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September 6 2010

MEEZAN
INTERNSHIP REPORT
BANK

Hajvery University Lahore | Nazish Sohail


Internship Report
Meezan Bank Limited

Prepared By:
NAZISH SOHAIL

BBA HONS

106-862

HAJVERY UNIVERSITY LAHORE

Page | 2
Dedication

I would like to dedicate this report to my Parents, for their never


ending support and the sense of security they have given when I
wanted it most. They have waited so long for this moment to come
true; I am glad that their waiting has finally been rewarded.

Page | 3
Acknowledgements

MY FIRST AND FOREMOST HUMBLE GRATITUDE TO “ALLAH” THE ALMIGHTY FOR GIVING

ME THE VALOR TO REMAIN DEDICATED TO MAKE THIS INTERNSHIP REPORT.

Apart from it I take the opportunity to acknowledge the real efforts of:

First, I would like to thank my university; HAJVERY UNIVERSITY LAHORE, for


the valuable support and encouragement which it has given to me in the form
of this internship program.

Secondly, I am very greatful to Mr. Mustansar Ali, Branch Manager/VP,


Meezan Bank, New Garden Town Lahore, for giving me the opportunity to be a
part of this organization and to Mr. Tabasher Zaki Malhi, Manager
Operations, for being so helpful and cooperative throughout my internship
program.

Likewise, I am indebted to Ms Rabia Aslam, Senior Officer-1, Ms Sana


Islam, Senior Officer-2, Mr. Umar Javeid, Relationship Manager/ Credits
Department, Mr Muneeb Ullah Khan, Manager Foreign Trade, and the entire
team of Meezan Bank, NGT, for their support and the provision of valuable
information which helped me a lot during my internship and in completion of
this report.

Page | 4
THE OPENING

‘In the name of Allah,


The most Gracious, the most Merciful.
All praise be to God alone,
the Lord of all the worlds,
the All-Merciful, the Ever Mercy-giving,
the Master of the Day of Judgment.
You alone we worship, and You alone we ask
for help.
Guide us on the Straight Path,
The path of whom You have blessed, not of
those who incur You anger,
Nor of those who go astray.’

(Al-Fatihah 1: 1-7)

Page | 5
Mustansar Ali
-The Branch Manager-

“The conventional definition of management is


getting work done through people, but real
management is developing people through work”

Page | 6
(Agha Hassan Abedi)

Tabasher Zaki Malhi

Manager Operations

Page | 7
Table of Contents
Chapter 1 Executive Summary 13

Chapter 2 Introduction 16

i. Company Background 16

Chapter 3 3.1 Company Analysis 17

3.2 Operation Analysis 19

i. Business & Branch Network 20

3.3 Financial Analysis 21

I. Operational Analysis 22

II. Balance Sheet Analysis 25

III. Ratio Analysis 27

3.4 Human Resource Management- Assessment 40

I. Board of Directors 40

II. Management Team 40

III. Organizational Structure 42

IV. Shariah Board 43

V. Executive Committee 43

VI. Audit Committee 43

VII. Company Secretary 43

VIII. Advisory Board 43

IX. Legal Advisor 43

Page | 8
X. Auditors 43

3.5 Marketing Analysis 44

I. First P- Product 45

II. Second P- Price 47

III. Third P- Place 48

IV. Fourth P- Promotion 49

V. Fifth P- People 50

VI. Sixth P- Process 51

VII. Seventh P- Physical Evidence 51

Chapter 4 4.1 Environmental Analysis 53

I. Growth Rate Of The Entire Industry 53

II. Performance of Islamic Industry 54

4.2 Competition Analysis 56

I. Major Competitors 55

II. Their introduction 57

III. Their Market Shares 59

4.3 Technology Analysis 60

I. Technical Methods that Affect the Industry 60

II. Innovation 61

Chapter 5 How and why I have selected Meezan Bank? 63

I. Reasons for selecting MBL 63

II. Practical Application of the Subjects 64

Chapter 6 My favorite Personality at MBL 66

Page | 9
Chapter 7 Brief on the Departments I worked during internship

and specific/leading contribution made 67

I. Brief Introduction 67

II. Department Overview 67

Chapter 8 Problem Identification 69

I. Weakest areas of MBL’s Performance 69

Chapter 9 SWOT Analysis 71

Chapter 10 Conclusion & Recommendations 74

Chapter 11 References 78

Chapter 12 Appendices 79

Page | 10
Appendices
Appendix A: Customer Services Department 79

Appendix B: Operations Department


82

Appendix C: Riba free term deposits offered by bank 86

Appendix D: Cash Department 91

Appendix E: Credits/Finance Department 92

Appendix F: Other Products Offered 94

Appendix G: Islamic Modes of Financing 96

Appendix H: Attachments 98

Page | 11
LIST OF ABBREVIATIONS

MBL: Meezan Bank Limited

NPL: Non Performing Loan

SBP: State Bank of Pakistan

ROA: Return on Assets

ROE: Return on Equity

EPS: Earnings per Share

M: Million

BOD: Board of Directors

NGT: New Garden Town

NPF: Non Performing Finance

HR: Human Resources

IBI: Islamic Banking Institutions

DFI: Development Finance Institutions

CAR: Credit Adequacy Ratio

SME: Small Medium Enterprises

FDR: Financing to Deposit Ratio

Dept: Department

L/C: Letter of Credit

Page | 12
KYC: Know Your Customer

Chapter 1

1. EXECUTIVE SUMMARY

Internship is an integral part of our Bachelors of Business Administration (BBA)


program. It provided me the opportunity to develop practical know how of
concepts which before that were only in theoretical form. My internship in
Meezan Bank Limited was full of learning regarding various aspect of banking.
The report contains practical knowledge, which I gained during my stay at
Meezan Bank Ltd.

Banking sector of Pakistan has been transformed within last decade (CY2000-
2009) from a sluggish and government-dominated sector to a much more
agile, competitive and profitable industry. Speed and sequencing on banking
sector transformation and its role in promoting economic growth is now a
leading story of a sector success. Within Pakistan SBP offers the story of
effective leadership as a regulator, change management and corporate
governance. Outside Pakistan it is serving to offer rich lessons in what
difference governance regulator can make and how bank restructuring and
privatization can change the landscape of the industry.

Meezan Bank limited is the pioneer Islamic Bank in Pakistan, and it has bright
future forward. Meezan Bank Limited is a publicly listed company first
incorporated on January 27, 1997. The Bank has an internationally
renowned, very high caliber and pro-active Shariah Supervisory Board

Page | 13
I did my eight weeks internship at Meezan Bank, Garden town branch, Lahore.
This branch also serves as a Parent branch to other sub branch. During my
internship I was rotated in different departments but my penetration was
developed in CIBD (Corporate & Investment Banking Division).

The work that I did during my internship at Meezan Bank primarily includes
voucher checking, checking account opening pre-requisites, account opening
backlog checking, analyzing the inward and outward clearing, maintaining
return mail register, completion of pay order and demand draft register, zakat
register maintenance, assisting the cheque book issuance department, know-
how about the lockers available and the rules relating to them, analyzing the
expenses incurred and maintain the records thereof. Assisting the officer
concern for the creation of expense approval sheets, understand the working
of credits department, and to assist the foreign trade wing.

One of the strongest reasons for selecting this company-Meezan Bank- was
that it is named after the Quranic word AL-MEEZAN which means BALANCE.
Second most important thing that influenced me for the selection of this bank
was that it has the privilege of being premiere Islamic bank in the Pakistan
which is why it is the market leader among all the Islamic Banks.

Banking sector owes a pivotal importance in the economy of any country


through its variant functions. This basic motivator stressed me to join Meezan
bank for Internship Training. Moreover, the experience and practice learned
during this tenure also proved very helpful and facilitating in the forthcoming
professional life.

During my internship program I have discovered many of the courses, I studied


at Hajvery University, were relevant to the work I have done during my
internship at Meezan bank. Chief ones are financial management, banking
practice & law, banking operations, database management system, and
Uniform Customs & Practices 600 for the documentary credit respectively.
Page | 14
The weakest area of performance that I identified during my internship
program is the working of HR department. The main problem that I identified
during my internship period was the lack of awareness about the exact job
description of employees, undefined job tasks in operations, excessive
documentations as per the policies making it extremely very difficult for the
customers to avail their desired services and more crucial one was the lack of
motivation at workplace.

Meezan Bank limited has two major competitors namely Al-Baraka Islamic
Bank B.S.C (E,C), Operations Pakistan and Bank Islami Pakistan Limited
respectively. The market analysis and financial analysis of the competitors
shows that the Meezan Bank limited is current market leader in the pie among
the Islamic banks.

Some of the suggestions in this report were that MBL should pursue aggressive
marketing and advertising strategy, introducing job specific training to
employees and adhering to the criteria laid out by the HR department for job
advancements in complete faith and employee training sessions on regional
level.

All information in this report is based on my observations, interviews with the


customers and the branch officers and practical involvement in different tasks
during my internship at Meezan Bank.

Page | 15
Chapter 2

2. INTRODUCTION

2.1 Meezan Bank

Public Limited
Type KSE: MEBL
LSE:
Industry Islamic Banking
Founded Al-Meezan Investment Bank Limited
Headquarters Karachi, Pakistan
Murabaha, Ijarah, Diminishing Musharakah, ATM/Debit Card,
Products Savings, Consumer Banking etc.

Revenue 2007 PKR 1.4 billion


Website www.meezanbank.com

Vision:
Establish Islamic banking as banking of first choice to facilitate the
implementation of an equitable economic system, providing a strong
foundation for establishing a fair just society for mankind.

Mission Statement:
To be a premier Islamic bank, offering a one-step shop for innovative value-
added products and services to our customers within the bounds of Shariah,
Page | 16
while optimizing the stakeholders’ value through an organizational culture
based on learning, fairness, respect for individual enterprise and performance.

Chapter 3

3.1 Company Analysis

Meezan Bank Limited is a publicly listed company first incorporated on


January 27, 1997. It started operations as an investment banking license
under SRO 585-(1)/87 in August of the same year. In January 2002 in an
historic initiative the State Bank of Pakistan granted Meezan Bank the nation's
first full fledged commercial banking license dedicated to Islamic Banking. And
it's started working as commercial bank from 1st May 2002.
Meezan Bank stands today at a noteworthy point along the evolution of Islamic
Banking in Pakistan. The banking sector is showing a significant paradigm shift
away from traditional means of business and is catering to an increasingly
astute and demanding financial consumer who is also becoming keenly aware
of Islamic Banking. Meezan Bank bears the critical responsibility of leading the
way forward in establishing a stable and dynamic Islamic Banking system
replete with dynamic and cutting-edge products and services.
The MBL has made fundamental and significant progress forward and in doing
so has established a strong and credible management team comprised of
experienced professionals which have achieved a strong balance sheet with
excellent operating profitability.

MBL’s main shareholders are leading local and international financial


institutions including
• Pak Kuwait Investment Company

Page | 17
(The only AAA rated financial entity in the country,)
• The Islamic Development Bank of Jeddah
• Shamil Bank of Bahrain, > Islamic Development Bank, Jeddah
• Kuwait Awqaf Public Foundation
• Saudi Pak Industrial and Agricultural Investment Company (Private)
Limited.

That in addition to their strength and stability adds significant value to the
Bank through Board Representation and applied synergies.
The Bank has an internationally renowned, very high caliber and pro-active
Shariah Supervisory Board presided over by Justice (Retd.) Maulana
Muhammad Taqi Usmani, a renowned figure in the field of Shariah,
particularly Islamic Finance. He holds the position of Deputy Chairman at the
Islamic Fiqh Academy, Jeddah and in his long and illustrious career has also
served as a Judge in the Shariat Appellate Bench, Supreme Court of
Pakistan. The Bank also has a resident Shariah advisor, Dr. Imran Usmani,
who strictly monitors the regular transactions of the Bank. The board also
includes Sheikh Essam M. Ishaq (Bahrain), and Dr. Abdul Sattar Abu
Ghuddah (Saudi Arabia).

At Meezan Bank, they strive to find commonalties with the conventional


banking system with absolutely no compromise on Shariah rulings. The bank
has developed an extraordinary research and development capability by
combining investment bankers, commercial bankers, Shariah scholars and
legal experts to develop innovative, viable, and competitive value propositions
that not only meet the requirements of today's complex financial world, but do
so with the world-class service excellence that our customers demand, all
within the bounds of Shariah.

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Furthermore, the Bank has built a strong Information Technology and customer
knowledge-based focus that continues to use state of the art technology and
systems. The Bank's Corporate and Investment Banking business unit is
geared towards nurturing and developing a long-term relationship with clients
by understanding their unique financing requirements and providing Shariah
compliant financing solutions across the horizon of corporate banking and
structured finance.

The Meezan Bank is also implementing robust and aggressive strategic and
tactical initiatives on the consumer banking side. The Bank has a rapidly
growing branch network across all major cities nationwide. Providing our
customers accessibility and convenience is a prime target, within an
atmosphere and culture of dedicated service and recognition of their needs.

3.2 Operations Analysis

3.2.1 Business & Branch Network


The Meezan bank continued with aggressive branch expansion plan during
2009 and expanded to 201 branches including sub branches in 54 cities from
166 branches in 41 cities. This has further strengthened Meezan bank’s ability
to create awareness and deliver Islamic banking products and services
throughout the country.

250
120000
200
100000
150
80000
branches
100 cities 60000
40000
50
20000
0
0
2005 2006 2007 2008 2009
2005 2006 2007 2008 2009

(1) (2)
Page | 19
Total deposits at December 31st 2009 crossed Rs 100 Billion compared to Rs 70
Billion for 2008, an increase of 43%, compared to the national average of
12.63%. In addition to a large branch network, Meezan bank also has an
effective customer outreach programme that uses a team of Business
Development Officers. The branch liability sales teams have done a great job
and need to be complimented for their efforts.
----------------
(1): Branch Network (including sub branches)

(2): Deposits (rupees in millions)

The Bank is currently segmented into three Regions of Pakistan. The cities in
which the Bank presently operates are as follows:

Southern Northern
Central Region
Region Region

Hub (Lasbela) Arifwala Abbottabad

Hyderabad Bahawalpur Attock

Karachi Burewala Dera Ismail Khan

Mirpurkhas Chiniot Dina

Nawabshah Daska Gujar Khan

Quetta Dera Ghazi Khan Haripur

Sakrand Faisalabad Havelian

Sukkur Gojra Islamabad

Tando Adam Gujranwala Jhelum

Tando-Allah-Yar Gujrat Kohat

Hafizabad Mansehra
Page | 20
Jhang Mardan

Kasur Muzaffarabad

Khanpur Nowshera

Khushab Peshawar

Lahore Rawalpindi

Lalamusa Swat

Mandi Bahauddin

Mian Channu

Multan

Okara

Rahim Yar Khan

Sadiqabad

Sahiwal

Sargodha

Sheikhupura

Sialkot

3.3 Financial Analysis

Page | 21
Pakistan has continued to suffer from the fallout of the international financial
crises that began in 2008. Since the inception of Meezan bank economic
shocks were usual and banks are not exemption to these shocks. The
instability of the economy has also affected the bank to some extent. Current
year’s profit rating shows the managements’ effective policies and viability.

The financial analysis is further classified into:

• Operational analysis
• Balance sheet analysis
• Ratio analysis

3.3.1 Operational Analysis1

Despite the different economic conditions, Meezan Bank has achieved


excellent results. Several historic milestones have been achieved in 2009.

In operational analysis, we’ll mainly focus on advances, deposits, investments,


earnings per share, loans and capital details respectively. These will be on
primary focus and will be discussed in more details in the coming period.

2009 2008 Growth

Branch Network 201 Branches 166 Branches 21% ↑

Deposits Rs. 100 Billion Rs. 70 Billion 43% ↑

Profit after taxation- bank Rs. 1.025 Billion Rs. 0.621 65% ↑
Billion

Profit after tax- consolidated Rs. 1.577 Billion Rs.0.213 640% ↑


Billion

Trade Finance Business Rs. 115 Billion Rs. 93 Billion 24% ↑

Financing/advances Rs. 44188 Billion Rs.39528Billio 15% ↑

Page | 22
n

Earnings per share 1.71 1.22 40% ↑

The branch network continued its momentum of growth in operational front.


The branch network of the bank expanded from 166 to 201 in 54 cities by
adding 35 new branches to the bank’s existing network. This achievement of
establishing an extensive branch network within the span of 8 years enabled
Meezan to consolidate its dominant its dominant position in Islamic banking
sector. While the deposits and advances increased by 43% and 11%
respectively. The bank enjoyed the profit before tax of Rs 1740 Billion as
compared to the preceding year’s profit of Rs 992 Billion. The bank registered
an impressive 65% increase in profit after taxation, from Rs 621 Million to Rs.
1025 Million. In addition, the consolidated profit after tax increased at the rate
of 640% respectively. The bank has been cautious in increasing its financial
portfolio due to the uncertain economic and political environments of the
country. The total financial portfolio grew by only 15% during the year
respectively. The bank’s equity stood at Rs. 9091Billion at the end of year
2009, increase of 32% over the previous year.

Earnings per Share

Due to increase in profitability, the earnings per share increased from Rs. 122
to Rs 1.71 per share, reflecting an increase of 40%.

Dividend

The board has recommended to issue 5% bonus shares (2008:8.6%) for year
2009 continuing the bank’s unbroken payout record since the date of listing on
the stock exchange. This will increase the bank’s paid up capital to Rs 6.98
Billion

Page | 23
Right Shares

The paid up capital of bank was increased to 6.6 Billion during the year after
taking into account the proceeds of the right issue of Rs 1.7 Billion approved
by Rating Company, an affiliate of Japan Credit Ratings Company, maintained
the Bank’s long term entity rating at A+ and upgraded the outlook from
“stable” to “positive”. The short term rating has been maintained at A1.

Future Outlook and Strategy

The BOD devised a strategic plan in 2006 for the year 2007-2011. One of the
key features of the plan was to aggressively grow the branch network to 200
branches by the end of 2010 which is already achieved. The highlights of the
strategic plan for the period of 2010 to 2014 are to:

• Improve systems and control


• Maintain growth without any compromise on Shariah compliance
• Continue to build the branch network
• Sustained investment in technology
• Focus on service quality
• Improve staff training

The bank will strive to build high quality financial portfolio. The bank is in the
process of installing the latest T-24 technology to all of its branches. The
deployment is in progress and the entire network will be switched to T-24 by
the end of this year.

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1. Financial Report 2009
3.3.2 Balance Sheet Analysis2

Page | 25
-
2. Annual Report 2009

Page | 26
The total assets for the year 2009 amounted to Rs. 124182 Million; financing of
the bank had the share of Rs. 44189 Million, followed by the investments made
by the bank of Rs. 23291 Million. The total liabilities of the bank amounted for

Page | 27
Rs. 114998 Million for the year 2009, of which the total deposits and other
accounts amounts to Rs. 1003331Million setting 92% of the total liabilities of
Meezan bank. The shareholder’s equity remained 9091 Million in 2009 after
the increase of 31% from 2008’s equity respectively. There was an increase of
26%, 9091M, in the share capital of Meezan bank as compared to the 2008’s
figures (6341 M).

3.3.3 Ratio Analysis

A ratio analysis is very important measure to judge the performance of an


organization and to compare that performance ratio with previous year ratio
and future of the position of the organization. In this portion we’ll analyze the
important financial ratios of Meezan Bank, also the comparative results in
yearly form are depicted to study the trend of ratios and reasons for increase
or decrease shall be explained.
Return on Equity
Return on Equity = Net Profit after Tax / Stockholders’ Equity

2009 = (1025351/9090535) x 100 = 11.28%

2008 = (621187 / 6341097) x 100 = 9.80 %

2007 = (963501 / 5719910) x 100 = 16.84 %

2006 = (604251 / 4756409) x 100 = 12.70 %

2005 = (419455 / 2970940) x 100 = 14.12 %

20
15
10 ROE(%)
5
0
2009 2008 2007 2006 2005
ROE(%) 11.28 9.8 16.84 12.7 14.12

Page | 28
This ratio shows the profit earned by the company as a percentage of the

amount of equity/ capital invested by the company in the business. I have

analyzed last five years ROE to have a better understanding of the company’s

ratio of investment in the business. In the year 2005, this ratio was 14 percent

but this ratio seems to fluctuate in the later years. In the year 2007, this ratio

improved to 16 percent but again in the year 2008 it is declined to about 10

percent. This is because the company has increased the amount of capital but

the net profit after tax could not be increased according to that ratio. However

in the year 2007, the ratio was increased to the maximum of all the previous

years in spite of an increase in the stockholders’ equity. This is because the

net profit was increased proportionately to that. However in the year 2009, the

situation is not very bad the bank as compared to the last year’s ratio. There is

a slight increase of 1.48% in the return on equity in the year 2009 which

means the amount of profit increased.

Return on Assets
Return on Assets = Net Profit after Tax / Total Assets

2009 = (1025351/124181734) x 100 = 0.82 %

2008 = (621187 / 85276070) x 100 = 0.73 %


2007 = (963501 / 67178559) x 100 = 1.43 %
2006 = (604251 / 46438623) x 100 = 1.30 %
2005 = (419455 / 30675822) x 100 = 1.37 %

Page | 29
2

1.5

1 ROA (%)

0.5

0
2009 2008 2007 2006 2005
ROA (%) 0.82 0.73 1.43 1.3 1.37

Return on assets is the ratio that shows the percentage of net profit after tax

to total assets. This ratio is also called the return on investments because

investment by the company in the business is always in the form of different

types of assets. This ratio of Meezan Bank Limited shows that the return

earned by the bank on its total investments is fluctuating from year to year.

This is because the bank has continuously increasing its investments in the

total assets but against that investment the bank is not earning sufficient

amount of profits. The situation is somewhat better in the year 2007 where

because of highest of all the years’ profits, the return percentage is 1.43. The

bank should consider the situation and should try to rectify this.

Net Spread Margin


Net Spread Margin = Net return on Loans and Advances / Total

Assets

2009 = (3612968/124181734) x 100 = 2.7%

2008 = (2997559 / 85276070) x 100 = 3.52 %


2007 = (1685888 / 67178559) x 10 = 1.98 %
2006 = (1117229 / 46438623) x 100 = 1.66 %
Page | 30
2005 = (729831 / 30675822) x 100 = 2.38 %

2 Net SpreadMargin(%)

0
2009 2008 2007 2006 2005

Net SpreadMargin(%) 2.7 3.52 1.98 1.66 2.38

This ratio shows the gross earnings on financing less the return paid to the

deposit holders as a percentage of total assets. This is some sort of gross profit

ratio because the earning on financing is the main revenue of the bank where

the return paid to deposit holders is the cost of those funds. Here this ratio

shows that the situation was better in the year 2005 but in the year 2006 it is

again declined. Then in the year 2007 it again became better while in the year

2008 surprisingly this ratio is the highest. Although the net profit after tax in

this year is lesser than that of the previous years but this ratio shows that the

bank has become efficient in its core operations and the problem lies with its

other income and other expenses.

Net Other Income Margin

Net Other Income Margin = Net Other Income / Total Assets

2009 = (1597804 / 124181734) x 100 = 1.29 %

Page | 31
2008 = (707908 / 85276070) x 100 = 0.83 %

2007 = (1347893 / 67178559) x 100 = 2.01 %

2006 = (690561 / 46438623) x 100 = 1.49 %

2005 = (622151 / 30675822) x 100 = 2.03%

2.5
2
1.5
Net Other Income Margin(%)
1
0.5
0
2009 2008 2007 2006 2005

Net Other Income 1.29 0.83 2.01 1.49 2.03


Margin(%)

Net other income margin is the percentage that shows the return earned by

the bank from the sources other than its core operations. Keeping in view the

intense competition among the banks today, a bank must seriously

concentrate on the other sources because in this sheer competition a bank is

not in a position to earn premium revenue on the finances provided. For

Meezan Bank, this ratio shows that there have been the fluctuations in other

income from year to year but the situation is very bad in the year 2008 where

this ratio is the minimum of all the previous years. Due to this reason the

overall performance of the bank declined that year.

Page | 32
Earnings per Share
Earnings per Share = Net Profit after Tax / Number of Shares

Issued

2009 = (1025351/6650048) = Rs.1.71 per


Share

2008 = (621187 / 492596.1) = Rs.1.26 per


Share

2007 = (963501 / 377989.7) = Rs.1.96 per


Share

2006 = (604251 / 377989.7) = Rs.1.88 per


Share

2005 = (419455 / 203658.2) = Rs.1.46 per


Share

2.5

1.5
EarningsPer Share
1

0.5

0
2009 2008 2007 2006 2005

EarningsPer Share 1.71 1.26 1.96 1.88 1.46

EPS is the ratio that measures how many rupees the company has earned

against one ordinary share issued to the shareholders. The greater is the ratio,

the better it would be. It is because the company will have the greater amount

of profits per share to pay as dividend to the shareholders. This ratio is the

most important ratio from the shareholders’ point of view because they also

want to know that how much the company is going to pay them against the

Page | 33
number of shares they are having. For Meezan Bank, this ratio improved from

the year 2005 to the year 2007 with a little exception in 2005 but in the year

2009 there is a slight increase of Rs.1.71 per share which is because the

company has issued bonus shares to its shareholders as a stock dividend.

Stock Dividend Percentage


2009 = 5%

2008 = 8.6 %

2007 = 20 %

2006 = 10 %

2005 = 16 %

25
20
15
StockDividendPercentage
10
5
0
2009 2008 2007 2006 2005

StockDividend 5 8.6 20 10 16
Percentage

Over the years from 2004 to 2008, the bank has been paying the stock

dividend instead of cash dividend. Although this is not a good sign but we can

say that since this is because of the consent of the shareholders that’s why it

is compromise able. This ratio shows that the bank has been paying sufficient

amount of dividend to the shareholders from the year 2005 to the year 2007

but in the year 2008 this ratio declined 11.4%. This was because in the year

2008, the bank had not earned a handsome amount of profits to justify the

Page | 34
larger stock dividends. In the year 2009, the situation is lot more alarming the

already declining dividend further declined to 5% which is not a good sign

because the bank, as compared to last year’ profit rate, has earned growth of

65% in 2009 but still the amount of dividend is way too low.

Market Price per Share


2009 = Rs.15.74 per Share

2008 = Rs.21.48 per Share

2007 = Rs.38.55 per Share

2006 = Rs.19.50 per Share

2005 = Rs.23.25 per Share

50
40
30
Market Price Per Share (Rs)
20
10
0
2009 2008 2007 2006 2005

Market Price Per Share 15.74 21.48 38.55 19.5 23.25


(Rs)

The market price per share has been fluctuating from year to year but the

overall impact on the market price is encouraging. However we suggest that

the bank should stop paying stock dividends as this increases the number of

shares in circulation and the ultimate result will be the decline in the market

price.

Page | 35
Price Earning Ratio
Price Earning Ratio = Market Price per Share / Earnings per

Share

2009 = 15.74 / 1.71 = 9.20

2008 = 21.48 / 1.26 = 17.03

2007 = 38.55 / 1.96 = 15.12

2006 = 19.50 / 1.88 = 10.51

2005 = 23.25 / 1.46 = 15.92

20

15

10 Price EarningRatio

0
2009 2008 2007 2006 2005

Price EarningRatio 9.2 17.03 15.12 10.51 15.92

The price earnings ratio is commonly used to assess the owner’s appraisal of

share value. This ratio measures the amount that investors are willing to pay

for each rupee of company’s earnings. The level of this ratio indicates the

degree of confidence that investors have in the firm’s future performance. The

highest the P/E ratio greater will be the investor confidence in the company.

The figures calculated above show that the investors’ confidence in the

company is increasing year by year as this ratio is increasing from earlier years

to the later years. In the year 2006, this ratio was decreased but soon after

that this ratio was improved in 2007 and became even better in 2008.

Page | 36
Net Profit before Tax Margin
2009 = 14.87 %

2008 = 13.21 %

2007 = 21.43 %

2006 = 22.98 %

2005 = 30.42 %

40

30

20 Net Profit Before Tax(%)

10

0
2009 2008 2007 2006 2005
Net Profit Before Tax(%) 14.87 13.21 21.43 22.98 30.42

Net profit before tax margin represents the profit earned before tax as a

percentage of gross revenue. The need to calculate this ratio is that the actual

performance of the bank is measured before tax and not after tax. So this ratio

shows that the profit earned by the bank increased in the year 2005 but in the

later years this ratio continued to decline and in the year 2009 this ratio was

only 14.87 percent but it was better as compared to that of year 2008.

Net Profit after Tax Margin


2009 = 8.76 %

2008 = 8.27 %

2007 = 16.27 %

2006 = 17.80 %
Page | 37
2005 = 20.15 %

25

20

15
Net Profit After Tax(%)
10

0
2009 2008 2007 2006 2005

Net Profit After Tax(%) 8.76 8.27 16.27 17.8 20.15

Net profit after tax margin was about 21 percent in the year 2005 whereas it

started decreasing gradually in the subsequent years. The main reason for this

decrease in the net profit was increase in the other expenses and also because

of an increase in the amount of taxation. Although the better measure for the

efficiency of the management is the net profit before tax margin but since that

profit is not on the disposal of the management so it is better to calculate the

net profit after tax margin so that the disposable income of the organization

should be measured. And this ratio shows that the efficiency of the

organization is decreasing year by year. There is only 0.49% increase in the

year 2009 which is not a good sign as this ratio shows the efficiency of the

organization.

Operating Expenses to Income


2009 = 72.15 %

2008 = 77.24 %

2007 = 71.21 %

2006 = 73.40 %
Page | 38
2005 = 67.71 %

80

75

70 OperatingExpensesto Income (%)

65

60
2009 2008 2007 2006 2005
OperatingExpenses 72.15 77.24 71.21 73.4 67.71
to Income (%)

The operating expense to income ratio shows that the organization has been

able to control its operating expenses over the year from 2005 to 2009. This

ratio was 67.71 percent in the year 2005 and in the year 2009 it is ended with

a little increase to 72.15 percent. In spite of the stability of this ratio the net

profit margin of the bank declined to a considerable extent. This was because

of an increase in the other expenses of the organization. So the bank should

focus to decrease its operating expenses so that its net profit should be

improved.

Financing to Deposit Ratio-Net


2009 = 44.04 %

2008 = 51.62 %

2007 = 56.90 %

2006 = 65.68 %

2005 = 73.86 %

Page | 39
80

60

40 FDR(%)

20

0
2009 2008 2007 2006 2005
FDR(%) 44.04 51.62 56.9 65.68 73.86

Financing to deposit ratio is perhaps the most critical ratio for a commercial

bank. This ratio represents the amount extended as a loan by a bank to its

clients compared to deposits that the bank receives from its deposit holders.

As per the definition of a commercial bank, the bank is an institution that

receives money from those who have it spare and lends it to those who are in

need of them. This ratio of Meezan Bank has been declining from the year

2005 to the year 2008. The bank should seriously consider this ratio because

these are the core operations of the bank. If the bank could not fully utilize the

funds received from the deposit holders it would have to suffer a loss of its net

income.

Book Value per Share


Book Value per Share = Stockholders’ Equity / No. of Common Shares

Issued

2009 = 9090M / 6650 M = Rs.1.36 per Share

2008 = 6341 M / 4925 M = Rs.1.29 per Share

2007 = 5720 M / 3779 M = Rs.1.95 per Share

Page | 40
2006 = 4763 M / 3779M = Rs.1.97 per Share

2005 = 3025 M / 2036 M = Rs.1.49 per Share

2.5

1.5
BookValue Per Share
1

0.5

0
2009 2008 2007 2006 2005
BookValue Per Share 1.36 1.29 1.95 1.97 1.49

Book value per share is the ratio that shows that how much value of assets the

bank has to pay to its shareholders in the event of its winding up. If we

compare the book value per share with the market value per share we see that

although the book value per share is much lesser than the market value even

then the shareholders are willing to pay much higher price for the share of the

bank. It shows that the shareholders have confidence in the company that the

company will the prosperous in the future. However since the market price has

declined recently, therefore the company should take corrective actions so

that the confidence of the shareholders should be maintained.

3.4 Human Resource Assessment

3.4.1 Board of Directors

The Board of Directors of Meezan Bank are:

• H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman)


(Minister of Housing, Ministry of Housing, Kingdom of Bahrain)

• Mr. Naser Abdul Mohsen Al-Marri (Vice Chairman)

Page | 41
• Mr. Jassar Dakheel Al-Jassar

• Mr. Rana Ahmed Humayun

• Mr. Mohammed Azzaroog Rajab

• Mr. Ahmed Abdul Rahim Mohamed

• Mr. Nawal Ahmed

• Mr. Alaa A. Al-Sarawi

• Mr. Mian Muhammad Younis

• Mr. Irfan Siddiqui (President & Chief Executive Officer)

• Mr. Ariful Islam (Chief Operating Officer)

3.4.2 Management team

The Meezan Team

Meezan Bank is managed by a team of professional bankers committed to the


cause of Islamic Banking. This single unifying factor unleashes the tremendous
power of a dedicated and motivated team committed to fulfilling the Vision
and Mission of this Bank.

The business segments of the Bank are:

• Corporate Banking
• Investment Banking
• Commercial Banking and SME
• Consumer Banking
• Treasury & Financial Institutions
• Asset Management (managed through a subsidiary Al Meezan
Investment Management Limited.)

Page | 42
• Retail Banking is organized in seven regions across Pakistan, namely
South-I Region, South-II Region, South-III Region, Lahore Region,
Faisalabad Region, Multan Region, and North Region.

3.4.3 Organizational Structure

Page | 43
3.4.4 Shariah Board

• Justice (Retd.) Muhammad Taqi Usmani Chairman


• Dr. Abdul Sattar Abu Ghuddah
• Sheikh Essam M- Ishaq
• Dr.Muhammad Imran Usmani

3.4.5 Executive Committee


• Naser Abdul Mohsen Al Marri

Page | 44
• Zaigham Mahmood Rizvi
• Mohammad Abdul Rehman Hussain

3.4.6 Audit Committee


• Zaigham Mahmood Rizvi
• Mohammad Abdul Rehman Hussain
• Irfan Siddiqui

3.4.7 Company Secretary


• Gohar Iqbal Shaikh

3.4.8 Advisory
• Dr. Muhammad Imran Usmani
Shariah Advisor
• Zafar Aziz Osmani
Human Resource Advisor

3.4.9 Legal Advisor


• Rizvi, Isa, Afridi & Angell

3.4.10 Auditors
• A.F. Ferguson & Co

Everybody's saturated with the marketing hype of next-generation consoles. They


are wonderful, but the truth is that they are as powerful as a high end PC is right now.

Page | 45
John Carmack

Marketing is not the art of finding clever ways to dispose of what you make.
It is the art of creating genuine customer value."

-Philip Kotler

Marketing is the science and art of exploring, creating,


and delivering value to satisfy the needs of a target
market at a profit. Marketing identifies unfulfilled needs
and desires. It defines, measures and quantifies the size
of the identified market and the profit potential. It
pinpoints which segments the company is capable of
serving best and it designs and promotes the appropriate
products and services.

Philip Kotler

3.5 Marketing Analysis

In today’s highly competitive environment, marketing plays very important


role and banks, like Meezan Bank Ltd, that has remarkable penetration in the
market, need to use their market plan and strategies effectively to attract
more customers.

Page | 46
As we all know banking sector falls in the category of services. Process of
Marketing is not confined to the marketing of products only. As of 2003, there
is a major shift of attention noticed among the developed countries towards
services sector. Unlike traditional 4 P’s of marketing, services marketing
includes 3 additional P’s; Process, People, Physical evidence to take into
account the special nature of services marketing.

Therefore, I am going to apply the “7 P’s of Services” in order to analyze the


marketing strategies adopted by Meezan Bank.

3.5.1 First P- Service Product

Major Product Line:

Now banking products has so much deepened that the customers have to do
some basic analysis before pursuing any product. Keeping in view the intense
competition and the diverse range of banking products available in the market,
the product line offered at MBL is presented as under:

 Riba Free Meezan Providence


 Riba Free - Certificates of Islamic Investment
 Riba Free - Monthly Musharakh Certificate

 Riba Free - Dollar Saving Account


 Riba Free - Rupee Saving Account
 Riba Free - Current Account
 Car Ijarah - Islamic Car Financing

Meezan bank was established under the Islamic principles therefore the entire
product portfolio is Shariah based. Financing is based on the following modes
laid out by the Shariah

Page | 47
Islamic Mode of Financing

 Musharakh
 Mudarbah

 Murabah
 Salam
 Istisna
 Ijarah

Market Segments

There are different market segment and strategies for different banks as per
their top management to target but if we have to draw a generalized segment
format for bankers, the segments would be:

• Individuals

• Salaried persons

• Sole proprietor

• Retailers

-----------------------------------------------------------------------------------------------------------

• Detailed overview of the products offered is given in the Appendix A

• Explanation of the Islamic Modes of financing is given in the Appendix G

• SME’s

• Corporate Bodies

• Trusts

• NGO’s

Page | 48
• Autonomous and semi-autonomous bodies

• Partnerships

• Clubs

• Societies

• MNC’s

Target Market:

• All the religious sects.

• Followers of Maulana Taqi Usmani

• Age limit: 18- onwards

• Middle class

3.5.2 Second P: Service Price

Pricing is the crucial “P” of services marketing because it determines the


revenue that a company’s services will earn. Pricing has several components
and there are three basic criterion involved in pricing a service3:

---------------------

3. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill


Publishing Company Limited

• Cost- sum of all the costs

• Competition- competitive pricing

• Objectives- strategic considerations

Page | 49
Pricing strategy devised at MBL is objectives based. The Meezan bank’s
objectives are to increase its market share in the market. The prices set for its
products and/or services are very economic and minimal in nature as
compared to the other market players of Islamic banking category.

3.5.3 Third P: Place

Many experts say that location is the key to successful marketing of services.
This is because the customer is often present at the same place where the
service “manufactured” and delivered.

Customer research has shown that in many cases customers will choose a
conveniently located supplier of services over the best service provider located
far away. Therefore a captive audience of customers could be built up by a
well located retailer of consumer goods, or a service4- bank.

The placement in banking sector plays a vital role. The availability of branches
in the business areas and in the areas where it is convenient for the customers
to reach and get their desired banking services is very crucial. MBL has
strategically designed the placement strategies in order to reach maximum
number of customers. But the strategy is little flawed.

------------

4. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill


Publishing Company Limited

There is a sum total of 37 branches5 running currently in Lahore city. In spite of


this branch number, the branch network is weaker. The customer has to wait
too long in order to get its desired service if his/her account is in some, lets
say, MBL (XYZ) branch and he has tried to get services from, for instance, MBL
(PQR)branch.

Page | 50
Apart from this the location of branches is questionable. In some areas the
branches are located closely e.g. NGT branch and Model town branch. Whereas
in some locations the branches are located far away this may be a negative
mark on the placement strategy of MBL.

There are total of 209 branches operating within the 54 cities throughout the
country. This is no doubt a good sign as compared to the branch network of
Meezan Bank’s competitors.

3.5.4 Fourth P: Promotion

Promotion is vital for any business. But many service businesses do not spend
adequately on promotional activities. The ways through which Meezan Bank
Promotes itself includes:

• Electronic media

• Print media

Electronic Media

Television is the best option to reach a wide audience in an instantaneous


manner, not only because it is cost effective but also in terms of impact and
visual appeal, television is the medium that has the best characteristics.

------------------------------

5: Branch Network- Financial Report

Television ads for MBL mainly try to emphasize the importance of Islamic
Banking and the services it offers can help you in the time of need which is
totally riba free. Various business channels, like business plus, and commercial
channels, like Indus vision, displays the TV ads respectively.

Page | 51
Another way through which Meezan Bank promotes itself electronically is
through its website, which is designed in an effective manner with detailed
information, so that visitors and the prospective customers can easily get
know how about its available products and/or services.

Print Media

After the selective advertising in the television another medium used by


Meezan bank to promote its products and services is Print media respectively.
Print media loosely consists of major newspapers in the country and few
business magazines.

Moreover, Pamphlets are displayed at the branch level to promote forthcoming


products to the potential customers respectively and sometimes billboards are
used in the commercial areas.

3.5.5 Fifth P: People- Love Lock

As most services are dependent on people to deliver them successfully, this


element of “people” is considered to be a key to a service business. Like other
services, businesses “people” plays very important role in the success of the
banking industry.

The employees at MBL are fully trained professionals who know how to deal
with the messy customer. They are capable of handling stress involved in
keeping large number of people (customers) happy while not losing their own
temper. They are given suitable level of empowerment required to perform
their various job related tasks. Apart from that they are continuously at on job
training in the form of job rotation and job enrichment. Apart from this the
employee turnover rate is very high because of the job dissatisfaction and the

Page | 52
over burden of work. The salaries offered at MBL are another job dissatisfier
that is leading to the high rate of employee turn over.

3.5.6 Sixth P: Service Process

This P involves the number of backend or frontend processes involved in


delivering the final Service to the end customers. In the banking industry, this
P is of huge importance. The very successful example in banking industry is
the SINGLE WINDOW CONCEPT.
At MBL, the processes involved in the delivery of the service are little complex.
In order to get the desired services, the customers have to wait too long. For
instance, if someone wants to get the information about the TD’s the front
desk people let him or her wait too long instead of guiding them to the officer
concerned. This weak point should be overcome because it may become the
reason of customer(s) to switch their bank.

3.5.7 Seventh P: Physical Evidence-Servicescape

Servicescapes is a term used by two American researchers in the field of


service marketing. Philip Kotler has used the term Atmospherics to describe
the effect of servicescape. The service servicescape creates a mood, a longing,
an attraction or a desire to visit the service provider, in the context of a service
purchase.

The feelings evoked in a customer can be affected by the physical aspects of


the building housing the service provider, its ambiance, its level of cleanliness,
the dress worn by the service provider’s employees, and even the number and
type of customers present when he enters or avails of the service being
provided.

Page | 53
Servicescape or the design of the MBL branch (es) is carefully and strategically
designed to attract the potential and actual customers. The atmospherics I
have found at MBL, New Garden Town Branch, were little clumsy. The branch
size was small and the traffic was heavy. This was one of the reasons of
making the PROCESSES slow and keeping the customer(s) at WAIT. Apart from
that the branch had many indoor plants, the well dressed staff, cleanliness and
abaya worn by female staff creates Islamic impact and charisma for the new
comers.

Page | 54
Chapter 4

4.1 Environmental Analysis

4.1.1 Growth rate for the entire industry

Overview

The banking system effectively coped with several challenges emanated from
the economic slowdown both at home and abroad due to strong resilience built
over the years and effective regulatory and supervisory regime. According to
the SBP’s quarterly performance review6 of the banking system for the quarter
ended December 31, 2008 asset base of the banking system grew 2.6% over
the quarter to reach Rs 5,653 Billion, well-supplemented by 3.6% and 7%
growth in deposit and shareholder’s equity, respectively.

The liquidity profile of the banking system remained constrained for most part
of the quarter. However, post quarter statistics indicate a significant easing of
the liquidity profile because of gradual increase in deposits and reduction in
bank’s advances.

The inline with the deterioration in macroeconomic indicators, the credit risk
remained high during the quarter. However, satisfactory earnings enabled the
system to cover these loan losses. The NPLs are covered by loan loss
provisions to the extent of 75%, but on account of these increased loan
provisions in absolute amounts, earnings of the banking system came under
pressure and remained lower than the last couple of years. Return on assets
(ROA) was 1.2% for the year 2008 vs 1.5% for 2007 and 2% for 2006. Overall
solvency position of the banking system showed an improvement.

-----------------

Page | 55
6. The growth rate of entire banking industry is compositely gained from
SBP’s quarterly performance review of the banking system for the quarter
ended December 31 2008 and the 1st quarter ended March 31 2009

The Capital Adequacy Ratio (CAR) under Basel-II framework, which also
accounts for the operational risk charge, improved to 12.2% (12.6% for
commercial banks) due to fresh injection of equity and satisfactory earnings.
The CAR improved to 13% jointly for banks and development finance
institutions (DFIs). “Banking system shows strong resilience to unusual shock
in major risk factors. This strength of the banking system largely came from
the prudent regulatory and supervisory regime strengthening the risk
management and governance standards in banks as well as the improved
solvency positions7.”

“Going forward, due to constrained economic environment both at home and


globally, the credit risk, earnings and growth rates of the banking system are
likely to remain under some strain in coming quarters,” the report anticipated.
The banking system has gained stability over the last couple of years through
sustained growth in asset and customer-base. Currently, a decline in the
demand for credit from different sectors was witnessed. Banks, as a result, had
to divest their asset mix from loans towards investments. Similarly, further
tightening of monetary policy squeezed the surplus liquidity from the market.
(SBP 1HFY08)

4.1.2 Performance of Islamic Industry8

The Islamic Banking Institutions (IBIs) maintained their profitability, though


with slight deceleration during the quarter under review. However, growth in
assets remained higher than that of the conventional banks, thus increasing
share of IBIs in the system.

Page | 56
---------------
7. Business Recorder, March 24, 2009

8. SBP, Quarterly performance Review September 2009

The balance sheet composition with slight changes remained more or less
stable during the quarter. On the asset side, significant increase was observed
in investments and interbank lending, while financing portfolio contracted.
Deposits of the Islamic Banking increased, despite a decline in deposit base of
the banking system. ‘Due to financial institutions’ also increased marginally
after declining over a couple of quarters. Deposit mix of Islamic banks, due to
decline in deposits from financial institutions tilted toward the customer
deposits.

Analysis of uses of funds shows a consistent increase in investments of IBIs.


During the quarter under review, investments registered a healthy growth of
21 percent. Most of the increase in investments resulted from 4th auction of
GoP Ijara Sukuk of Rs 14.4 billion in September, 2009. Periodic issues of Ijarah
Sukuk have contributed towards the resolution of key issue i.e. lack of
alternative avenues for Islamic banks. So far GoP Ijara Sukuk of Rs 42.2 billion
have been issued, which now represent 65 percent share in investments of the
Islamic Banks. In line with general trend, Financing of Islamic banks decline by
4.7 percent in Sep-09 and its share in overall assets decreased to 41 percent.

The composition of financing shows a substantial increase in share of Ijarah


and a moderate increase in Istisna. Other modes of financing declined over the
quarter, with considerable decline in Mudarbah and Salam. Group-wise
analysis shows that decline in financing was more pronounced in IBIs.

Page | 57
The financing portfolio of IBIs is concentrated in corporate and consumer with
smaller shares of SMEs and commodity finance, while financing to agriculture
is almost negligible. There is a strong potential for the IBIs to expand into SME
and Agriculture sector. Keeping in view the potential and demand for Agri-
finance and to promote Islamic Financing in this area, SBP has issued
‘Guidelines on Islamic Finance for Agriculture’.

The liquidity position of IBIs improved over the quarter under review, as the
decline in Financing and increase in deposit base led to further lowering in
Financing to Deposits ratio (FDR).

Increasing financing risk continues to pose challenge to IBIs. Increase in NPFs


coupled with drop in financing led to deterioration in asset quality indicators.
Since NPLs increased mainly in Loss category, which attract higher
provisioning, provision coverage ratio improved over the quarter.

Sector wise analysis shows that textile, chemical and individuals have the
major share in financing. However, infection ratio is quite high for cement,
electronics and individuals. While NPFs of individuals are generally adequately
secured through collaterals, low infection ratio for textile sector vis-à-vis
conventional banks reflects upon the better risk management of IBIs.

The year to date profits of IBIs remained higher than the results of
corresponding period of last year, though there was significant increase in
provisioning for NPFs. However, Islamic banks saw a marginal decline in ROA
due to shift in the mix of earning asset towards low-return assets. Incidentally,
major part of IBIs profitability is coming from IBIs of conventional banks and a
couple of Islamic banks. Islamic banks, therefore, need to improve on their
operational efficiency for keeping their competitiveness in the industry in
terms of both market share and profitability.
Page | 58
4.2 Competition Analysis

4.2.1 Major Competitors

The augmentation in the banking industry, specifically Islamic banking


segments, of Pakistan has directed to an increase in the number of banks both
domestically and internationally to be established and create a competitive
industry. For MBL its competitors come in the form of a mixture of domestic
and international banks established in Pakistan.

Meezan Bank limited feels that its major competitors are as follows:

• Bank Islami Pakistan Limited

• Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations

• Dubai Islamic Bank Pakistan Limited

• Dawood Islamic Bank Limited

• Emirates Global Islamic Bank

It claims that it has a cut throat competition with:

 Bank Islami Pakistan Limited

 Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations

4.2.2 Their Introduction

4.2.2.1 Bank Islami Pakistan Limited9

Bank Islami Pakistan Limited (“Bank Islami”) is located in Karachi, Sindh,


Pakistan. Bank Islami Pakistan received an Islamic commercial banking license
from State Bank of Pakistan on March 31, 2005. It is the first financial
institution in Pakistan that is going to focus on Wealth Management as the core

Page | 59
area of business. It intends to offer retail banking products, proprietary and
third party product,
------------------
9. http://www.bankislami.com.pk/about_us/

and integrated financial planning services. The Bank is expected to start its
operations in the last quarter of year 2005.
The epochal idea of Bank Islami was conceptualized by Jahangir Siddiqui &
Company Limited and DCD Group in late 2003. Mr. Hasan A. Bilgrami was
appointed as Adviser to the sponsors on March 16, 2004 to formalize the idea.
He presented the concept paper of Bank Islami to sponsors on March 24, 2004.
A detailed business plan was then prepared and a formal application was
submitted to the State Bank of Pakistan on May 26, 2004. On September 26,
2005, Dubai Bank joined the Sponsors and became one of the founding
shareholders of Bank Islami by investing 18.75% in the total Capital.

4.2.2.2 Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations10

Albaraka Banking Group is the biggest Islamic banking group listed on the
Bahrain Stock Exchange in terms of capitalization. It has been rated by
Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail,
corporate and investment banking and treasury services strictly in accordance
with the principles of the Shari’ah. The authorized capital of ABG is US$1.5
billion, while the total equity amounts to about US$ 1.59 billion.

With assets of US$11.2 billion, the Group has a wide geographical presence in
the form of subsidiary banking Units in 12 countries, which in turn provide their
services through more than 250 branches. These banking Units are Jordan
Islamic Bank/ Jordan, Al Baraka Islamic Bank / Bahrain, Al Baraka Islamic Bank /

Page | 60
Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al
Baraka Bank Ltd / South Africa,

10. http://www.albaraka.com.pk/about/index.php

Al Baraka Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/


Tunisia, The Egyptian Saudi Finance Bank/Egypt, Al Baraka Turk Participation
Bank/Turkey, Albaraka Bank Syria (under establishment), and representative
office, Indonesia.

Currently operating with 29 branches in 17 major cities of the country, AIB


offers a wide array of Islamic financing products such as Murabaha, Ijara,
Musharaka and Islamic Export Refinance, etc., catering to a diverse cross-
section of the economy, including the Corporate, SME and Consumer sectors.
Moreover, various Shari’ah compliant deposit schemes are available for
customers to invest their funds in, along with a variety of other ancillary
services such as online banking, ATM/debit card, safe deposit lockers and
utility bill payments etc.

4.2.3 Their market shares

There are many criteria on the basis of which we can assign the market share
of the banks in the banking industry. Some calculate it on the basis of its
deposits, while others on the basis of its customer base. Likewise some
analysts calculate the market share on the basis of assets and equity one may
have.

Here I have used the data provided by the central bank i-e State Bank of
Pakistan, for the calculation of market shares of MBL and its competitors. The
Page | 61
report published by SBP “Quarterly performance Review September 2009” is
used for overall values of banking sector. There can be different criteria for this
calculation but I am considering the bank’s deposits and advances for this
purpose.

According to the latest calculations of SBP, advances of the Islamic banking


sector stood at Rs133,745 Million, total customer deposits of the Islamic
banking sector reached at Rs. 244,792 Million respectively.

Name of the Banks Assets Advances Deposits Equity in


millions

Meezan 108,079 37,238 87,681 8,867


Dib Limited 32,607 20,019 25,451 5,262
Dawood islamicLimited 13,777 4,664 7,370 5,051
Al Baraka 25,604 14,192 19,574 2,194
Bank Islami 29,094 7,248 22,861 4,823
Emirates global Islamic bank 20,185 9,739 14,820 3,659

Meezan Bank Limited is the first and largest Islamic Bank of Pakistan with a
204-branch network presence strategically spread across 54 major cities in the
country. The Bank has a cumulative annual growth rate of 60% over a period
of 5 years and currently enjoys 42% market share in the Islamic banking
industry. Meezan Bank has established a strong and credible management
team comprised of experienced professionals, which have achieved a strong
balance sheet with excellent operating profitability, including a capital
adequacy ratio that places the Bank at the top of the industry11.

4.3 Technology Analysis

Page | 62
4.3.1 Technical methods that affect the industry

Technology is having a major impact on the banking industry. Direct deposits


allow companies and governments to electronically transfer payments into
various accounts. Debit cards, which may also be used as ATM cards,
instantaneously deduct money from an account when the card is swiped
across the machine at a stores’ cash register. Electronic banking by phone or
computer allows customers to access information such as account balances
and statement history, pay bills and transfer money from one account to
another.

----------------

11. www.meezanbank.com/NewsDetail.aspx?iNewsID=2

Advancements in technology have also led to improvements in the ways in


which banks process information. The use of cheque imaging allows banks to
store photographed cheques on the computer instead of paper files.

Some of the technical methods that are used and affect the banking industry
are as follows:

• Availability and growing use of credit scoring software allows


lending departments to approve loans in minutes, rather than days
(already in use of American bankers). It is a perfect example of
electronic decision maker; it can give relief to the credits
department personnel by way of auto calculating the manual
calculations by single click.

• Computer networking within branch level is also eroding traditional


barrier between financial service providers (bank) and technology
firms which are ultimately boosting revenue for banking and
telecom industry.

4.3.2 Innovation

Page | 63
Innovation is a necessity in contemporary times, as it is becoming one of the
reasons of competitive advantage in banking industry. It helps banks to
compete in today’s highly technologically driven industry. Some of the
innovations that the banking industry is looking forward are:

• Advanced means of connectivity between branches through better


and advanced software and hardware to maintain connections
within banks in remote areas and during natural calamities in
Pakistan. This includes better connection through WiFi or WiMax

• Credit scoring software which allows lending departments to


approve loans in minutes, it provides the major edge to credit
officers in Pakistani scenario.

• Information systems in banks that are more protected than prior to


eliminate any probability of fraud and which are even more users
friendly to help employees to use them not only to make key
decisions but also satisfy customer need in a more well-timed
manner.

• Advancements in online transfer from inter branch to an even


more helpful interbank transfers.

• Automation of simple operations task that will not only improve


efficiency but also reduce costs like stationary and courier
services, like automation of cheque books etc.

• Digital imaging of cheques is also an innovative technology for


Pakistani bankers to follow and introduce paper free environment.

• Banks in Pakistan are trying internet, mobile and telephone


banking in its operations to major extent so that customer driven
banking can be implemented.

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Chapter 5

5. How & Why I have selected Meezan Bank?

5.1 Reason for Selecting Meezan Bank

Few decades back, people had no other option to go for except commercial
banking. Some of the reasons for this are that at that time many people were
ignorant of the Islamic values n principles regarding the interest –fixed- paid by
the commercial banks. Secondly, even if they had any information or
knowledge and exposure about the working of banks and the commercial
banking they still had to do their transactions through them as there was not a
single bank engaged in Islamic banking.

With the passage of time many Islamic and shariah scholars laid fatwah on the
mode of working of commercial banks and considered the fixed rate of profit
and interest paid by them Haram (unlawful, prohibited). Today, due to the
Page | 65
increased exposure, people are much more inclined to invest or deposit their
money in the banks who are engaged in the Islamic banking. Due to this many
banks has taken initiative to open the branches conducting Islamic banking.

My reason for selecting Meezan bank is that, firstly, it is the pioneer Islamic
bank in Pakistan which is formed on the principles of shariah. A wide range of
products are developed and launched consolidating the Bank’s position as the
premier Islamic Bank of the country. As in marketing, the pioneer in the
market is said to be the market leader as more people are aware of the
company

In 2001, The Shariah Supervisory Board was established at Meezan Bank led
by Justice (Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan
sets criteria for establishment of Islamic commercial banks in private sector
and subsidiaries and stand-alone branches by existing commercial banks to
conduct Islamic banking in the country.

Another reason for selecting Meezan is its connection with the Quran. The term
Meezan is derived from the word Al-Meezan which means balance.

The Islamic mode of banking is still an emerging market in Pakistan. It has a


broad future waiting ahead in the Pakistani markets. The competition is multi-
folded from last decade. Currently in this hyper competitive environment it’s
the management, professional staff and services of Meezan Bank which has
increased its worth multi folded.

Like wise, the most notable reason for selecting Meezan Bank is the
atmospherics of the organization. Based on the Islamic principles, female staff
is required to wear abaya during the working hours of bank. This has inspired
me a lot. You don’t have to worry about your dressing and about the nasty/
filthy eyes customers.

The how part of the question is answered as: through word of mouth.
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5.2 Practical Application of the Subjects

Almost every course assigned to me in Hajvery was somehow or other relevant


to the working of the company. Here is the list of some of the courses that are
applicable or they are applied in real time in the banking environment.

• Banking Practice & Law

• Banking Operations

• International Banking

• Financial Management

• Human Resource Management

• Communication Skills

• Accounting

• Management

Well some of the courses were applicable completely like accounting,


management, banking operations, banking practice and law etc. while the
others were applicable to some extent only. As most of the books we have
studied during our degree program were written by the international authors
so the procedures differed to some extent. Things taught to us were same but
the way of its application or its essence was entirely different.

Likewise few things appeared to be entirely bookish if we compare them with


the practical environment of the organization.

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Chapter 6

6.1 Person I admire most at MBL

During the course of my Internship at Meezan Bank Limited, I worked in


various departments with various supervisors and key personnel. I learnt lot of
professional key attributes and mandatory banking procedures in practice
currently in Pakistan as well as learnt different behaviors during my internship
program. The behaviors are directly related to our professional competency.
The behaviors and mood are also regarded as key motivators for the
customers and the colleagues present respectively.

The person I cherished most during flux of time was Officer Operations,
Miss Rabia Aslam. I liked her not for her beauty, intelligence, personality or her
behavior. I liked her most for her professionalism and courtesy.
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The one thing an internee does most during internship is to observe things,
scenarios and situations. My observations guided me that this lady was always
courteous and polite with the customers which is why most of the time there
was notable rush on her table. Her ability to perform well in different
conditions and keeping the customers happy inspired me a lot.

Apart from that she is a very humble and nice human being who was always
there to help me and guide me during my internship. Her method of
supervising was very friendly, respectful and understanding.

Chapter 7

7. Brief on the Departments I worked during internship and


specific/leading contribution made.

7.1 Brief introduction

I did my eight week internship at Meezan Bank Limited New Garden Town
Branch Lahore. This branch also serves as a Parent Branch of Model Town
Branch. During internship I was rolled over in departments including accounts
opening, remittance, cheque book issuing, foreign trade, assisting customer
Care, but any penetration was developed in the Credits Department.

The work that I did during my internship at Meezan Bank primarily includes
voucher checking, checking account opening pre-requisites, account opening
backlog checking, analyzing the inward and outward clearing, maintaining
return mail register, completion of pay order and demand draft register, zakat
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register maintenance, assisting the cheque book issuance department,
developed know-how about the lockers and the rules related to them,
analyzing the expenses incurred and maintain the records thereof. Assisting
the officer concern for the creation of expense approval sheets, understand
the working of credits department, and to assist the foreign trade wing.

7.2 Department Overview

CIBD (Corporate & Investment Banking Division) or Credits Department, this


was the department which attracted me the most and due to my interest in
finance I started penetrating in CIBD. A very brief overview of this department
is that it tends to focus on the corporate lending and somewhat syndications
also; indeed it covers the lending modes in corporate sector.

This department is entirely dependent on some other departments for the sake
of client’s verification and legal provisions. The lending cases starts at the
lower level I-e, Relationship officer or Relationship Manager. The case is then
forwarded to the Regional level and then the Head office for the final approval.

Documents to be acquired from the prospective client while request of lending


is received are attached in the appendix H.

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Chapter 8

8. Problem Identification

The main problems I identified during my internship programs were:

• The lack of awareness among the employees about the exact job
description.

• Undefined job tasks in operations

• Lack of IT specialist at branch level.

• Lack of common Room.

• Lack of incentives, performance rewards etc.

• The branch atmospherics sometimes creates low levels of customer


satisfaction

8.1 Weakest area(s) of Meezan Bank’s Performance

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The weakest area of performance which I have identified during my eight
week’s internship is Human Resource Department.

HR is responsible for hiring and firing of the work force within the organization.
Here at MBL the HR dept, I believe, needs lot more attention. A low salary, lack
of motivation at workplace, little or no incentives is the crucial things affecting
the performance of the employees. The employees are not given reasonable
motivational add on which results the poor performance of the staff. This poor
performance in the end badly affects the customers of the banks resulting
unhappy customers and in extreme cases product and or service switchers

Likewise, the policies settled by the company are little problematic as they
involves excess documentation.

Second weak area I have identified was the lack of proper Marketing on behalf
of the Meezan Bank Limited. Today Competitive environment, Marketing is
considered to be crucial for the success of any company or its products and/or
services. Unfortunately marketing at meezan Bank has not achieved the level
which is required for the better penetration of the company in today’s
aggressive banking industry where every bank positions itself strategically
from its competitor.

Likewise, the increased level of costs; the cost of particular one branch is
extremely very high that they have to take most of the times approvals from
the head office or regional offices.

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Chapter 9

9. SWOT Analysis

Meezan Bank being a quality organization strives to provide quality to all its
stakeholders, customers, employees and environment. In Pakistan, it is
operating in a very volatile economic and political environment.

I have personally conducted interviews of some of the employees of the


branch to do a SWOT analysis of MBL in the light of their experience in the
banking field. My analysis, consolidated with theirs', is given below;

Strengths –Internal

• MBL has the privilege of being the first in the Islamic Banking sector
which gives MBL a competitive edge over all other banks.

• Having renowned Shariah Scholars, Backed up by the Kuwaiti sponsors


who held vast knowledge of banking and have high networking and vast
range of Islamic Products, MBL is enjoying major share in the market.
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• “Every branch is your own branch”, there are very nominal service
charges deducted by the bank for its banking facilities.

• There are many value added features in the products offered by the
bank. ATM cards are provided with every account. Other features are
present in the various products. The priority customers enjoy a much-
pampered status at the bank.

• The employees at the bank provide impeccable customer service to their


customers.

Weaknesses- Internal

• Lack of proper marketing strategy.

• Delayed performance of the departments.

• High employee turnover rate.

• Low salaries, low employee motivation at workplace.

• 201 branches are opened so far but the networking within the branches
needs to be worked out.

• Excess liquidity.

• Markets are not open from the point of view of investments. Being an
Islamic bank it has to carefully examine the opportunities available to
invest its money.

• Lagging behind technologically wise as compared to the other banks.

Opportunities-External

• Increasing growth of the Islamic banking sector

• MBL can capitalize its first mover’s advantage

• Development of shariah compliant products

• New markets to explore


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• It can establish Full fledged consumer banking menu in Pakistan

• Opportunities are available in the remote area as compared to the big


cities.

Threats-External

• Economic downfall of the country.

• New entrants; There is an increasing competition in the Islamic banking


sector

• Minimum capital requirement

• It may lag behind due to the aggressive marketing strategies adopted by


its competitors

• Acceptability of Islamic banking as it is still an emerging concept in


Pakistan.

• If the growth of the Islamic banking sector is an opportunity it is in the


meanwhile threat as well.

• Employee turnover rate may increase further if it is not controlled by the


management by giving incentives.

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Chapter 10

10. Conclusion & Recommendations

“The percent of interns converted to full time e6mployees has increase fro6m
35.6% in 2001 to 50.5% in 2008” (NACE, March 2008, P.5)12

Fundamental aspect of landing a good job is getting a good internship. In


today's competitiveness, this is pretty tough to get a good internship.
Internships provided you with the opportunity to get the feel of the real world
environment. There are some things which cannot be taught in a class room
and sometimes those are the most definitive skills that you will need in at
workplace.

I had the opportunity to work with one of the leading Islamic banks of the
country. By and large, MBL is enjoying the position of a pioneer Islamic bank in

Page | 76
Pakistan. There are currently six dedicated Islamic banks operating in Pakistan
with a total of 475 branches. Having opened 35 new branches in 2009, Meezan
bank has a network of 201 branches across 54 cities, making it the largest
Islamic Banking Institution in the country, commanding a 42% share of the
total dedicated Islamic Banking network in Pakistan.

During my internship program I have studied the working of various


departments and the products and/or services offered there to the end
customers. The financial and operational analysis of MBL is somewhat
satisfactory. The careful analysis of 7P’s of

--------------------

12. http://www.insightintodiversity.com/index.php?
option=com_content&view=article&id=120:the-importance-of-internships-
in-a-declining-economy-&catid=50:april-2009-issue&Itemid=109

services was not very encouraging. The element of “People”, “Process”, and
“Physical Evidence” needs attention from the top management. “People” are
the internal customers (employee) of the company. With which Processes and
Physical Evidence is closely related (linked), that are overlooked in this service
oriented organization. The employee turnover is very high which they have to
cut down as they are losing a number of good trained employees due to its
poor policies.

During my internship period I have identified number of weak points that may
erode the success factors of the organization in the future. As per my
expertise, I am suggesting the following measures to overcome the very
crucial bottlenecks to enhance the performance of every department and more
specifically “People”.

• First of all, I would I like to suggest that the bank must pursue a very
aggressive marketing and advertising strategy so that it can create
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awareness in the general public about its Islamic products and services.
Aggressive Marketing strategy is extremely very necessary in today’s cut
throat competitive environment. For this purpose MBL must hire efficient
marketing personnel to increase its market penetration.

• Healthy Customer (internal & external) relationship must be developed


in order to sustain its market leadership.

• The employee turnover rate is way too high. There is a need of creating
satisfaction among employees. They do not feel any attachment to the
organization. There is a requirement for building up their loyalties so that
the bank can curtail the dissatisfaction and turnover among employees.

• Eroded Management/HR policies must be redefined. There is a lot of


excessive paper work involved in the banking processes. The personnel
in the bank should not be overstressed with workload. The workload is of
a destructive level. At that level of load the employees loose all the
comfort in their work and remain tense and frustrated.

• Develop the healthy and sound competition between employees and


bosses. Listen to the employees, effective surveys can be taken from
them in this regard. Develop the system of internal control- performance
and workforce satisfaction wise (internal audit).

• Meezan bank does not provide job security to the employees. Mostly are
hired on contractual basis. More people must be employed on permanent
basis/ providing job security and satisfaction.

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• Employee motivation level is very low. There must be motivational add
on’s ,which may be in the form of increased salaries, recognition,
incentives scheme, appreciation, job security, recreational and
informational trips, that may increase the employee motivation at work
place which will ultimately become the source of customer satisfaction.
The performance reward linkage should be making strong as it is said “A
happy employee delivers more than he receives from the organization".
The MBL should also try to make its employees happier.

• Introduction of job specific training to the employees and adhering to the


criteria laid out by the HR department for job advancements. There is no
separate department for the training of new employees. There should be
establishment of a separate department for the training of the new
employee and experienced teaching staff should be hired for their
training.

• Active R&D should continuously try to gather information about the


present actions of its competitors and expected future actions. So in this
way more effective strategies can be formulated.
• New schemes should be introduced and maximum privileges should be
given to customer, so that to win money market.

• The clumsy processes for providing the banking facilities to the end
users must be properly managed in order to decrease the customer
dissatisfaction and the waiting involved in getting their desired services.

• A proper IT department should be established in all branches, with


professionals having the knowledge to maintain a secured connection

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with other banks. Scheduled computer data backup should be done
within the bank.

"We have the duty of formulating, of summarizing, and of communicating


our conclusions, in intelligible form in recognition of the rights of other free
minds to utilize them in making their own decisions"

- Ronald Fisher

Chapter 11

11.1 Web References

• www.meezanbank.com

• www.sbp.org.pk

• www.brecorder.com

• www.albaraka.com.pk

• www.bankislami.com.pk

• www.ibp.com.pk

• www.google.com.pk
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• www.learnislamicfinance.com

11.2 Documental References

• Annual Report 2009 (MBL)

• Annual Report 2009 (Bank Albraka)

• Annual Report 2009 (Bank Islami)

• Quarterly Performance Report 2009 (SBP)

• Nargundkar, Rajendra (2007). Services Marketing, Tata McGraw Hill


Publishing Company Limited

• Brigham, F. Eugene, Ehrhardt C. Micheal (2003). Financial Management.


(11th ed). McGraw Hill Publishing Company Limited

Chapter 12

Appendix A:

CUSTOMER SERVICES DEPARTMENT

Account opening and closing is the function of customer services dept. The bank’s customers
includes individuals (single or joint), firm (partnership/proprietorship), Autonomous corporations,
Limited companies, Charitable Institutions, associations, Educational Institutions or local bodies.

Products offered by this department:

a) Riba Free Rupee Savings Account


 Current account
 Saving Account

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b) Riba Free Dollar Savings Account
 Foreign Currency Account

BASIC OF ACCOUNT OPENING

Account opening is the basic and first relationship, which is established between Bank and the
customer. In account opening extreme care has to be exercised in case of completion of account
opening documentation.
Whenever a client comes in the bank in order to open an account the first information that is given
to him/her about the types of accounts, which can be opened, so far this purpose the client is given
detailed information about the accounts and their respective profit rates.

TYPE OF ACCOUNTS OPENED

 CURRENT
 SAVING
 TERM DEPOSIT

ACCOUNTS OF ILITERATE [Photo Account]


These accounts can be opened individually or jointly.
For men, the right hand thumb impression and for women, the left hand thumb impression is taken
on account opening form.
The customer is given advice to come to bank himself in order to withdraw any cash or deposit the
cheque.
Requirements:
 Photocopy of NIC of Account Holder.
 Two-three passport size photographs.

Sub-categories of Accounts and the Basic Requirements are given in the Appendix____

THINGS TO BE CONSIDERED BEFORE OPENING AN ACCOUNT:


 Verification of the customers’ credentials.
 The suitability of the prospective customer.
 State Bank’s rules and regulations.
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 The Bank’s own policy.
 The prospective profitability of the relationship.

i. PROCEDURES FOR ACCOUNT OPENING:

First of all, after inquiring from the customer what type of account he/she wants to open, the
account opening form is got filled from the customer and signed it. Along with the account opening
form, the customer is also signed two Specimen Signatures Cards.

After fulfilling all the formalities of account opening, the computer generated account number is
given to the customer that is of special series depending on the type of account.

REQUISITION SLIP

A requisition slip is given to the customer to sign it so that the customer can get chequebook.
Chequebook is issued after one day of receiving the requisition slip.

ii. LETTER OF THANKS


After opening the account “A Letter Of Thanks” is send to the customer in order to thank the
customer for opening an account in the Bank. This letter tells all the information regarding his/her
account, which are kept very confidential.

iii. ACCOUNT OPENING REGISTER


After an account is opened, an entry is made in the account opening register, which has the
following columns:

 Date
 Account Number
 Name & Address
 Telephone Number
 Initial Deposit
Customer Services Officer enters the new account opened in computer and the Specimen signature
Cards are also scanned so that whenever a cheque of the respective account comes for encashment,
the signatures can be verified.

Overall functions performed by Customer Services Department:


Page | 83
 ACCOUNT OPENING
 ACCOUNT CLOSING
 GENERAL CLIENT DEALING

Appendix B:

OPERATIONS DEPARTMENT
FUNCTIONS PERFOMED:
a) CLEARING
b) REMITTANCE

CLEARING
 Inward clearing
 Outward clearing

2) INWARD CLEARING
In the morning, the bank receives its own cheques, which have been presented by the customers in
some other bank to be deposited in their account. NIFT provides the facility of bringing cheques
for inward and also takes the cheques of outward clearing to other banks. The cheques received in
Page | 84
inward clearing are the cheques drawn on bank and the bank has to pay for them. For this purpose
the bank makes clearing in computer by checking the balances of the respective customer, if their
balances are up to the mark then that cheque is cleared and the respective customer account is
debited with the respective amount. If the balances are short then that cheque is bounced back to
the related bank.
Reasons for returning a cheque:

• All required stamps of Clearing, Crossing and Endorsement are not present on cheques.
• Cheque is post date.
• Refer to drawer
• Effects not cleared, may be presented again
• Amounts in words and figures differ.

If any of these reasons exists then that cheque is returned through NIFT and deducts Rs. 300 from
customer’ account as cheque returned charges.

Then the report of returning any cheque is sent through fax to the head office Karachi. After this
put the entry in Cheque return register showing the following columns:

 Date
 Title of account
 Account number
 Cheque number
 Bank and Branch name
 Reason to return

(ii) OUTWARD CLEARING:


All the cheques of other banks which are deposited to MBL are presented in outward clearing. This
is said as outward clearing because they are presented on the very next day after depositing a
cheque.
In outward clearing, the entry is made like:
Customer Account Cr.
State Bank of Pakistan Dr.
This entry is made when we come to know about the clearing of all cheques, which are sent to
other banks.

(iii) SERVICES PROVIDED


I. TRANSFER OF AMOUNT
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II. TELLING ACCOUNT BALANCES

a) I. TRANSFER OF AMOUNT
If a customer holds two accounts in the bank and he/she wants to transfer money from one account
to other account, customer writes a cheque and fills deposit slip in which he/she writes account
number to which amount is to be transferred. After making transfer entry in the computer, affix
transfer stamp in the middle of the cheque, crossing on the upper left and bank’s endorsement
stamp on the backside of the cheque.

b) II. TELLING ACCOUNT BALANCES

c) Whenever clearing officer receives phone call from the customer inquiring about
his/her account balance after confirming the name, address and other information he
tells the balance through computer.

i) REMITTANCE
a) Pay order
b) Demand drafts
c) Inward collection
d) Outward collection

a. a) PAY ORDER:
Pay order is an order to pay money but this payment is to be made within city. In other words it can
be said that the payee and the payer should be in one city.
In pay order the payment can be made in:
A) Cash
B) Clearing
C) Transfer

2) PROCEDURE:
In case of pay order first of all the customer has to fill a pay order application form in favoring
section: name, account number, amount, beneficiary name, address, etc.
The data is entered in already set format of pay order in computer and pay order print out is taken.
An authorized person and manager operations are signed pay order.
The original copy of the pay order is given to the customer and carbon copy is kept with bank for
office record.

3) b) DEMAND DRAFT

Page | 86
An order to pay money to the payee who is residing outside the city. DD can be for a customer who
may or may not have an account in the bank but the other person’s account must be maintained
with the bank for which the payer has demanded the DD.

i. c) INWARD COLLECTION
When the bank receives cheques of any other bank from its any branch situated in the some other
city, and then those have been dealt as inward collection.

OTHER FUNCTIONS UNDER OPERATIONS DEPARTMENT

CHEQUE BOOK ISSUANCE


It is also the duty of department to issue a chequebook when an officer receives request from the
customer.
LOCKERS
Lockers operations shall not be permitted under power of attorney of a customer. A customer
wishing to allow another person or agent may be requested to open a new locker account under
joint names and close the existing account.
In offering this facility branches have to be selective and should provide lockers to the customers
whose identity and integrity is verified, who should maintain account with the branch and have
potential for deposits and other banking business. It is reiterated that honesty, creditability and
good reputation of the customer is of utmost importance in the selection of customer for lockers.

KEY FEATURES:
 Available in selected branches
 Available in 3 sizes
 For all eligible Account Holders
 Key security Deposit PKR 3000

Procedure
 Application on Prescribed Form duly filled
 Saving/Current Account with MBL
 02 Passport size Photographs

Charges
 Key Deposit PKR 3000/
 Small PKR 1000/Year
 Medium PKR 1500/Year
Page | 87
 Large PKR 2000/Year
 Locker breaking charges Rs 3000

Cheque Books Handling


 Application for New Cheque Book

CHARGES
 PKR 03/Leaf for Saving Account Cheque Book
 PKR 01/Leaf for Current Account Cheque Book
 PKR 01/Leaf for FCY Account

Appendix C:

RIBA FREE TERM DEPOSITS OFFERED BY BANK


 Certificate of Islamic Investment
 Monthly Mudarabah Certificates
 Dollar Mudarabah Certificates
 Meezan Amdan Certificates

Page | 88
 Meezan Providence Certificate

Certificate of Islamic Investment

Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a COII holder, the customer enters into a relationship, based on Mudarabah,
with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank
is the Manager (Mudarib) of the funds deposited by the customers.

The bank allocates the funds received from the customers to a deposit pool. These funds are
utilized to provide financing to customers under Islamic modes that include, but are not restricted
to, Murabaha and Ijarah.

Tenor
 3 Months
 6 Months
 1 Year
 2 Years
 3 Years
 5 Years

Profit Payment Options

3 Months on maturity
6 months on maturity
1 year monthly or quarterly min investment 200K
2 year monthly or quarterly min investment 200K
3-5 year monthly or quarterly min investment 200K

There will be different rate of profit according to the profit payment option and amount and tenor.

Pre-mature encashment
In case of pre mature encashment the profit rate will be calculated according to the completed
tenor, if extra profit is paid that will be recovered

 No pre-mature encashment penalty in MBL

Payment of Premium
Bank pay premium from its own share of profit to high depositors.

Premium Rate
Page | 89
5M-9.99M 1%
10M-29.99M 1.25%
30M-49.99M 1.50%
50M+ 2%

Karobari Munafa Account


Riba-Free Karobari Munafa Account works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah.
On agreeing to become an account holder, the customer enters into a relationship based on
Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal),
and the Bank is the Manager (Mudarib) of the funds deposited by the customers.
The bank allocates the funds received from the customers to a deposit pool. These funds from the
pool are utilized to provide financing to customers under Islamic modes that include, but are not
restricted to, Murabaha and Ijarah.

 Profit calculated on daily basis and paid monthly


 No minimum balance requirement
 No restriction on deposit/withdrawals
 Free Cheque Books, Pay Orders and Online Banking
 Dedicated Account/Relationship
 High return for high depositors

Monthly Mudarabah Certificates

RibaFree Monthly Mudarabah Certificates is a flexible investment product which has been
designed to give you a monthly return which is Halal. The minimum investment required is only
Rs. 100,000 and you receive profit for each complete month of investment with the Bank.

How Monthly Mudarabah Certificates works?


Riba-Free Monthly Mudarabah Certificate (MMC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MMC holder, the customer enters into a relationship based on Mudarabah
with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank
is the Manager (Mudarib) of the funds deposited by the customers.

The bank allocates the funds received from the customers to a deposit pool. These funds from the
pool are utilized to provide financing to customers under Islamic modes that include, but are not
restricted to, Murabaha and Ijarah.

Page | 90
Features:
 Minimum requirement of PKR 100K
 Profit disbursement on maturity
 Tire system for profit payment (Refer Rate Sheet)
 No payment on premature encashment

Dollar Mudarabah Certificates

On agreeing to become a DMC holder, the customer enters into a relationship based on Mudarabah
with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the
Bank is the Manager (Mudarib) of the funds deposited by the customers.

The Bank allocates the funds received from the customers to a deposit pool. These funds from the
pool are utilized to provide financing to customers under Islamic modes that include, but are not
restricted to, Murabaha and Ijarah.

Requirements:
 In USD only
 Individuals and Corporate
 Minimum investment 10K and above

Tenor:
 3Months
 6Months
 1Year
 3Years

Profit payment Options:


 3Months Maturity
 6Months Maturity
 1year 6 Monthly or Maturity
 3years 6 Monthly or Maturity

Meezan Amdan Certificates

The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an
exceptionally high monthly profit designed especially for those individuals and corporations who
are in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani)
certificate with a variety of free packaged benefits.
Working

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The Riba-Free Meezan Aamdan Certificate (MAC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MAC holder, the customer enters into a relationship based on Mudarabah
with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the
Bank is the Manager (Mudarib) of the funds deposited by the customers.

The Bank allocates the funds received from the customers to a deposit pool. These funds from the
pool are utilized to provide financing to customers under Islamic modes that include, but are not
restricted to, Murabaha and Ijarah.

Features:
 Long Term Product
 Tenor 5-1/2 years & 7 years
 Profit 9.5% 10.50% (Last month)
 For Individuals and Corporate
 Minimum deposit PKR 100 K
 (50K for old citizens and widows)

Meezan Providence Certificate (MPC)

A long-term investment product specially designed to cater to the needs of corporate and business
concerns for purposes of investing their Provident, Pension and Gratuity Funds.

How Meezan Providence Certificate works?


Riba-Free Meezan Providence Certificate (MPC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MPC holder, the customer enters into a relationship based on Mudarabah
with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank
is the Manager (Mudarib) of the funds deposited by the customers.

 Min. deposit 01 Million

Tenor
 5 Years
 7 Years

Other options:
 Provident and Pension Fund of large corporate
 Premature encashment facility available

Meezan Islamic Institution Deposit Account


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The Meezan Islamic Institution Deposit Account (MIIDA) is a unique product, tailored exclusively
for Islamic Financial Institutions (IFIs). With MIIDA, any IFI now has the opportunity to manage
excess liquidity in an immediate and profitable manner, by maintaining a checking account with
Meezan Bank.
All eligible Islamic Banks can enter into a Mudarabah relationship with Meezan Bank. Under this
relationship, the respective Islamic Banks are the Investors (Rab ul Maal), and Meezan Bank is the
Manager (Mudaarib) of the funds deposited by them. Meezan Bank allocates the funds received
from the Islamic Banks to a deposit pool consisting of financing under Islamic modes that includes,
but is not restricted to, Murabaha and Ijarah.

Features:
 For Islamic Financial Institutions deposit
 To invest their access liquidity
 Min. investment PKR 10 M and multiplies there of
 Max investment 01 B

Appendix D:

CASH DEPARTMENT

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The cash department is the most important department of the bank. It receives cash from customers
and then deposits it into the accounts of the customers and maintained their balances.
In cash department following books are maintained.

 Scroll book
 Paying book
 Cash balance book

SCROLL BOOK
When cash is received at the customer it is recorded in the scroll book.

PAYING CASH BOOK


The cashier makes entry in the paying cashbook when cash is paid.

CASH BALANCE BOOK


The consolidated figure of receipt and payment of cash is entered in cash balance book.

Appendix E:

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CREDIT / FINANCE DEPARTMENT

Islamic Financing for the following:


 Corporate
 SME
 Personal

Details are mentioned in Appendix ______

Easy Home
Easy home works under the Diminishing Musharakah where customer participates with Meezan
Bank in joint ownership.
Easy Home finance is available for:

Purchase
 3-20 year
 Max. Finance 85%

Construction
 2-20 year
 Max. Finance 70%

Renovation
 2-7 year
 Max Finance 85%

Replacement
 3-20 year

Eligibility
 Pakistani National
 Age 25—65 (till maturity)
 Professional Experience

Salaried person:
 2 year of consecutive experience in same industry
 Min salary 20 k per month

Business
 3 years business experience
 Min. business income Rs 50K per month
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Processing Charges
 Businessmen Rs 12500
 Salaried Person Rs 8500
 (Up to Rs 4 M, 2000 Additional for above)
 Time Frame 3-4 Weeks

Car Ijara
Ijara is a rental agreement under which bank purchase a vehicle and give the same on rent to
customer
Car Ijarah is Pakistan’s first "Interest Free" car financing based on the Islamic financing mode of
Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while
avoiding an interest-based transaction.

Scope of Facility
 Domestic Vehicle (Local made)
 Commercial Vehicle (Local+Imported)
 Used/Imported Vehicle (1st Transfer only)

Rates offered:
(For New) (For used)
 3 year 14% 15%
 4 year 15% 15.50%
 5 year 16.50% 18%

1% higher than normal for commercial+imported+used vehicle

Eligibility:
• Pakistani National
 Salaried individual, self-employed, professional or businessperson
 Minimum 3 years of work/business/professional experience
 6 month working with present employer
 Net income exceeds three times of monthly rental

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Appendix F:

OTHER PRODUCTS OFFERED

On line Real Time ATM


 Free ATM Card
 Per Day Limit of PKR 20K
 Rs 15 charges for use of other ATM Network
 Acceptable at all ATM outlets
 Debit card at Orix out lets (PKR 50k/Day)

On line Real Time Facility


 Absolutely free from all branches of MBL
 Collection of Cheques absolutely free
 Available to PKR current, saving & Karobari Munafa acc.

Banking Facility at all MBL Branches for


 Mon - Sat 9-5
 Friday 9-12-30 & 3-5
 Saturday 9-12-30

24/7 Call Center


24/7 call center provides you access to a wide range of Tele-banking solutions and
personalized banking service.

Key Features
 Check account balances
 Instruct issuance of pay orders and demand drafts
 Transfer funds between your own accounts
 Order issuance of cheque book
 Check transaction history of accounts
 Receive information on MBL products and services
 Issue stop payment instructions
 Report loss of your cheque book
 Request or change T-PIN
 ATM PIN Re issuance
 Report loss of ATM/Debit Card or cheque(s)

Internet Banking
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Internet Banking allows having access to accounts regardless of where they may be in the
world.

Key Features
 Balance inquiry
 Statement viewing
 Statement download
 Cheque status
 Cheque blocking
 Pay order request
 Complaint logging and follow-ups
 Funds transfers between own accounts at MBL
 Change of address request
 Cheque book request

Alerts and Notification by E-mail


 Low/High balance alert
 Credit/Debit transaction alert
 Request resolution alert
 Complaint resolution alert

Future Features
 Alerts by SMS/Fax
 Utility bill payments
 Inter bank funds transfers
 Payment to nominated accounts at MBL
 Standing orders for repeated payments

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Appendix G:

Overview of Islamic Modes of Financing

1. Mudarbah (Passive Partnership)

This is a contract between two parties: a capital owner (rabb-al-mal) and an investment
manager (mudarib). Profit is distributed between the two parties in accordance with the
ratio that they agreed upon at the time of the contract. Financial loss is borne by the capital
owner; the loss to the manager being the opportunity cost of his own labor, which failed to
generate any income for him.

2. Musharakh (Active Partnership)

A musharakh contract is similar to that of the mudarbah, with the difference that in the case
of musharakh both partners participate in the management and provision of capital and also
share in the profit and loss. Profits are distributed between partners in accordance with
agreed ratios, but the loss must be distributed in proportion to the share of each in the total
capital.

3. Diminishing Partnership

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This is a contract between a financier (the bank) and a beneficiary, in which the two agree
to enter into a partnership to own an asset, but on the condition that the financier will
gradually sell his share to the beneficiary at an agreed price and in accordance with an
agreed schedule.

4. Murabah (sales contract at a profit margin)

Under this contract, the client orders an Islamic bank to purchase for him a certain
commodity at a specific cash price, promising to purchase such commodity from the bank
once it has been bought, but at a deferred price, which includes an agreed upon profit
margin called markup in favor of the bank.

5. Ijarah (leasing)

The subject matter in leasing contract is the usufruct generated over time by an asset, such
as machinery, airplanes, ships or trains. This usufruct is sold to the lessee at a pre-
determined price. The lessor retains the ownership of the asset with all the rights as well as
the responsibilities that go with ownership.

6. Istisna

Al-Istisna is a contract in which a party orders another to manufacture and provide a


commodity, the description of which, delivery date, price and payment date are all set in the
contract. According to a decision of the OIC Fiqh Academy, this type of contract is of a
binding nature, and the payment of price could be deferred.

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7. Salam

Salam is a sales contract in which this price is paid in advance at the time of contracting,
against delivery of the purchased goods/services at a specified future date. Not every
commodity is suitable for a Salam contract. It is usually applied only to fungible
commodities.

AIMS-UK Islamic Banking & Finance | Online Certifications | Training & Consultancy

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Appendix H: Attachments

• Accounts opening form

• L/C Form

• Locker opening form

• Labbaik travel asan form

• Form M

• Form I

• Form R

• Term Deposit Form

• Remittance Application Form

• Profit Rate List

• Account Closure Request

• Customer Due Diligence form

• Stop Payment Request

• Sms Alerts Request

• KYC

• List of information required for funded/non funded facility

• Basic Documents Required for Account Opening

• Account Statement Request

• Undertaking for the difference of signatures

• Undertaking for the difference of address on CNIC and AOF

• Housewife/Retired Person/ Household Resident Declaration

• Cheque Book Application

• MBL News teller


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