SERIAL
NO.
NAME OF THE STUDENT
ID No.
01.
Mahmuda Mongur Diti
343
02.
Mokerrama Najin
344
03.
Md. Zahidul Islam
351
Objectives of the report
We tried our best to force the role of AB Bank Ltd. and AlArafah Islami Bank Ltd. in the social development of
Bangladesh.
Our special focus was on the problem of the environmental
forces of the company and our objective was to find out the
solution of this problem.
Our additional focus was on the analysis of the financial
state of AB Bank Ltd. and Al-Arafah Islami Bank Ltd.. So
we tried to make an analysis view of that state.
1. Broad Objective
The prime objective of the report is to analyze
“Environmental Forces of AB Bank Ltd. and Al-Arafah
Islami Bank Ltd.”
2. Specific Objective
- To present an over view ABBL and AIBL.
- To find out the objective of ABBL and AIBL.
- Analyzing the position in bank sector of Bangladesh.
- To examine the formation of ABBL and AIBL.
- To identify the service they provide.
- To find out their existing and future programs.
- To identify the problems with their management.
- Evaluate the contribution in overall economic
development.
- To have introduction to the functions of general banking
section.
- To know about the profile of ABBL and AIBL.
- To know about performance of the Bank.
- To apply theoretical knowledge in the practical field.
Methodology of the report
1. Type of research
This report is a descriptive type of research, which briefly
reveals the overall activities performed by AB Bank Ltd.
and Al-Arafah Islami Bank Ltd. It has also been
administered by collecting secondary data. Annual reports
of AB Bank Ltd. and Al-Arafah Islami Bank Ltd. were the
major secondary data sources in this regard. Environmental
forces of social force analysis have also been used as major
tools for the financial performance analysis. The study is
performed based on the information extracted from
different sources collected by using a specific
methodology. This report is analytical in nature.
2. Sources of data
Primary sources:
- Officers
- Customers
Secondary data:
- Annual Report of the organization.
- Different text book and journals.
- Various reports and articles related to study.
- Some of my course elements as related to this report.
- Web base support from the internet.
3. Data Collection Procedure
Secondary data:
For the “Environmental Forces of AB Bank Ltd. and AlArafah Islami Bank Ltd.” We are mainly used Secondary
data.
Primary sources:
Besides this we are also collect some information by
taking expert opinion from the officers and communicate
with their customers.
4. Sampling plan
Population
All the customers and employees of AB Bank
Ltd. and Al-Arafah Islami Bank Ltd.
Sample element
Individual customer
Sample frame
There was no sample frame found.
Sampling procedure
Non- probability convenience sampling…..
Sample size
Area
Number of Respondents.
Mirpur
5
Dhanmondi
2
Shahbag
3
Total
10
Limitation of the report
- Access to data regarding different performance
indicators of ABBL and AIBL.
- The report is mainly based on the secondary data
which published by different organization as annually,
half-yearly, monthly, weekly or daily.
- Time constraints are another limitation of this report.
- Due to some legal obligation and business secrecy
banks are reluctant to provide data. For this reason, the
study limits only on the available published data and
certain degree of formal and informal interview.
- The bankers are very busy with their jobs,
which lead a little time to consult with.
- Finally, some recent data which were needed
to enrich this report but the unwillingness of
executives of the bank due to confidentiality was
made my report limited to data content.
- Lack of my experience and practical
experience.
Overview of ABBL
Vision of the ABBL
"To be the trendsetter for innovative banking with
excellence & perfection"
Mission of the ABBL
"To be the best performing bank in the country"
Goal of the ABBL
To achieve the desired goal, it has the intention to
pursuit of excellence at all stages with a climate of
continuous improvement.
Organogram OF ABBL:
President & MD
Deputy
managing
Director
Credit
(CRM)
Head of
Credit
Admin &
Monitoring
(CAM)
Credit
Admin
Officer
CAM
Deputy
managing
Director
(Corporate)
Regional
Relationship
Manager/
Head
Relationshi
p Officer
(SME)
Head of
retail &
consumer
banking
Deputy
managing
Director
(operator)
Branch Manager &
Relationship Head
Head of IT
Mkt.
Treasury &
Foreign Ram
Head of Int.
Control
&Complianc
e
CFO &
Head of
Finance
Priority
Banking
Operations
Manager
Concurrent
Audit
Cluster Relationship
Manager
Relationship
Officer
(CORP)
Account
opening &
Cheque Mgt
Relationshi
p Officer
(REATIL)
Cash
operation
General
Bankin
g
Service
s
Customer
Services
Desk
Remittance
Local
Admin &
Secu. & IT
Applicatio
n
Cleaning
& allied
Services
Foreign
Trade
Finance
Export
Financia
l Control
Import
SWOT Analysis of the ABBL
Strengths
- Several types of loans and advances with unique
features and facilities which are so much helpful for
enhancing the economic growth.
- Innovator of different new products and services
like they are the innovator of ATM booth system.
- They demand a standard interest rate on the loan
and advances.
- High geographic coverage.
- Availability of online Banking facility.
- Strong and attractive promotional activities.
- Own training institutional which arrange useful
and distinctive training program time to time.
- Duties and responsibilities of the employees in the
RM and CAM department are clearly define.
- Co-operative and skilled personal, who are very
much specialized in interacting with clients.
(Particularly in RM and CAM department.)
- ABBL employees are one of the major assets of the
company. The employees of ABBL have a strong sense of
commitment towards organization and also feel proud and
a sense of deluging towards ABBL. The strong
organizational culture of ABBL is the main reason behind
this strength.
Weaknesses
- Various complex requirements demanded by the
Bank to give the loan.
- This bank mainly provides services to their big
corporate clients.
- Variability of credit card facility for all customer groups.
It provides credit and facility only for the selected
customer groups.
- They have only one branch for Islamic Banking but
it has a great demand in BD.
Opportunities
- Possibility to generate
very high note of
return as compared to fixed rate of interest.
- An industry with an endless demand.
Name of the products are so easy to understand so
people easily their loan facilities.
- The use of latest technology in all spheres of
banking, which will increase the banks efficiency
and service quality more.
- Introduction of online banking facility is
ennobling the bank to offer its banking service
beyond its national border.
- Expansion of its existing product services basket.
Threats:
- Strong appetite for Islamic financial services among the
people of Bangladesh, but AB Bank has only one branch of
Islamic Banking.
- The upcoming private of ABBL, it is expected that in the
next few years more commercial banks will emerge. If that
happens the intensity of competitor will rise further and
banks will have to develop strategies to compete against and
win the battle of banks.
- Unfavorable government rules and regulation regarding
banking business.
- Now day’s different foreign and private banks are also
offering similar type of product with an almost similar profit
margin. So, if all competitors fight with the same weapon,
the natural result is declining profit.
Overview of AIBL
Vision of the AIBL
To be a pioneer in Islami Banking in Bangladesh and
contribute significantly to the growth of the national
economy.
Mission of the AIBL
- Achieving the satisfaction of Almighty Allah both
here & hereafter.
- Proliferation of Shariah Based Banking Practices.
- Quality financial services adopting the latest
technology.
- financing.
- 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
Goal of the AIBL
Al-Arafah Islami Bank Limited is Islamic Banking
institutions that operates with the objectives t implement
and materialize the economic and financial principles of
Islamic in the banking arena. The objectives of AIBL are
not only to earn profit, but also to do good and welfare to
the people. The main objectives of AIBL are listed below- To conduct interest free banking
- To establish participatory banking instead of banking
on debtor creditor relationship
- To invest through different modes permitted under
Islamic Shariah
- To accepts deposits on profit loss sharing basis
- To establish as welfare –oriented banking system
- To extend co-operation to the poor, the helpless and
the low income group for their economic up liftmen
- To play a vital role in human development and
employment generation
- To contribute towards balances growth and
development of the country through investment
operations particularly in the less developed areas
- To contribute in achieving the ultimate goal of
Islamic economic System.
Organogram OF AIBL:
Board of Director
Managing Director
Deputy Managing Director
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Investment
General banking
A/C
opening
Cash
Clearin
g
Account
Foreign Exchange
Export
Import
SWOT Analysis of the AIBL
Like other organizations, AIBL also have its strength,
weakness, opportunities and threats. The following
stated the SWOT of the bank
Core strength(S)
- AIBL was adjudged second among the entire Islamic
bank in the country in terms of service and business. The
customer service was conducted by the general banking.
- AIBL is doing business under the direct supervision of
Bangladesh Bank.
- Good asset quality
- Satisfactory business growth
- Diversified product lines
- Experienced top management
- Good operating efficiency
The following are the core strength of the Islamic bank
for which it is now considered to be the emerging sector
for success:
If we drew the differences between the normal banking and the
Islamic bank than it will be clear about the core strength of Islamic
bank:
One of the key strength of the Islamic bank is that it distributes a
significant amount of profit that they earn by investing different
areas. On the other hand, in case of conventional banking they
provide a fixed amount of return which is called “RIBA” or interest
that may not be consistent with the profit positioning of the bank’s
operations. So in case of conventional banking, they either sacrifice
by bearing losses or they deprived the depositors’ by not paying them
the part of profit.
As the Islamic bank has to provide a significant of profit so they have
to investment in a proper way to maximize the return. Because if a
investment becomes classified which will affect the total profit
position of the Bank, that will become the impediments to the profit
of the depositors’.
Under conventional banking the depositors’ can estimate the income
from their deposit that lead them to expand the area of his expense
which ultimately increase the inflation. On the other hand, in Islamic
bank the depositors’ have to wait for the profit, so that can’t increase
the tendency to expense much.
Islamic collect deposits by Murabaha Mode whereas they invest by
Murabaha, Mishawaka Mode that increase the intimacy with the Bank
and with the depositors’.
Meanwhile islami bank provide credit through Murabaha, Baimuajjal etc. Under these systems banks have full regulatory power
that’s why it develops good friendship relation with the Bankers’ and
the clients’.
Islami banks fulfill its administration expenses from the profit of its
investment and from the service charges. So bank ensures close
observation to its investment so that the investment profit doesn’t
come down as well as its service charges goes up.
Islami bank works to the development the socio-economic and value
system of the people that is not seen in case of normal banking.
Islami bank does not incur losses as it provide the return under the
scientific process where as the conventional banks provide interest
though they incur losses that ultimately reduce the deposit of the
clients.
Islami bank includes the profit suspense system in its
investment mode especially in Murabaha and Bai-Muajjl
system. Islami banks are following this system prior to the
Bangladesh Bank’s FSRP.
Islami banks ensure the utilization of credit for which the
client received the money. For this reason people have a
low scope to use it in other purpose which ultimately
ensures the recovery of invested money. Beside observation
Islami banks find other sources of investment.
Islami banks invest in the human welfare sector. So Islamic
bank practices mainly welfare banking. These banks invest
only in those sectors where human welfare can be ensured.
If needed islami provide Quard-a-hasana, which means the way to
provide credit without any profit. So this system provides benefits to
the poor.
Islami bank is free from the circle of interest or “Riba”. Interest
actually has some bad impact on the society as well as on the
economy. A famous economist James Ken said if banks don’t provide
any interest but the people will deposit to bank. According him the
only reason is safety that the people want from banks. So banking
system without interest is the best banking practices.
The benefit of interest is mainly upwarding. This means that the
interest that middle class people provide ultimately goes to the hand
of rich people.
So it can be said that the benefits that the Islami has it significant
which give the new era to the banking sector around the world as
well as the AIBL.
Major weakness:
MIS at primary stage
Limited Branch network
Limited market share
Islamic banking is guided by some principles but it has some
weaknesses, some of the major weaknesses are discussed in
below:
Lack of profit and loss sharing:
Profit Loss Sharing (PLS) dominates the theoretical literature on
Islamic finance. Broadly, PLS is a contractual arrangement between
two or more transacting parties, which allows them to pool their
resources to invest in a project to share in profit and loss. Most
Islamic economists contend that PLS based on two major modes of
financing, namely Mudaraba and Musharaka, is desirable in an
Islamic context wherein reward-sharing is related to risk-sharing
between transacting parties..
Almost all theoretical models of Islamic banking are either
based on Mudaraba or Musharaka or both, but to-date
actual practice of Islamic banking is far from these models.
Nearly all Islamic banks, investment companies, and
investment funds offer trade and project finance on markup 3 , commissioned manufacturing, or on leasing bases.
PLS features marginally in the practice of Islamic banking
and finance.
Whatever is the degree of success of individual Islamic
banks, they have so far failed in adopting PLS-based
modes of financing in their business. Even specialised
Islamic firms, like Mudaraba Companies (MCo’s) in
Pakistan, which are supposed to be functioning purely on a
PLS basis, have a negligible proportion of their funds
invested on a Mudaraba or Musharaka basis. According to
the International Association of Islamic Banks, PLS
covered less than 20 percent of investments made by
Islamic banks world-wide (1996. Likewise, the Islamic
Development Bank (IDB) has so far not used PLS in its
financial business except in a few small projects.
Opportunities:
AIBL has some opportunities which are given
below:
About 85% people are Muslims in our country.
Other Islami banks do not cover the demand of
customer as their requirements as Muslim.
People aware of their religious because people
dont know the concept of Islami banking before.
Threat(S):
First, PLS contracts are inherently vulnerable to agency
problems as entrepreneurs have disincentives to put in
effort and have incentives to report less profit as
compared to the self-financing owner-manager. This
argument is based on the idea that parties to a business
transaction will shirk if they are compensated less than
their marginal contribution in the production process,
and as this happens in the case of PLS, the capitalists
hesitate to invest on PLS basis.
Second, PLS contracts require well-defined property
rights to function efficiently. As in most Muslim
countries property rights are not properly defined or
protected, PLS contracts are deemed to be less attractive
or to fail if used.
Third, Islamic banks and investment companies have to
offer relatively less risky modes of financing as
compared to Mudaraba or Musharaka in the wake of
severe competition from conventional banks and other
financial institutions, which are already established and
hence more competitive.
Fourth, the restrictive role of shareholders (investors)
in management and, hence, the dichotomous financial
structure of PLS contracts make them non-participatory
in nature, which allows a sleeping partnership. In this
way, they are not sharing contracts in a true sense; the
transacting parties share financial resources without
participatory decision-making.
Fifth, equity financing is not feasible for funding shortterm projects due to the ensuing high degree of risk (i.e.,
the time diversification effect of equity). This makes
Islamic banks and other financial institutions rely on
some other debt-like modes, especially mark-up to
ensure a certain degree of liquidity.
Sixth, unfair treatment in taxation is also considered to
be a major obstacle in the use of PLS. While profit is
taxed, interest is exempted on the grounds that it
constitutes a cost item. This legal discrimination and its
associated problem, tax evasion, make PLS less reliable
as a tool for reward sharing.
Seventh, secondary markets for trading in Islamic
financial instruments, particularly Mudaraba and
Musharaka, are non-existent. Consequently, they have
so far failed to effectively mobilise financial resources.
Beside the above mentioned limitations of lack of profit
and loss sharing banks’ that are operating as Islamic
banking philosophy are also facing the following
limitations:
1. Islamic banks suffer from serious sort of liquidity
problem. Because they don’t have specific Shariah
sector on which they can invest their liquid money. The
Bangladesh Bank has not yet introduced any profit and
loss basis bond, though BB is now discussing to
introduce Mudaraba Bond but it is not yet implemented.
The problem of this bond is that the sector where it will
invest is not said.
2. Islamic bank deposited 10% cash amount against
the BB requirement of SLR & CRR, on which the
Islamic banks’ has no chance to earn profit. On the other
hand, the conventional deposited only 4% of CRR on
without profit basis. From the observation it will be
clear that Islamic banks’ are not getting any profit on
6% on cash deposits.
3. Islamic bank don’t get any profit from the FC
Clearing Account while same is getting by the Islamic
banks. It will be beneficial to provide them on three,
seven, fifteen or one month basis that will recover them
from loss.
Analysis and Findings of ABBL
Society influences to the Bank to developing their
activities and helps to grow the business. After
influence, Bank decides by providing different
kinds of new and potential products and services to
the society. At the same time, banks grow faster and
achieve some long –range growth and also society
will be satisfied.
These are -
Products & Services of ABBL
Corporate Banking
At AB Bank we provide complete range of
solutions to meet Corporate Customers'
requirement. Our Corporate Banking solutions
include a broad spectrum of products and services
backed by proven, modern technologies.
Following are some of the products and
financial tools of Corporate Banking:
- Project Finance
- Working Capital Finance
- Trade Finance
- Cash Management
- Syndicated Finance, both onshore & off-shore
- Equity Finance, both onshore & off-shore
- Corporate Advisory Services
SME Banking: - SME Loan
SME Sectors in which AB Bank has participated
so far:
- Agro machinery
- Poultry
- Animal Feed
- Dairy Product
- Fruit Preservation
- Hotel & Restaurants
-Garments Accessories
- Leather products
- Plastic product
- Furniture : Wooden & Metal
- Ink
- Paint
- Printing & Packaging
- Wire & Cable
- Aluminum
- Cement and Lime Plaster
- Clinics and Hospitals
- Engineering & Scientific Instruments
Large Loan & Project Finance
In order to cater the demand of client AB Bank has
segmented its portfolio in terms of loan size. As per this
segmentation any loan over Tk. 10.00 Crore falls under the
purview of Large Loan Unit.
In AB Bank, there is also a separate Project Finance unit
who evaluate the business. The unit is entrusted to handle
the portfolio in a focused manner. AB Bank is always in
fore front to support establishment of new projects of
diverse nature which will help to broaden the
manufacturing arena vis-à-vis to generate to employment.
At the moment AB Bank ‘s exposure in Large Loan &
Project Finance portfolio is distributed in the
following sectors:
Non-Resident Bangladeshi (NRB) Banking
Facilities offered to NRBs
- Opening of Foreign Currency A/C
- Wage Earners Development Bond
- USD Premium Bond
- USD Investment Bond
Money Transfer
Foreign Remittance through Exchange House
For Inward Remittance, AB Bank established
extensive drawing arrangement network with Banks
and Exchange Companies located in the important
countries of the world.
Islami Banking
The goals and objectives of Islamic banking Wing are
as under:
- To facilitate the Islamic banking system in the country
- To create new entrepreneurs and to arrange required
finance for them
- To play effective role for socio economic development
of the country
- To give assistance in launching welfare oriented
economic system under Islamic values
Under this wing AB Bank extends the following Islamic
banking services:
- Deposit services
- Investment services
Under Deposit services the following services
are being rendered:
- Mudaraba Savings Account
- Mudaraba Short Noticed Account
- Mudaraba Term Deposit Account (with
different terms)
- Mudaraba Monthly Profit Account
- Al-Wadiah Current Deposit Account
- Mudaraba Deposit Pension Scheme
- Besides Mudaraba Hajj Deposit Scheme and
some other schemes are under process.
Investment Services
AB Bank Islmic Banking Wing provides investment
facilities for project finance, working capital
finance, SME finance, consumer / retail baking
finance etc. under following modes:
- Hire-Purchase under Shirkatul Melk (HPSM)
- Ijara or Leasing
- Bai-Muajjal / Bai-Murabaha
- Musharaka
- Mudaraba.
Sector of Investment:
Islamic Banking Wing of the bank finances in all
sectors i.e., Industry, business, Agriculture, Real
Estate etc. if purpose of the investment is
permissible under Islamic Shariah.
Limit of Investment:
Investment is offered to the extent of single
borrower exposure limit as fixed by the Bangladesh
Bank from time to time.
Foreign Trade
Islamic Banking Wing provides the following
services at its foreign trade desks:
- Opening of LCs
- Post -Import Finance
- Export bill purchase and negotiation
- Pre-shipment financing etc.
AB Bank Islamic Banking Wing has been
continuously trying to expand it’s service horizon
keeping the necessity of valued clients in view and
upholding the principle of Islamic Shariah.
Investment banking
AB Investment Limited, a subsidiary of AB Bank Limited
incorporated under the companies act 1994 and running its
Merchant Banking operations being licensed by the
securities and exchange commission.
Custodial Service
Customers:
Investors Who Are Interested to Invest In the Bangladesh
Capital Market
• Non Resident Bangladeshi (NRBs)
• Foreign Institutional and individual clients
• Local Institutions
• Sponsors' group and High net worth client
Services:
• Safe custody of client securities
• Foreign Trade Execution and Settlement
• Share transfer in the name of client
• Complete the Dematerialization process as per client
request
• IPO, Private Placement & Right share subscription as
per client instruction with deposit
• All types of corporate action that includes cash
dividend, bonus share and right share collection
• Open BO account
• Instant information regarding client securities position
as per their request
• Quarterly reporting to the client by Custodial
Department
Brokerage Service
Introduction:
AB Securities Limited (ABSL) is a subsidiary company of AB
Bank Limited having holding 99.60% shares of the ABSL.
Earlier, AB Bank Limited provided stock broking services
through Arab Bangladesh Bank Foundation (ABBF) since 2006.
Incompliance with Bangladesh Bank’s directives, AB Bank
Limited formed separate subsidiary company under Company Act
1994 in name of AB Securities Limited (ABSL) and shifted its
stock broking services from ABBF to ABSL. ABSL started its
new journey on 2nd August, 2010 with improved customer
service, highly skilled professionals and state of art technologies.
Memberships of both Dhaka Stock Exchange Limited and
Chittagong Stock Exchange Limited has been transferred in name
of ABSL to provide more efficient and professional broking
services to the capital market investors.
Brokerage Services: We provide broking services
under following categories:
a) Individual & Joint Account (Local, NRB &
Foreign)
b) Institution Investment Account (Local and
Foreign)
Margin Loan Facilities: We also provide margin
loan facility to our valued clients as per desecration
of management of ABSL.
Stock Dealer Service: ABSL also has the stock
dealer license to manage own portfolio as well as
can manage reputed institution’s portfolio accounts.
CDBL Services as full service Depository
Participant (DP):
As a full service depository participant, ABSL
provides following services:
a) BO (Beneficial Owner) accounts opening and
maintenance.
b) Dematerialization & c) Rematerialization
c) Freeze (freeze request and release request) and
suspensions
d) Pledging, unpledging and confiscation
e) BO ISIN balances and master maintenance
enquiry
Future Products Expansion
New Business
In addition, AB Bank will also expand its
operations in the investment banking in the
following areas:
Business Area
Status
Islamic Capital Market Products
Supporting infrastructure going to be
prepared
Processing
Asset Management / Mutual Fund
Derivatives Products
We are planning to launch and manage
Mutual Fund in future.
Cards
- Debit Cards
- Credit Cards
- ATM Locations
- Merchant Outlets
- FAQ
- Future Plans
Safe Deposit Locker
Advantages / Key Benefits:
- Wide Availability.
- Lockers available in various sizes. i.e. Small, Medium and Large
with varying rents.
- Lockers are rented out for a minimum period of one year. Rent is
payable in advance.
- The rent may be conveniently paid from your deposit account
with us.
- Direct debits for locker rentals from your account rid you of the
hassles in writing out cheques.
Eligibility:
An individual (not minor), firms, limited company, associations,
clubs, trusts, societies, etc may hire a locker.
Accounts:
- Individual and Joint Account
- Sole Proprietorship Account
- Limited Company Account
- Partnership Account
Retail Banking Personal Banking Loan Products
- Personal Loan
- Auto Loan
- Education Loan (disbursed to parents/guardian)
- Education Loan (for executive)
- Home Loan
Total deposits (million taka)
Amount of Paid up capital(million Taka)
3000
2564
2500
2230
2000
1500
1000
520
572
2006
2007
743
500
0
2008
2009
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
83087
68560
53375
42077
27361
2006
2010
2007
2009
2010
Year
Year
Loans (million taka)
Operating Income (million taka)
80000
9000
70000
70880
60000
8000
7000
6000
56709
50000
5000
40000
4000
40915
30000
20000
2008
3000
31289
2000
21385
1000
10000
0
0
2006
2006
2007
2008
2009
2010
2007
2008
2009
2010
Dividend
Cash & Bank Balance
50.00%
45%
10000
45.00%
9000
40.00%
8000
35.00%
30.00%
7000
30%
3000
10.00%
2000
5.00%
1000
0.00%
0
2007
2008
2008
2009
4000
10.00%
2006
6396
4520
5000
20%
20.00%
15.00%
6160
6000
30.00%
25.00%
8849
2009
2476
2006
2010
2007
No. of branches
No. of emplyees
77
78
2500
2000
1525
1590
1725
2010
1804
1952
76
74
71
72
1500
70
1000
68
500
66
67
72
68
64
0
2006
2007
2008
Year
2009
2010
62
2006
2007
Year
2008
2009
2010
Import (million taka)
80000
Export ( million taka)
35000
70041
65956
70000
60000
50000
42860
25000
48441
20677
12595
15000
23151
10000
20000
5000
10000
0
0
2006
2007
2008
2009
2006
2010
2007
2008
2009
Total Assets ( million taka)
Operating Expense( million taka)
120000
3000
2466
2500
1939
2000
106912
100000
84054
1854
80000
63550
1331
1500
2010
Year
Year
1000
30640
17876
20000
40000
30000
28937
30000
60000
47989
822
40000
33065
500
20000
0
2006
2007
2008
Year
2009
2010
0
2006
2007
2008
2009
2010
Analysis and Findings of AIBL
Society influences to the Bank to developing their
activities and helps to grow the business. After
influence, Bank decides by providing different kinds of
new and potential products and services to the society.
At the same time, banks grow faster and achieve some
long –range growth and also society will be satisfied.
These are –
Product of AIBL Bank Ltd. as an Islamic Bank
Need based deposit product
The AIBL (Al-Arafah Islami Bank) offers their
customers’ genera banking facilities, which ensures the
safety of their money as well as the fair and smart return
of their money. Following are the ways through which
Banks collects their deposits from the clients:
- AL-WADIA CURRENT DEPOSIT
- MUDARABA SAVINGS DEPOSIT
- MUDARABA SHORT TERM DEPOSIT
- MUDARABA TERM DEPOSIT
- MUDARABA SUNDRY DEPOSIT
- MUDARABA DEPOSIT UNDER SCHEMES
- BAI MUAZZAL SPL.DEPOSIT (CCH)
- FOREING CURRENCY DEPOSITS
- BAI MRAJJAL DEPOSIT (CCH)
- MURABHAHA DEPOSIT (CCP)
B. MUDARABA SAVINGS DEPOSIT
Mudaraba Saving Deposit (MSD) is open by the lower
and middle classer people who wish to save a part of
their incomes to meet their future need intend to earn an
income from their savings. It aims at encouraging
savings of non-trading person(s), institution(s), society,
etc. by depositing small amount of money in the bank.
Under this MUDARABA SAVINGS
DEPOSIT, the bank has a number of financial
deposits scheme which are- One time Hajj deposits scheme
- Hajj Account scheme
- Monthly profit based turn deposit scheme
- Savings investment Scheme
- Monthly Deposits Saving Scheme
- Marriage Deposit and Investment Scheme
- Lakhapati deposit scheme
Modes of Investment:
Bai- Murabaha
Bai- Muajjal
Ijara Bil-Bie (Hire Purchase)
Mudaraba
Musharaka
Bai-Salam
Other special Investment Scheme:
Masque Based Investment Scheme
Vetches Investment Scheme
Consumer Investment Scheme
Small investment Scheme
Grameen & small investment scheme
An investment product “Grameen & small investment”
is in operation. The objective of this project is to
introduce Shariah based banking system in rural and
village area, creating employment through financing to
low income group, build up savings attitude,
improvement of living standard of rural low income
mass people, creating opportunity to carry out Islamic
lifestyle by way of alleviating poverty and at the same
time to make other financially established by investing
in small investment projects. Initially this scheme was
introduced in three branches of AIDL i.e Gallai, Comilla
Ruposhpur Srimongal and Companion Comilla. There is
a plan to expand this project gradually in other rural
branches.
Within the scope of Grameen and Small
investment schame, Investment has been
made in the following sectors:
1. Fisheries
2. Poultry Rearing
3. Cattle Rearing
4. Goat Rearing
5. Beef fattening
6. Poultry Firm
7. Procesing of muree
8. Processing of Sweets
9. Sationary business
10.Vegetables business
11. Tailorin Business
12. Cultivation of Betle Lealf
13. Woek of baboo and cane
14. Cultivation of pinaapple
15. Cultivation of lemon
16. Processing of Crockeries
17. Purchaseing of Rickshaw
18. Small business i.e Paddy,Rice
19. Medicine shop and shoe stores
20. Library business
Alternative delivery channel
- ATM
- POS
- Internet Banking
- Phone Banking
- Mobile Banking
- SMS Banking
- Islamic Banking Window
- Customize consumer lending
-Student service
- Merchant banking service for investor
Corporate Social Responsibilities
Al-Arafah Islami Bank Foundation :
The Bank has a Foundation launching philanthropic
activities. Al-Arafah English Medium Madrasah and
Al-Arafah Islami Bank Library are major two wings
for launching philanthropic activities.
Al-Arafah English Medium Madrasah :
Al-Arafah English Medium Madrasah has been
established by the Al-Arafah Bank Foundation with
a view to building next generation according to the
ideals of peace and equality of Islam and to
establishing banking and other aspects of life in the
way of Islam. The prime aim of this madrasah is to
contribute towards building human resource and in
the broader sense to ensure human welfare. With
the view Al-Arafah Islami Bank Foundation has
established an English medium madrasah at
Dhanmondi in 1999. Such institution upto O level
of its kind is for the first time in Bangladesh.
Al-Arafah Islami Bank Library :
Library is the carrier & reservoir of knowledge. AlArafah Islami Bank has shown that other than
generating profit, it can also contribute significantly
in the field of providing good source of knowledge
by establishing a public library at 32, Topkhana
Road, Chittagong Bhaban (1st floor), Dhaka, thus
strengthening social development. It is situated in a
sound, healthy surroundings. It harbors 23,000
books of reference for the researchers, students,
professionals, bankers, physicians, engineers,
politicians, writers or journalists, even for the kids.
It is open to all from the year 2000 and well
located & accessible to everybody. It procured
some exceptional collection of books on religion,
economics, banking, computer science, business
administration, sociology, English & Arabic
language and juvenile literature in Bangla,
English, Urdu & Arabic, which are very rare.
Trends of Performance Parameters
The main function of AIBL are to collect deposits,
mobilization funds, select projects for funding, provide
investment (loan & advances) and recover the same for
reinvestment. In order to asses the overall performance of
AIBl, there are some indicators are measured.
General Business
In assessing the performance dynamics in respect of
general business, as many such as total business, total
deposits, total investment (loan & advances) and foreign
exchange performance have been used. They are analyzed
below.
Total Business
AIBL is one of the new entrants of the 3rd
generation banks having only 50 branches
currently. With in short time period, AIBL has been
to create an image as a progressive and dynamic
financial institution for itself and has earned
significant reputation in the country’s banking
sector. Despite of stiff competition in banking
sector, AIBL witness a considerable improvement
in its overall business performance during 31
December, which contributed to consolidate the
position of the bank.
At the end of last year, the number of depositors
stood at 253273 and the amount deposit has
accumulated to Tk. 29690.12 million. The total
numbers investors are 14213 and total investment
extended to them was a sum of taka 29723.79
million.
The bank has earned Tk. 4387.26 million and
incurred an expense of Tk 2859.16 million in the last
year. At the end of the year the profit before tax has
stood Tk. 1528.09 million, which is 88.97% more
than Tk. 590.66 million pre-tax income of the last
year.
Total deposits (million taka)
35000
29690.12
30000
1200
905.33
835.98
800
20000
16775.34
10108.28
600
11643.66
10000
400
5000
200
0
2006
2007
2008
2009
1383.81
1153.18
854.2
2006
677.94
2007
2008
Year
542.22
2006
2007
2008
2009
2010
Year
Amount of Paid up capital(million
Taka)
586.99
488
0
2010
Year
1600
1400
1200
1000
800
600
400
200
0
1091.95
1000
23009.13
25000
15000
Reserve fund (million taka)
2009
2010
Total Income (million taka)
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
4387.26
2955.61
2172.48
1120.85
2006
1452.68
2007
2008
Year
2009
2010
Dividend
40.00%
No. of emplyees
1200
35%
35.00%
30%
30.00%
20.00%
803
771
2006
2007
800
20%
600
15.50%
15.00%
400
10.00%
200
5.00%
0
0.00%
2006
2007
2008
2009
2010
2008
2009
2010
Year
Year
No. of branch
No. of Shareholders
60
14000
12013
12000
10664
10000
50
40
41
2006
2007
46
46
2008
2009
50
40
8000
6000
1080
912
1000
26.00%
25.00%
1033
5379
5402
30
4487
20
4000
10
2000
0
0
2006
2007
2008
Year
2009
2010
Year
2010
Manpower per Branch
23
25
20
19
20
Total Expenditure ( million taka)
23
20
3500
2859.16
3000
2199.43
2500
15
2000
1500
10
1000
5
771.96
904.48
2006
2007
1202.71
500
0
0
2006
2007
2008
2009
2010
Year
2009
Total Assets ( million taka)
35000
45000
29723.79
30000
39158.44
40000
35000
22906.37
25000
2010
Year
Investment ( million taka)
30182.32
30000
20000
17423.19
15000
10000
2008
25000
21368.17
20000
11474.41
15000
8150.16
12874.61
15336.89
10000
5000
5000
0
2006
2007
2008
Year
2009
2010
0
2006
2007
2008
Year
2009
2010
Major Findings of AIBL
AB has taken the following measure to create, sustain
deliver value which are as follows:
Maintaining Adequate Capital
Capital Adequacy Ratio (CAR) determines the capacity of
the bank in terms of meeting the time liabilities and other
risks such as credit risks, market risks etc. At the end of
2010, bank’s total capital reached at taka 1,079.02 crore as
against taka 743.98 crore on 31 December 2009.
Risk Management
AB Bank risk management system has been designed and
implemented to ensure quality and value of assets and
smooth banking operations and services in a sustainable
way to protect interest of shareholders, depositors and all
the stakeholders.
Sustainable Dividend Policy
AB bank paid 15% stock dividend and 15% cash dividend
in 2009 while for 2010 the proposition is stock dividend
25% and cash dividend 20% respectively.
Maintenance of liquidity
Banks maintains liquid assets to carry out the day to day
operations and fulfill the statutory requirements in relation
to business. Assets & liabilities committee (ALCO) of the
Bank monitors the evolving business situation and
provides direction to maintain an optimum trade-off
between liquidity and profitability.
Utilization of resources
Bank follows the overall limit of credit-Deposit ratio to
ensure resource utilization. This has contributed towards
improvement of assets quality in the overall.
Contribution to the National Exchequer
AB Bank contributed tk.220 crore into the national
exchequer in the form of VAT, Income Tax and Excise
duty.
There are many internal strengths and weaknesses of
ABBL. These causes are:
- Innovator of different new products and services
like they are the innovator of ATM booth system.
ABBL employees are one of the major assets of the
company.
- They demand a standard interest rate on the
loan and advances. High geographic coverage. Availability
of online Banking facility.Strong and attractive promotional
activities.
- The employees of ABBL have a strong sense of
commitment towards organization and also feel proud and a
sense of deluging towards ABBL.
- Reputation of being a provider of superior quality
financial services among its customers, particularly the
RM and CAM department has obtained most of the
clients’ reliability in providing different loans and
advances.
- Various complex requirements demanded by
the Bank to give the loan. This bank mainly
provides services to their big corporate clients.
- Variability of credit card facility for all customer
groups. It provides credit and facility only for the
selected customer groups. They have only one branch
for Islamic Banking.
Major Findings of AIBL
Understanding Customer and Banker
There is a gap between the customers and bankers.
Customers are unwired about the moral of Islamic
banking system. Sometimes they are not familiars with
the rules of Islamic banking.
Management Problem
The management of AIBL takes no risk when they give
loans to their clients. They are very slow in decision
making. They sometimes fail to take the current
opportunities for this slow decision makings process.
Centralization
The Al-Arafah Islami bank is too much centralized. For
each and every work branch office has to get permission
from the head office. The head office tightly controls
each and every branch.
Advertising and Promotion
Advertising and promotion are the weak points of AlArafah Islami Bank Ltd. AIBL do not have any effective
marketing activities. Others banks have betters
marketing strategy.
Employee’s Dissatisfaction
Lack of Promotion longer probationary period is the main
causes of dissatisfaction among the employees.
Lengthy Investment process
In Islamic Banking System Lone is very lengthy process.
But it is lengthier in AIBL, because branch managers do
not have the power to give lone. For every lone manager
have send proposal to head office. Management does not
want to take risk.
Lack of State-of-art
Technology that AIBL is using for their banking system is
not updated. Now there is some international bank in
Bangladesh, they are very fact and very up dated. AIBL is
their clients because of technology
Causes of Poor Performance:
There are many causes for Poor Performance of AIBL.
These causes are:
- Head office of AIBL based operating decision is one
of the major cause of poor operating performance. In the
today’s competitive environment continuous monitoring
and instant response to the market demand are the keys to
success, As the management of the AIBL can not exercise
any financial and decisional power without the prior
approval of the head office, it sometimes lags behind the
competitors in terms of instant market response.
- The bank is interested to invest in the trading and
shop keeper based not to more willing to invest in the
small and cottage industries and medium and big
industries for risk.
- Its advertisement is not target based and adequate.
- Management information System (MIS) AIBL is
not adequate; Management information system is also
poor. Accounting and Information System is newly
introducing in on line banking .All these are preventing
the Management of the factory to take appropriate
operating decision.
- AIBL‘s products are not diversified such ATM
card, Visa Card, Credit Card are not introduced.
- Investment Procedure comparatively difficult than
other banks.
- Each branch employees are less as there require.
- Top level management’s decision making is very
weak of Al- Arafah Islami Bank Ltd
- AIBL has a lack of right experienced personnel in
the right position.
- Planning and controlling system not properly
executed.
- Lack of competitiveness.
Recommendation of ABBL
We would like to put the following recommendation:
- Maximizing diverse business platform reach.
- Reap benefit with expansion of corporate business base
through “nurturing” of existing clients while propagating
the growth strategy.
- Diversification of business into SME and retail while
aligning with regulatory priorities.
- Re-emphasizing on service delivery.
- Enhance AB’s image as a corporate citizen through
compliance and focus on value driven CSR.
- Ensuring Shareholders value creation.
Recommendation of AIBL
Recommendation to Improve Performance of
AIBL:
- Al- Arafah Islami Bank Limited should delegate
authority and responsibility to the branch so that they can
take some decision in some cases.
- The authorities must keep it mind that `No risk No gain’
is the main philosophy of a business. So they should
investment in the small and cottage industries even in the
medium and large scale business.
- Its advertisement must set up on the target based and
adequate.
- As the management Information System is new, they
should provide proper training the employees.
- Al- Arafah Islami Bank should introducing
multidimensional service products to compete with
other competitors.
- Skilled employees must be recruited to provide better
services.
- Top level management should take proper decision.
- The authorities of AIBL should set up right personnel
to the right place at the right time.