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1.1

Background of the

Study
1.2

Rationale of the Study

1.3

Scope of the Study

1.4

Objective of the Study

1.5
1.6

Data Collection
Limitation of the study

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1.1 Background of the study

This report is one of the major parts of B.B.A program. In todays world education is not just
limited to books and classrooms. Education now-a-days is understanding the real world &
applying knowledge. So the internship is such a way that helps to apply the knowledge and
understanding the work and to use them in a practical field. Al-arafah islami bank ltd gives me
this opportunity to be engaged there to gather practical experience about the real business world
and to observe different practical aspcts of education.

1.2 Rationale of the Study

With the rapid growing competition (due to free market economy) among nationalized, foreign
and private commercial banks as to how the banks operates its banking operation and how
customer service can be made more attractive, the expectation of the customers has immensely
increased. Side by side these banks have now concentrated their attention towards diversification
of their products for better performances and existence. For the above circumstances, it has
become necessary for Al-Arafah Islami Bank Ltd, one of the leading commercial banks, to focus
its attention towards the improvement of the customer service. The study may help formulating
policy regarding the ideas relating to the feelings of the customers and bankers.
Further more, Al-Arafah Islami Bank Ltd executives who are actually executing the policies
undertaken by the top management will have a chance to communicate their feelings and will
have the feedback about their dealing from the customers.

1.3 Scope of the study

Internship experience plays a vital role for every student to implement their theoretical
knowledge and get a practical knowledge from any organization. Now I can implement this
internship experience in my future work area. AIBL gives me the opportunity for gathering
practical experience.

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In this century bank is and essential part of every business commercial welfare activities .but this
is also using by criminals for illegal monetary activities. In this case money laundering is
commonly used a term .Financial institutions ,government need to aware about the term money
laundering for protect illegality and ensure social and economic welfare.
Finally I prepare this report under the supervision of Miss Farhana sadia lecturer of Southeast
University.

1.4 Objective of the Study

The main objective of the study is given below:
1. To submit a report, for the fulfillment of my BBA practical.
2. To know about the banking system of Al-Arafah Islami Bank Ltd
3. To develop working skills.
4. To know bout the different scheme, policy, procedures of AIBL.
5. Identify the limitations of the Bank.
6. The main objective of this report is to find out the Overall Branch Banking of Al-Arafah
Islami Bank Limited. And to know about money laundering.
7. Effect of money laundering.
8. To know about SME
9. To find out the sector in which AIBL provides Investment.
10. Identify the main objectives of AIBL Investment Disbursement.

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1.5 Data collection

To prepare this report I mostly depend on the experience & secondary source because as an
intern it was difficult for me to collect primary information.

A. Secondary source:

Practical deskwork.
Face to face conversation with the officers and executives.
Face to face conversation with the client.
Personal observation.
AIBL website

B. Primary source
Annual report of Al-Arafah Islami Bank Ltd.
Bank statements.
Annual circular on money laundering

1.6 Limitation of the study

There are few limitations I faced to prepare this report. Some of these limitations are following:
It was difficult to communicate with the officers of all departments of bank, because most
of them were busy with their respective jobs.
Information that is collected from bank website was not detailed.
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 study was not done very successfully due to inexperience.
The data and information was not easily available.

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81

2.1 Organizational overview of

AIBL
2.2 Historical background of
AIBL
2.3 AIBL profile
2.4 Vision & Mission of AIBL
2.5 Objective of AIBL
2.6

Special feature of

AIBL
2.7

Function of the AIBL

2.8

Organ grams of the

AIBL
2.9

Rule of the AIBL

2.10

Present program of

the AIBL
2. 11

AIBL khilkhet branch

2.1Organizational 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
1.6

Limitations

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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.[1]

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-Quran and lifestyle of Hazrat Muhammad (Sm) for our supreme success.[1]
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-Quran
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 precepts of Islam. All activities of the Bank are conducted according to
Islamic Shariah where profit is the legal alternative to interest.

2.3AIBL Profile

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With the objective of achieving success here & hereafter by pursuing the way directed by Allah
and the path shown by His Rasul (SM),
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.[4,5]
Al-Arafah Islami Bank Ltd. has 53 braches and a total of 1080 employees (31 December 2008).
Its authorized capital is Taka 2500 millions and the paid-up capital is Taka 1153.18 millions.
[4,5]
Al-Arafah Islami Bank Ltd. has 78 branches and a total of 1711 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.[4,5]
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 [1]

Vision

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

Mission

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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 [5]

Form 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 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.

Other objective of Al Arafah Islami Bank include:

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 To establish interest-free and welfare oriented banking system.

To establish an 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

2.6 Special Features of the Bank: [1]

As an Islami bank, AIBL singular in every positive aspect. AIBL provide a bunch of state-of-art
banking services within the wide bracket of shariah. AIBL are unique with our products, strict
with AIBL principle and uncompromising with honesty. Some of special features that make
notable in Islami banking sector are as follows:

All activities of AIBL are conducted under an profit/loss based system according to
Islamic Shariah to get the nation rid of Usury.
The Banks investment policy follows different modes approved by Islamic Shariah based
on Quran & Sunnah & monitored by the board of Shariah Council.
AIBL in providing dedicated services to the clients imbued with Islamic spirit of
brotherhood, peace and fraternity.
The bank is committed towards establishing a welfare-oriented banking system to meet
the needs of low income and underprivileged class of people.
The Bank upholds the Islamic values of establishment of a justified economic system
through social justice and equal distribution of wealth.
Following the Islamic traditions, it is assisting in the economic progress of the socially
deprived people; in the creation of employment opportunities and in promotion of rural
areas to ensure a balance development of the country.

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 According to the needs and demands 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 taken by the Government
and developing infrastructure.
During the year 2007, 70% of the investment income has been distributed among the
Mudaraba depositors.
In 2008, AIBL has included online banking in its wide range of services. Bangladeshi
software has been introduced in this feature to promote the local developers.

2.7 Function of AIBL

Export and Import Function

Retail Banking
Industrial financing trade financing
Syndicated Loan
Project financing
Hire purchase
Lease financing
Online service
Automated Accounting
Integrated System
Signature Verification
Any Branch Banking
ATM Services (to be implemented )
POS Services

2.8 Organ grams of the AIBL

1) Board of Directors: Take all the decision for bank development. The board of
director comprised of Chairman, vice-chairman, seventeen member of the bank, two
Ex officio director and two company secretary.

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2) Executive Committee: This committee is comprised of Chairman, vice-chairman, five

members of the bank. The functional and responsibilities of this committee is to

establish and periodically review the banks overall credit and lending policies and
procedures, development and implement uniform and minimum acceptable credit
standards for the bank, new credit proposal assessment and approval, investment
file justification for loan passed and Bank Expenditure justification.
3) Audit Committee: The main objective of this committee is to assist Board of
Directors with regard to the audit of financial reports, management reports by the
external auditors, internal controls and internal audits. This committee consists of
chairman & four member of the bank.
4) Shariah Supervisory committee: the responsibility of this committee is banking
business operation in accordance with Islamic principle, rules & regulation is upon
the bank management. This are also responsible to analyze &prepare independent
opinion based on Islamic shariah. This committee is comprised of Chairman, five
members of the bank &one secretary.[5]

5) Management Committee: The main objective of this committee is to ensure

business operations are in line with the Banks policies, strategies and objectives,
the bank has set up. This committee consists of the Managing Director, Deputy
Managing Director and different business unit heads. This is
Managing Director(MD)

Deputy Managing Director(DMD)

Senior Executive Vice President(SEVP)
Executive vice President(EVP)
Senior vice president(SVP)

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Vice precedent(VP)
Assistant vice president(AVP)
First assistant vice President
(FAVP)
senior principle officer(SPO)

Principle officer(PO)

Senior executive officer (SEO)

Executive officer (EO)

Officer

2.9 Role of the AIBL in the economic development of Bangladesh

Bank is the means performer for the financial sector of Bangladesh as well as for the economy.
Bank comprises with human resource who are most important and essential assets of an
organization. An organization is nothing without human resource.
In modern life there have no alternative way to develop the national economy with out bank .
Bank is not only a financial institution but also life blood of the national growth. a banking
institution is essential in a modern society . It plays a key role in the economic development of a
country and forms the core of the money market in an advanced country .in recent age the
banking sector over the world has been undergoing a lot of change due to deregulation,
technological innovation, globalization etc. Bangladesh banking sector is lagging for behind in
adopting these changes. To succeed well in these changing environments, not only development
of appropriate infrastructure is necessary but also infusion of professionalism in to banking
service is essential.

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Commercial banks play a significant role to meet up the needs of the society such as capital
formulation, large scale production industrialization, growth of trade etc. Carry the foreign
remittances of wage earners and other fund for the country. AIBL is and unconditional land
specialized financial institution that performs most of the standard banking services and
investment activities on the basis of profit and loss sharing system confirming to the principle of
Islamic shariah .A IBL bank does not pay interest to depositors. Instead depositors participate in
the profitability of the bank.

2.10 Present Program of AIBL

a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
p)
q)
r)
s)
t)
u)
v)

Al-Wadia Current Account

Mudaraba term deposit(36 ,24,12,06,03&01month)
Mudaraba Saving deposit
Short Notice deposit
Monthly hajj deposit
Monthly installment term deposit
Monthly profit based term deposit
Monthly saving investment
Special Saving scheme
Lakhopati deposit scheme
Kotipati deposit scheme
Millionaire deposit scheme
Double benefit scheme
Triple benefit scheme
Mudaraba saving deposit student,farmers,freedom fighters.
Fixed deposit
Bai-Musharaka
Bai-Murabaha
Bai-Muajjal(buying &selling of commodities goods etc.with profit)
Ijara(leasing for rent)
Higher purchase or Shirkatul Melk
Bai-Salam(purchase of agricultural product while in production & providing advance

money to the products)

w) Export & Import

2.11 AIBL Khilkhet Branch

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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 doesnt deal large foreign
exchange transaction. The branch has efficient human resources that can meet up customers
needs. Order wise work is distributed properly.

Operating activities of khilkhat branch

1. General Banking
a) Cash
b) Account
c) Remittance
d) Clearing House
e) Customer Services
2.

Investment
x) Bai-Musharaka

Function of AIBL Khilkhet Branch

Khilkhet branch is a non ad branch that means this branch doesnt foreign exchange transaction.
So this bank operate following function

Retail Banking
SME(short & medium enterprise)
Online banking
Money gram
Locker service

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81

3. Introduction
3.1 Cash section
3.2. Account section
3.2.1 account opening process
3.2.2. Types of account
3.2.3 Scheme based account

3.2.4 Al-Arafah Islami Bank Ltd. Schedule of

Charges
3.3 Clearing Section

3.3.1 Types of clearing

3.3.2. Essential elements for Clearing
3.3.3 Clearing department
3.4 Remittance section

3.4.1 Foreign remittance section

3.4.2 Local remittance section
3.5 Other Service Section

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3. Introduction
General Banking is designed to provide financial service to the general people. General Banking
sector includes customer services department.
Banks perform their function in two ways taking deposits from various areas in different forms
& lending that accumulated amount of money to the potential investors in other different forms.
General banking department acts in taking deposits in various ways. There are various sedtion in
this department:
1. Cash section
2. Accounts section
3. Clearing section
4. Remittance section
5. Other service section

3.1 Cash section

The most important section of the branch is cash department. It deals with all kinds of cash
transactions. This department starts the day with cash in value each day some cash that is
opening cash balance are transferred to the cash officers from the cash vault. Opening cash
balance is adjusted by cash receipts & payments. This figure is called closing balance.

Books maintained this section

a) Vault register: It keeps account of cash balance in vault in the bank.
b) Cash receipt register: cash receipt in whole of the day is recorded here.

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c) Cash payment register: cash payment is made in a day are entered here.
d) Rough vault register: cash calculation for final entry in vault register is done here as any
error & correction is not acceptable.
e) Cash balance book: Balance here is compared with vault register if no correction is
found, indicates no error.

Function of cash department (Table 1)

Cash payment

Cash receipt

1)cash payment is made only against cheque

1)It receives deposits in from of cash

2)This is the unique function of the banking

system, which is known as payment on
demand

2) It collects money only its receipts

forms.

3)It makes payment only against printed valid

cheque

Cheque or cash payment process

Step 1

Receiving cheque by the employee in the cash counter

Verification of the signatute by the cash officer in the computer section

Step 2

Date of the cheque(present within 6 month from issue date)

Issue from the branch

Amounts in figure & sentence written does not differ

Signature of the drawer does not differ

Step 3

Gives pay cash seal & sends to payment counter

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Step 4

Payment officers make payment

3.2 Account Section or account opening section

Accounts department is the most important department in the AL-Arafah Islami Bank Ltd
because customer is the main source of bank. Banks success & failure largely depend on their
customer.
3.2.1 Need Accounts Opening
Individual
Name
Present & permanent address
Date of birth
Nationality
Tax information number
Passport number
National in card
Furnishing photographs- 2 (Two) copies.
Introduction by an account holder
One photograph of the nominee duly attested by the account holder
Nominee declaration from
A partnership firm need more document
A copy of the partnership agreement (Partnership Deed)
A letter signed by all the partners containing the following particulars.
The name and addresses of all partners

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 The nature of the firms business

The name of the partner authorized to operate the account in the name of the firm,
Including the authority to draw, endorse and accepting the bills and mortgage and sell the

properties belonging to the firm.

In case of limited company
Registration Certificate from the Registrar of Joint Stock of Companies
Certificate of Incorporation
Certificate of Commencement of Business
Memorandum of Association
Articles of Association
Copies of Annual Accounts
Copies of the Boards resolution, which contains
a) The name of the persons who have been authorized to operate the bank account on
behalf of the company.
b) The name of the persons who are authorized to execute documents with the bank
on companys behalf
Joint Account in The Name of Minor: A minor cannot open an account in his own name due to
the incapacity to enter into a contract. He can open an account in Al-Arafah Islami Bank Ltd in
Joint name of another person who will be guardian of him.

General procedure of opening account:

Step1

: Bank provides account opening form to the prospective customer or applicant.

Step 2

: Applicant fills up the form

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Step 3

: Application submits the form dully signed by a introducer and along with 2 passport

size photo signed by the introducer & applicant national ID card or birth certificate or passport or
driving license photocopy.
Step 4

: The authorized officer scrutinizes the application form and

Step 5

: If they are satisfied, they will open the account

Step 6

: They issue deposit slip and deposit must be made it

Step 7

: After deposition one checkbook is issued

Step 8

: Bank preserves the specimen Signature card to verify the signature of the client

Step 9

Account is opened

3.2.2Types of account: Al Arafah Islamic Bank Limited collects deposits from people by
various accounts. There are mainly three types of account

A. Al-Wadia current A/C: Al Arafah Islami Bank Ltd operates the Al Wadia current A/C
according to the principles of Al Wadia, which are based on Islamic Shariah. It is
promised to hard over the deposited money to clients of the bank when they desire to
withdraw on the others hand bank take the permission from the clients to invest the
deposited money. The depositors do not get profit from the account and not need to bear
any loss which from this account. This can be open by any individual or joint or any
name of proprietorship business, private limited company or public limited company,
trusts, clubs, school etc. Generally current account is opened for businessman & traders
for easy transaction. AIBL takes a service charge of TK100 for six months.

B. Mudaraba saving Deposit account(MSD): To maintain smooth & certain life in

future MSD is very suitable for middle class group. In this account.

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 500Tk is the minimum amount of initial deposit

Client cannot withdraw money more than twice in a week
The profit rate is 4% twice in a year.
If client withdraw money more then 4time in a month, withdraw more then
50000Tk or withdraw more then of saving then client dont gate any profit.

C. Mudaraba Short Notice Deposit A/C: It is one kind of current A/C. Before withdrawing the
deposit depositor must inform the bank but the account holders have to have fixed amount of
deposit for withdrawing the depositor will get profit in daily basis.
Table 2: Profit rate for SND
1, 3, 6, 12, 24&36 month.
Profit Rate

12.5%

D. Mudaraba Term Depositnts: It is a kind of fixed deposit. On the basis of tine duration its
profit rate varies on various deposits. If one wants to withdrawn its deposit amount before
maturity then he will get profit which is given Mudaraba Savings deposit. These deposits for
1, 3, 6, 12, 24&36 month.

E. Installment term deposit (ITD) : ITD is a sure investment for a steady return. It can be
opened for 5, 8, 10 & 12 years for Tk200, Tk300, Tk 500, Tk1000, Tk1500, Tk2000,
Tk3000, Tk4000, Tk5000 etc. there are some important condition
If the depositor wants to withdraw money before 5year then the saving interest rate
will be applied to pay some profit to the depositor.
If the depositor unable to paid 3installment before 5year then profit will be given
to the depositor by mudaraba saving deposit base.

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3.2.3 Scheme based account

a) Mudaraba Lakhopati scheme: Al-Arafah Islami Bank Limited has brought this
tremendous scheme to make the dream of becoming a "hundred thousand taka" true. One
can select the maturity period from 3, 5, 8, 10 or 12 years. This eye catching scheme is
lucrative because it will accumulate profit on your deposit in a daily-stay basis with a
weight age 0.05 more than that of a 2 years deposit. A single person can open more than
one account in the same branch. Tax will be applicable on the deposited amount along
with profit according to the country law. Monthly installment can be deposited on any
working day from any branch. One can give standing order to make payment of the
installment from his savings account maintained with the branch.
Table 3: Year, monthly installment& estimate return after maturity for Mudaraba Lakhopati
scheme
Period of deposit
3 years
5 years
8 years
10 years
12 years

Monthly Deposit
2325/1275/645/450/330/-

Estimated return after Maturity

100000/100000/100000/100000/100000/-

b) Mudaraba Millionaire scheme: With this excellent scheme your deposit will increase to
million taka! The main attraction of this Mudaraba-based scheme is that, profit will be
accumulated on your deposit in a daily-stay basis. To make it a more important scheme it
will have a weight age of 1.05, which is 0.05 more than that of a 3 years deposit. Monthly
installment can be deposited on any working day from any branch. One can even give
standing order to make payment of the installment from his savings account maintained
with the branch. Advance deposit is also possible. This scheme comes with exciting
investment facility. One can take advantage of 80% of his/her deposit as investment
facility. Tax will be applicable on the deposited amount along with profit according to the
country law. For this scheme 3, 4, 5, 6, 7, 10, 12, 15, & 20 years. This scheme monthly

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installment is Tk23200, Tk16400, Tk12700, Tk10020, Tk7820, Tk4500, Tk3330, and

Tk2190 & Tk1175. After the maturity the depositor will get Tk1 million.

c) Mudaraba Kotipati scheme: With the help of Kotipoti scheme, your savings will rise to a
mammoth amount of 10 million taka. Various installment amounts along with different
maturity periods are available in this scheme, which will definitely match your
requirement. Any person above 18 can open this magnificent scheme. Even an MKDS
can be opened on behalf of a minor! The main attraction of this Mudaraba-based scheme
is that, profit will be accumulated on your deposit in a daily-stay basis. In this scheme,
profit will be given with a weightage of 1.05, which is 0.05 more than that of a 3 years
deposit. Monthly installment can be deposited on any working day from any branch. One
can even give standing order to make payment of the installment from his savings
account maintained with the branch. Advance deposit is also possible. Tax will be
applicable on the deposited amount along with profit according to the country law. This
scheme comes with an exciting investment facility. One can take advantage of 80% of
his/her deposit as investment.
Table 4: Year, monthly installment& estimate return after maturity for kotipati scheme
Period of deposit
3 years
4 years
5 years
6 years
7 years
10 years
12 years
15 years
18 years
20 years

Monthly Deposit

Estimated return after Maturity

232000/164000/127000/100000/78200/45400/33250/21850/15800/11670/-

1 corer
1 corer
1 corer
1 corer
1 corer
1 corer
1 corer
1 corer
1 corer
1 corer

There are some conditions for mudaraba lakhopati, kotipati & millionaire scheme these are
By filling up a form an account opening

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 One photograph of the depositor &one photograph of the nominee holder,

national ID card photocopy
A non transferable deposit receipt will provide to the customer after opening the
account.
The depositor can be able to get loan 80% of the deposit amount under this
scheme.
The depositor cant withdraw money fron this deposit account before maturity.
If some reason the depositor want to withdraw money from his/her deposit

account then the depositor gets no profit if deposit month is less then 6month. If
the deposit month is more then 6 month then the depositor gets profit by MSD
account.

d) Double benefit deposit scheme (MDBDS): Saving works as the very foundation of
development. Saving is the prime source of business investment in a country. So it helps
to build up capital. Any person above 18 can open this magnificent scheme. Even an
MDBDS can be opened on behalf of a minor! Any person can open this scheme in his/her
own/joint name, any business organization, educational institution, govt. or non govt.
organization, NGO, semi govt. or cooperative organizations can open account and deposit
their savings in this scheme to get higher profit. In this Mudaraba based scheme one can
deposit Tk.10, 000/- or its multiple. Under this scheme with life of 6 years, your deposit
will earn profit in an incremental ratio. That's why within just 6 years of time your
deposit will be doubled in return. Tax will be applicable on the deposited amount along
with profit according to the country law. This convenient scheme comes with an exciting
investment facility. One can take advantage of 80% of his/her deposit as investment loan.
AIBL offers Mudaraba double benefit scheme to the people for put their money for
double return after 6years. There are some condition such as

81

 This is 6 year period deposit. So the depositor can not be withdrawn at any
time with in the maturity date. If he/she withdraw money before 6year or
after 6month he or she can get profit by MSD
e) Triple benefit scheme: It helps to build up capital. Any person above 18 can open this
magnificent scheme. Any person can open this scheme in his/her own/joint name, any
business organization, educational institution, govt. or non govt. organization, NGO, semi
govt. or cooperative organizations can open account and deposit their savings in this
scheme to get higher profit. In this Mudaraba based scheme one can deposit Tk.10, 000/or its multiple. Under this scheme with life of 9.5 years, your deposit will earn profit in
an incremental ratio. That's why within just 9.5 years of time your deposit will be triple in
return. Tax will be applicable on the deposited amount along with profit according to the
country law. This convenient scheme comes with an exciting investment facility. One can
take advantage of 80% of his/her deposit as investment loan. There are some condition
such as:
This is 9.5 year period deposit. So the depositor can not be withdrawn at any
time with in the maturity date. If he/she withdraws money after 6month he or
she can get profit by MSD. If he or she withdraws money after 6years he/she
get profit by MDBDS.

f) Hajj Scheme: There are many religious minded people who fail to perform Holy Hajj
due to indecision. Under the above scheme they will e able to perform Holy Hajj by
depositing slab wise amount per month.
g) Onetime Hajj Deposit: Under the above scheme, fixed amount of Hajj deposits are
accepted from the clients for particular term and as per rules profit is accumulated
thereon per year in this regard. As and when the fixed deposit is matured, Hajj expenses
are defrayed by the same. Under the scheme, the guardians may also open Hajj account to
enable their successors to perform Hajj. Highest amount of profit is paid in the above
types of deposit by the bank.

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3.2.4 Al-Arafah Islami Bank Ltd.

Schedule of Charges
Effect from 08/03/2011.
Table 5: Charges and fees for on line accounts [1]
1. Charges and fees for on line accounts
Description of Services
Maximum Limit

Cash Deposit

Charges
Un limited

Up to Tk. 1.00,000/From Tk. 1, 00,001/- To

From Tk. 2, 00,001/- To
From Tk. 4, 00,001/- To
From Tk. 6,00,001/- To
From Tk.10,00,001/- To
From Tk.15,00,001/- To
Above Tk. 20,00,000/-

Maximum Limit
Cash Withdrawal

A/c to A/c Fund Transfer

Tk. 2,00,000/Tk. 4,00,000/Tk. 6,00,000/Tk. 10,00,000/Tk. 15,00,000/Tk. 20,00,000/-

Free
Tk. 50.00+15% VAT
Tk. 100.00+15% VAT
Tk. 200.00+15% VAT
Tk. 300.00+15% VAT
Tk. 500.00+15% VAT
Tk. 800.00+15% VAT
Tk. 1,000.00+15% VAT

Un limited

Up to
Tk. 50,000/From Tk. 50,001/To Tk. 2,00,000/Above Tk. 2,00,000/-

Maximum Limit

Un limited

Up to
From Tk. 1,00,001/- To
From Tk. 2,50,001/- To
From Tk. 5,00,001/- To
From Tk. 1000001/- To
From Tk. 1500001/- To
Above Tk. 20,00,000/-

Tk.
Tk.
Tk.
Tk.
Tk.
Tk.

Monthly Special Schemes

Cash(Installment) Deposit /

1.00,000/2,50,000/5,00,000/1000000/1500000/2000000/-

Free
Tk. 50.00+15% VAT
Tk. 100.00+15% VAT

Free of cost
Tk. 50.00+15% VAT
Tk. 100.00+15% VAT
Tk. 250.00+15% VAT
Tk. 500.00+15% VAT
Tk. 750.00+15% VAT
Tk. 1000.00+15% VAT

Free

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A/C Transfer
Brokerage House A/C :
Cash
Deposit/
Cash
Withdrawal / A/C Transfer
Table 6: Account Maintenance Fee [1]

Free

2.Account Maintenance Fee

Description of Services
Al-wadiah Current Account
Mudaraba
Short
Account Deposit

Charges
Tk-500/- (Half Yearly)

Notice

Tk-500/- (Half Yearly)

Mudaraba Savings Account Maximum Limit

Average Balance:
From 0
Tk 5000/Tk. 25,000/-

Un limited
toto
to

Tk 5,000/Tk 25000/Above

Nill
Tk-100/- (Half Yearly)
Tk-300/- (Half Yearly)

Table 7: Minimum Deposit for opening Account [1]

3. Minimum Deposit for opening Account
Description of Services
Al-wadia Current Account

Tk-2,000/-

Mudaraba Short Notice Account Deposit

Tk-5,000/-

Mudaraba Savings Account

Tk-500/-

Charges

Table 8: Minimum Balance in the Account [1]

4. Minimum Balance in the Account
Description of Services
Al-wadiah Current Account

Tk-2,000/-

Mudaraba Short Notice Account Deposit

Tk-5,000/-

Mudaraba Savings Account

Tk-500/-

Charges

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Table 9: Dormant Account re opening charge [1]

5. Dormant Account re opening charge
To open Dormant Account

Charge is Tk-200/-

Table 10: Charge for issuing Cheque book [1]

6. Charge for issuing Cheque book
Charge for giving cheque book

Charge is Tk. 3.00 per leaf

Table 11: Account Closing Charge [1]

7.Account Closing Charge
Description of Services
Al-wadiah Current Account

Charges
Tk. 300/-

Mudaraba Short Notice Account Deposit

Tk. 300/-

Mudaraba Savings Account

Tk. 200/-

Different Monthly Savings Scheme Before or After

Maturity

Nill

Table 12: Account Statement charge [1]

8.Account Statement charge
Balance confirmation Certificate
Statement -Half yearly/Yearly

/Regular

Duplicate Statement (Balance confirmation

Certificate /Regular Statement)

Charge
No charge
Tk-200/-

3.3 Clearing Section

In the clearing department the work is to clear the Cheque and pay order through Bangladesh
Bank or Central Bank that are submitted for cash collection Everyday clearing house takes a
place in Bangladesh Bank once in the morning called morning house (1st house) another in the
evening called return house (2nd house). In the house all the banks representative sit together and

81

change their money receive instrument of the particular banks to clear the paper and transfer the
money to their particular accounts.
The main function of clearing section is to operate with safety and security of financial
transaction of financial instrument like DD, PO, check etc. on behalf of the customers through
Bangladesh Bank Clearing House, Outside Bank Clearing (OBC), Inter Branch Clearing (IBC).

3.3.1 Types of clearing: There are two types of clearing:

Inward clearing: The Cheque or instruments of Al Arafah Islami Bank Ltd that are submitted to
other banks for collections of money of bills are called inward clearing. the following should be
checked very carefully;

The check must be crossed.

The check should not carry a date older then the receiving date for more than 6 months.

The collecting bank must check whether endorsement is done properly or not.

The amount both in words and figures in deposit slip should be same and also it should
be in conformity with the amount mentioned in words and figures in the checks.

Outward Clearing: The Cheque or instruments of other banks that are submitted to the Al
Arafah
Islami Bank Ltd for collection is called outward clearing. The procedures of Outward Clearing
are followed:

The instruments with schedules to the main branch of AL-ARAFAH-ISLAMI Bank Ltd.
With issuing an Inter Branch Debit Advice (1BDA).

Clearing stamps are affixed on the instruments.

Checked for any apparent discrepancy.

The authorized signature endorses instruments.

Particulars of the instruments and vouchers are recorded in the 'Outward Clearing'
register

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The clients receive the duty signed instruments and also branch code number affixed on
the instruments.

3.3.2 Essential elements for Clearing:

There are three essential elements are required for clearing the Instruments:
a. Clearing Seal,
b. Crossing Seal.
c. Endorsement Seal
Bank receives all kinds of cheque in favor of the client for clearing. When cheque is received it is
necessary to endorse it & cross it specially.
Table 13: Different cheque clearing process
Types of cheque
Inward
clearing Chrque

Explanation
received from

Clearing process
the Partys A/C ..Dr

cheque
clearing house of AIBL.
AIBL General A/C ..Cr
Outward Bills for Cheques of other branch of These cheques are directly sent to the
collection

AIBL within its clearing house respective branch & request them to sent
area.

Clearing cheque

IBCA. When it comes, then customers

A/C is credited for the cheque

Cheques another bank within These cheques are sent to clearing
AIBL clearing house area

housevie khilkhet branch. When drawee

bank honor the cheques then the account

Outward clearing

another

of cheque depositors are credited

bank If any branch of AIBL exists within the

outside the clearing area

clearing house area of drawee bank then

Cheques

for

AIBL send the cheque to that branch of

Inward

Bills

for From other branch of AIBL

collection

AIBL & sends IBCA to it.

These cheques are settled by IBCA i.e.
debiting depositors account & crediting
senders

From another bank outside the These cheques ae settles debiting depositors

81

clearing house

account & sending DD,MT,TT in favor of

senders bank.

3.3.3 Clearing department

This department of AIBL receives cheque, demand draft & pay orders of their clients. Upon the
receipt of the instrument the cheque clearing department examines three types of payment
modules.

Types of cheque collected by clearing department:

1. Local bills collection cheques: Local bills collection cheques are those cheques, which
are collected and paid by two different branches of a bank situated in the same city.
2. Outward bills collection cheques: cheques are those cheques which are collected & paid
by two different branches of same or different bank situated in the outstation.
3. Transfer cheque: are those cheques which are collected & paid by the same branch of
AIBL.

3.4 Remittance section:

Sending money from one place to anther through some charges is called remittance. To pay or
receive money of customers in the from of remittance from one place to another, from one
person to another inside or outside the national boundary is an earning sources of every bank.
AIBL khilkhet branch operate both the foreign & local remittance to serve its customers. In
addition this service is an important part of country payment system. Through this system people
can transfer their funds from one place to another place very quickly.

3.4.1 Foreign remittance:

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Foreign remittance is to send money of customers from one lace to another, from one person to
another outside the national boundary. Through khilkhet branch AIBL is non-ad branch, it can be
able to serve the customers by receiving & paying their incoming foreign remittance in the from
of local currency. Foreign remittance is received by the bank via some internationally authorized
agent. There are two medium of agent for foreign remittance at AIBL khilkhet branch, these are

I.

Money gram: is a money transfer medium/agent serves both domestic &

international services. Its identification number consist 8digit. For money
gram customer national ID card & identification 8 digits must be need for
receiving money from bank.

3.4.2 Local remittance: [2]

Money can be remitted domestically which knew as local remittance. There are three ways of
transferring fund domestically. The modes of transferring funds are:

I. Demand Draft (DD): This is an instrument through which customers money is

remitted to another person firm organization in outstation in outstation outside the
clearing house area from a branch of one bank to an outstation branch of the some bank
or to a branch of another bank with prior arrangement between those banks with the
issuing branch. This an order instrument in which the issuing branch gives instruction
to the payee drawee branch to pay certain amount of money to the order of certain
person firm organization. The DD may be open without crossing or crossed. An open
DD can be over the counter to the payee endorsee by the payee drawee branch against
proper identification of the payee. The crossed DD is paid through the payees account
only.
Table 14: commission for demand draft[1]

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Demand Draft Issuance Commission

@ 0.15% or minimum Tk 25/-

Procedures of issuing:
1. Obtain Demand drafts application from duly filled in and signed by the form
purchaser applicant
2. Receive the amount is case transfer with prescribed commission and postage
amount
3. Issue the DD duly filled in and signed by the authorized signatories
4. Insert test number (here applicable)
5. Enter the DD issue register
6. Issue advice to the payee branch (IBCA)

Issuing Voucher of DD:

Cash /partys A/C Dr.
AIBL G/A (concerned branch) Cr
Income A/C Cr
(Other commission on remittance)
DD application forms treat as a credit voucher. DD issued branch has to prepare
AIBL inter branch transaction credit advice ) and then after advice send to the
responding blanch.

81

II. Pay order: A Pay order is a written under issued by a branch of bank to pay a certain
sum of money to a specific person or a bank. It may be said as to be a bankers Cheque
as it is issued by a bank and payable by itself.

Procedures for issuing:

1. Obtain

PO

application

from

duly

filed

in

and

signed by the

purchaser/application.
2. Receive the amount in cash/ transfer with commission amount
3. Issue P/O
4. Enter in P. O register
Table 15: Commission & VAT for pay order
Amount of P.O
1-100000
100001-500000
500001-1000000
1000001-above

Commission
20/30/50/100/-

VAT
3/4/8/15/-

Total
23/34/58/115/-

Issuing Vouchers of P.O:

Cash or party A/C Dr
P. O Cr
Income A/C Cr
If the payment order issued against a Cheque of party A/C then Cheque will be
Debited in respective partys A/C

III. Telegraphic Transfer (TT): This is a mode of transfer remittance of customers money
from a branch of one bank to another branch of the same bank or to a branch of another
bank with prior arrangement between that banks with the TT issuing branch through

81

telegraphic message The issuing used to send the message of such remittance to the
Drawee/ payee branch through telegram adding certain code number or test number on
the basis of test key apparatus developed by the concern bank for its different branches.
The payee / Drawee branch on receipt of the message decodes the test a message and
being fully satisfied pay the amount by crediting the payees account (if account is
maintained with the payee branch). Now days the messages are passed through
telephone /FAX/E-mail etc. Recently the communication system has developed to a
great extent.
Table 16: charge for issue Telegraphic Transfer
@ 0.15% or minimum Tk 25/T.T issue Charge

Plus Telephone/Swift/Telex Tk 30/

Procedure of issuing:
1. Obtain TT application form duly filled in and signed by the
purchaser/applicant with the false account particulars of the beneficiary.
2. Receive the amount in cash /transfer with prescribed commission postage
telephone / telex etc. charge
3. Prepare TT message inserting test number
4. Enter in TT issue register (code number).
5. Issue advice to the payee branch (IBCA)

Vouchers of Issuing TT :
Note the TT message and verify the test number and vouchers of issuing TT:
Partys A/C Dr
AIBL G/A (Concerned branch) Cr
Income A/c(Commission, Telex) Cr

81

3.5 Other Services Section

A) Lockers: Lockers are a safe custody of a bank for the clients .There are three types of lockers
in the bank.
Lockers operation: Lockers always operated jointly One of them is banker and another is
customer.
a) Rent: Lockers are allotted on yearly basis, for large size locker the rent is TK.300 and for

medium size the rent is TK.1200 and small size rent is TK.1000 only.
b) Requirement:
1) A locker holder must have a bank A/C i.e. MSD A/C.
2) A locker holder should him important and reliable customer.
3) Fill up an application form for a lockers as an SS card.
4) One copy of PP size photograph that is introduced by a previous locker holder or
A/C holder.

Table 17: Locker Facility Charge [1]

Locker Facility Charge

Size
Locker Charge (Small) Annually

Tk-1,500/-

Locker Charge (Medium) Annually

Tk-2,000/-

Locker Charge (Large) Annually

Tk-2,500/-

Locker Security Deposit (Refundable)

Tk-2,500/-

Locker Key
replacement)

Replacement

Insurance Premium

Charges

Cost

(Per Tk-1,000/At actual

81

Table 18: Auxiliary Service Charge [1]

Auxiliary Service Charge

Charges
Internet Banking
SMS Banking
Phone Banking

Tk-200 /- (Yearly)
No Charge
No Charge

81

81

Investment
4.1 Definition of investment

Money Laundering

4.2 Investment modes of AIBL

4.3 Investment AIBL khilkhet branch

4.13 Money Laundering

4.4 Investment (Lending) decision

4.14 Reasons of Money Laundering

4.5 Process of Loan

4.15 Impact of money Laundering

4.6 Investment authority

4.16 Affect Of Money Laundering in

business/ economic development

4.7 Credit Information Bureau

4.17 Stages of Money Laundering

4.8 Rules for CIB in Bangladesh

4.8.1 Function of CIB
4.9 Credit risk analysis for investment

4.18
Symptom
laundering

of

money

4.19
Penalties
laundering

for

Money

4.10 Documentation
4.11 Credit Disbursement
4.12 Investment Assessment

4. Introduction of Investment
Modern Investment management is extended through specialized financial institutions of which
commercial banks are the oldest and most important. In present days of industrial economics, the
banks are able to extend and increase the supply of Investment by the creation of Investment

81

management for their loan customers. The lender must judge each loan he makes on the basis of
the charter of the borrower (his intention to pay), (his capacity to pay), (based on his potential for
earning) and his collateral pledged in case of default on the loan. The terms of Investment
transactions may be publicly regulated to prevent abuses by customers and lenders as well as to
channel Investment in to particular sectors of the economy.[3]

4.1Definition of Investment
Investment, 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.
Investment may be extended by the public or private institutions to finance business activities,
agricultural operation, consumer expenditures or government projects.

4.2 Investment modes of AIBL

The bank extends investments to the clients under the following modes of investment under
Islamic Shariah:
1. Bai-Murabaha or simply Murabaha: The terms Bai-Murabaha have derived form
Arabic words Bai and Ribhum. The word Bai means purchase and sale and the word
Ribhum means an agreed upon profit. So Bai-Murabaha means sale for an agreed upon
profit. It may be defined as a contract between a Buyers and a Seller under which the
seller sells certain specific goods permissible under Islamic Shariah and the word Law of
the land to the Buyer at a cost plus and agreed upon profit payable today or on some date
in the future in lump-sum or by installments. The profit may be either a fixed sum or
based on a percentage of the price of the goods.[3]

2. Mudarabah: The term Mudarabah refers to a contract between two parties in which one
party supplies capital to the other party for the purpose of engaging in a business activity

81

with the understanding that any profits will be shared in a mutually agreed upon. Losses,
on the other hand, are the sole responsibility of the provider of the capital. The first party
provides capital and the other party provides the expertise with the purpose of earning
lawful profit (approved by Islamic law) which will be shared in a mutually agreed upon
proportion. [3]
3. Bai-Muajjal: The term Bai and Muajjal are derived from the Arabic words Bai and
Ajal where Bai means purchase and sale and Ajal means a fixed time or a fixed
period. So Bai-Muajjal is a sale for which payment is made at a future fixed date or
within a fixed period. In short, it is a sale on Credit. It is basically a contract between a
buyer and seller under which the seller sells certain specific goods, permissible under
Shariah and law of the country to the buyer at an agreed fixed price payable at a certain
fixed future date in lump-sum or in fixed installments. [3]
4. Bai-Salam: The term Bai-Salam is used to define a sale in which the buyer makes
advance payment, but delivery is delayed until some time in the future. Usually the seller
is an individual or business and the buyer is the bank.
5. Bai-Istishna: The word Istishna has been derived from the word Istishna which means
industry or Manufacturing enterprise. Istishna means to goods manufactured by placing
orders to a manufacturer. Isteshna'a is a contract between a manufacturer/seller and a
buyer under which the manufacturer/seller sells specific product(s) after having
manufactured, permissible under Islamic Shariah and Law of the Country after haying
manufactured at an agreed price payable in advance or by installments within a fixed
period or on/within a fixed future date on the basis of the order placed by the buyer. [3]
6. Hire purchase under shirkatul melk: is a special type of contract which has been
developd through practice. Actually it is a synthesis of three contracts: shirkat, ijarah &
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

81

as per agreement and bear the loss in production to their respective equity, the contract is
called shirkatul contract
7. Musharaka: The word Musharaka is derived from the Arabic word Sharikah meaning
partnership. Islamic jurists point out that the legality and permissibility of Musharakah is
based on the injunctions of the Holy Quran, Sunnah and Ijma (consensus) of the
scholars. Musharaka transaction may be conducted in the following manner:
One, two or more entrepreneurs approach an Islamic Bank to request the financing
required for a project. The bank, along with other partners, provides the necessary capital
for the project. All partners including the Bank have the right to participate in the project.
The profit is distributed according to an agreed ratio. However, losses are shared in
exactly the same proportion in which the different partners have provided the finance for
the project. [3]

Welfare oriented special investment schemes

1.
2.
3.
4.
5.
6.
7.

SME investment
Investment in agricultural sector
Investment in industrial sector
Investment in business sector
Investment in construction & housing
Higher purchase under shirkatul melk
Investment schemes in Masque & Madrasa

4.3 Investment AIBL khilkhet branch:

AIBL khilkhet branch follow Bai-Muajjal investment modes. & this branch investment
schemes is SME (Small and Medium Enterprise) banking investment & Hire purchase under
shirkatul melk.

81

SME investment: Small and Medium Enterprise (SME) is playing a significant role to the
growth of overall GDP of the country. Of all industrial productions, a huge part stems from
SME. In order to boost up the small and medium enterprises of the country, Bangladesh Bank
has recently advised the commercial banks to enhance the flow of investment and offered
directives and policies to supervise and monitor this sector. [1]
As SME has emerged as a thrust sector, Al-Arafah Islami Bank Ltd. also considers it
important to extend and enhance finance for the same. Keeping this idea in the forefront, the
bank has prepared an integrated policies, methods and procedures for SME investment. [1]

Purpose [1]

To facilitate small and medium level entrepreneurs

To boost up the small business in the country
To facilitate the growth of agro-industries
To create employment
To broaden the base of Islamic Banking in the society
To encourage women entrepreneurs

Eligibility [1]

Permanent resident of Bangladesh

The age must range between 25 years to 60 years
Physically fit and capable of working hard
Capable of reading & writing
Capable of managing his / her business successfully
Sufficient Infra-structure and skilled personnel
At least 02 (two) years experience in the applied business
Having Transparent CIB Report
Valid Licenses, such as- Trade License, VAT registration, TIN, NOC from

Environment Department (where applicable)

Other terms and conditions stipulated by the bank
Securities against Investment [1]
Personal guarantee of spouse/parents/other family members.
In case of limited companies, guarantees of all directors other than nominated
directors shall be obtained.

81

 Registered mortgage of immovable properties with registered Power of Attorney

(for 2 lac and above).
Third party personal guarantee (at least one).
Post dated cheques for each installment and one undated cheque for full investment
value including full mark-up profit.
Hypothecation on the inventory, receivables, advance payments, plant and
machinery.
Bank may relax the security for investment amount up to 2 lac for the growth of
SME investment.

Hire purchase under shirkatul melk: is a special type of contract which has been developd
through practice. Actually it is a synthesis of three contracts: shirkat, ijarah & sale. Shirkat means
partnership, Shirkatul melk means share an ownership.
Stages of Hire Purchase under Shirkatul Melk [5]
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.

Types of sale contract in hire purchase under shirkatul melk

As per procedure of transfer of ownership and legal title of the part owned by the Bank is
transferred to the other partner, the sale contract may be of various, some of the major forms are
mentioned below:

81

Hire Purchase under Shirkatul Melk through gradually transfer (sale) of legal
title/ownership of the hired asset/property [5]
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 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

81

from the Client / Client's security. In our Bank, we shall be following this type of Sale Contract
in Hire Purchase under Shirkalul Melk.

Hire Purchase under Shirkatul Melk through transfer of legal title by gifts (for no
consideration)[5]
Under this type the portion of asset owned by the Hire partner is hired out to the Hirer partner
with a prior promise that the Hire, upon settlement of all the rent / rentals / installments by the
Hirer, will transfer his ownership I title to the property to the Hirer through gift without any
further consideration.
After the expiry of the hire period and payment of the entire rent /rentals installment, the title of
property may be transferred by a separate gift deed executed by the Hire or, the title may be
transferred by issuing a gift deed by the Hire making it conditional on the settlement of all rental
installments. In the later case, the legal title is automatically transferred as soon as the hire period
expires and the fixed rent installments for rent are settled. The working of the agreement would
be: If the agreed upon rental installments are settled within the agreed upon period, ownership of
the asset will be transferred to the Hirer as gift.
Under this mode the rentals fixed and agreed upon will be sufficient not only to amortize the
capital outlay but also to yield an adequate amount of profit for the Hire. However, tile rent /
rentals agreed upon shall not be considered as price or part of price of the asset and the full
ownership of the asset shall lay with the Hire till final settlement of the rent I rental installments.

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Hire Purchase under Shirkatul Melk Through transfer of legal title (sale) at the end of hire
period for a token consideration
Under this contract the possession of the asset owned by the Hire is hired out to the hire for a
fixed period against fixed rent / rentals and at the end of the hire period the title to the asset is
transferred to the Hirer by a separate sale contract on payment of agreed upon token
consideration. The consideration may be equal to the value of the asset or not and it would be
sufficient if a mutual agreement is reached on the consideration.
Hire Purchase under Shirkatul Melk through transfer of legal title (sale) at the end of Hire
period for payment of a specified amount to the hire by the hirer

This agreement includes an Ijarah / hire contract and a sale contract. Under this agreement a
specific asset is hired out for a fixed period against specific rent mentioning a specific
consideration to be paid by the Hirer (buyer) after the expiry of the hire period and upon
payment of the agreed upon consideration. The hired asset becomes sold and its title
transferred to the Hirer (the buyer). Under the agreement, the hire contract becomes effective
firstly sale contract will be effective only after the expiry of the hire contract.

Hire Purchase under Shirkatul through transfer of legal title (sale) period to the end of the
hire term for a price that is equivalent to the remaining Ijarah /rental instruction. This is an

81

Ijarah hire agreement which includes a promise made by the Hire that he will transfer the title
of the hired property to the Hirer at any time during the hire period on payment of the
remaining Ijarah /rental installments, if the Hirer wishes so. Under this system first, the
Ijarah/hire contract becomes effective and remains so until the legal title is transferred to the
Hirer. As soon as the title to the asset is transferred to the Hirer the ijarah/hire contract lapses
for the remaining period, because both tile benefit and the hired property become the Hirer's
property. This type of sale should be executed by a separate sale contract at the time of sale.

Taking delivery of asset by the bank (hiree) and the (client) hirer:
After finalization of purchase of the Hire Purchase under Shirkatul Melk asset/property either by
the Bank officials or through any Agent or the Client Agent from the local or outstation market,
the Bank shall request the seller/suppliers to delivery the asset/property purchase to the Banks
Authorized

Official/Agent/Representative/Client/Banks

Goodwin

against

proper

acknowledgement Accordingly the authorized official /Agent /Representative /Client shall

receive delivery of the asset/property on behalf of the Bank by signing the Delivery Challan or
the Cash Memo/purchase Schedule which will be in the name of the Bank and the Client.

4.4 Investment (Lending) decision:[3]

The principal function of a Bank is to lend or invest. Lending is a dynamic activity .It helps to
create entrepreneur and thus the country would be industrialized. When a country becomes
industrialized it eradicates poverty from the society and over all from the country. Bank collects

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deposits from common people invest to the people who are willi8ng to run business or to set up
an industry. In this respect the Bank takes collateral security to secure the invested amount.

1. Safety: safety should get the prior important 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-Arafah 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

The repaying capacity & willingness of the debtor to repay the loan with interest

2. 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.

3. Liquidity: Banker should consider the liquidity of the loan in time of sanctioning it.
Liquidity' is necessary to meet the consumer need.
4. 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.
5. 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

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should distribute its 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.
6. National interest: Banking industry has significant role to play in the economic
development of a country. The banker would lend if the purpose of the investment is for
overall national development plans necessitating flow of credit to priority sector in the
larger national interest. Sometimes, the need of the borrower may be considered so
essential for the benefit of the national economy despite of heavy risk involved if the
investment may be granted.

4.5 Process of Loan

Table 19:
Heads
Application

Characteristics
Applicant applies for the loan 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

81

Bank.
5. If everything is in accordance the loan is sanctioned
Documentation Then bank prepare a loan proposal which contains terms and conditions of
loan for approval of Ra or Manager
Takes the necessary papers and signatures from borrower
Disbursement

A loan Account is opened. Where customer A/C------------------Dr.

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

4.6 Investment authority

As sure proper and orderly conduct of the business of the Bank, the Board of Directors' will
empower the Managing Director and other Executives of the Bank to lend up certain amount
under certain terms and conditions at their discretion. The lending officer is broadly categorized
as follows:
Managing Director
Deputy Managing Director
Executive vice President Asst.
Senior vice President
Vice President
Senior Asst. vice President
Asst.Vice President.

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The amount and scope of each Officer lending authority is a function of the amount and extent of
authority required by the officer to carry out his/her responsibilities to the Bank and its clients
may prudent, effective manner. It must be emphasized mat an Officer will not be delegated
lending authority only on the basis of his position. In other words, an officer does not
automatically get lending authority by virtue of his corporate and/ or functional title. Specified
lending authority will be delegated by the Managing Director to various Executives after taking
into consideration his proven credit judgment, knowledge and experience. The amount of lending
authority approved by the Board for various Executives form the upper limits of the authority
that may be delegated to an officer holding corporate title. Each individual lending authority will
be delegated to him in writing. The managing Director with the Executive Committee/ Board
will review all lending authorities periodically.[3]

4.7 Credit Information Bureau

Bangladesh Bank has established within itself a Credit Information Bureau (CIB), which collects
credit information from the banks. Banks are required to furnish such information in respect of
credit limit of Tk.50000 and over. They mention the Name of facility, security and charge along
with outstanding balance. After consolidating such information in respect of each customer the
central bank supplies to the total limits sanctioned to and the number of banks dealing with a
party. Thus the banks can find out if any of their customers is having excessive borrowings from
the banking system at any particular time.

4.8 Rules for CIB in Bangladesh:

Due to irregular and insufficient flow of credit information in the banking system the proportion
of classified loan in relation to total credit is very high. This proportion of classified loan
operated a bad culture in the Banking sector. In order to eliminate the bad culture & to equip the
banks with proper credit information for loan application processing, proposal for relation of CIB
was put forward by different committee and organizations and it was established in 1992.[3]

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4.8.1 Function of CIB: The CIB function as following: [3]

1. To standardize information flow on loans/credits within the Bangladesh Banking system.
2. To increase the speed & accuracy with which the credit information is made available to
banker assessing credit role.
3. To combine the information gathered on classified loans with the information on newly
sanctioned loans to the borrowers thereby making available on integrated information
package.
4. To integrate the default loan information in the CIB its timely submission to the banks for
loan application processing.
5. To collect credit information on quarterly basis from banks.

4.9 Credit risk analysis for investment: [3]

Credit Risk Grading: Credit risk grading is an important tool for credit risk management as it
helps the Banks & financial institutions to understand various dimensions of risk involved in
different credit transactions. The aggregation of such grading across the borrowers, activities and
the lines of business can provide better assessment of the quality of credit portfolio of a bank or a
branch. The credit risk grading system is vital to take decisions both at the pre-sanction stage as
well as post-sanction stage. At the pre-sanction stage, credit grading helps the sanctioning
authority to decide whether to lend or not to lend, what should be the loan price, what should be
the extent of exposure, what should be the appropriate credit facility, what are the various
facilities, what are the various risk mitigation tools to put a cap on the risk level.

Definition of Credit Risk Grading (CRG):

The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale
and reflects the underlying credit-risk for a given exposure.
A Credit Risk Grading deploys a number/ alphabet/ symbol as a primarysummary
indicator of risks associated with a credit exposure.

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 Credit Risk Grading is the basic module for developing a Credit Risk Management
system.

4.9.1 Use of Credit Risk Grading:

As evident, the CRG outputs would be relevant for individual credit selection,wherein
either a borrower or a particular exposure/facility is rated.
Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level
analysis.

4.10 Documentation
Documentation can be described as the process or technique of obtaining the relevant documents.
In spite of the fact that banker lends credit to a borrower after inquiring about the character
capacity and capital of the borrower he must obtain proper documents executed from the
borrower to protect him against willful defaults. Moreover, when money is lent against some
security of some assets, the document must be executed in order to give the banker a legal and
binding charge against those assets. Documents contain the precise terms of granting loans and
they serve as important evidence in the law courts if the circumstances so desire. That's why all
approval procedure and proper documentation shall be completed prior to the disbursement of
the facilities.

4.11 Credit Disbursement

Having completely and accurately prepare the necessary loan documents, the loan officer ready
to disburse the loan to the borrower's loan account. After disbursement, the loan needs to be

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monitored to ensure whether the terms and conditions of the loan fulfilled by both bank and
client or not.

4.12 Investment Assessment: [3]

Relationship Manager(s) \ Investment Officer(s) shall conduct a thorough assessment of
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 terns and conditions in case of necessity

In addition the RM (Relationship Manager ) \ Investment officers shall address the fallowing
issues which assessing investment proposal:

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

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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 borrowers
Cash flow statement
Strength of the borrowers balance sheet
Leverage
Profitability

E. Project Financial Performance: 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

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 Excess over limit drawings

Excess over DP drawing
Banks commission and charges payment

G. Mitigating Factor : Following risk mitigating factors to be identified in the investment

assessment
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
Proposed investment an oust and tenor is not excessive

I. Security:
Primary security should be acceptable, marketable & legal items
Slow, perishable, obsolete, banned, expired items not to be taken as security
A current valuation of collateral security shall be obtained

4.13 Money Laundering [3,5]

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Definition of Money Laundering: A definition of what institutes the offence of money laundering
under Bangladesh law is set out in Section-2 (Tha) of the prevention of Money Laundering Act
2002 (Act No. 7 of 2002) Which is reads as follows: Money Laundering means:
(Au) Properties acquired or earned directly or indirectly through illegal means;
(Au) Illegal transfer, conversion concealment of location or assistance in the

above act of the

properties acquired or earned directly or indirectly legal or illegal means;

Properties has been defined in section 2(Da) of the Act as Properties means movable or
immovable Properties of any nature and description.
The U.S customs Service, an arm of the Department of the Treasury, provides a lengthy
definition of money laundering as the process whereby proceeds, reasonably believed to have
been derived from criminal activity, are transported, transferred, transformed, converted or
intermingled with legitimate funds for the purpose of concealing or disguising the true nature,
source disposition, movement or ownership of these proceeds. The goal of the money
laundering process is to make funds derived from, or associated with, illicit activity appear
legitimate.
Another definition of Money laundering under U.S. law is, the involvement in any one
transaction or series of transactions that assists a criminal in keeping, concealing or disposing of
proceeds derived from illegal activities.
The EU defines it as the conversion or transfer of property knowing that such property is
derived from serious crime, for the purpose of concealing or disguising the illicit origin of the
property or of assisting any person who is involved in committing such an offence or offences to
evade the legal consequences of his action, and the concealment or disguise of the true nature,
source, location, disposition, movement, rights with respect to or ownership of property,
knowing that such property derived from serious crime.

In lay terms Money Laundering is most often described as the turning of dirty or black money
into clean or white money. If undertaken successfully, money laundering criminals to legitimate
dirty money by mingling it with clean money, ultimately providing a legitimate cover for the

81

source of their income. Generally, the act of conversion concealment is considered crucial to the
laundering process.

4.14 Reasons of Money Laundering:

Criminals engage in money laundering form three main reasons:
First, Money represents the lifeblood of the organization that engages in criminal conduct
for financial gain because it covers operating expenses, replenishes inventories purchases
the services of corrupt officials to escape detections and further the interests of the illegal
enterprise, and pays for an extravagant lifestyle. To spend money in these ways, criminals
must make the money they derived illegally appear legitimate.
Second, a trial of money from an offence to criminals can become in criminating
evidence. Criminals must obscure or hide the source of their wealth or alternatively
disguise the ownership or control to ensure that illicit proceeds are not used to prosecute
them.
Third, the proceeds from crime often become the target of investigations and seizure. To
shied ill-gotten suspicion and protect them from seizure, criminals must conceal their
existence or alternatively make them look legitimate.

4.15 Impact of money Laundering: [3]

Money Laundering has potentially devastating economic, security and social consequences.
Money laundering is a process vital to making crime worthwhile. It provides the fuel for drug
dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to operate
and expand their criminal enterprises. This drives up the cost of government due to the need for
increased law enforcement and health care expenditures (for example, for treatment of drug
addicts) to combat the serious consequences that result. Crime has become increasingly

81

international in scope, and the financial aspects of crime have become more complex due to
rapid advances in technology and the globalization of the financial service industry.

1. Impact of Tax and Revenue: Money Laundering diminishes government tax revenue
and therefore indirectly harms honest taxpayers. It also makes government tax
collection more difficult. This loss of revenue generally means higher tax rates than
would normally be case if the untaxed proceeds of crime were legitimate. We also pay
more taxes for public works expenditures inflated by corruption. And those of us who
pay taxes pay more because of those who evade taxes.

2. Impact of Market price: Money Laundering distorts asset and commodity prices and
leads to misallocation of resources. For financial institutions it can lead to an unstable
liability base and to unsound asset structures thereby creating risks of monetary
instability and even systemic. The loss of credibility and investor confidence that such
crises can bring has the potential of destabilizing financial systems, particularly in
smaller economics.
3. Impact on Private sector: One of the most serious microeconomic effects of money
laundering is felt in the private sector. Money Launderers often use front companies,
which co-mingle the proceeds of illicit activity with legitimate funds, to hide the illgotten gains. These front companies have access to substantial illicit funds, allowing
them to subsidize front company products and services at levels well below market
rates. This makes it difficult, if impossible, for legitimate business to complete against
front companies with subsidized funding, a situations that can result in the crowding
out of private sector business by criminal organizations.
4. Impact on Global Economy: No one knows exactly how much dirty money flows
through the worlds financial system every year, but the amounts involved are
undoubtedly huge. The international Money has estimated that the magnitude of money
laundering is between 2 and 5 % of world gross domestic product, or a least USD 800
billion to USD1.5 trillion. In some countries, these illicit proceeds dwarf government

81

budgets, resulting in a loss of control of economic policy by governments. Indeed, in

some cases, the sheer magnitude of the accumulated asset base of laundered proceeds
can be used to corner markets- or even small economies.
5. Impact on national economy: Among its other negative socioeconomic effects, money
laundering transfers economic power from the market, government, and citizens to
criminals. Furthermore, the sheer magnitude of the economic power that accrues to
criminals from money laundering has a corrupting effect on all elements of society.
6. Impact on society; The social and political costs of laundered money are also serious
as laundered money may be used to corrupt national institutions. Bribing of officials
and governments undermines the moral fabric in society, and by weakening collective
ethical standards, corrupts our democratic institutions. When money laundering goes
unchecked, it encourages the underlying criminal activity from which such money is
generated.
7. Impact of financial Institutions: Nationals cannot afford to have their reputations and
financial institutions tarnished by an association with money laundering especially in
todays global economy. Money laundering erodes confidence in financial institutions
and the underlying criminal activity-fraud, counterfeiting, narcotics trafficking and
corruptionweaken the reputation and standing of any financial institution. Actions by
banks to prevent money laundering are not only a regulatory requirement, but also an
act of self interest. A bank tainted by money laundering accusations from regulators,
law enforcement agencies, or the press risk likely prosecution, the loss of their good
market reputation, and damaging the reputation of the country. It is very difficult and
requires significant resources to rectify a problem that could be prevented with proper
anti money laundering controls.
It is generally recognized that effective efforts to combat money laundering cannot be carried
out without the cooperation of financial institutions, their supervisory authorities and the law
enforcement agencies. Accordingly, in order to address the concerns and obligations of these
three parties, these guidance Notes were drawn up.

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4.16 Affect Of Money Laundering in business/ economic development : [3]

Damages market integrity

Deters foreign investment
Diminish Gov. Tax revenue.
Contaminates the Industry.
Uneven playing field for honest business.
Risks for financial institutions.
Distorts assets and commodity prices and leads to misallocation of resource.
Makes crime a profitable enterprise

4.17 Stages of Money Laundering: [3] Three basic stages on money laundering are:
1. Placement: The physical disposal of the initial proceeds derived from illegal activity.

2. Layering: Separating illicit proceeds from their source by creating complex layers of
financial transactions designed to disguise the audit trail and provide anonymity.
3. Integration: The provision of apparent legitimacy to wealth derived criminally. If the
layering process has succeeded, integration schemes place the laundered proceeds back
into the economy in such a way that they re-enter the financial system appearing as
normal business funds.
Table 20: Stage of money laundering [3]

Cash

Placement stage
paid
into

(sometimes

with

complicity

or

proceeds

of

mixed

Layering stage
Integration stage
bank Sale or switch to other forms Redemption of contract or
staff of investment.

switch to other froms of

with Money transferred to assets of investment.

legitimate legitimate

financial False

loan

repayments

business)

institutions.

Cash exported.

Telegraphic transfers (often for laundered money.

or

forged invoices used as cover

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Cash used to buy high value using fictitious name or funds Complex web of transfers
goods, property or business disguised
assets.
Cash

as

proceeds

legitimate business.)
purchase

of

of (both

domestic

and

international) makes tracting

single Cash deposited in outstation original

source

of

funds

premium life insurance or branches & even overseas virtually impossible.

other investment.

banking system.
Resale of goods/assets.

4.18 Symptom of money laundering: [3]

The following is a list of circumstances, which might give rise to a suspicion of money
laundering. The list is not exhaustive and whether or not they are suspicious depends on the
background and details. He example are as under:
1. Money Laundering using Cash Transactions:
)Unusually large cash deposits made by an individual or business whose
ostensible business activities would normally be generated by Cheque and
other instruments.
Substantial increases in cash deposits of any individual or business without
apparent cause, especially if such deposits are subsequently transferred within
a short period out of the account and/or to a destination not normally
associated with the customer.
Customers who deposit cash by means of numerous credit slips so that the
total of each deposit is unremarkable, but the total of all the credits is
significant.
Company accounts where the transactions, both deposits and withdrawals, are
denominated in cash rather than forms of debit and credit normally associated
with commercial operations (e.g. Cheque, casher orders, demand drafts etc.)
Customers who constantly paying or deposits cash to cover requests for
demand draft, money transfer or others negotiable instruments.
Customers who seek to exchange large quantities of law denomination notes
for those of higher denomination.

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 Frequent exchange of cash into other currencies.

Customers whose deposits contain counterfeit notes, or forged instruments.
Customers transferring large sum of money to or form overseas locations with
instructions for payment in cash.
Purchase or sale of foreign currencies in substantial amounts using cash

settlement, deposit the customer having an account with the institution.

2. Money Laundering Using Bank Accounts:

Customers who wish to maintain a number of trustee or customers accounts
which do not appear consistent with the type of business, including
transactions which involve nominees.
Customers who have numerous account and paying amount of cash to each
of them where the total of credits is a large amount.
Any individual or business whose account shows virtually no normal
personal banking or business related activities, but is used to receive or
disburse large sums which have no obvious purpose or relationship to the
account holder and/or his business (e.g. a substantial increase in turnover on
an account.)
Reluctance to provide normal information when opening an account,
providing minimal fictitious or conflicting information, or information which
is difficult or expensive to verify.
Customers who appear to have accounts with several financial institutions
within the same locality, especially when there is a regular consolidation
process of funds from such other accounts prior to a request for onward
transmission of the funds.
Matching of debits with credit paid in by cash on the same or previous day.
Paying in large third party Cheque endorsed in favor of the customer.
Large cash withdrawals from a previously dormant or inactive account, or
from an account which has just a large credit from abroad.
Business representatives avoiding contract with the branch.
Customers who decline to provide information which normally would make
them eligible for credit or other valuable banking services.
Insufficient use of normal banking facilities (e.g. avoidance of high interest
rate facilities for large balance.)

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 Large numbers of individual making payments into the same accounts

without an educate explanation.

3. Money Laundering Using Investment Related transactions:

Purchase of government securities, where this does not appear appropriate

given the customers apparent standing.

Requests by Customers for investment management services (either foreign
currency or government securities ) where the source of the funds is unclear

or inconsistent with the customers apparent standing.

Large or unusual settlements of securities in cash form.
Purchase or selling securities with no discernible purpose or in unusual
circumstances.

4. Money Laundering by Off-shore Activity:

Customers introduced by an overseas branch, affiliate or other bank in known

drug producing or drug trafficking countries.
Use of letters of credit and other methods of trade finance to move money
between countries where such trade is not consistent with the customers
usual business.
Customers who make regular and large payments, including wire transfer
transactions, that cannot be clearly identified as bona fide transactions to, or
receive regular and large payments from, known drug producing or drug
trafficking, countries or countries which are commonly associated with
terrorist activity or which are tax havens.
Building up of large balances not consistent with the known turnover of the
customers business and subsequent transfer to accounts held overseas.

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 Unexplained electronic fund transfers by a customer on an in and out basis or

without passing through an account.
Frequent requests for travelers, Cheque, Foreign currency, drafts or other
negotiable instruments.
Frequent paying in of travelers Cheque or foreign currency drafts particularly
if originating from overseas.
Numerous were transfers received in a account but where each transfer is
below the transaction size reporting requirement in the remitting country.

5. Money Laundering by Secured and Unsecured Lending:

Customers who repay problem loans unexpectedly.

Requests to borrow against assets held by the financial institution or a third

party, where the origin of the assets is not known or the assets are
inconsistent with the customers standing.
Request to provide or arrange finance where the source of the customers
financial contribution to a deal is unclear, particularly where property is
involved

4.19 Penalties for Money laundering: [3]

All offences under the act are non-bail able and the penalties for the commission of the offences
all have prison terms and/or fines as prescribed in the act as follows:

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The offence of money Laundering is punishable by terms of a minimum imprisonment for six
months and a maximum of up to seven years plus a fine amounting to double the money
laundered (See Section 13 of the Act).

The punishment for violation of seizure Orders is a minimum imprisonment for one year or a
fine of at least Taka ten thousand or both (See Section 14 of the Act).
The punishment for violation of Freezing Orders is a minimum imprisonment for one year or a
fine of at least Taka five thousand or both (See Section 15 of the Act).
The offence of divulging information by informing i.e. tipping off the person who is the subject
of a suspicion, or any third party is punishable by a minimum imprisonment for one year or a
fine of at least Taka ten thousand or both (See Section 14 of the Act).

The offence of obstructing investigation or failure to assist any enquiry officer in connection
with an investigation into money laundering is punishable by a minimum imprisonment for one
year or a fine of at least Taka ten thousand or both (See Section 17 of the Act).

If any bank, financial institution and other institutions engaged in financial activities fail to retain
customer identification and transaction records or fail to furnish required information as per the
Act, Bangladesh Bank will report such failure to the licensing authority can take proper action
for such negligence and failure (See section 19 (3) of the Act).

Bangladesh Bank is empowered to impose fines of not less than Taka ten thousand and not more
than Taka one lac on any bank, financial institution and other institutions engaged in financial
activities for the failure or negligence to retain customer identification and transaction records or
fail to furnish required information to Bangladesh Bank (See section 19 (4) of the Act).

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If any Company Partnership Firm, Society or Association violates any provisions of the Act it
will be deemed that every owner, partner directors, employees and officers have individually
violated such provisions

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5.1 Finding
5.2 Analysis
5.3 Recommendation
5.4 suggestions for money laundering
5.5 conclusions

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5.1 Finding
The three 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. Bangladesh is one of the less developed countries. So the
economic development of the country depends largely on the activities of commercial banks.
During my internship period at Al- Arafah Islami Bank limited I have observed the system
following by the bank. By observing the system I have identified some problem of Al- Arafah
Islami Bank limited .The finding are as follows:
The working environment of AIBL khilkhet branch is so much well. Furniture & other
necessary tools are properly arranged.
The organization does not provide any extra incentive for showing extra ordinary
performance.
Has not enough strong marketing policy.
There is no customer care section.
Less attractive remuneration package and motivation for the employees.
For advertisement AIBL is absent in TV, Print Media, Bill Boards, and Sponsorships etc.
Bank should advertise about itself so that it can attract more clients. That will increase the
business volume of the bank.

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 Maximum clients do not know about AIBL Loan schemes. They should carryout more
promotional activities to make clients aware about their offers.
AIBL should appoint a sufficient number of women employees to deal women
entrepreneurs and professionals and understand their needs and thus create demand for
investment.
Employees of AIBL are not getting enough training facility.

5.2 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.
1. 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.
2. 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.
3. 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.
4. Threats:
The worldwide trend of mergers and acquisition in financial institutions is causing
problems.

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 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

5.3 Recommendation

Recommendation for Al-Arafah Islami Bank limited.

Though my work at the AIBL khilkhet branch, I have acquired some practical knowledge about
banking system and other relevant matters. Now I would like to provide some recommendation,
which maybe helpful to promote the performance of Al-Arafah Islami Bank limited. As per
earnest observation some suggestions for improvement of the situation are given below:
The internal decoration of the branch has scope for much improvement
More employees should be appointed to manage the increasing customer
Ensure high level customer service

5.4 Suggestion for Money Laundering:

In order to prevent money maundering, attention should be given following things to be
considered besides law enforcing:

1. Only banking system will not achieve expected success. Its necessary to build up
economic infrastructures which are helpful for the development of the country.

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2. Strong determination should be taken and fruitful measures should be taken to

remove corruption from country. For this accountability and transference will ensure
and as a result liability will be increase.
3. Everything required for the development of banking system should be done and
qualified person should be given duties. In this regard honesty, competencies,
sincerity and responsibility should be under consideration.
4. The bad effect of money Laundering should be published through newspaper, radio
and other world service. Besides immigrants should be encouraged to send money
through legal way. Foreign embassies can play a positive role in this case.
5. The distance of foreign exchange should be reduced. Many people dont want to send
money through banking channel for high remittance charge fixed by foreign banks.
6. The advantage of online banking system should be extended and its fruitfulness
should be sent to peoples. The distance of bank in town and villages should be
lessened and the quality of the service should be developed.
7. In order to prevent money laundering mutual co-operation between governments of
different countries can play a significant role. Moreover, International Monitory fund
(IMF) can take appropriate measures in this case.
8. Foreign aid to the government sanction money, loan etc. should be used appropriately
in appropriate fields. This should be a system for different non-government
organizations, foreign agencies for their activities and liabilities

After all the aspects of money laundering is worldwide and with it powerful, shrewd and
dishonest persons are involved in this Act. So these steps are not taken by only central bank and
other commercial banks. Actually a combined efforts and sincerity of people in different
occupations such as police income tax authority, customs, BDR and civil society is needed and
moreover wit the help of responsible and powerful authority of the government and international
agency and all the chief of the government can bring expected success.

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5.5 Conclusion
Al-Arafah Islami Bank ltd. is a non government commercial Bank in Bangladesh, which started
its business from 1995.I t is a unique combination of Shariah & Islamic banking. Among non
government commercial banks, Al-Arafah Islami Bank Ltd. is a milestone for economic
development. It has been playing an important role to eradicate the unemployment problem in
Bangladesh. Over 800 employees and 5500 shareholders are getting benefit from this
organization. But most of the people in our country have misconception about Islamic banking
specially Al-Arafah Islami Bank Ltd. & other Islamic banks. They can not find any difference in
its operation between conventional commercial Banks and Islamic Banks because they have no
clear idea about the activities as well as investment mechanism of Islamic banks.

The Bank is committed to run its activities as per Islamic Shariah and thus it has different
investment(credit) modes, different repayment schedules, different disbursement procedure,
different mark up system. and also has a different Credit(Investment) policy. Mark up means
adding some additional value after purchasing the goods but before to sell the same to another
people. This system is accepted in Islamic Shariah because here money is converted to goods.
Money begets money is prohibited in Islamic Shariah. People is getting more benefit from the
dealings of Islamic banking because here quarterly interest is not charged and there is no
possibility of interest to be converted into principal. It can not take part in call money market.
Mudaraba, Musharaka are another mode of investment in Islamic Banking. But here honesty is
the only pre-requisite. For ensuring more benefit, more facility from Islamic banks like AIBL we
have to be honest and more sincere to repay the taken money from these banks in time.

Success in the banking business largely depends on effective lending. Less the amount of loan
losses, the more the income will be from credit operations. The more the income from credit
operations the more will be the profit of the AL ARAFAH ISLAMI Bank Ltd. and here lays the
success of credit financing.

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From the learning and experience point of view I can say that I really enjoyed my internship at
AL-ARAFAH-ISLAMI Bank Ltd. from the very first day. I am confident that this 03 (Three)
months internship program at AL-ARAFAH-ISLAMI Bank Ltd. will definitely help me to
realize my further carrier in the job market. By this internship program I have learned about
practical banking practice. I have also tried to learn about the theoretical emersion of money
laundering.

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Reference
1.
2.
3.
4.
5.
6.

http://www.al-arafahbank.com/profile.php
http://www.scribd.com/doc/64934358/Al-Arafa-Islami-Bank
http://www.scribd.com/doc/49381119/al-arafah-BANK
Various report and statement supplied by AlARAFAH ISLAMI BANK LIMITTED
Annual report of AIBL
Annual circular on Money laundering by BB

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