Main

Chapter 1: Introduction
1.1
Introduction
1.2
Background of the Study
1.3
Objective of the Study
1.4
Scope of the Study
1.5
1.6
Methodology
Limitations
The Process & Challenges of Retail Products
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Introductio
n
1.1 Introduction:
Banking is one the most competitive industries of Bangladesh that has seen a huge amount of
growth during the last decade. A large number of new banks have made their places in the
industry and yet there are more to register in the list. In such a highly competitive service
industry, the importance of customer satisfaction cannot be de-emphasized.
To keep pace with this situation, we need banking knowledge for future career. If we want to
build our career in banking area, only theoretical knowledge would not help us. As internship
program is established to gather practical knowledge regarding various sector of economy, I
chose to get practical knowledge regarding banking sector and I select Al-Arafah Islami Bank as
my organization to work.
The duration of my program was 3months and during this period, I have learned many things. I
observed that there is a great difference between theoretical knowledge and practical knowledge.
I learned many terms, functions and nature of banking activities. I also get practical knowledge
regarding organizational environment.
1.2 Background of the Study:

To supply well-versed graduates Stamford University Bangladesh is conducting BBA program
with good reputation. Each of the professional degree needs practical knowledge of respective
field of discipline to be fruitful. To complete BBA program also has an internship, relating to the
exchange of theoretical knowledge into the real life practical situation. The main purpose of the
preparation of the report is due to the partial fulfillment of the internship program conducted by
the Department of Business Administration, Stamford University Bangladesh.
During the Internship Program, I was under the supervision and guidance of Ishrat Jahan Tania
Assistant Professor, Department of Business Administration, Stamford University Bangladesh
assigned to prepare a report about particular topic among some option which should be relevant
to my practical knowledge within these 3 months tenor. To fulfillment of the internship program
the report is originated entitled The process and the challenges of retail products.
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Introductio
n
1.3 Objective of the Study:

The main objective of this study is to have some practical exposures that will be helpful for my
Final year courses in the BBA Program.
To achieve the broad objective the following specific objectives has been attained:
To find out the marketing strategy of Al-Arafah Islami Bank Ltd Bank Ltd.
To find the financial performance of Al-Arafah Islami Bank Ltd Bank Ltd.
Analyzing the performance of the bank
To find out the different banking procedures of the branch.
To know the competitive strength and weakness of the bank.
To know the marketing and expansion strategy of bank that can help to face the potential
threats and opportunities.
To know the technological advantage and lacking of this bank in the modern banking
system.
To find out the relations among the various department.
To make a bridge between the theories & practical procedures of banking day-to-day
operations.
To make possible recommendations for the internship organization to improve the

services & service range so that the department can cater to the needs and demands of
customers.
1.4 Scope:
The study encompasses the overall banking activities, management, organizational structure,
credit facilities & Foreign Exchange Division, Retail banking of Al-Arafah Islami Bank.
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I have got the opportunities to see the internal work environment as like their thought, their
behavior, their services as well as with their strategies that they follows, which was really helpful
for me.
Introductio
n
1.5 Methodology:
In order to carry out this study, two sources of data and information have been used:
1.5.1 Primary data:

Primary data were collected through discussions with the executives & officials of the AIBL,
which has been presented in the report.
1.5.2 Secondary data:

Annual Reports of 2007-2008 of Al-Arafah Islami Bank Bangladesh Ltd.
Desk report of the related department
Manuals of Al-Arafah Islami Bank Bangladesh Limited (Foreign Remittance)
1.6 Limitations:
The study report consists of few limitations:
The report has been conducted within a limited time frame.
The study is self financed.
Only dhanmondi branch has been considered for the study.
To analysis SWOT of emerging market is a wide spread survey material. However, time
constraint restricted the report to specific feature.
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Banks policy of not disclosing some data and information for obvious reason, which could be
very much useful.
Chapter 2: Banking
Overview
2.1
Introduction
2.2
Overview of Banking Industry
2.3
Concepts of Islamic Banking
2.4
Islamic Banking around the World
2.5
Islamic Banking in Bangladesh
2.6
Theoretical Background of Islamic Banking
2.7
Objective of Islamic Banking
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Banking Overview
2.1 Introduction:
A bank is a financial institution whose main objective is the mobilization of fund from the
surplus unit to deficit unit. In the process of acceptance of deposits and provision of loan, Bank
creates money. This characteristics feature sets bank apart from other financial institutions.
Bank is very old institution that is contributing toward the development of any economy and is
treated as an important service industry in modern world. Now a day the function of bank is not
limited to within the same geographical limit of any country. Due to globalization and free
market economy, this industry is facing severe competition in any country and implementation of
WTO will further increase competition. The overall performance of Bank does not only depend
upon the banking industry itself but also on the performance of economy where it is operating.
2.2 Overview of Banking Industry:

After the surrender of the Pakistani forces on 16 th 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
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the Bangladesh Bank. By the steps stated above, the banking system of Bangladesh started with a
legal shape.
Banking Overview
The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are
Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 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 12 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.
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Banking Overview
Bangladesh Bank
Commercial Bank
Specialized Bank and Credit

Agents
Private
Bank
Nationalized
bank
Traditional
Bank
BKB
Co-operative Banks
Foreign
Bank
Islamic Bank
RAKUB
BSBL
BSB
CCBL
BSRS
PSC
BASIC
Grameen
Bank
Karmasanghtan
Bank
Ansar-VDP
Unnayan Bank
Figure 1: Banking Operation under BB
Sources: Chowdhry, L.R. (2002, 2nd edition), A Text Book On Banker Advances
Some words used as a abbreviate form in the diagram are:

BKB -
Bangladesh Krishi Bank
RAKUB-
Rajshahi Krishi Unnayan Bank

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BSB-
Bangladesh Shilpa Bank
BSRS-
Bangladesh Shilpa Rin Shangshta
BASIC-
Bangladesh Small Industries & Commerce.
BSBL-
Bangladesh Samabaya Bank Ltd.
CCBL-
Central Co-operative Bank Ltd.
PCS-
Primary Cooperative Socites.

Banking Overview
2.3 Concepts of Islamic Banking:

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. Islamic banks is committed to establish socio-economic justice.
2.3.1 The Need for Islamic Banking:

The objective of Islamic banking is not only to earn profit but also to do good and welfare to the
people. Islam upholds the concept that money, income and property belong to Allah and this
wealth is to be used for good of the society .Islamic Banks operate on Islamic principle of profit
and loss sharing strictly avoiding interest, which is the root of all expansion and is responsible
for large-scale inflation and unemployment. An Islamic bank is committed to do away with
disparity and established elasticity in the economy, trade, commerce and industry build
socioeconomic infrastructure and create employment opportunities.
2.3.2 Related Definitions of Islamic Bank:

The general secretariat of the organization of the Islamic conference defines an Islamic Bank, as
Islamic bank is a financial institution whose status, rule and procedure expressly state its
commitment to the principle of Islamic Shariah and to the banning of procedures expressly state
its commitment to the principles of Islamic Shariah and to the banning of the receipt and
payment of interest on any of its operation. All OIC COUNTRIES INCLUDING Bangladesh
have approved the above definition of Islamic Bank. The Islamic Development Bank and other
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national and international Islamic Banks have also adopted the above definition as their
operating guide. Islamic Act 1983 of Malaysia (Act no.276) has given the following definition:
Islamic Banking means any company, which carries on Islamic Banking business and
holds a valid license, and all the offices and branches in Malaysia of such a bank shall
deemed to be one bank.
Banking Overview
The Islamic Republic of IRAN has promulgated The for usury- free banking on
August 30, 1983 incorporating the detail objective and duties of the banking system in
Iran;
Islamic Banking Business means banking business whose aims and operation do not
involve any elements, which is not approved by the RELIGION OF Islam.
2.4 Islamic banking around the world:

The expansion and unfolding of Islamic banking along with traditional interest based banking is
recent phenomenon.Islmic banking is an inseparable part of Islamic economy. During fifties it
was only a subject mattered of research and was limited to the Waiting of scholar and
philosopher. During the sixties actual experiments were made and in the seventies institution
started gaining strength. The eighties and nineties are the period of consolidation and now
Islamic Banking is coming up as the only welfare banking system of the modern world. There
has always been a desire to establish financial institution to operate as per the tenants of Islamic
Shriah.A successful ISLAMIC Banking venture in MytGamr, Egypt was made in 1993.
Subsequently, Islamic-banking movement achieved steady progress and assumed significant
dimension and role with the establishment of the Nasser Social Bank (1972). Dubai Islamic
Bank(1975).Islamic development
bank(1975),Faysal Islamic Bank in Egypt and Sudan(1977).Emergence of development bank as
an international Financial Institution with a view to involving all the Islamic countries in the
establishment of Islamic banks and financial institution with a view to involving all the Islamic
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countries and of Islamic banks and financial institution in about 50 countries of Asia, Africa,
Europe , America like U.K, U.S.A,Germany,Argentina, Denmark, Luxemburg, Switzerland and
India have been established. The banking system of Pakistan and Iran was established on the
basis of Islamic Shariah.
Banking Overview
2.5 Islamic banking in Bangladesh:
In AGUST 1974, Bangladesh signed the Charter of Islamic Development Bank and
committed itself to recognize its economic and financial system as Islamic Shariah.
In January 1941, the president of Peoples Republic of Bangladesh while addressing the
3rd Islamic summit conference held at MAKKA and TAIF suggested, The Islamic
countries should develop a separate Banking system of their own in order to facilities
trade and commerce.
The statement of the president indicate favorable attitude of the Government of the
people Republic of Bangladesh towards establishing Islamic Banks and financial
institution in the country.
Earlier in November 1980, Bangladesh Bank, the countrys central Bank, sent a
representative to study the working of several Islamic Bank in a aboard.
In November 1982, a delegation of IDB Visited Bangladesh and showed keen interest to
participate to establishing a joint venture Islamic bank in the private sector. They found a
lot of work had already been and Islamic banks were already forming for immediate
introduction. Two professional bodies-Islamic economic researches Bureau (IERB) AND
Bangladesh Islamic Bankers Association (BIBA) made significant contribution toward
introduction of Islamic banking in the country.
They come forward to provide training on Islamic banking to top bankers and economist
to fill-up the vacuum of leadership for the future Islamic banks in Bangladesh. Thy also
held seminars, symposia and workshops on Islamic economics and banking throughout
the country to mobilized public opinion in favor of Islamic banking.
The professional activities were reinforced by a number of Muslim Entrepreneurs

working under the agent of the Muslim Business Society (now reorganized as
Industrialist and Business Association).The body concentrated mainly in mobilizing
equity capital for the emerging Islamic bank.
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At last the long drawn struggle to established an Islamic bank in Bangladesh become a
realty and Islami bank Bangladesh Ltd was established in 1983 in which 19 Bengali
national, 4 Bangladeshi institution an 11 banks, financial institution and Government
bodies of the middle East Europe including IDB AND two eminent personalities of the of
Saudi Arabia joined hands to make the dream a reality.
Later, other five Islamic Banks, Islamic Insurance and financial institution were
established in the country. Exim bank is one of them. Some Traditional banks opened
Islamic Banking branches in some major cities
Banking Overview
2.6 Theoretical background of Islamic banking:

There are few economics who are discussing the object of Islamic economics, banking and the
Objective of Shariah. There definition is as follows:
The objective of the shariah is to promote the welfare of people, which lies in
safeguarding their faith, their life intellect, their posterity and their wealth. Whatever
ensure these five interest and desirable.(AL-Ghazzali)
Economics is a science, which studies human relationship between ends and scare means,
which have alternative, use.(Prof.L.Robbins)
Islamic economics aim at the study of human falah achieved by organizing the resources
of the earth on basis of co-operation and participants(MdAkramkha)
Islamic economics is the thinkers responses of economic challenges of their items, In

this end over they are aided by the Quran and Sunni.
Economics is the science of how man uses resources and means of production to study
his needs accordingly to predetermine code given by ALLAH (SWT) in order to achieve
the greatest equity (Princes Muhammad AL-Faisal).
Economics is a social science which studied the economic problem of the people imbued
of the value of Islam. It is a composite science, which studies problem of production,
distribution and consumption through integrative system of exchange and transfer over
the time and their social and moral consequences in the light of Islamic rationalism. It
assumes the presence of Islamic mean.
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Islamic economic is that branch of knowledge, help realize through allocation and
distribution of scare resources that is co firmly Islamic technique
without unduly
curbing individual freedom or creating continued macro-economic and ecological

imbalance(Omar Chapra)
The basis of Shariah is wisdom and welfare of the people in the world and the hereafter.
This welfare lies in complete justice, marry, well being and wisdom from welfare to
misery and wisdom and to folly has nothing with shariah (Ibn AL-qayyim)
Banking Overview
2.7 Objectives of Islamic Banking:

It is a golden desire of every Muslim that his social and political lives should be in accordance
with the divine guides prescribed in the holy Quran and the Sunnah. In the same tune of
aspiration as above, he desires to follow a unified life in financial and business life. So, the
objectives of the Islamic Banking may be derived from the broader objectives of the Islamic
economy. Two quotations may help us understand our objectives.
Ibn al- Qayyim says. The basis of the Shariah is the wisdom and welfare of the people in this
world as well as the hereafter. This welfare lies in complete justice, mercy, well-being and
wisdom. Anything that departs from justice to oppression, from mercy to harshness, from welfare
to misery and from wisdom to folly, has nothing to do with the Shariah Al-Ghazali says, "The
very objective of the shariah is to promote the welfare of the people which lies in safeguarding
their faith, their life, their intellect, their posterity and their property. Whatever ensures the
safeguard of these five serves public interest and is desirable."
However M. UmerChapra, in his book "Towards a just Monetary System discussed some of the
most fundamental characteristics of Islamic money and banking system.
Those are as follows:
1. Broad-based economic well-being with full employment and optimum rate for economic
ground;
2. Socio-economic justice and equitable distribution of income and wealth;
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3. Stability in the value of money to enable the medium of exchange to be a reliable unit of
account, a just standard of deferred payments, and a stable store or value.
4. Mobilization and investment of savings for economic development in an equitable manner
such that a just return is ensured to all parties concerned, and
5. Effective rendering of all services normally expected from the banking system.
Chapter 3:
Organizational Overview
3.1
History of AIBL
3.2
Special features of AIBL
3.3
Chairman & Directors of AIBL
3.4
Executive Committee of AIBL
3.5
Audit Committee
3.6
Members of Shariah Council
3.7
Hierarchy of the Executive Body of AIBL
3.8
Organogram of AIBL Dhanmondi Branch
3.9
Branch Location all over Bangladesh
3.10
Graphically AIBL Countrywide Branches
3.11
Corporate Culture
3.12
Shariah Board
3.13
Information Technology of AIBL
3.14
Welfare Projects of AIBL
3.15 Classification of Bank product

3.16 Services of Al-Arafah Islami Bank Ltd
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3.1 History of AL-Arafah Islami Bank (AIBL):

Islamic ideology encourages us to succeed in life here& hereafter. To achieve this success we
must follow the way dictated by the HOLY QURAN and the path shown by Rasul (SM). With
this goal in view AL Arafah Islami Bank Ltd was established (registered) as a public limited
company on 18 June 1995. The inaugural ceremony took place on 27 September 1995. The
authorized capital of the Bank is TK.2500.00 million and the paid up capital TK.1153 million.
Some very renowned Islamic personalities and pious businessmen of the country are the
sponsors of the bank. The total paid up capital was invested locally.
The Bank is committed to contribute significantly in the national economy. It has made a positive
contribution towards the towards the socio economic development of the country by opening 46
branches on which 16 authorized dealer (AD) throughout the country.
The equity of the bank stood at TK.2037 million Crore as on 31 December 2007, the manpower
are 1033 and number of shareholders are 12013.
The Bank conducts its business on the principles of Musaraka, Bai-muazzal, and hire purchase
transactions approved by Bangladesh Bank. Naturally, its modes and operations are substantially
different from those of other conventional commercial Bank. There is a Shariah council in the
Banks who maintains constant vigilance to ensure that the activates of the bank are being
conducted on the precepts of Islam. The Shariah council consists of prominent Ulema, reputed,
Bankers, renowned lawyers and eminent Economist.
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3.2 Special Features of AIBL:
All activities of the bank are conducted according to Islamic Shariah where profit is the
legal alternative to interest.
The banks investment policy follows different modes approved by Islamic
Shariah based on Quran & Sunnah.
The bank is committed towards establishing welfare oriented banking system,
economic upliftment of the low-income group of people, create employment opportunities.
According to the needs and demands of the society and the country as a whole the
bank invests money to different Halal business. The bank participates in different activities
aiming at creating jobs, implementing development projects taken by the government and
developing infrastructure.
The bank is committed to establish an economic system through social justice
and equal distribution of wealth. It is committed to bring about changes in the

underdeveloped rural areas for ensuring balanced socioeconomic development of the
country through micro credit program.
According to Mudaraba system, the depositors are the partners of the investment
income of the bank. During the period under review, 70% of the investment income has
been distributed among the Mudaraba depositors.
To render improved services to the clients imbued with Islamic spirit of
brotherhood, peace and fraternity and by developing an institutional cohesion.

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The bank is contributing to economic and philanthropic activities side by side.
AIBL English Medium Madrasah and AIBL library are among mention worthy.
3.3 Chairman and Directors of Al-Arafah Islami Bank Ltd:

Al-hajj Md. Anower Hossain
Chairman
Al-hajj Mir Ahmed Sowdager
Vice Chairman
Al-hajj Ahmed Ali
Director
Al-hajj Hafez Md. Enayetullah
Director
Al-hajj Kazi Md.Mofizur Rahman
Director
Al-hajj Badiur Rahman
Director
Al-hajj Md. Harun-ar-Rashid Khan

Al-hajj Abdul Muktadir
Director
Director
Al-hajj Md. Fazlur Rahman
Director
Al-hajj Nazmul Ahsan Khaled
Director
Al-hajj Abdus Samad
Director
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Al-hajj Abdul Malek Mollah
Director
Al-hajj Engr. Kh. Mesbahuddin Ahmed
Shareholder Director
Md. Abdus Samad Sheikh
Ex-Officio
Director/Managing
Director
Company Secretary
Md. Mofazzal Hossain
3.4 Executive Committee of AIBL:

Al-hajj Abdus Samad
Al-hajj Abdul Malek Mollah
Al-hajj Md. Anower Hossain
Al-hajj Mir Ahmed Sowdager
Al-hajj Md. Harun-ar-Rashid Khan
Al-hajj Hafez Md. Enayetullah
Al-hajj Kazi Md.Mofizur Rahman
Al-hajj Ahmedul Haque
Chairman
Co-Chairman
Member
Member
Member
Member
Member
Member
Member
3.5 Audit Committee:

Al-hajj Ahmed Ali
Al-hajj Engr. Kh. Mesbahuddin Ahmed
Chairman
Member
Member
3.6 Members of Shariah Council:

Moulana Md. Siddiqur Rahman
Chairman
Moulana Abu Sayeed Mohammad Omar Ali
Member
Mufti Moinul Islam
Member
Alhajj Md. Anwar Hossain
Member
Page 18
Alhajj A J M Shamsul Alam
Member
Md. Abdur Rahim Khan
Secretary (Acting)
3.7 Hierarchy of the Executive Body of AIBL:

Managing
Director
Additional
Managing
Director
Executive Vice
President
Senior Vice
President
Vice President
Page 19
Assistant Vice
President
3.8 Organogram of AIBL Dhanmondi Branch:
Page 20
Branch
ManagerAVP
Second
Officer
Senior
Officer
Officer
Junior
Officer
Assistant
Officer
Messenger
Figure: Organization structure of Al-Arafah Islami Bank Ltd
3.9 Branch Location all over Bangladesh:
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DHAKA DIVISION(25):
Motijheel
Moulovi Bazar
VIP Road
Motijheel Corporate
Nowabpur Road
North South Road
Hazaribag
Keranigong
Uttara Model Town
New Elephant Road
Banani
Gulsan-2
Mirpur
Mouchak
Dhanmondi
Mohammadpur Krishi Market
Dilkusha
Islampur
Progoti Sboroni
Mymensing
Joydebpur
Madhobdi
Pagla
Narayangonj
Kapasia
CHITTAGONG
DIVISION(10)
Agrabad
Khatun Ganj
Jubily Road
O R Nizam Road
Coxs Bazar
Chowmouhani
Feni
Comilla
Companohonj
RAJSHAHI DIVISION(4):
Rajshahi
Bogura
Syedpur
Mohadevpur
KHULNA DIVISION(6):
Khulna
Satkhira
Mongla
Benapole
Jessore
Chuknagar
BARISAL DIVISION(2):
Barisal
Jhalokhati
SYLHET DIVISION(5):
Lal Dhigir Par
Jinda Bazar
Moulovi Bazar
Ruposhpur
Biani Bazar
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3.10 Graphically AIBL Countrywide Branches:
3.11 Corporate Culture:

Page 23
Al-Arafah Islami bank is one of the most disciplined Banks with a distinctive corporate culture
based on Islami Shariah. Here they believe in shared meaning, shared understanding and shared
sense making. The people in this bank can see and understand events, activities, objects and
situation in a distinctive way. They mould their manners and etiquette, character individually to
suit the purpose of the Bank and the needs of the customers who are of paramount importance to
the bank. The people in the Bank see themselves as a tight knit team/family that believes in
working together for growth. The corporate culture has developed has not been imposed; it has
rather been achieved through their Corporate conduct.
3.12 Shariah Board:

Shariah Council of AIBL consists of 5 members specialized in Fiqhul Muamalat (Islamic
Commercial Law) according to guidelines given by the Bangladesh Bank to ensure whether all
banking operations are transacted in accordance with Islami Shariah i.e. Quran, Sunnah, Ijma,
and Iztihad.
In the year 2007 the Shariah Council has complied various decisions taken by the council on
different matters at different times under the caption Islami Banking Shariah Nitimala (19952006) and prepared a Shariah Manual and published which is first of its kind in Bangladesh.
Shariah Council advices everybody concerned to comply with Shariah requirements and render
all out efforts to increase the standard of service rendered to the clients.
3.13 Information Technology of AIBL:

AIBL has already started providing on-line general banking services to the clients from 23 May
2008 through a network of all branches in the country using satellite based Communication links.
This bank is a member of the Society for Worldwide Interbank Financial Telecommunications
(SWIFT).All of the Authorized Dealer Branches has SWIFT connectivity. The bank will
introduce a few more products for the client, such as, SMS banking, Tele-banking, Internet
Banking etc in near future. To present the overall picture of the bank to the Depositors,
Shareholders, and Investment Clients and Well wishers in home and abroad transparently bank
has designed a web site www.al-arafahbank.com
3.14 Welfare Projects of AIBL:

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3.14.1 Staff Welfare Project:

The Bank always kept a careful eye on the economic security and benefit of its staffs & officers.
The Bank operates a contributory provident fund, a social security & benevolent fund and a
gratuity fund for its employees. In the year 2007 Tk. 7.5 lac was paid to wife of late Mr. Shahidul
Islam, AVP & former branch manager of Joydevpur Branch from bank's social security &
benevolent fund. Till now a total of Tk. 30 lac has been paid from the fund to the families of late
officers & staffs of the bank.
3.14.2 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.
3.14.3 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 this in view Al-Arafah Islami Bank Foundation has established an English
Medium Madrasah at Dhanmondi in 1999. Such institution up to O level of its kind is for the
first time in Bangladesh.
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3.14.4 Al-Arafah Islami Bank Library:

Library is the carrier and reservoir of knowledge. Al-Arafah Islami Bank has shown that other
than generating profit, it can also contribute significantly in the field of providing good source of
knowledge by establishing a public library at 32, Topkhana Road, Chittagong Bhaban (1st floor),
Dhaka, thus strengthening social development. It is placed in a sound, healthy surroundings. It
harbours 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.
Varieties of good books were procured in the library, but those were predominantly to enrich
Islamic knowledge and culture. To fulfill that goal Al-Arafah Islami Bank distributed a total
of 1084 copies of Arabic-BangIa 'Torjomatul Quran' to all the upazillas of the country.
Education is the harmonious development of body, mind & soul. If religion is not attached to it
the real attitude towards life and values will fail to develop. It is mandatory to learn Elm-eDin to govern our life in the right way of Islam. To fulfill this noble intention Al-Arafah
Islami Bank Library started Dars-ul-Quran (Teachings of Quran) program. This program
will cover translation with detail explanation of Quran starting from Sura Fatiha upto Sura
Nas gradually. Dars-ul-Quran program takes place every Monday after Magrib prayer.
Other than this Al-Arafah Islami Bank Library arranges shows of feature films or Documentary
films on Islamic life & Culture.
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3.15 Classification of bank product:

THE PRODUCT
Deposits
Advances
Time
demand
Fund oriented
International
banking
L/C, Foreign
currency
Consultancy
Miscellaneous
Tax, consultancy,
Marcent banking
project,
Counseling,
Investment
counseling
Self-custody,
Sale of drafts,
Standing
instruction,
Trusteeship.etc.
Non-fund oriented
Guarantees
Terms loans, Clean
Letter of credit.
loans, Bills
discounting, Pre
shipment, Post
shipment, Lines of
credit- Secured,
unsecured,
Overdraft.
Fig: - Structure of Bank Product

Page 27
3.16 Services of Al-Arafah Islami Bank Ltd:

The importance of mobilizations of savings for the economic development of our country can
hardly be over emphasized. We considered savings and deposits as lifeblood of the bank. More
the deposit, greater is the strength of the bank. The bank intends to launch various new savings
scheme with prospect of higher return duly supported by a well-orchestrated system of customer
services. The bank would cater to the credit needs of individuals as well as corporate clients.
Initial it will emphasize on trade finance, which would be short term and self-liquidating in
nature. Considering the importance of foreign trade in our national life, financing and handling
of export & import business and also handling of foreign remittance business would be given top
most priority. Moreover the bank operate all of its activities under the rules and regulations of
Islamic Shariah.The services provided by the Al-Arafah Islami Bank Ltd. is given bellow: -
Bank services
General banking
Different accounts
open, issues of
DD. TT. PO,
Clearing,
FD, Different
Scheme etc.
Credit/advance
SOD General loan,
House building
loan, Lease finance,
Hire purchase,CC
hypo, Staff loan,
CCS etc.
Foreign exchange
Export
Import
Remittance
Figure: various services provided by Al-Arafah Islami Bank
Chapter 4: General
Banking
Page 28
4.1
Introduction of General Banking
4.2
Cash Section
4.3
Account Opening
4.4
Cheque Clearing
4.5
Local Remittance
4.6
Various Types Of Deposit Account
4.7
Clearing Department
4.8
Clearing House
Page 29
General Banking
4.1 Introduction of General Banking:

The starting point of all the banking operations is General Banking. It is an important department
for all banks because it provides services to the customers day-to-day. Front Desk is the
important for general banking. Customers give their deposits and meet their demand for cash by
honoring Cheques. The customer opens new accounts, remit funds, issues bank drafts and pay
orders etc. There are various sections in this department, which are as follows: Cash Section
Accounts Opening Section
Cheque Clearing Section
Remittance Section
4.2 Cash Section:

The most vital and important section of the branch is Cash Department. It deals with all kinds of
cash transactions. This department starts the day with cash in vault. Each day some cash that is
opening cash balance are transferred to the cash officers from the cash vault. Opening cash
balance is added by cash receipts and payments. The figure is called closing balance. This
balance is then added to the vault. This is the final cash balance figure for the bank at the end of
any particular day.
4.2.1 Books Maintained By This Section:

Vault Register
: It keeps account of cash balance in vault in
the bank.
Cash Receipt Register
: Cash receipt in whole of the day is recorded here.
Cash Payment Register
: Cash payments are made in a day are entered here.
Rough Vault Register
: Cash calculation for final entry in vault register is done here as any
error and correction here is not acceptable.
Cash Balance Book
: Balance here is compared with vault register. If no difference is

found, indicates no error.
Page 30
General Banking
4.2.2 Functions of Cash Department:

1. Cash payment is made only against Cheque
Cash Payment
2. This is the unique function of the banking system, which is known as

payment on demand
3. It makes payment only against its printed valid Cheque.
Cash Receipt
1. It receives deposits in form of cash

2. It collects money only its receipts forms.
4.2.3 Cheque Cancellation or Cash Payment Process:

Step 1
1. Receiving Cheque by the employee in the cash counter

2. Verification of the followings by the cash Officer in the computer section
Step 2
1. Date of the Cheque(present within 6 months from issue date)

2. Issued from this branch
3. Amounts in figure and sentence written does not differ
4. Signature of the drawer does not differ
5. Cheque is not torn or mutilated
Step 3
Gives pay cash seal and sends to the payment counter
Step 4
Payment officers make payment
4.3 Account Opening:

Account opening section is an important factor for banks because customer is the main source of
bank. Selection of customer is another important factor. Banks success and failure largely
depends on their customers. If customer is not good then may create fraud and other problems by
their account with bank and thus destroy goodwill of banks. Therefore, bank must be conscious
in selecting its customer. For this reason Al-Arafah Islami Bank Ltd. keep key information
system.
Page 31
General Banking
4.3.1 Accounts Opening Process:

Step 1
I. Receiving filled up application in banks prescribed form mentioning what type of
account is desired to be opened.
II. The form is filled up by the applicant himself/ herself
III. Two copies of passport size photographs from individual are taken, in case of firms
IV. photographs of all partners are taken
V. Officer are taken information from customer by key information system
Step 2
I. Applications must submit required documents
II. Applications must sign specimen signature sheet and give mandate
III. Introducers signature and accounts number-verified by legal officer
Step 3
I. Filling & signing up KYC or Know Your Customer Form
II. Filling & signing up Owner Information Form
Step 4
Authorized Officer accepts the application
Step 5
Minimum balance is deposited-only cash is accepted
Step 6
Account is opened and a cherub book and pay-in-slip book is given
Page 32
General Banking
4.3.2 Required Information to Open Account:

A.Individual
1. Name
2. Present and Permanent Address
3. Date of birth and age
4. Nationality
5. Tax information number (TIN- if available )
6. Passport or certificate provided by the employer
7. Photograph of the account holder
8. One photograph of the nominee duly attested by the account holder.
9. nominee declaration form
10. money laundering leaflet
B. Partnership Firm
1. Information Mentioned in -A
2. Copy of Partnership Dead
3. Mandate from the partners is essential indicating who will operate the account
C. Limited Company
1. Information Mentioned in -A
2. Certificate of Incorporation
3. Copy of Memorandum and Article of Association
4. Certificate of Commencement
5. Copy of Resolution of the Board of Directors
Dormant Account
If any account is inoperative for more than one year is called dormant account. To operate these
accounts manager permission is necessary.
Page 33
General Banking
Transfer of Account
When account is transferred, following steps are considered:
A) Application in written to the Manager of the account maintaining branch
B) Manager sends a request to the manager of the desired branch of depositors
C) Sends original Account opening application and specimen signature sheet with the
balance remained in the account at he sent Managers request
D) New account is opened at desired branch
4.4 Cheque Clearing:

Bank receives all kinds of Cheque in favor of the client for clearing. When Cheque is received it
is necessary to endorse it and cross it specially.
Types
Explanation
Clearing Process
Inward
Cheque received from thePartys A/C ----Dr.
Clearing
Clearing
Cheque
Arafah Islami Bank.

Cheques of other branch ofThese Cheques are directly sent to the respective Branch
OBC
House
(Outward Bills forAl-Arafah

Collection)
Islami
of
Al-Al-Arafah Islami Bank General A/C---Cr
Bankand request them to sent IBCA. When it comes, then
within its Clearing HouseCustomers Accounts is credited for the Cheque.
area.
Clearing Cheque Cheques
within
another
BankThese cheques are sent to clearing house via Dhanmondi
Al-Arafah
Islamibranch. When drawee bank honor the Cheques, then the
Bank Clearing House area. account of Cheque depositors are credited.

Outward Clearing
Cheques for
If any branch of Al-Arafah Islami Bank exists Within the
another bank
clearing house area of drawee Bank then Al-Arafah
outside the clearing area
Islami Bank send the Cheque to that Branch of Al-Arafah

Islami Bank and sends IBCA to it.
Inward Bills for CollectionFrom other branch of Al-These Cheques are settled by IBCA, i.e. debiting
(IBC)
Arafah Islami Bank
depositors account and crediting senders
branch account
From another bank outsideThese Cheques are settled debiting depositors account
the clearinghouse
and sending DD, MT, TT in favor of senders bank.
Page 34
General Banking
4.5 Local Remittance:

When money is sending from one place to another place for the customer is another important
service of banks. In addition, this service is an important part of countrys payment system. For
this service, people, especially businesspersons can transfer funds from one place to another
place very quickly. There are five kinds of techniques for remitting money from one place to
another place. These are:
1) Demand Draft
2) Telegraphic Transfer
3) Telephone Transfer
4) Pay Order
Telegraphic and Telephone Transfer (TT) are almost the same, both are them are known as TT in
short.
Pay Order
Pay order gives the payee the right to claim payment from the issuing bank. It is payment from
issuing branch only. Within the clearinghouse area of issuing branch. Payment is made through
clearing.
1) Examine genuinely the pay order
2) Enter into PO register and give contra entry
3) Debit if fund OK for payment.
4) Charges of pay order are shown in bellow by a chart:
5)
Amount of P.O.
1-100000
100001-500000
500001-1000000
1000001-Above
Commission
20
30
50
100
VAT
3
4
8
15
Total
23
34
58
115
General Banking
Demand Draft
Page 35
This is an instrument through which customers money is remitted to another person/

firm/organization in outstation (Outside the clearing house area) from a branch of one bank to an
outstation branch of the same bank or to a branch of another bank (with prior arrangement
between that bank with the issuing branch)
Demand Draft Payment is made through the following process:
1) Confirm that the DD is not forged one.
2) Confirm with sent advice.
3) Check the Test Code
4) Make payment
TT
This is a mode of transfer / remittance of customers money from a branch of one bank to
another branch of the sane bank or to a branch of another bank (with prior arrangement between
that bank with the TT issuing branch) through telephonic message. The issuing branch used to
send the message of such remittance /transfer to the drawer/payee branch through telephone
adding certain code number or test number on the basis of text key apparatus developed by the
concerned bank for its different branches.
Payment process of TT is:
1) Confirm issuing branch
2) Confirm payee A/C
3) Confirm amount
4)
Make payment
5) Receive advice
General Banking
4.6 Various Types Of Deposit Account:

Page 36
AIBL Bank offers following types of deposit account:

1. Mudaraba Savings Deposit Account (MSD)
2
Mudaraba Current Deposit Account (CD)
Mudaraba Term Deposit Receipt Account (MTDR)
Short Notice Deposit Account (SND)
5 Installment Term Deposit (ITD)

6
Mudaraba Hazz Account
Mudaraba Pension Scheme
Mudaraba Lakhpoti Scheme
Mudaraba milliner Scheme
10 Mudaraba Kotipoti Scheme

11 Mudarab Double Deposit Scheme
4.6.1 Brief Description Of Different Accounts:

1. Current Account:
Current account facilitates the account holder to draw money at any times but no profit is given
to the current account deposited money. Current accounts can be opened by any individual or
joint or any name of proprietorship business, private limited company or public limited company,
association, clubs, societies, trusts etc. Generally, current account is opened for businessman and
traders for easy transaction. By taking this liability, AL-ARAFHA-ISLAMI Bank takes service
charge 100/- for six months.
2. Mudaraba Term Deposit Receipt Account (MTDR):
It's a certain period deposited system, which is not repayable before the maturity date of a
fixed period. AL-ARAFHA-ISLAMI Bank offers higher rates of profit on such deposits. Usually
customers are allowed to open this account for a certain period and the rate of profit in
accordance with the terms of the deposit. The features of MTDR as follows:
Minimum balance: TK 10000.00
Profit
3 months
11.00%
6 months
11.50%
1 year
12.00%
General Banking
3. Savings Account:
Page 37
To maintain smooth and certain life in future Savings account is very suitable for middle
class groups. The attributes of Savings Account are:
500/- is the minimum amount of initial deposit.
Client cannot withdraw money more than twice a week,
The profit rate is 8% against MD account
For opening of this type of accounts following requirements are necessary:
a) The introducer must be attested photograph.
b) The introducer must be account holder of MD of AL-ARAFAH-ISLAMI Bank
Bangladesh Ltd.
4. Short Term Deposit (SND):
Short Term Deposit has following attributes:
6% profit rate against STD.
No restriction over withdrawal of money
1000/- is the minimum balance.
a) Installment Term Deposit (ITD)

It's a sure investment for a steady return. It can be opened for 5, 8, 10, or 12 years for
Tk.200, Tk.300, Tk.500, Tk.1000, Tk.1500 and Tk2000. The savings amount is to be deposited
any day of the month. If the depositor has a separate account in the bank for which a standing
instruction can be given to transfer the monthly deposit in the scheme's
account. Incase of failure to make the monthly installment in the schedule time 5% on overdue
installment amount will be charged. The lowest charge will be Tk. 10 and this will be added with
the following months installment. After 3 years of savings in this schemed the depositor is
eligible for a loan up to 80% of his deposited amount.
General Banking
b) Highlights of the Scheme
o Mudaraba Lakhpoti Scheme
Page 38
o Mudaraba milliner Scheme

o Mudaraba Kotipoti Scheme
Mudaraba Kotipoti Scheme: This are the most popular & target oriented schemes.
One can open for 3,4,5,6,7,10,12,15,18,20 years and have to pay (Monthly installment)
2,39,500/- 1,69,500/- 1,27,500/- 99,500/- 80,000/- 46,000/- 33,450/- 21,485/- 14,330/- 11,100/respectively and will get 1corror.
Mudaraba milliner Scheme: For Mudaraba milliner Scheme 3,4,5,6,7,10,12,15,20
years monthly installments are 23,950/- 16,950/- 12,750/- 9,950/- 8,000/- 4,600/- 3,345/- 2,170/1,150/- respectively and will get 10million.
Mudaraba Lakhpoti Scheme: For Mudaraba Lakhpoti Scheme 3,5,8,10,12 years
monthly installments are 2,375/- 1,275/- 670/- 460/- 335/-/- respectively and will get 1lak.
Conditions of the Scheme
1) By filling up a form an account is opened.
2) A non-transferable deposit receipt will provide to the customer after opening the
account.
3) If the deposit is withdrawn before a 5-year term, then saving interest rate will be
applicable and paid to the depositor. However, no in profit paid if the deposit is
withdrawn within 1 year of opening the account and Monthly Income paid to the
customer will be adjusted from the principal amount.
4) This scheme will be credited to the loan account until liquidation of the loan amount
inclusive of profit. A depositor can avail loan up to 80% of the deposit amount under this
scheme.
General Banking
c) Mudaraba Double Deposit:
Page 39
Savings works as the very foundation of development. Savings is the prime source of
business investment in a country. So it helps to build up capital. To create more awareness and
motivate people to save, ALARAFAH-ISLAMI Bank offers Mudaraba Double Deposit. Here people put their money for
double return after 6years.
Conditions Of The Scheme:
a) The deposit can be made in multiplies of TK. 10000.00.
b) This is 6 years period deposit. The deposit cannot be withdrawn at any time with
in the maturity date.
c) Al-Arafah monthly deposited Hazz account:
d)Pension scheme
4.7 Clearing Department:

Cheques clearing section of Al-Arafah Islami Bank Ltd. receives cheque, demand drafts and pay
orders of their clients. Upon the receipt of the instrument the cheque clearing section examines:
Whether the paying bank within Dhaka city.
Whether the paying bank outside Dhaka city.
Whether the paying bank of their own branch..
The Paying Bank within Dhaka City:
The cheques clearing section of Al-Arafah Islami Bank Ltd., Dhanmondi Branch sends Inter
Branch Debit Advice (IBDA) to the head office on the receiving day of the instruments. The
main branch takes those instruments to the clearinghouse on the following day. If the instruments
are dishonored, Head Office of Al-Arafah Islami Bank Ltd. sends IBDA to the Al-Arafah Islami
Bank Ltd., Dhanmond branch
The Paying Bank of Their Own Branch:
The cheque clearing section of Al-Arafah Islami Bank Ltd., Dhanmond branch sends outward
bills for collection (OBC) to the concerned paying branch to get Inter Branch Credit Advice
(IBCA) from the paying branch. If the paying branch dishonors the instrument, the paying
branch returns it to the Al-Arafah Islami Bank Ltd., Dhanmond branch describing why the
instrument is dishonored.
General Banking
Types of Cheque Collected By Clearing Department:
Page 40
1. Transfer Cheque
Transfer Cheques are those cheques, which are collected and paid by the same branch of AlArafah Islami Bank Ltd.
2. Local Bills Collection Cheques (LBC)
Local bills collection cheques are those cheques, which are collected and paid by two different
branches of a bank situated in the same city.
3. Outward Bills Collection Cheque (OBC):
OBC cheques are those cheques, which are collected and paid by two different branches of same
or different bank situated in the outstation.
4.8 Clearing House:

Clearing House is an arrangement under which member banks agree to meet, through their
representatives, at an appointed time and place to deliver instruments drawn on the other and in
exchange, to receive instruments drawn on them. The net amount payable or receivable as the
case may be, is settled through an account kept with the controlling bank.
4.8.1 Types of Clearing

1. Outward Clearing
Outward clearing means when a particular branch receives instruments drawn on the other bank
within the clearing zone and those instruments for collection through the clearing arrangement is
considered ad outward clearing for that particular branch.
2. Inward Clearing
When a particular branch receives instruments, which drawn on them and sent by other member
bank for collection are treated as inward clearing.
Chapter 5: Foreign
Exchange Division
Page 41
5.1
Introduction of Foreign Exchange
5.2
Import
5.3
Export
5.4
Foreign Remittance
Foreign Exchange
Division
Page 42
5.1 Introduction of Foreign Exchange:

Foreign exchange is the means and methods by which rights to wealth in a country's currency are
converted into rights to wealth in another country's currency. In banks when we talk of foreign
exchange, we refer to the general mechanism by which a bank converts currency of one country
into that of another. Foreign Exchange Department (FED) is the international department
Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks
are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market,
it can remit foreign exchange from local country to foreign countries. So AL-ARAFAH ISLAMI
Bank, Principal branch is an authorized dealer.
There are three kinds of foreign exchange transaction:A) Import.
B) Export.
C) Remittance.
5.2 Import:
To import, a person should be competent to be and importer. According to Import and Export
Control Act, 1950, the Office of Chief Controller of Import and Export provides the registration
(IRC) to the importer. In an international business environment, buyers and sellers are generally
unknown to each other. So seller of goods always seeks security for the payment of his exported
goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the
buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer
and exporter is given a legal shape by the banker by 'Letter of Credit'.
5.2.1 Letter of Credit:

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the
instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking
that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain
conditions mentioned in the letter gave been complied with.
Page 43
Foreign Exchange
Division
5.2.2 Parties to the L/C

Importer
Issuing Bank
Confirming Bank
Who applies for L/C

It is the bank which opens/issues a L/C on behalf of the
importer.
It is the bank, which adds its confirmation to the credit and it,
is done at the request of issuing bank. Confirming bank may
Advising or Notifying
or may not be advising bank

It is the bank through which the L/C is advised to the
Bank
exporters. This bank is actually situated in exporters country.

It may also assume the role of confirming and / or
Negotiating Bank
negotiating bank depending upon the condition of the credit.

It is the bank, which negotiates the bill and pays the amount
of the beneficiary- The advising bank and the negotiating
bank may or may not be the same. Sometimes it can also be
Accepting Bank
confirming bank.
It is the bank on which the bill will be drawn (as per
Reimbursing Bank
condition of the credit). Usually it is the issuing bank

It is the bank, which would reimburse the negotiating bank
after getting payment - instructions from issuing bank.
5.2.3 Steps for import L/C Operation - 8 steps operation:

Step 1 - Registration with CCI&E:
For engaging in international trade, even 7 trader must be first registered with the Chief
Controller of Import and Export.
By paying specified registration fees to the CCI&E- the trader will get IRC/ERC
(Import/Export Registration Certificate), to open L/C with bank, this IRC is must.
Page 44
Foreign Exchange
Division
Step 2 - Determination terms of credit:
The terms of the letter of credit are depending upon the contract between the importer and
exporter. The terms of the credit specify the amount of credit, name and address of the
beneficiary and opener, tenor of the bill of exchange-period and mode of shipment and of
destination, nature of credit, expiry date name and number of sets of shipping documents etc.
Step 3 - Proposal for Opening of L/C:
To have an import LC limit an importer submits an application to department to AL-ARAFAHISLAMI Bank.
The proposal contains the following particulars:
Full particulars of the bank account.
Nature of business.
Required amount of limit.
Payment terms and conditions.
Goods to be imported.
Offered security.
Repayment schedule.
Step 4 - Application by importer to the banker to open letter of credit:

For opening L/C, the importer is required to fill up a prescribed application form provided by
the banker along with the following documents:
1. L/C Application form
2. Filled up LCA form
3. Demand Promissory Note
4. pro-forma invoice
7. Authority to debit account

8. Filled up amendment request Form
9. IMP form
10. Insurance cover note and money
5. Tax Identification number

6. Import registration certificate
receipt
11. Membership certificate
12. Rate fluctuation undertaking
Page 45
Foreign Exchange
Division
Step 5 - Opening of L/C by the bank for the opener:
Taking filled up application form from the importer.

Collects credit report of exporter from exporter's country through his foreign
correspondence there.
Opening bank then issues credit by air mail/TELEX/SWIFT followed by L/C advice as
asked by the opener through his foreign correspondent or branch as the case may be, at
the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own
form where it is addressed to him or merely hand over the original L/C to the beneficiary
if it is so addressed.
Step 6 - Shipment of goods and lodgment of documents by exporter:

Then exporter ships the goods to the destination of the importer country.
Sends the documents to the L/C opening bank through his negotiating bank. Generally the
following documents are sent to the Opening Banker with L/C:
1. Bill of Exchange
6. Packing List
2. Bill of Lading
7. Advice Details of Shipment
3. Commercial Invoice
8. Pre-shipment Inspection Certificate
4. Certificate of Origin
9. Vessel Particular
5. A certificate stating that each packet 10.Shipment Certificate

contains the description of goods over
the packet.
Step 7 - Lodgment of Documents by the opening Bank from the negotiating bank:
After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy
found, it informs the importer. If importer accepts the fault, then opening bankers call importer
retiring the document. At this time many thing can happen. These are indicated in the following:
Discrepancy found but the importer accepts - no problem occurs in lodgment.
Page 46
Foreign Exchange
Division
Discrepancy found and importer not agreed to accept - In this case, importer protest and send
back all the documents to the exporter and request his to make in the specified manner. Here
banker is not bound to pay because the documents send by exporter is not in accordance with the
terms of L/C.
Documents are OK but importer is willing to retire the documents - In this case bank is
obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this
payment by bank is one kind of credit to the importer and this credit in banking is known as
PAD.
Everything is O.K. but importer fails to clear goods from the port and request bank to
clear - In this case banks clear the goods and takes delivery of the same by paying customs duty
and sales tax etc. So, this expenditure is debited to the importer's account and in banking it is
called LIM.
Step 8 Retirement:
The importer receives the intimation and gives necessary instruction to the bank for retirement of
the import bills or for the disposal of the shipping document to clear the imported goods from the
customs authority. The importer may instruct the bank to retire the documents by debiting his
account with the bank or may ask for LTR (Loan against Trust Receipt).
Accounting Procedure in case of L/C Opening:
Particulars
Customer's A/C
L/C Margin A/C
Commission A/C on L/C
VAT
SWIFT Charge
Data max
Stamp
Postage
HL/Courier
Debit/ Credit
Debit
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Credit
Charges in Taka
12%
10%
50%
15% on commission
3000/=
1000/=
150/=
300/=
1500/=
Page 47
Foreign Exchange
Division
Amendment of L/C:
After opening of L/C some time's alteration to the original terms and conditions become
necessary. These amendments involve changes in
a Unit price.
b. Extension of validity o the L/C.
c. Documentary requirements etc.
Such amendments can be affected only if all the concerned parties agree i.e. the beneficiary, the
importer, the issuing bank and the advising bank.
For any amendment the importer must request the issuing bank in writing duly supported by
revised indent/preformed invoice. The issuing bank then advises the required amendment to the
advising bank. L/C amendment commission including postage is charged to the clients A/C.
Loan against Trust Receipts (LTR):
Advance against a Trust Receipt obtained from the Customers are allowed to only first class
tested parties when the documents covering an import shipment or other goods pledged to the
Bank as security are given without payment. However, for such advances prior
permission/sanction from Head Office must be obtained.
The customer holds the goods or their sale-proceeds in trust for the Bank, till such time, the loan
allowed against the Trust Receipts is fully paid off.
The Trust Receipt is a document that creates the Banker's Hen on the goods and practically
amounts to hypothecation of the proceeds of sale in discharge of the lien.
Loan against Imported Merchandise (LIM):
Advance (Loan) against the security of merchandise imported through the Bank may be allowed
either on pledge or hypothecation, of goods, retaining margin prescribed or their Landed Cost,
depending on their categories and Credit Restriction imposed by the Bangladesh Bank. Bank
Page 48
shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods
cleared through LIM Account.
Foreign Exchange
Division
5.2.4 Payment Procedure of Import Documents:

This is the most sensitive task of the Import Department The officials have to be very much
careful while making payment. This task constitutes the following:
Date of Payment:
Usually payment is made within seven days after the documents have been received. If the
payment is become deferred, the negotiating bank may claim interest for making delay.
Preparing Sale Memo:
A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the
difference between these two rates is exchange trading. Finally, an Inter Branch Exchange
Trading Credit Advice is sent to ID.
Requisition for the Foreign Currency:
For arranging necessary fund for payment a requisition is sent to the International Department
Transmission of Message:
Message is transmitted to the correspondent bank ensuring that payment is being made.
5.3 Export:
The goods and services sold by Bangladesh to foreign households, businessmen and Government
are called export. The export trade of the country is regulated by the Imports and Exports
(control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and
after shipment of goods. The exports from Bangladesh are subject to export trade control
exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CC &
E).
Page 49
Foreign Exchange
Division
No exporter is allowed to export any commodity permissible for export from Bangladesh.
Unless he is registered with CC& E and holds valid Export Registration Certificate (ERC). The
ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms
and other documents connected with exports. The formalities and procedure are enumerated as
follows:
5.3.1 Procedure of Export:

1. Obtaining exports LC: To get export LC form exporter issued by the importer.
2. Submission of export documents: Exporter has to submit all necessary documents to the
collecting bank after shipping of goods
3. Checking of export documents: After getting the documents banker used to check the
documents as per LC terms
4. Negotiation of export documents: If the bank accepts the document and pays the value draft
to the exporter and forward the document to issuing bank that is called a negotiating bank. If the
bank does buy the LC then the bank normally acts as collecting bank
5. Realization of proceeds: This is the period when the issuing bank has realized the payment.
6. Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank has to
report to respective department of Bangladesh bank by mentioning latest payment.
7. Issue to proceeds realization certificate (PRC): Bank has to issue precede realization
certificate of export LC to the supplier / exporter for getting cash assistance
5.3.2 Export operation:

Bangladesh exports a large quantity of goods and services to foreign households. Readymade
textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the
main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the
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largest sector that exports the lion share of the country's export; Bangladesh exports most of its
readymade garments products to U.S.A and European Community (EC) countries, Bangladesh
exports about 40% of its readymade garments products to U.S.A. Most of the exporters who
export through AL-ARAFAH-ISLAMI BANK are readymade garment exporters.
Foreign Exchange
Division
They open export L/Cs here to export their goods, which they open against the import L/Cs
opened by their foreign importers.
Export L/C operation is just reverse of the import L/C operation For exporting goods by the local
exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter.
As An Advising Bank:
It receives documents from the foreign importer and hands it over to the exporter. Sometimes it
adds confirmation on the L/C on request from the Opening Bank. By adding confirmation, it
assumes the responsibility to make payment to the exporter.
As Negotiating Bank:
It negotiates the bills and other shipping documents in favor of the exporter. That is ? it collects
the proceeds of the export-bill from the drawer and credits the exporter's account for the same.
Collection proceed from the export bill is deposited in the bank's NOSTRO account in the
importer's country. Sometimes the bank purchases the bills at discount and waits till maturity of
the bill. When the bill matures, bank presents it to the drawer to in cash it.
In our country, Export and Import operation of bank is very much related with one another
because of use of Back to Back and maturity of payment for Back-to-Back L/C is set in such that
it can be paid out of export proceeds.
5.3.3 Back-To-Back L/C:

It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two
separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of
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Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as
Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.
Foreign Exchange
Division
5.3.3.1 Features Of Back To Back L/C:

An Import L/C to procure goods /raw materials for further processing.
It is opened based on Export L/C,
It is a kind of Export Finance.
Export L/C is at Sight but back to Back L/C is at Sance.
No margin is required to open Back to back L/C
Application is registered with CCI&E
Applicant has bonded warehouse license.
L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.
Sance period will be up to 180 days.
The import L/C is opened for 75% of the value of Export L/C.
Here L/C issued against the lien of export L/C.
Arrangements are such that export L/C matures first then out of this export profit, import L/C
is paid out.
5.3.3.2 Documents Required for Opening a Back-to-back L/C

In AL-ARAFAH-ISLAMI Bank Principal Branch, following papers/ documents are required for
opening a back-to-back L/C1. Master L/C.
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC).
3. L/C Application and LCAF duly filled in and signed.
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4. Performa Invoice or Indent.

5. Insurance Cover Note with money receipt.
6. IMP Form duly signed.
Foreign Exchange
Division
In addition to the above documents, the followings are also required to export oriented garment
industries while requesting for opening a back-to-back L/C 1. Textile Permission.
2. Valid Bonded Warehouse License.
3.
Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the
applicant for quota items.
5.3.4 Check list of export L/C :

Following defective points are usually found in the Master L/C. So, these points are so much
carefully checked by the bank officials. These are:
1. Name of the Advising Bank.
2. Name of Transferring Bank
3. Form of Doc. credit:
Name of Issuing Bank
Documentary Credit No. And issuing date
Date of shipment
Expiry date and place
4. Applicant/ for order of/ On Account.
5. Beneficiary/ Favoring
6. Amount
7. Availability of Credit
8. Partial shipment/ Transshipment
9. Payment condition /Draft Sight
10. Category.
11. Description of goods:
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Item
Total Qty & Unit Price
12. B/L Clause
13. Reimbursement clause.
14. UCPDC Clause
15. Net FOB value.
Foreign Exchange
Division
5.3.5 Payment of back to back L/C:

In case back to back as 60-90-120-180 days of maturity period, deferred payment is made.
Payment is given after realizing export proceeds from the L/C issuing bank.
L/C under EOF:
Exporter development Fund is created by Bangladesh Bank to give encourages to the exporter
in Bangladesh.
Generally Back-to-Back L/C is Usance L/C that is here bill of exchange is payable after some
maturity date say 90 or 120 days after the date of acceptance/negotiation. But some foreign seller
may require sight payment. Here import L/C matures first. In that case Bangladesh Bank gives
the fund to the bank to pay the price of imported goods in favor of the local purchaser of raw
materials. When export proceeds come, first Bangladesh Bank loan to the importer is adjusted
and remaining part goes to the importer of raw materials
5.3.6 Negotiation of Export Documents:

The most common method of financing exporters is negotiation of documents under L/C. It is a
post-shipment credit. Here the bank acts as a negotiating bank. After the shipment of the goods,
the exporter submits the relative documents to the branch for negotiation. The documents are to
submit within the period mentioned in the L/C. after approval of negotiation of the bill the full
particulars of the documents are branch with a forwarding letter. The branch claim
reimbursement from the issuing bank or from the reimbursing bank, giving clear instructions to
credit the proceeds of the bill to the AL-ARAFAH-ISLAMI Bank head office NOSTRO A/C
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maintained with the named correspondent bank abroad under telex intimation to the Principal
branch and Head Office (International Division).
Negotiation stands for payment of value to the exporter against "the documents stipulated in the
LAC. If documents are in order, AL-ARFAH-ISLAMI Bank purchases (negotiates) the same on
the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase
Foreign Exchange
Division
(FDBP).If the bank is not satisfied with the documents submitted to AL-ARAFAH-ISLAMI
Bank gives the exporter reasonable time to remove the discrepancies or sends the documents to
L/C opening bank for collection , this is known as Foreign Documentary Bill for Collection
(FDBC) entered into the Foreign, bill Purchased (F.B.P) register. The documents are sent to the
L/C opening
5.3.7 Presentation of export documents for negotiation/Purchase:

After shipment exporter submits the following documents to AL-ARAFAH-ISLAMI Bank for
negotiation.
Bill of exchange
Bill of Lading
Invoice
Insurance Policy/Certificate
Certificate of Origin
Inspection Certificate
Consular Invoice
Packing List
Quality Control Certificate
G.S.P. certificate.
5.3.8 Foreign documentary bills for collection (FPBC):

Settlement of Local Bills:
1. The settlement of local bills is done in the following ways. -
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2. The customer submits the L/C to AL-ARAFAH-ISLAMI Bank along with the documents to
negotiate
3. AL-ARAFH-ISLAMI Bank official scrutinizes the documents to ensure the conformity \\ith
the terms and conditions.
4. The documents are then forwarded to the L/C opening bank.
5. The L/C issuing bank gives the acceptance and forwards an acceptance letter.
6.
Payment is given to the customer on either by collection basis or by purchasing the
document.
Foreign Exchange
Division
5.3.9 Mode of payment of export bill under L/C:

As per UCPDC 500, 1993 revision there are four types of credit. These are as follows;
Sight Payment Credit: In a Sight Payment Credit the bank pays the stipulated sum
immediately against the exporter's presentation of the documents.
A Deferred payment Credit: In deferred payment, the bank agrees to pay on a specified future
date or event, after presentation of the export documents. No bill of exchange is involved.
Payment is given to the party at the rate of D. A 60-90-120-180 as the case may be. But the Head
office is paid at T.T clean rate. The difference between the two rates us the exchange trading for
the branch.
Acceptance credit: In acceptance credit, the exporter presents a bill of exchange payable to him
and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to
accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can
then represent it for payment on maturity. Alternatively he can discount it in order to obtain
immediate payment
Negotiation Credit: In Negotiation credit, the exporter has to present a bill of exchange payable
to him in addition to other documents that the bank negotiates.
5.4 Foreign Remittance:
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This bank is authorized dealer to deal in foreign exchange business. As an authorized dealer, a
bank must provide some services to the clients regarding foreign exchange and this department
provides these services.
The basic function of this department are outward and inward remittance of foreign exchange
from one country to another country. In the process of providing this remittance service, it sells
and buys foreign currency. The conversion of one currency into another takes place an agreed
rate of exchange, which the banker quotes, one for buying and another for selling. In such
transactions the foreign currencies are like am other commodities offered for sales and purchase,
the cost (convention value) being paid by the buyer in home currency, the legal tender.
Foreign Exchange
Division
5.4.1 Remittance procedures of foreign currency:

There are two types of remittance:
1. Inward remittance
2. Outward remittance.
1. Inward Foreign Remittance: Inward remittance covers purchase of foreign currency in the
form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in
Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of
Bangladesh bank on Form-C.
2. Outward Foreign Remittance: Outward remittance covers sales of foreign currency through
issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C
and against import bills retired.
5.4.2 Workings of this department:

1. Issuance of TC, Cash Dollar /Pound
2. Issuance of FDD, FTT & purchasing, Payment of the same.
3. Passport endorsement.
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4. Encashment certificate5. F/C Account opening &filing.

6. Opening of Export FC retention Quota A/C& maintain.
7. Maintenance of ledger of Cash Dollar, FC Deposit A/C & TC.
8. Maintain FBC register &follow up FBC.
9. Opening of Student file &Maintain.
10. Preparation of all related statement, Voucher & posting.
11. Preparation of Weekly, Monthly. Yearly Statement for Bangladesh Bank return
timely.
12. Attending all related correspondence to other Bank or Institutions.
Chapter 6: Investment
Division
6.1 Introduction of Investment Division

6.2 Investment Policy
6.3 Investment Facility Parameters
6.4 Investment Principles
6.5 Process of Loan
6.6 Lending Authority
6.7 CIB
6.8 Loan Classification
6.9 Documentation
6.10Credit Disbursement
6.11Administration
6.12Modes
6.13Miscellaneous Services by this Department
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Investment Division
6.1 Introduction of Investment Division:

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

The investment policy should be updated annually to reflect changes in the economic outwork
and evolution of banks investment portfolio. The investment proposal should be forwarded to
head office for sanction with recommendation showing justification that should include the
following:
a) Industry and business segment focus:
The bank shall provide suitable investment services & products for the following sectors, which
must meet the other requisites as set by the bank from time to time.
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Investment Division
Sectors:a) Steel & engineering.
b) Food & Allied.
c) Agriculture.
d) Textile & garments.
e) Pharmaceuticals & Chemicals.
f) Paper & paper products.
g) Service industries.
h) Housing & real Estate.
i) Cement.
j) Bricks Fields.
k) Edible oil.
l) Assembling industry.
m) Cottage industry.
n) Electronics & Electrical Commodities.
o) Construction Company.
p) Trading (retail/whole sale)
q) Others.
Every year at the time of investment budgeting a clear indication of banks appetite for growth to
be reflected approved investment budget shall be strictly followed for the development of the
bank.
b) Investment categories:
As initiated by Bangladesh bank vide BCD circular no. 33 dated 16-11-89 different kinds of
lending were subdivided into 11 categories w. e. f 01-01-90, which was subsequently reduced to
9 vide BCD circular no. 23 dated 09-10-93 and again to 7 prime sectors vide BCD circular no. 8
dated 25-04-94 for fixation of rates of profit by the individual banks on competitive basis
depending on the cost of funds, prevailing market condition and monetary policy of the country.
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Investment Division
Investment has primarily been divided into two major groups:

i) lzara bill baia: these are the investments made by the bank with fixed repayment schedules.
the term of investment are defined as follows:
Short term
up to 12 months
Medium term
more than 12 and up to 36 months.
Long term
more than 36 month.
ii) Continuing investments: these are the investments having no fixed repayment schedule, but
have an expiry date at which it is renewable on satisfactory performance.
Further all categories of investments have been accommodated under the 7 prime categories as
under:
1. Agriculture:
Investment facilities to the agriculture sector falls under this category. it is subdivided into tow
major heads:
a) Investment to primary producers: financing under this categories refers to the investment
facilities allowed to production units engaged in farming, fishing, forestry or livestock.
Investments to processors or traders of agricultural products are not to be categories as
agricultural investments.
investments to tea gardens for production are treated as agricultural investment, but investments
to tea gardens for export should be treated under the category investment on export. Similarly
medium and ling term investments to tea gardens are categorized as industrial term lending.
b) Investment to dealers/distributors: it refers to the financing allowed to input dealers and
(or) distributors in the agricultural sectors.
Agriculture investment may include short, medium and long investments as well as continuing
investment. as such it may fall under the head lzara bill baia /lzara bill baia (HP)/lzara (LF)
ii) lzara bill baia for large & medium scale industry: This category of investments
accommodate the medium and long term financing for capital structure formation of new
Page 61
industries or for BMRE Of The existing Units who are engaged in manufacturing goods and
services.
iii) lzara bill baia to small & cottage industry: These are the medium and long term
investments allowed to small & cottage manufacturing industries (small industry is presently
defined as those establishments whose total investment in fixed capital such as land, building
machinery and equipment (excluding taxes and duties) does not exceed 30 million taka and
investment in cottage industries also fall within this definition).
No short term or continuing investments are to be included in this category. Like the large &
medium scale industry it is also allowed in the form of lzara bill baia/ lzara bill baia (HP)/lzara
(LF).
iv)Working Capital: Investment allowed to the manufacturing units to meet their working
capital requirements, irrespective of their size-big, medium or small, fall under the category.
These are usually continuing investments and as such fall under the head Bai-Muazzal.
V) Investment on export: Investment facilities allowed to facilitate export of all items against
letter of credit and/or confirmed export orders fall under this category. it is accommodated under
the heads Musharaka pre- shipment (ECC), Musharaka pre- shipment(PC), foreign documentary
bills purchased (FDBP), Local Documentary Bills Purchase (LDBP) etc.
vi)Commercial lending: Short-term investments and continuing investments allowed for

commercial purposes other than exports fall under this category. It includes import financing,
financing for internal trade, service establishment etc. no medium and ling term investments are
accommodated here. these category of investments are allowed in the from of (i) Murabaha post
import (MPI) (ii) investment against trust receipt (TR) (iii) Murahaha import bills (MIB), (iv)
Bia-Muazzal, (v) lzara bill baia, etc. for commercial purposes.
vii) Others: any investment that does not fall in any of the above categories is considered under
the category Others. It includes investment to (i) transport equipments; (ii) Construction works
including housing (commercial/residential), (iii) work order finance, (iv) personal investment,
etc.
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Investment Division
C) Types of investment facilities:

Depending on the various nature of financing all the lending activities have been brought under
the following major heads.
I. lzara bill baia (general):
Short term, medium term & long term investments followed to individual/firm/industries for a
specific purpose but for a definite period and generally repayable by installments fall under this
head. This type of lending is mainly allowed to accommodate financing under the categories (i)
large & medium scale industry and (ii) others are also included here.
II. Izara Bill Baia (HB):

Investments allowed to individual/enterprises for construction of house (commercial) fail under
this type of investment. The amount is repayable by monthly installment with a specified period.
Such investments are known as Izara Bill Baia (HB): No investment for construction of
residential house building shall be accommodated to the Bank's customer where there is no other
business consideration.
III. Izara Bill Baia (Staff HB):
Investment allowed to our Bank employees for purchase/construction of house shall be know as
Investment (STAFF HB).
IV. Other Investment to Staff:
Investment allowed to employees other than for House Building shall be grouped under head of
Staff Izara Bill Baia (General).
V. Bai-Muazzal:
Investment allowed to individual/firm for trading as well as wholesale purpose or to industries to
meet up the working capital requirements against hypothecation of goods as primary security fall
under this type of lending, it is a continuous investment. It is allowed under the categories (i)
"Commercial Lending" when the customer is other than a industry and (ii) "Working Capital"
when the customer is an industry.
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Investment Division
VI. Murdaraba:
Financial accommodations to individual/firm for trading as well as for wholesale or to industries
as working capital against pledge of goods as primary security fall under this head of investment.
!t is also a continuous investment and like the above allowed under the categories (i)
"Commercial Lending" and (ii) Working Capital". '
VII. Izara Bill Baia (HP) :

Izara Bill Baia (HP) is a type of installment investment under which the Purchaser agrees to take
the goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as
profit for adjustment of the investment within a specified period.
VIII. Izara (LF) :
Izara (LF) is one of the most convenient sources of acquiring capital machinery and equipment
whereby a client is given the opportunity to have an exclusive right to use an asset usually for an
agreed period of time against payment of rent. It is a term financing repayable by installment.
IX. House Hold Durable Scheme (HDS) :
It is a special investment scheme of the Bank to finance purchase of consumer durable to the
fixed income group to raise their standard of living. The investments are allowed on soft terms
against personal guarantee and deposit of specified percentage of equity by the customers. The
investment is repayable by month installment within a fixed period.
X. Bai-Muazzal (General/FO) :
Investment allowed to individual/firms against financial obligation (i.e. lien on MTDR/
PSP/BSP/insurance Policy/Share etc.) This may not be a continuous Investment.
XI. Bai-Muazzal (WO):
Investment allowed against assignment of work order for execution of contractual work fails
under this head. This investment is generally allowed for a definite period and specific purpose
i.e. it is not a continuous investment.
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Investment Division
XlI. Bai-Muazzal (Export) :

Investment allowed for purchasing foreign currency for payment against L/Cs (Back to Back)
where the exports do not materialize before the date of import payment. This is also an
investment for temporary period, which is known as export finance and fafls under the category
"Commercial Lending".
XIII. Murabaha Import Bills (MIB) :
Payment made by the bank against lodgment of shipping documents of goods imported through
L/C falls under this head. It is an interim investment connected with import and is generally
liquidated against payment usually made by the party for retirement of the documents for release
of imported goods from the customs authority it fails under the category "Commercial Lending".
XIV. Murabaha Post Import (MPI):
Investment allowed for retirement of shipping documents and release of gods imported through
L/C taking effective control over the goods by pledge in Go down under Bank's lock & key fall
under this type of investment. This is also a temporary investment connected with import that is
known as post-import finance and falls under the category "Commercial Lending".
XV. Trust Receipt (TR):
Investment allowed for retirement of shipping documents and release of goods imported through
L/C fall under this heard. The goods are handed over to the importer under trust with the
arrangement that sale proceeds should be deposited to liquidate the investments within a given
period. This is also a temporary investment connected with import and knows as post-import
finance and falls under the category "Commercial Lending".
XVI. IBP:
Payment made through purchase of inland bills/cheques to meet urgent requirement of the
customer falls under this type of investment facility. This temporary investment is adjustable
from the proceeds of bills/cheques purchased for collection. If falls under he category
"Commercial Lending".
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Investment Division
XVII. Musharaka Pre-shipment (EGG):

Financial accommodation allowed to a customer for exports of goods fall under this head and is
categorized as "Investment on Export". The investments must be liquidated out of export
proceeds with 180 days.
XVIII. Musharaka Pre-shipment (P.C:
Investment allowed to a customer against specific L/C/firm contract for processing/ packing of
goods to be exported falls under this head and is categorized as "Musharaka Pre-shipment". The
investments must be adjusted from proceeds of the relevant exports within 180 days. It falls
under the category "Investment on Export.
XIX. F D B P:
Payment made to a customer through purchase/negotiation of a foreign documentary bills falls
under this head. This temporary investment is adjustable from the proceeds of the
shipping/export documents. It falls under the category "Investment on Export".
XX. L D B P:
Payment made against documents representing sell of goods to Local export oriented industries
that are deemed as exports and which are denominated in Local Currency/Foreign Currency falls
under this head. This temporarily ability is adjustable from proceeds of the Bill.
XXI. FBP:
Payment made to a customer through Purchase of Foreign Currency Cheques/Drafts fall under
this head. This temporary investment is adjustable from the proceeds of the cheque/draft.
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Investment Division
d) SINGLE BORROWER/GROUP LIMITS/SYNDICATION:

Bank may allow investment facilities to a single customer/Group (Funded & non funded) up to
its 50% of total capital out of which funded facilities must not exceed 25% of total capital. All
proposal submitted to Head Office will also be required to indicate the extent of the Bank's
global exposure to that customer group.
Group exposure shall be deemed to include the total investment facilities as detailed below :
Investment facility in the name of the borrower.
Investment facility in the name of the firms & companies in which the borrower or its
partner or its director is the proprietor or a partner or a Director.
Investment facility in the name of any firm of company in which the borrower or its
partner or its director owns 20% or more share even if not a Director.
Any Investment facility guaranteed by the borrower or its partner, or its Director.
However, definition of group exposure if given by Bangladesh Bank shall be followed regardless
of the above definition.
e) Lending Caps:
The Bank shall establish a specific Industry sector exposure cap by preparing a sector wise
investment budget In order to avoid over concentration in any one-industry sector. The
Investment budget shall release (after approval from the Board) in the month January of every
year. Investment budget shall be proposed /released considering the following points.
I. Total Facilities:
The aggregated of all cash facilities shall not exceed 80% of customer's deposits, it is further
governed by the statutory and liquidity reserve requirement of Bangladesh Bank.
II. Term Facility:

Aggregate Long Term facilities shall' not exceeds 20% of the total investment portfolio.
Facilities shall not be allowed for a period exceeding 5 (Five) year. Any exceptions will require
the approval of the Board of Director.
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Investment Division
III. Unsecured Facilities:
Aggregate Bank investments to corporate or individual customers which are not secured by
collateral and are allowed on the strength of customer's personal integrity and financial standing
or the corporate customer's balance sheet, with or without hypothecation of stock shall not
exceeds 30% of the total investment portfolio.
IV. Sector-wise Allocation:
Sector-wise allocation of investment/investment budget shall be made in the month of January of
each year with the approval of Executive Committee/Board of Directors. This will be reviewed
from time to time.
V. Security:
Security accepted against investment facilities shall be properly valued and shall be effected in
accordance with the laws of the country in which the security is held. An appropriate margin of
security will be taken to reflect such factors as the disposal costs or potential price movement of
the underlying assets.
F) Discouraged Business Type:

The Banks should outline industries or leading activities that are discouraged. As a minimum, the
following should be discouraged.
a. Military Equipment/Weapons Finance.

b. Highly Leveraged Transactions.
c. Finance of Speculative Investments.
d. Logging, Mineral Extraction/Mining, or other activity that is Ethically of
Environmentally Sensitive.
e. Lending to companies listed on CIB black list or known defaulters.

f. Counter parties in countries subject to UN sanctions.
g. Share Lending.
h. Taking an Equity Stake in Borrowers.
i. Lending to Holding Companies.
j. Bridge Investments relying on equity/debt issuance as a source of repayment.
k. Tannery Finance.
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l. Izara Bill Baia (HB-residential) who has no other business with the Bankg)
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Investment Division
6.3 Investment Facility Parameters:
a) Tenure:
Bank shall not ordinarily go for any investment facilities for long term basis. Short-term
investment facilities shall be for 3 month to 12 months. Medium term investment shall be 12
months to 36 months. Long terms investment shall be more than 36 months.
b) Size:
i) Maximum 50% (Funded & non-funded) of total capital of the Bank
ii) Maximum 25% (funded) facility of total capital of the bank.
c) Security:
All assets (Bai-Muazzal & Murabaha) must be covered under proper insurance risk with enlisted
insurance Companies. Insurance coverage obtained outside enlisted companies are discouraged.
For valuation of securities following guidelines to be followed:
d) Valuation of Primary Security:
MPI: MPI facility shall be allowed as post-import finance against imported goods under our
L/Cs. MPI facility should not exceed invoice value net of L/C margin unless the4 Bank agrees to
finance duties/VAT. However, where market price of the goods is lower than landed cost
necessary arrangement should be made with the customer to obtained additional deposit. Head
Office should approve the price at which MPI goods to be released to customer or it may be at
market price or landed cost whichever is higher,
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Investment Division
Murabaha: Valuation of the goods to be pledged to the Bank against Murabaha limit
shall in no cases exceed:

I.
The landed cost or market prices whichever is lower in case of imported goods.
II.
The ex-mill/factory price of market price whichever is lower in case of

domestically manufactured commodities as evidenced by invoice
III. The wholesale price/competitive market price duly verified by the Branch and approved
by Head Office.
e) Valuation of Collateral Security :
Branches should meticulously follow following instructions:
The property should be physically inspected and verified jointly by 2 (two) Bank's
Officers, one of who should be the Branch Manager of the 2 nd Officer. A valuation
certificate mentioning market value and forced sale value should be prepared in the
designated from supplied to the Branches and to be jointly signed by the above
mentioned 2 (two) inspecting officers of the Bank. The forced sale value of the collateral
security will have to be 1.5 times higher than the facility/facilities allowed unless
specifically waived by the approving authority giving full justification.
A Site Plan" and "Map" along with 3R size distinct photographs of the mortgaged
property covering full exposure from 3 angles mentioning detailed particulars on the back
to the photographs duly authenticated by the authorized officer(s) to be obtained by the
Branches.
Its should be ensured that the collateral security is in the physical possession of the
mortgagors(s) and the mortgagor(s)/owner(s) has/have valid title over it.
A letter of satisfaction from the Bank's Lawyer to be obtained that the mortgage formality
has been properly created.
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Investment Division
f) Cross Borders Risk:
Limit to be established by the Board of individual Country as well as or aggregate Bank Credit
exposures to different countries. These limits are to be reviewed from time to time with due
regard to the political and economic environment in each country. The country exposure limits
may be utilized up to maximum amounts for different maturities as follows:For maturities up to one year: 100% of the limit.
For maturities up to two years:
maximum 50% of the limit.
For maturities up to three years:
maximum 25% of the limit.
For maturities beyond three years: maximum 10% of the limit.

For exceptions, approval is required from the Board of Director.
6.4 Investment Principles:

The Principle of lending is a collection of certain accepted time tested standards, which ensure
the proper use of loan fund in a profitable way and its timely recovery. Different authors describe
different principles for sound lending.
1. Safety
2. Security
3. Liquidity
4. Adequate yield
5. Diversity
1. Safety:
Safely should get the prior importance in the time of sanctioning the loan. At the time of maturity
the borrower may not will or may unable to pay the loan amount. Therefore, in the time of
sanctioning the loan adequate securities should be taken from the borrowers to recover the loan.
Banker should not sacrifice safety for profitability.
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Investment Division
AL-ARAFH-ISLAMI Bank Ltd. exercises the lending function only when it is safe and that the
risk factor is adequately mitigated and covered. Safety depends upon:
The security offered by the borrower: and
The repaying capacity and willingness of the debtor to repay the loan with interest.
2. Liquidity:
Banker should consider the liquidity of the loan in time of sanctioning it. Liquidity' is necessary
to meet the consumer need.
3. Security:
Banker should be careful in the selection of security to maintain the safety of the loan. Banker
should properly evaluate the proper value of the security. If the estimated value is less than or
equal to loan amount, the loan should be given against such securities. The more the cash near
item the good the security. In the time of valuing the security, the Banker should be more
conservative.
4. Adequate Yield:
As a commercial origination, Banker should consider the profitability. So banker should consider
the interest rate when go for lending. Always Banker should fix such an interest rate for its
lending which should be higher than its savings deposits interest rate. To ensure this profitability
Banker should consider the prospect of the project.
5. Diversity:
Banker should minimize the portfolio risk by putting its fund in the different fields. If Bank put
its entire loan able fund in one sector it \\ill increase the risk. Banker should distribute its loan
able fund in different sectors. So if it faces any problem in any sector it can be covered by the
profit of another sector
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Investment Division
6.5 Process of Loan:

Process of Loan
Table- 17
Heads
Application
Characteristics
Applicant applies for the loan in the prescribed form of the bank describing
Sanction
the types and purpose of loan.

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

Documentation Then bank prepare a loan proposal which contains terms and conditions of
loan for approval of Ra or Manager
Disbursement
Takes the necessary papers and signatures from borrower

A loan Account is opened. Where customer A/C------------------Dr.
Respective Loan A/C --------------------------------------- Cr.
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Investment Division
6.6 Lending Authority:

As sure proper and orderly conduct of the business of the Bank, the Board of Directors' will
empower the Managing Director and other Executives of the Bank to lend up certain amount
under certain terms and conditions at their discretion. The lending officer is broadly categorized
as follows:
Managing Director
Deputy Managing Director
Executive vice President Asst.
Senior vice President
Vice President
Senior Asst. vice President
Asst.Vice President.
The amount and scope of each Officer lending authority is a function of the amount and extent of
authority required by the officer to carry out his/her responsibilities to the Bank and its clients
may prudent, effective manner. It must be emphasized mat an Officer will not be delegated
lending authority only on the basis of his position. In other words, an officer does not
automatically get lending authority by virtue of his corporate and/ or functional title. Specified
lending authority will be delegated by the Managing Director to various Executives after taking
into consideration his proven credit judgment, knowledge and experience. The amount of lending
authority approved by the Board for various Executives form the upper limits of the authority
that may be delegated to an officer holding corporate title. Each individual lending authority will
be delegated to him in writing. The managing Director with the Executive Committee/ Board
will review all lending authorities periodically.
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Investment Division
6.7CIB:
Bangladesh Bank has established within itself a Credit Information Bureau (CIB), which collects
credit information from the banks. Banks are required to furnish such information in respect of
credit limit of Tk.50000 and over. They mention the Name of facility, security and charge along
with outstanding balance. After consolidating such information in respect of each customer the
central bank supplies to the total limits sanctioned to and the number of banks dealing with a
party. Thus the banks can find out if any of their customers is having excessive borrowings from
the banking system at any particular time.
6.8 Loan Classification:

Loan classification is a process by which the risk or loss potential associated with the loan
accounts of a bank on a particular date is identified and quantified to measure accurately the
level of reserves to be maintained by the bank to provide for the probable toss on account those
risky loan.
Like other banks, all types of loans of AL-ARAFH-ISLAMI fall into following four scales:
Unclassified: Repayment is regular.
Substandard: Repayment is stopped or irregular but has reasonable prospect of

improvement.
Doubtful debt: Unlikely to be repaid but special collection efforts may result in
partial recovery.
Bad/Loss: Very little chance of recovery.
6.9 Documentation:
Documentation can be described as the process or technique of obtaining the relevant documents.
In spite of the fact that banker lends credit to a borrower after inquiring about the character
capacity and capital of the borrower he must obtain proper documents executed from the
borrower to protect him against willful defaults. Moreover, when money is lent against some
security of some assets, the document must be executed in order to give the banker a legal and
binding charge against those assets. Documents contain the precise terms of granting loans and
they serve as important evidence in the law courts if the circumstances so desire. That's why all
approval procedure and proper documentation shall be completed prior to the disbursement of
the facilities.
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Investment Division
6.10 Credit Disbursements:

Having completely and accurately prepare the necessary loan documents, the loan officer ready
to disburse the loan to the borrower's loan account. After disbursement, the loan needs to be
monitored to ensure whether the terms and conditions of the loan fulfilled by both bank and
client or not.
6.11 Administration:
The Administration of the loan process shall ensure. Compliance with all Saws and regulations at
both local and global levels including bank policy as set out in this document and the Banks
credit manual/ circulars.
Proper analysis of credit proposal is complex and requires a high level of numerical as well as
analytical ability and common sense to ensure effective understanding of the concepts and thus
common sense. To ensure effective understanding of the concepts and thus to make the overall
credit portfolio of the Bank healthy proper staffing of the credit departments shall be done
through placement of qualified officials who hare got the right aptitude, formal training in
finance, credit risk analysis. Bank credit procedures as well its required experience.
Where repayment and interest servicing performance of a credit deteriorates shall be identifies at
an early state and closely-monitored to avoid low losses.
Loans/facilities, where appropriate and related security will be monitored and reviewed by a
separate unit of unconnected with the credit approval process on a regular basis in order to assess
the collected ability of the loan and effectiveness of the security. This Unit will report to the
Managing Director or his designated officer.
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Investment Division
6.12 Modes:
The remittance process involves the following four modes:Cash
Sell
Bank sells Dollar / Pound for using in abroad by the
Remittance
purchaser. The maximum amount of such sell is mentioned in
Dollar/
the Bangladesh Bank publication of 'Convertibility of Taka
Pound
for Currency Transactions in Bangladesh

Purchase Bank can purchase dollar from resident and non - resident
Bangladeshi and Foreigner. Most dollars purchased comes
from realization of Export Bill of Exchange.
Issue of TC is useful to traveler abroad. Customers can encase the TC
Traveler's
TC
Cheque
in abroad from the drawee bank. TC is alternative to holding

cash and it provides better security than holding cash in hand.
Buying If any unused leaf of TC is surrendered bank buys it from the

of TC
customer. All payments are made in local currency. Banks

generally buy only those TC.
Telex
Outward It remits fund by tested TT via its foreign correspondence
Transfer
TT
bank in which it is maintaining its NOSTRO Account.
It also makes payment according to telegraphic message of its Incoming

foreign correspondence bank from the corresponding VOSTRO
Foreign
Account.
Bank issue Demand Draft in favor of purchaser or any other according
Demand
to, instruction of purchaser. The payee can collect it for the drawer bank
Draft
in which the Issuing bank of Demand Draft holds its NOSTRO Account.
Bank also makes payment on DD drawn on this bank by its foreign
correspondence bank through the VOSTRO Account.
Investment Division
Page 78
In these processes of remittance, bank must have to make profit as a business institution. Profit is
made in two ways:
1. Commission charged
2. Difference in the buying and selling rate.
6.13 Miscellaneous Services by This Department

Student File: Students who are desirous to study abroad can open file in the Bank. By opening
this file, bank assures the remittance of funds in abroad for study.
F.C Accounts: Foreign Currency Accounts opened in the names of Bangladeshi nationals or
persons of Bangladeshi origin working or self -employed abroad can now are maintained as long
as the account holders desires.
RFCD: Stands for Resident Foreign Currency Accounts. Persons" ordinary resident in
Bangladesh may maintain foreign currency accounts with foreign exchange brought in at abroad.
Balance of such accounts is freely remittable abroad.
Formalities for opening foreign currency (FC) Account:
The AD may without prior approval of the Bangladesh Bank open Foreign Currency (FC)
account in the name of:
1. Bangladesh national residing abroad.
2. Foreign nationals residing abroad/ in Bangladesh and also foreign firms
3. Registered abroad and operating in Bangladesh and abstract foreign missions and
their expatriate employees.
4. Resident of Bangladesh nationals working with the foreign / international organization
operating in Bangladesh provided their salary in paid in foreign currency.
Foreign exchange earned through business doves or service rendered in Bangladesh cannot be
put into these accounts.
No payment in foreign currency (FC) may be made to any resident in Bangladesh out of the
foreign currency (FC) account.All citizens of Bangladesh and other persons are residing to
Bangladesh who became the owner of any foreign currency (FC).
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Investment Division
Papers required:
Application duly billed in and signed.
Photograph (two copies).
Passport photocopy.
Work permit from board investment. (In case of foreign nationals).
Rate of exchange:
It means the price of one currency expressed in terms of another currency. Rate of exchange is
the rate by which the relation among different foreign currencies is established in terms of local
currency of that country. Value at which one country currency can be converts into another's
country.
In exercise of the power conferred by section three of exchange regulation ACT 1947?
Bangladesh has issued license to certain bank to deal in foreign exchange is called authorized
dealer.
Spot rate: it is quoted for transaction where the foreign currency bought or sold is to be received
or delivered immediately. The current rate of exchange quoted in the foreign exchange market.
Forward rate: when a rate is applied to a future date it is called forward rate at which foreign
exchange can be sold or bought for delivery at a future time.
Cross rate: the rate of exchange quoted expressing the quotation for any two currencies in term
of a third.
SWAO: sport rate against forward purchased or a spot purchase against forward rate.
Pence rate / direct quotation: rates are quoted in tarn's foreign currency per one unit of foreign
currency.
Page 80
Investment Division
Currency rate / indirect quotation: rates are quoted in terms of foreign currency per one unit
of home currency.
Buying rate: authorized dealer applies this at the time of purchasing / negotiation of export
document and payment against TT. MT, check and drafts required from abroad.
Selling rate: authorized dealer applies this at the time of lodgment of import documents,
realization of LC margin from importer and other foreign exchanges transaction on overseas
bank.
Telquel rate: This is the rate when rate of foreign currency is quoted according to the since of
the bill.
Forward rate at a discount: when forward rate is higher than that of spot rate.
Forward rate at a premium: when forward rate is lower than that of spot rate.
Getting
Getting Loan
Loan Proposal
Proposal
from
from the
the Client
Client
Collecting
Collecting Information
Information
About
About Client
Client
Disbursing
Disbursing Loan
Loan
Recovery
Recovery of
of the
the Loan
Loan
Usual
Usual Recovery
Recovery Legal
Legal Recovery
Recovery
Evaluating
By Agent
About
About Project
Project
Legal
Legal Assessment
Assessment
Supervision
Supervision
of
of the
the Loan
Loan
Evaluating
Evaluating Project
Project
and
and Proposal
Proposal
Evaluating
Evaluating Collateral
Collateral
Sanctioning
Sanctioning and
and
Documentation
of
Documentation of Loan
Loan
Decision
Decision
Head
Head Office
Office
Level
Level
Branch
Branch Level
Level
Evaluation
Evaluation
Branch
Branch Level
Level
Figure: Flow of Handling of Loan
Page 81
Chapter 7: Investment
Risk Grading
7.1 Investment Risk Grading:

Concept, Procedure & Use
7.2 Investment Risk Grading Score Sheet of AIBL
Page 82
Investment Risk Grading
7.1 INVESTMENT RISK GRADING (IRG): Concept, Procedure and Use

7.1.1 Introduction:
Investment risk grading is an important tool for Investment risk management as it helps the
Banks & financial institutions to understand various dimensions of risk involved in different
Investment transactions. The aggregation of such grading across the borrowers, activities and the
lines of business can provide better assessment of the quality of Investment portfolio of a bank or
a branch. The Investment risk grading system is vital to take decisions both at the pre-sanction
stage as well as post-sanction stage.
At the pre-sanction stage, Investment grading helps the sanctioning authority to decide whether
to lend or not to lend, what should be the loan price, what should be the extent of exposure, what
should be the appropriate Investment facility, what are the various facilities, what are the various
risk mitigation tools to put a cap on the risk level.
At the post-sanction stage, the bank can decide about the depth of the review or renewal,
frequency of review, periodicity of the grading, and other precautions to be taken.
Having considered the significance of Investment risk grading, it becomes imperative for the
banking system to carefully develop a Investment risk grading model which meets the objective
outlined above.
The Lending Risk Analysis (LRA) manual introduced in 1993 by the Bangladesh Bank has been
in practice for mandatory use by the Banks & financial institutions for loan size of BDT 1.00
crore and above. However, the LRA manual suffers from a lot of subjectivity, sometimes creating
confusion to the lending Bankers in terms of selection of Investment proposals on the basis of
risk exposure. Meanwhile, in 2003 end Bangladesh Bank provided guidelines for Investment risk
management of Banks wherein it recommended, interalia, the introduction of Risk Grade Score
Card for risk assessment of Investment proposals.
Page 83

Since the two Investment risk models are presently in vogue, the Governing Board of
Bangladesh Institute of Bank Management (BIBM) under the chairmanship of the Governor,
Bangladesh Bank decided that an integrated Investment Risk Grading Model be developed
incorporating the significant features of the above mentioned models with a view to render a
need based simplified and user friendly model for application by the Banks and financial
institutions in processing Investment decisions and evaluating the magnitude of risk involved
therein.
Bangladesh Bank expects all commercial banks to have a well defined Investment risk
management system which delivers accurate and timely risk grading. This manual describes the
elements of an effective internal process for grading Investment risk. It also provides a
comprehensive, but generic discussion of the objectives and general characteristics of effective
Investment risk grading system. In practice, a banks Investment risk grading system should
reflect the complexity of its lending activities and the overall level of risk involved.
7.1.2 Definition of INVESTMENT RISK GRADING (IRG):
The Investment Risk Grading (IRG) is a collective definition based on the pre-specified
scale and reflects the underlying Investment-risk for a given exposure.
A Investment Risk Grading deploys a number/ alphabet/ symbol as a primary summary

indicator of risks associated with a Investment exposure.
Investment Risk Grading is the basic module for developing a Investment Risk
Management system.
7.1.3 Functions of INVESTMENT RISK GRADING

Well-managed Investment risk grading systems promote bank safety and soundness by
facilitating informed decision-making. Grading systems measure Investment risk and
differentiate individual Investments and groups of Investments by the risk they pose. This allows
bank management and examiners to monitor changes and trends in risk levels. The process also
allows bank management to manage risk to optimize returns.
Page 84
7.1.4 Use of INVESTMENT RISK GRADING:
The Investment Risk Grading matrix allows application of uniform standards to

Investments to ensure a common standardized approach to assess the quality of individual
obligor, Investment portfolio of a unit, line of business, the branch or the Bank as a
whole.
As evident, the IRG outputs would be relevant for individual Investment selection,
wherein either a borrower or a particular exposure/facility is rated. The other decisions
would be related to pricing (Investment-spread) and specific features of the Investment
facility. These would largely constitute obligor level analysis.
Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level
analysis.
7.1.5 Number &Short name of grades use in IRG:

The proposed IRG scale consists of 8 categories with Short names and Numbers are provided
as follows:
GRADING
Superior
Good
Acceptable
Marginal/ Watch list
Special Mention
Sub standard
Doubtful
Bad & Loss
SHORT NAME
SUP
GD
ACCPT
MG/WL
SM
SS
DF
BL
NUMBER
1
2
3
4
5
6
7
8
7.1.6 INVESTMENT RISK GRADING DEFINITIONS

Page 85
A clear definition of the different categories of Investment Risk Grading is given as follows:
Superior - (SUP) - 1
Investment facilities, which are fully secured i.e. fully cash covered.
Investment facilities fully covered by government guarantee.
Investment facilities fully covered by the guarantee of a top tier
international Bank.
Good - (GD) - 2
Strong repayment capacity of the borrower
The borrower has excellent liquidity and low leverage.
The company demonstrates consistently strong earnings and cash flow.
Borrower has well established, strong market share.
Very good management skill & expertise.
All security documentation should be in place.
Investment facilities fully covered by the guarantee of a top tier local
Bank.
Aggregate Score of 85 or greater based on the Risk Grade Score Sheet

=3=
Acceptable - (ACCPT) - 3
These borrowers are not as strong as GOOD Grade borrowers, but still
demonstrate consistent earnings, cash flow and have a good track record.
Borrowers have adequate liquidity, cash flow and earnings.
Investment in this grade would normally be secured by acceptable
collateral (1st charge over inventory / receivables / equipment / property).
Acceptable management
Acceptable parent/sister company guarantee
Aggregate Score of 75-84 based on the Risk Grade Score Sheet

Page 86
Marginal/Watch list - (MG/WL) 4
This grade warrants greater attention due to conditions affecting the
borrower, the industry or the economic environment.
These borrowers have an above average risk due to strained liquidity,
higher than normal leverage, thin cash flow and/or inconsistent earnings.
Weaker business Investment & early warning signals of emerging business
Investment detected.
The borrower incurs a loss
Loan repayments routinely fall past due
Account conduct is poor, or other untoward factors are present.
Investment requires attention
Aggregate Score of 65-74 based on the Risk Grade Score Sheet
Special Mention - (SM) - 5

This grade has potential weaknesses that deserve managements close attention.
If left uncorrected, these weaknesses may result in a deterioration of the
repayment prospects of the borrower.
Severe management problems exist.
Facilities should be downgraded to this grade if sustained deterioration in
financial condition is noted (consecutive losses, negative net worth, excessive
leverage),
An Aggregate Score of 55-64 based on the Risk Grade Score Sheet.
Substandard - (SS) - 6
Financial condition is weak and capacity or inclination to repay is in doubt.
These weaknesses jeopardize the full settlement of loans.
Bangladesh Bank criteria for sub-standard Investment shall apply.
Page 87
Doubtful - (DF) - 7
Full repayment of principal and interest is unlikely and the possibility of loss is
extremely high.
However, due to specifically identifiable pending factors, such as litigation,
liquidation procedures or capital injection, the asset is not yet classified as Bad &
Loss.
Bangladesh Bank criteria for doubtful Investment shall apply.
Bad & Loss - (BL) - 8
Investment of this grade has long outstanding with no progress in obtaining
repayment or on the verge of wind up/liquidation.
Prospect of recovery is poor and legal options have been pursued.
Proceeds expected from the liquidation or realization of security may be awaited.
The continuance of the loan as a bankable asset is not warranted, and the
anticipated loss should have been provided for.
This classification reflects that it is not practical or desirable to defer writing off
this basically valueless asset even though partial recovery may be affected in the
future. Bangladesh Bank guidelines for timely write off of bad loans must be
adhered to. Legal procedures/suit initiated.
Bangladesh Bank criteria for bad & loss Investment shall apply.
An Aggregate Score of less than 35 based on the Risk Grade Score Sheet.
7.1.7 How to compute IRG:
The following step-wise activities outline the detail process for arriving at Investment risk
grading.

Page 88
Step I
: Identify all the Principal Risk Components
Investment risk for counterparty arises from an aggregation of the following:
Financial Risk
Business/Industry Risk
Management Risk
Security Risk
Relationship Risk
Step II
Allocate weightages to Principal Risk Components
According to the importance of risk profile, the following weightages are proposed for
corresponding principal risks.
Principal Risk Components:
Weight:
Financial Risk
50%
Management Risk
12%
Security Risk
10%
Relationship Risk
10%
Step III
18%
Establish the Key Parameters
Financial Risk
Key Parameters:
Leverage, Liquidity, Profitability & Coverage ratio.
Size of Business, Age of Business, Business
Outlook, Industry Growth, Competition & Barriers to Business
Management Risk
Experience, Succession & Team Work.
Security Risk
Security
Coverage,
Collateral
Coverage
and
Support.
Relationship Risk
Account Conduct ,Utilization of Limit, Compliance
of covenants/conditions & Personal Deposit.
Page 89

Step IV
Assign weightages to each of the key parameters.
Key Parameters:
Financial Risk
50%
Leverage
15%
Liquidity
15%
Profitability
15%
Coverage
Weight:
5%
18%
Size of Business
5%
Age of Business
3%
Business Outlook
3%
Industry growth
3%
Market Competition
2%
Entry/Exit Barriers
2%
Management Risk
12%
Experience
5%
Succession
4%
Team Work
3%
Security Risk
10%
Security coverage
4%
Collateral coverage
4%
Support
2%
Relationship Risk
10%
Account conduct
Utilization of limit
5%
2%
Page 90
Compliance of covenants /condition

Personal deposit
2%
1%
Step V
Input data to arrive at the score on the key parameters.
After the risk identification & weightage assignment process (as mentioned above), the next steps
will be to input actual parameter in the score sheet to arrive at the scores corresponding to the
actual parameters.
This manual also provides a well programmed MS Excel based Investment risk scoring sheet to
arrive at a total score on each borrower. The excel program requires inputting data accurately in
particular cells for input and will automatically calculate the risk grade for a particular borrower
based on the total score obtained. The following steps are to be followed while using the MS
Excel program.
Step VI
Arrive at the Investment Risk Grading based on total score obtained.
The following is the proposed Investment Risk Grade matrix based on the total score obtained by
an obligor.
Number
1
Risk Grading
Superior
Short Name
SUP
Score
100% cash covered
Government guarantee
International Bank
guarantees
2
3
Good
Acceptable
GD
ACCPT
85+
75-84
4
5
6
7
8
Marginal/Watchlist
Special Mention
Sub-standard
Doubtful
Bad & Loss
MG/WL
SM
SS
DF
BL
65-74
55-64
45-54
35-44
<35
Page 91
7.1.8 INVESTMENT RISK GRADING Process:
Investment Risk Grading should be completed by a Bank for all exposures (irrespective
of amount) other than those covered under Consumer and Small Enterprises Financing
Prudential Guidelines and also under The Short-Term Agricultural and Micro - Investment.
For Superior Risk Grading (SUP-1) the score sheet is not applicable. This will be
guided by the criterion mentioned for superior grade account i.e. 100% cash covered,
covered by government & bank guarantee.
Investment risk grading matrix would be useful in analyzing Investment proposal, new
or renewal for regular limits or specific transactions, if basic information on a borrowing
client to determine the degree of each factor is a) readily available, b) current, c)
dependable, and d) parameters/risk factors are assessed judiciously and objectively. The
Relationship Manager as per Data Collection Checklist should collect required information.
Relationship manager should ensure to correctly fill up the Limit Utilization Form in
order to arrive at a realistic earning status for the borrower.
Risk factors are to be evaluated and weighted very carefully, on the basis of most up-todate and reliable data and complete objectivity must be ensured to assign the correct
grading. Actual parameter should be inputted in the Investment Risk Grading Score Sheet .
Investment risk grading exercise should be originated by Relationship Manager and

should be an on-going and continuous process. Relationship Manager shall complete the
Investment Risk Grading Score Sheet and shall arrive at a risk grading in consultation with
a Senior Relationship Manager and document it as per Investment Risk Grading Form
which shall then be concurred by the Investment Officer in consultation with a Senior
Investment Officer.
Page 92
All Investment proposals whether new, renewal or specific facility should consist of a)
Data Collection Checklist, b) Limit Utilization Form c) Investment Risk Grading Score
Sheet, and d) Investment Risk Grading Form.
The Investment officers then would pass the approved Investment Risk Grading Form
to
Investment
Administration
Department
and
Corporate
Banking/Line
of
Business/Recovery Unit for updating their MIS/record.
The appropriate approving authority through the same Investment Risk Grading Form
shall approve any subsequent change/revision i.e. upgrade or downgrade in Investment risk
grade.
7.1.9 EARLY WARNING SIGNALS (EWS):

Early Warning Signals (EWS) indicate risks or potential weaknesses of an exposure requiring
monitoring, supervision, or close attention by management.
If these weaknesses are left uncorrected, they may result in deterioration of the repayment
prospects in the Banks assets at some future date with a likely prospect of being downgraded to
classified assets.
Early identification, prompt reporting and proactive management of Early Warning Accounts are
prime Investment responsibilities of all Relationship Managers and must be undertaken on a
continuous basis.
Despite a prudent Investment approval process, loans may still become troubled. Therefore, it is
essential that early identification and prompt reporting of deteriorating Investment signs be done
to ensure swift action to protect the Banks interest. The symptoms of early warning signals as
mentioned below are by no means exhaustive and hence, if there are other concerns, such as a
Page 93
breach of loan covenants or adverse market rumors that warrant additional caution, a Investment
Risk Grading Form should be presented.

Irrespective of Investment score obtained by any obligor as per the proposed risk grade score
sheet, the grading of the account highlighted as Early Warning Signals (EWS) accounts shall
have the following risk symptoms.
a. Marginal/Watchlist (MG/WL - 4): if
Any loan is past due/overdue for 60 days and above.
Frequent drop in security value or shortfall in drawing power exists.
b. Special Mention (SM - 5): if
Any loan is past due/overdue for 90 days and above
Major document deficiency prevails (such deficiencies include but not limited
to; board resolution for borrowing not obtained, sanction letter not accepted by
client, charges/hypothecation over assets favoring bank not filed with Registrar,
Joint Stock Companies, mortgage not in place, guarantees not obtained, etc.)
A significant petition or claim is lodged against the borrower.
The Investment Risk Grading Form of accounts having Early Warning Signals should be
completed by the Relationship Manager and sent to the approving authority in Investment Risk
Management Department. The Investment Risk Grade should be updated as soon as possible and
no delay should be there in referring Early Warning Signal accounts or any problem accounts to
the Investment Risk Management Department for their early involvement and assistance in
recovery.
7.1.10 Exceptions to INVESTMENT RISK GRADING:
Page 94
Head of Investment Risk Management may also downgrade/classify an account in the

normal course of inspection of a Branch or during the periodic portfolio review. In such
event, the Investment Risk Grading Form will then be filled up by Investment Risk
Management
Department
Business/Investment
and
will
Administration
be
referred
to
Corporate
Department/Recovery
Unit
Banking/Line
for
updating
of
their
MIS/records.
Recommendation for upgrading of an account has to be well justified by the

recommending officers. Essentially complete removal of the reasons for downgrade should
be the basis of any upgrading.
In case an account is rated marginal, special mention or unacceptable Investment risk as

per the risk grading score sheet, this may be substantiated and Investment risk may be
accepted if the exposure is additionally collateralized through cash collateral, good tangible
collaterals and strong guarantees. These are exceptions and should be exceptionally approved
by the appropriate approving authority.
Whenever required an independent assessment of the Investment risk grading of an

individual account may be conducted by the Head of Investment Risk Management or by the
Internal Auditor documenting as to why the Investment deteriorated and also pointing out the
lapses.
If a Bank has its own well established risk grading system equivalent to the proposed
Investment risk grading or stricter, then they will have the option to continue with their own
risk grading system.
7.1.11 INVESTMENT RISK GRADING Review:

Investment Risk Grading for each borrower should be assigned at the inception of lending and
should be periodically updated. Frequencies of the review of the Investment risk grading are
mentioned below;
Number
Risk Grading
Short
Review frequency (at least)
Page 95
1
2
3
4
5
6
7
8
Superior
Good
Acceptable
Marginal/Watchlist
Special Mention
Sub-standard
Doubtful
Bad & Loss
SUP
GD
ACCPT
MG/WL
SM
SS
DF
BL
Annually
Annually
Annually
Half yearly
Quarterly
Quarterly
Quarterly
Quarterly
7.1.12 MIS ON INVESTMENT RISK GRADING:
Bank should have comprehensive MIS reports on Investment risk grading to evaluate
entire Investment portfolio of the Bank. There are 4 Formats of such MIS reports on
Investment risk grading as under.
Investment Risk Grading Report (Consolidated)
Investment Risk Grading Report (Branch Wise)
Investment Risk Grading Report (Branch & Risk Grade Wise)
Investment Risk Grading Report (Grade Wise Borrower List)
MIS reports as mentioned above should be prepared and circulated at least on a

quarterly basis.
7.1.13 FINANCIAL SPREAD SHEET (FSS):

A Financial Spread Sheet (FSS) has been developed which may be used by the Banks while
analyzing the Investment risk elements of a Investment proposal from financial point of view.
Page 96
The FSS is well designed and programmed software having two parts. Input and Output Sheets.
The financial numbers of borrowers need to be inputted in the Input Sheets which will then
automatically generate the Output Sheets.
Page 97
7.2 IRG Score sheet of AIBL:

Al-Arafah Islami Bank Limited
Dhanmondi Branch, Dhaka.
Reference No.:
Borrower
Group Name (if any)
Branch:
Industry/Sector
Date of Financials
Completed by
Approved by
Number
1
2
3
4
5
6
7
8
Criteria
Weight
A. Financial Risk
50%
1. Leverage: (15%)
Debt Equity Ratio () - Times
Total Liabilities to Tangible Net
worth
All calculations should be based on
annula financial statements of the
borrower (audited preferred)
2. Liquidity: (15%)
Current Ratio () -Times
Current Assets to Current Liabilities
CREDIT RISK GRADING SCORE SHEET

AIBL/DMB/INV/09/
Date:
M/S. Al-Mizan Trading Company.
N/A
Aggregate Score:
Dhanmondi
Whole sale Trading
Risk
Grading:
11.12.08
Md. Eklas Ahmed, J.O.
Md. Moshiur Rahman,
Senior Officer
Grading
Superior
Good
Acceptable
Marginal/Watchlist
Special Mention
Substandard
Doubtful
Bad/Loss
Short
SUP
GD
ACCPT
MG/WL
SM
SS
DF
BL
30/07/2009
78
Acceptable
Score
Fully cash secured, secured by
government guarantee/international
bank guarantee
85+
75-84
65-74
55-64
45-54
35-44
<35
Score
Actual Parameter
Score
Obtained
Less than 0.25

0.26 to 0.35 x
0.36 to 0.50 x
15
14
13
0.17
15
0.51 to 0.75 x
0.76 to 1.25 x
1.26 to 2.00 x
2.01 to 2.50 x
2.51 to 2.75 x
More than 2.75
12
11
10
8
7
0
Greater than 2.74

2.50 to 2.74 x
2.00 to 2.49 x
1.50 to 1.99 x
1.10 to 1.49 x
0.90 to 1.09 x
0.80 to 0.89 x
15
14
13
12
11
10
8
0.75
Parameter
Page 98
3. Profitability: (15%)
Operating Profit Margin (%)
(Operating Profit/Sales) X 100
0.70 to 0.79 x
Less than 0.70
Greater than 25%
20% to 24%
15% to 19%
10% to 14%
7% to 9%
4% to 6%
1% to 3%
Less than 1%
7
0
15
14
13
12
10
9
7
0
More than 2.00
More than 1.51 Less

than 2.00
More than 1.25 Less
than 1.50
More than 1.00 Less
than 1.24
Less than 1.00
15.06
15
5.07
4. Coverage: (5%)
Interest Coverage Ratio () - Times
Earning before interest & tax
(EBIT)
Interest on debt
Total Score- Financial Risk

B. Business/ Industry Risk 18%
1. Size of Business (in BDT crore)
3
2
0
50
0.55
3
2
1
0
Favorable
Stable
Slightly Uncertain
Cause for Concern
3
2
1
0
Favorable
4. Industry Growth
Strong (10%+)
Good (>5% - 10%)
Moderate (1%-5%)
No Growth (<1%)
3
2
1
0
Good (>5% - 10%)
5. Market Competition
Dominant Player
Moderately Competitive
Highly Competitive
2
1
0
Moderately Competitive
6. Entry/Exit Barriers
Difficult
Average
The size of the borrower's business

measured by the most recent year's
total sales. Preferably audited
numbers.
2. Age of Business
The number of years the borrower
engaged in the primary line of
business
3. Business Outlook
Critical assesment of medium term
prospects of industry, market share
and economic factors.
> 60.00
30.00 59.99
10.00 29.99
5.00 - 9.99
2.50 - 4.99
5
4
3
2
1
< 2.50
> 10 Years
> 5 - 10 Years
2 - 5 Years
< 2 Years
42
Page 99
Average
Easy
Total Score- Business/Industry
Risk
C. Management Risk
1. Experience
1
0
18
12%
Quality of management based on

total
# of years of experience of the
senior
management in the Industry.
2. Second Line/ Succession
3. Team Work
More than 10 years in the

related line of business
510 years in the related
line of business
line of business
No experience
Ready Succession
Succession within 1-2
years
Succession within 2-3
years
Succession in question
4
3
Very Good
Moderate
Poor
Regular Conflict
3
2
1
0
Total Score- Management Risk

D. Security Risk
10%
1. Security Coverage (Primary)
2. Collateral Coverage (Property

Location)

line of business
Ready Succession
Very Good
3
2
0
2
0
12
Fully Pledged
facilities/substantially
cash covered / Reg.
Mortg. for HBL
Registered Hypothecation
(1st Charge/1st Pari passu
Charge)
2nd charge/Inferior charge

Simple
hypothecation/Negative
lien on assets
2
1
No security
Registered Mortgage on
Municipal
corporation/Prime Area
property
Pourashava/Semi-Urban
area property
Equitable Mortgage or No
property but Plant and
Machinery as collateral
Negative lien on collateral
10
Registered
Hypothecation (1st
Charge/1st Pari passu
Charge)
Municipal
corporation/Prime Area
property
Page 100
3. Support (Guarantee)
Total Score- Security Risk

E. Relationship Risk
1. Account Conduct
No collateral
Personal Guarantee with
high net worth or Strong
Corporate Guarantee
0
2
Personal Guarantees or
Corporate Guarantee with
average financial strength
No support/guarantee
Personal Guarantees or
Corporate Guarantee
with average financial
strength
0
10
10%
More than 3 years
Accounts with faultless
record
More than 3 years

record
Less than 3 years

record
Accounts having
satisfactory dealings with
some late payments.
Frequent Past dues &

Irregular dealings in
account
2. Utilization of Limit
(actual/projection)
More than 60%

40% - 60%
Less than 40%
2
1
0
100.00%
3. Compliance of Covenants /
Conditions
Full Compliance
Some Non-Compliance
No Compliance
2
1
0
Full Compliance
4. Personal Deposits
Personal accounts of the

key business Sponsors/
Principals are maintained
in the bank, with
significant deposits
No depository
relationship
No depository relationship
Total Score- Relationship Risk
0
10
Grand Total - All Risk
100
78
Chapter 8: Marketing
Strategies of AIBL
Page 101
8.1 Vision of AIBL

8.2 Mission of AIBL
8.3 Marketing Strategies
Marketing Strategies of AIBL
8.1 Vision of AIBL:
Page 102
To be a pioneer in Islamic Banking in Bangladesh and contribute significantly to the growth of

the national economy.
8.2 Mission of AIBL:

Achieving the satisfaction of Almighty Allah both here and hereafter.
Proliferation of Shariah Based Banking practices.
Quality financial services adopting the latest technology.
Fast and efficient customer service .
Maintaining high standard of business ethics.
Balanced growth.
Steady and competitive return on shareholders equity.
Innovative banking at a competitive price.
Attract and retain quality human resources.
Extending competitive compensation packages to the employees.
Firm commitment to the growth of national economy.
Involving more in Micro and SME financing.
8.3 Marketing Strategies:

The main strategy of the bank is using Islami Banking System to attract its market.
Providing efficient customer service
Maintaining corporate and business ethics
Being trusted repository of customers and their financial advices
Making its products superior and rewarding to the customers
Display team spirit and professionalism
Sound capital base
Enhancement of shareholders wealth
Fulfilling its social commitments by expanding its charitable and humanitarian activities
Providing high quality financial services in export and import trade.
Building tight personal relationship with customers and clients
Taking less promotional activities and emphasizing on relationship marketing.
Page 103
Chapter 9: SWOT
Analysis, Findings,
Recommendation &
9.1 SWOT Analysis

9.2 Findings & Analysis
9.3 Recommendation
9.4 Conclusion
Page 104
SWOT Analysis, Findings, Recommendation &

Conclusion
9.1SWOT Analysis:
Not surprisingly, in the competitive arena of marketing era SWOT analysis is a must based on
Product, Price, Place and Promotion of a financial institute like private bank. From the SWOT
analysis we can figure out ongoing scenario of the bank. So to have a better view of the present
banking practices of Al-Arafah Islami Bank Ltd.
Internal
Internal
Factors
Factors
Strength
External
External
Factors
Factors
Weakness
Opportunity
Threats
In SWOT analysis two factors act as prime movers

Internal factors which are prevailing inside the concern which include Strength and
weakness.
On the other hand another factor is external factors which act as opportunity and threat.
9.1.1 Strength:
Usage of faster PC Bank software.
Membership with SWIFT.
Good banker-customer relationship.
Online banking system.
Islami Shariah based Banking system.
Energetic as well as smart work force.
Competitive Profit provider comparing with other Islamic Bank.
Strong Financial Position.
Efficient administration
Page 105

Conclusion
9.1.2 Weakness:
Reluctance to ad campaign.
Existing manual vouchers.
Lack of consumer credit scheme.
Manpower is not sufficient.
Marketing policy is not well setup.
Limited number of branches in its network.
Officers have limited experience and not enough trained
Many inexpert and laggard assistant officers.
The bank has no ATM service
Insufficient number of deposit Scheme and loan.
9.1.3 Opportunity:
Huge business area.
Introducing consumer credit scheme.
Growth of sales volume.
Introducing branch banking through online.
Develop relations and correspondence with foreign banks.
More concentrated Banking based on Islamic Shariah.
Few Competitors practicing Islamic Banking.
9.1.4 Threats:
Competitors have more attractive deposit schemes.
Bangladesh Bank has no well established Islami Banking Rules.
Different classic services of other banks.
Entrance of new private commercial banks.
Young, energetic, dynamic, talent and smart work force of competitors.
Govt. imposes high rate of taxes and VAT.
Page 106
Political unrest and Economic recession.

Illegal business operation by the some clients.

Conclusion
9.2 Findings and Analysis:
AIBL profit earning capacity is not satisfactory.
Its marketing strategy is not well designed.
Existing Human Resources are not sufficient for AIBL. They have to recruit more
skilled employees.
Number of Branches are not satisfactory, AIBL have to give more emphasize on
increasing number of Branches.
The whole activities of AIBL is not computerized, still there exist manual record
keeping system.
Insufficient training program for the employees.
Slower in modernization comparing with its competitors.
The working environment in any branch is not congenial & appropriate. The
working desk provides sound pollution. It looks like a hall room.
The modern technology is not used in the recruitment and selection process. The
backdated methods are using for selection till today.
Salary structure of AIBL is satisfactory comparing with other Islamic Banks, the
pension policy and the payment of pension to the employees are very fair and
transparent.
The transfer and promotion process is fair but the promotion is not faster.
Loan facilities are very attractive to the employees of AIBL.
Most of the policies are backdated. Only the authority amends the policy but
preserve the old policy.
Page 107
There is no policy to build up harmonious relationship among the employees. The

employees cannot protest the injustice of the authority because the pure trade union
is absent there.
The record keeping system is also backdated, not followed computerized system
properly
Security system of many branches is not sufficient.

Conclusion
9.3 Recommendation:
AIBL should concentrate in increasing its profit earning capacity.
It should develop effective marketing strategy to attract new customers.
Raising the capital, statutory reserve and increase the investment.
The number of branches should be increased
Expand and diversify customer base.
Upgrade Online Banking.
Bank should introduce independent Marketing Department
Personal relationship should be build with the customers.
Customers are the heart of the organization. They should provide more space in the office
and if possible they should have some entertainment facility.
Few branches are not under online banking system, so all the branches should confirm on
line banking system.
Ensure stable dividend.
Ensure high level customer service.
The Bank should follow Islami Sharia strictly in every of its operation.
Bank should introduce ATM system.
Should introduce one-stop service centre.
Bank should introduce consumer credit scheme.

Page 108
Bank should increase their office space and take more care in interior decoration.
Some new investment schemes are to be introduced for socio-economic development and
welfare of the distressed humanity.
Finally the Bank should has the vision to automate its all operations and functionalities
and should be committed to achieve the goal to be a lead Bank in the country both in
service and in technical aspect and to fulfill the requirements of mass people.
Conclusion
9.4 Conclusion:
Today the banking service is very competitive. From the practical materialization of
customer dealing procedure during the whole period of my practical orientation in ALARAFAH-ISLAMI Bank limited I have reached a firm and concrete conclusion in a very
confident way. I believe that my realization will be in harmony with most of the banking
thinkers. It is quite evident that to build up an effective and efficient banking system to the
highest desire level, computerized transaction is must.
AL-ARAFAH-ISLAMI Bank Ltd. is a new generation Bank. It is committed to provide
high quality financial services/products to contribute to the growth of G.D.P of the country
through stimulating trade and commerce, accelerating the pace of industrialization,
boosting up export, creating employment opportunity for the educated youth, poverty
alleviation, raising standard of living of limited income group and overall sustainable
socio-economic development of the country. The is not so far when it will be in a position
to overcome the existing constraints and it may be expected that by establishing a network
over the country and by increasing resources this bank will be able to play a considerable
role in the portfolio of development of financing.
Success in the banking business largely depends on effective lending. Less the amount of
loan losses, the more the income will be from credit operations. The more the income from
credit operations the more will be the profit of the AL-ARAFAH-ISLAMI Bank Ltd. and
here lays the success of credit financing.
Page 109
It can be argued that though the results achieved so far are not satisfactory, credit financing
is a modern scientific technique for enhancing AL-ARAFAH-ISLAMI Banks strength and
there lies the opportunities to make it more effective in the future for our own benefit.
From the learning and experience point of view I can say that I really enjoyed my
internship at AL-ARAFAH-ISLAMI Bank Ltd. from the very first day. I am confident that
this 03 months internship program at AL-ARAFAH-ISLAMI Bank Ltd. will definitely
help me to realize my further carrier in the job market.
Chapter 10: Bibliography &

Reference
10.1 Bibliography
10.2 Reference
Page 110
Bibliography & Reference
10.1 Bibliography:
o http://banglapedia.search.com.bd/HT/T_0234.htm
o http://www.secbd.org/Full%20Prospectus%20of%20Trust%20Bank%20Limited.pdf
o http://en.wikipedia.org/wiki/List_of_Banks_in_Bangladesh
o http://investing.businessweek.com/research/stocks/private/snapshot.asp?
privcapId=31030707
o http://www.highbeam.com/doc/1P1-83729256.html
Annual Report of AL-ARAFAH ISLAMI Bank Limited (2007)
Several Booklets from AL-ARAFAH ISLAMI Bank.
Several Newsletter s from AL-ARAFAH ISLAMI Bank.
Credit Operational Manual of AL-ARAFA H ISLAMI Bank Limited.
SHARIAH MANUEL published by Al-Arafah Islami Bank Limited.
10.2 Reference:
Aladwani, A. M. & Palvia, P. C. (2002) Developing and validating an instrument for
measuring user-perceived web quality, Information & Management, 39, pp. 467476.
Ariely, D. (2000) Controlling the information flow: effects on customers decision
making and preferences, Journal of Consumer Research, 27 (September), pp. 233248.
Cronin, J, Jr. & Taylor, S.A. (1992) Measuring service quality: a reexamination and
extension, Journal of Marketing, 56(3), pp. 5568.
Page 111
Davis, F. D. (1989) Perceived usefulness perceived ease of use and user acceptance of
information technology, MIS Quarterly, 13(4), pp. 319340.
Huizingh, E. K. (2000) the content and design of web sites: an empirical study,
Information & Management, 37, pp. 123134.
Kaiser, H. F. (1974) an index of factorial simplicity, Psychometrika, 39, pp. 3136.
Liu, C. & Arnett, K. P. (2000) Exploring the factors associated with web site success
in the context of electronic commerce, Information & Management, 38, pp. 2333.
Page 112

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Chapter 1: Introduction

Background of the Study

Objective of the Study

Scope of the Study

The Process & Challenges of Retail Products

1.2 Background of the Study:

1.3 Objective of the Study:

Analyzing the performance of the bank

To find out the different banking procedures of the branch.

To know the competitive strength and weakness of the bank.

To find out the relations among the various department.

To make possible recommendations for the internship organization to improve the

The Process & Challenges of Retail Products

1.5.1 Primary data:

1.5.2 Secondary data:

Manuals of Al-Arafah Islami Bank Bangladesh Limited (Foreign Remittance)

The Process & Challenges of Retail Products

Overview of Banking Industry

Concepts of Islamic Banking

Islamic Banking around the World

Islamic Banking in Bangladesh

Theoretical Background of Islamic Banking

Objective of Islamic Banking

The Process & Challenges of Retail Products

2.2 Overview of Banking Industry:

The Process & Challenges of Retail Products

The Process & Challenges of Retail Products

Specialized Bank and Credit

Figure 1: Banking Operation under BB

Some words used as a abbreviate form in the diagram are:

Bangladesh Krishi Bank

Rajshahi Krishi Unnayan Bank

Bangladesh Shilpa Bank

Bangladesh Shilpa Rin Shangshta

Bangladesh Small Industries & Commerce.

Bangladesh Samabaya Bank Ltd.

Central Co-operative Bank Ltd.

Primary Cooperative Socites.

2.3 Concepts of Islamic Banking:

2.3.1 The Need for Islamic Banking:

2.3.2 Related Definitions of Islamic Bank:

2.4 Islamic banking around the world:

2.5 Islamic banking in Bangladesh:

The professional activities were reinforced by a number of Muslim Entrepreneurs

The Process & Challenges of Retail Products

2.6 Theoretical background of Islamic banking:

Islamic economics is the thinkers responses of economic challenges of their items, In

curbing individual freedom or creating continued macro-economic and ecological

2.7 Objectives of Islamic Banking:

The Process & Challenges of Retail Products

Special features of AIBL

Chairman & Directors of AIBL

Executive Committee of AIBL

Members of Shariah Council

Hierarchy of the Executive Body of AIBL

Organogram of AIBL Dhanmondi Branch

Branch Location all over Bangladesh

Graphically AIBL Countrywide Branches

Information Technology of AIBL

Welfare Projects of AIBL

3.15 Classification of Bank product

3.1 History of AL-Arafah Islami Bank (AIBL):

The Process & Challenges of Retail Products