 0.77% 0.40%
Exim Bank 1.95% 1.86% 3.66% 2.29% 1.90%

06. Equity to Assets Ratio

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 8.49% 9.27% 10.38% 7.35% 7.28%
Shahjalal Islami Bank 6.99% 7.38% 8.56% 8.36% 8.17%
Social Islami Bank 9.56% 11.15% 7.61% 8.89% 6.26%
First Security Islami Bank 4.37% 4.95% 6.16% 5.97% 8.13%
Exim Bank 11.34% 11.15% 11.03% 8.06% 7.29%

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07. Deposits to Assets Ratio

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 81.58% 79.64% 71.77% 79.06% 79.86%
Shahjalal Islami Bank 90.99% 76.89% 68.65% 65.10% 67.31%
Social Islami Bank 80.85% 79.20% 81.30% 79.01% 80.85%
First Security Islami Bank 84.72% 85.91% 88.57% 88.42% 82.76%
Exim Bank 83.59% 83.07% 83.97% 88.61% 84.13%

08. Operating Efficiency

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 32.49% 28.66% 29.59% 34.43% 29.67%
Shahjalal Islami Bank 25.82% 35.26% 27.26% 30.02% 22.09%
Social Islami Bank 31.82% 33.22% 37.77% 38.04% 39.04%
First Security Islami Bank 48.00% 41.90% 42.28% 43.45% 66.90%
Exim Bank 39.90% 38.61% 23.50% 28.35% 29.05%

09. Asset Utilization

Year 2012 2011 2010 2009 2008

Al-Arafah Islami Bank 9.65% 8.67% 5.63% 8.25% 9.30%

Shahjalal Islami Bank 8.54% 9.43% 8.14% 9.39% 9.60%

Social Islami Bank 9.16% 8.20% 7.04% 7.70% 9.17%

First Security Islami Bank 10.28% 9.62% 8.72% 9.06% 10.06%

Exim Bank 9.71% 10.10% 8.50% 9.78% 9.61%

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10. Total Expenses to Total Assets

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 1.45% 1.42% 1.76% 1.87% 1.73%
Shahjalal Islami Bank 0.92% 1.52% 1.68% 1.49% 1.16%
Social Islami Bank 1.64% 1.63% 1.80% 1.63% 1.69%
First Security Islami Bank 1.38% 1.26% 1.39% 1.20% 1.23%
Exim Bank 2.11% 1.92% 1.60% 1.51% 1.51%

11. Operating Income to Total Assets

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 4.46% 4.95% 5.96% 5.44% 5.84%
Shahjalal Islami Bank 3.57% 4.32% 6.16% 4.95% 5.27%
Social Islami Bank 5.14% 4.91% 4.77% 4.30% 4.33%
First Security Islami Bank 2.88% 3.01% 3.28% 2.77% 1.83%
Exim Bank 5.30% 4.96% 6.81% 5.33% 5.19%

12.Equity to Loan/ Investment Ratio

Year 2012 2011 2010 2009 2008


Al-Arafah Islami Bank 11.64% 12.45% 14.54% 9.47% 9.38%
Shahjalal Islami Bank 9.04% 9.22% 10.60% 10.38% 10.58%
Social Islami Bank 13.52% 15.91% 10.57% 12.75% 8.98%
First Security I.Bank 5.60% 6.13% 7.13% 7.06% 9.61%
Exim Bank 12.64% 13.49% 12.62% 9.49% 8.83%

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