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The purpose of the study is to work in a real life situation and to apply management
skills. In this context its objectives are:
To do practical work in field and apply the knowledge of classroom lectures to the
real life situations,
1
1.2 Limitations of the Study
Due to the constraint of time the problem of short time period makes the analysis
restricted as one cannot properly understand and thus analyze all the operations of a
bank just in eight weeks.
More over some of the data was confidential and was not made available to me.
Sometimes due to the busy schedule of the bank, complete information regarding
different activities was not provided in time. During the study it was tried to include
only relevant material and avoid irrelevant material.
2
The data gathered from existing sources are called secondary data. They are in processed
form.
The main sources of secondary data of Al – Baraka Islamic Bank (AIB) are:
Journals, newspapers and course books.
Previous Annual reports of Al – Baraka Islamic Bank (AIB)
Brochures & Manuals of the Bank.
Websites
Newspapers
Previous Internship Reports
3
CHAPTER 2
In view of the above definitions, in simple words a bank can be defined as an institution
dealing in money, accepting deposits and advances loans.
4
the region. Taxes were all time high. Recoveries were hardly 25%. Political pressures
damaged the efficiency. The World Bank and IMF never lent support to the industry.
The State Bank of Pakistan realizing the gravity of the situation introduced reforms.
Banking sector reforms have brought in competition within the system, improved internal
efficiency, reduced the lending rates significantly and broadened access to the middle
class. While these results are encouraging, a lot more needs to be done and, we have
spelled out the agenda for the second-generation reforms in the financial sector covering
the period 2005-2010. Banks in Pakistan account for 95 % of the financial sector and
hence good health of banks is directly related to the economic growth and development
of Pakistan. Banks in Pakistan had been catering basically to the needs of the government
organizations, subsidizing the fiscal deficit, serving a few large corporations and
engaging in trade financing. There was no lending to small and medium enterprises, to
the housing sector or to the agricultural sector, which create most of the growth and
employment in Pakistan. Most important, the financial sector suffered from political
interference in lending decisions and also in the appointment of managers. The middle
class which is the backbone of any economy was not given due attention by the banking
sector. (Hussain, S; Rana, K & Shabbir, A (1991))
Pakistan is one of the few developing countries where the public sector banks went to the
private hands in a very short span of time. The government only owns the National Bank,
while 80 % of the bank assets are in private hands. And there is tough competition among
the banks, as in the private sector everything is performance-based. Unlike the public
sector or the government, any employee not producing results is fired because he affects
profit of the organization. The bankers these days go out of their cozy offices to market
their financial products and build up customer base. The seller market has changed into a
buyer market. The customer may choose the bank with best products and services. There
was a time, only a few years back, people used to go the banks and the staff treated them
shabbily, was generally uncooperative and unfriendly. Now, they are after the customers.
Banking sector reforms were thus needed badly to address these and other constraints so
that the banks could play their due role in the economic development of the country.
5
Although, there is no room for complacency and a lot still needs to be done, even the
worst critics of this government do concede that if there is one sector, which has
undergone basic transformation that is the banking sector.
Banks in Pakistan have been catering basically to the needs of the government
organizations, subsidizing the fiscal deficit, serving a few large corporations and
engaging in trade financing. There was no lending to small and medium enterprises, to
the housing sector or to the agricultural sector, which create most of the growth and
employment in Pakistan. Most important, the financial system suffered from political
interference in lending decisions and also in the appointment of managers.
As private sector credit is rising and money demand is constantly rising from agriculture
as well as manufacturing sectors. These are now offering from 7% to 11% return to their
depositors on term deposits. So it is also giving a strong indication that the people may
not withdraw their savings from banks in an environment where banks have started to
give them attractive rates with much better service than the saving centers. Banks have a
vast branch network and provide convenience too. Year 2008 is going to be the fourth
consecutive year for double-digit profitability growth of the commercial banks. The
excellent performance of the bank can be attributable to the prudent fiscal and monetary
measures of the government which resulted in the increased credit demand from private
sector, improved spreads, exceptionally increased in non interest income of the bank
(particularly fee income and dividends).
Some of the major reforms achieved in the banking sector to-date include:
6
Strict monitoring and reduction of non-performing loans by active involvement of the
Corporate Industrial Restructuring Corporation (CRIC) and Committee of Revival of
Sick Units (CRSU).
SBPs removal of restrictions imposed on nationalized NCBs for commercial
financing and incentive schemes for encouragement of mortgage financing by the
banks.
Implementation of Financial Institutions (recovery of finances) Ordinance 2001, and
relaxation of licensing and regulatory environment for Micro Credit and Rural
Finance Institutions, encouraging their establishments at districts, provincial and
national levels with varying capital requirements;
Mandatory requirement for all banks to get themselves evaluated by credit rating
agencies in order to facilitate depositors to make informed judgments about placing
their savings with the banks.
7
2.3.1 Al – Baraka Islamic Group
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 / Pakistan, Banque Al Baraka
D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Ltd / South Africa, 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.
8
Source: Al-Baraka Islamic Bank Annual report 2008
2.3.3 History
Al-Baraka Islamic Bank (AIB) has the honor of being the pioneer of Islamic banking in
Pakistan and has been operating in the country as branches of Al-Baraka Islamic Bank
Bahrain since 1991. Over the years, the bank has successfully developed and maintained
its identity as one of the leading providers of a host of banking products and services in
strict compliance with Shari’ah principles. Currently operating with 20 branches in 11
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.
Currently the authorized capital of Al – Baraka Islamic is US $ 1.5 billion, while the total
equity amounts to about US $ 1.5 billion. The Group has a wide geographical presence in
the form of Subsidiary banking units in, which in turn provide their services through
more than branches. Currently there are 496 employees working at different branches of
Al – Baraka Islamic at Pakistan.
9
2.3.6 Credit Rating
JCR-VIS Credit Rating Company Ltd. has reaffirmed the medium long term rating of
Albaraka Islamic Bank BSC © - Pakistan Branches at A ( single A) with a ‘stable’
outlook, the shot term rating is A-1 (Single A-one).
2.3.7Auditors
Ford Rhodes sidat Hyder & Co., Chartered Accountants, being eligible, have offered
themselves to act as auditors of the Bank for the year ending December 31, 2010
10
BOARD OF
DIRECTORS
Executive Committee
EXECUTIVE
COMMITTEE Audit committee
Shariah Board
BRANCH MANAGER
Source: www.albaraka.com.pk
11
Board of Directors
Country Manager
Regional Chief
Branch Manager
Source: www.albaraka.com.pk
2.7 Objectives
To enhance shareholder value whilst pursing a strategy of business growth and
geographical expansion.
12
To provide innovative and high quality research and development into Islamic
financial products which comply fully with the principles of Shari’a Law and Islamic
values, for the benefit of our customers.
To utilize the Group’s geographical presence to distribute its products and services
and promote cross border services.
13
• Sales (recent year)
• Shareholder Information
• Up to 10-year Analysis Summary (Per Share)
o Market Price
o Value Ratios
Price/Earnings
Price/Book Value
Dividend Yield
o Equity Capital
% Earned Growth
% Profit Rate (ROE)
Beginning of the Year Book Value
o Earnings
12 Month Earnings per Share
Annual percentage Change
o Dividends
% Payout Ratio
12 Month Dividends per Share
• Proprietary Wright Quality Rating
NAME DESIGNATION
14
2.11 Executive Committee
Name Designation
2.14.1 Departmentalization
The Al-Baraka Islamic Bank has number of interrelated departments that works together
to achieve the specific goals and objectives of the organization. The AIB has built a
hierarchical system that includes the sub departments.
The AIB’s exiting system includes following departments.
Cash department
Deposits department
Clearing department
Advances department
Remittances department
15
Government department
2.14.2 Location
The branch is located at Alfateh shopping plaza, Mansehra road, opposite Radio Station,
Jhangi, Abbottabad. This is very appropriate location because it is in the centre of the city
located on a busy road having offices of many companies and easily accessible to all the
inhabitants of the city.
16
Assets and Liabilities Management Committee Include Head of Treasury , Head of
operation and Chief financial Officer.
Mr. Waqas Bin Khalid (Head of Treasury)
17
CHAPTER 3
Striving to develop and an integrated Islamic Financial System. Compliance with the
rules and principles of Islamic Sharia is the core of the banking and financial activities of
the Bank. To this end, Albaraka has successfully sought the advice and expertise of
Islamic scholars acclaimed for their knowledge and piety from all over the Islamic world
to guide its path and monitor its performance. The Banks’ activities and operations are
regularly scrutinized by its Sharia Advisory Board.
Housing Musharakah
18
3.2.2 Letters of Credit (L/C)
AIB is committed to offering its business customers the widest range of options in the
area of money transfer. If you are a commercial enterprise then our Letter of Credit
service is just what you are looking for. With competitive rates, security, and ease of
transaction, AIB Letters of Credit are the best way to do your business transactions.
19
3.2.7 Islamic Export Financing
This facility is encouraged to boost exports of the country. Funds are made available
from SBP at lower rates.
20
3.2.10 ATM Network
Al – Baraka Islamic Bank also provide the facilities of ATM card (Barakash). Customers
now have the convenience of withdrawing cash from any of multiple ATMs ("All-Time
Banking" locations) conveniently located in major cities like Karachi and Lahore at any
time of the day or night even on closed days/holidays. Other services include customer
being able to inquire about the AIB balance of his/her account or printing an abbreviated
(mini) statement showing the most recent eight transactions up to the previous working
day.
3.2.11 Lockers
Al – Baraka Islamic Bank Lockers are available in three different sizes Small, Medium
and Large on a yearly fee. Locker holders need not have an account in the Bank.
3.3 Departmentalization
The Al-Baraka Islamic Bank has number of interrelated departments that works together
to achieve the specific goals and objectives of the organization. The AIB has built a
hierarchical system that includes the sub departments.
Deposits department
Cash department
Clearing department
Advances department
21
Remittances department
All these departments come under the operations, which is headed/ controlled by the
Manager Operations.
Current Account
PLS Saving Account
Term Deposit Account
22
3.3.2.3 Term Deposit Accounts
In this category Fixed or Term Deposit accounts are offered by the bank. In these types of
accounts the deposit can be withdrawn after a specified period of time. Since the amount
in these types of accounts is deposited for a fixed period so the bank can easily invest
them in any profitable activity and can get return because there is no burden of with
drawl by the customer.
23
Must not be bewared under any law from entering into any contract.
Should be known to the any of the banking staff according to KYC policy.
3.3.3.2 Account Opening Procedure
The following procedure is followed for opening of all the accounts.
Individual accounts:
Individual accounts are the most common personal investment accounts. Opened by
single person.
Joint Account
A joint account occurs when two or more than two customers have one account. The
parties to a joint account are considered in law as they are one person.
24
Business accounts:
Business accounts can be opened by institutions, companies, partnerships, trusts and non-
profit organizations. Following documents are required.
3.3.3.5 General Rules for Various Types of Accounts
Following are some general rules, which are applicable to all kinds of accounts:
Not more then one account of each category may be opened in one and the same
branch except joint account with any other individual.
In the event of the death of an account holder the credit balance in the account shall
be paid to the legal heirs of the account holder.
The account holder wishes to close the account should surrender all unused checks.
3.3.4.1 Receipts
The Account holder deposits in their accounts through a deposit slip. The deposit slip
contains the account number and the title of account. The amount in figure and words is
also written on both side of the slip. The customer then deposits the amount to the
cashier, which is dully signed by the cashier and an officer .At last amount is deposited in
customers account.
3.3.4.2 Payments
The customers withdraw the deposit through their account through cheque.“Cheque is a
bill of exchange drawn on a specified banker and expressed to be payable otherwise on
demand”.
25
3.3.4.3 Kinds of checks
Cross cheques
Ordinary cheques
26
The function of the remittance department is the transfer of money/funds from one
bank/branch to the other.
The Bank of Punjab, like other Commercial Banks undertakes to remit or transfer money
from one place to any part of the country and outside the country. The money is remitted
mostly by means of:
It is made by the banks against payment of cash. The bank recovers different types of
charges from the applicant on issuance of DD, covering its commission and other postal
charges.
27
These are the faster ways to transfer money. The following procedures are fulfilled in this
regard:-
Check the test numbers at the arrival
Verify the signatures of the bank official.
Entered in the relevant register.
Make payment.
In Telegraphic transfer the specific codes are exchanged by the bank official on
telephone but this is normally not followed.
28
market fluctuations.
3.3.7.1 Securities
Common Securities for the banker’s advances are as under.
Guarantees
When an application for advance cannot offer any tangible security, the banker may
rely on personal guarantees to protect himself against loss on advances or overdraft to
the applicant.
Mortgage
A mortgage is the transfer of an interest in specific immovable property for the
purpose of security the payment of money advanced or to be advanced by way of
loan, and existing or future debt, or the performance of an engagement which may
rise to a pecuniary liability. The transfer is called a mortgagor, the transferee a
mortgage.
Hypothecation
When property in the shape of goods is charged as security for a loan form the bank
the ownership and possession is left with the borrower, the goods are said to be
Hypothecated The essence of hypothecation is that neither the property in the goods
not the possession of them are possession is left with the borrower, the goods are said
to be Hypothecated the essence of hypothecation is that neither the property in the
goods not the possession of them are possessed by the lender, but the security is
granted by means of letter of hypothecation, which usually provides for a banker’s
charge on the hypothecation goods.
29
Pledge
In a pledge the ownership remains with pledge, but the pledge has the exclusive
possession of property until the advance is repaid in full. While in case of the default
the pledge has the power of sale after giving due notice.
Promissory Note
Sometimes promissory note is also accepted as a security, "A promissory note is an
instruments in writing containing an unconditional undertaking signed by the maker,
to pay on demand or at a fixed or determinable future time a certain sum of money
only, to or to the order of certain persons, or to the bearer or the instrument." A
promissory note is incomplete until has been delivered to payee or the bearer.
Moreover, the sum promised in a promissory note may be made by two or more
makers who may be liable there on jointly and severally.
Car Ijarah
AlB provide the facilities of car Ijarah/leasing to his customer. AlB provided fund up
to 4 million to his customer for the period of 2 to 5 year. No interest concept is
involved, therefore profit margin is not announced before transaction .finance on the
concept of asset based financing. Therefore no chance of default for bank.
REQUIREMENTS EXPLANATION
RS: 40000000
MAXIMUM FINANCE LIMIT
30
1-5 YEARS
MAXIMUM PERIOD UP TO
ASSET BASED FINANCING
SECURITY(IES)
Housing Musharakah
AlB also provides the facilities of Housing Musharakah to his customer. AlB contribution
is 80% of total investment, and client can contribute 20% of the investment. The
employee can pay rental and installments to bank in order to get total share of the
property or land which they jointly buy. The period is from 1 to 15 year.
REQUIREMENTS EXPLANATION
80% OF INVESTMENT
FINANCING BY BANK
1 TO 15 YEARS
MAXIMUM PERIOD UP TO
ASSET BASED FINANCING
SECURITY(IES)
3.4 Conclusion
From the list of products and services mentioned it is obvious that AlB is providing a
range of Products and Services in various fields of corporate banking to its customers and
its services are spread over many aspects of commercial banking.
31
Al – Baraka Islamic bank, Pakistan, operates as branch of foreign bank incorporated and
domiciled in Bahrain on February 21, 1984 and is a member of Al – Baraka banking
Group. The registered office of the bank is situated at 95-B Hali Road, Gulberg II, Lahore
and it presently operates through 20 branches (2006: 11 branches) in Pakistan.
32
CHAPTER 4
The information derived from these types of analysis should be blended to determine the
overall financial position. No one type of analysis supports overall findings or serves al
types of users. Financial statement analysis is a judgmental process. One of the primary
objectives is identification of major changes (turning points) in trends, amounts, and
relationships and investigation of the reasons underlying those changes. Here only two
type of analysis is done
Common size Analysis
Ratio Analysis
33
It has the following types
Horizontal Analysis
Vertical Analysis
Horizontal analysis compares each amount with a base amount for a selected base year or
we take each item of base year as 100% and compare with other items
34
ASSETS 2007-2008 2008-2009
(%) (%)
Cash and balances with treasury bank 14.13 (1.0)
Balances with other banks (9.79) (28.52)
Lending to financial institutions (20.13) (20.60)
Owners’ Equity
Share Capital 0 25.0
Interpretation
Horizontal analysis of balance sheet shows decrease of bank’s reserve with treasury i.e.
14.13% in 2008 as compared to year 2009 i.e. -1.0%. But the balance with other banks
35
decreased to -9.79% in 2008 and continuing this trend in 2009 also where it further
reduced to -28.52% showing much borrowing on the other hand. The bank’s lending to
other financial institutions recorded much fluctuation where it decreased to -20.13% in
2008 and slightly reduced to -20.60% in the next year (2009). The net investments
showed increase to 99.49% in 2009. Similarly the bank’s net advances also showed
considerable decreased i.e. -6.38% in 2009.
On the liability side the banks payable bills showed considerable increase to 87.0% in
2009 as compared to -64.9% in 2008 and the bank’s borrowing also showed much
increase of 465.17% in 2009 as compared to -31.08% in 2008.
The total owners’ equity has showed positive signs for the bank’s growth which
increased in 2009 to 2007 to (-20.33% to 27.36%).
428.85
Provision against non-performing advances (63.81)
(131.87)
Net mark-up/interest income after provision 761.32
12.93
Total non-markup/interest income (54.42)
36
Administrative Expenses 25.28 9.86
(3.76)
Total non-markup/interest expenses 75.86
(390.81)
Profit before taxation 126.22
(335)
Taxation 153.37
(563.91)
Profit after taxation (37.40)
Interpretation
Interest expenses have showed increase to 25.95% in 2009 based with year 2008. This
shows that the management has no control over the financial cost and if this trend
continued the Bank may show huge loss in profitability in the coming years. The gross
profit decreased marginally in year 2009 and recorded -5.78% but increased in 2008 to
98.31% by taking 2007 as base year. Non-markup interest income decreased to -54.42%
in 2008 and increased to 12.93% in 2009 which shows good performance but the critical
analysis shows that this increase is slightly due to the increase of normal incomes
especially income earned in dealing with foreign currency but the major factor
contributing to this increase is due to the gains recovered from the sale and redemption of
securities.
The total non mark-up interest expenses have decreased to -3.76% in two years due to
increase in the administrative and other expenses showing inefficiency of management.
Net profit (Profit after Taxation) of the bank has decreased to -563.91% in 2009 as in
2007 it was -37.40%.
37
4.1.1.2.1 Vertical analyses of balance sheet
38
2009 (%)
LIABILITIES & OWNERS’ EQUITY 2007 (%) 2008 (%) 2009 (%)
Owners’ Equity
Interpretation
Vertical analysis of balance sheet shows that the bank’s cash and reserve with the
treasury bank has slightly decreased in 2009 as compared to 2007 (4.60% to 3.97%). The
bank’s balance with other banks also decreased from 12.55% to 10.73% in two years
(2007 to 2008) and further decreased to 6.2 in 2009. Similarly the bank’s lending to
financial institutions has decreased in 2008 as compared to 2007 (9.62% to 7.28%) and
further decrease to 4.6% showing a decrease in lending rates. The net investments
decreased from 29.96% to 28.67% in 2007 to 2008 and in 2009 increases to 46.33. The
advances rate showed an increase in 2007 and 2008 (33.94% to 40.35%) and in 2009
again decreases to 30.5.
On the liability side the bills payable of the bank decreased in 2007 to 2008(1.17% to
0.39%) and 2009 it became to 0.59%. The banks borrowings showed much fluctuation by
decreasing to 2.90% in 2008 from 4.45% (in 2007) and increased to 13.26% in 2009. The
Bank’s deposits increased in 2008 as compared to 2007 (72.06% to 78.92%) and in 2009
decreased to 67.7%.Share capital of the Bank decreased in 2008 as compared to 2007
(13.47% to 12.77%) but slightly increased in 2009 to 12.89%. Reserves of the Bank
increased to 4.58% in 2008 as compared to previous year but in 2009 decreases to 1.16%.
The Inappropriate profit showed a slight increase of 0.76% in 2008 from 0.74% in 2007
but in 2009 Inappropriate profit decreases to -1.02% . But the greater reduction happened
in surplus on revaluation of assets which showed a much decrease. This contributed
negative effect on the total owners’ equity which decreased from 1.04% (2007) to -3.20%
in 2008 but in 2009 increased to 1.65%.
40
Net mark-up/Return/ interest income 22.48 35.86 29.5
19.46
Provision against non-performing advances 27.54 6.52
Provision for diminution in the value of 17.75
investments 0.15 1.54
-
Bad debts written off directly 0.002 -
-7.73
Net mark-up/interest income after provision (5.22) 27.79
Non Markup/Interest Income
Fee, Commission & Brokerage Income 3.30 3.75
3.25
Dividend Income 5.33 5.08 3.46
Income from dealing in foreign currency 0.62 1.11 0.09
Gain/Loss on Sale & Redemption of Securities 18.20 (0.019) 1.98
Un realize gain/loss on revaluation of - - (0.03)
investment
Other Income 4.15 2.04 2.06
11.31
Total non-markup/interest income 26.09 39.28
Non Markup/Interest Expenses
Administrative Expenses 21.96 22.13 21.22
Provisions/Write offs - 8.93 5.47
Other charges 0.88 1.25 0.45
27.14
Total non-markup/interest expenses 22.25 32.32
(23.56)
Profit before taxation 3.25 6.95
(4.76)
Taxation (5.70) 2.31
()
Profit after taxation 8.95 4.64
Interpretation
Interest expenses have decreased from 77.52% (2007) to 70.5% in 2009 which shows
management efficiency to control expenses. The gross profit which increased from
22.48% to 35.86% in a span of one years i.e. from 2007 to 2008 and then decreased to
29.5% in 2009. Non-markup interest income has increased from 26.09% in 2007 to
39.28% in 2008 and decreased during 2009 to 11.31%. But this increase is mostly due to
41
the gains recovered from the sale and redemption of securities and slightly due to
increase in dealing with the foreign currency.
The total non-markup interest expenses have increased from 22.25% to 32.32% during
2007 to 2008 and in 2009 these expenses again decreases to 27.14% which is not a
healthy sign for the Bank because it shows management inefficiency. Net profit (Profit
after Taxation) of the bank has greatly decreased from 8.95% to 0% in the two years i.e.
2007 to 2009 which shows management inefficiency.
42
This ratio tells about how well management puts Bank assets to work. Here the ratio
shows a tremendous increase to 87.54% in 2009 from 8.7% in 2008. Above analysis
shows that Bank Assets are very efficiently utilized during these years.
Figure 4.1: Earning assets to total assets
88
87.5
87
86.5
86
85.5
85
2007 2008 2009
80
60
40
20
0
2007 2008 2009
43
Credit to Deposit Ratio
It is a measure of Bank’s position with regards to taking risk. This ratio increased in 2008
to 51.12% from 47.10% in 2007 and decreased to 45.02% in 2009.
52.00%
50.00%
48.00%
46.00%
44.00%
42.00%
40.00%
2007 2008 2009
Return on Assets
It tells the efficiency of assets utilized by generating income. The results of the Bank
show considerable decrease from 1.12% in 2007 to 1.0% in 2008 and it decreased in
2009 to -1.301%.
1.50%
1.00%
0.50%
0.00%
-0.50%
-1.00%
-1.50%
2007 2008 2009
44
The Cost to Income results of the Bank show considerable increase from 247.7% in 2007
to 696.7% in 2008 and it decreased to -144.4% in 2009. This ratio indicates that
Operating Expenses of the Bank have decreased in last year as compared to Net Profit
which shows Management’s inefficiency to control unnecessary expenses of the Bank.
800.00%
600.00%
400.00%
200.00%
0.00%
-200.00%
2007 2008 2009
This ratio also shows fluctuating results during three years. This ratio was 19.75% in
2007, decreased to 14.93% in 2008 and then increased to 15.36% in 2009 showing a
fluctuating profit of the Bank as compared to Net Assets of the Bank.
20.00%
15.00%
10.00%
5.00%
0.00%
2007 2008 2009
45
These ratios indicate the productivity level of the bank’s employees. Banks can improve
these ratios by increasing the technology infrastructure, frequent offering of innovative
products and also employee ratio
Interpretation
Interest income per employee shows the interest income generated by each employee, so
as the number of employees increased in 2009, they generate more interest income that
year. The profit generated by the employees in 2008 is more than 2009.Total deposits and
total advances by the employees have decreased in 2009 than 2008. The total deposits
and total advances in the branches have also decreased. This shows that the business of
the bank has increased last year than before. The number of employees per branch has
also decreased in 2009
46
SWOT stands for Strength, Weaknesses, Opportunities and Threats. SWOT is useful tool
for providing a framework for analysis of an organization. It is widespread approach to
make assessments in terms of internal and external environment of the organization and
to formulate strategies by analyzing its internal strengths and weaknesses, external
opportunities and threats.
STRENGTHS
47
The managers are fully aware of the recent managerial concepts and are able to deal with
any type of scenario.
Job satisfaction is one of the important factors for the employees to be motivated. The
people in the organization under consideration were found highly satisfied with there
jobs.
Friendly environment
The environment of the organization is very friendly. People over here are very
cooperative, not only with the customers but among themselves as well.
4.2.2 WEAKNESSES
48
Centralized decision making
The decision making in the organization is completely centralized which results in the
loss of confidence of the employees over the management, employees may not want to
follow the dictates, rules and regulations.
It has been found that in the organization under consideration, if new vacancies are
allocated there is a trend of external recruitment, which results in the dissatisfaction of
the current employees.
4.2.3 OPPORTUNITIES
49
from market.
4.2.4 THREATS
Increase in Competition
The increasing competition in local as well as national and multinational level also lower
down the profitability of the bank and compelling the bank to use a large amount of funds
to meet out competition.
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Other organizations are using better HR techniques.
Other organizations of similar nature are using better and recent HR techniques, so they
have got an edge to facilitate their employees whenever they need. It can be a serious
threat to this organization as there employees would not be satisfied of their own
organization which will effect their performance.
CHAPTER 05
Conclusion
The Al – Baraka Islamic Bank is a new emerging bank and it is trying to get market share
in the presence of national and foreign banks operating in the country. It has played an
important role in boosting the economy of the country but there always exists some room
for improvement.
After observing this AIB very closely and its HR department in particular, following
outcomes have been concluded.
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The decision making is still centralized as the middle and low level management is
not taken into confidence.
There are no sub divisions at the provincial or branch level. So when different
problems related to HR are raised, they are left unaddressed.
Most of the employees working in this branch are not much familiar with computer.
They just know how to use their part of software if any problem comes in the
computer they can’t fix it.
The spacing requires expansion. The employees are seated congested .If the
customers exceed more than fifteen in number, then the branch get filled with lot of
disturbance.
The recruitment process is very lengthy it should be trimmed.
The marketing efforts at the branch level are less disciplined and there are no
integrated efforts from all the staff members. The mobilization of deposits is mainly
considered as the responsibility of the branch manager but the rest of the staff is
usually least interested.
Bank branches are restricted to some specific cities.
The bank has been applying the modern concepts of management and marketing at
both micro levels. The interior and exteriors of the branch have been changed but the
staff of the branch has been found less motivated towards the organizational
objectives.
5.2 Recommendations
As I have spent two months in AIB Abbottabad Branch for the Internship purpose.
During this period I have tried my best to observe the banking environment in the AIB. I
have observed a lot of strengths and weaknesses in the branch. On the basis of this
observation I have come up with certain recommendations particularly related to the AIB,
Abbottabad Branch but generally can be applicable to the whole banking system of
Pakistan including all other branches of Al – Baraka Islamic Bank for improvement.
These recommendations will help to cope with the problems being faced by the Bank and
will enhance the efficiency and performance of the AIB in particular and all the banking
sector of the country in general.
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From the previous analysis of the financial statements I have realized that that Al –
Baraka Islamic Bank is performing very well since its inception. It is quite difficult to
give suggestion to improve the banking conditions AIB. As we know that nothing is
perfect, there is always a room for improvement, so I will recommend following
suggestions for AIB:
Bank should introduced incentive plans for employees on regular basis so that if
employees may work whole heartedly for the welfare of their organization. While
giving incentives qualification, work, experience, hard work and such other factors
must be considered.
Fresh graduates must be recruited. As the combination of Experienced and fresh can
produce better results and it will improve the efficiency of management.
AIB is going towards mobile banking but the problem is that a common client has no
idea of its usage due to lack of marketing. I think that a proper marketing programme
must be launched for client’s awareness.
Banks different schemes must be conveyed to the targeted customers so that to have a
reasonable share in market
To motivate the employees their remuneration / salaries should be made at par with
top tier Banks.
Bank should adopt such an induction plan that when a customer opens his account
with the bank he should be supplied with a booklet which enables him to know the
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procedure of filing the cheques, pay-in-slip etc. It will save a lot of time of the bank
staff afterward during the conduct of the account of that customer.
The attitude of the bankers with all of their customers is not the same; they pay more
attention and good service to some of the customers and neglect a major portion of
them. Some of the customers approach to the bank officials and get their work done
before others; it is not a good practice. All the customers should be treated equally.
AIB should increase its communication with customers about the terms and
conditions of its different products and services.
Misuse of telephone internet, fax machines and other facilities available to the
employees of the bank must be handled properly.
Scholarship programs should be designed for senior employees and branch managers.
The AIB should get into contract with top foreign universities. Every year the bank
should finance and send their senior managers for further education abroad. After
completion of higher education employees will be in a better position to attain the
strategic objectives of the bank and increase the overall business and profitability
portfolio of the bank.
The branch network should be improved and number of branches should be increased
to reach and provide services to maximum number of customers.
AIB should conduct meaningful refresher courses, seminars and workshop with a
view to improve the knowledge of the staff. The HR Departments arrangement for
staff training’s to coup with new demands that may become threats for interests of the
Company. The present conventional training programs need to be made more
comprehensive.
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The coordination among employees and different departments should be improved.
The coordination between top and lower management also needed to be improved.
REFERENCES
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Waleed (2010); Interview with Mr. Waleed, Manager Operations, Al-Baraka
Islamic Bank, Abbottabad, 11 March, 2010
Tariq Mahmood (2010); interview with Mr. Tariq Mahmood, Branch Manager
AIB, Abbotabad branch, 15March,2010.
Tamuja Agarwala (2008); Strategic Human Resource Management, 7th ed. Oxford
University Press, New Delhi, India .
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Account Opening Form
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ATM Application Form
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