Al-Arafah Islami Bank

Al Arafah Islami Bank Ltd.
Introduction
After the surrender of the Pakistani forces on 16th December 1971, the government of the
Peoples Republic of Bangladesh formally took over the charge of the administration of
the territories now constitute Bangladesh. In order to rehabilitate the war devastated
banking system of Bangladesh, the government promulgated a law called Bangladesh
Bank (temporary) Order, 1971(Acting Presidents Order No 2 of 1971). By this order the
State Bank of Pakistan was declared as Bangladesh Bank and the offices, branches and
assets of the said State Bank was declared to be deemed as offices, branches and assets of
Bangladesh Bank. It was also declared by the aforesaid Order that all currency notes and
coins issued by the said State Bank and government of Pakistan and were in circulation in
Bangladesh shall be deemed to have issued by the Bangladesh Bank. By the steps stated
above, the banking system of Bangladesh started with a legal shape.
The number of banks in all now stands at 48 in Bangladesh. Out of the 48 banks, four are
Nationalized Commercial Banks (NCBs), 30 local private commercial banks, 9 foreign
banks and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the
largest among the NCBs while Bank Asia is leading in the private ones. Among the 9
foreign banks, Standard Chartered and HSBC has become the largest in the country.
Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank,
Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial
sector. Bangladesh Bank (BB) regulates and supervises the activities of all banks.
Private sector banks started functioning during the year 1983-84 with the objective of
government policy to make sure effective and meaningful participation of the private
sector in the overall national economy.
The perception of Islamic banking has been bloomed from the inspiration of building up a
society on justice in accordance with basic socio-economic principles of Islam. The
difference between Islamic bank and conventional bank is on principles. The functions of
this type of bank are completely different. This bank is established on Islamic Shariah and

all types of transactions are free from interest. Justified profit is the basis of financial
transaction of this bank. This bank is committed to establish socio-economic justice. AlArafah Islami Bank Bangladesh Limited is the first interest free commercial bank in
South-East Asia. The bank has opened 50 branches covering important commercial areas.
Al-Arafah Islami Bank Bangladesh is a financial institution whose status, rules and
procedures expressly state its commitment to the principle of Islamic Shariah.
Consequently Islamic banks operate on Islamic principles of profit and loss sharing,
strictly avoiding interest, which is the root of all exploitation and is responsible for largescale inflation and unemployment. In this report, I undertake microscopic analysis mainly
on General Banking, Investment mode and Foreign Exchange.
Origin of the report

This report is based on an internship program. IBTRA arranges internship program to
gather practical knowledge about banking activities followed by AIBL for University
students as Universities conducted with different organization after the completion of
theoretical courses of program of Masters of Business Administration (MBA). Each intern
must carry out a specific project, which is assigned by the IBTRA. Consequently a report
based on the projects is to be submitted to the authority of IBTRA. We select ALARAFAH ISLAMI BANK LIMITED (AIBL) for our internship & since then I have
started our realistic orientation program in General Banking, Investment & foreign
exchange department. But we have prepared our project paper on investment as it is
assigned by IBTRA.
Hence we were placed in Local Branch of AL-ARAFAH ISLAMI BANK LIMITED

from 06th June to 12th August , 2009.
Acknowledgement
It is our great privilege to express our gratitude to our creator Allah (SWT) for such great
opportunity to be in touch with AL-ARAFAH ISLAMI BANK LIMITED (AIBL) for the
following days. We also have to put our heartened feelings and gratitude for the kindness
and assistance that was provided to us to complete our assigned report as on the topic
General Banking, Investment and Foreign Exchange. In preparing the proposed
report we have taken great assistance support and guidance from the persons of ALARAFAH ISLAMI BANK LIMITED Training and Research Academy (AIBTRA) and
from our branch as well.
We express our heart full thanks to all the faculty members of AL-ARAFAH ISLAMI
BANK LIMITED (AIBL) especially to Mr. Muhammad Abu Taher (AVP,Manager), who
gave us necessary information and excellent guidance to prepare this internship report.
We are very grateful to Mr Md. Khairul Enam (officer consumer banking),Mr.Golam
Hossain & Mr. Ariful Bari for their hearty co-operation to learn about AIBL General
Banking, Investment Mode &Foreign Exchange as well.
We also like to thanks all the other employees of all level for their beloved manner and
attitude that they had shown to us during the staying in the Branch.
Executive Summary
This report is prepared as requirement of the internship of MBA program of different
university. This report focuses Three months working experiences in Banani Branch, ALARAFAH ISLAMI BANK LIMITED. This report will give a clear idea about activities
and operational strategies of (AIBL). Especially this report focuses on the General
Banking, Investment Mode and Foreign Exchange by AIBL.
AL-ARAFAH ISLAMI BANK LIMITED (AIBL) was established in September27 ,1995
with a clear manifesto of demonstrating the operational meanings of participatory
economy, banking and financial activities as an integral part of an Islamic code of life.
The philosophy of AL-ARAFAH ISLAMI BANK is to establish as egalitarian society
based on the principle of social justice and equity. As an integral part of this process ALARAFAH ISLAMI BANK introduced measures to abolish interest and charge or pay
fixed interest on loans or deposits. Interest of pre determined interest on deposits; the
depositors participate in the profit of the bank as an agreed ratio. Whereas, interest based
conventional banks pay a fixed interest on savings and time deposits and grant loans with
interest for any purpose.
Basically AIBL is an Islamic Bank based on ISLAMIC SHARIAH. It follows the
alternative concept of Al-Arafah Islamic Banking. Which
represents unique human
approach to credit and banking based on profit-oriented economy devoid of interest, in

this regard AIBL has introduced a number of income generating programs for the millions
of urban and rural poor. With the objective in view AIBL has formulated a profitable live
in a batter society with greater security and peace. AIBL is opening in a three sectors
banking system, such as formal, non-formal and voluntary sector. General banking,
Investment and foreign exchange are operated under the formal sector.
Development management of Waqf and mosque properties, management of in heritance
properties, and joint venture project for management of non-profit foundations, charitable
trusts and organizations are executed under the voluntary sector
Objective of the study

The first objective of writing the report is fulfilling the partial requirements of the MBA
program. In this report, we have attempted to give on overview of AL-ARAFAH ISLAMI
BANK LIMITED in general. Following are the main objectives
To familiar the history and operations of Islami Banking in Bangladesh.
To show the investment mechanism and product offerings in different modes of

AIBL.
To show overall investment proposal, appraisal procedures, documentation system

of AIBL and Conventional Banks.
To show the differences with conventional banking regarding investments aspects.
To identify strength and weakness of investments of AIBL.
To identify the problems related to investments faced by AIBL.
To recommend actions that may be necessary to redesign the investments of

AIBL.
Justification of the study

In our economy, there are mainly three types of schedule commercial banks are in
operation. They are Nationalized Commercial Banks, Local Private Commercial Banks
and Foreign Private Commercial Banks. Islami Bank has discovered a new horizon in the
field of banking area, which offers different General Banking, Investments and Foreign
Exchange banking system. So I have decided to study on the topic General Banking,
Investment and Foreign Exchange. Because the Internship program of the university is
an integral part of the MBA program. So it is obligatory to undertake such task by the
students who desirous to complete and successfully end-up their MBA degree. This also
provides an opportunity to the students to minimize the gap between theoretical and
practical knowledge. During the internship program the teachers of the department are
attached to actively and constantly guide the students. A student are required to work on a
specific topic based on their theoretical and practical knowledge acquired during the
period of the internship program and then submits it to the teacher. That is why we have
prepared this report.
Methodology of the study

For carrying out this project paper I had to study the actual banking operations of AIBL.
In order to carry out this study, two sources of data and information have been used:
a) Primary data
I discussed with the executives & officials of the AIBL and found the approximate data,
which has been presented in the report. I also discussed with the officials of conventional
Banks & IBTRA regarding the issue and found necessary information, which has been
presented in the report.
b) Secondary data
Annual Reports of 2004-2008 of Al-Arafah Islamic Banking Ltd.
Desk report of the related department
Manuals of Al-Arafah Islamic Banking Limited (Bai-Murabaha, Bai-Muajjal, BaiSalam, Musharaka)

Training sheets which are provided by Islami Bank Training and Research
Academy (IBTRA).
Scope of the report

The scope of this paper is limited to the organizational structure, background, and
objectives, functions, and investment performance of AIBL as a whole. The scope is also
limited to different investment schemes, modes, mechanism, investment proposal
appraisal procedures, monitoring and documentation of IBBL.
Limitations of the study

There are some limitations in our study. We faced some problems during the study which
we are mentioning them as below-
i) Lack of time:
The time period of this study is very short. I had only 8 weeks in my hand to complete
this report, which was not enough. So I could not go in depth of the study. Most of the
times the officials were busy and were not able to give us much time.
ii) Insufficient data:

Some desired information could not be collected due to confidentiality of business.
iii) Lack of monitory support:

Few officers sometime felt disturbed, as they were busy in their job. Sometime they
didnt want to supervise us out of their official work.
Chpater-01
General Banking of AIBL
Introduction
General Banking is the heart of Banking. Here money collection procedure occurs. Other
services, like cheque encashment, account transfer; account closing, bills and remittance
are given here. So general banking is the most important thing in banking service.
Procedures
1. Issuance of token, Maintenance of subsidiary day Book, writing of day Book,
balancing of Ledger.
2. Opening of A/c Mudaraba Savings A/cs Mudaraba term deposit A/c Al-Wadiah current
A/cs, Mudaraba Hajj saving A/cs, writing of A/c opening registers and issuance of pass
book and cheque Book.
3. Maintenance of current A/c ledgers, deposit ledger and TDR ledger and operation of
computer.
4. Writing of transfer scroll, statement of current A/cs and deposit A/c and Hajj deposit
A/c pass book.
5. Bills: Outward & inward Bills (OBC & IBC) and clearing.
6. Remittance: Issuance and payment of DD, TT, PO etc.
7. Writing of clean cash Book and posting of General Ledger and checking of computer
final sheets with General Ledger.
8. Maintenance of charges, suspense and sundry deposit A/c, maintenance of dead stock
and stationery articles registers.
9. Schedule Telegram and preparation of General ledger A/c statement.
10. Establishment: Preparation of Salary, pay sheet, LPC, maintenance leave
register, personal files and method of correspondence and payment of income
tax.
Dispatch
Inward
1. Inward mail, other than those which are registered, marked confidential and addressed
personally to same official, may be opened by an authorized member pf staff who should
enter in the inward mail register and mention serial number of the mail register on the
letter/ paper received, affix "Received" date stamp on it and delivery the same to the
concerned officials against acknowledgment.
2. Letters addressed personally to any official shall be opened by the address only.
3. Registered mails and mails marked confidential will be opened by an officer or
management in small branches. All these letters shall however entered in the inward mails
registers.
4. Stop payment instructions and court orders shall be received authorized officials who
will immediately note date & time on it and take necessary steps.
OUTWARD
1. Outward letters must bear serial number and entry in the register with name and
address.
2. Each typist will maintain a typist master file and dispatch Clark also maintain a
separate master file for future record.
3. Local letters may be delivered through peon book. If the area is large and letters are
many in number service of post-office may be utilized.
4. Letters dispatched must be entered in the outward mail register and bear proper postal
stamps, if sent through post office.
5. Remarks such as Urgent By Airmail Register' 'Registered with A/D' 'Confidential'
etc. must appear on top of the letter as well as envelop.
6. If the letters are sent by registered post or courier service, postal receipt/ courier receipt
must be maintained by the dispatch department in a file. Similarly acknowledgments
received back should be maintained in the file.
7. If any telegram is sent by any branch, a copy of the message duly signed by authorized
officer must be sent by post to the address as confirmation.
8. Similarly when the branch receives any inward telegram, they must compare it with the
confirmatory copy when received.
9. Receipt for telegraphic message issued by telegraph office should be maintained in a
file and authorized officer must check them at the time of passing expenses voucher.

10. If any telegram is sent relating to services given to a customer. Charges should be
recovered from the customer concerned.
11. Manager and other officers of the bank must ensure economic use of telephone. Trunk
call & STD conversation must be short. If telephone is used on account if customers,
charges must be recovered.
12. Trunk calls & STD calls must be recovered in the trunk call register and verified with
the telephone bill when received from T&T office.
General Characteristics of Deposit Account:

Bank receives deposit by different accounts. Those are two types:
i)
Al Wadiah --- Client A/C is conducted under Al - Wadiah system
ii)
Mudaraba Mode --- Client- Sahib Al Mal
Bank- Mudarib
Under this arrangement - profit distribution under agreed ratio and loss (if any) will be
borne by Sahib Al Mal
Under Mudaraba mode there are many accounts as under:
i)
MSA - Mudaraba Savings Account
ii)
MHSA - Mudaraba Hajj Savings Account
iii) MSB - Mudaraba Savings Bond

iv) MSS - Mudaraba Special Scheme
v)
MTDR - Mudaraba Term Deposit Account
vi) MMPDS - Mudaraba Monthly Profit Deposit Scheme

vii) MMS - Mudaraba Mahor Savings A/C
viii) MSNA - Mudaraba Short Notice A/C
Al-Wadiah Current A/C (AWCA)

AWCA accounts are unproductive in nature, is nature, as banks lovable investment fund is
concerned sufficient fund has to be kept in liquid from, as current deposits are demands
liabilities. Thus huge portion of his fund becomes on performing for this reason banks do
not pay any of AWCA - CD account holder. Businessmen and companies are the
customers of this product.
Mudaraba Saving Account (MSA)
As per Bangladesh bank instruction 90% of SB deposit are treated as time liability and
10% of it as demand liability. In IBL there is a restriction about drawing money from SB

account but any time holder may draw money of any amount with prior motive. General
house holder and individuals are the clients of this account
Mudaraba Term Deposit (MTDR)
Fixed deposits are of two kinds midterm deposit (MTD) and term deposit (TD)
instrument whose maturity period is within one year are known as MTD and those above
one year are considered as term deposit. Calculation of profit TDR and provisioning
regarding this is quite complicated issue. Profit is calculation at each maturity date and
provision is made on that. Also at the month and provision of profit is made.
Mudaraba saving Account (MSNA) A/C
MSA account can be treated can be treated as semi term deposit. Deposit should be kept
in these accounts for at least seven days to get interest of MSA accounts is less then SB
accounts. (5.5%) Generally profit but may increase to 6% or more depending on the fund
Checkbook is issued them but frequent use of checkbook is discouraged. Governmentally
organization big corporate house and banks are generally the clients of this account.
Account Opening Eligibility
a) Persons over 18 years (except some restricted persons),b) Account of Club,c)

Association,d) Agent,e) Govt.,f) Semi Govt.,g) Organization,h) Liquidators,i) Minor,j)
Married Women,k) Pordanshil Women,l) Illiterate Persons
Account Closing:
First a customer has to submit an application with his/her signature mentioning that
he/she wants to close his/her A/C. Then the signature will be verified by the officer.
Customer has to certify by different department (Advance, Foreign Exchange department)
of Bank that he/she has no liabilities to the Bank. After that the Customer's A/C is debited
and then Bank issue a Pay Order in the name of A/C holder.
General Practice at Regarding Accounts, in Account Opening Register:

After fulfilling all the requirements for opening account necessary entries are given in
the account opening register. There are several registers for several accounts as MSA,
AWCA, TDR etc. Date of opening name of the account holder, nature of business,
address, initial deposit, and introduction various information are recorded in that
register. New accounts number is given from the list of new numbers provided by the
computer department.3.7.1

The principles of calculation and distribution of profit to Mudaraba Depositors
generally followed by different Islami Banks are as under:
Mudaraba Depositors share income derived from investment activities i.e. from the
use of fund.
Mudaraba Depositors do not share any income derived from miscellaneous banking
services where the use of fund is not involved, such as commission, exchange, service
charges and other fees realized by the Bank.
Profit and losses resulting from the use of funds are separately maintained in the
accounts from other income and expenditure relating to other activities and services
offered by the Bank.
Mudaraba Deposits get priority in the matters of investment over Bank's equity and
other cost free funds.
Mudaraba Depositors do not share any income derived from investing Bank's equity
and other cost free fund.
The amount of the statutory cash reserve and the liquidity reserve, which are required
to be maintained with Bangladesh Bank, is deducted from the aggregate balance of
Mudaraba Deposits to arrive at the net balance of profit sharing deposit.
The gross income derived from investments during the accounting year is, at first,
allocated to Mudaraba Deposits and cost-free-funds according to their proportion in
the total investment.
Islami Bank Bangladesh Ltd, at present, applies the following weightages to

Mudaraba Deposits:
Sl. no.
Particulars of Deposits
1.
Mudaraba Hajj Savings A/C : 11 to 12 years
2.
Mudaraba Hajj Savings A/C : Upto 10 years
3.
Mudaraba Special Savings (Pension) A/C (MSS): 10 years
4.
Mudaraba Special Savings (Pension) A/C (MSS) : 5 years
5.
Mudaraba Muhur Savings Account (MMSA) : 10 years
6.
Mudaraba Muhur Savings Account (MMSA) : 5 years
7.
Mudaraba Savings Bond (MSB) : 8 years
8.
Mudaraba Savings Bond (MSB) : 5 years
9
Mudaraba Monthly Profit Deposit A/C (MMPDS)
10.
Mudaraba Term Deposit Account (MTDA) : 36 months
11.
12.
13.
14.
15.
Mudaraba Savings A/C (MSA)
16.
Mudaraba Foreign Currency Deposit A/C (MFCDA)
17.
Mudaraba Special Notice A/C
Source: Diary 2005, AIBL, Page 13-14.
Weightages
1.35
1.30
1.30
1.10
1.30
1.10
1.25
1.10
1.20
1.00
0.98
0.96
0.92
0.88
0.75
0.75
0.55
Differential rates of weightages have been assigned to Mudaraba Depositors on

account of the following factors:
a) Period of Deposits
The longer the period of deposit, the greater the risk they bear with regard to
fluctuation of the rates of profit and erosion of the value of deposit due to
inflation. The Term Depositors have also to forgo profit in case of premature
encashment.
b) Banking Facilities
The Term Depositors do not enjoy any banking facility such as, operating accounts by
cheques, transfer of account from one branch to another, collection of cheques and other
instruments, executing standing instructions through their accounts and so on and so
forth. On the other hand, the PLS Savings Depositors have freedom to get the above
services through their accounts. PLS Short Notice Depositors enjoy still greater facilities
in regard to making deposits in and withdrawal from their accounts.

c) The pattern of Rates of Return on various types of cost bearing deposits of the
traditionalBanks in our Money Market have also an important bearing on
allocation of weightage a different rates.
d)
In consideration of the above factors, full weightage has been assigned to our
Mudaraba Deposits of 36 months and relatively lower Weightages have been
given to Mudaraba Deposits of lower periods, Mudaraba Savings and Mudaraba
Short Notice Deposits.
Local Remittance
AIBL sells and purchases PO, DD and TT to its customers only. It does not offer
remittance service frequently to those other then its customer.
Pay Order (PO) :
Pay Order an instrument, which is used to remit money with in a city thorough banking
channel the instruments are generally safe as most of them are crossed.
Issuing of a pay order (PO) :

A customer can purchase pay order in different ways:
By Cash A/C............................................................................. Dr
By account Client A/C ............................................................. Dr
By transfer head office/other departments client A/C .............
Dr
Bills Payable (PO) A/C ............................................................Cr

Income A/C commission on Remittance .................................Cr
Demand Draft (DD)

Demand Draft is many popular instruments for remitting money from one corners of
country another. The instrument is basically used for transfer and payment. Difference
between pay order and demand draft is in terms of place only PO is used for remittance
money with in the city where as DD is used for within the country DD too, constitutes
current liability on the part of a bank. At AIBL DD is not sold to people other than its
customer.
Telegraphic Transfer (TT)

Telegraph transfer in one of the fastest means of transferring money from one branch to
another or from one to another. The TT issuing bank instructs its counterpart by tested
telex message regarding remittance of money. No instrument is given for TT both parties
should have account, as money is transferred.
Clearing
As far safety is concerned customers get crossed check for the transaction. As we know
crossed check cannot be encased from the counter rather it has though been collected
through banking channel i.e. clearing. A client of AIBI received a check of another bank,
which is located with in the clearing range deposit, the checks in account at AIBL New
AIBL will not the money until the check is honored.
Transfer Delivery
Transfer delivery is a cheque collection procedure among internal branches within the
Clearing House. When a cheque is of a Branch Office is deposited to another Branch
Office, then collecting branch on that date sends that cheque to their, Local Office, sends
that cheque to that respective branch and takes necessary action for honoring cheque.
If the cheque is dishonored then authorized branch send the cheque to the local office and
Local Office send that cheque to the collecting branch on the collecting date.
Here Clearing house function is not required because transactions occur among the same
branch of same Bank within the Clearing House.
Cheque is of a same branch of AIBL
If the cheque is of a Branch Office of a Bank (within the Clearing House of same city)
then the collection branch send the cheque to the authorized branch/drawn on branch and
issues an IBCA to the collecting branch.
On the other hand, if the cheque is of another Bank (outside of Clearing House to another
city) then cheque collecting branch will find out whether any branch office of the
collecting branch situated near to Authorized branch.
If yes, then cheque collecting branch will send the cheque to the branch office near
Authorized branch, that branch (near Authorized branch) office collect the cheque from
drawn on branch and issues an IBCA.
If not, then the collecting branch will send that cheque to the Authorized branch, after that
Authorized branch will send a DD with mentioning the name of their branch office near
collecting branch and collecting branch will collect that cheque thereby.
Debit Transaction
Incase of responding transactions, say a customer wants to draw any sort of financial
instrument of a branch to some other place at his/her convenient then authorized branch
of that financial instrument issues an IBCA to that "Drawn On" branch. Here "Drawn On"
branch of Responding Branch pays on behalf of Originating Branch and record all
transactions in the Debit side of the IBG A/C.
Credit Transaction
Cheques are deposited for payment in a branch that branch sends those cheques or other
financial instrument to Clearing House for clearing. After clearing those cheques or
financial instruments collecting branch makes payment against those financial
instruments, before paying this branch as Originating Branch sends an IBDA to the
Authorized Branch/Responding BranchIf those financial instruments are dishonored then
respective parties are not paid and authorized Branch/Responding Branch again sends an
IBDA to the Originating Branch. These returned financial instruments advice are recorded
in the Credit side of the IBG A/C.
Cash
Cash section demonstrates liquidity strength of a bank. It also sensitive as it deals with
liquid money. Maximum concentration is given while working on this section. As far as
safety is concerned specials precaution is also taken. Tense situation prevail if there is any
imbalance in the case.
Vault
All cash instruments (PO, DD, Check) and other valuables are kept in the vault is insured
up to Tk. 4 core with a local insurance company. If cash stock goes beyond its limit of Tk.
4 core the excess money is transferred to Bangladesh bank if there is shortage of cash
during transaction period money is transferred to drawn from the central bank. There are
three keys of the vault, which are given to three seniors most officers. Daily an estimated
amount of cash is brought out from the vault for transaction purpose. No more than Tk. 4
core brought at once from the vault on a single day.
Teller Customers Relationship
In a bank a person who delivers and receives cash from the cash counter is known as
teller a customer meets most of the time in a bank with a taller on the counter.
So teller should hold certain quality should be friendly, provided prompt service and be
accurate in his task.
Cash Packing and Handling
Cash packing and handling needs a lot of care as any mistake may lead to disaster.
Packing after banking hour when the countries closed cash is packed according to
denomination. Notes are counted several times and packed in bundle Stetted and stumped
with initial.
Evening Banking:
After the banking hour the cash counter is closed. But sometimes customers come to draw
or deposit money after the service hour. However their money is received or paid
recorded in the next daybook. This is known as evening.
Chapter-02
Investment Mode of
AIBL
Investment Mode of AIBL
The most important difference between the Conventional and Islamic bank is that both the
banks operate to earn profit but they differ in the way of operation. Al-Arafah Islamic
Bank emphasis on legitimate (Halal) business. On the other hand traditional bank is not
operated by the following rules and regulations approved by Islam that is the most
powerful contradiction between them. Al-Arafah Islamic Bank does not invest in loans
and fixed interest securities. It can invest in ordinary share only while interest based bank
can invest in loans and different kinds of securities. Al-Arafah Islamic Bank establishes
and participate projects with its client as a partner and bears the risk along with the client
on a proportionate basis. Besides, other conventional banks sometimes finance projects
but do not bear risk. Finally, the concept of Al-Arafah Islamic Bank is to establish on
egalitarian society based on principles of social justice and equity. Whereas traditional
banks pay a fixed interest on savings, time deposit and grant loans with interest for any
purpose. We have gathered the fact that investment management is the theme of AIBL.
The bank takes deposits and invests the same based on the profit-loss sharing. Bank go
for the investment mainly which are long term and profitable in nature. AIBL also give
high concentration on the investment that will generate more employment. As investment
is one of the most priority areas for the AIBL, so it needs to cautious in investment
decision. To ensure proper investment AIBL always go with in-depth study before making
the investment
Investment Objectives of AIBL

The objectives and principles of investment operations of the Banks are:
1. The investment fund strictly in accordance with the principles of Islamic
Shariah.
2. To diversifies its portfolio by size of investment, by sectors (public and
private), by economic purpose, by securities and by geographical area
including industrial, commercial and agricultural.
3. To ensure mutual benefit both for the Bank and the investment client by
professional appraisal of investment proposals, judicious sanction of
investment, close and constant supervision and monitoring therefore.
4. To make investment keeping the socio-economic requirement of the country in
view.
5. To increase the number of potential investors by making participatory and
productive investment.
6. To finance various developments schemes for poverty alleviation, income and
employment generation with a view to accelerating sustainable socioeconomic growth and upliftment of the society.
7. To invest in the form of goods and commodities rather than give out cash
money to the investment clients.
8. To encourage social upliftment enterprises.
9. To shun even highly profitable investment in fields forbidden under Islamic
Shariah and is harmful for the society.
10. The Bank extends investments under the principles of Bai-Marabaha, BaiMuazzal Hire purchase under Shairkatul Melk and Musharaka. The Bank is
making sincere efforts to go for investment under Mudaraba principle in near
future.
Investment Policy of AIBL

Investment operation of a Bank is very important as the greatest share of total revenue is
generated from it, maximum risk is centered in it and the very existence of a Bank mostly
depends on prudent management of its Investment Port-folio.

For efficient deployment of mobilized resources in profitable, safe and liquid sector a
sound, well-defined and appropriate Investment Policy is necessary.
The important feature of the investment policy of the Bank is to invest on the basis of
profit-loss sharing system in accordance with the tenets and principles of Islami Shariah.
Earning of profit is not the only motive and objective of the Banks investment policy
rather emphasis is given in attaining social good and in creating employment
opportunities.
Pursuant to the Investment Policy adopted by the Bank a 7-year Perspective Investment
Plan has been drawn-up for the year 1995 to 2002 and put into implementation. Recently
a further 5-year perspective investment plan has been drawn up for the year 2003 to 2008
and put into implementation. The plan aims at diversification of the investment port-folio
by size sector geographical area, economic purpose and securities to bring in phases all
sectors of the economy and all types of economic groups of the society within the fold of
Banks investment operations.
Investment Mechanism of AIBl

Bai- Mechanism
Share Mechanism
a) Bai-Murabaha
b) Bai-Muajjal
c) Bai-Salam
d) Istishnaa
a) Mudaraba
b) Musharaka
Ijara Mechanism
a) Hire Purchase
b) Hire Purchase Under
shirkatul Melk
Investment Instrument of AIBL

Trading modes (Bai-Mechanism)
Bai-Murabaha
Meaning
The terms Bai and Murabaha have been derived from Arabic words Murabaha and
Bai. The word Bai means purchase and sale and the word Murabaha means a in cash
Bai-Murabaha meas sale for which payment is in cash or in future fixed date or within a
fixed period. In short, it is a sale on cash.
Definition
Bai-Murabaha may be defined as a contract between a buyer and a seller under which the
seller sells certain specific goods (permissible under Islamic Shariah and the Law of the
land), to the buyer at a cost plus agreed profit payable in cash or on any fixed future date
in lump-sum or by installments. The profit marked-up may be fixed in lump-sum or in
percentage of the cost price of the goods.
Types of Murabaha
In respect of dealing parties Bai-Murabaha may be of two types.
Ordinary Bai-Murabaha
If there are only two parties, the seller and the buyer, where the seller as an ordinary
trader purchases the goods from the market without depending on any order and promise
to buy the same from him and sells those to a buyer for cost plus profit, then the sale is
called Ordinary Bai-Murabaha.
Bai-Murabaha on Order and Promise
If there are three parties, the buyer, the seller and the Bank as an intermediary trader
between the buyer and the seller, where the Bank upon receipt order from the buyer with
specification and a prior outstanding promise to buy the goods from the Bank, purchases

the ordered goods and sells those to the ordering buyer at a cost plus agreed profit, the
sale is called Bai-Murabaha on Order or Promise, generally known as Murabaha.
This Murabaha upon order and promise is generally used by the Islami Banks, which
undertake the purchase of commodities according to the specification requested by the
Clients and sale on Bai-Murabaha to the one who ordered for the goods and promised to
buy those for its cost price plus a marked-up profit agreed upon previously by the two
parties, the Bank and the Clients
. Bai Muajjal
Meaning
The terms Bai and Muajjal have been derived from Arabic words Ajal and Bai. The
word Bai means purchase and sale and the word Ajal means a fixed time or a fixed
period Bai-Muajjal meas sale for which payment is made at a future fixed date or within
a fixed period. In short, it is a sale on credit.
Definition
Bai-Muajjal may be defined as a contract between a buyer and a seller under which the
seller sells certain specific goods (permissible under Islamic Shariah and the Law of the
Country), to the buyer at a agreed fixed price payable at a certain fixed future date in lumpsum or within a fixed period by fixed installments. The seller may also sell the goods
purchased by him as per order and specification of the Buyer.
Bai - Salam
Meaning
The terms Bai and Salam have been derived from Arabic wordsBai and Salam. The word
Bai means sale and purchase and the word Salam means Advance. Bai-Salam means
Advance Sale and Purchase.

Definition
Under this mode Bank will executive purchase contract with the client and make payment
against purchase of product, which is under process of production. Bai-Salam contract will be
executed after making any investment showing price, quality, quantity, time, place and mode
of delivery. The profit is to be negotiated. The payment as the price of the goods is made at
the time of Agreement / on the spot and the delivery of the goods is deferred.

Bai-Istishna
Meaning
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.
Definition
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
Leasing mode (Ijarah mechanism
Hire purchase /Ijarah
The term Ijarah has been derived from the Arabic works Ajr and Ujrat which means
consideration, return, wages or rent. This is really the exchange value or consideration,
return, wages, rent of service of an Asset. Ijarah has been defined as a contract between
two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service on
benefit gainst a specified consideration or rent from the asset owned by the Hiree. It is a
hire agreement under which a certain asset is hired out by the Hiree to a Hirer against
fixed rent or rentals for a specified period.
Hire Purchase Under shirkatul Melk
Hire purchase under shirkatul Melk is a special type of contract which has been
developed through practice. Actually, it is a synthesis of three contracts: Shirkat, Ijarah
and sale. Shirkat means partnership. Shirkatul Melk means share an ownership. When

two or more persons supply equity, purchase an asset, own the same jointly, and share the
benefit as per agreement and bear the loss in proportion to their respective equity, the
contract is called Shirkatul contract.

Share Mechanism
Mudaraba
It is a from of partnership where one party provides the fund while the other provide the
expertise, labor and the letter referred to at the Mudarib any profits accrued are shared
between the two parties on a pre agreed basis, while capital loss in exclusively born by
the partner providing the capital.
Musharaka
The term Shirkat and Musharakah have been derived from Arabic words Shairkah and
Sharika. The word shirkah means a partnership between more than one partner. Thus
the ward Musharaka and Shirkat means a partnership established between two or
more partners for purpose of a commercial venture participate both in the capital and
management where the profit may be shared between the partners as per agreed upon .
Small business investment scheme
Bangladesh a third-wood developing country is rich in natural and human resources. In

spite of vast possibilities, the majority people of the country live in hardship-below
poverty tapped, explored and exploited. Physical labor is their only means of earning. A
large segment of this populace is active youth force. Many of them are efficient,
intelligent and energetic with initiative & drive and have courage to tale risks. But they
can not uplift their socio-economic condition due to poverty, lack of financial support and
other required facilities.
Housing investment scheme
One of the basic human needs is to have a house to live in. A house is in an abode of
peace and happiness. Housing has now become an acute problem in the country,
especially in the towns, cities and metropolis. With their limited income, it has become
almost impossible on the part of the lower middle class, middle class and sometimes,
even for upper middle class to solve their housing problem. To meet this basic human
need, Al-Arafah Islamic Bank Limited is committed to contribute to this end to provide a
peaceful and happy
Real estate investment program
Professionals, Service-holders, Businessmen, Real Estate Developer and other categories

of people who are not entitled for availing investment facilities under Housing Investment

Scheme, shall be eligible under this programme Investment is to be extended to build new
houses and for extension/ completion of the house already constructed, commercial
building, shopping complex, flat apartment etc.
Transport investment program:
Under this scheme, investment in being allowed to the existing successful businessmen
and potential entrepreneurs in this sector for all types of road and water transport with
simple and easy terms and conditions. The bank is also extending investment facilities to
multinational companies, established, business houses and well to do officials and
professionals for acquisition of private cars, microbus and jeeps.
Car investment scheme
Car is considered as on essential mode of transport in the modern society, particularly by

a section of the officials, business houses and business executives and established
Micro industries investment scheme
Al-Arafah Islamic Bank Ltd. has been appreciably participating in this direction by
financing industrial sector. With a view to creating wider base for industries, the Bank
has decided to launch "Micro Industries Investment Scheme" through its Branches
Investment at minimum possible risk.
Liquidity of investments.
Conform to central banks investment restrictions.
Chapter-03
Foreign Exchange of
AIBL
Meaning of Foreign Exchange
Foreign Exchange means currency & trade exchange say conversion of one to another.
This is a part of economic & Science. This is a big deal divided into different currencies
instrument such as Draft, Traveler Cheque, Bill of Exchange business including sell,
purchasing of currency notes & TC etc.
Currency Exchange means the conversion of one Currency into another.
Foreign Exchange Market:
Foreign Exchange market means the places where foreign currency is bought & sold. In
this more that supply, currency value.
Alternately following are the features of foreign exchange market:
1.
Bank & client.
2.
Different Banks in the same foreign exchange market.
3.
Different Bank & Schedule Bank of the same country.
4.
Different Control Bank.
Islami a Bank follows the following the two craters in respect & payment of foreign
exchange:
1. Local currency market value &
2. Foreign currency market value.
Exchange is being controlled:
1. To stabilize the rate of exchange.
2. To protect domestic industries.
3. For proper implementation of plans.
4. To increase the bargaining strength
5. To check over invoicing & Under invoicing

Authorized Dealer Branch:
Bangladesh bank in exercise of the power under section 3 of Foreign Exchange regulation
Act. 1947 issues a license to schedule Bank where they have adequate trained
Officer/Staff to deal in Foreign Exchange. The banks that are authorized to deal in foreign
exchange are called authorized dealers.
Arbitrage of Foreign Exchange:
Arbitrage can be defined as simultaneous buying and selling of foreign currencies for the
purposes of making profit Arbitrage is carried out mostly by banks, They keep constant
watch over the latest development in the financial market of the world.
Foreign Exchange Regulation Items:
1. Bangladesh Bank Manual.
2. Foreign Exchange Circular.
3. Public Notice
4. Import & Export Policy Gazette
5. Ministry of Commerce Circular
6. BCD circular.
7. Guide lines for foreign exchange regulation.
8. Other authorization (i.e. NBC Dept)
Methods of effecting payment of AIBL
Islami Bank follows the following methods to make payments between countries.
1. Telegraphic Transfer (TT): This is an instruction for transfer of money by
Telegram, Cable or telex from a bank in one country to another Bank in different
center. This is an instruction form the Importers Bank to the exporters Bank. The
TT charge is realized by us from the partly as per Bank circular.
2. Mail Transfer (M.T): This transfer is the order to pay cash to a 3rd party. This
Transfer is sent by mail & the charge must be realized as per Bank circular.
3. Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its
branch.

Activities of Foreign Exchange
There are three kinds of foreign exchange transaction

1. Import
2. Export &
3. Remittance.
In the following these are discussed in brief.
IMPORT
Meaning of Import
Import means lawfully carrying out of anything from one country to county for Buying. It
will be occurred according to the Government law.
Important Policy Order
Based on the needs of commodity and availability of finance, Government declares
policy. For import of goods for a particular period having approval from the National
Assembly is defined as Import policy order. Import policy is a guideline of a set of rules
envisaged by Government Authority i.e. the Ministry of Trade and commerce for the
registered importer for import of goods inside the country.
Duration
Earlier import policy has been formulated for two years. But present import policy order
has been formulated for 5 (five) years, Effect from the 14 th June 2002 to 30th June 2008
and valid till announce of new import policy order. If require Government can revise the
policy in each every years.
Import related fees
Four categories of importer registration renewal fees are as under
Categories
Yearly
heights Registration
A
B
C
D
import
5.00
15.00
50.00
Above 50.00
Fees (Taka)
500/1500/3000/5000/-
Renewal
500/1500/3000/5000/-

Regulations of Import::
L/C: may be open under deferred payment basis.
Direct Payment in Abroad:
Only for Bangladeshi National who live in abroad for service. Those who are entitled to
purchases the importable goods for direct payment to the beneficiary from his own
service without opening any L/C, The goods must be sent to the Bangladesh. Nationals
who lived in Bangladesh. In that case no approval is required from CCI & E.
Time Limit Opening of L/C:
Letter of Credit shall be opened by all importers within 120 days from the date of
registration of LCAF with the Bangladesh Bank unless otherwise notified.
Validity of LCA for Shipment:
Unless otherwise specified, shipment of goods shall take place within 17 month in the
case of machinery and spare parts and 11 months in the case of all other items form the
date of issuance of LCA from by Bank or registration of LCA form within Bangladesh
Bank registration unit as the case may be.
Document required to be submitted along with LCA Form:
Importers in both public sector and private sector shall submit to their nominated banks
the following documents along with the L/C authorization Form for opening letter of
credit.
a) L/C application form duly signed by the importer.
b) Indent for goods issued by indenture or pro-forma invoice obtained from
the foreign supplier, as the case may be and
c) Insurance cover note.
Import L/C (Letter of Credit):
A letter of credit is a conditional Bank undertaking of payment. In other words letters of
credit is a letter form the importer Bankers to the exporter that the bills if drawn as per
terms & conditions complied with will be honored on presentation.

Definition of L/C:
A letter of Credit is a conditional bank undertaking of payment. In other words letters of
credit is a letter form the importer bankers to the exporter that the bills if drawn as per
terms and conditions are compiled with will be honored on presentation
As per UCPDC 500 a credit may be either:
i)
Revocable.
ii)
Irrevocable.
The Credit, therefore, should clearly indicate whether it is revocable or irrevocable. In the
absence or such indication the credit shall be deemed to be irrevocable.
Classification of L/C:
Revocable
L/C,Irrevocable
L/C,Confirmed
L/C,Transferable
L/C,Divisible
L/C,Revolving L/C,Restricted L/C,Red Clause L/C,Green Clause L/C,Back-to-Back L/C
Types of L/C:
1. Revocable Credit:
As per Article no. 8 (a) A revocable credit is a credit which can be amended or canceled
by the issuing bank at any time without prior notification to the seller since to offers little
security to the seller.
2. Irrevocable Credit:
As per Article no 9 an irrevocable credit constitutes a definite undertaking of the issuing
Bank. A credit cannot be amended or cancelled without the agreement of all parties. It
gives the seller grater assurance of payment. An irrevocable credit can be either confirms
or unconfirmed dependant on the desire of the seller.
L/C application & Procedure for Opening L/C :
For opening L/C the client is to submit to the bank an application in the printed format of
the designated bank. This is called L/C application form which is also an agreement
between the importer and the bank. The form is to be stamped under stamp Act. In force
in Bangladesh. The importer must submit the LCA & IMP and indent or contract.
Purchase order/pro-forma invoice (duly accepted by the importer) along with L/C
application.
The L/C application must be completed/ filled in and signed by the authorize person of
the importer giving the following particulars:
a. Full name and address of the supplier of beneficiary and importer.

b. Brief description of the goods.
c. L/C value for US$, etc. (CFR value) which must not exceed the LCA value.
d. The unit price, quantity quality of the goods.
e. Origin of the goods, port of loading and port of destination must be mentioned.
f. Model of shipment (Sea, Air, Truck or Rail etc.)
g. List date of shipment and negotiation time (must not be beyond 30 days from the
shipment date).
h. Insurance cover note number and name or the company.
i. Tenor of draft (1.e, sight/ issuance/ deferred etc.
j. Mode of advising L/C (i.e. airmail/ full telex short cable etc.)
k. Opening of L/C under UCPDC publication No. 500/- ICC revision 1993.
l. Whether shipment/ transshipment is allowed.
m. Instruction to add confirmation if required.
n. LCA Number.
o. Any other relevant information and instruction if any must be mentioned in the
L/C application form.
A written application from opener is verified a relevant license/ LCA/ permit of the loan/
Barter must remain valid up to that period the extension is sought. Increase of L/C
amount may be done provided the LCA covers the increase in amount.
L/C amount can be decreased provided the relevant Indent is amending accordingly and
with the consent of beneficiary.
Each of clauses of the L/C can be amended provided the parties involve the L/C consent
to it. Procedure or preparation and dispatch:
Amendment is to be typed in the Banks printed format. The copies of the amendment
must be dispatched to all concerned as done in dispatching the L/C. Amendment be kept
in the L/C file chronologically date wise.

Back to Back L/C
Meaning of Back to Back L/C
Back to Back L/C is a type of import L/C either in inland or in abroad, which open
against lien on valid expert L/C.
In our country in export garment this method of finance is widely used and very well
known to the manufacturers of garments. Bangladesh exporter received an irrevocable
L/C. for supply readymade shirts from an American Bank. For manufacture of the ordered
shirts the exporter. Dose not has required raw materials and cloths. To execute the order
he is to import materials and cloths from Korea.
Then the Bangladesh exporter does not have the required raw materials and clothes. To
excite the order he is to import materials and cloths from Korea.
Then the Bangladeshi exporter will have to open an import L/C favoring Korean suppler
for import of cloths and accessories. The L/C is opened by the Bangladeshi bank keeping
the American Bank L/C in the back (i.e. to fulfill the requirement) of the export L/C is
called back to back L/C.
While opening such import L/C the Bangladeshi exporter is to pledge to manufacture the
shirt by the Korean in imported cloths under boded ware house system.
Problems of Back to back L/C
1.
Shipment time gap: Sometime time is shorted for exporting against import
L/C, kit may be caused.
2.
Terms and rules violations: AIBL cannot violate the rules & term of
Shariah council.
EXPORT
Meaning of Export: Export means lawful carrying out of anything from one country to
another country for sale
Definition of Exporter
The importers and exports trade of the country is regulated by the Imports Exports
Control Act 1950. No person /firm is allowed to export any thing from Bangladesh unless
he is registered with CCI and E under the registration order (Importer and Exporter) 1952.
To become an exporter an ERC (export Registration Certificate) must be obtained from
the office of CCI & E.
Export under L/C
Exporters are allowed to export the commodity under irrevocable letter of credit. Under
this type of export, exporter will ship the goods as pr terms of the credit and will get
payment as per arrangement of the credit.
General Rules for Export
There are some rules, which are mandatory for export of any goods form Bangladesh. The
rules are as under:
(1) No Person can export any goods from Bangladesh, unless he is duly registered as an
exporter with the CCI & E.
(2) All export must be declared on the EXP form, which is consisting of 4 copies.
(3) Export mush is against any of the following:
a) Export L/C.
b) Firm Contract.
c) Advance Payment.
REMITTANC
Meaning of Remittance
The word Remittance originates from the word remit which means to transmit
money/ fund. In banking terminology, the work remittance means transfer of fund one
place to another. When money transferred from one country to another is called Foreign
Remittance

Types of Remittance:
Foreign remittance may be classified into.
Inward Foreign Remittance.
Outward Foreign Remittance.
Mechanism of Remittance
FCAD- Foreign currency A/C Dollar.
FCAP- Foreign currency A/C Dollar.
MFCD- Mudaraba foreign currency deposits.
PFC- Private foreign currency.
FCAD- Exp.- Foreign currency A/C dollar export.
NRO- Non residence dollar.
NRT- No residence Taka.
PDAP- properly development A/C dollar.
PDAP- properly development A/C pound.
Instruments of Foreign Remittances:
Cash for
: Dollar, Pound, France Fr. Riyal or any other currency.
T.C.
: Travelers Cheque.
F.D.D
: Foreign Demand Draft.
T.T
: Telegraphic Transfer, Cable transfer or swift transfer.
M.T
: Mail Transfer.
I.M.O
: International Money Order.
Cheque
: By any person & institution..
P.O
: Payment Order.
PROBLEMS & RECOMMENDATION
PROBLEMS
Islamic Banking is a new phenomenon in our country during last two decades. So
majority of our people have no proper knowledge about the activities of Islamic
Banking as well as its investment mechanism hamper large scope of investment of
AIBL.
Most of the people in our country have a bad impression of AIBL operations
regarding indirect generation of interest which meaning no difference between

investment of AIBL loan / Credit / advance of conventional banks for this reason,
they are not too much interested to make investment with AIBL.
Because of improper insufficient application of Islamic Banking rule in our

country. The investment operations of AIBL can't run smoothly.
AIBL, which is committed to avoid interest, cant invest the permissible part of its
statutory liquidity Reserve and short Term liquidity surplus in those securities.
Recommendation
1. AIBL should increase skilled manpower to do its financial activities more efficiently.
So that many of the employees do not have to do extra work.
2. The Bank should go aggressive advertising and promotional activities to get a broad
geographic coverage.
3. The authority of AIBL should introduce more innovative and modern customer
service.
4. Practice amount of doubtful income declined substantially during the year as
compared to the past few years, indicating more carefulness of the Management in
complying with Shariah. As a result, idle money will be invested to increase potential
profit of this Bank.
5. Inclusion of more subjects based on the Quran and Sunnah in the Training courses of
the Islami Bank Training & Research Academy in order to develop human resources
having morally.

Performance of AIBL:
APPENDIX
(Figure in Million)
Particulars
2004
2005
2006
2007
2008
Authorized Capital
1,000
1,000
25,000
25000
25000
Paid-up Capital
586.96
677.94
854.20
1153.18
1383.81
Reserved Fund & other reserve
270.27
365.87
536.00
653.00
905.33
957.26
1220.16
1690.18
2037.74
2705.74
10108.28
11643.66
16775.34
23009.13
29690.12
Investments (Growth)
8150.16
11474.41
17423.19
22906.37
29723.79
Import Business
9337.49
12631.60
18821.40
27042.72
32685.13
Export Business
3639.34
4932.90
9142.70
12714.91
20176.64
Inward Foreign Remittance
292.00
455.60
1346.54
1843.94
2672.04
Guarantee Business
305.09
299.15
520.15
601.88
784.49
Total Income
1120.85
1452.68
2172.48
2955.61
4387.27
Total Expenditure
771.96
904.48
1202.71
2199.43
2859.17
Net Profit before Tax
348.89
548.20
969.77
756.18
1528.10
Payment to Govt.(Income Tax)
154.76
262.90
470.02
347.31
668.24
Dividend
15.5%
26%
35%
20%
30%
12874.61
15336.89
21368.16
30182.32
39158.44
Fixed Assets
195.17
208.00
215.10
2334.48
396.76
No. of Foreign Correspondents
775
815
830
840
850
Number of Shareholders
5379
5402
4487
12013
10664
Number of Employees
803
771
912
1033
1080
Number of Branches
40
41
46
46
50
Book Value per Share (Taka)
178.58
205.98
232.63
196.69
195.53
Earning per Share (Taka)
26.36
38.78
55.02
25.10
48.29
Market Value per Share (Taka)
323.00
306.00
242.00
440.00
444.00
Capital Adequacy Ratio
14.56%
12.17%
10.71%
10.92%
11.20%
Shareholders Equity(Capital
Reserve
Deposits (Growth.)
&
Total Assets (excluding off balance

sheet items)
Note: Tk. in (Million).Foreign
national position:
Exchange Business performance of AIBL compared to that of

In million taka.
Import
Year
Export
National
AIBL
1995
127986
6204
1996
146930
1997
% of
Remittance
National
AIBL
4.85
68235
3967
8778
5.97
81600
163500
8612
5.27
1998
201105
14623
1999
257765
2000
of
National
AIBL
5.81
29835
1814
6.08
4949
6.06
34692
2029
5.85
92985
5842
6.28
40260
2403
5.97
7.27
114645
7790
6.79
45847
2943
6.42
21218
8.23
134935
11016
8.16
88873
2447
4.40
293190
17874
6.10
152105
11764
7.73
56352
3328
5.91
2001
323625
17370
5.37
184785
14469
7.83
66173
4806
7.26
2002
363335
20238
5.57
206220
14894
7.22
75662
6361
8.41
2003
403790
20396
5.05
228870
14798
6.47
90024
8415
9.35
2004
463990
25327
5.46
286710
16889
5.89
98481
7644
7.76
2005
492140
25907
5.26
319115
16082
5.04
115785
9879
8.53
2006
495210
33788
6.82
314550
16673
5.30
164844
14670
8.90
2007
599250
46237
7.72
361870
21738
6.01
184913
16668
8.01
303510
59804
466200
29151
139964
23669
Jan--Aug
Jan-Dec
Jan--Aug
Jan-Dec
Jan--Aug
Jan-Dec
2008
AIBL
---
AIBL
---
AIBL
---
Source: Economic Trends published by Bangladesh Bank.

Foreign Exchange Business performance of AIBL during the year 2006 & 2007 and
target for 2008:
of
IMPORT
SL
Name
No.
Branch
of Achieved
2006
Target
for
2007
Achieved
2008
%of
achieved
over target
Target for
2008
Corporate Branch :
01
Local
10025
14536
12847
88
17986
02
F. Exchange
3328
4826
4585
95
6419
03
Nowabpur
3629
5262
3774
72
5284
04
Head Office
1039
1560
2207
141
3090
18021
26184
23413
89
32778
Sub Total
Zonal Branch :
01
Dhaka South
8962
13675
11169
82
16083
02
Dhaka North
1253
2301
782
34
1571
03
Chittagong
8171
11913
9338
78
13429
04
Bogra Zone
4779
6930
7365
106
10317
05
KhulnaZone
4475
6606
7460
113
10891
06
Comilla Zone
576
676
277
41
1016
Sub Total
28216
42101
36391
86
53307
Grand Total
46237
68285
59804
88
86085
EXPORT
SL
Name
No.
Branch
of Achieved
2006
Target
for
2007
Achieved
2008
%of
achieved
over target
Target for
2008
Corporate Branch :
01
Local
13124
18374
16200
88
22683
02
F. Exchange
2054
2875
3028
105
4239
03
Nowabpur
560
784
769
98
1077
04
Head Office
228
330
709
215
993
151166
22363
20708
93
28991
Sub Total
Zonal Branch :
01
Dhaka South
4764
7063
6848
97
9587
02
Dhaka North
193
604
363
60
508
03
Chittagong
571
950
860
91
1204
04
Bogra Zone
99
276
194
70
272
05
KhulnaZone
145
303
178
59
249
06
Comilla Zone
-----
50
-----
----
----
Sub Total
5772
9246
8443
91
11820
Grand Total
21738
30609
29151
92
40811
REMITTANCE
SL
Name
No.
Branch
of Achieved
2006
Target
for
2007
Achieved
2008
%of
achieved
over target
Target for
2008
Corporate Branch :
01
Local
5482
8234
5019
61
7278
02
F. Exchange
232
348
356
102
516
03
Nowabpur
58
87
39
45
57
04
Head Office
330
512
380
74
551
6109
9181
5794
63
8401
Sub Total
Zonal Branch :
01
Dhaka South
1594
2404
2652
110
3850
02
Dhaka North
1737
2617
3173
121
4604
03
Chittagong
1564
2360
2068
88
3011
04
Bogra Zone
484
730
945
128
1389
05
KhulnaZone
534
825
994
120
1451
06
Comilla Zone
4646
7003
8043
115
11684
Sub Total
10559
15945
11875
112
25990
Grand Total
16668
25126
23669
94
34391
TOTAL
SL
Name
No.
Branch
of Achieved
2006
Target
for
2007
Achieved
2008
%of
achieved
over target
Target for
2008
Corporate Branch :
01
Local
28638
41144
34068
83
47946
02
F. Exchange
5614
8049
7969
99
11174
03
Nowabpur
4247
6133
4582
75
6417
04
Head Office
1597
2402
3296
137
4633
40098
57728
49915
86
70171
Sub Total
Zonal Branch :
01
Dhaka South
15320
23142
20669
89
29521
02
Dhaka North
3183
5522
4318
78
6684
03
Chittagong
10306
15223
12266
81
17645
04
Bogra Zone
5362
7942
8504
107
11977
05
KhulnaZone
5154
7734
8632
112
12591
06
Comilla Zone
5222
7729
8320
108
12700
Sub Total
94547
67292
62709
93
91117
Grand Total
84643
125020
112624
90
161287
Confidential Report 2008

Summary of Foreign Exchange Business performance of AIBL as on
31.12.08
SL
Nature of
No
Business
Achievement
Target
Achievement
during
for
during
2006
2008
2008
of %
of
achievement growth
over
target over
2008
2008
Target
Projected
for
Growth
2008
Rate
01
Import
46237
67044
59804
89.20
29.34
86085
44
02
Export
21738
30433
29151
95.79
34.10
40811
40
03
Remittance
16668
25002
23669
94.67
42.00
34391
45
84643
122479
112624
91.95
33.06
151287
43
Total
Foreign Exchange Business:
SL
No
Nature
Business
of 2008
Amount
2007
% of Total
Amount
Growth
Amount
% of Total 2008
Amount
2006
01
Import
59804
53
46237
54
29
02
Export
29151
26
21738
26
34
03
Remittance
23669
21
16668
20
42
112624
100
84643
100
33
Total
of
over
Notes
2007
Current Asset
Cash
Balance with other Banks & Financial Institutions
2008
2019209679
3477042678
2415216307
1382983634
Maturity grouping of Investment (up to one year)

Maturity grouping of bills purchases &
discounted
88225921
13177365769
66853386
14834146957
Total
Current Liabilities:
Borrowing from others
19157850675
18302923656
1780000000
1320000000
Maturity grouping of Deposit

Residual. Maturity grouping of Others
Total
20072123915
0
16371599213
0
21852123915
17691599213
Ratio analysis:
Ratio analysis refers to the relationship determined from a firms
financial statement expressed in simple mathematical form. It is used to compare and

investigate the logical relationship between different pieces of financial information. It is
helpful to highlight the strength or weakness of a firm. Following ratios can be calculated
to depict the performance of AL-ARAFAH ISLAMI BANK LTD. over year, as well as
in comparison with the industry average.
LIQUIDITY RATIO
Current and quick ratio is mostly used to measure the liquidity, this ratio measure the
banks ability to fulfill its short term debts out of its liquid assets.
CURRENT RATIO
AL-ARAFAH BANK LTD.
INDUSTRY AVARAGE (2008)

DBL: 1.13
EBL: 1.14
CBL: 1.07
EXIM: 1.15
PBL: 1.10
Current Ratio 2008 =
Average
1.12
Current Asset
Current Liabilities
=18302923656/17691599213
= 1.03 x
Current Ratio 2008 =

=
Current Asset
Current Liabilities
19157850675/21852123915
= 0.88 x
Name of the 2008

Bank
Al-Arafah
1.03 x
Islami Bank
Ltd
2008
0.88 x
Industry
Average
1.12x
COMMENTS: The liquidity position of the bank was more increase year by year than
industry average. The industry average was poor .The overall liquidity position was at all
satisfactory. Because of, the liquidity position of the bank as strong as average bank.
LEVERAGE RATIO
Debt ratio and debt to equity ratio is mostly used to measure the leverage ratio, the
employment of the assets or the source of fund for which the firm hat to fixed cost and get
fixed return may be tremens as leverage. Increase in leverage in crease the level of risk as
well as return and vice versa.
DEBT RATIO: It measures the firs ability to pay its long term debt. This ration gives
two answers they are:
1. Is the company financed mainly by debt or equity?
2. Does the company make enough to pay the interest on its total loan when due?
AL-ARAFAH ISLAMI BANK LTD.
INDUSTRY AVARAGE(2008)
DBL: 0.94
EBL: 0.91
CBL: 0.94
EXIM: 0.92
PBL: 0.93
Debt Ratio 2007 =
0.93
Total Debt
Total Asset
= 28144824936 / 39158437848
= 0.93
Debt Ratio 2008 =
Total Debt
Total Asset
=28144824936 / 30182323406
= 0.93
Here we compare the performance of AL-ARAFAH ISLAMI BANK LTD in 2008 in
terms of its performance in 2007 as well as the Industry average of 2007.
Name of the Bank
2007
2008
Al-Arafah Islami 0.93

Bank LTD
0.93
INDUSTRY
AVARAGE
0.93
COMMENTS: This ratios indicate of debt mgt in comparison to average industries. The
bank highly levered and dependent on creditors on the assets is increasing over the years.
Under such circumstances it would be difficult for the bank .The arrange outside
financing unless the improve on equity finance.
DEBT TO EQUITY RATIO/MANAGEMENT EFFICIENCY

RATIO:
AL-ARAFAH ISLAMI BANK LTD.
INDUSTRYAVARAGE (2008)
DBL: 17.3
EBL: 10.4
CBL: 15.9
EXIM: 11.74
PBL: 14.
Average
13.8
Total Debt
Debt to Equity Ratio 2007= Shareholder Equity

= 28144824936
203749847
= 13.81
Total Debt
Debt to Equity Ratio 2008= Shareholder Equity

= 36452697089
2705740759
= 13.47
We compare the performance of AL-ARAFAH ISLAMI BANK LTD.. in 2004 from 2008
as well as the Industry average of 2008.
Name of the Bank
2007
2008
Al-Arafah Islami
bank
13.81
13.47
Industry
average
13.8
COMMENTS: The performance of the debt position is at all satisfactory. The debt
position of bank is reduce year by years
Return on Assets
ROA 2007 = Net income / Total Asset
=347344759 / 30182323406
=0.0115
ROA 2008 = Net income / Total Asset
= 668383316 / 39158437848
=0.017
COMMENTS: The bank wills capable to earn adequate profit .Because of, ROA is more
increase year by year. The recent year profitability position and Return on assets is more
than industry average.
RETURN ON EQUITY RATIO (ROE):

It measures the return that the company earns on every tk. of owners and shareholders
investments. If ROE increases then return against every tk. invested in the firm by owners
and shareholders increases.
AL ARAFAH ISLAMI BANK LTD.
INDUSTRYAVARAGE (2008)
DBL: 22.5 %
EBL: 11.28 %
CBL: 11.9 %
EXIM: 23 %
PBL: 26.5 %
Average
19 %
ROE 2007 = Net Income / Total Equity

=347344759 / 2037498470
= 0.1704
ROE 2008 = Net Income / Total Equity
= 668683316 / 2705740759
= 0.2470
Here we compare the performance of AL-ARAFAH BANK LTD in 2007from 2008 as
well as the Industry average of 2007.
Name of the Bank

Al-Arafah
Bank Ltd.
2007
Islami 17.04 %
2008
24.70 %
INDUSTRY
AVARAGE
19 %
COMMENT: The bank wills capable to earn adequate profit .Because of, ROE is more
increase year by year. The recent year profitability position and Return on equity is more
than industry average.
Working capital:
Working capital 2007:
18302923656 -17691599213
= 611324443
Working capital 2008:
19157850850675 21852123915
= (2694273240)
Comment: The working capital mgt position is increase year by year. It will possible,
the adequate working capital to operate other banking activities.
Performance at a glance
(In Million taka)
Operating Profit
(In Million Taka)
Deposit Mix (%)

Sector wise Investment (%)
Finding
Al-Arafah Islami bank is the pioneer of private banking sector
It provides high quality service to the customer in all area
By virtue of high customer satisfaction bank build strong goodwill
It provides excellence service at comparatively lower charge
Both interest rate on deposit and interest rate on various loans is comparatively
lower
Special schemes like Monthly saving scheme, Al-Arafah Islami Bank Ltd. saving
scheme are very popular.
Modern banking services like online banking, wide range of ATM service ,one
stop banking service are not available
Contemporary security arrangement is not existing
Lack of new feature deposit and loan product
Loan assessment and approval procedure is lingering
Suggestion
Al-Arafah Islami Bank Limited is a large organization and banking is a complex and
comprehensive task. So it is difficult for me, by my little knowledge, to give suggestion
regarding improvement of the service of AIBL. From my observation I have found that
following things may improve the service of the bank
Modern banking service like online banking, branch network system needs to
introduce.
A wide range of network will bank the bank more competitive
If AIBL establish networking system with all branches then it can easily transfer
data one another branch within short time.
Instead of introducer system bank may use national ID card for account opening
to reduce the difficulty of the customer
Bank can introduce new featured deposit product to increase amount of deposit
Modern security facilities like close circuit camera is demanded
Emphasis on advertising and branding of the bank is essential to increase the

customer base
Website of AIBL need to be enriched to give more information to the customer
AIBL may introduce diverse loan product to meet various requirement of the
customer
Whole loan process need to be shorten so that customer can get loan in short time
Conclusion
From its inception Al-Arafah Islami bank is serving the customer ensuring high level of
satisfaction. Through its integrity, innovation and relentless ef fort it has made a distinct
position among other bank. Though the bank is facing some problems it has more
opportunity to flourish itself.

BIBLIOGRAPHY
Books:
1. A.A.M. Habibur Raman; Islami Banking.
2. Md. Haider Ali; A Hand Book of Islami Banking & Foreign Exchange Operation.
3. Bangladesh Bank; Guide lines for Foreign Exchange Transactions.
4. Howard R. Goldsmith; Import / Export
(A Guide to Growth, Profits and Market Share).
5. Sayed Ashraf Ali; Foreign Exchange & International Finance.
6. A.K. Chatterjee ; Principles of Foreign Exchange.

7. M. Omar Chapra; Review of Islami Economics.
Reports
1. Annual Report of AIBL, 2008.
2. Confidential Report of AIBL, 2008
3. Al-Arafah Islamic Bank Ltd. Parichiti-2001
4. Economic Trends published by Bangladesh Bank
ABBREVITIONS
A/C
: Account
ACA
: Al Wadia Current Account
MSD
: Mudaraba Savings Deposit
MSND
: Mudaraba Short Notice Deposit
MTD
: Mudaraba Term Deposit
MSD
: Mudaraba Special Deposit
BP
: Bills Pabable
Internship Report
ON
General Banking,
Investment
& Foreign Exchange of
AL- ARAFAH ISLAMI
BANK LIMITED.
Al-Arafah Islami Bank Ltd.
SOUTHEAST UNIVERSITYl
Internship Report
ON
General Banking,
Investment
AL- ARAFAH ISLAMI
BANK LIMITED.
(Banani Branch.)
SOUTHEAST UNIVERSITY
Internship Report
ON
General Banking, Investment
AL- ARAFAH ISLAMI BANK LIMITED.
(Banani Branch.)
PREPARED FOR
Mr. Kazi M. Tarique
Assistant Professor
School Of Business Studies
Southeast University
PREPARED BY
Md. Khalid Hussain
ID No. 2008010001026
Program MBA, Regular
Major-Finance & Banking
Batch 18th
Date of Submission: 29th July, 2009
Southeast University, Dhaka,
Bangladesh

July 29, 2009
To
Mr. Kazi M Tarique
Assistant Professors
School of Business Studies
Subject: Submission of internship report.
Sir,
Here is the report of my internship project in AL-ARAFAH ISLAMI BANK LIMITED
that you authorized on June 06, 2009. The project was General banking, investment and
foreign exchange operation of AL-ARAFAH ISLAMI BANK LIMITED.
The report covered the comprehensive banking, especially foreign exchange business &
its problem and prospect of AIBL. Finally, the report tried to identify the probable reasons
of the problem and suggestions are made for the business mechanism of AIBL to
betterment of the current situation. Instructions regarding the size of the report and
limited time to study affect the report. Major limitations include unavailability of
complete data for 2008and lack of generalization of the findings as it was done in a case
study format.
At the end I hope that the report will shed some light on the topic even with the
limitations. I am again thankful to you for your kind co-operation.
Sincerely Yours,
Md. Khalid Hussain
ID NO-2008010001026, Batch-18th
Prog.-MBA (Regular), Major: Finance & Banking
Table of Illustration
Particulars
Page
Introduction
Origin of the report
Acknowledgement
Executive summary
Objectives of the study
Justification of the study
Methodology of the study
Scope of the report
Limitations of the study
Chapter -1
Chapter -2
Chapter-3
1
3
4
5
6
7
8
9
10
11-20
21-28
29-45
Notes & Ratio Analysis

Graphical Presentation
Finding
Suggestion
Conclusion
General Banking
Investment
Foreign Exchange
46-51
52-54
55
56
57
Bibliography
58
Abbreviation
59
CERTIFICATE
This is to certify that the internship on General Banking ,Investment &Foreign Exchange has
been submitted for the award of the degree of Masters of Business Administration (MBA)
major in Finance&Banking from Southeast University, carried out by Md.Khalid Hussain
of 18th batch bearing ID:2008010001026, under my supervision. To the best of my
Knowledge and as per his declaration, any part of this report has not been submitted for
any degree, diploma or certificate.
He is permitted to submit the Internship Report.
-----------------------------------------Mr. Kazi M. Tariuqe

Assistant Professor
DECLARATION
I, Md.Khalid Hussain, the student of Masters of Business Administration (MBA) 18 th
batch bearing ID: 2008010001026 major in Finance&Banking from Southeast
University , would like to solemnly declare here that an internship report on General
Banking ,Investment &Foreign Exchange
has been authentically prepared by me. While
preparing this internship report, I didnt breach any copyright act intentionally. I am
further declaring that, I did not submit this report anywhere for awarding any degree,
diploma or certificate.
_______________________
Md.Khalid Hussain
MBA (Major in Finance&Banking)
18th Batch
ID: 2008010001026

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