Petaling Jaya Branch of Mukhlisin Bank Berhad Malaysia

operating as
Islamic commercial bank

Business Plan

Managing Islamic Financial Institutions

October 5, 2013
Executive Summary
Opened as a branch of Mukhlisin Commercial bank, Petaling Jaya branch began
operating from 1 November 2013. Still being in its infancy, Islamic finance promises to
bring a reasonable profitability to the bank. The bank is mainly involved in mobilizing
deposits from surplus unit and extending financing to the deficit unit based on Islamic
contracts. Indicating a competitive rate of return, the Islamic bank hopes to earn a
decent profit this year and it aims to increase its profit growth i.e. the branch is planning
to turn around its operation. In order to start operating, the bank is planning to mobilize
$ 10,000,000 in deposits for the year 1.
1.1 Products and Services
The branch will act as an Islamic financial institution and its main products are all
contract based such as consumer financing, corporate or commercial financing, working
capital financing from the asset side of its operations; from the liability side of its
operations, the bank mobilize deposits on the basis of Murabahah, commodity
Murabahah, Tawarruq, BBA, partnership-based contracts.
1.2 Financing
As stated above, the branch needs deposit for $ 10,000,000 in order to begin
functioning and it plans to acquire the amount from several sources.
1.3 Mission Statement
Mission of the branch is to provide financing and to let the investors, Muslim and non-
Muslim earn a competitive profit based on Islamic contracts of transactions.
1.4 Sales forecast
The branch authority expects a decent profit returns on its operations in future;

2.0 Company and financing summary

2.1 Registered name and corporate structure
The bank is registered as Petaling Jaya Branch of Mukhlisin Islamic Bank Berhad
Malaysia.
2.2 Required funds
At the initial stage of commencing its operations, the branch needs financing in the
amount of $ 10,000,000 and the table below shows the breakdown from where it gets
initial capital and where it uses this capital (deposits, …):
Capital – $100,000
Maximum financing breakdown the branch can extend as per the risk features
embedded in the contracts employed under the transaction:
Formula: 0.08=capital/RWA(FxRW)
risk maximum total
contract type weight financing deposits SRR
      10000000 4%
CM,Tawarruq 100 125000000 10000000 400000
Murabahah 50 250000000 10000000 400000
Musharakah 20 625000000 10000000 400000
Bai al Dayn 150 83333333 10000000 400000
Mudarabah 150 83333333 10000000 400000
Istisna(Salam) 150 83333333 10000000 400000

Initial expenditures:
$300,000.00 (20% depreciation
Establishment cost (renovation, license, etc.)
p.a for 5 year amortization)
Rental cost & maintenances $15,000.00 (monthly)
Staff & Administrative cost $55,000.00 (monthly)

3.0 Products and Services

Main type of operations the bank will engage is mobilizing deposits from investors and
extending financing to the customers.
Customer deposits:
3.1 Deposits will initially be mobilized from surplus unit based on Qard Hasan and
Mudarabah Mutlaqah instruments mainly because of the branch’s infancy and capital
requirements.
3.2 Financing can be extending based on several Islamic instruments according to the
type of financing:
Home financing will be utilized through Musharakah mutanaqisah,
Automobile financing with Ijarah muntahiya bi thamlik
Personal financing with Tawarruq, CM
And so on.
4.0 Strategic and market analysis
4.1 Economic outlook
The economic condition in Malaysia is very favorable; financial industry is booming
mainly because of the government policy and other sectors’ concurrent development
such as real estate sector, construction sector.
4.2 Industry analysis
In Malaysia, banks operating in Islamic finance industry are numerous, and its asset
value reaches around $70 billion and it is growing 18-20% p.a.. Particularly sukuk
market is showing a very strong growing trends and this in its turn contributing to the
economic and financial development of the state.
4.3 Customer Profile
Customer profile of the bank is divided into several subgroups as per customer needs
and bank’s policy and internal and external factors. General customer accounts is
allowed to open for Malaysian, permanent residents and nonresidents who are 18 years
old or over, yet there are particular accounts aimed for juniors such as education
account, or junior gold account.
5.0 Marketing Plan

5.1 Marketing objectives

The main objective of Islamic bank is to maximize its profit and to contribute to the
welfare of the people and its stakeholders as well. In mobilizing deposits from investors,
the bank will utilize several marketing strategies such as traditional media and print
advertising and online advertising techniques in order to widen customer base.
5.2 Pricing
In pricing the products, the bank uses mainly floating rate of return mainly because to
give an edge to its customers before its competitors and to maintain the undisturbed
profit flow to its customers.

Organizational Plan and Personnel summary

 6.0 Financial plan
6.1 Underlying assumptions
The Branch will have a rate of return in the amount of 18% p.a.
It will attract deposits of $10000000 in the first year. With this amount, we’ll try to
finance consumer needs.
Total capital
risk profit rate Percent the financing
contract type financing matrix gross profit deposit requirem
weight (indicative) tage extended
SRR(4%) ent
(total deposit=
    10000000) % 1 9600000 0.08  
CM,Tawarruq 100% 960000 9 43200 10%   76800 883200
Murabahah 50% 3840000 7 134400 40%   153600 3686400
Musharakah 150% 480000 5 12000 5%   57600 422400
Bai al Dayn 150% 288000 11 15840 3%   34560 253440
Mudarabah 150% 864000 11 47520 9%   103680 760320
Istisna(Salam) 150% 672000 11 36960 7%   80640 591360
Income statement as of 30 April 2014(for 6
Ijarah 170% 1920000 12 115200
months 20%
period  beginning 1 November
261120 2013)1658880
Others 200% 576000 15  
43200 6%   9216030-Apr-14
483840
Revenue  
      Income derived from    of
investment  
Total   9600000   depositors’
448320 funds  and others 860160 448320
100% 8739840
Income derived from investment of
shareholders’ funds* 2000
total
Allowance for impairment on
deposit 9600000
financing -15080
The above table illustrates one possible Other expenses directly
attributable to the investment of
combination and every instruments’ single the depositors’ funds -150
Write-back / (impairment loss) on
performance from financing. It is obvious securities -35

from the table that matrix distribution of total distributable income 435055
   
deposits to financing resulted in more profit income distributable to depositors -187670

than the deposits allocated alone in most of total 247385

   
the case. personal expenses -57000
other overheads and expenditures -74500
Profit(Loss) before zakat and
Balance Sheet taxation 115885
   
taxation (half year) 21439
  94446
zakat (2.5%) half year 1181
NET INCOME FOR THE PERIOD 93266
* We assume that the capital will be invested into the low risky instrument
like MGSs and they give a profit at a rate of 4%
 
Balance sheet as at 30 April 2014
  30-Apr-14
Assets  
Cash and short-term funds  2700
Financing and Advances  
CM,Tawarruq 1003200
Murabahah 3974400
Musharakah 492000
Bai al Dayn 303840
Mudarabah 911520
Istisna(Salam) 708960
Ijarah 2035200
Deposits and placements with other
institutions 102000
Other assets 619200
Statutory deposits with Bank Negara
Malaysia(4%) 400000
Investment Properties  
Property and Equipment  
Intangible Assets  
Deferred tax assets  
   
Total Assets 10550320
   
LIABILITIES AND SHAREHOLDER’S
EQUITY  
Deposits from customers  
Demand deposits:  
Amanah(Trust) CASA 2000000
Wadiah CASA 3700000
Investment Accounts:  
Mudarabah 2987000
Special Investment Accounts:  
Mudarabah 883000
Musharakah 430000
Reserves: Amanah  
Equity: Musharakah  
Deposits and placements of banks
and other financial institutions  
Bills and acceptances payable  
Other liabilities  
Total Liabilities 10000000
Shareholder’s equity  
Share capital 100000
Reserves 450320
 Total Shareholder’s Equity 550320
Total Liabilities and Shareholder’s
Equity 10550320

Income Statement
As a capital, the initial cash allocation will be taken away to be a guarantee for the
amount the branch financed that is $10,000,000 and we suppose that the branch
invests this amount in MGSs. This investment yields 4 % and the half-year profit from
this investment accounts to $2,000 and this in its turn represents the profit derived from
investment of shareholder’s fund.

Cash flow
Cash flow from operating activities
   
Profit/(Loss) before Zakat and Taxation 115885
   
Adjustments for 45080
Depreciation of Property and Equipment 30000
Amortization of intangible Assets 0
Allowance for impairment on financing 15080
Bad debt on Financing - Recovered 0
Bad debt on Financing - Written off 0
(Write Back)/Impairment loss on securities 0
   
operating profit before working capital
changes 70805
   
decrease/(increase) in operating assets  
deposits and placements with banks and
other financial institutions 102000
Financing, advances and other receivables 9429120
other assets 619200
Statutory deposits with Bank Negara
Malaysia 400000
   
decrease/(increase) in operating assets  
1000000
deposits from customers 0
deposits and placements of banks and other
financial institutions  
other liabilities  
   
Cash used in operations:  
Tax 21439
Zakat 1181
NET CASH GENERATED FROM OPERATING
ACTIVITIES -502135

Balance sheet as at 30 June 2014 Income statement as at 30 June 2014

  30-Jun-13
6/30/2013
Revenue  
for two
Income derived from investment of
months
depositors’ funds and others 158881
  period
Income derived from investment of
Assets   shareholders’ funds* 1302
Cash and short-term funds  3000 Allowance for impairment on financing -5027
Financing and Advances   Other expenses directly attributable to
the investment of the depositors’ funds -50
CM,Tawarruq 1113552
Write-back / (impairment loss) on securities 0
Murabahah 4034016
total distributable income 155106
Musharakah 495280
   
Bai al Dayn 307891
income distributable to depositors -62557
Mudarabah 922154
total 92549
Istisna(Salam) 723139    
Ijarah 2055552 personal expenses -19000
Deposits and placements with other other overheads and expenditures -25000
institutions 103360
Profit(Loss) before zakat and taxation 48549
Other assets 624275
   
Statutory deposits with Bank Negara
Malaysia(4%) 405651 taxation (half year) 2994
Investment Properties, Property and
 
Equipment, Intangible Assets  
Deferred tax assets   zakat (2.5%) half year 190
Total Assets 10784871 NET INCOME FOR THE PERIOD 45366
We assume that the capital will be invested into the low risky instrument like
LIABILITIES AND SHAREHOLDER’S EQUITY  
MGSs and they give a profit at a rate of 4%
Deposits from customers 10141285  
Demand deposits:  
Amanah(Trust) CASA 2030000
Wadiah CASA 3755500
Investment Accounts:  
Mudarabah 3031805
Special Investment Accounts:  
Mudarabah 891830
Musharakah 432150
Reserves: Amanah  
Equity: Musharakah  
Deposits and placements of banks and
other financial institutions  
Other liabilities  
Total Liabilities 10141285
Shareholder’s equity  
Share capital 193266
Reserves 450320
Total Shareholder’s Equity 643586
Total Liabilities and Shareholder’s
Equity 10784871

Cash flow from operating activities  

   
Profit/(Loss) before Zakat and Taxation 48549
   
Adjustments for  
Depreciation of Property and Equipment 10000
Amortization of intangible Assets  
Allowance for impairment on financing 5027
Bad debt on Financing - Recovered  
Bad debt on Financing - Written off  
(Write Back)/Impairment loss on securities  
   
operating profit before working capital changes 33522
   
decrease/(increase) in operating assets  
deposits and placements with banks and other financial institutions 1360
Financing, advances and other receivables 222465
other assets 5075
Statutory deposits with Bank Negara Malaysia 5651
   
decrease/(increase) in operating assets  
deposits from customers 141285
deposits and placements of banks and other financial institutions  
other liabilities  
   
Cash used in operations:  
Tax 2994
Zakat 190
NET CASH GENERATED FROM OPERATING ACTIVITIES -62928
The above financials for the two periods show that the branch was active in mobilizing
deposits and in extending them as financing. The net cash flow generated from
operating activities is getting negative bigger, meaning that the branch extending
financing more and more period by period. Income generated mainly come from
investing depositors’ money.
We believe that Petaling Jaya branch of Muhlisin bank achieved targeted aim and the
future proscpects look bright for the bank and its customers.