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Deposit and Investment Management

of Al-Arafah

Al-Arafa h Islami Bank Limite d

Sk. Mel.

An Internship Report Submitted in Partial Fulfilment of the


Requirements for the BB A Program,
Ahsanullah University of Science & Technology

INTERNSHIP
REPORT

DEPOSIT AND
INVESTMENT
MANAGEMENT
OF
AL-ARAFAH
ISLAMI BANK
LIMITED
PREPARED FOR
DUTTA
PROFESSOR
SCHOOL OF BUSINESS

PREPARED BY
HOSSAIN
10.01.02.01
BBA 25

th

BATCH

SCHOOL OF BUSINESS

DATE OF SUBMISSION
201 4

UNIVERSITY OF SCIENCE
& TECHNOLOCV

LETTER
August 07, 2014
Dr. Dipak Kanti
Professor,
School of
Business
Ahsanullah
University of
Science &
Technology

Subject:
Submission of
Internship
Report.

Dear Sir,
This is my
pleasure
to
present my
internship
report entitled
"Deposit
Management of
Al-Arafah
in Al-Arafah
Islami Bank
Limited,
Sonargaon
Janapath Road
Branch (Plot 30,
Sector
11,
Sonargaon
Janapath
Road, Uttara,
Dhaka-1230)
I believe that
knowledge and

experience
I
gathered during
the
internship
period
will be
helpful in my
future
professional life.
I will be grateful
to you if you
accept the report.
I
will be available
for defense on
this report at any
time.
Your support in
this regard
will be highly
appreciated.
Thanking you.

Sincerely yours

Sk. Md . Maidul
Hossain
ID:
10.01.02.010
25,h

wwm
mmm
wmm
mmm

$mm
mmw
mwm

Page | ii

ACK
NO
WL
EDG
EME
N
T

Bank
Limited,
for
giving
me
the
valuable
opportun
ity
to
do
my
internshi
p
program
and
supporti
ng
me
with
knowled

ge
and
resource
s.
I
am
also
grateful
to
the
entire
Team
Sonarga
on
Janapath
Road
Branch
of AlArafah
Islami
Bank
Limited
as they
had
always
been
there for
me
when I
needed
them the
most.
Their
active
participa
tion to
all
my
question

s,
queries
during
my
internshi
p has
made
this
journey
a true
success.
Especiall
yI
want to
thank
my
organiza
tional
supervis
or Mr.
Rubayet
Ullah,
Khan
(Second
Officer),
Mr.
Tareq
Pathan
(Senior
Executiv
e
Officer),

Page | iii

PR
EF
AC
E
First of
all I
would
like to be
grateful
to the
Almight
y Allah,
the
merciful
& the
benevole
nt
that has
enabled
me to
complete
this
report.
The
internshi
p, a part
of the
academic
disciplin
e, for the
BBA
students

has been
designed
to
acquire
practical
knowled
ge. It is
expected
that the
integrati
on of
knowled
ge in
theories
and
practices
will
enable us
to
become
effective.
Through
this
program,
I have
got the
chance to
acquire
some
experien
ce in a
reputed
bank.
Which is
expected
to
enlighten
my
career.

and
Investme
nt
Manage
ment of
AlArafah
as
subject
matter
for my
internshi
p
program
due to
personal
curiosity
&
interest
to
achieve
some
practical
knowled
ge about
this
sector.
Besides
this
banking
activity
is
much
importan
t for the
economi
c
develop
ment.
Without
bank it's

difficult
to run
financial
activities
or
operation
. So it's
normally
claims a
research
on it for
better
understa
nding at
present.
Finally,
it
is
my
earnest
&
sincere
hope
that
this
report
on
"Deposit
and
Investme
nt
Manage
ment of
AlArafah
Islami
Bank
Limited"
would be
found
useful by
the

individua
ls.
I tried to
make the
report
effective,
informati
ve and
represent
ative.

EXECUTIV E SUMMAR Y

Islami Bank Limited, Sonargaon Janapath


as a requirement of my BBA program in
School of Business, Ahsanullah University of
Science & Technology. My topic is Deposit
and Investment Management of Al-Arafah Islami
Bank Limited. In this report I described
about Islamic concept about deposit and
investment,
available
deposit
and investment
products of AIBL ,

The first chapter shows different aspects of the


report like a brief introduction, origin of
the report, statement of the Issue, objectives,
significance, methodology & limitations of
the study. Second chapter shows a brief
company overview.
In
this
section
different
important data about Al-Arafah Islami Bank
Limited is provided. Background, vision,
mission, commitments, special features, product
line, organogram of AIB
L and some other
necessary company related information is provided
in this chapter.

The third chapter is about literature review.


In this chapter I described the concepts of
Islamic banking and basics about my
internship
report
topic
deposit
and
investment
management under Islami Sharia.

The next two chapter is the most important


chapter of this report. Chapter 4
describes
deposit management and Chapter 5 describes
investment management of AIBL
. I described
how the bank collect the money from different
deposit source and allocate them to different
investment portfolio to earn profit. I showed current
deposit and investment position of the
bank and some previous records. I also
described Sharia
concept about
deposit
and
investment of the bank. There is a detailed
description about their deposit and investment
products so that their managing strategy could be
understood more clearly.

The sixth chapter shows the findings of my study. There I described the condition of deposit
and investment of the bank for last two years. Then I stated some problems I realized about
the bank that need to be fixed for the improvement of deposit and investment related
profitability. Then I briefly presented my
SWOT analysis of AIBL
Page | v

Finally, in the last chapter I stated some recommendations for the improvement of deposit
and investment condition of the bank and then the conclusion has been made.

CONTENTS
Page
Letter of Transmittal
Acknowledgements
Preface
Executive Summary

Chapter 1:
INTRODUCTIO
N
Introduction
Origin of the Report
Statement of the Issue
Objectives of the
Study
Significance of the
Study
Methodology of the
Study
Limitations of the
Study

Chapter 2:
COMPANY
OVERVIE W
Background of AIBL

2.8

AIBL

Credit Rating

2.13

Organogram of an AIBL

2.14 Internal Control &


Compliance (ICC)
Shariah

2.20

Card

Chapter 3: LITERATUR
E
REVIE
W

3.8

Type

Chapter 4: DEPOSI T
MANAGEMEN
T

4.3

Deposit Mix

Chapter 5: INVESTMEN T MANAGEMEN T


Investment of AIB L

5.3

Sector Wise Investment 2013

5.5
46

Micro, Small & Medium Enterprises (MSME) Investment

5.7
(4%)

Investment for Growing Spices at a Lowest Profit Rate


50

5.8

Al-Arafah

5.10

Grameen Small Investment Scheme (GSIS)

Chapter 6: FINDINGS

Chapter 7: RECOMMENDATION S &


CONCLUSION
S

References
Appendix

OF FIGURES
Page
A Performance at a Glance
(In million taka)

Figure 2C
an AIBL

Organogram of

Figure 4B
2013

Deposit Mi x

Figure 5B

Figure 5E
Category Wise
MSME Development (Client
Percentage) 48
Figure 5F
Sector wise
Agricultural Investment 20122013 (%)
50
Figure 5G
Gradual
Development of GSIS
Figure 5H
Gradual
Development of Solar Energy
Investment Client
55

Islami Bank Limited

Chapte
r
1

INT
ROD
UCT
IO
N
Topics
the Study
1.2 Origin of the
Report
1.6 Methodology of
the Study
1.3 Statement of the

Issue
1.7 Limitations of the
Study
1.4 Objectives of the
Study

1.1 Introduction
Bangladesh is one of
the
largest
Muslim
countries
in
the
world.
The
people
of this
country are deeply
committed to Islamic way
of life as enshrined in the
Holy Qur'an and
the Sunnah. Naturally,
it
remains
a deep cry
in
their hearts
to
fashion and
design their
Page 11
economic lives in
accordance with the
precepts of Islam.
The
establishment of Al-Arafah

practices, only in the late


20th century were a
number of Islamic
banks
formed
to apply these
principles
to private
or semi-private
commercial
institutions within
the Muslim community.
Islamic banking

commenced operations
in
Bangladesh
in
1983.
There are
8
Islami
Shariah based banks
in
Bangladesh and they
execute
banking
activities
according
to
Islami
Shariah
based
principles i.e. Profit-Loss
Sharing (PLS) mode.

1.2 Origin of the


Report

and Investment
is
on
of

conducted
the
basis
my
practical experience of
three
months
long
internship at
Sonargaon
Janapath
Road
Branch
of Al-Arafah Islami
Bank
Limited.
After
consultation

with
my
faculty

supervisor
Dr.
Dutta, Professor,
School of Business,
Ahsanullah
University
of
Science &
Technology and under
the direction of my
organizational supervisor
Mr.
Rubayet
Ullah,
o
Senior Principal
Officer,
Sonargaon
Janapath Road
Branch,
AlArafah Islami
Bank
a
Limited, I have prepared
this internship report with
the mentioned topic.

1.3 Statement of the Issue


Islami

Bank

:Limited". It focuses on the current


deposit and investment management
system,
deposit
and investment evaluation method,
strength
and
weaknesses
of
current
deposit
and
investment strategy and future initiatives
taken to
improve the condition
of deposit and
investment management of Al-Arafah
Islami Bank Limited.

1.4 Objectives of the Study


The main objective of the study isTo provide a critical study about the
deposit
and
investment
management system
of Al-Arafah Islami Bank Limited

Other secondary objectives are-

L
To focus on deposit and investment
management practice in of AIB
L
To identify the problems related to
deposit and investment of AIB
L

To provide
guidelines
deposit and

some policy
for
improving
investment

management situation of AIB L


To match the theoretical knowledge
with practical knowledge
To gain practical knowledge about
corporate world

1.5 Significance of the Study


This internship report is an important
partial requirement of four years BBA
graduation
program. This is because knowledge
and
learning become perfect
when it is
associated
with theory and practice.
By this
internship program students
can establish contacts and
networking. Contacts may help to get a
job in practical life. That is, student can
train and
prepare themselves for the job
market.
A developing
country like
Bangladesh has
an

overwhelming number of unemployed educated graduates. As they have no internship


experience they have not been able to gain normal professional experience of establish
networking system, which is
important in getting a job. Therefore, it
is obvious that the
significance of internship is clearly justified as the crucial requirement of four years BBA
graduation.

1.6 Methodology of the Study


1.6.1
The study is exploratory in nature. It gives an insight and comprehensiveness of the
deposit and investment management and also the attributes that affects the profitability of
the bank. To collect and analyze the information for this report, I have used both
qualitative and quantitative research methods.

1.6.2
Different data and information are required to meet the goal of this report. Those data and
information were collected from various sources, such as, primary and secondary which
is showed below:
(a) Primary Sources of Data: Primary source of data are known as the data
which are collected through
observation and direct contact. They are not
derived from any other sources. The primary data are the information collected
during the internship period by the observation and involvement. Most of the
primary data are collected through the following sources:
Day to day operation with staff of AIB

(b) Secondary Sources


of Data: The secondary data is one which has already
been collected by a source other than present investigator. Secondary data
include both raw data and published summaries. Documentary secondary data

Page | 3

include written material such as; books, journal articles, newspapers as well as
administrative and public records. These types of data are collected through
following ways:
Annual report of AIB

1.7 Limitations of the Study


On the way of preparing this report, I have faced following problems that may be
termed
as the limitations of the study:

Bank's policy of not disclosing some sensitive data and information


obvious reason posed an obstacle to prepare more informative report.

for

Personal limitations like inability to understand some officia


decorum etc. created a few problems.

The duration of completing internship program and preparing internship


report was inadequate. It was very difficult for me to understand an
organization's

l terms, office

Islami Bank Limited

Chapt
er 2
COM
PAN
Y
OVE
RVIE
W
Topics
2.1 Background of
AIB

L
2.19 Branch Network
2.20 Card & AT M
2.21 Green Banking

2.22 CSR Activities


of AIB
L

Credit Rating
2.12 Hierarchy of
the Management
Team
2.13 Organogram of
an AIB
L Branch
2.14 Internal Control
& Compliance
(ICC)

Islami Bank Limited


Arafah Islami Bank Ltd was
established
The inaugural ceremony took
Page | 5
place on 27 September 1995.
The
authorized capital
of the Bank
is
Tk.5000.00
Renowned Islamic
Scholars and pious
businessmen of the country
are
the sponsors
of the
Bank.
100%
of
paid up capital is being owned
by indigenous shareholders.

and
the
number
of
shareholders was 49,386.
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 products
is the tool of
the
bank to achieve success. The
bank has a
diverse array
of carefully tailored products
and
services to satisfy customer
needs.

is AD throughout the country.

2.2 Vision
> To be a pioneer in Islami
Banking in
Bangladesh
and
contribute
significantly
to
the growth of the national
economy

2.3 Mission

Maintaining high standard of


business ethics
Balanced growth
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
Page | 6

2.4 Commitments
is a customer focused modern Islamic Bank, sound and
steady growth
in
both mobilizing deposit and making quality investment to keep their
position as a
leading Islami bank in Bangladesh.
To deliver financial services to retail, small and medium scale
enterprises, as well
as corporate clients through branches across the country.

AIBL' s

2.5 Special Features of the Bank


As an Islami bank, AIB L is singular in every positive aspect. They
provide a bunch of
state-of-art banking services within the wide bracket of shariah.
AIB
L is
unique with
their products, strict with their principle and uncompromising with their
honesty. Some of
the special features that make them notable in Islami banking sector are as
follows:
based system according to
Islamic Shariah to get the nation rid of Usury.
Its investment policies under different modes are full
y Shariah
compliant and well
monitored by the board of Shariah Council.
During the year 2007, 70% of the investment income has been
distributed among
^
the Mudaraba depositors.

w
developers.

EGMs (Extraordinary General Meeting) are also arranged.


declared 30% bonus dividend to their shareholders.

They believe in providing dedicated services to


spirit of brotherhood, peace and fraternity.

the clients imbued with Islamic

The bank is committed towards establishing a welfare-oriented banking system to


meet the needs of low income and underprivileged class of people.

The Bank upholds the Islamic values of establishment of a justified economic


system through social emancipation and equitable distribution of wealth.

Page |

Following the Islamic traditions, it is assisting in the economic progress of the


socially deprived people; in the creation of employment opportunities and in
promotion of rural areas to ensure a balance development of the country.
The Bank believes in social and philanthropic activities and has established AIBL
English Medium Madrasha and AIB L Library.

2.6 Corporate Information

Branch:
Opening Ceremony:
Authorized Capital:
Paid-up Capital:
Local Partnership of Capital:
Equity:
Number of Branches:
Deposit:
Investment:
Number of Employees:
Number of Shareholders:

June 1995
Motijheel Branch, Dhaka
27 September, 1995
15,000.00 Millio n
8,343.25 Millio n
100
0
140,980.55 Million
125,715.39 Millio n
2,387
58,466

2.7 Corporate Culture


Islami bank is one of the most disciplined Banks with a distinctive corporate
culture based on Islami Shariah. Here they believe in shared meaning, shared
understanding and shared sense making. The people in this bank can see and understand
events, activities, objects and situation in a distinctive way. They mould their manners
and etiquette, character individually to suit the purpose of the Bank and the needs of the

customers who are of paramount importance to the bank. The people in the Bank see
themselves as a tight knit team/family that believes in working together for growth. The
corporate culture has developed has not been imposed; it has rather been achieved
through their Corporate conduct.
Page | 8

2.8AIBL

supreme success. Islami Banking System

for our
is becoming more and more attractive day by

day to peoples irrespective of nations, religious, colors and species. More than 300 Banks
& financial institutions are serving Islami banking throughout the world. At present in
our country 8 full-fledged Islamic Banks are working successfully. And other traditional
banks have Islami Banking Wings conducting Shariah based banking activities. Recent
Development of Bangladesh Government Islamic Investment Bond (BGIIB)
started its journey in
1995 with the said principles
banking system based on Al-Qur'an

chairman of the bank.

Islami Bank
in mind and to introduce a modern

His progressive leadership and continuous

is the founder
inspiration provided a

boost for the bank in getting a foothold in the financial market of Bangladesh. A group of
20 dedicated and noted
Islamic personalities of Bangladesh are the member of Board of
Directors of the bank. They are also noted for their business acumen. Its authorized
capital is Taka 15,000.00 Millio n and the paid-up capital is Taka 8,343.25 Million . The
equity of the bank has stood at Tk. 16,091.17 million as on 31 December 2013, the
manpower was 2,387 and the number of shareholders was 58,466. 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 products is the tool of the
bank to achieve success. The bank has a diverse array of carefully tailored products and
services to satisfy customer needs. The Bank is committed to contribute significantly to
the national economy. It has made a positive contribution towards
the socio economic
development of the country with 110

Wisdom of the directors, Islamic bankers and the wish of Almighty


Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh.

Allah make Al-

2.9 Financial Highlights of Last 5


Years
Page |
9

(In million taka)


Particular
Authorized Capital
Paid up Capital
Reserve Funds & Other
Reserv
3,564.73
9,790.36
Reserve)
Deposits
Investment
Total Incom
Total Expenditure
Profit Before Tax & Provision
Profit Before Tax
Profit After Tax
Fixed Assets
Total Assets (Excluding offbalance
Import
Export Business
Core Capital (Tier-1
Supplementary Capital (Tier-11

5,000.00

5,000.00

10,000.00

10,000.00

15,000.0

1,798.95

4,677.28

5,893.37

7,130.98

8,343.25

1,223.18

1,779.08

2,437.43

4,079.63

4,827.20

11,989.1

14,050.69

16,091.17

38,355.50

53,882.96

82,186.98

118,683.39

140,980.55

36,134.08

53,582.96

77,714.95

106,650.42

125,715.39

5,305.64

7,685.57

11,332.5

3,575.81

16,692.58

19,723.4

4,462.30

7,005.81

11,937.0

14,774.85

1,729.83

3,223.27

4,326.78

4,755.54

4,948.56

1,589.24

2,852.47

3,946.62

3,944.1

4,360.41

858.99

1,959.04

2,198.7

1,945.4

2,276.68

466.30

655.39

2,394.62

2,517.22

48,515.7

74,005.01

106,768.18

149,320.36

173,161.63

34,074.80

55,934.10

76,112.1

71,931.70

85,915.00

23,546.10

32,042.40

52,202.10

58,476.60

68,980.30

3,498.07

9,582.85

11,924.5

13,073.14

567.89

929.96

1,123.40

1,731.5

1,511.75

4,065.96

10,512.81

13,047.90

14,804.73

16,625.3

Tier-1 Capital Ratio


Tier-11 Capital Ratio
Total Capital
Total Capital Ratio
% of NPIs

Number of Shares Outstanding


Earnings per Share (Taka)
Book Value per Share (Taka)

179,895,360

467,727,936

589,337,19

713,098,01

834,324,671

Price Earnings Ratio (Times)


Price Equity Ratio (Times)
Bonus Share (%)
f Branches
Number of Employees
N

5
8
,
4
6
6

Annual Report 2013, page


1

2.10 Performance
at a Glance

at a Glance (In million taka

2.11 Credit Rating


Credit Rating Agency of
Bangladesh
(CRAB)
Limited has adjudged
AA
3 (pronounced
Double A Three) rating
in
the Long Term
and
ST-2 rating in

the
Short Term
Al
Bank Limited.
Ba
se
d
on
:

Date of
Rating:

Validi
ty:

for

Audited
Financial
Statement
2012

30 June,
2013

30 June,
2014

Definitions of AA3 & ST-2 are given below:


AA3 (very Strong Capacity & Very High
Quality): Commercial Banks rated in this
category have very strong capacity to meet
their financial commitments. They differ from
the highest-rated commercial banks
only
to
a
small
degree.
This
level
of
rating is
adjudged to be of very high quality and is
subject to very low credit risk.

Pag
e|1

ST-2 (High Grade): Commercial Banks


rated in this category
are
considered to have
strong capacity for timely repayment.
Commercial
Banks rated
in
this
category are
characterized with commendable position
terms of liquidity,
internal fund generation
and access to alternative sources of funds.

2.12 Hierarchy of the


Management Team
Managing Director

Deputy Managing Director

Executive Vice President

Senior Vice President

in

Vice President

Assistant Vice President


Figure 2B: Hierarchy of the Management Team

2.13 Organogram of an AIBL


Branch Manager
Page | 12

Second Officer
Senior Officer
Officer
.
Junior Officer
Assistant Officer
Messenger
Figure 2C: Organogram of an AIB
Branch

2.14 Internal Control &


Compliance (ICC)
The internal control environment is the
framework,
under
which
internal controls are
developed, implemented and monitored.
The main components, which together
comprise
the control environment, are:
(a) Board of Directors: One of the
responsibilities
of the
Board
of Directors
is the
financial stewardship. Financial
stewardship involves the directors being the
guardians of
the Bank's assets and being
predisposed to act
in the
shareholders/stakeholders best
interests. The Board is actively
concerned with
sound corporate
governance,
risk
5

management and that understands and


diligently
discharges its
responsibilities
by

ensuring that the bank is appropriately and


effectively managed and controlled; to fulfill
o=
the oversight responsibilities of the
Board
including
implementation
of the
objectives,
>
strategies and overall business plans for
effective functioning of the bank, the Board
shall
have the following Committees:
(a)
Executive Committee,

(b)
Audit

Committee & (c)


Risk Management Committee. Al
l the
above committees are also the element of
Internal
Control of the bank

(b) Board Audit Committee: The Audit Committee has particular responsibility to
evaluate the adequacy and appropriateness of internal control, internal audit and risk
management, evaluate compliance with laws and regulations etc.
Page | 13

(c) Management: Management actively manages and operates the bank in a sound and
prudent manner as per policy & guidelines of Board of Directors and regulatory
authorities.

(d) Shariah Supervisory Committee: To ensure whether the Shariah Principles are
followed in all the transactions & procedures of any activities.

(e) Al l the Zonal/ Divisional/ Departmental Heads/ Branch Managers & Executive/
Officials have to play a few roles in implementing Internal Control & Compliance of the
Bank.

(f) Independent Internal Audit Mechanism:


Independent Internal & External Audit
have scope of providing bias free reports to the competent authority, so that the authority
can maintain integrity standard
achieved in long run.

of its financial

operation and goal of the bank can be

(g) Standard Policy/ guidelines on Risk Management & all the important aspects of the
bank, well designed Organizational Structure, Concurrent Audit, Auto Information/
Whistle Blowing
(ICT),

System, healthier use of Information Communication & Technology

2.15 Shariah Board of AIB


Shariah Board
:
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 AIB
L
the pioneering
organization to practice
Islamic
finance in true letter and spirit. The
name AIB
L has come to signify innovation,
financial
dynamism, leadership and above all a
complete assurance that all the
transactions are free
from riba (interest).

2.15.2 The Board's Role


The Fatwa & Shariah Supervision Board
oversees the application of different
aspects of
Shariah in the Bank. It also ensures that

all transactions are in strict compliance


with the
right of contradicting (fatwa) any
violating procedures, if found. The
Board of Directors
is obligated to obey the fatwas,
irrespective of whether a
unanimous
or a
majority
consensus secured the decision.
Board meetings are held periodically or
whenever the need arises. The rights of
the Board
are enshrined in Article Seven o
the Bank's
Memorandum
&
Articles
of Association
(Clauses).

Duties of the Shariah Board


As an expert source on Islamic
Principles (Including Fatwas), the Board
through a
representative, usually the General
Secretary of the
Board, supervises
the Shariah
compliance of all the transactions in
the Bank.

To devote time and effort to


devising
more Shariah
compliant transactional
procedures, templates and
banking
products that enable
the Bank to
adapt to
market trends while maintaining a
high competitive
edge in deposit
procedures,

investments, and banking services. At the same time, the Board gives its opinion
on proposed new templates, and banking transactions.

Analysing unprecedented situations


that are not covered by fatwa,
transactional procedures or those reported by different departments,
even the customers. This is to ensure Shariah compliance
develops any new products or implements any new procedure.

in the Bank's
branches and

before the Bank Page 115

Analysing contracts
and agreements concerning the Bank's transactions, as
submitted by the Chairman of the Board of Directors or any department/branch
within the bank or requested by the Board itself so that Shariah compliance can be
evaluated and maintained.

Ensuring Shariah compliance in the implementation


and correcting any breaches.

Analysing administrative decisions, issues and matters that require the Board's
approval.
Supervising Shariah training programs for the Bank's staff.

of all banking transactions

Preparing an annual report in the Bank's balance sheet with respect to its Shariah
compliance.

The Fatwa & Shariah Supervision Board submits a complete annual report for the
Board of Director, summarizing all the issues referred to the Board, as well as its
opinion on the Bank's transactional procedures.

2.15.4 AIBL s
The AIBL's library houses a vast collection of more than 4,000 books on Islamic Fiqh,
law, economy, banking and Shariah, The library was primarily established with the aim
of serving the Fatwa &
Shariah Supervision Board's research team and the AIBL

2.15.5 Shariah Supervisors


The Clause of the Bank's Memorandum & Articles of Association requires the Board
of Directors to appoint a Shariah Supervisor, responsible for monitoring
all the Bank's
transactional procedures and assuring Shariah compliance.

Also the General Secretary of the Fatwa & Shariah Supervision Board, the Shariah
Supervisor handles queries about the Bank's administration from staff members,
shareholders, depositors and customers,
liaises with the Shariah auditors and provides
them with guidance. He submits reports and suggestions to the Fatwa & Shariah
Supervision Board and to the Chairman of the Board of Directors. The position also calls
for participation in the Bank's training programmes.

2.15.6 Sharia

h Auditin

Page | 16

The supervisory function forms a part of the Shariah Supervision procedures,


task being to check Shariah compliance under the guidance of the Shariah Supervisor.
The auditors continuously
adherence to the framework

its main

review the Bank's transactional procedures to ensure


created by the Fatwa & Shariah Supervision Board. The

Shariah auditors submit periodic reports to the


maintain Shariah compliance.

Shariah Supervisor so as to monitor and

2.16 Types of Internal & External Audit & Inspection


Risk Based Comprehensive Internal Audit Inspection,Quarterly Foreign Exchange &
Investment Audit, Core Risk Management (CRM) System Inspection, Surprise
Inspection, Special Inspection, Shariah Audit, Management Audit, Concurrent Audit,
External Audit, Regulatory/Bangladesh Bank Inspection etc. are carried out effectively
and efficiently.

2.17 Correspondent Relationship


The Bank has continued efforts and endeavor to develop relationship with foreign
correspondents worldwide to facilitate the International Trade operation of the Bank. As
on 31st December 2013, the number of foreign correspondents is 298 Banks in 52

>
^

(twenty six)

in 5 major international currencies. The bank also enjoys substantial credit

needed which is facilitating our international trade.

2.18 Products and Services Provided by AIB


AIB L
Page | 17

Depo
sit
Invest
ment

Fore
ign
Trad
e

Wadiah Current Deposit


(CD)
Mudaraba Short Notice
Deposit (SND)
Mudaraba Savings Deposit
(MSD)
Mudaraba Term Deposit
(MTDR)
Monthly Profit Based Term
Deposit
(PTD)
Monthly Installment Based
Term
Deposit (ITD
A
l
A
r
a
f
a
h
(MHD)
Al-Arafah Termed Hajj
Deposit (THD)
Monthly Installment Based
Marriage
Savings Investment Scheme
(MIS)
Al-Arafah Savings Bond

MS
ME

AT
M
Servi
ces

(ASB)
Foreign Currency
Deposit (FCD)
Pension Deposit
Scheme (PDS)
Cash Waqf Deposit
Scheme (CWD)
Mudaraba Lakhpoti
Deposit Scheme
(LDS)
Mudaraba
Millionaire Deposit
Scheme
(MDS)
Mudaraba (Special)
Pension Deposit
Scheme (MSPDS)
Mudaraba Kotipoti

Locke
r
Servic
es

Investme
nt in
Agricult
ural
Sector
Investme
nt in
Industria
l
Sector
Investme
nt in
Business
Sector
Investme
nt in
Foreign
Trade
Investme
nt in
Construc
tion
and
Housing

Investment in Transportation
Sector
Hire Purchase (HPSM)
Investment Schemes in
Masque and Madrasa
(MMIS

Small Enterprise
Investment
Schemes (SEIS)
Consumer
Investment
Schemes
(CIS)

Import
Export
Remittan
ce

(MKDS

Figure 2D: Products and Services Provided by AIB

2.19 Branch Network


At present AIB L
Page | 18

2.20 Card
Over the past couple of years the
usage of Debit/ATM Cards has
increased dramatically.
People now feel safer and
comfortable in carrying plastic
cards
rather than bundles
of
money with them. Nowadays,
remarkable transactions occur in
ATMs. AIB
L have issued
about 20,000 (twenty thousand)
Debit/ATM Cards. Considering
this scenario the bank
has intended to expand the AT
M network and increase card
facility among the customers.
Meanwhile AIB L have
deployed
40 AT M
booths in various location
and another 10
ATMs are in process. They
have
already completed
testing with
NPSB
(National
Payment Switch of
Bangladesh) and the network
will
be
open
very
soon.
The
introduction of the common
switch
has
greatly
enhanced the efficiency

2.21 Green Banking


We are aware that global
warming is an issue that calls for
a global response. The rapid
change in climate will be too
great to allow many eco-systems
to suitably adapt, since the
change have direct impact on
biodiversity, agriculture, forestry,
dry land, water resources
and human health. Due to
unusual weather pattern, rising
greenhouse gas, declining air
quality etc. Society demands
that
business also
take responsibility in
safeguarding
the
planet. Green finance as a
part of Green
Banking
makes
great contribution to
the
transition to resource-efficient
and
low carbon
industries
i.e.
green
industry
and green
economy in general. Green
banking is a component of the
global initiative by a group of
stakeholders to save environment.
Green banking is a simple word
but
its magnitude is significantly
wide covering social
z

environment and economical


aspects. Green banking is a
device that considers social and
o
ecological factors to
protect
environment and conserve natural

resources.
protect

If we

environment, we protect ourselves. Green bankers think to protect environment and


conserve power and energy in order to ensure a safer world for the next generation.
Islami Bank Ltd. Being an ethical Bank and in compliance to Bangladesh
Bank guidelines has formed green

2.22 CSR activities of


CSR is an integral part of corporate culture and ethics. AIB
L responds positively in every
sphere of social activities they are delivering innovative solution to the valued customer
and in the same manner they are also helping different areas of social activity through
their CSR activities. To enhance social service as part of corporate social responsibility,
the Bank has facilitated farmers & freedom fighters to open savings accounts with special
facilities of giving profit on daily balance and not realization Account Maintenance Fee
from those accounts. The Bank has also originated School Banking to open savings
accounts of school students (minor) with same facilities as offered to farmers and
freedom fighters in operating their savings accounts. During the year 2013 AIB L
accomplished different humanitarian and social activities which include allocation of
fund Tk.45.50 million.
Besides, AIB L has taken a program to develop
make them self-employed as well as assisting them for employment in abroad.

manpower and

2.22.1

The Bank has a Foundation launching philanthropic activities. Al-Arafah Islamic


International School & College and Al-Arafah Islami Bank Library are major two wings
for launching philanthropic activities.

Al-Arafa

h Islamic

Al-Arafah Islamic International School & College has been established by the Al-Arafah
o
Bank Foundation with a view to building next generation according to the ideals of peace
and equality of Islam and to establishing banking and other aspects of life in the way of
<
Islam. The prime aim of this Islamic International School & College is to contribute
towards building human resource and in the broader sense to ensure human welfare. With
o

Islami Bank Foundation has established


Such institution upto O
its kind is for the first time in Bangladesh.

Al-Arafah

Page | 20

2.223 Al-Arafah Islami Bank Library


Library is the carrier & reservoir of knowledge. Al-Arafah Islami
Bank has shown that
other than generating profit, it can also contribute significantly in
the field of providing
good source of knowledge by establishing a public
library at 32, Topkhana Road,
Chittagong Bhaban (1st floor), Dhaka, thus strengthening
social development. It
is
situated in sound, healthy surroundings. It harbors 23,000
books of reference for
the
researchers, students, professionals, bankers, physicians,
engineers, politicians, writers or
journalists, even for the kids.
It is open to all from the year
2000 and well located &
accessible to everybody. It procured some exceptional
collection of books
on religion,
economics, banking, computer science, business
administration,
sociology, English &
Arabic language and juvenile literature in Bangla, English, Urdu
& Arabic, which are
very rare.

Islami Bank Limited

Chapt
er
3
LITE
RATU
R
E
REVI
E
W
Topics
3.1

Isla

mic
Ban
king
3.2
Prin
cipl
es
of
Isla
mic
Ban
king
33
Isla
mi
Ban
king
in
Ban
glad
esh
3.4
Defi
nitio
n of
Ban
k
Dep
osits
3.5
Dep
osit
Acc
ount

3.6
Dep
osit
Ma
nag
eme
nt
3.7
Sha
ria
Inv
est
me
nts
3.8
Typ
e of
Fun
ds
3.9
Inv
est
me
nt
Res
trict
ions
3.1
0
Inv
est
me
nt
Ma
nag
eme
nt

3.1 Islamic Banking


Islamic banking is banking
or
banking activity that
is
consistent with the
principles of
sharia and its practical
application through the
development of Islamic
economics. As
such, a more correct term for
'Islamic
Sharia prohibits acceptance of
specific
interest or
fees for loans of money
(known as riba,
or usury), whether the payment
is fixed or floating. Investment
in businesses that provide
goods or services considered
contrary to
Islamic
principles
(e.g. pork
or alcohol)
is also
haraam

3.2 Principles of
Islamic Banking
Islamic banking has the
same
purpose as
conventional
banking:
to
make
money for
the
banking institute by lending
out capital. But that is not the
sole purpose either. Adherence
to Islamic law and ensuring
fair play is also at the core of

Islamic banking. Because


Islam
forbids simply lending out
money at
interest,
Islamic rules
on
transactions
(known as
Fiqh al-Muamalat)

and leasing (Ijara)


In an Islamic mortgage
transaction, instead
of
lending
the
g
buyer money
to
purchase
the
item, a bank might buy the
item itself from the seller,
and re-sell it to the buyer at a
profit,

^
arrangement is called
Murabahah.
Another
approach is
Eljara

An innovative approach applied by some banks for home loans, called Musharaka alMutanaqisa, allows for a floating rate in the form of rental. The bank and borrower form
a partnership entity, both providing capital at an agreed percentage to
purchase
the

Page | 22

property. The partnership entity then rents out the property to the borrower and
charges
rent. The bank and the borrower will then share the proceeds from this rent based on the
current equity share of the partnership. At the same time,
the borrower in the
partnership
entity also buys the bank's share of the property at agreed installments until the full equity
is transferred to the borrower and the partnership is ended. If default occurs,
both
the
bank and the borrower receive a proportion of the proceeds from the sale of the property
based on each party's current equity. This method allows for floating rates according
to
the current market rate such as the BLR (base lending rate), especially in a dual-banking
system like in Malaysia.
There are several other approaches used in business transactions. Islamic banks lend their
money to companies by issuing floating rate interest loans. The floating rate of interest is
pegged to the company's individual rate of return. Thus the bank's profit on the loan is
equal to a certain percentage of the company's profits. Once the principal amount of the
loan is repaid, the profit-sharing arrangement is concluded. This practice is called
Musharaka. Further, Mudaraba is venture capital funding of an
entrepreneur who
provides labor while financing is provided by the bank so that both profit and risk are
shared. Such participatory arrangements between capital and labor reflect the Islamic
view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced
distribution of income and not allowing the lender to monopolize the economy.
Islamic banking is restricted to Islamically acceptable transactions, which exclude those
involving alcohol, pork, gambling, etc. The aim of this is to engage in only ethical
investing, and moral purchasing. The Islamic Banking and Finance Database provides
more information on the subject.

per
cent reserve banking are known to exist. Islamic banks have micro-lending institutions
founded by Muslims, notably Grameen
Bank, use conventional lending practices and are
However,
u

Muhammad

Yunus,

the founder of Grameen Bank and

<

collateral and lack of excessive interest in micro-lending


prohibition of usury (riba).

3.3 Islami
Banking in
Bangladesh
Islami Banking System is becoming more and more
attractive
day by
day to
peoples
irrespective of nations, religious, colors and species. More
than 300
Banks
& financial
institutions are serving Islami banking throughout the
world. At present,
eight
fullfledged private Islamic commercial banks and 17
conventional banks
through Islamic
windows and branches are operating in Bangladesh.
About half a dozen conventional
banks have applied to the Central Bank for being converted into
Islamic ones. Currently,
Islamic banks hold 24 percent of total banking deposit
having around
10 percent of the
total bank branches. The combined share of Islamic banks
(excluding
Islamic banking
branches/windows of conventional banks) is around
17

3.3.1

based banks
and financial institutions and
for their better management,

Bangladesh Bank introduced


Islami
Interbank
Fund
Market

in 2012. Under this arrangement, an interested Islamic financial


institution can place their
surplus fund overnight at Bangladesh Bank. Islamic
banks and banks
having
Islamic
banking branches and windows may borrow from this
fund
overnight.
IIFM

Investment

The Ministry of Finance,

Government of Bangladesh
introduced the
BGIIB

3.3.3 Islamic Banks Consultative Forum (IBCF

with Islamic Banks and Conventional Banks


having Islamic Banking Branches as
members, was established in 1995 for effective
interaction, cooperation, promotion and
furthering of the cause of Islamic
banking in
Bangladesh.
Seven
fullfledged
Islamic

3.3.4 Central Sharia Board


Bangladesh

for Islamic Banks of


(CSBIBB

CSBIBB was established in 2001


and
assistance to
member
matters related to harmonization
banking policies
and
also

to offer views
banks
in
of Islamic
practices. It

promotes knowledge on Islamic banking by organizing


seminars and conducting training
and research on Islamic Sharia. Seven full-fledged
Islamic Banks and ten Conventional
Banks having Islamic banking branches are the members
of CSBIBB.

3.4 Definition of Bank Deposits


Money placed into a banking institution
safekeeping.
Bank deposits are
to
deposit accounts at a banking institution,
savings accounts, checking accounts

for
made
such as

and money market accounts. The account holder has the


right to withdraw any deposited
funds, as set forth in the terms and conditions of the
account.
The "deposit"

For example,

when someone opens a bank account and

makes
a deposit of Tk.
50,000
cash, the account holder surrenders legal title to the Tk.
50,000 cash. This cash becomes
an asset of the bank; the account becomes a liability.

3.5 Deposit Account


A deposit account is a savings account, current account,
or other type of bank account, at
JJj
a banking institution that allows money to be
deposited and withdrawn by the account ^
holder. These transactions are recorded on the bank's
books, and the resulting balance is <
recorded as a liability for the bank and represents the
amount owed by the bank to the
customer. Islami banks pay the customer profit on the
funds deposited.

3.6 Deposit Management


One of the main functions of banks is to
accept deposits.
Deposits may be
fixed, saving,
current etc. Islamic banks will
have
to
pay
profit
to
the
customers
on
the basis
of the
sharia compliant bank rules.
Deposits
are
used for the purpose of investment but
since
Page |
25
banks are using other people's money
to do business,
it
should make sure that
it
will be
able to repay the deposits to the
respective
customers
when
they
claim
for
it. The
management of all this is called deposit
management.

3.7 Sharia Investments

life
including the type of investments
allowed.
For
instance,
interests are considered usury
according to the Riba rule therefore
bonds is prohibited to investors
following the Sharia
law. A Shariah compliant fund is an
investment vehicle fund structured in
accordance to
Shariah rules. Shariah funds can be
managed as mutual funds, exchange-

traded funds or
hedge funds. They are in essence
common funds with an extra
layer of ethical rules
integrated in the investment
policies
of the fund not
dissimilar to socially responsible
investing. While the funds are
required to
be fully
compliant with Shariah
rule,
the
companies structuring, managing and
promoting the funds do not have to be
necessarily
Shariah compliant.

Type of Funds
3.8.1 Commodities

commodities. Because
of the restrictions on the use of
derivatives, commodities fund make
use of two types of
Shariah approved contracts
It's a contract where the buyer of an
item funds upfront the production of
the item. A detailed specification of the
item has to be agreed before production
cc

It's similar to a forward


contract where the buyer pays
in
advance
for the delivery of raw materials or
fungible goods at a given date. The spot
price

of the item includes the profit of the person who has taken the task of purchasing
good and, of course, the cost of the product.

business.
Companies
are also screened in order to check for Shariah compliant accounting principles. Because
of the limited pool of companies the funds can invest into, equity funds can have higher
volatility compared to similar funds in the same space.

3.8.3 Murabaha
financing,
where a
fund will buy goods and resell them to a third party at a given price. The price is made of
the cost of goods plus a profit margin. Cost and margin are agreed in advance.

3.8.4 Ijar
Funds that acquire and keep ownership of an asset (real estate, machinery,
vehicles or
equipment) and then makes profits by leasing it out in return of a rental payment.
The
fund is responsible for the management of the asset and will normally
receive a
management fee. The leased item must be used in a Halal manner.

3.9 Investment Restrictions


3.9.1 Riba
The payment or receipt of interests are considered usury and unjust. Debt is
also
disapproved making investments in highly leveraged companies unacceptable.
Funds
cannot pay fixed or guaranteed return on capital. Instead of borrowing
and
lending,
Islamic finance relies on sharing the ownership of the assets and therefore
risk
and

profit/loss

3.9.2
Comp
anies
involv
ed
in
prohib
ited
busine
ss
activiti
es
cannot
be part
of a
Sharia
h
fund
strateg
y.
Prohib
ited
busine
ss
activiti
es
can
relate
to
food
(produ
ction
and
sales
of
alcoho
lic
bevera
ges
includi
ng
pubs
and
restaur

ants,
pork
produc
ts,
tobacc
o),
gambli
ng
(casin
os,
on-line
gambli
ng,
betting
,
lottery
schem
es),
adult
oriente
d
(video,
magaz
ines,
on-line
materi
al,
strip
clubs),
dubiou
s,
immor
al and
illicit
trades
(prosti
tution,
drugs).

3.9.3
Maisir
Islam
forbids
gambli

ng in
any
form.
Conse
quenti
ally,
derivat
ives,
forwar
ds,
option
s and
futures
are
prohib
ited.
Other
forbid
den
practic
es
includ
e short
selling
,
Lotter
y,
margin
,
and
scalpin
g
trading
.

3.9.4
Day
Day
trading
is
consid
ered
akin to
maisir.

Marke
table
securit
ies
genera
lly
have a
multiday
settle
ment
period,
during
which
time
the
underl
ying
instru
ments,
while
cleare
d, are
not
formal
ly
registe
red in
the
name
of the
purcha
ser.
As
day
traders
do
not
wait
for
settle

ment
to
compl
ete,
they
are
using a
type of
credit
cushio
n
provid
ed by
their
broker.
Some
day
traders
also
rely on
a
margin
accoun
t to
financ
e their
trading
activiti
es.

3.10
Inve
stme
nt
Man
age
men
t
Invest
ment
manag
ement
is

a
dynam
ic
field
where
a
certain
standa
rd
of
longrange
planni
ng
is
needed
to
allocat
e
the
fund
in
divers
e
field
and
to
minim
ize
the
risk
and
maxim
izing
the
return
on
the
investe
d
fund.
Contin
uous
superv
ision,
monito
ring
and
^

foll
owup
are
hig
hly
requ
ired
for
ens
urin
g
the
tim
ely
repa
yme
nt
and
min
imi
zing
the
defa
ult.
Act
uall
y
the
Inve
stm
ent
port
foli
o
is
not
onl
y
con
stitu
ted
the
ban

>
=
manag
ement
depen
ds
on
the
banks
invest
ment
policy,
portfol
io
of
invest
ment,
JJ
monito
ring,
superv
ision
and
follow
-up
of
the
loan
and
advanc
e.
Theref
ore,
while
analyz
ing
the
Invest
ment
Manag
ement
of
AIBL
,

Islami Bank Limited

Chapte
r
4

DEP
OSIT
MAN
AGE
MEN

T
Topics
L
4.2 Deposit Growth
43

AIB

million
was
general
Page
|
28

deposit.
The
present
strategy
is
to
increas
e
the
deposit
base
through
maintai
ning
compet
itive
profit
rates
and
having
low
cost of
funds
to
ensure
a better
spread
with an
average
return
on
investm

ent.

4.2
Depo
sit
Gro
wth

Figure
4A:
Deposit
Growth
(In
million
Taka)

We can
see that
the
deposit
of

AIB
L
is
increasi
ng
every
year
and
in
2013
the
amount
of
deposit
was
140,98
0.55
million
taka
which
was
much
higher
than
2009's

4.3 Deposit Mix


Amounts of different
deposit products for the
year 2013
P
P
a
g
e
|
2
9

Source: AIBL

Deposit Mix
(%)
Wadia Current Account
Mudaraba Savings Deposit
Other Mudaraba Deposit
Mudaraba Term Deposit
Bills Payable

Figure 4B: Deposit Mi x


2013

Figure 4B shows the


percentage of different
types of deposited
amount for the year 2013.
We can
highest
amount
Other
Deposit

see that the


deposited
came
from
Mudaraba

accounts which is actually different


AIBL .

types of specialized deposit schemes provided by

4.4 Deposit Products


4.4.1 Al-Wadiah
Al-Wadiah
Arafah Islami Bank Ltd. as per Islamic Shariah. _The fund deposited in this account by
the client will be secured by the Bank and the Bank
will be bound to refund this amount
fully/partially on demand of the client. The bank can invest the deposited amount with
other deposits as per Al-Wadiah principles of Islamic Shariah. The weightage of the
account will be zero and the client will not bear any profit or loss.

Features of the Account

Any adult having sound mind can open this


jointly with others. Any proprietorship/

account in his/ her name singly


partnership firm,

This account is to be opened on introduction of a current account holder/person


acceptable to the Bank. To open Al-Wadiah current account, minimum Tk. 2000/-

or

is to be deposited primarily, which is treated as minimum balance of the account.


This minimum balance along with required excise duty must be maintained in the
account; otherwise, the bank reserves the right to return client's

Specified amount of charge will be debited with interval of six months as account
maintenance fee. Besides, the Bank can realize other necessary fees.

The account holder in any time can close the operation of his account after
surrendering his cheque book & submitting the application duly signed on
realization of closing charge.

During banking hour multiple deposit & withdrawal by cheque is permitted. In


this regard, all clauses of Negotiable Instrument Act will be applicable.

Bank statement/ balance confirmation certificate


is generally issued twice (half
yearly and yearly) in a year without any cost. Account statement is also provided
to clients demand on realization of specified charges.

VA T & Excise Duty is applicable as per govt. rules.

4.4.2 Mudaraba Savings Deposit (MSD


Page | 3

Mudaraba savings deposit is opened under the


Mudaraba
principal of Islami
Shariah.
Under the above principal the clients is the
Shaheb-Al

Rules and Regulations


Mudaraba i.e. Deposit of one party and on the basis
of operation by another party
this deposit is taken.
By providing Introducer of the account as required by
the bank and by depositing
a minimum amount any depositor or multiple
depositors can open single or joint
account. Any educational institute, Club, Association
or Social institutes can open
this account.
The bank may merge amount collected through this
deposit and may invest in any
shariah allowed investments.

After determining the annual profit/loss

of the deposited amount or Tk. 2000/-, the lowest


can
be
withdrawn
without

g
notice. If any amount exceeding the above is withdrawn
without providing 07 days
i
If an account is closed before the declaration of
current year's
depositor will have to take profit as per previous years
declared profit rate.

The Bank has the right to deny opening any account or can close down any
existing with showing any reason.

The bank operates the client accounts with utmost attention but still if any
miscalculation occurs the bank holds the right to make adjustments and rectify the
problems. But in this situation if any miscreants occur which is caused by the Page | 32
client the bank wil l not be held liable for that.

The Bank may change / amend / rectify any rules and regulations of this account
and the client must abide by the rules.

4.4.3
Mudaraba Short Notice Deposit (SND) is a profit bearing Mudaraba deposit account
intended for those people who are involved in business or their transactions are frequent
but do follow a pattern. It enables people to operate a kind of Current Account which
incurs profit. Like in other Mudaraba deposit products, customer will act as the capital
supplier of the investment and the Bank acts as the investor/mudarib. The deposits held in
these accounts shall be payable on short notice period but the notice must not be less than
7 days.

4.4.4 Mudaraba Term Deposit (MTDR


Mudaraba Term Deposit (MTDR) is a mode of deposit under Mudaraba principles of
Islamic Sharia. It is a profit / loss bearing account. These deposits are repayable subject
to a period of notice and hence known as time deposits or time liabilities meaning thereby
that these are withdraw able subject to a period of notice and not on demand.
Deposits
under MTDR are accepted for different tenures as decided by the Bank and are entitled to
receive profit on their deposit on the basis of weightage as decided by the management. A
receipt is issued against each deposit under MTDR.

Different Tenor of MTD

R Products

Mudaraba Term Deposit - 1 month

Mudaraba Term Deposit - 3 months


Mudaraba Term Deposit - 6 months
Mudaraba Term Deposit - 12

4.4.5
It is a
monthl
y
saving
s
schem
e to
secure
future
with
ease. A
small
saving
s of
today
will
provid
e you
comfor
t
tomorr
ow.
Deposi
t can
be
made
by
conven
ient
monthl
y
install
ment
Pa
s
e

depend
ing
on
incom
e.
Install
ments
can be

deposit
ed
in
any
workin
g
day
of the
month.
Even
advanc
e
install
ment
may
be
deposit
ed.
Profit
will be
calcula
ted on
daily
basis
upon
deposit
.
To
make
it
more
attracti
ve
deposit
ed
amoun
t
will
be
weight
ed
1.05,
which

is
0.05
percen
t
higher
than 3
years
term
deposit
.
Durati
on of
the
deposit
will be
5, 8,
10 or
12
years
along
with
install
ment
amoun
t of
either
Tk.
200/-,
300/-,
500/-,
1000/-.
Any
person
above
18
of a
minor!
This
worth
while
schem
e will
make
deposit
to

grow
in the
followi
ng
ratio:

Source
:
AIBL

4.4.6
AlArafa
h
AlArafah
Islami
Bank
Limite
d has
introdu
ced a
Month
ly
install
ment
based
Hajj
Deposi
t
for the

5
8
1
2
4
5
9
1
1

middle
class
pious
Musli
ms.Jn

2, 55,500/- and for the upcoming years


it has been gradually incremented in the rate
of 5%. A variety of maturity period and installment size will give you the option to make
it your own affordable scheme. If the depositor wants to go for Hajj before maturity Page |
period, he/she can amend the residual amount with the deposit and fulfill his/her holy
wish. Estimated expenditure for Hajj for next 20 years after 2008 and the relative
installment amounts will be as under:

Year

Monthly Installment
750/800/880/950/1020/
1070/
1170/
1375/
1450/
1600/
1770/
2050/
2360/
2680/3140/
3900/

Estimated Expenditure & Saving for Hajj


635000/
605000/590000/556000/531000/
485000/466000/450600/
436000/
414000/
390000/
380000/
367400/
342980/323000/-

316500/
4880/6600/10000/
20000/Website (

297500/
284800/270000/255500/-

Termed Haii Deposit (1 HP

For the people who hold the holy


desire to go for the Hajj with a
onetime deposit along
with bank's given profit there on,
Al-Arafah Termed Hajj Deposit
has been introduced.
After maturity, onetime deposit
will meet up the expenses
of Hajj.
One can prepare
for
pag

Hajj"
must
be
done.
Under
no
circumstances the deposited
amount will
be
withdrawn.
After maturity,
if the deposited
amount along with accumulated
profit is less than the Hajj
expenditure on that particular
year, the depositor can make
up the residual amount
at
once
and go for
pilgrimage.
A
separate form has to be filled up to
open Termed Hajj deposit. Under
this scheme one can
open an account in the name
of a
minor or
a
child
too.
Tax
will
be applicable on
the
deposited amount along with profit
according to the country law.

Estimated expenditure
for Hajj for next 25 years after
2008 and the relative one time
deposit will be as under:

Estim
ated
expens
e for
Hajj
18
00
00/

16
70
00/

15
80
00/

1
8
6
0
0
0
/

3
2
3
0
0
0
/

1
7
6
0
0
0
/

1
7
0
0
0
0
/

3
4
2
9
8
0
/
-

36
74
00/

15
30
00/

14
20
00/

13
10
00/

12
60
00/

11
90
00/

111
00
0/

1
5
8
0
0
0
/

3
8
0
0
0
0
/

1
4
6
0
0
0
/

3
9
0
0
0
0
/

1
3
9
0
0
0
/

4
1
4
0
0
0
/

1
3
2
0
0
0
/

4
3
6
0
0
0
/

1
2
3
0
0
0
/

4
5
0
5
0
0
/

1
1
5
0
0
0
/

4
5
0
5
0
0
/

4
6
6
0
0
0
/
-

103000/

107500/

466000/-

485000/9
7
0
0
0
/
9
6
0
0
0
/
9
8
6
5
0
0
/
-

6
8

6
7
7

3
7
1

6
6

6
7
5
0
0
/
-

9
7

6
4
0
0
0
/
-

8
6

6
6
5
6
Website (

Monthly
Installment
Based Marriage
Investment
Scheme (MIS)

1,
000/and
make
the
scheme
more
desirable.
The
main
attraction of the
scheme is that,
profit will be
accumulated on
deposit in a
daily-stay basis

with a
weightage
of 0.98
rate. This
fabulous
scheme comes
with exciting

investment
facility.
One
P
can take
M
advantage
of
on Total
Tk.30,
000/thl deposit
alongof
or
y double
his/her
In with
profit
deposit
sta
after
ll
(whichever
m maturit
is less) as
en y
(Estima
tinvestment.
Tax ted).
will be
1
applicable on
2
the deposited
4amount along
Source:
with AIB
profit
L
Website (
according to
the country
law.

4.4.9 Cash Waqf


In the Voluntary
Sector,
AIBL

This scheme has


been well received
by the public in
general for its unique
features. AIB L
as a pioneer of
this
innovative
financial
product
of
social
capital
mobilization
has
received both local
& international
accreditation.
By opening a Cash
Waqf Deposit A/C
someone
can
get an
opportunity to do
welfare
to
the mankind through
Sadaka-e-Jariah.
AIB
L urges
to all
religious
& affluent persons
of
the society to come
forward
to
mobilize
Cash
Waqf Deposit so
that
the
profit
may
be
utilized for the well-

being of mankind.
The Guidelines for
operation of this
scheme are stated
below:
Cash waqfs shall
be accepted
as
endowment
in
conformity
with the
Shariah.
Bank will
manage the waqf on
behalf of the
waqif.

or institution(s),
those Cash Waqf will
be treated as
General Cash Waqf
and the profit of
those A/Cs
will be spent for
welfare of mankind
in
the field of (1)
Family
Rehabilitation (2)
Education & Culture
(3) Health &
Sanitation (4)
Social Utility and
(5) Others.
On
the other
hand, Waqif may
choose distribution
of the

profit to any specific


individual(s)/

The amount
deposited
in
the Cash Waqf
A/Cs
o
will be
invested
as
per Bank's
own
^
profit at the highest
rate offered by the
Bank from time to
time. The waqf
amount
<
will remain intact
and only the
profit
amount will
be spent
for the
purpose(s)
specified
by the Waqif.
Unspent profit
amount will
automatically
be added to
waqf amount and
earn
profit to be grown
over the time. No
cheque book
will be
issued in this
account.

Page | 38

1,000/=
(one
thousand)
only (or
equivalent
foreign
currency).
The
subsequen
t
deposits
shall
also
be
made
in
hundred
or
in
multiple
of
hundred
Takas.
However,
General
Cash
Waqf
A/Cs
(where
name of
beneficiar
y whether
Individual
(s) or
Institution
(s) are not
mentioned

) may be
opened by
depositing
a
minimum
sum of
Tk.
1,000/=
only.
Specific
Cash
Waqf
A/Cs
(where
name of
beneficiar
y whether
Individual
(s) or
Institution
(s) are
mentioned
) by
depositing
a
minimum
sum of
Tk.
5,000/= &
above

.
Cash
waqf shall
be
accepted
in
specified
endowme

nt
Receipt
Voucher
and a
Certificate
for the
entire
amount
shall be
issued as
and when
the
declared
amount
is built.
Account
of Cash
Waqfs are
maintaine
d in a
separate
ledger and
necessary
charges
as per
rules may
be
deducted
therefrom.
In case of
any
change of
address of
the Waqif
or
beneficiar
y, must be
informed
by
the Waqif
to the
Bank

immediate
ly.
Bank
however
reserves
the right
to regret
to open
any Cash
Waqf
Account.
The rules
of Cash
Waqf
Account
are
subject to
amendme
nt in
conformit
y with the
Shariah at
any time
by the
Bank.

4.4.10
Mudarab
a
Lakhpoti
Deposit
Scheme
(LDS
Islami
Bank
Limited
has
brought
this
tremendo

us scheme
to make
the dream
of
becoming
a
"hundred
thousand
taka" true.
One can
select the
maturity
period
from 3,
5, 8, 10
or 12
years.
This eye
catching
scheme
is
lucrative
because
it will
accumulat
e z
profit on
your
deposit
in a dailystay basis
with a
weightage
0.05 more
than that
of a 2
^
years
deposit.
A single
person
can open
more than
one
account in
the same

branch.
Tax
^_
will be
applicable
on the
deposited
amount
along
with
profit
according
to the
country
^5
2

give standing order to make payment of the installment


maintained with the branch.

from his savings account

Period

Monthly Deposit
3 years
5 years
8 years
10 years
12 years

Page | 39

Estimated return after maturity

2,325/-

1,00,000/-

1,275/

1,00,000/

645/-

1,00,000/-

450/-

1,00,000/-

330/-

1,00,000/-

Website (
4.4.11 Mudaraba Millionaire Deposit Scheme (MMDS)

which is 0.05 more than that of a 3 years deposit. Monthly


installment can be deposited on any working day from any branch. One can even give
standing order to make payment of the installment from his savings account maintained
with the branch. Advance deposit is also possible. This scheme comes with exciting
investment facility. One can take advantage of 80% of his/her deposit as investment
facility. Tax will be applicable on the deposited amount along with profit according to the
country law.
Period
Monthly Deposit
3 Years
4 Years
5 Years
6 Years

24400/-

Estimated return after maturity period


(1 Million)

17530/

Lacs

13500/

Lacs

10800/

Lacs

7 Years
10 Years
12 Years

8800/-

Lacs

5400/-

Lacs

4100/

Lacs

15 Years

2870/-

Lacs
Source:

AIBL

Page | 40

4.4.12 Mudaraba
(Special) Pension
Deposit Scheme
(MSPDS

An unparallel
scheme to make
small savings turn
into a line of
income in future.
In this
simple but
attractive scheme,
savings will be
accumulated in
monthly
installments. Then
in the future it
will be source of
monthly income.
One can decide the
size of monthly
deposit from
Tk.500/-,
Tk.
1,000/- or
any
multiple
of
Tk.

years. Deposited
amount will earn
profit on dailystay basis. This
particular scheme
has
profit with the
weightage of 1.05,
which is 0.05
more than that of a
3 years deposit.
Tax

will be applicable
on the deposited
amount along with
profit according to
the country
law.

9
3
0
0
0

4
0
0
0

M
o
nt E E E E E Es
hl st st st st st ti
y i i i i i m
m m m m m at
D at at at at at ed
e e e e e e
p d d d d d
os
m
it
d m d m d on
e o e o e thl
p nt p nt p y
os hl os hl os pe
it y it y it ns
w p w p w io
it e it e it n
h ns h ns h fo
p io p io p r
ro n ro n ro
fit fo fi fo fit ne
xt
r t r
15
af n af n af y
te ex te ex te e
r t r t r a
5 5 1 1 1 r
0 0 5 s
ye ye
y
ar ar y e ye
s s e a ar
a rs
rs s
4
1
2

5
0
0
0

6
0
0
0

7
0
0
0

8
0
0
0

2
4
9

9
0
0
0

2
2

8 1
3
7
2
5
6

6 8

1
8
5
5
0

2
3
2
0
0

1 1

1 2

2
7
9
0
0

1 3

3
2
5
5
0

1 1 2 3

3
7
2
0
0

1 1
9
8
3
7

2
5
1
0

1
0
0
0
0

1
8

Source: AIBL
Website (

Kotipot i Deposit Scheme (MKDS)


million

requirement.
Any person above
18
can open this magnificent scheme.
Even an MKD
S can be opened on behalf of a
minor!

Page
| 41

The main attraction of this


Mudaraba-based scheme is that,
profit will be accumulated on
deposit in a daily-stay basis. In this
scheme, profit will be given with a
weightage of 1.05,
which is 0.05 more than that of a 3 years
deposit. Monthly installment can be
deposited
on any working day from any branch.
One can even give standing order to
make payment
of the installment from his savings
account maintained with the branch.
Advance deposit
is also possible. Tax will be
applicable
on the deposited
amount along
with profit
according to the country law. This
scheme comes with an exciting
investment facility.
One can take advantage of 80% of his/her
deposit as investment.

Period of Deposit
Monthly
Installment
Expeeted return
after maturity
period
3 Years
244000/-

1
Cr

ore
4
Y
ea
rs

C
5
Y
ea
rs

Cr
6
Y
ea
rs

C
7
Y
ea
rs

C
10
Ye
ars

Cr
1
2
Y
ea
n

C
15
Ye
ars

Cr

18
Ye
ars

Cr
20
Ye
ar
s

Cr
Website (

Double Benefit Deposit Scheme (MDBDS

Page | 42

10,000/or its multiple. Under this scheme with life


of 6
years, deposit
will earn
profit
in
an
incremental ratio. That's why within just 6 years of
time deposit will be doubled in return.
Tax will be applicable on the deposited amount
along with profit according to the country
law. This convenient scheme comes with an
exciting investment facility. One can take
advantage of 80% of his/her deposit as investment
loan.

Al-Arafah Islami

Bank Limited

Chapter
5

INVES
TMEN
T
MANA
GEME
N
T

Topics
Investment

3
5.4
Classified
Investmen
t Ratio
5.5 Micro,
Small &
Medium
Enterprise
s (MSME)
Investmen
t
5.6
Agricultur
al
Investmen
t
5.7
Investmen
t for
Growing
Spices at
a
Lowest
Profit Rate
(4%)

Scheme
5.12
Modes
of
Investmen
t
of
AIB L
5.13
Investmen
t
processing
of AIB
L

5.1 Investment of AIB


125,715.39 million
31st
(Net
f PR)
in the previous
showing an

as on
December
106,650.42
of
million
year

increase by 17.88 %. The


investment portfolio of the bank is
well diversified and covers a
Page | 43
broad spectrum of businesses
and
industries including
readymade
garments,
textile,
edible oil , ship scraping,
steel &
engineering,
chemicals, pharmaceuticals,
cement,
telecommunication,
construction, health
care, real estate,
education, transport
and
investment under consumer
schemes. The bank
have
geared up
efforts
to improve
the
recovery rate of disbursed
investment and also
taken
adequate measures for
converting
the classified investment into
performing assets. As a result,
classified investment of the
bank could be kept at a low level
far below the national average. It
is 2.77% in the bank
as on 31 December 2013. The
bank gives
top-most
priority
to
the
creation
of quality
assets and does appropriate risk
grading while approving

commercial, trade and project


investment to different clients.

5.2 Investment Growth

from 2009 to 2013. We can see that the


increasing every year as we saw the same about deposit in chapter

investment of AIBL is
4 (Figure 4A). In 2013
was much higher than 2009's
Page | 44

5.3 Sector Wise Investment 2013


Sector wise invest amounts of AIB

L for the year 2013

Sectors

Taka in million
Agriculture, Fishing and Forestry
1,617.08
Industry
57,003.70
Construction
2,334.40
Water works & Sanitary Service
1,984.80
Transport & communication
8,262.50
Storage
831.2
Trade Finance
48,128.20
Miscellaneous
14,369.01
Total (Including Profit Receivable)
134,530.88
Less Unearned Profit on Investment
8,815.4
Total
125,715.39

Source: AIBL Annual Report 2013, page 36

(%)

a
n
d
F
o
r
e
s
tr
y

P
a
g
e
|
4
5

Water
Works &
Sanitary
Services

Commu
nication
Storage
Trade
Finance
Miscella
neous

Sector
Wise
Investm
ent (%)

of the
investm
ent
was
made to
this
sector.
Second
highest
investm
ent was
made to
trade
finance.
About
36.99%
of the
total
amount
was
invested
to trade
financin
g sector.

5.4
Classi
fied
Invest
ment
Ratio
Any
bank
investm
ent
that is
in
danger
of
default
is
classifie
d
investm
ent.
Classifi
ed
investm
ents
have
unpaid
interest
and
principa
l
outstand
ing, and
it is
unclear
whether
the
bank
will be
able to
recoup
the

investm
ent
proceed
s
from the
borrowe
r.
Banks
usually
categori
ze such
investm
ents as
adversel
y
classifie
d assets
on their
books.

target is
below
2.77%.

Page | 46

200 9
201 0
201 1
201 2
2
0
1
3

Figure
5C:
Classified
Investmen
t Ratio
(%)
was
much
higher
than
previous
years.
That is
not a
good sign
for the
profitabili
ty of the
bank. The
bank has
already
taken

necessary
actions to
put the
percentag
e below
2.77% in
2014

5.5
Micro,
Small
&
Mediu
m
Enterp
rises
(MSM
E)
Invest
ment
Micro
Small &
Medium
Enterprise
(MSME)
plays a
pivotal
role in the
economic
growth
and
developm
ent of a
country.
MSME
works as
the

platform
for job
creation,
income
generatio
n,
and
developm
ent
of
forward
and
backward
industrial
linkages.
MSMEs
occupied
a unique
position
in the
economy
of
Banglades
h. Micro,
Small and
medium
enterprise
s
(MSMEs)
make
up
the
largest
portion
of the
employm
ent
base
in
many
developin
g

countries
and,
indeed,
are often
the
foundatio
n
of the
local
private
sector.
z
Now the
MSMEs
are
not
only
concentrat
ed
to
low-tech,
traditional
,
and
agrobased ^
economic
activities;
these
are
spread
over
other
nontraditional
manufact
uring
and
^
service
sector as
well. To
achieve
high and
sustained

economic
growth, a
triggering
force
<
is
mandator
y to exit
from
endemic
poverty
and socioeconomic
deprivatio
n.
MSMEs
constitute
the
dominant
source of
industrial
employm
ent
in
Banglades
h (80%),
^_
and about
90% of
the
industrial
units fal
l
into this
category.
The actual
performan
ce of
MSMEs,
however,
varies
depending
on

the
relative
economic
efficiency,
the
g
macroeco
nomic
policy
environm
ent and
the
specific
promotion
policies
pursued
for their
[JJ
benefit.

To ensure proper manifestation and rapid advancement of Micro, Small & Medium
Enterprises, a number of schemes are running in this bank. In the light of a unique
definition of Bangladesh Bank, the bank is giving a priority over financing to three
categories of enterprises viz. Industry, Trade & Services. Based on December 2013, total
MSME investment portfolio is 68,913.60 million,
which is 52.96% of Total Investment
portfolio. Among them 28949.30 million is under Small Enterprises and 39964.30 million
is under Medium Enterprises. Participation of Small Enterprises is 42% of Total MSME
Investment. The bank prior Area Approach Method when MSME financing.
To speed up MSME investment flow and to include in people who are beyond the range
of banking facilities,
schemes named 'Small
are running in the bank. With
schemes, operation of collateral security free SEIS & MEIS investment is continuing in
all 110

these

December, 2013
Micro, Small & Medium Enterprise Investment
Portfolio
68,913.60
Terms & Conditions
Stipulated by the Bank
SEIS & MEIS (Collateral Security Free Investment, included MSME)
Portfolio
Tk. 582.52 Million
Minimum Investment
Tk. 50,000.00
Maximum Investment
Tk. 700,000.00
Number of Branches under the scheme
Rate of Profit
9%-10
Maximum Duration
3 years
Repayment System
Monthly Installment

Page | 47

Recovery Rate
99.77 %
Terms & Conditions

MSM E Portfolio of

Page | 48

il
Figure 5D: MSME
Investments of
AIB L (In
million Taka
Figure 5D shows that
AIB
L invested highest
amount of money on
MSME sector in 2013.
Around 68913
years.

Categorywis e
MSME
Developmen
t
(Number of
client)

Industry |
Service
Trade

Figure 5E: Category


Wise MSME
Development (Client
Percentage)

Figure 5E shows percentage of category wise MSME investment clients. Most of the
clients are from trade sector (86%),
industry sector clients 11%

Page | 49

5.6 Agricultural Investment


To encourage the marginal farmers of Bangladesh, bank is paying massive attention to
invest on agricultural sectors. The main items of agricultural sectors are- crops, fisheries,
warehouse, poverty alleviation, irrigation, livestock development etc. At the end of
December 2013, total agricultural investment portfolio is Tk.
1650.65 million of the
fiscal year 2013-2014. With collateral and without collateral both are practiced in
agricultural investment. The report as on 31 December, 2013 is shown in the table:

Agricultural Investment
Portfolio
Tk. 1650.65 Million
Fisheries
Poverty alleviation
Livestock Development
Warehouse of corps
Crops
Others
Number of Clients
Rate of Profit
Recovery Rate
Terms & Conditions
Source: AIBL

Tk. 650.25 million


Tk. 217.25 million
Tk. 199.93 million
Tk. 14.75 million
Tk. 68.85 million
Tk. 499.62 million
37,141 Persons
7.2%-13%
99.82%
Stipulated by the Bank

Sectorwis e Agricultura l
Investmnet 2012-1
3
Live Stock
Crops
Fisheries
Poverty alleviation
Warehouse of Crops
Others
Figure 5F: Sector wise Agricultural Investment
2012-2013
Figure 5F shows that 39% of the
agricultural investment
was on
fisheries. It
was the
highest amount of agricultural investment
during 2012-2013. Lowest
amount was
invested on warehouse of crops (1%).

5.7 Investment for Growing Spices


at a Lowest Profit Rate (4%)
As per instruction of Bangladesh Bank, and to
increase the production of different types
of spices like Pulse, Oil-seed,
Spice and
Maize, AIB
L
of profit (only 4%) to the marginal farmers.

December, 2013
Nam
e of
Crop
s
Pulse, Oil-seed,

Investm
ent
Amount
Spice

and Maize
Tk.
1.80
millio
n
Source: AIBL Annual Report 2013, page 39

Khamerbari Investment Scheme


has launched a new
product named "Al-Arafah Khamerbari
Investment
Scheme (Khamerbari)".
this

With

product, the bank work for a farmer's community


around the Branch area. Field officials
Page | 51
motivate farmers to grow the potential corps based
on their previous farming experience.
This scheme has an innovative action to develop the
crop sector of Bangladesh. AIB
L has
34.28 Millio n of investment portfolio among
2574 farmers under this scheme so far.

5.9 Investment on Women


Entrepreneurs
About 50% of the populations of Bangladesh
are women.
Women
participation
in the
mainstream of economic activities especially
in
the productive
sectors
is
crucial
for
attaining sustainable economic growth,
poverty reduction
and women's
empowerment.
But women participation in economic sector
is inadequate
and the
number of women
entrepreneurs is very low compared to that of their
male counterparts. In fact, there exist
many obstacles in women participation in the
mainstream of economic activity although
the degree of integrity,
devotion, creativity and
expertise of women make us surprised.
Especially women participation in
microcredit programs
and
readymade
garments
industry is contributing
significantly to the
country's industrialization. Similarly,

participation of women entrepreneurs in


SME
sector
is
vital
for
the
flourishing
of
Bangladesh economy and enhancing women
empowerment.
Al-Arafah Islami Bank Ltd. is working with women
entrepreneurs to make them capable
of earning by connecting with country's
economic
activities.
AIB
L
gives
priority
to
women entrepreneurs

to invest on various
productive
sectors. By

the side of collateral


secured investment, collateral security free
investment is also considered in the question
of women development.
is shown in the table:
Women Entrepreneur Investment
P
Tk.
580
2.30
Mill
io
n
Ter
ms
&
Co
ndi
tio
ns
Source: AIBL Annual Report 2013, page 39

Stip
ulat
ed
by
the
Ban
k

5.10 Grameen Small Investment Scheme

decade.

(GSIS

activities in the last one and a half


This
experience

has made important contributions to the emergence of this


concept
globally. Grameen
Page
| 52
Small Investment Scheme (GSIS) is very much related to
Cottage
Industry/Enterprise
defined by Bangladesh Bank.

Definition of Cottage Industry/Enterprise


As per Bangladesh Bank SMESPD Instruction Circular No. 1,
Dated: 19
June, 2011,
Cottage Industry/Enterprise means as follows:

Cottag e
Industry/
Enterprise

Fixed Assets
Valu e in Tak
a
And/o r
Attributes unde Excludin g Lan
Total
r
d
Numbe r of
th e categorie
& Building
employee s
s
(Includin g
Replacement
Cost )
Manufacturin
g
Less Tha n 5 La c
Less Tha n 1
Servic
Trad e

Less Tha n 5 La c
Less Tha n 5 La c

Source: Bangladesh Bank Website (


Small

Less Tha n 10
Less Tha n 1

this scheme helps farmers,


labours, fishermen,
microbusinessmen and small entrepreneurs. Another important
objective
of this scheme is to
give priority to make economically self-dependent of rural
women entrepreneur.
To get
investment under this scheme, no collateral security is required.
Repayment system is
weekly installment basis. Basically, this scheme is one kind
of supervised
investment
system and skilled personnel are working in different
branches
to
ensure continuous
supervision.

is shown in the table:

Number of Villages
Covered

Number of Branches
under the scheme
Number of Samit

Rate of Return

Terms & Conditions

Dec'1 3
Figure 5G: Gradual
Development of GSIS

gradually increased during the year 2013. In


the number of client was 25,953.

Solar Energy Investment Scheme


Solar
is
launched
crisis
benefits

Energy

Investment

Scheme'

in order to face the present electricity


and
to
spread
the
of

renewable energy among the rural people. This


program treats as an innovative step on
the history of Private Banking Sector in
Bangladesh.
Actually, solar
energy
is a
renewable, efficient, and non-polluting energy source.
Homeowners, who install solar
systems, are helping to reduce the emission of
greenhouse gases
which
have
a
direct
relation to global warming. This scheme also
has
unveiled the
wide field
of
Green
Banking concept, the burning issue.

have
already
established
2,50,740
Watt
Peak of electricity among 5,011 families through 21
Rural Branches so far. The bank is
running this program with own funding as well as
permanent skilled personnel.
is shown in the table:

Al-Arafah Solar Energy Investment Scheme

Electricit
y
Provided

2,50,740
Watt
Peak

Number of privileged
Family

5,
0
1
1

Number of Branches under the scheme


Rate of
Return

Repaym
ent
system

Recove
ry Rate

Terms & Conditions

9
%
l
l

Down payment &


Monthly Installment
Basis

9
9
.
4
2
%

1^1
l

Figure 5H:
Gradual
Developm
ent of
Solar
Energy
Investment
Client
(Number)
in 201

shows
that
number
of
solar
energy
investment
client
has
been
gradually
increased
during the
year 2013

5.12
Modes
of
Invest
ment
of AIB
When
money is
deposited
in the
AIBL
, the bank,
in turn,
makes
investment
s in
different
forms
approved
by the
Islamic
Shariah
with the
intention
to earn a
profit. Not
only a
bank, but
also an
individual
or
organizatio
n can use
Islamic

modes of
investment
to earn
profits
for
wealth
maximizati
on.
Some
popular
modes of
investment
of
AIBL's
discussed
below:

5.12.1
Murabaha
h

This
concept
refers to
the sale of
goods at a
price. This
includes a
profit
margin

agreed to
by both
parties.
The
purchase
and selling
price,
other
costs, and
the profit
margin
must be
clearly
stated at
the time
of the sale
agreement.
The
bank
is
compensat
ed
for the
time
value of its
money in
the form of
the profit
margin.
This is a
fixedincome
loan for

the
purchase
of a
real
asset
(such
as
real
estate
or
a
vehicle),
with
a
fixed
rate
of profit

determined by the profit margin. The bank is not compensated for the time value of
money outside of the contracted term (i.e., the bank cannot charge additional profit on
late payments); however, the asset remains as a mortgage with the bank until the default
is settled.
Page | 56
5.12.2 Bar Muaiial (Credit Sale)
muajjal means a credit sale. Technically, it is a financing technique adopted
by Islamic banks that takes the form of murabahah muajjal. It is a contract in which the
bank earns a profit margin on the purchase price and allows the buyer to pay the price of
the commodity at a future date in a lump sum or in installments. It has to expressly
mention cost of the commodity and the margin of profit is mutually agreed. The price
fixed for the commodity in such a transaction can be the same as the spot price or higher
or lower than the spot price. Bai'

Bai Sala
Bai salam means a contract in which advance payment is made for goods to be delivered
later on. The seller undertakes to supply some specific goods to the buyer at a future date
in exchange of an advance price full
y paid at the time of contract. It is necessary that the
quality of the commodity intended to be purchased is full y specified leaving no
ambiguity leading to dispute. The objects of this sale are goods and cannot be gold,
silver, or currencies based on these metals. Barring this, Bai Salam covers almost
everything that is capable of being definitely
workmanship.

described as to quantity, quality,

and

Basic features and conditions of Salam:

The transaction is considered Salam if the buyer has paid the purchase price to the
seller in ful l at the time of sale. This is necessary so that the buyer can show that
they are not entering into debt with a second party in order to eliminate the debt

with the first party, an act prohibited under Sharia. The idea of Salam is normally

cannot be effected on a particular commodity or on a product of a particular


field or farm. For example, if the seller undertakes to supply the wheat of a
particular field, or the fruit of a particular tree, the salam will not be valid, because
there is a possibility that the crop of that particular field or the fruit of that tree is
destroyed before delivery, and, given such possibility, the delivery remains
uncertain. The same rule is applicable to every commodity the supply of which is
not certain.

necessary that the quantity of the commodity is agreed upon in


unequivocal terms. If the commodity is quantified in weights according to the
usage of its traders, its weight must be determined, and if it is quantified through
measures, its exact measure should be known. What is normally weighed cannot
be quantified in measures and vice versa.

that the delivery of both be simultaneous. Here, salam cannot work.


Similarly, if wheat is bartered
for barley, the simultaneous delivery of both is
necessary for the validity of sale. Therefore the contract of salam in this case is not
allowed.
This is the most preferred financing
compliance.

structure and carries higher order Shariah

Iiarah
Ijarah means lease, rent or wage. Generally, the Ijarah concept refers to selling the benefit
^
of use or service for a fixed price or wage. Under this concept, the Bank makes available
5
equipment such as plant, office automation,
1vehicle for a fixed period and price.

Page | 57

(Hire Purchase)
Parties enter into
contracts
that
come
into
effect serially, to
form a
complete
lease/
buyback transaction.
The first contract
is an Ijarah that
outlines the terms
for leasing or
renting over a
fixed period,
and
the
second contract is
a
Bai that
triggers a
sale
or
pag

purchase once the


term of the Ijarah is
complete. For
example, in a car
financing facility,
a customer enters
into
the
first
contract and
leases
the car from
the owner (bank)
at
an
agreed amount over
a specific period.
When the lease
period expires, the
second contract
comes into effect,
which enables the
customer to
purchase the car at

an agreed price. The


bank generates a
profit by
determining in
advance the cost of
the item,
its residual value
at the end of the
term and the time
value or profit
margin for the
money being
invested in
purchasing the
product to be leased
for the intended
term.
The combining of
these three
figures becomes the
basis for the
contract between the
Bank and the client
for the initial
lease contract.
This type of
transaction
is
similar
to the
contractum
trinius,
a
legal
maneuver used by
European bankers
and merchants
during
the
middle
Ages to
sidestep
the Church's
prohibition on
interest
bearing
loans.
In a
contractum, two
parties
would
enter into three

concurrent and
interrelated legal
contracts, the net
effect being the
paying
of a fee for the use
of money for the
term of the loan.
The use of
concurrent
interrelated
contracts is also
prohibited under
Shariah Law.

Ijarah-Wal-Iqtin

an integral part of
the lease contract
to make it
conditional. The
rentals as well as the
purchase price are
fixed in such
manner
that the bank gets
back its principal
sum along with
profit over the
period of lease.

5.12.5 Mudarabah

is a
special kind of
partnership where
one partner gives
money to another
for investing it in a

commercial
enterprise. The
capital investment
should normally
come
from both partners.
The Mudarabah
(Profit Sharing) is a
contract, with ONE
party providing
100 percent of
the capital and the
other party
providing its
specialized
knowledge to invest
the capital

and manage the investment project. Profits generated are shared between the parties
according to a pre-agreed ratio. If there is a loss, the first partner "rabb-ul-mal"
his capital, and the other party "mudarib"
Page | 59

5.13 Investment processing of AIB

Islami
Bank (AIBL ) makes its investment decision through successfully passing the following
crucial stepsHere, investment taker (client) approaches to any of the branch of Al-Arafah Islami Bank
Bangladesh Limited (AIBL) . Then he talks with the manager or respective officer
(investment). Secondly, bank considers five

Generally, bank analyses the following five


Character
2. Capacity
3. Capital
4. Collateral
5. Condition

5.13.1 Application Stage

duly respective
information which is crucial for the initial of investment proposal. Generally, here, all the
required documents for taking investment have to prepare by the client himself.
</

Trade License photocopy (for proprietorship)


Abridged pro forma income statement
Attested copy of partnership deed (for partnership
business)
Page | 60

Prior three (03) years' audited balance sheet (for


Joint Stock Company)
Prior three (03) years' business transaction
statement for the
Musharaka /
Mudaraba investment
Abridged proof income statement for the
the
Musharaka
/
Mudaraba
investment
Attested copy of the Memorandum
)
& Articles
Association
(AOA) for the joint stock company

(MOA
of

Attested copy of the Tax Identification


Number
(TIN)
including
final
assessment
Detailed summary of the sundry debtors and
creditors (including both time
& schedule)
Summary of the personal movable & immovable
assets, and others

5.13.2 Appraisal Stage


At this stage, the bank evaluates the client and his/
her business.
It is the most important
stage. Because, on the basis of this stage, bank
usually goes for sanctioning the proposed
investment limit or proposal. If anything
goes
wrong here,
the
bank
suddenly stops
to
make payment of investment. In order to appraise
the client, AIB
L

167B

Company's or client's
Owner's
List of partners
Purpose of investment/facilities

Other liabilities of the client

Previous banker's information


Details of sister/ allied concerns
Allied deposits as on
Business/ industry analysis
Relationship analysis
Asset- liability position of the client as per audited balance sheet

Page | 61

Working capital assessment


Risk grade
Particulars of the go down for storing mpi/
Insurance coverage
Audit observation
Security analysis

5.13.3 Sanction

Stag

As this stage, the bank officiall y approves the investment proposal of the
respective
client. In this case client receives bank's sanction letter.
Al-Arafah
sanction letter contains the following elements

Investment Limit in Million

Mode & amount of Investment


Purpose of investment

Period of Investment
Rate of Return

Securities:
^>
Murabaha Post Investment (MPI)/ Bai Murabaha- Pledge of MPI/
*

Cash/
^

Cash/ Goods

Security

In allowing Murabaha
investment and amount of
cash security is generally
realized from
the client (amount
depends
on
the
nature
of
goods,
creditworthiness
of
the client,
collateral security
obtained etc.)
which
is
converted to
goods
security after
purchase of
pag

investment and client's

Example- if for a
Murabaha investment cash
security is fixed at 25%
Bank's investment
stands at 75% on the total
goods purchased. For
example, if cost of total
goods purchased
is Tk. 100000 Bank's
investment
will be tk. 75000 and
client's cash security
will be tk.
25000.

5.13.4 Documentation
Stage
At this stage, usually the
bank analyses wealthier
required documents are in
order.
In the
checks the following
some documents of

Tax Payment Certificate


Stock Report
Trade License (Renewal)
VA T Certificate
Liability statement from
different parties
Receivable from different
clients
Other assets statement
Aungykar Nama
Ghosona Potra
Three (03) years net
income & business
transaction
Performance report with
bank
Valuation Certificate
Particulars of the proposal
Particulars of the
mortgagor
Particular of the properties
Outstanding liability
position of the bank
CIB

Disbursement Stage

showing the exact


locatio
n of
each
mortga
ge
proper
ty
needs
to be
physic
ally
verifie
d.

63

5.13.6 Monitoring &


Recovery stage

Islami Bank Limited


bank will
contact
with the
client
continually, for
example- bank can
obtain
monthly stock report
from the client in case of
micro investment. Here
the bank will keep
his eye on over the
investment taker.
If needed, bank
will physically
verify the client's
operations. Also if
back feels that
anything
is
going
wrong
then it
tries
to
recover
its
investment fund from the
client.

Al-Aratah

Ch
apt
er
6

FI
N
DI
N
G
S
Topics

6.1
Findings
6.2
Problems
6.3 SWOT
Analysis
of

6.1 Findings
is committed
to provide banking
services that is
purely based
on
Islamic
Sharia
transparent and
efficient
in
this
competitive
environment.
Deposit
&
Investment
Management
related finding for
the year 2013 and
2012 are given
below:

Particulars
T
o
t
a
l
D
e
p
o
s
i
t
s
Total
Invest
ment
Invest
ment
Depo
sit
Ratio

(
T

14
1,
70
4,
64
0,
62
4
12
1,
29
8,
98
5,
43
9
85
.6
0
%
2.

97%

.0
8
%
2.
26
%

Amou
nt of
Classi
fied
Invest
ment
P
r
o
v
i
s
i
o
n

3
1

k
e
p
t

I
n
v
e
s
t
m
e
n
t
%
Income from
Investment in
Shares
607,225,060
772,218,82

We can see that


deposit is the
main part
of the AIB
L fund.
So
we
can say
that
deposit is the

1
7
0
6
,
3
2
9
,
0
0
0

heart of AIBL .
Investment of the
bank increased with
the increase of
deposit.
total deposit
amount
is
101,567,035,153.

ability
to
cover
withdrawals made
by
its customers. If the
ratio
is
too
high,
it means
that banks
might not have
enough liquidity to
cover any
unforeseen fund
requirements; if the
ratio is too low,
banks may
not
be
earning
as much
as they
could be.
AIBL' s
is 85.08%. Which
is good
for the bank.
Any bank
investment that
is in danger of
default
is
called classified

investment.
Classified
investments
have unpaid
interest and
principal
outstanding,
and it
is
unclear whether
the bank
will be able to
recoup the
investment
proceeds from the
borrower. Banks
usually categorize
such investments as
adversely classified
assets

classified investment condition is better in 2012. In 2013


the classified investment ratio is 2.97% which is higher than 2012's
is performance
AIBL's

measure used to evaluate the efficiency

of an investment.

6.2 Problems
Due to lack of AT M Booth facilities,
deposits.

the bank is not able to attract more new

does not provide credit card facilities to its customers.


3. AIBL does not provide internet banking
technologically
advanced people do open account in the bank.

facility.

Therefore

4. SMS banking facility is not available which is essential nowadays for depositors.
They have to come to the bank to know their account balance.
5. Banking software is not up-to-date. There are lot of software bugs, therefore often
bank officials face interruption in their work. They also use Windows XP as the
operating system which is out of date.
6. Banking service is not fast enough. Often customer need to wait for a long time for
service.
7. Marketing strategy of the bank is very poor. They do not use any
modern
advertising method to attract customers.
8. People cannot know about their investment products through online. Their website
is not up-to-date and most of the section are incomplete.
9. Lack of manpower slows down their service.
AIBL does not provide VISA card facility to its customers.

They do not have any dedicated helpline for customers.


12. Investment processing is lengthy therefore people become
demotivated.
Page | 66

forms are not managed properly. Often


forms
are lost.
Sometime
accounts are opened without necessary documents.
14. There are almost no modern banking facilities available
other than online banking.
People do not know the actual profit rate for their deposited
amount. So they often
become confused.
16. The record keeping system
followed computerized system
properly.

is also backdated, not

17. Most of the policies are backdated. Only the


authority
amends the policy
but
preserve the old policy.

6.3 SWOT Analysis of AIB


Every organization

is composed of some internal


strengths
and
weaknesses and
also
has
some external opportunities and threats in its whole life cycle.

6.3.1 Strength
AIB L provides its customers excellent and consistent quality
in every service.
AIB L is a financially sound company.
AIBL utilizes state of the art technology
consistent
quality and
operation.

to ensure

AIB L provides its work force an excellent place to work.

AIB L already achieved a goodwill among the clients.


AIB L has a research and training division.
AIB L has strong deposit and investment management
capabilities.

6.3.2 Weaknesses
AIBL

Employees are not


motivated in some
areas.

6.3.3
Emergence of
online banking will
open more scope for
AIBL.
AIB L can
introduce more
innovative and
modern customer
service.
Many branches
can be opened in
local remote area as
its high demand.
AIB L can
recruit experienced,
efficient and
knowledgeable
officers
offers good working
environment.

6.3.4 Threats
The worldwide
trend of mergers and
acquisition in
financial institutions
is causing
problems.
Frequency
devaluation
foreign
exchange
fluctuation

taka
and
rate
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.

Chapter 7
RECOM
MENDAT
ION S
AN D
CONCLU
SION S
Topics
7.1 Recommendations
7.2 Conclusions

7.1 Recommendations
should change the outlook of the
branch to attract premium
customers.
AIB L should provide an effective
training program for the junior level
officers.
The service in Sonargaon
Janapath
Road
Branch
has
real
good prospect, thus
the
bank should work actively so that
it can attract more clients.
The branch should give more
emphasis on proper record keeping.
They should give more attention in
increasing their deposits in different
accounts.

Investment income were more than


double by last
4 years, it convey very good sign.
They should try to retaining their
position.

and
Barisal
Region
but more concentration at Dhaka and
Chittagong, they should give
concentration at Khulna and Barisal
Region also.
Optimal cost for sanctioning and
disbursing investment should be
minimized.
The number of branches should be
increased.

Bank should offer more


facilities to the
consumers
such
as credit
card,
master
card, AT M Machine etc.
Banking
is service-oriented
marketing.
Its business
profit
depends on its
service
quality. That is why the
authority always should
be
aware
about their
service
quality. Employees must give
individual attention to the consumer.
For that, they
can recruit more employees.
AIB L should invest in profitable
sector. Among the different sector
AIB L should
invest highly in Industry and
Commerce sector for high profit.

7.2 Conclusion s

has to follow the rules of


Bangladesh bank despite
the fact that these rules
sometime restrict the
foreign business to some
extent. During my
internship in this branch
I have found the
investment department to
be very efficient;
therefore this department
plays a major role in the
overall profitability of the
branch and
to the Bank as a whole.
Al-Arafah Islami Bank
Ltd is one of the most
potential islami banks in
the islami banking
sector. It has a large
portfolio with huge
assets to meet up
its
liabilities and
the
management of this bank
is equipped with the
expert bankers and
managers in all level of
management.
The Bank's drive towards
market leadership as well
as quality in choosing
business wil
l
continue in the coming
years although
competition
is
intensified
with

the opening
of
more financial
institutions.
The Bank
is
optimistic
that
the
volume of
business wil
l
increase in future
through pragmatic and
market friendly
policies. The
Bank
shall
continue to explore new
fields of investment and
take steps
to open new
Branches for
Banking. The bank
should
endeavor to
adopt customer-oriented
policies
and
introduce
new techniques that
will
help
to
earn
profit
and
increase
greater
confidence of
the
*
existing prospective
customers.

:
Arafah Islami Bank
Limited. AIB
L is a bank that offers the
best islami banking
services
J
to its customer and also a
fast growing bank.
By working
in
Sonargaon Janapath
Road
J
Branch, the

knowledge
would
helpful
to sustain
the real

learned
be
enough
with
v.
organizational
environment.

References
Reilly and Keith
C. Brown,
"Investment
7th Edition.
Page | 70

Annual Report
2013
3) AIB L Annual
Report 2012
4) AIB L
Probaho (OctoberDecember 2013)
5)
6)
7)
en.wikipedia.org/
wiki/Islamic_bank
ing
8)

List of Acronyms
Islami Bank Limited
Profit-Loss-Sharing
Bachelor of Business
Administration
Authorised Dealer
M
Micro, Small
and Medium
Enterprises
A
G
M

Annual
General
Meeting

E
Extraordina
ry General
Meeting
B
Bangladesh
Government
Islamic
Investment
Bond
C
R
M

Core Risk
Manageme
nt

A
Automated
Teller
Machine
Corporate Social
Responsibility
C
Central Sharia
Board for
Islamic Banks
of Bangladesh

Letter of Credit
Pay Order
General Banking
Credit Information Bureau

My Internship Experience

deals with the three parts


of
activities.
These are: general banking,
investment and
foreign
exchange. As
I
was
an
intern,
my
tasks were mostly related to general
banking. I got to learn a
lot of
things about branch
banking during this time. I got familiar
with the work environment, I got to
know how all
the branches are centralized and
about the process
flow.
I mainly had to
report
to the
Branch Manager, but my supervisor
was the Senior Principal Officer

Experience Regarding
Personal Improvement
1. Time Management
Time management is the great virtue for
each & every
person. As
a
private
university
student, I spent only 4 to 5 hours in
the university campus
with
gossiping,
taking tea
&
snacks. But in the professional life like
bank, each & every employee reach in
the office
not more than 9.30 am and go out

from
office not
less than
6pm
due to
heavy
working
pressure. So, I also maintained my
office time. They do their daily task
in daily basis. I
also helped them to make their task
easier.

2. Direct Communication with


Customer
Today's world is so challenging.
Customer has
more power due
to
wide range
of
switching option. I was little nervous in
my first few days to communicate with
customer.
But in later, I was enjoying serving the
customer.

3. Formal Dress Code


I always wear jeans, t-shirt, casual
short
shirt, snicker.
I hardly
wear formal pants,
shirt
and shoe. In the 3 months internship
period I maintained the dress code
regularly and I'm
habituated with this now.

4. Neat
I had
long
hair
with
little
beard
before
starting
my
internshi
p
program.
After
starting
internshi
p, make
my hair
short,
shaving
in time,
cutting
nail, and
polish
shoe in
time. I Pa
s e
have
wearied
ironed
and clean
cloth
regularly.
First few
days, I
feel
boring
but now I
am
habituate
d of it.

5.
Teamwo
rk
Theoretic
ally I
read
what is
team and
teamwor
k but
practicall
y I did
not have
experien
ce
about it.
In the
professio
nal life
there's
exist
team like
Banglade
sh cricket
team.
Each &
every
team
member
has
some
responsib
ilities
and
target to
fil
l
closely
and

helped
them to
make
their task
easier.

Practi
cal
Worki
ng
Experi
ence

(a)
Account
Opening
I
filled
different
types of
account
form for
the
customer.
There is
different
type of
Bank
account
such as
Current
Account:
I
filled
up the
current
account
form

for the
clients.
I also
checked
the
account
form and
checked
the
documen
ts for
opening
the
account.

Savings
Account:
I
filled
up the
savings
account
form
which
is
known
as
Mudarab
a
Savings
Account
(MSD)
for the
clients.
I also
checked
the
account
form
and
check the
documen
ts of

opening
the
Account.
Term
Deposit:
Here
I filled
up the
DPS
form
which
is
known
as ITD

(b) Genera] Banking Task:

Input the cheque book


number in register book
Issued cheque random digit
number
Matched the initial of
customer at the time of giving
cheque book
Wrote inward and outward
register book

(c) Investment Task


Filled up the investment
application form for the
customer
Checked the necessary
document and listed them up
Filled up the dill papers for
the clients
Prepared debit and credit
voucher for the payment and
adjustment
Filled up the CI

(d) Cash Department Task


Received cash from the
customer and pay in counter
Counted cash which was
given by the clients of the bank
Received cheque from the
client and gave them cash.

(e) Others

Assisted customers with

necessary information
Putted various types of seals
for clearing
Updated the record book of
clearing, FDR and cheque books
Data entry task by computer
Filled up other necessary
forms for the bank

Furnished all documents for monthly report