Financial Performance Analysis of Al-Arafah Islami Bank Limited

(A Study Based on Rampura Branch)

Submitted By:
Jannatul fardus sristy
Batch: 53/B
Roll No:32
Reg. No: 1610438
Major: Finance

Supervised By:
Sharmin Tasmina
Lecturer
Department of Business Administration

Date of Submission:

Dhaka International University

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 LETTER OF TRANSMITTAL

Date:

Sharmin Tasmina
Lecturer
Department of Business Administration
Dhaka International University

Subject: Submission of the Internship Report.

Respected madam

It is my pleasure to submit my internship report “Financial Performance Analysis” of Al-

Arafah Islami Bank Limited. which I was assigned by you as a part of the Internship at the
bank.

As a part of the completion of the Bachelor Business Administration, Dhaka International

University, it is a privilege to work at Al-Arafah Islami Bank Limited. It is worthwhile
experience to develop an aptitude to build up carrier in the banking sector. This experience
will help me developing professionalism and have positive attitude towards business world.
It will be my pleasure to clarify any matter regarding this Study I thank you for allowing me
the opportunity to undertake the task and for your sincere guidance and cooperation.

Yours truly,

____________
Jannatul fardus sristy
Roll: 32, Batch: 53/B
Session: 2016-2017
Reg. No: 16104385
Major: Finance
Dhaka International University

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 ACKNOWLEDGEMENT

First of all, I would like to thank the Almighty Allah, the merciful. Without his blessings, this
internship Study wouldn’t be finish in time.

This internship Study wouldn’t be completed without help from some important person. First of all I

would like to thank my honorable Supervisor Dhaka International University, Sharmin tasmina
. Without her kind help, I wouldn’t be able to complete this project Study on Financial Performance
Analysis of Al-Arafah Islami Bank Limited: A Case Study of rampura Branch.

I am very much grateful to Sir, Md. Abul Kalam Azad Manager, and VP of our Branch for
giving me opportunity to complete my internship in AIBL and for Guiding by sending every
department and for sharing his valuable and understandable experience of banking whenever
was possible.

Then at last, I shall be grateful to those persons who will read this Study and who shell get
benefit from this Study.

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 BONA-FIDE CERTIFICATE

This is to certify that the internship report on ‘‘Financial Performance Analysis of Al-
Arafah Islami Bank Ltd.’’ is the Bona-fide work of jannatul fardus sristy , Batch:53/B,
Roll:32, Reg No:104385 Major: Finance who carried out the internship under my
supervision. Certified further that to the best of my knowledge the work report herein does
not form the part of any other internship report or dissertation on the basis of which a degree
or award was conferred on an earlier occasion on this or any other candidate.

I wish her every success in her life.

…………………………

Sharmin tasmina

Lecturer

Department of Business Administration

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 DECLERATION OF THE STUDENT

I am jannatul fardus sristy, student of B.B.A., at Dhaka International University, hereby

declare that the internship report titled “Financial Performance Analysis of “Al-Arafah Islami
Bank Limited.” has been authentically prepared by me after the completion of internship at
Al-Arafah Islami Bank Ltd. and submitted by me to Dhaka International University.

-----------------------
Jannatul fardus sristy
Roll: 32, Batch: 53/B
Session: 2016-2017
Reg. No: 104385
Major: Finance
Dhaka International University

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 EXECUTIVE SUMMARY

Islamic Banks is one of the key contributors in the economy of developing countries. They
act as financial intermediaries by performing the function of mobilizing the funds from one
group and lending the same to another while making a reasonable amount of profit after
meeting the cost of fund. People and the government itself are very much dependent on the
service provided by the 59 banks in the financial market. To know how well Islamic Banks
perform actually, a case study on Al-Arafah Islamic Bank Limited is being taken. As a part of
my internship program I got a chance to work at this bank for a period of three months.
During this period I have learned about this organization and its work environment, which
inspire me to work on my topic. This report is divided into five chapters. Chapter one,
Introduction of the Study. Chapter two Overview of Al-Arafah Islami Bank Ltd. Chapter
three, Financial Performance Analysis and Evaluation. Chapter four, Findings of the Study.
Chapter five, Recommendations and Conclusion. Al-Arafah Islami Bank is an interest-free
Shariah bank and its modus operandi is substantially different from those of regular
commercial banks. The bank however, renders all types of commercial banking services
under the regulation of the Bank companies Act 1991. It conducts its business on the
principles of Musharaka, bai-Murabaha, and bai-muajjal and hire purchase transactions. All
activities of the Al-Arafah Islamic bank are conducted on an interest free system according to
Islamic Shariah. It invests all of its surplus funds on the basis of the trade mode of financing
ensuring buying and selling of halal commodities and on a profit and loss sharing basis. A
fixed percentage of income derived from investment of Mudaraba deposits is distributed to
the Mudaraba deposit holders. The investment of the bank is supervised strictly so that no
investment becomes overdue with consequential loss of investment income. In the case of
import-export AIBL shows better performance than the other banks. The import and export
business of AIBL has a gradual-increasing tend from 1995. As a kid in the banking industry
AIBL is performing well as have acquired the assets and human resources of higher quality.
AIBL will be more effective in our economy by adopting modern financial technology by
extending their activities in human and social welfare.

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 Table of Contents
Prefatory Parts Page Number
Cover Page i
Title Page i
Letter of Transmittal ii
Acknowledgement iii
Bona-fide Certificate iv
Declaration of the Student v
Executive Summary vi

SL.NO Name of the Topic Page Number

Chapter-01 Introduction of the Study 01-02

1.1 Introduction 02

1.2 Origin of the Study 03

1.3 Objectives of the Study 03

1.4 Methodology of the Study 04

1.5 Scope of the Study 05

1.6 Limitations of the Study 06

Chapter-02 Overview of Al-Arafah Islami Bank Ltd. 07

2.1 Historical Background of Al-Arafah Islami Bank 08
Limited (AIBL)

2.2 Islamic Banking Movement in Bangladesh 09

2.3 Vision 10

2.4 Mission 10

2.5 Commitments 10

2.6 Shariah Board 11

2.7 Strategy Statement 11

2.8 Ownership Structure 11

2.9 Composition of the Board 12

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2.10 Capital and Reserve 12

2.11 Milestones in the development of the organization 13

2.12 Management Structure of AIBL 14

2.13 Name of the Employees in Rampura Branch 15

2.14 District-wise Branch distribution all Over 18

Bangladesh

3.17 Financial Statements 28-30

Chapter-04 Financial Performance Analysis and 31-48

Evaluation
4.1 Ratio Analysis 32-45

4.2 SWOT Analysis 46-48

Chapter-05 Findings of the Study 49-50

5.1 Major Findings 50

Chapter-06 Recommendations and Conclusion 51-55

6.1 Recommendations 52

6.2 Conclusion 53

6.3 Abbreviations 54

6.4 Bibliography 55

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 Chapter-01
Introduction of the study

1.1 Introduction:
Banking system occupies an important place in a nation’s economy. A banking institution is
indispensable in a modern society. It plays a pivotal role in the economic development of a
country and forms the core of the money market in an advanced country. In recent times the
banking sector over the world has been undergoing a lot of changes due to deregulation,
technological innovation, globalization etc. Bangladesh banking sector is lagging behind in

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adopting these changes. To thrive well in this changing environment, not only development
of appropriate infrastructure is necessary but also infusion of professionalism in to banking
service is essential. The Banking sector is one of the highly regulated sectors in our country.
It is governed by the rules and regulation of Central Bank of the country i.e. Bangladesh
Bank and Security and Exchange Commission. The bank companies are forced to comply the
best accounting practices. It strictly follows International Accounting Standard (IAS) norms.
It publishes the financial statement every year getting it duly audited by recognized audit
firms. Every bank of our country has a division named Financial Administration Division
(FAD) which takes care of the accounting issues of the Bank. Most of the personnel who lead
these divisions are of accounting background among the accounting based FAD personnel
who know the banking operation better can contribute more in the banks.

Private sector banks started functioning during the year 1983-84 with the objective of
government policy to make sure effective and meaningful participation of the private sector
in the overall national economy.

The perception of Islamic banking has been bloomed from the inspiration of building up a
society on justice in accordance with basic socio-economic principles of Islam. The
difference between Islamic bank and conventional bank is on principles. The functions of this
type of bank are completely different.
‘Islamic Bank’ theory is established on Islamic Shariah and all types of transactions are free
from interest. Justified profit is the basis of financial transaction of this bank. This bank is
committed to establish socio-economic justice. Al-Arafah Islami Bank Limited is one of the
progressing Islamic banks in Bangladesh

1.2 Origin of the Study:

The Study titled “Financial Performance Analysis of Al-Arafah Islami Bank Limited” has
been prepared as a partial requirement of the MBA degree from Stamford University. The
students are required to undertake an internship program. For this purpose, I myself get
attached with Al-Arafah Islami Bank Limited during the internship; I was supposed to
prepare a Study on aspects of the organization where I was assigned. It is designed with an

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excellent combination of theoretical and practical aspects. This Study is the requirement of
that Practical Orientation. Bank is service oriented organization. So the practical orientation
has been made as an integral part of the MBA degree requirement. This Study is the outcome
of the three month long internship program conducted by the Al-Arafah Islami Bank Limited
at Rampura Branch in Dhaka. I have tried my best to properly apply my potentiality and
theoretical knowledge to make the Study reliable and information worthy. The Study focuses
on the general Banking division as I was attached with that division during the tenure of my
internship.

1.3 Objectives of the Study:

Al-Arafah Islami Bank Limited is a schedule private bank in the private sector which is
focused on the established and emerging market in Bangladesh. The main objective of the
study is to develop an understanding about the practical Banking activities on general
banking and to relate them with the theoretical knowledge acquired from the banks.
Besides these the specific objectives are the followings:
1. To get enough knowledge about the general banking activities of AIBL.
2. To identify the different procedure of receiving and payment of cash.
3. To identify the different types of deposit accounts and procedure of opening and
closing them.
4. To make suggestions for policy recommendation.
5. To discuss about loan and advance facility given by AIBL, judgment procedure
before sanctioning the loan.
6. Identify the factors contributing the attractive and operative performance of the local
branch in Rampura by the bank.
7. Finally, to submits a Study for the fulfillment of my MBA practical.

1.4 Methodology of the Study:

It is designed with an excellent combination of theoretical and descriptive case studies base
on empirical method. Because it covers the different financial aspects of General Banking of
AIBL and casual studies because Study prepares must follow some specific methods. From
my educational background I have learned different methodology in research process. So in

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this study I had the opportunity to implicate my educational knowledge in practical field. I
have collected data from many sources:

Sources of
data

Primary Sources Secondary

Sources
Fig: The method of data collection.

 Primary Sources: They are collected afresh and for the first time by the face to face
conversation with the executive and officers of bank, and thus happens to be original in
character. They are the most original data and mostly have not undergone any sort of
statistical test. For instance:

1. Personal interview: face to face conversation and in depth interview with the
respective officers of the branch.
2. Personal observation: observing the procedures of banking activities followed by
each department.
3. Practical work: Practical work exposure on different areas of the branch.
4. Informal communication: Informal conversation with the client or customers.
5. Document Access: Relevant documents related to the study as provided by the
officers.
Secondary sources: They are those that has already been collected by the bank and any
entity and which has been already been passed through the statistical process. They are not
pure and have undergone some treatment at least once. For instance:
1. Annual Study of AIBL.
2. Periodical published by Bangladesh bank.
3. Internet is also used as theoretical sources of information.
4. Website and newsletters are also used as major sources.

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Data Collection System:
For the sake of my study, I have used some methods such as studies and documents, discuss
with concerned officials and interviewing with the relevant personal following a
questionnaire, review and analysis of relevant Study’s and so on.

Data processing Tools:

For the processing the data collection, I used Microsoft Word to analyze various trends. For
comparative study, I used Microsoft Excel and photo shop program. On the other hand, I used
different formula to analyze the cost, to perform data entry, to create tables and graphs and so
on. I used both qualitative analysis like SWOT and quantitative analysis such as ratio analysis
for the financial performance.

1.5 Scope of the Study:

The study gives a lot of knowledge about financial performance analysis of AIBL. This Study
gives a broad overview of financial department of Rampura branch , Dhaka of AIBL. It
consists of my observation and on the job experience during the internship period. This Study
incorporates the different aspects of financial tools and techniques and its effect on the
performance of the bank. Mainly, the scope of the organizational part covers the
organizational structure, background, objectives, functional department and business
performance as a whole. Last but not the list, the general banking position of the bank in the
banking industry based on its last couple of year’s performance.

1.6 Limitations of the Study:

To prepare a Study on the achieved practical experience in a short duration (only three
months) is not an easy task. In preparing this Study some problems and limitations have
encountered which are as follows:

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 Lack of adequate information: there was lack of sufficient primary and secondary
data. The record system of the annual Study is not sufficient.
 Lack of proper time: The time period of internship study is too short. I have only
three months include with vacations to spend in branch and to complete this Study. So
I am unable to go deep of the study. Most of the time the officers were busy and they
are not able to give me much time.
 Inaccurate information: All required information is not available in any specific
branch of the bank and there are also limited opportunities to visit more than one
branch.
 Improper communication: Banking people are very busy. Sometimes it seems
hard to get their attention.
 Lack of Experience: As a newcomer I have little experience in this regard. There
was lack of experience in collecting information, doing analysis and taking
assessment of the related topics.
 Differences between Practices: Field practice varies with the standard practice
that also created problem.
 Secrecy of the information : every organization has their own secrecy that is not
revealed to others.

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 Chapter-02
Overview of Al-Arafah Islami Bank Ltd.

2.1 Historical Background of Al-Arafah Islami Bank Limited (AIBL) :

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With the objective of the achieving success here and hereafter by purchasing the way directed
by Allah and path shown by his Rasul (SM). Al-Arafah Islami Bank Limited established
(registered) as a private limited company on 18 June 1995. The inaugural ceremony took
place on27 September 1995.the authorized capital of the bank is tk. 1500.00 crore and paid
up capital is tk. 834.32 crore as on 30.09.2013. Renowned Islamic scholars and pious
business man of the country are the sponsors of the bank. 100% of paid up capital is being
owned by indigenous shareholders.

The equity of the bank stood of 1551.44 crore as on 30.09.2013. The man power was 2,359
(as on 25.11.2013) and the number of shareholders 52,739(as on 31.12.2012). It has achieved
a continuous profit and declared a good dividend over the years. High quality customer
service through the integration of modern technology and new product is the tool of the bank
to achieve success. The bank has diverse array of careful tailor products and services to
satisfy customer needs. The bank is committed to significantly contribute to the national
economy. It has made positive contribute towards the socio economic development of the
country with 119 branches of which 21st is AD throughout the country.

The bank conducts its business on the principles of Mudaraba, Bai-muazzal, and hire
purchase transactions approved by Bangladesh Bank. Naturally, its modes and operations are
substantially different from those of other conventional commercial bank. There is a Shariah
council in the banks who maintains constant vigilance to ensure that the activities of the bank
are being conducted on the precepts of Islam. The Shariah council consists of prominent
Ulema, reputed bankers, renowned lawyers and eminent economist.

2.2 Islamic Banking Movement in Bangladesh:

In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed
itself to reorganize its economic and financial system as per Islamic Shariah. In January 1981,
the then President of People’s Republic of Bangladesh while addressing the 3 rd Islamic
summit conference held at Makkah and Taif suggested, “the Islamic countries of should
develop a separate banking system of their own in order to facilitate their trade and
commerce “This statement of the president indicated favorable attitude of the Government of
the Peoples Republic of Bangladesh towards establishing Islamic banks and financial
institutions in the country.

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Earlier in November 1980, Bangladesh Bank, the country’s Central Bank, sent a
representative to study the working of several Islamic banks in abroad. In November 1982, a
delegation of IDB visited Bangladesh and showed keen interest to participate to establishing
a joint venture Islamic bank in the private sector. They found a lot of work had already been
and Islamic bank was in already form for immediate introduction.

Two professional bodies-Islamic Economics Research Bureau (IERB) and Bangladesh

Islamic Bankers Association (BIBA) made significant contribution towards introduction of
Islamic banking in the country. They came forward to provide training on Islamic banking to
top bankers and economist to fill-up the vacuum of leadership for the future Islamic banks in
Bangladesh. They also held seminars, symposia and workshops on Islamic economics and
banking throughout the country to mobilize public opinion in favor of Islamic banking. Their
professional activities were reinforced by a number of Muslim entrepreneurs working under
the aegis of the then Muslim Business Society (now reorganized as Industrialist and
Businessmen Association). The body concentrated mainly in mobilizing equity capital for the
emerging Islamic bank.
At last, the long drawn struggle to establish an Islamic bank in Bangladesh became a reality
and Islamic Bank Bangladesh Limited was established in March 1983 in which 19
Bangladeshi national, 4 Bangladeshi institutions and 11 banks, financial institutions and
government bodies of the Middle East and Europe including IDB and two eminent
personalities of the Kingdom of Saudi Arabia joined hands to make the dream a reality.

Later, other five Islamic banks, Islamic Insurance companies and financial institutions were
established in the country. Some traditional banks opened Islamic Banking branches in some
major cities.

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2.3 Vision:

 To be a pioneer in Islamic Banking in Bangladesh and contribute significantly to the

growth of the national economy.

2.4 Mission:

 Achieving the satisfaction of Almighty Allah both here & hereafter.

 Proliferation of Shariah Based Banking Practices.
 Quality financial services adopting the latest technology.
 Fast and efficient customer service.
 Maintaining high standard of business ethics.
 Balanced growth.
 Steady & competitive return on shareholders’ equity.
 Innovative banking at a competitive price.
 Attract and retain quality human resources.
 Extending competitive compensation packages to the employees.
 Firm commitment to the growth of national economy.
 Involving more in Micro and SME financing.

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

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2.6 Shariah Board:
Scholars of high repute with extensive experience in law, economics and banking systems
and specializing in law and finance are as prescribed by Islamic Shariah make up the AIBL's
Fatwa &Shariah Supervision Board. The Board is appointed by the bank's Board of Directors.
The Shariah Board supervises the development and creation of innovative Shariah -compliant
investment and financing products and services. The Board is empowered to issue fatwas on
any matter proposed to it by different business units of the bank. The Shariah auditors ensure
that all the transactions are carried out in strict compliance to Islamic principles of banking.
This framework along with a stringent compliance to rules has made AIBL the pioneering
organization to practice Islamic finance in true letter and spirit. The name AIBL has come to
signify innovation, financial dynamism, leadership and above all a complete assurance that
all the transactions are free from riba (interest).

2.07 Management Structure of AIBL:

Managing Director

Deputy Managing Director

Executive Vice President

Senior Vice President

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Vice President

Assistant Vice President

 First Assistant Vice President

Senior Principal Officer

Principal Officer

Senior Executive Officer

Executive Officer

Professional Executive Officer

Officer

Professional Officer

MCG

Flowchart 2.12: Management Structure

N.B. Updated June, 19

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Chapter 3: financial statement of Al Arafah Islami Bank

3.17 Financial statement

5 Years Financial Highlight

Amount in Million Taka
Particulars 2015 2016 2017 2018 2019

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Income Statement

Investment income 18,568.00 18,8301 20,491.0 24,956.8 28,811.65

5 3 1

Profit paid on deposit 11,073.01 9,957.73 11,784.2 16,256.6 18,604.42

0 1

Net investment income 7,494.99 8,872.42 8,706.83 8,700.20 10,207.23

Non investment income 2,511.94 2,791.54 3,557.36 3,769.39 4,037.57

Non investment expenses 3,646.78 4,152.93 5,308.42 6,160.70 6,384.18

Net non investment income (1,134.84) (1,361.3 (1,751.0 (2,391.3 (2,346.61)

9) 6) 1)

Profit before tax and provision 6,360.15 7,511.03 6,955.77 6,308.89 7,860.62

Provision for investment 1,796.68 1,547.87 1,354.89 2,177.98 2,867.66

Profit before tax 4,563.47 5,963.16 5,600.88 4,130.91 4,992.96

Provision for tax (including deferred tax) 2,097.59 2,613.76 2,431.38 1,674.11 2,565.33

Profit after tax 2,465.88 3,349.40 3,169.50 2,456.80 2,427.63

Balance Sheet

Authorized capital 15,000.00 15,000.0 15,000.0 15,000.0 15,000.00

0 0 0

Paid up capital 9,469.58 9,943.06 9,943.06 10,440.2 10,649.02

2

Reserve funds and other reserve 6,432.32 7,468.16 8,556.96 9,365.62 10,318.61

Shareholders’ equity ( capital and reserve) 19,236.07 21,337.4 22,520.6 23,483.2 24,148.21
8 8 2

Deposits 169,887.0 199,703. 244,806. 266,205. 297,241.81

8 92 26 48

Investment 162,503.1 196,519. 235,905. 261,874. 288,486.02

4 38 23 13

Investment in shares and securities 8,851.13 9,058.68 10,145.4 12,214.6 16,170.52

9 7

Fixed Assets 3,057.38 3,240.18 3,260.38 4,494.61 4,351.93

Total Assets (excluding off-balance sheet) 229,106.6 272,900. 319,255. 338,465. 381,051.81

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 6 04 29 30

Foreign Exchange Business

Import business 107,049.8 118,786. 156,700. 168,573. 171,611.70

0 60 00 80

Export business 79,362.90 88,152.2 104,540. 114,481. 108,967.10

0 00 90

Guarantee business 4,471.41 4,981.34 6,443.41 7,096.02 8,274.25

Inward foreign remittance 9,498.00 11,735.4 20,700.0 36,917.2 37,713.40

0 0 0

Capital Measures

Core capital (tier-1) 18,244.48 20,359.3 21,459.8 22,379.9 22,817.41

9 5 3

Supplementary capital (tier-11) 4,828.03 5,095.97 5,488.97 10,078.5 9,735.77

6

tier-1 capital ratio 13.17 11.92 10.40 10.12 10.22

tier-11 capital ratio 3.48 2.98 2.66 4.56 4.36

Total capital 23,072.51 25,455.3 26,948.8 32,458.4 32,553.18

6 2 9

Total capital ratio 16.65 14.91 13.06 14.68 14.58

Investment Quality

Volume of non-performing investment 7,713.67 8,994.98 9,921.51 12,690.7 14,100.41

2

% of NPIs to total investment 4.66 4.54 4.10 4.79 4.82

Provision for unclassified investment 1,090.27 1,352.83 1,723.04 1,891.00 2,157.28

Provision for classified investment 2,100.27 2,586.67 3,096.15 3,946.09 6,022.02

Provision for Off balance sheet exposures 346.75 449.88 570.42 689.80 778.50

Share Information

Number of share out standing 946,958,5 994,306, 994,306, 1,044,02 1,064,902,1

03 428 428 1,750 85

Earnings per share (taka) 2.25 3.07 3.15 2.35 2.28

Book value per share (taka) 20.31 21.46 20.88 20.80 21.13

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Market price per share (taka) 14.70 15.90 24.10 19.90 17.20

Price earnings ratio (times) 6.53 5.18 7.64 8.48 7.56

Price equity ratio(times) 0.72 0.74 1.15 0.96 0.81

Dividend Per Share

Cash dividend (%) 10.00 20.00 15.00 15.00 13.00

Bonus share (%) 5.00 - 5.00 2.00 -

Operating Performance Ratio

Investment/deposit ratio 88.59 88.50 89.95 89.87 88.93

Return on equity(ROE)% 12.82 15.70 14.07 10.46 10.05

Return on Assets(ROA)% 1.08 1.23 0.99 0.73 0.64

Cost of fund% 9.18 7.92 7.50 8.70 9.02

Other Information

Number of branches 129 140 154 168 182

Number of employees 2,810 3,070 3,446 3,682 3,795

Number of shareholders 44,427 36,695 30,386 25,793 24,276

N.B. Updated June, 2019

Table 3.17: Financial Statements

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Consoloditaed income statement or profit or loss accounts as at
december 31, 2019

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 Chapter-03
Financial Performance Analysis and Evaluation

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 4.1 Ratio Analysis

Ratio Analysis for the last Five years:

The Al-Arafah Islami bank is one of the leading Islamic Bank in our country. Every year it
needs to declare or calculate many financial Study or activities. They also need to make their
ratio analysis against every year. There some calculations may change or may not change.
Many terms may changeable or may not changeable by the calculation. They actually do this
analysis for making their financial terms and activities more strong and effective. So as a part
of my term paper I need to make the Al-Arafah Islami bank’s ratio analysis for the previous
five years. Here my analysis calculation is in below-

I just make 10 elements of ratio analysis. Because I tried to make many but there was not
sufficient information all the year. So for that I just made the following analysis. As like:

 Current ratio
 Gross profit margin
 Net profit margin
 Operating expense ratio
 Operating profit margin
 Fixed asset turnover
 Debt ratio
 Return on asset (ROA)
 Debt equity ratio
 Asset utilization ratio
 Sales turnover or total asset turnover

The analysis is like that. Here is not all the analysis. I just give this eleven analysis coz for
information lacking. I’ll show all the analysis separately to the following page. I will show
them in a graph or chart and I’ll discuss all the problems and solutions among them.

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The analysis:

Current
ratio
Sales turnover
or total asset Gross profit
turnover margin

Asset
Net profit
utilization
margin
ratio

Ratio
analysis of
Debt equity AIBL Operating
ratio expense ratio

Return on Operating
asset (ROA) profit margin

Fixed asset
Debt ratio
turnover

Flow chart 4.1: Ratio Analysis

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Calculation Part:

Here is the calculation part. In this part I am going to show all the calculation of all the year
individually.

CURRENT RATIO:

In the below there is the current ratio in a chart. This chart belong all the current ratio of year
2014-2018. In this chart one thing is very much clear that all the year there have some
changes of this ratio. All the years are not same. Below the chart all the details of every
year’s calculation are given very clearly.

Current asset

Current ratio = = (Times)

Current liabilities

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 6

3 CR

0
2014 2015 2016 2017 2018

╬ For the year 2014:

In the year of 2014 we can see that there is the calculation is zero. Because in the year of
2013 the current asset is 394, 49, 78,380 /- BDT and there was no current liability of this
year. In the annual Study there were no current liabilities. So for the calculation it comes zero
ratios.

╬ For the year of 2015:

In the year of 2015 there the current asset is 727, 59, 55,470 /- BDT. And the current
liabilities are 132, 00, 00, and 000 /- BDT and the calculation of the ratio is 5.512087 times.
That means the current ratio for this year is more than the previous year, where the previous
year’s ratio was just nil.

╬ For the year of 2016:

In the year of 2016 the current asset is 943, 46, 46,990 /- BDT. And the current liability is
178, 00, 00,000 /- BDT. So the calculation for this year is 5.300363 times. That means the
current ratio for this year is less than the previous year.

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╬ For the year of 2017:

In the year of 2017 the current asset is 1238170259/- BDT. And the current liability is 262,
00, 00,000 /-BDT. So the calculation of ratio for this year is 4.725840 times. That means this
year’s ratio is decreasing that the previous year.

╬ For the year of 2018:

In the year of 2018 the current asset is 217, 91, 40,468 /-BDT. And the current liability is
568, 00, 00,000/- BDT. So the calculation of ratio for this year is 3.836514 times. That means
this year’s ratio is also less than the previous year’s ratio.

Problems Arising on Current Ratio:

In the current ratio there have some problems. In the year of 2014 there was no current
liability. But for the banking sector sometimes liability is need for some reason. But if I
compare all the year then I can say the ratios of all year are comparatively small. Where the
current asset is good but the current liabilities is always near about the current assets. This is
a major problem for AIBL.

Own Opinion and Solutions:

For the current ratio, The AIBL needs to give more concentration about their current
liabilities. Their current liabilities are always small difference than the current asset. So this is
not a easy way to keep their competition in this competitive economic market. So my own
opinion is that the management level must need to observe for their current liabilities. I hope
if they observe that carefully then they will do better.

Debt Ratio:

In the below there is Fixed asset turnover ratio in a chart. This chart belong all the total debt
and the entire total asset for the year of 2014-2018. In this chart one thing is very much clear
that all the year there have some changes of this ratio. All the years are not same. Below the
chart all the details of every year’s calculation are given very clearly.

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 Total Debt
Debt Ratio= =( Percentage)
Total Asset

94

93

92

91
DR
90

89

88
2014 2015 2016 2017 2018

╬ For the year of 2014:

In the year of 2014 the bank’s total debt is 1967, 79, 83,839/-BDT. And the total asset is
2136, 81, 68,142/-BDT. So for this amount this year’s ratio is 92.09 %.

╬ For the year of 2015:

In the year of 2015 the AIBL have total debt is 2814, 48, 24,936/-BDT. This year’s total asset
is 3018, 23, 23,406/-BDT. After calculation this year’s total ratio is 93.24 %.This ratio is
small better than the previous year.

╬ For the year of 2016:

In the year of 2016 the AIBL have total debt is 3645, 26, 97,089/-BDT. This year’s total
asset is 3915, 84, 37,848/-BDT. After the calculation the ratio amount is 93.09 %. But this
year this is very small less than the previous year.

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╬ For the year of 2017:

In the year of 2017 the AIBL have total debt is 4495, 10, 58,918/-BDT. This year’s total asset
is 4851, 57, 87,384/-BDT. After the calculation the ratio amount is 92.65 %. This is again
comparatively little bit less than the previous year.

╬ For the year of 2018:

In the year of 2018 the AIBL have total debt is 6769, 60, 61,857/-BDT. This year’s total asset
is 7537, 43, 65,400/-BDT. After the calculation the ratio amount is 89.81 %. This is
comparatively very much less than the previous all year’s.

Problems Arising on Debt Ratio:

In this year there was starting was 92.09 %. But the nest year it increase and after that the
next three years It goes down and down specially in the year of 2017 it goes more down than
the other years. Maximum ratio has fall down in the year of 2017. This cause was for recent
share market fall.

Own Opinion and Solutions:

My only one opinion for this ratio is that only in the year of 2017 they as usual fall down and
they show its reason just the recent money market fall. And they need to concern for this.

Return On Assets (ROA):

In the below there is Fixed asset turnover ratio in a chart. This chart belong all the net income
and total asset for the year of 2014-2018. In this chart one thing is very much clear that all the

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year there have some changes of this ratio. All the years are not same. Below the chart all the
details of every year’s calculation are given very clearly.

Net Income
Return On Asset ( ROA ) =(Percentage)
Total Asset

2.5

1.5
ROA
1

0.5

0
2014 2015 2016 2017 2018

╬ For the year of 2014:

In the year of 2014 the bank’s total Net income is 47, 00, 18,407 /- BDT. And the total asset
is 2136, 81, 68,142/-BDT. So for this amount this year’s ratio is 2.19 %.

╬ For the year of 2015:

In the year of 2015the AIBL have total Net income is 34, 73, 14,166/-BDT. This year’s total
asset is 3018, 23, 23,406/-BDT. After calculation this year’s total ratio is 1.15 %. Next year it
falls down.

╬ For the year of 2016:

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In the year of 2016 the AIBL have total Net income is 66, 82, 42,288/-BDT. This year’s total
asset is 3915, 84, 37,848/-BDT. After the calculation the ratio amount is 1.70 %. This year it
increases but not more than the year of 2014.

╬ For the year of 2017:

In the year of 2017 the AIBL have total Net income is 85, 89, 87,708/-BDT. This year’s total
asset is 4851, 57, 87,384/-BDT. After the calculation the ratio amount is 1.77 %. This year it
also increases than the previous year but not than the year of 2014.

╬ For the year of 2018:

In the year of 2018 the AIBL have total Net income is 177, 69, 92,595/-BDT. This year’s
total asset is 7537, 43, 65,400/-BDT. After the calculation the ratio amount is 2.35 %. But
only this year this ratio gain better than the previous all years.

Problems Arising on Return on Asset:

Problem is that in the year of 2018 it falls down but from the next year it again turns around
to the increasing level.

Own Opinion and Solutions:

My only one opinion for this ratio is that only in the year of 2017 they as usual fall down and
they show its reason just the recent money market fall. And they need to concern for this. So
my I think the year of 2017 was really bad for AIBL.

Fixed Asset Turnover Ratio:

In the below there is Fixed asset turnover ratio in a chart. This chart belong all the sales
revenue and total asset for the year of 2014-2018. In this chart one thing is very much clear

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that all the year there have some changes of this ratio. All the years are not same. Below the
chart all the details of every year’s calculation are given very clearly.

Turn Net Income

¿ Asset = =(¿)
Ratio Total Asset

25

20

15
FATR
10

0
2014 2015 2016 2017 2018

╬ For the year of 2014:

In the year of 2014 the bank’s total sales revenue is 88, 16, 82,692/-BDT. And the total asset
is 2136, 81, 68,142/-BDT. So for this amount this year’s ratio is 4.12 times.

╬ For the year of 2015:

In the year of 2015 the AIBL have total sales revenue is 61, 45, 18,980/-BDT. This year’s
total asset is 3018, 23, 23,406/-BDT. After calculation this year’s total ratio is 20.3times. It’s
very high.

╬ For the year of 2016:

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In the year of 2016 the AIBL have total sales revenue is 128, 16, 78,168/-BDT. This year’s
total asset is 3915, 84, 37,848/-BDT. After the calculation the ratio amount is 3.27 times.
This year it decreases more and more.

╬ For the year of 2017:

In the year of 2017 the AIBL have total sales revenue is 133, 71, 97,611/-BDT. This year’s
total asset is 4851, 57, 87,384/-BDT. After the calculation the ratio amount is 2.75 times.
This year it decrease little bit.

╬ For the year of 2018:

In the year of 2018 the AIBL have total sales revenue is 94, 69, 22,517/-BDT. This year’s
total asset is 7537, 43, 65,400/-BDT. After the calculation the ratio amount is 1.25 times. But
only this year this ratio gain very much low than the previous all years.

Problems Arising on Fixed Asset Turnover Ratio:

All the year have problems without the other years. Which year is low or less that year is very
much low and less than the other years.

Own Opinion and Solutions:

For this ratio the AIBL management was very weak. So they really need to take necessary
steps for not face this situation once again.

Debt Equity Ratio:

In the below there is Fixed asset turnover ratio in a chart. This chart belong all the total debt
and the entire total equity for the year of 2014-2018. In this chart one thing is very much

Page 52 of 65
clear that all the year there have some changes of this ratio. All the years are not same. Below
the chart all the details of every year’s calculation are given very clearly.

Total Debt
Debt Equity Ratio= =(¿)
Total equity

14

12

10

8
DER
6

0
2014 2015 2016 2017 2018

╬ For the year of 2014:

In the year of 2014 the bank’s total debt is 1967, 79, 83,839/-BDT. And the total equity is
2136, 81, 68,142/-BDT. So for this amount this year’s ratio is 11.64 times.

╬ For the year of 2015:

In the year of 2015 the AIBL have total debt is 2814, 48, 24,936/-BDT. This year’s total
equity is 3018, 23, 23,406/-BDT. After calculation this year’s total ratio is 13.81 times. This
ratio is small better than the previous year.

╬ For the year of 2016:

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In the year of 2016 the AIBL have total debt is 3645, 26, 97,089/-BDT. This year’s total
equity is 3915, 84, 37,848/-BDT. After the calculation the ratio amount is 13.47 times. But
this year this is very small less than the previous year.

╬For the year of 2017:

In the year of 2017 the AIBL have total debt is 4495, 10, 58,918/-BDT. This year’s total
equity is 4851, 57, 87,384/-BDT. After the calculation the ratio amount is 12.60 times. This is
again comparatively little bit less than the previous year.

╬ For the year of 2018:

In the year of 2018 the AIBL have total debt is 6769, 60, 61,857/-BDT. This year’s total
equity is 7537, 43, 65,400/-BDT. After the calculation the ratio amount is 8.81 times. This is
comparatively more less than the previous all year’s.

Problems Arising on Debt Equity Ratio:

Actually for this ratio there are no problems. Just only one have problem is that in the year of
2017 they have problems as usual.

Own Opinion and Solutions:

So my only one opinion and suggestion is that they need take necessary steps for the year of
2017.

4.2 SWOT Analysis:

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SWOT analysis provides an opinion and adjustment whether the organizations current
position is satisfactory or not. Every organization is composed of some internal strengths and
weaknesses and also has some external opportunities and threats in its whole life cycle.

Strengths of AIBL:

 All activities of the bank are conducted according to Islamic shariah where profit is

the legal alternative to interest.

 The bank has earned customers loyalty as organizational loyalty.

 AIBL maintain corresponding relationship with many foreign banks so that it is an

effective measure for the smooth business.

 Skilled manpower and efficient employees are being involved to meet the clients’

satisfaction.

 The amount of deposits is one of the biggest strengths of AIBL.

 AIBL is always trying to add new and modern equipment.

 AIBL provides its customer excellent and consistent quality is every service.

 AIBL is financially sound company.

 AIBL utilizes state of the art technology to ensure consistent quality and operation.

 AIBL provides its works force an excellent place to work

 AIBL already achieved a good will among the clients

 AIBL has research and training division.

Weaknesses of AIBL:

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 In addition to that a huge number of financial institution working besides commercial

Banks of our country. As such their business is becoming more and more vital

weakness of AIBL because our financial market is not expanding in comparison with

the establishment of new banks.

 The advertising and promotional activities of this bank are up the mark.

 There some officer who work hard but are not appreciated by the authority.

 AIBL has not set up proper network system among branches.

 The bank does not have any research and development division.

 AIBL lacks well trained human resource in some area.

 AIBL lacks aggressive advertising.

 The procedure of credit facility is to long compare to other banks.

 Employees are not motivated in some areas.

 Risk Management system is not strong. The bank has already exposed to a variety of

risks the most important of which are credit risk, market risk and liquidity risk.

 IT division is not strong because bank put due importance to utilization of

Opportunities of AIBL:

 Favorable business climate for commercial banks in the country in comparison with
other business.
 They can also offer the micro credit business for individual and small business.
 Expanding the financial policy with credit facility customer is very secure in business
environment.
 Emergence of on line banking will open more scope for AIBL.
 AIBL can introduce more innovative and modern customer service.
 Many branches can be opened in local remote area as its high demand.

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  AIBL can recruit experienced, efficient and knowledgeable officers and staffs as it
offers good working environment.

Threats of AIBL:

 The world is advancing towards technology very fast. Though AIBL taken effort to
join the stream, it is not possible to complete the mission due to the poor
technological infrastructure of our country.
 Local competitors can also capture as huge market share by offering similar products
and services provided by the bank.
 Though the innovative working is in contentious process but the other rival banks are
coping it within the short time.
 They are carrying out aggressive campaign to attract lucrative corporate client as well
as big-time depositor.
 Bangladesh Bank is always supervising the local and foreign banks in Bangladesh and
sometimes it is hampering the normal operation of private bank.
 The worldwide trend of mergers and acquisition in financial institutions is causing
problems.
 Frequency taka devaluation and foreign exchange rate fluctuation is causing problem.
 Lots of new banks are coming in the scenario with new service.
 Local competitors can capture huge market share by offering similar products

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 Chapter-04
Findings of the Study

5.1 Major Findings:

While working on Al-Arafah Islami Bank limited, I have attained newer kind of experience.
After collection and analyzing data I have some findings. These findings are completely my
personal view to research work.
 Al-Arafah Islami Bank limited has lack of strong supervision for which loans are
default.
 Al-Arafah Islami Bank limited also has not proper monitoring system.
 Its term of repayment large loan has performed better then small size loan.

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 This bank started on-line service newly. As a resulted customers are not getting the
full service by the on-line service. Sometimes they have to face problem with on-line
account.
 Branches are very much enthusiastic to provide more service to the clients.
Investment division is an efficient department. They are very much prompt to give
decision to their valued client. Head office credit committee sits regularly on weekly
basis. They never keep any things pending.
 Lack of good cooperation is identified among the work procedures and employees of
the bank, which results in lengthiness and ineffective service. The employees of the
bank cannot provide effective services to the customers because of lack of computer
facility.
 The number of human resources in the computer section is really in sufficient to give
services to huge number of customers.
 The investment to the branch is too low in comparison to the total deposits of the
branch.
 The bank has given less emphasis on long term financing.
 Al-Arafah Islami Bank limited has also shortage of efficient management information
system.

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 Chapter-05
Recommendations and Conclusion

6.1 Recommendations:
AIBL need to consider these things for their General Banking to overcome the problems -
 They need to upgrade their existing marketing strategy to come more close to the
people.
 They need to provide market transparency, which is lacking so much in Al-Arafah
Islami Bank.
 They have to spread ATM card system very soon to compete with top ranking banks.

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  AlBL has not sufficient number of branches. They should immediately provide
branches in urban area where other banks are enjoying their business lonely.
 They have no marketing department at all, which create problems in advertising.
 Their Online banking needs to be enforced to attract upper class people.
 Proper Banking software should be used to get best benefit from this department.
AIBL should use the latest banking technology to provide better services to the
customers.
 Staff meetings and departmental meetings at the branch level must be increased to
develop service quality as well as problem solving.
 The bank should give an aggressive advertisement campaign to build up a strong
image and reputation the potential customer.
 AIBL should pursue advertising campaign in order to build a strong image among the
people. They should carry out aggressive marketing campaign to attract clients.
 The management should take immediate decision to take the current opportunities.
 AIBL should give equal priorities to the female candidates in terms of recruitment.
 AIBL should play a big role in social responsibility. However, they have a library
and an English medium school, but which is not sufficient.

On the basis of observation, SWOT analysis, Ratio analysis, and employee’s comments I
have some recommendations for Al-Arafah Bank Limited to capture more market share and
to make the internal environment more active. I hope these recommendations would help
them to compete with their competitors.

6.2 Conclusion:

Banks have their own unique strategy, which leads to their objectives. Some wishes to grow
faster and achieve some long range growth. On the other hand some banks want to lead a
quite life minimizing risk and convey an image of a sound bank. AIBL is pretty new in its
operation. Even though the financial analysis on the banks performance seems the banks
doing very well in the banking industry of Bangladesh, and has prosperous future.

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 AIBL has established goodwill through innovative products and services. Technology
development has opened up a new dimension in the development of creative products,
efficient services and customer satisfaction. The bank must cope with this technological
advancement its present status.

Though there are some drawbacks in some sectors of Al- Arafah Islami Bank Limited, still
modern banking technology and employee and employer sincerity may lead to increased
profit. The progress of AIBL in Bangladesh is depended on the environment, structure,
special features offered by the bank, rapid increase of deposit, investment, profit, dividend on
behalf of short time, the public respond over the bank.

The aim of the internship program is to gain knowledge of practical banking and to compare
this practical knowledge with theoretical knowledge. During the three months internship
program, it is not possible to go to the depth or each activities of division because of time
limitation. So, objectives of internship program have not been fulfilled with complete
satisfaction. However, highest effort has been given to achieve the objectives of internship
program. I think this Study may show a guideline to AIBL for its future planning and its
successful operation to achieve its goal in the competitive environment.

6.3 Abbreviations:
Acronyms
AIBL Al-Arafah Islami Bank Limited BB Bangladesh Bank

MD Managing Director BCD Bearer Certificate of Deposit

DMD Deputy Managing Director OB On line Banking

EVP Executive Vice President BBLC Back to Back Letter of Credit

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SVP Senior Vice President BL Bill of Lading

VP Vice President MTDR Mudaraba Term Deposit

AVP Assistant Vice President ITD Installment Term Deposit

FAVP First Assistant Vice President SND Short Notice Deposit

SPO Senior Principle Officer MSD Mudaraba Savings Deposit

PO Principle Officer STD Short Term Deposit

SEO Senior Executive Officer PTD Profit Term Deposit

MTO Management Trainee Officer IBC In ward Bills for Collection

EO Executive Officer OBC Out ward Bills for Collection

O Officer LC Letter of Credit

MCG Messenger CC Cash Credit

TB Tea Boy DD Demand Draft

MSD Mudaraba Savings Deposit OD Over Draft

AWCD Al-Wadieah Current Deposit TT Telegraphic Transfer

SND Short Notice Deposit PO Pay Order

ATM Automated Teller Machine PAD Payment against Document

MICR Magnetic Ink Character Reader LTR Loan against Trust Receipt

SOD Secured Over Draft LIM Loan against Imported Merchandise

Table 6.3: Abbreviations

Bibliography:
AIBL Annual Study:
 Al-Arafah Islami Bank Ltd. “Annual Study 2018”, Al-Arafah Islami Bank Ltd.,
Dhaka, Bangladesh.
 Al-Arafah Islami Bank (2018) “Manual for investment under Bai-Mudaraba mode”
Al-Arafah Islami Bank Ltd. Dhaka.

Books:

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  Madhura, Jeff (2005), International Financial Management 8th Edition, Thomas South
Wesrern.
 Besely, Scott and Bringham, Eugene F.(2000) Essentials of Managerial Finance, 12 th
Edition, Harcourt Inc. Publication.
 Rose, Peter S (2002) Commercial Bank Management, 5th Edition, Irwin Professional
Publication New York.

Websites
 Website of AIBL “ http://www.al-arafahbank.com/ “
 Website of IBBL “http://islamibankbd.com/index.php “
 www.google.com
 www.wikipedia.org

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