Chapter 1

TITLE OF THE REPORT

Performance Evaluation of Al-Arafah Islami Bank Limited

Chapter 2
Introduction

2.1 Introduction
Banking is the backbone of national economy. The growth of the economy depends on the performance of the banking sector. All sorts of economic and financial activities revolve round the axis of the bank. As the industry produces goods and commodities, so does the bank creates and controls money-market and promotes formation of capital. From this point of view, bankinga technical profession- can be termed as industry. In the global context, the role of banks is far reaching and more penetrating in the economic and fiscal discipline, trade, commerce, industry, export and import- all carried through the bank. Banks are the only media through which international trade and commerce emanate and entire credit transactions, both national and international. Banks secure money of the society. Government takes various monetary policies. This policy is implementing on the help of this banking sector. Banks provide service in business sector that help the business sector a lot of carry on the business. This report is partial requirement for the completion of the Masters of Business Administration (MBA).This report is outcome of the Ten weeks long internship program conducted Al-Arafah Islami Bank Limited (Rampal Branch), one of the reputed private commercial banks of the country .While working in the bank the standard operating procedures carried out by the bank the standard operating procedures carried out by the bank were observed and understood. To do my internship by rotation to all department of Al-Arafah Islami Bank Limited, Rampal Branch. The report is on Performance Evaluation of Al-Arafah Islami Bank Limited This report has been prepared in the light of practical as well as theoretical knowledge. Also it is prepared under the guidance and supervision of the supervisor. During the internship program I have got a good idea and about the bank and that is depicted the report.

2.2 Rational
Through the internship in Rampal Branch of Al-Arafah Islami Bank Limited I am trying to conduit theoretical knowledge and real life experience as part of Masters of Business Administration (MBA) program. This Internship report has been designed to have a practical experience through the theoretical understanding. In this internship program, I was not just only observing how people were working, rather I was a part of team of Al-Arafah Islami Bank Limited with all my responsibilities from my very first day. There have been lot of meaningful projects and targets set by the bank management and I had the time and space to make them count. This has given me the opportunity to learn job responsibility and accountability. I gained experience fundamentally in General banking except that I got little bit chance to do work in remittance, cash & foreign exchange. Last of all I decided to prepare my report in performance evaluation over all banking of Al-Arafah Islami Bank Limited. This Internship report titled Performance Evaluation of Al-Arafah Islami Bank Limited is prepared to fulfill the degree requirement of MBA program. In this regard I had been assigned in Rampal branch of Al-Arafah Islami Bank Limited just immediately after the completion of the course requirement of the program. I had been supervised there by the management of the bank to gather information which was necessary to prepare my report.

2.3 Background
2.3.1 Organizational Overview Al-Arafah Islami Bank Ltd. as the name implies a newly formed commercial bank in Bangladesh. It has been incorporated in Dhaka, Bangladesh as a public limited company and its Head Office of the Bank is located at Rahman Mansion, 161, Motijheel C/A, Dhaka- 1000.In the world of consumerism the business organization of the world strive for the consumers satisfaction as a number one business strategy whatever may be the product of the organization, either service or non service. Service is the product of bank. There is a saying that customer service starts rights right from the stairs of the bank building. The guard at the door is first person pep resents of the bank, receives a customer with wishes in smiling face.

2.3.2 Historical Background Al-Arafah Islami Bank Ltd. (AIBL) was incorporated on 18 June,1995 with authorized capital of Tk.1000 million (100 Crore) and paid up capital of Tk.10.12 Crore paid up by the Sponsors/Directors and Tk.10.12 Crore was offered to the public for subscribed portion of public issue of shares. The Bank was formally inaugurated on 27th September, 2005 with

Motijheel Branch (Principal Branch).The Management of the Bank is vested in a Board of Directors consisting of 24 members including the Managing Director of the Bank. Among 24 Directors 2 (two) Directors came from the public shareholders. Managing Director is the chief executive of the Bank. There is a Shariah council of 7 (seven) members in Al-Arafah Islami Bank Ltd. to monitor the investments whether it invests in Shariah allowed sectors or not .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 in2001, 1 in 2005, & 5 in 2006 i.e. at the end of 2006 the Bank Branch reaches to 46 & in 2012 it is 100. 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

2.3.3 Corporate Structure

Date of Registration 1st Branch Opening Ceremony Authorized Capital Paid-up Capital Local Partnership of Capital Equity Number of Branches Deposit Investment Number of Employees Number of Shareholders
Table: 1 Corporate Structure

18 June 1995 Motijheel Branch, Dhaka 27 September, 1995 10,000.00 Million 7,130.98 Million 100% 14,050.69 Million 100 118,683.39 Million 106,650.42 Million 2,110 52,739

2.3.4 Structure of AIBL: (Organizational Chart)

2.3.5 Vision
Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh.

2.3.6 Mission Statement

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.

2.3.7 Commitments
Ours is a customer focused modern Islamic Banking making sound and Steady growth in both mobilizing deposit and making quality Investment to keep our position as a leading Islami Bank in Bangladesh. To deliver financial services with the touch of our heart to retail, small and medium scale enterprises, as well as corporate clients through our branches across the country. Our business initiatives are designed to match the changing trade & industrial needs of the clients.

2.3.7 Special Features of the Bank

As an Islami bank, we are singular in every positive aspect. We provide a bunch of state-of-art banking services within the wide bracket of shariah. We are unique with our products, strict with our principle and uncompromising with our honesty. Some of our special features that make us notable in Islami banking sector are as follows: All activities of AIBL are conducted under an profit/loss based system according to Islamic Shariah to get the nation rid of Usury. Its investment policies under different modes are fully Shariah compliant and well monitored by the board of Shariah Council. During the year 2007, 70% of the investment income has been distributed among the Mudaraba depositors. In 2008, AIBL has included online banking in its wide range of services. Bangladeshi software has been introduced in this feature to promote the local developers.

 AIBL regularly arranges its AGMs (Annual General Meeting). Whenever needed EGMs (Extraordinary General Meeting) are also arranged. We regularly pay dividend to our valued shareholders. For the year of 2008, we declared 30% bonus dividend to our shareholders. We believe in providing dedicated services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity. The bank is committed towards establishing a welfare-oriented banking system to meet the needs of low income and underprivileged class of people. The Bank upholds the Islamic values of establishment of a justified economic system through social emancipation and equitable distribution of wealth. Following the Islamic traditions, it is assisting in the economic progress of the socially deprived people; in the creation of employment opportunities and in promotion of rural areas to ensure a balance development of the country. The Bank believes in social and philanthropic activities and has established AIBL English Medium Madrasha and AIBL Library. More endeavors will inshallah follow in future.

2.3.8 Management Structure

A fourteen member Board of Directors are responsible for the strategic planning and overall policy guidelines of the bank. Further, there is an Executive Committee of the board to dispose of urgent business proposals. The Executive Committee is assembled by nine members. Besides, there is a tree member Audit Committee in the board to oversee compliance of major regulatory and operational issues. There is another eight member Shariah Council to accelerate, monitor, control, supervise and maintain the modes of Islamic banking system. Key issues are managed by a Management Committee headed by the CEO and Managing Director to facilitate rapid decisions.

2.3.9 At a Glance AIBL

Name of the Company Al-Arafah Islami Bank Ltd. A public limited company registered in Bangladesh on 18 June 1995, under the Companies Act 1994 and enlisted in Dhaka Stock Exchange Ltd. & Chittagong Stock Exchange Ltd. Commercial Banking based on Al-Quran and Sunnah. Head Office Peoples Insurance Building (6th 9th Floor) Registered Office 36, Dilkusha Commercial Area Dhaka-1000 Bangladesh. Telephone No. Fax No. SWIFT Code E-mail Web Page 9567885, 9567819, 9569353, 9568007, 9560198, 7123255-7 880-2-9569351 ALAR BD DH* [* means Branch Code] aibl@al-arafahbank.com www.al-arafahbank.com 1. Hoda Vasi Chowdhury & Co. Chatered Accountants , BMTC Bhaban, Level 8, 7-9, Karwan Bazar, Dhaka-1000,Bangladesh. 2. Syful Samsul Alam & Co. Chatered Accountants Paramount Heights, Level 6 (Box culvert Road) 65/2/1, Purana Paltan, Dhaka-1000, Bangladesh.

Legal Identity

Nature of Business

Auditors

2.3.10 Product & service

2.3.10.1.1 Marriage Savings Deposit Fixed monthly installment for a particular period is to be deposited to defray the expenses of marriage and the bank allows double of saving or Tk.30,000/- which is higher as investment to procure ornaments, furniture, fixture etc., repayable in 24monthly installment without any collateral security. 2.3.10. 1.2 Savings Bond Deposit Under this scheme the bank has introduced saving bonds for Tk. 10,000/-, Tk.25,000/-and Tk. 100,000/- for 3,5 and 8 years. 2.3.10. 2 Investment: The Total investment of the bank stood at Tk.5079.21 million against Tk.3728.41 million during the corresponding period of last year. The percentage of increase is 36.23% as against 13.00% in banking sector. The bank extends investments to the clients under the following modes of investment under Islamic Shariah: 2.3.10.2.1 Bai-Murabaha or simply Murabaha: The terms Bai-Murabaha have derived from Arabic words Bai and Ribhum. Theword 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 asa 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. 2.3.10.2.2 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 onthe 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 requiredfor a project. The bank, along with other partners, provides the necessary capital for theproject. 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.

2.3.10.2.3 Mudarabah: The term Mudarabah refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole responsibility of the provider of the capital. The first party provides capital and the other party provides the expertise with the purpose of earning lawful profit (approved by Islamic law) which will be shared in a mutually agreed upon proportion. 2.3.10.2.4 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. SoBai-Muajjal is a sale for which payment is made at a future fixed date or within affixed 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. 2.3.10.2.5 Bai-Salam: The term Bai-Salam is used to define a sale in which the buyer makes advance payment, but delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank.

2.4 Objectives:
General Objective: To gain practical job experience and view the application of theoretical knowledge in the real life. Specific objective: The specific objective of this report is to evaluate the performance of last five year using ratio analysis of Al-Arafah Islami Bank Limited. The organization is one of the emerging banks of the third generation bank in the Bangladesh. It being popular day by day with its attractive service and competitive product package. To get a clear knowledge of business operation of Al-Arafah Islami Bank Limited. This report also provide progress curve of the AlArafah Islami Bank Limited.