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PREAMBLE
Since it is required by the students of M.com to commence a report on manufacturing or service organization as Internships provide an opportunity to link theory with practice in order to cope the gap between theoretical study and actual practices for better understanding that how it is performed in actual. To fulfill this mandatory requirement I was assigned by my MENTOR to do a six week internship. The key purpose of this report is to critically scrutinize and realize banking operations and propose measures in the form of solid and weighted recommendations for their more perfection. I decided to do a complete analysis of bank with respect to technology it has, its prevailing culture and also its financial analysis. And then give concrete recommendations and suggestions. To achieve my mission stated above the first step was to choose the organization so I got the opportunity to do internship inAl Baraka Bank (Pakistan) Limited (ABPL) a pioneer in Islamic banking my key purpose was to study how Conventional banking is different from Islamic banking I realized main difference is on the part of operations and use of funds. I joined a 6 week internship for a practical exposure of banking world I work from 9.00 to 3.00 pm Daily I have one day off in every week. I find Al-baraka is performing its banking business in line with the set of laws of SBP. As the Al-baraka Gujranwala is a foreign subsidiary so its main products are the similar as being offered at head office. The vision and mission of Al baraka are also stated in report along with the complete detail of hierarchy of bank. Then the work done by me during the internship is also discussed and the ratio analysis years 2009-2010. Then I have done the SOC analysis on the report to know about the strengths, opportunities and challenges which are being faced by the bank and they will have to face in the near future, by

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doing the SOC analysis I give conclusion on the bank performance and some recommendations. I have used my maximum efforts to achieve my mission stated above. I am sure that my effort would b fruitful for users. In this short span of time I feel the environment of al-baraka is quite friendly because I did not feel any professional jealously, leg pulling and any other such thing

AL-BARAKA IN PAKISTAN
Al Baraka Islamic Bank (Aib) has the honor of being the pioneer of Islamic

banking in Pakistan and has been operating in the country as branches of Al Baraka Islamic Bank Bahrain since 1991. Over the years, the bank has successfully developed and maintained its identity as one of the leading providers of a host of banking products and services in strict compliance with Shariah principles. Currently operating with 29 branches in 17 major cities of the country, AIB offers a wide array of Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance, etc., catering to a diverse cross-section of the economy, including the Corporate, SME and Consumer sectors. Moreover, various Shariah compliant deposit schemes are available for customers to invest their funds in, along with a variety of other ancillary services such as online banking, ATM/debit card, safe deposit lockers and utility bill payments etc. Al Baraka Islamic Bank (AIB) is a member of Al Baraka Banking Group (ABG) which is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. ABG is committed to expanding its presence in Pakistan, which is evident from the rapid growth being undertaken by Al Baraka Islamic Bank in

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the country and its plans to have its Pakistan operations localized as a Bank registered in Pakistan, over the next few weeks. Building on the expertise and experience of its workforce and the growing awareness of Shariahcompliant banking solutions among the masses, AIB has successfully developed itself as a major unit of ABG operating in the region, capitalizing on the Groups geographical presence and high quality research and development in Islamic financial products for its business expansion in the country. Faced with growing challenges in this rapidly developing market, AIB strongly relies on its ability to be an effective and efficient market player through renewed focus on superior customer service, development of Islamic alternatives to conventional financing facilities, and strict adherence to Shariah rulings and principles. Albaraka Banking Group is the biggest Islamic banking group listed on the Bahrain Stock Exchange in terms of capitalization. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Shariah. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.59 billion. With assets of US$11.2 billion, the Group has a wide geographical presence in the form of subsidiary banking Units in 12 countries, which in turn provide their services through more than 250 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank / Bahrain, Al Baraka Islamic Bank / Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Egyptian Saudi Finance Ltd / South Africa, Al Baraka Al Baraka Turk Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/ Tunisia, The Bank/Egypt, Participation Bank/Turkey, Albaraka Bank Syria (under establishment), and representative
office, Indonesia.

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CORE VALUES Partnership: Our shared beliefs create strong bonds that form the basis of long term relationships with customers and staff. Driven: We have the energy and perservance it will take to make an impact in our customers lives and for the greater good of the society.

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Neighborly: We value and respect the communities we serve. Our doors are always open; our customers always experience a warm-hearted, hospitable welcome and accommodating service. Peace of mind: Our customers are rest assured that their financial interests are being managed by us to the highest ethical standards Commitment. AL BARAKAS COMMITMENT TO ISLAMIC BANKING Al Baraka Islamic Bank and Albaraka Banking Group are fully committed to develop and promote an integrated Islamic Financial System. Compliance with the rules and principles of Islamic Shariah is the core of the banking and financial activities and its philosophy. All its banking activities are very closely regulated by a Board of Shariah Advisors based at the Head Office in Bahrain and a Shariah Advisor based in Pakistan, to ensure strict compliance with the highest standards of Islamic Banking principles.

PAKISTAN MANAGEMENT Board Of Directors: Mr. Adnan Ahmed Yousif, Chairman Mr. Tariq Mahmood Kazim, Deputy Chairman

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Mr. Shafqaat Ahmed, Chief Executive Officer Mr. Abdulrahman Shehab, Director Mr. Nadeem Amjad Khan, Director Mr. Syed Tariq Hussain, Director Mr. Abdul Ghaffar Fancy, Director Mr. Federico Tauber, Director Mr. Tariq Hamid Mr. Salman Ahmed Mr. Imtiaz Ahmad Pervez

Board Executive Committee (BEC): Mr. Tariq Mahmood Chairman Member Member Member Member Member Secretary of BEC

Kazim Mr. Tariq Hamid Mr. Salman Ahmed Mr. Abdul Ghaffar Fancy Mr. Nadeem Amjad

Khan Mr. Shafqaat Ahmed Mr.MuhammadSiddique Memon

HR Board Remuneration Committee (HRRC): Chairman Mr. Adnan Ahmed Yousuf Mr. Tariq Mehmood Kazim Member (ABL)

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Mr. Abdul Ghaffar Fancy (EFH) Mr. Federico Tauber (MAK) Mr. Mukkarram Jafri

Member Member Secretary of HRRC

Board Audit Committee (BAC): Mr. Mr. Mr. Mr. Chairman Imtiaz Ahmad Pervez Member Abdulrahman Shehab Member Salman Ahmed Country Head Secretary to BAC Hanif Asharf

Board Risk Committee (BRC): Chairman Mr. Tariq Hamid Mr. Imtiaz Ahmad Member Central Region South Region Pervez Regional Manager Mr. Nadeem Amjad Member MR Amjad Ali Khan Branch Manager Mr. Syed Tariq Husain Member Mr Muhammad Member Mr. Federico Tuaber Arshad Mr Muhammad Secretary to BRC Mr. Ayyaz Ahmed Arshad Shari'a Advisor: Justice (R) Khalil-ur-Rehman Khan
Operational Manager Abdullah Mufti Umer Musadiq Assistant Manager MR Irfan Assistant Manager A/c opening Officer Miss Anum Cash Officer Mr Raheel Clearing Officer Mr Ramzan
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North Region

Credit & Marketing Foreign trade Najeebul Haq Siddiqi Manager MR Asad Meer Manager Mr Hafiz Ullah Khan

Officer MR Salman

MR Aamir

MANAGEMENT HIERARCHY

Clearing Officer Mr Saqib

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DEPARTMENTS & SERVICES


OPERATION DEPARTMENT It is also called front office. The ABPLs operations department has number of interrelated departments that works together to achieve the specific goals and objectives of the organization. The ABPL has built hierarchical system that Operation department perform functions relating to Clearance Settlement opening of accounts collecting the bills for Government Collecting the fees on the behalf of universities and other agency functions. This department keeps customer records and handles the day-to-day monitoring of margin positions. It basically divided into these sub departments. Deposits/account department Cash department Clearing department Remittances department

All these departments come under the operations, which is headed/ controlled by the Manager Operations. These are sub departments but jointly known as operation department.

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DEPOSITS DEPARTMENT CATEGORIES OF ACCOUNTS: Bank offer following type of account to their customers. Individual accounts: Individual accounts are the most common personal investment accounts. Opened by single person. Joint Account: A joint account occurs when two or more than two customers have one account. Theparties to a joint account are considered in law as they are one person. Business accounts: Business accounts can be opened by institutions, companies, partnerships, trusts and non-profit organizations. Following documents are required. TYPES OF ACCOUNTS: Deposits are collected by opening account. Major types of accounts offered in ABPL are following: Current Account Saving account Profit and loss saving account Khazana accont Foriegn currency account Current account

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Saving account Term Deposit Account

Current Account: This type of account is payable to the customer on demand, hence called currentliabilities due to their nature. No profit is given at this account. Minimum amount for opening these types of accounts is normally about Rs: 1,000/-.

Saving account: Saving account of two types is offered in ABPL P & L saving account Khazana account

PLS Saving Account: The objective of saving account is to inculcate the saving habit in the general public because profit is paid with fix rate of 5.25%. Khazana account: It is same like PLS Saving Account with difference that profit rate is decided on monthly, quarterly, half yearly or yearly basis according to the terms of the account. Note The rate of profit is high if the term of taking profit is haigh e.g profit rate of quarter will be less than the half year term account. Foreign Currency Accounts (FCAs) Foreign Currency Account in ABPL can be opened in three major currencies of the world,i.e., U.S. Dollars, European Euro and UK Pound Sterling. Only authorized branches of ABPL can deal in foreign currency account. The accounts can be opened both by Pakistancitizens and foreigners by introduction and following other procedures required for general accounts

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with one exception for foreigners that they will have to submit a copy of their passport. Amount deposited in the foreign currency account must be in four currencies, which are mentioned earlier. When the customer will withdraw the money,he/she will receive the amount in the same foreign currency/profit will also be in thesame foreign currency.There are two types of foreign currency accounts: Current Account Saving Account

These accounts are treated in the same manner as Pak Rupee Accounts.

Term Deposit Accounts In this category Fixed or Term Deposit accounts are offered by the bank. In these types of accounts the deposit can be withdrawn after a specified period of time. Since the amount in these types of accounts is deposited for a fixed period so the bank can easily invest them in any profitable activity and can get return because there is no burden of withdrawal by the customer. OPENING OF ACCOUNT Following is the procedure to open an account Requirements for Opening an Account: At the time of opening an account the customer must have following characteristics: Must be an adult/adult guardian. Must not be bewared under any law from entering into any contract.

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Should be known to the any of the banking staff according to KYC policy.

Account Opening Procedure: The following procedure is followed for opening of all the accounts. Filling of the application form. Signing the specimen card/SS Card. Submission of proper legal documents. Allotment of account number. Issuing of check book. The original CNIC card is checked. For more confirmation,after scanning the photocopy of CNIC copy it is mailed to headoffice. Head office sends back the verysis after confirming it from NADRA

Method of Judging the Fraud:

Face is matched with the picture on the ID card. Expiry of the CNIC is also checked. The signature of the customer is checked. In case if customer is illiterate then his photo is attached and thumbs expression is given.

After the account is opened a letter of thanks is issued to the customer.

Purpose of sending letter of thanks: The purpose is verification of address If the customer had given the wrong address the letter will come back and the account is marked as doubtful. TYPES OF ENTITIES: Bank offer account of following types to these entities.
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Individual account Businessman Salaried person Student Minor House wife Photo account

Joint account Sole proprietorship Partnership Public /private Ltd. Company Trust/club/society Others

DOCUMENTS REQUIRED The following documents are required from the different type of customers.It is important to mention that documents are demanded from customers with a view to ensure the source of income of respected entity. Types of documents Two types of documents are demanded from respected entity. Business documents Personal documents

HOW TO CLOSE AN ACCOUNT Procedure for closing an account:

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The customer can close the account. The customer is required to submit an application for closing the account. Then the account is closed out and his balance is paid to him after deducting the Closing charges Rs. 232 and the application is filed in Account closing file.

Internal circular is circulated in the whole branch for checking if any liability arises. If any liability existed then account cant be closed. Cheque book is returned back to bank and the officer cancel and the remaining cheques in cheque book by marking the stamp VOID. And all other facilities if the customer was taking from the customers are surrendered.

The range of checks in the checkbook returned is also jot down in the account closing form. After deducting the account closing charges and bringing the balance of account being closed to zero the statements of all the years are printed out.

Acoount closing form is attachd with account opeing form of relevevnt account and the account apening form is mar I used to learn how my instructor keeps the record of check book being issued to customer and remaining cheque books in hand.

General Rules for Various Types of Accounts Following are some general rules, which are applicable to all kinds of accounts:

Not more than one account of each category may be opened in one and the same branch except joint account with any other individual. In the event of the death of an account holder the credit balance in the account shall be paid to the legal heirs of the account holder.

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The account holder wishes to close the account should surrender all unused checks. In case of minor account, when minor become major then it is responsibility of bank to close its minor account and open simple account

If a person is agriculturist then he is required to submit FARD Any professional is required to submit the proof of hie professionalism for example Doctor is required to submit MBBA certificate or appointment letter

If some one for example labor does not have any strong evidence or proof of his earning then he is required to submit application having request of opening account CASH DEPARTMENT

The Major function of this system is Receipts & payments to the customers, on behalf of their account, through Cheque or any other negotiable instruments.The cash system mainly encompasses following areas: Receipts Payments

Receipts: The Account holder deposits in their accounts through a deposit slip. The deposit slip contains the account number and the title of account. The amount in figure and words is also written on both side of the slip. The customer then deposits the amount to the cashier, which is dully signed by the cashier and an officer .At last amount is deposited in customers account. Payments: Kinds of checks: Cross cheques Ordinary cheques

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CLEARING DEPARTMENT The function of this department is getting payment of check, demand draft, paymentorder, telegraphic transfer, mail transfer or dividends warrants deposited by the customer of the branch and other branch of the same bank. SBP acts as a clearing house. Clearing House In Pakistan, State bank of Pakistan acts as Clearing House to settle the claims of the different banks through their representatives and this function was earlier performed by the National Bank of Pakistan where there is no branch of SBP but now National Institutional Facilitation Technologies (NIFT) is performing the function of Clearing House for all the Banks including ABPL. Clearing Procedure The following procedure is fulfilled for clearing items. All instruments for collection (check, drafts, pay orders, etc) received for clearing tobe deposited by the customers are be entered on the banks general pay-in slip alongwith all the details, especially the bank name/code and the document number. The clearing official of the bank affixes the banks crossing and clearing stampsalong with his/her signature. All these instruments are sorted and posted in the system. The next day they are presented for clearing in NIFT. In case there is no objection the customers account is credited.For dishonored instrument the fine is charged from the customer

REMITTANCES DEPARTMENT
The function of the remittance department is the transfer of money/funds from onebank/branch to the other.

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Modes/Instruments of Remittance The Bank of Punjab, like other Commercial Banks undertakes to remit or transfer moneyfrom one place to any part of the country and outside the country. The money is remitted mostly by means of: Demand Draft (DD) Pay Order (PO) Mail Transfer (MT)/Telegraphic Transfer (TT) Outward Bills for Collection (OBC) Inward Bills for Collection (IBC)

Demand Draft (DD) A demand draft is an order instrument issued for payment of a certain sum of money tothe order of certain person and drawn on one office of the bank by another office.It is made by the banks against payment of cash. The bank recovers different types of charges from the applicant on issuance of DD, covering its commission and other postal charges. Pay Order (PO) It is a check drawn by a bank on itself. The payment orders are generally issued for thepayment with in the city where payment through checks is not possible. The bank chargesfixed commission for clearing this instrument. Mail Transfer/Telegraphic Transfer These are the faster ways to transfer money. The following procedures are fulfilled in thisregard:

Check the test numbers at the arrival Verify the signatures of the bank official. Entered in the relevant register. Make payment. In Telegraphic transfer the specific codes are exchanged by the bank official ontelephone but this is normally not followed.

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Outward Bills for Collection

Bills sent to other cities banks for clearing are called outward bills for collection. Checks are entered in the OBC register, the number is written and clearing stamp is affixed along with the test number entry. The OBC advice is prepared. The respective checks are attached with the advice. This is sent to the relevant city. Upon clearing that bank credits the bank account and gives advice to the bank.

Inward Bills for Collection

Bills received from other banks out of city for the local clearing are called inward billsfor collection. The bank received the clearing advice along with the check/draft. The checks/drafts are recorded in the inward mail and entered in the IBC register. The checks are lodged for clearing. After realization the advice is mailed to the branch and its account is credited.

Foreign Remittances To facilitate its customers in the area of Home Remittances ABPL has taken a number of measures to Increase home remittances through the banking system and Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries. CREDIT DEPARTMENT

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Credit department deals with funded and non funded facility. In other words it can be said that it covers with both long-term and short- term requirements. Murabha, Istasna and Salam meet working capital needs whereas Ijarah and Diminishing Musharakh fulfill long-term financing requirements for plant and machinery. As an Islamic Bank the Credit department of ABPLprovides the goods to the customers not cash like Conventional Banks which makes the transaction Halal according to the Islam. Credit is divided into the following Categories: Funded Non-Funded

Funded

Murabaha DiminishingMusharaka

Ijarah

Non-Funded

Letter of credit (LC) Guarantee (LG)

Letter of

Murabaha
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The Murabaha transaction was prevalent in the day of Prophet

Islamic banks therefore use a sale-based transaction (Murabaha) instead of loan-based transactions for financing purchase of assets by their clients.

Over 70% of all advances made by Islamic banks comprises of Murabaha transactions. Murabaha is a particular kind of sale Islam prohibits charging interest on money, but permits charging profit on sale of goods Where the transaction is done on a cost plus profit basis i.e. the seller discloses the cost to the buyer and adds a certain profit to it to arrive at the final selling price

The distinguishing feature of Murabaha from ordinary sale is: the seller discloses the cost to the buyer and a known profit is added. Prohibition of: Major Uncertainty (Gharar) and Sale of Debt Subject matter of sales must conform to shariah rules: Be in existence, Possession by seller either physically or constructive.

Valid Sale A valid sale contract exhibits two features: Knowledge; i.e. parties full knowledge of the object of sale. Existence; a concrete sale object

Absence of these features introduces Gharar in the transaction. Payment of Murabaha The profit may be added: On a lump sum basis & as a percentage of cost Payment of Murabaha price may be At spot

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In installments In lump sum after a certain time

Hence, Murabaha does not necessarily imply the concept of deferred payment. Basic rules for Murabaha financing: The following are four basic rules for the implementation of Murabha contract according to Islam, Asset to be sold must exist. Sale price should be determined. Sale must be unconditional. Assets to be sold: should not be used for un-Islamic purpose, should be in ownership of the seller at the time of sale, and should be in physical or constructive possession of the seller. Quranic view on Gambling & Risk O believers! Intoxicants and gambling and Al Ansab (Animals sacrificed for idols) and Al Azlam (arrows for seeking luck or decision) are an abomination of Satan's handiwork. So avoid them in order that you may be successful. Satan wants only to excite enmity and hatred between you with intoxicants and gambling and hinder you from the remembrance of Allah and from prayer. So, will you not then abstain? (Al Maidah 90 ) Ahadith on Gambling & Risk Whoever buys foodstuff let him not sell it until he has possession of them. (Bukhari)

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Do not buy fish in the sea, for it is Gharar. (Bukhari) He who purchases food shall not sell it until he weighs it. (Muslim) The Prophet forbade the sale of grapes until they become black and the sale of grain until it is strong. (Bukhari, Muslim, Abu Dawood, Tirmidhi)

Types of Murabaha
Murabaha sale is divided into two types: Ordinary Murabaha sale: There are two parties to it, the seller and the buyer. The seller is an ordinary trader who buys a commodity without depending on a prior promise of purchase, and then he displays it for Murabaha sale for a price and a profit to be agreed upon. Murabaha sale connected with a promise: There are three parties to it. The seller, the buyer and the bank as an intermediary trader between the buyer and the seller. The bank here does not purchase unless the buyer specifies his desire and a prior outstanding promise to purchase. The mode of Murabaha sale connected to a promise is used by the Islamic banks which undertake the purchase of commodities according to the specifications requested by the customer and then resell them on Murabaha to the one who promised to buy for its cost price plus a pre-agreed profit.

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There are different forms to the application of Murabaha sale connected to a promise of purchase. Some of these forms are determined by whether the promise is binding or not. Other forms are determined by how the bank receives the commodity in the case of the first sale. The bank may receive the commodity directly or through one of its agents or it can authorize the buyer to receive the commodity. Features: Flexible repayment terms Competitive pricing Fixed/Reducing balance basis Minimum Murabaha finance: USD 50,000/Variable tenors

Procedure of Murabaha Financing in AlBaraka Islamic Bank The practical steps of the Murabaha sale The purchaser determines his needs: The purchaser: Determines the specifications of the commodity he wants and requests the seller to determine the price. The seller: Sends a quotation valid for a certain period. Signing a promise to purchase agreement The purchaser: Promises to buy the commodity from the bank on Murabaha sale for the cost of the commodity plus the agreed upon profit.

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The bank: Studies the request and determines the condition and securities for approval. The first sale contract The bank: notifies the purchaser of its approval to purchase the commodity. The bank may pay the price immediately or as per the agreement. The seller: Expresses his approval to the sale and sends the invoice Delivery and receipt of the commodity The bank: authorizes the beneficiary to receive the commodity. The seller: sends the commodity to the place of delivery agreed upon. The purchaser: undertakes the receipt of the commodity in his capacity as legal representative and notifies the bank of the execution of the proxy. The Murabaha sale contract The two parties (the bank and the purchaser) sign the Murabaha sale contract according to the agreement of the promise to purchase.

Areas of applications Murabaha is one of the most widely used modes of financing by the Islamic banks. It is suitable for partial financing of investment by customers operating in industry or trade. It enables the customer /investor to purchase finished goods, raw material, machines or equipment from the local market or through import.

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Documentation
There are a number of documents involved in a Murabaha financing transaction. The following documents are required for the approval of credit. Credit Application CIB Other Bank Opinion Spread Last Three Years Financials Borrowers Basic Facts Sheets (BBFS) Request Letter (RL) Call Report Risk Rating

Transactional documents for Murabha are as follow: Purchase Agreement Agency Agreement. Possession Report. Description of assets Report. Demand Promissory Note. Provisional Transactional Note. Bill Cheque / DD/ PO

The following are the other charge documents, Personal Guarantee Demand Promissory Note (for total)

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GFCA Statement of Lien Statement of Set off

Import Murabaha LC opened and subsequently financed by ABPLis an ideal example of a direct payment Murabaha. The customer opens the LC from ABPLas an agent of the Bank (i.e. places order with the foreign supplier on behalf of AlBaraka Islamic Bank. Upon receipt of documents ABPLmakes payment to the foreign supplier. ABPLsells the goods to the customer on Murabha (i.e. cost plus profit basis) Application of Murabaha in ABPL

ABPLand the customer sign agreement to Sell & Purchase along with Agency Agreement. Customer makes a written request to the Bank for the purchase of Raw Cotton. ABPLdisburses funds amounting to Rs.10 Million to the agent (usually the customer) under Agency Agreement. Agent/Customer purchases and takes possession of the cotton on behalf of AlBaraka Islamic Bank. Agent/Customer informs ABPLthat it has purchased cotton of Rs.10 Million and has also taken its delivery/possession on the banks behalf. The Agent then makes an offer to purchase it at Rs. 15 Million to be paid after one year by signing the Declaration and submits

Murabaha purchase evidence in the form of an invoice, bill or some other documentary evidence. ABPLsells the goods to the customer on Murabha (i.e. cost plus profit basis).

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FOREING TRADE DEPARTMENT

Note: This is all about what foreign trade department does. I did work on only import. Export: There are following three basic modes of export: Export on Collection Basis Export on Advance Payment Export by Negotiation

Collection: Exporter comes to the bank to issue E-FORM for shipment. Shipment goes first then foreign bank sends money to the exporters bank. All the risk bear by exporter collection base export in. Advance Payment:

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Foreign bank sends money to the exporter on the account of export advance payment. Exporters bank receives the payment and asks the exporter to give the purpose of this payment. Get the Advance Payment Voucher signed by the exporter and finally realize the payment.

Negotiation: Exporter comes to the bank and submits the shipping documents along with LC (letter Of Credit) exporter bank received the documents with LC. Checks the documents with LC, take indemnity or guarantee from the exporter and after approving from the branch manager and head office, gives value of the documents to the exporter. In other words negotiation means payment of documents in export by the bank to the beneficiary (exporter). FOLLOWING BODIES MAKES THE ROLES AND REGULATIONS ABOUT LC State bank manual: State bank foreign exchange manual 2002 states the roles and regulations which guide how the transaction would be carried out across the border. International Chamber of Commerce: International chamber of commerce make a set of rules about Liberalization; Energy; IT, E-Commerce and Telecommunications; Transport, Shipping and Logistics; IPR and Copyright, and Arbitration.

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ISBP 2002: The widely acclaimed International Standard Banking Practice (ISBP) for the Examination of Documents under Documentary Credits was selected in 2007 by the ICCs Banking Commission. First introduced in 2002, the ISBP contains a list of guidelines that an examiner needs to check the documents presented under the Letter of Credit. Its main objective is to reduce the number of documentary credits rejected by banks. UCPDC
GUIDELINES:

Uniform Customs and Practice for Documentary Credit (UCPDC) is a set of predefined rules established by the International Chamber of Commerce (ICC) on Letters of Credit. The UCPDC is used by bankers and commercial parties in more than 200 countries including India to facilitate trade and payment through LC.UCPDC was first published in 1933 and subsequently updating it throughout the years. In 1994, UCPDC 500 was released with only 7 chapters containing in all 49 articles. The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCPDC600, formally commenced on 1 July 2007. It contains a total of about 39 articles covering the following areas, which can be classified as 8 sections according to their functions and operational procedures. I.C.C. Rules for Foreign Trade: URC 522 stands for Uniform Rules for Collection. Foreign Trade done all over the world according to the rules and regulations of URC 522. UCP600 (Uniform Custom Practices 600 VERSION) whereas all the parties follow UCP600 rules and regulations in foreign trade.

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Terms of contract/sale: In negotiating a contract, an exporter must determine who is to meet the various charges as they are incurred. The more common terms of contract are: CIF C&F FOB

CIF (cost, insurance, freight): It means that the price will include all the cost of goods, insurance and freight incurred until the goods are delivered at the port or airport of destination named in the contract. Essential documents are: Commercial invoice. Insurance policy or certificate. A full set of bills of lading marked Freight Paid evidencing that the goods have been shipped on board the carrying vessel, or alternative documents of title to the goods.

C & F (cost and freight): It means that the price will include the cost of goods and freight paid in connection with the delivery of goods on board the carrying vessel for unloading at the port or airport of destination named in the contract. Documents needed are: Commercial invoice.

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A full set of bills of lading evidencing that the goods have been shipped on board the carrying vessel and stating that freight has been paid by the exporter.

FOB (free on board): It means that the exporter has only arranged the space and shipped the goods without payment of freight. Thus the freight charges are to be paid by the consignee at the port or airport of destination.

IMPORT
There are three types of import: Letter of credit Firms contract Advance payment

LC (Letter of credit): It means guarantee to pay by the issuing Bank if either of the parties (importer or exporter) defaults/unable to pay at sight (immediately /arrival of documents) or at payment in due date in acceptance. Advance payment: In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer. Cash in advance before shipment may seem to be the most desirable method of all, since the shipper is relieved of collection problems and has immediate use of the money if a wire transfer is used. Payment by check, even before shipment, may result in a collection delay of four to six weeks

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and therefore frustrate the original intention of payment before shipment. On the other hand, advance payment creates cash flow problems and increases risks for the buyer. Thus, cash in advance lacks competitiveness; the buyer may refuse to pay until the merchandise is received.

Advance Payment
EXPORTER RISK IMPORTER RISK

LC Contract

REMITTANCES Remittances are of two types: Inward Remittance. Outward Remittance.

Inward Remittance: The Bank receive inward message through SWIFT for credit to the beneficiary account being maintained either in Pak rupees or FC account. In case of Pak rupees account mentioned in the SWIFT Message. The receiving bank converts the FC account into Pak rupees by applying TT Buying Rate of the value date of that day. Remittance Outward: Until and unless special approval /permission have being granted by SBP. The FC amount can be duly remitted through FC account only by depositing FC cash.

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IJARAH
Ijarah means to give something on rent. It is a long term financing agreement Mode of Financing The chosen mode of financing would be the Ijarah agreement, where the Bank acquires an asset (plant & machinery, vehicle) and the rents it to the client for an agreed period. Car Ijarah in ABPL A rent arrangement is executed between the AIB and applicant (customer), where the Bank will provide an asset (vehicle) after the mutual agreement to the term laid down the Ijarah contract. The customer agrees to a monthly payment (rent) to the Bank for use of the vehicle. At the completion of the agreed period, the Bank gives the customer an option to purchase the asset (vehicle). The following table details some of the macro-features of the applicable mode of financing:

Parameters
Role of ABPL

Detail
To purchase a vehicle and rent it to a customer under an Ijarah agreement.

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Ownership (Title) Ownership lays with ABPL Financing Limit There is no limit for new vehicles purchase Periodicity Period of facility Mode of payment Purchase the customer option Pre-determined monthly rentals. 3 years to 5 years. Through post dated cheques or direct debit instructions. to At the end of the Ijarah agreement period, AIB will make an offer to the customer to purchase the asset at a pre-determined value.

Documentation of Ijarah
There are a number of documents involved in an Ijarah financing transaction. The following documents are required for the approval of credit. Credit Application CIB Other Bank Opinion Spread Last Three Years Financials Borrowers Basic Facts Sheets (BBFS) Request Letter (RL)

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Call Report Risk Rating

Transactional documents for Ijarah are as follow: Purchase Agreement Agency Agreement. Possession Report. Description of assets Report. Demand Promissory Note. Provisional Transactional Note. Bill Cheque / DD/ PO

The following are the other charge documents, Personal Guarantee Demand Promissory Note (for total) GFCA Statement of Lien Statement of Set off Diminishing Musharaka Musharaka is a contract whereby the bank and a customer agree to combine their financial resources for the establishment or running of a business or project, or for undertaking any type of business activities. The two parties agree to manage the project in accordance with the terms of the contract. The profit or loss will be apportioned between the parties pro rate their participation in the invested capital. Unlike the sharing of loss, the sharing

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of profit may be or may be not pro rata the share of the parties in the capital, depending on the additional work or responsibilities that either of the two parties may shoulder. In a Diminishing Musharaka the banks share decreases gradually as a result of a gradual sale of its shares to the customer against the payment of installments. The bank makes profit by selling the share at a price which is higher than its original value. TYPES OF SECURITIES The word security means any thing given to protect or safeguard the repayment of an advance and to justify this term the thing so given should itself be safe; otherwise the object for which it is given is defeated. The ABPLusually takes three types of securities from its customers just for the sack to secure its clients deposits.

These types are: Pledge Hypothecation Mortgage

In each case the bank does not become the owner of the, property but the bank has only the right over the property until the borrower makes payment of his debt. Pledge:

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In a pledge, the possession of the property but not the ownership passes to the creditor. The pledgee is entitled to the exclusive possession of the property until the debt is repaid but the ownership remains in the pledgor subject to the pledgees right. Hypothecation: In case of hypothecation, the property in goods is charged as security for a loan from the bank. But the ownership and possession is left with the borrower. In case of hypothecation, neither the property in goods and nor the possession of property pass to bank, but only the security is granted in a form of letter of hypothecation, which usually gives the banker' charge on the hypothecated goods. Mortgage: In a mortgage, the property in the thing mortgage is conveyed to the mortgagee conditionally. The possession, until default in repaying the loan, generally, remains in the original owner subject to the mortgagees rights.

NON FUNDED FACILITIES Letter of Guarantee ABPL issues all types of financial instruments including bank letters of guarantee in accordance with the provisions of Islamic Sharia. The bank

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issues

different

types

of

letters

of

guarantee

including

bid

bonds, bonds,

performance

bonds,

advance

payment

guarantees,

retention

maintenance bonds and customs guarantees. Issuance of Letters of Guarantee The bank issues all types of letters of guarantee related to trade finance, construction and projects as well as all other financial guarantees which cover all kinds of liabilities of the applicant. The bank issues letters of guarantee for specific purposes such as guaranteeing the performance of certain jobs or legal obligations. The bank may request the customer to deposit a certain amount of money as a margin to secure such a facility. The Bank charges fees for the services that it provides if the letter of guarantee is cash covered; otherwise, the bank takes a commission that covers the actual cost for the issuance of the letter of guarantee. Letters of Credit The Bank provides to its customers short-term facilities to finance their trade activities. Such facilities can be used to finance the sale, purchase, import or export of goods, machinery or raw materials and spare parts etc. Documentary Letters of Credit against Cash Margin: The customer requests the bank to open a letter of credit according to certain conditions (the terms of the customer's original deal with the supplier).

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The bank requests the customer to deposit a sum of money to a maximum equivalent to the price of the goods to be purchased or imported, to cover the amount of the letter of credit.

Based on this, the bank opens the letter of credit. The settlement of the letter of credit is effected by utilizing the amount of the margin deposited by the customer. The documents received under the letter of credit are then sent to the customer.

The bank charges fees for its services.

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MY AREA OF INTERNSHIP
I did my internship in banking sector, AlBaraka Bank Pakistan Ltd. , Gujranwala branch situated at Anwar Industrial Complex, G.T Road. ABPL is working in Pakistan as a foreign bank since 1991; in Gujranwala it starts its work from 31st December, 2007. This branch within a short time gets better position in market. During my internship I got the opportunity to work in different departments like OPERATIONS DEPARTMENT CREDIT DEPARTMENT FOREIGN TRADE DEPARTMENT

I learnt a lot about the practical work of different departments under the supervision of the department managers. I was given full authority to do tasks so I gained a lot by the favor of certain individuals at bank. Although I worked in all these departments but I gained most from foreign trade department due to the manager of the department because he was very cooperative and adept in his work. And I also give the credit to the branch manager who gives me freedom to go all the departments for learning.

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WORK DONE BY Me
As I have mentioned earlier that it is mendatory for the students of masters of commerce to join internship for the period of six weeks. The purpose is to learn the things practically. To fulfill this requirement I choosed the banking sector. As i studied the subject of Islamic banking in my 2nd semester so I was curious to know the real working of Islamic banking. I was fully ambitious to learn maximum in this short spam of time. To achieve my ambition I choosed the Islamic bank AL BARAKA ISLAMIC BANK PKISTAN LIMITED (ABPL) Gujranwala branch situated at Anwar Industries Complex, G.T Road. I feel it necessary to describe that the manager of branch and the credit and marketing department were too much cooperative and helping. It made workme feel confident and I was able to work in all the departments freely. During my internship branch manager go for UMRA and the credit & marketing manager worked in place of him he was too much co-operative and motivated us to learn as much as you can and assured us for any kind of help if needed. He also assured us for any kind of help needed for preparation of report. During my internship I worked in three departments

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Foreign trade department Credit department Operations department

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WORK DONE BY ME First week


At first day I was very passionate as after giving my last semester I was going to last step of my masters of commerce. Now it was time of practically viewing the working of an organization. During my internship I came to know that there is a big difference in real working and bookish knowledge. I spend my first week in foreign trade department. Here Mr. ASAD MEER guided us as he is foreign trade manager in this branch. he shared us his views about the need of the establishment of this department. In this department I was able to know about the activities involved for import and export in the foreign trade department. In this department I keenly observed all the documents involved in import. I also asked the meaning of some technical terms found in these documents and there purpose. He told us the whole process of import in detail. We did not learn too much about export as he said that the process of export is exactly opposite to the process opf import. Mr ASAD MEER also told us the regulating laws of foreign trade which are followed durion the whole process of import. I also viewed the registers in which entries are made. 1st day of 1st week FOREIGN TRADE DEPARTMENT First thing I learned was letter of credit, and then I viewed import and export documents. LETTER OF CREDIT:

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Letter of credit is the guarantee given by the importer bank to the exporter bank that if the importer fails to pay the money, the importer bank also called Applicants bank pay on his behalf.

TYPES OF L/C: There are several methods for making payment of an import or export transaction. These are listed below: Irrecoverable Letter Of Credit The issuing bank (importers bank) gives a lasting undertaking to accept and pay bills drawn upon it, to the exporter, upon fulfilling the terms and conditions stipulated in the Letter of Credit (LC). It gives complete protection to the exporter. Recoverable Letter of Credit The issuing bank (importers bank) can modify the LC without any obligation on its part. These are usually not accepted by the exporters. LC at sight

When exporter ships goods and present documents of shipment in its bank, exporter sends these documents to importers bank. Importer has to make payment within 5 working days. In case of default, foreign bank can claim markup. This is called LC at sight.

2nd day of 1st week


2nd day we ask Mr. ASAD MEER about the remaining types of LC. He was telling us in very detailed way. The remaining kinds of LC are: LCDA It is supplier credit LC. It facilitates importer. Payment is made at predefined future date which may be 30, 60, 90 days. Goods are delivered before payment. Acceptance arrangement is made b importers bank.

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Deferred payment LC

It is just like LCDA but no acceptance is involved. Importer bank sends schedule to exporter bank of deferred payment according to phases defined. Pre defined date is not given as production may be completed earlier. Transferable LC

In transferrable LC, exporter can transfer full LC or part of it. Non-Transferable LC

In this kind, LC cannot be transferred to any other party. Confirmed Letter of Credit

This kind of LC has the protection of the credit standing of the importers as well exporters banks. The exporters bank which confirms this LC, takes full responsibility of making payment if the importers bank fails to do so. Unconfirmed Letter of Credit

Though the issuing bank gives a commitment to honor the drafts, however, it does not give any guarantee. From the exporters point of view confirmed irrecoverable LC is the best form of receiving payment. 3rd day of 1st week As there are so many kinds of LC it was a new thing 4 me so I was feeling it difficult to digest them easily so the concerned manager advised us to revise the work of previous 2 days. So In my 3rd day of internship I revised the previous 2 days work and learned about some other kinds of LC briefly. Some other kinds are: Freely negotiable LC Clean LC Special LC

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Red clause LC Green clause LC Documentary LC Fixed LC Revolving LC Back to Back LC

Other modes like L/C L/C transfers equal risk to parties involved thats why it is considered favorable as compare to others. Open account: In this mode, major risk is of exporter. As he sends goods before receiving payment, importer may or may not make payment. No bank is involved in this transaction. Payment is made simply through accounts of businesses. Import contracts: It is just like L/C. transaction is committed between importer and exporter. Importer submits import contract to bank just like Performa invoice. Security of supplier is less as compare to L/C. importers bank does not give any acceptance, payment is only made when importer makes payment. A certificate is issued by the importer named registration of certificate. It is for security of supplier. Advance payment: Importer makes payment in advance. Major risk is of importer, as exporter may or may not send goods, or he may send improper goods. To avoid any discrepancy resulting from cultural or language differences, HS-code is introduced. Formerly ITC was applied.

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Communication system In ancient times L/C was used to send through Letter head of business. Then it was used to send through Telex. It is just like typing machine. More reliable system of communication is SWIFT. L/C confirmation It is needed in case of any issue which may be political or economical. If L/C is not being used by a renowned bank, beneficiary bank may ask for confirmation from renowned bank. Security is given by both of the banks. Confirmation charges are charged by confirming bank. upon confirmation, L/C may be accepted Codes used by SWIFT: 707- Amendment 103- Funds transfer 202- Bank to bank payment 700- Credit issue Modes of shipment Shipment is made mostly through sea as it is economical as compare to other shipments. Modes of shipments are as follows: Shipment through sea Shipment through air Shipment through road Shipment through rail Shipment through truck etc.

Documents of shipment

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Bill of lading is prepared in case shipment is made through sea. This bill is prepared by booking officer or agent or captain of ship. Usually 4 copies are prepared each for exporter, importer, importers bank, captain.

Air way bill is prepared in case shipment is made through air. If shipment is made through truck, truck receipt is prepared.

4th day of 1st week In 4th day of my internship I asked them the payment methods he told us that there are many modes of payments which are offered to customers according to the needs of customers.

MODES OF PAYMENT There are four modes payments which are as follows: Deferred Credit Sight Credit Acceptance Credit Negotiation Credit

Deferred Credit The draft is issued by the importer and presented to the bank by the exporter along with documents (bill of loading, invoice, and insurance). The payment is made by the bank on maturity of draft.

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Sight Credit The draft is issued by the importer and presented to the bank by the exporter along with documents (bill of loading, invoice, and insurance). The payment is made by the bank if it finds the documents correct. Acceptance Credit Bank confirmed that document has been received and payment would be made within certain time period. Negotiation Credit The issued L/C can discount at any bank and got the amount money that he required against L/C issued by the bank. SHIPPING GUARANTEE In case documents are not received by the importer and goods have been reached on the port. Authorities inform the importer to get goods immediately. Importer may request importers bank to issue shipping guarantee. Bank guarantees at his request and ensures that documents will be presented when received. It is called shipping guarantee.

5th day of 1st week In 5th day of my 1st week I learned about the main documents of which are asked by ICC and some other rules of ICC which are applied between whole process of import and export. He also told us about some terms which are used in foreign trade world. IMPORTS & EXPORTS Main document is UCP for DC according to ICC publication # 600. ICC is regulatory body. Its head office is located at Paris. All countries are its members. UCP is set of rules to avoid complications & discrepancies among countries.

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Rules of ICC: URR--means uniform rules for reimbursements URC-- means uniform rules for collection URDG-- means uniform rules for demand guarantees These rules are applicable internationally. Some of them are being followed in Pakistan. Foreign exchange regulations: General rules: Foreign exchange rules Special rules: Import policy order Export policy order

Inco terms: (international commercial terms) It is series of ICC. New series is Inco term 2010. It defines liabilities of seller and buyer. Inco terms come with price quotations. FOB CFR/CNF/C&F CIF FAS

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DAF DDU FOT CPT

Terms allowed in Pakistan are FOB and CFR 6th day of 1st week In my last day of internship at foreign trade department I understand some ending processes of import and export and then I spend the remaining time in discussing some other issues related to import and export. IMPORTS When the goods arrive at port or dry port, the importer will file the Bill of Entry giving the detail of imports, Value of imports, Rate of duty & Tariff. Customs appraisal officer will carry out an assessment of goods according to the rules/tariff manual. Depending upon the assessment following taxes will be remitted by the importer: Custom duty based upon ad valorem, specific rate or both. Sales tax - 15% of ad valorem + custom duty. With-holding tax 4% of ad valorem + custom duty + sales tax, Regulatory duty as imposed by the government from time to time under the power of customs act. EXPORTS To dispatch the shipment, the exporter will submit shipping bill. The customs appraisal officer will examine the goods for correctness of declared description, value, and claimed duty drawback. Thereafter the goods will be allowed for shipping. I spend my third & fourth week of internship in Credit department. In this department I came to know the main purpose and benefit of the establishment of this department & the necessary points which are kept in

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mind while deciding that the credit should be granted or not. During my internship I concluded that it is the toughest department of the bank. Here I learned about the different modes of Islamic financing & about the facilities for which the credit is granted keeping in view the important points in mind as before granting credit different activities are performed on basis of which it is decided that credit should be granted or not e.g customer rating sheet is made which includes the rates assigned to different indicators. I also viewed the documents involved while performing activities in this department. WORK DONE IN 2ND WEEK 1st day of 2st week I spent 2nd week in credit authorization department and 1 st day I learned about the documents of credit, I keenly observed them which raised many questions in my mind I cleared some of them some of those documents are as follows: Transaction document Charge document Title documents

Transaction documents: Murabahah: General sale and purchase Ijarah: Rental based transaction is involved

2nd day of 2nd week In second day in this department I learned about different modes of Islamic financing.

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ISLAMIC MODES OF FINANCING: Murabahah: An agent is appointed, a document named agency agreement is signed b the agent appointed by the bank. Agent goes into the market and selects the required goods from the market and informs the bank. Bank purchases this on behalf of customer and sell it to the customer, who is also agent of the bank. In Murabahah, cost is known to the customer. Profit is also declared to the customer. Ijarah: Ijarah is basically rental based. Car is rented out to the customer for specific time period which may be 3, 4, 5 years. Customer pays the rent. Ownership is not transferred in this case. If customer uses this even for number of years it will not come under the ownership of the customer. Only price is declared to the customer. Musharakah: It is just like partnership. Two or more partners share their investment and profit. Profit is distributed in agreed ratio. Mudaraba: Two parties are involved in this case. One party invests capital in the business and other party provides services. Services may be related to managing of money to earn profit for the business. Rab-ul-Maal is the investor Modarib is the person who gives services and manages the money

3rd day of 2nd week


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At 3rd day in this department I learned about the sale based products SALE BASED PRODUCTS: Salam: Order is placed and payment is made in advance before goods are produced and delivered. Payment is made in full only. Istisna: Production starts after placement of order and payment is made when goods are delivered. Manufacturer uses its own material to produce goods. Payment can be made in installments or in full. 4th day of 2nd week In 4th day of 2nd week I revised the previous 2 days work as te concerned manager was busy and I assuming it as an opportunity I questioned him about previous ambiguities. 5th day of 2nd week In 5th day of this department I learned about the main points which are kept in mind while taking decision that credit sould be granted or not. Credit authorization: Three operations are performed: Identify existence of opportunity Assessment of person reputation in market Valuation of person through dealings

Valuation of customer is done through checking tangible and intangible securities. Securities are of two kinds, prime security and secondary security.

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6th day of 2nd week In 6th day which was my last day in this department I learned about the different risks involved in taking any decision related particularly related with the credit granting also learned about the documents involved for performing the whole credit process. There are three types of risks: Current risk Business risk Operations risk

After approval of credit, documents to be attached are: Personal guarantee This guarantee is given by any person. In case of default in paying back loan, that person wills pay the loan amount on behalf of client. General financing It includes the parties of financing like customer and bank and they are interested in what kind of financing is also mentioned. Letter of lien It means, take the right of accounts to charge. Letter of set off This letter is for payment of stamp charges. Sanction advice It contains information about sanctioning of advance. What amount of finance is sanctioned and it will be paid. It is prepared after approval of loan and is signed by the client. All above documents need signature from the client.

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DORMANT ACCOUNT: In case banker do not operate his account or do not make any transaction for six months, his account will be blocked apparently. Letter is sent to the customer one month before blocking account, this letter is called pre-dormant letter. After blocking, a letter is also sent to the customer, which is called post-dormant letter. If he wants to activate his account, he needs to sign the request and perform at least one transaction. No charges are deducted by the bank. He needs to submit his CNIC copy. KNOW YOUR CUSTOMER: A transaction profile is maintained by the bank in which important data relating to customer is included. The data entered may be no of possible transactions performed during the month and total amount of these transactions. Source of income and nature of business is also mentioned in this. If the customer has to transact more than the defined limit because of expansion in his business, the bank update KYC. If customer transact more than the defined limit and does not inform the bank, the bank may inquire this. Customer sometimes transacts their black money to convert it to white money. To avoid this, concept of KYC was introduced.

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WORK DONE IN 4TH WEEK 1st day of 4th week I spent second week in operation department doing billing and remittances. Operations officer gave me some knowledge about these things. Purpose of these products is to ensure safe payment. It is in favor of payee only. There are less chances of its miss use because these can be deposited only in payee account. in case of loss, bank will be responsible. DEMAND DRAFTS (DD) DD is a written order given by the branch of the bank on behalf of the customer to other branch of the same bank to pay the certain amount to the customer. DD are issued for the particular place other than place of issuance. A draft is a Cheque drawn by a bank on its own branch or any other branch of another bank at a different place requesting it to pay on demand a specified amount of money, which is already received, to the person named on it. DD is of following two types: DD payable DD Paid Suspense a/c

In the first type as advice reaches for payment the immediately pay to the customer while in later as DD presented by the customer, it is paid and the suspense account is debited. Documentation: A printed application form is provided for filling in completely and signing by the applicant. After depositing an amount of draft and commission of the bank, duly completed and signed by two authorized officers, then it is handed over the applicant and credit order is dispatched to drawer branch. Following are the pre-requisites for the processing of DD: Bank Serial No

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No. of Rs.60 Postage charges 0.02% Withholding tax

2nd day of 4th week In 2nd day of 4th week I learned about the other clearing instrument called as pay order in detail and also get knowhow about CDR. PAY ORDER For this kind of remittance the payer must have the account in the issuing bank. Pay order are more liquid as compared to cheques because cheques may be dishonored while PO cant be. It is written order issued by the bank drawn and payable on itself. It is used for local transfer of money from one person to another person. The public also uses it for depositing money with Government or Semi Government department. Documentation: The party who requires a pay order will get a printed application from the bank. He will fill it and deposits the amount and commission. The bank charges are same as on demand draft.

Bank Serial No. No. of PO Central No. 0.02% withholding tax

In case DD and PO gets dormant after 6 months of issue. Dormant account needed to revalidate. Issuer should go to drawer branch and request for revalidation, bank changes the date and authorized signatory signs the document again. Credit advice is generated having information about company on which it is generated in the favor of which company. One copy is sent to drawee branch and the other is sent to head office. CALL DEPOSIT RECEIPT:

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Bank has no advantage of issuing DD and PO. CDR is issued for Govt. contracts. CDR can be issued only to account holder

3rd day of 4th week This day I learned about other clearing instruments known as Bills collection. BILL COLLECTIONS Bills department performs the following functions. Inward Bills for Collection (IBC) Outwards Bill for Collection (OBC)

Inward bills for collection (IBC) These are bills or cheques etc., which are collected locally. They are received from outstation branches banks and parties. If intercity clearing services of NIFT are not available in the area in which branch of our bank is located. Cheques and DDs are sent through IBC & OBC. Outwards bill for collection (OBC) These are bills or cheques etc., which are sent intercity for collection. Clean bills: These are negotiable instruments, drawn on outstation branches, bills sent for collection on behalf of the customers i.e. cheques, drafts or treasury bills etc. Documentary bills: These are bills accompanied by documents such as R.R.T.R Bills of landing etc. having title to goods, collected by the bankers on behalf of their customers. 4th day of 4th week

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4th day I learned about clearing , its types, its documents and stamps marked in detail. CLEARING In old times one representative of each bank had to go to SBP every day for record of clearing. This was hard task to perform. To avoid this time taking task, SBP made contract with OCS and made an institution called NIFT. Representative of NIFT collects outwards in the evening and provide inwards in morning time. Types of clearing: Inward clearing: Checks of Al-Baraka bank if submitted in other banks, those banks sends the checks to AlBaraka bank for clearing, this is called inward clearing. Outward clearing: Cheques of other banks if submitted by customer in Al-Baraka bank, the bank sends cheques to other banks for clearing, this is called outward clearing. It is drawn by our bank on other. Local clearing: Within city clearing is named as local clearing. Same day clearing: Cheques having amount more than Rs. 100,000/- can be cleared in same day clearing. Only specific branches are members of same day clearing. If cheques are objectionable, they can be returned back. In this case Standard hours for NIFT service is 24 hours Inter city clearing: Clearing between the cities in which NIFT provides its services i.e. Karachi, Lahore, Peshawar, Gujranwala etc. if cheque is cleared through intercity clearing, there will be no deduction in the amount of cheque. Standard hours are 48. If SBP does not play its role in clearing then NBP is authorized to perform this function. Instruments of clearing:

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cheque Pay order Demand draft Challan form

Stamps on clearing cheque: Stamp of crossing Stamp of clearing

5th & 6th day of 4th week 5th day I was absent while 6th day I spent in clearing my ambiguities and revising the work done in this department. CREDIT Work done in 5th week I spent 5th week in credit & marketing department with Assistant vice president of the bank. Mr. Hafeez Ullah Khan in this department I got the opportunity to learn about how bank valuate their customers before lending them money. 1st day of 5th week 1st day I spent in this department in learning its objective of learning and existence and how a customer is captured. CREDIT & MARKETING Main objective of this department is to identify the parties who are interested to get loan. After identifying them, bank investigates whether that party has the capability and willingness to pay back the loan. I viewd the documents and information needed For this purpose. 2nd day of 5th week

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2nd day I learned the main objective of financial institutions and came to know that it is very important for an economy. Functions of financial institutions Main functions of financial institutions are as follows: To enlarge economy To make flow of funds more better

Financial system is a system which ensures the flow of funds between demanders and suppliers of funds. It creates interface between supplier and demanders of funds.

Categories to perform lending function Credit marketing Risk management Credit administration

3rd day of 5th week This day we properly started to learned the real working of this department. CREDIT MARKETING: Main objective of this category is the identification of clients in the market who needs credit. The main role of this category is to develop credit portfolio for investment of money. RISK MANAGEMENT: In this category risk attached to credit is managed. Main role of category is risk evaluation of proposal and if it matches to credit rules of SBP. CREDIT ADMINISTRATION: Main role of this category is the legal documentation of risk management.

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Analysis performed: Economic analysis Industry analysis Firm analysis

If bank want to lend some amount to a specific firm, it needs to analyze the economy at first, then it need to analyze the whole industry. After that analysis of the firm is conducted. In analyzing we do see two things, one is Risk and other is Return. Financial system hesitates to give credit to dying industry or sector like textile etc. rising industry is food and livestock. It would be beneficial for banks to give credit to this industry.

4th day of 5th week 4th day I learned the main thing of this department and that was the process of developing a relationship with a customer. Develop relationship: After identifying particular industry, we find ways to create relationship with that industry. For developing relationship, the following tasks are performed like: Detail study of credit rating Identify the risk involved Identify areas of risk

Components of credit: Capacity of repayment Willingness to pay 5th day of 5th week

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5th day I spent in discussing my various queries related with my previous work done in this department and then learned about the 5cs of credit analysis which are kept in mind while granting money to any customer. 5 Cs of credit analysis: Character

Personal attributes of any person are determined in this analysis. Capacity

Capacity to repay is checked through this. Cash flow

Operating cycle to generate cash flow is determined to find that whether person has sufficient cash to repay.

Capital

Companys equity against debt is determined to find that whether the firms position Conditions

Past, present and future condition of firm is determined. Bank sometimes conduct PEST analysis to make decision of lending. PEST means political, economical, social and technological analysis. 6th day of 5th week 6th day I further discussed queries which were arised in my mind and learned more which something was new for me. CPRMG: It stands for credit policy and risk management group. Function of risk management is performed by this group in head office of bank. This group implements the credit risk policy and manages risk. It tells the bank, to which industry bank should advance credit.
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It ensures the credit policy implementation It manages deviations from policy

In credit policy deviation, CPRMG checks that whether the procedure adopted is according to policy defined and if there is any deviation. It gives approval upon certain terms and conditions. Credit authorization department checks the compliance of terms and conditions given by CPRMG relating to issues of credit and its approval. 6th C added to credit risk components is collateral, which is security against credit. It is the most latest in components.

WORK DONE IN 6TH WEEK 6th week was last week of my internship. During internship, I was relatively confident as I keenly observed the overall operations of branch and concluded that it is better than its other branches. The evidence of this is that this branch stood 2nd in profitability in central zone. I got very good experience there because of cooperative environment. I conducted detailed SWOT analysis and became capable to discuss it in my report. I discussed this analysis with employees of bank and they were agreed to me. I also collected some annexure for my report and got my letter of internship. I spent time in all departments and asked some questions relating my internship. During internship I did some following practical work: I filled deposit-clips I reviewed and rechecked the particulars of account opening form

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I reviewed the forms of dormant account

Employees have been very cooperative to me in all my internship. Their cooperative nature and politeness is the key to success for them. LAST DAY AT BANK Last day is full of happiness because it was a tiring job for me to sit the entire day one place I appreciate the employees who did not get irritated from sitting for hours. I enjoyed to learnt a lot from bank but I personally dislike to have this as my profession as I fed up to see same routine duties there is less opportunity to gain much knowledge as does teaching job entail. Last day I personally went to each person who guided me during this short time of my internship. And presented the thank you card to them Thank God I have completed my internship successfully!!!

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SWOT ANALYSIS
SWOT stands for Strength, Weaknesses, Opportunities and Threats. SWOT is useful tool for providing a framework for analysis of an organization. It is widespread approach to make assessments in terms of internal and external environment of the organization and to formulate strategies by analyzing its internal strengths and weaknesses, external opportunities and threats. SWOT analysis for ALBARAKA BANK PAKISTAN LIMITED GUJRANWALA is as follow: STRENGTHS Strength can be defined as an area where a company is best at doing something or a feature that puts the company at an advantage in comparison to its competitors. Pioneer in Islamic banks:
Al

Baraka Islamic Bank (Aib) has the honor of being the pioneer of Islamic

banking in Pakistan and has been operating in the country as branches of Al Baraka Islamic Bank Bahrain since Commitment to Islamic Shariah: Striving to develop an integrated Islamic Financial System. Compliance with the rules and principles of Islamic Shariah is the core of the banking and financial activities of the Bank. To this end, Albaraka has successfully required the advice and expertise of Islamic scholars much-admired for their knowledge and piety from all over the Islamic world to guide its path and monitor its performance. The Banks activities and operations are regularly scrutinized by its Shariah Advisory Board. Large Branches:

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It has comparatively largest branch network among private Islamic banks of Pakistan the number is increasing as the Islamic banking is flourishing day by day. Experienced and Qualified Staff: During the internship it has been observed that the staff/personnel of the organization is qualified and experienced. Many of the bank officials have got advance knowledge and experience in the respected fields Excellent Branch Appearance: AIB Gujranwala branch has excellently furnished, plants within bank give a soothing view. ABPL has edge than other banks to have good interior. This good interior also provokes the walk in customer to make permanent contractual relationship with the bank. Good PR with Customers: The relationship of the manager and the other staff of the organization is really good with the customers, which results in good will and loyalty of the customers towards the organization. Global Expansion: Al-baraka is a subsidiary of Bahrain so it operating in many countries. Like Jordan, Indonesia, turkey, Tunis, Algeria, Lebanon, Egypt, Syria, S. Africa, Bahrain. Good Managerial Skills: The managers are fully aware of the recent managerial concepts and are able to deal with any type of scenario. Global Recognition: Al-baraka Islamic bank is not only known by the Pakistani as it has many subsidiaries over the globe. It got a good reputation in Islamic Banking over the globe.
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Job Satisfaction at All Levels: Job satisfaction is one of the important factors for the employees to be motivated. The people in the organization under consideration were found highly satisfied with their jobs. Customer Loyalty: Al-baraka has few and reliable customer and they used to avail every facility from the Al-baraka they never switch from Albaraka to any conventional banks. As Al-baraka give special protocol to retain their customer by giving them extra facilities. Continuous Performance Appraisal: Performance appraisal is the way by which one can evaluate the employees performance; it results in the enhancement of the organizations overall performance. The performance appraisal is done continuously in this organization, which results in better performance. Management: As the manage is very corporative so the employees feel being at home especially female employees top management didnt exerts its wrong influence on employees they did not punish anyone on person basis rather try to keep away the personal matters if any. Riba free financing: Being an Islamic bank Al-baraka has an edge that it doesnt deal in riba transaction. it deal is riba free transaction, its expose the cost to the customer then add the profit margin and the customer knows about the profit of the bank. Friendly environment

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The environment of the organization is very friendly. People over here are very cooperative, not only with the customers but among themselves as well. Hard working Employees: Al-baraka got very hard working employees they are come from reputable universities and being employed after screening process. They are very assertive towards their daily activities and tried to complete it on due date never let it pending. Competent senior management|: The senior management in the organization is very much competent and experienced; they successfully handle different internal and external affairs. Less turnover rate: As the employees turnover rate is almost negligible. As the Al-baraka bank given value to its customer and promoting them by help them in their daily routine work. Less Absenteeism: Employees used to come to the bank daily else some urgent work at home. So besides the urgent work employee tend to come bank daily.

Coping With Work force diversity: Employees at Al-baraka give due regard to every employee irrespective of its religion so there is no discrimination on sects. No professional jealousy:

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I have spent almost 6 weeks in the bank during this spam of time I didnt feel any professional jealousy, leg pulling or any other such thing. High job Involvement: Employees at Al-baraka bank have high job involvement as they didnt move from Al-baraka to another bank on bit higher salary offer because of too much candid and corporative employees and management. Financial Support: al Baraka Islamicbank is the foreign bank. It is the subsidiary of BAHRAIN bank so whenever the bank faces any problem the Bahrain bank works as lender of last resort for the Al-baraka Pakistan. Employee helps each other in work: During my internship I have observed that one employee help the other employee, irrespective that it is related to job or not. High Job satisfaction: People are very content on what they are getting from bank and they are not being discriminated so their job satisfaction is comparatively high. Organizational Citizenship Behavior: Employees at Al-baraka are very corporative they used to engage to help other employees if they face any problem beyond their defined duties.

WEAKNESSES A weakness is defined as an area in an organization where the organization is not as good at doing something as its competitors or a thing which an organization lacks thus putting the organization at disadvantage in

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comparison to its competitors. Based on the above definition, ABL has the following weaknesses. No Research on new product: Al-baraka did not produce any innovative product since its inspection so it is being under performing in research and development which eventually leads to the reducing the number of customer as customer switch towards innovative product which add value to their lives. Lack of newness: Employees come and go with the same daily work there is no new activity for them so they think it as a boring job. There is no entertainment occasion for employees for their get together. No HR department level at zonal and branch level: Human resource department is one of the foremost requirements of any organization of this age. The organization under consideration, though contain a HR division at headquarter but there are no sub divisions at the provincial or branch level. So when different problems related to HR are raised, they are left unaddressed. Promotion is not based upon on education rather seniority mostly: it is almost biggest dilemma in all organization that senior employees are being promoted to upper level of hierarchy irrespective of their academic background so they prove not to be a good decision maker even not a good manger as they did not get these education formally so they seem to be a big liability for any organization. Lack of investment in Capital Expenditure:

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As this subsidiary of Bahrain is parent company show reluctance to do any big dollar investment in Pakistan due to uncertain political, economic condition of bank.

Centralized decision making: The decision making in the organization is completely centralized which results in the loss of confidence of the employees over the management, employees may not want to follow the dictates, rules and regulations. Lack of frequent training: Though there is training academy at head office, but the training programs are usually confined to the managerial staff, there is a need of training at all the levels. Lengthy recruitment process: The recruitment process is quite lengthy which can discourage the new comers. So, there is a need to shorten the whole process. Less internal recruitment for new posts: It has been found that in the organization under consideration, if new vacancies are allocated there is a trend of external recruitment, which results in the dissatisfaction of the current employees. Lack of Marketing Effort: The bank does not promote its corporate image, services, etc on a competitive way. Hence lacks far behind in marketing effort. A need for aggressive marketing is there in the era marketing in now becoming a part of every organization. Work load: I feel that staff is less as compared to the word load of organization.

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Lack of proper reception: There is no proper reception in the branch and this formality is fulfilled by account opening officer which results in the loss of working tempo.

OPPORTUNITIES An opportunity can be defined as a change in external environment which if properly exploited with the organizational strengths will result in enhanced sales, market share, or income. Using its strengths, ABL can avail the following opportunities. More qualified people in the market Due to the increase of interest of people in business field, many business institutions have been established, which produces a good lot of qualified and competent business professionals. So, the organization under consideration can hire more qualified people from market. Market expansion: When new branches will open so its number of customer would increases which the few branch did not do so. So the incorporation of new branches Albaraka can catch the biggest market share and hence its market expands. Training can enhance the employees skills. Training and development is one of the important function of human resource management. If the staff of the organization are properly trained and developed they will add to the value of the organization. Familiarity about Al-baraka:

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For the expansion of market not only the large number of branches are enough rather there must be a proper advertisement to let the customer know about the bank and its product. so it is hope that with effective promotional activities people awareness about Al-baraka is possible. Eradication of Conventional Banking: As the steps towards eradication of conventional banking is promoted then customer flow towards Islamic banking increases. Awareness of Islamic banking: When people get aware about the Islamic banking and difference between Islamic and conventional one so more and more customer inclined towards Islamic banks.

THREATS Threat can be defined as a change in external environment which if not met with proper strategies will result in loss of revenues, market share, or income. In the context of ABLs external environment, the following potential threats exist: Increase in Competition The increasing competition in local as well as national and multinational level also lower down the profitability of the bank and compelling the bank to use a large amount of funds to meet out competition. Other banks influence: Other private commercial bank with sound profitability is also a threat to ABI as customer would preferably select the bank whose is financial strong and providing more return as well as innovative services. Good job opportunities outside:

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The other organizations of similar nature are offering more salaries and benefit packages to their employees. So, there is a threat to the organization that their current employees may leave it. Other organizations are using better HR techniques. Other organizations of similar nature are using better and recent HR techniques, so they have got an edge to facilitate their employees whenever they need. It can be a serious threat to this organization as their employees would not be satisfied of their own organization which will affect their performance.

CONCLUSION AND RECOMMENDATIONS


CONCLUSION The ALBARAKA BANK PAKISTAN LIMITED-GUJRANWALA is a new emerging bank and it is trying to get market share in the presence of national and foreign banks operating in the country. It has played an important role in boosting the economy of the country but there always exists some room for improvement. After observing this ABPL very closely following outcomes have been concluded.

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Centralized decision making: The decision making is still centralized as the middle and low level management isnt taken into confidence. No HR sub division; There are no sub divisions at the provincial or branch level. So when different problems related to HR are raised, they are left unaddressed. Lack of technical knowhow: Most of the employees working in this branch are not much familiar with computer. They just know how to use their part of software if any problem comes in the computer they cant fix it. Congested seating: The spacing requires expansion. The employees are seated congested .If the customers exceed more than fifteen in number, then the branch get filled with lot of disturbance. Lenghty recruitment process: The recruitment process is very lengthy it should be trimmed.

Less marketing efforts: The marketing efforts at the branch level are less disciplined and there are nonintegrated efforts from all the staff members. Breaches to some specific cities: Bank branches are restricted to some specific cities.

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The bank has been applying the modern concepts of management and marketing at both micro levels. The interior and exteriors of the branch have been changed but the staff of the branch has been found less motivated towards the organizational objectives. IN SHORT Today age is full of problems, challenges and competition and there is no organization in this world that dont have any challenges and competition in the market. Everyone wants to get more benefit then its competitors and the race of leading the market is on. Every organization has to endeavor and move violently to be the more profitable and to get a more competitive edge in the market. The management of ABPLis taking significant strategic steps in order to come forward as a strong, well-built and progressive institution. Concurrently it continues to make effort to refine its products and operations to make them more compatible, well-suited and according to the needs and wants of customers. As we know that the business and economic conditions in Pakistan always remain uncertain and anything can happen to the economy but still ABPL continues its effort to develop the new products and in a short time of span did their job very well. Its past success history round the world also in Pakistan in few years and prosperous future reveals the facts that ABPL has a very bright and dazzling future.

RECOMMENDATIONS

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As I have spent six weeks in ABPL Gujranwala Anwar complex branch for the Internship purpose. During this period I have tried my best to observe the banking environment in the ABPL. I have observed a lot of strengths and weaknesses in the branch. On the basis of this observation I have come up with certain recommendations particularly related to the ABPL Gujranwala Branch but generally can be applicable to the whole banking system of Pakistan including all other branches of ALBARAKA BANK PAKISTAN LIMITED-GUJRANWALA for improvement. These recommendations will help to cope with the problems being faced by the Bank and will enhance the efficiency and performance of the ABPL in particular and all the banking sector of the country in general. From the previous analysis of the financial statements I have realized that that ALBARAKA BANK PAKISTAN LIMITED-GUJRANWALAis performing very well since its inception. It is quite difficult to give suggestion to improve the banking conditions ABPL. As we know that nothing is perfect, there is always a room for improvement, so I will recommend following suggestions for ABPL: Introducing training programmes: Employees Training programmes must be introduced on continuous basis so that Employees have understanding with the latest developments especially with the customers. Incentive plans for employees: Bank should introduced incentive plans for employees on regular basis so that if employees may work whole heartedly for the welfare of their

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organization. While giving incentives qualification, work, experience, hard work and such other factors must be considered. Avoidance of mismanagement of resources: Mismanagement of resources must be avoided as much as possible as it decreases profit but also discourage hard worker and honest employees. Recruitment of fresh graduates: Fresh graduates must be recruited. As the combination of Experienced and fresh can produce better results and it will improve the efficiency of management. Proper marketing compaign for mobile banking: ABPL is going towards mobile banking but the problem is that a common client has no idea of its usage due to lack of marketing. I think that a proper marketing programme must be launched for clients awareness. Different schemes must be conveyed to the targeted customers Banks different schemes must be conveyed to the targeted customers so that to have a reasonable share in market Salaries should be raised: To motivate the employees their remuneration / salaries should be made at par. Aggressive publicity campaign: Aggressive publicity campaign must be introduced through press and Electronic media for new products and scheme by initiating vigorous marketing policy.

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Provision of booklet: Bank should adopt such an induction plan that when a customer opens his account with the bank he should be supplied with a booklet which enables him to know the procedure of filing the cheques, pay-in-slip etc. It will save a lot of time of the bank staff afterward during the conduct of the account of that customer. Same attitude with all customers: The attitude of the bankers with all of their customers is not the same; they pay more attention and good service to some of the customers and neglect a major portion of them. Some of the customers approach to the bank officials and get their work done before others; it is not a good practice. All the customers should be treated equally. Increase in communication: ABPL should increase its communication with customers about the terms and conditions of its different products and services. Recruitment on merit: In ABPL mostly recruitments are done through recommendations or references of employees. Recruitment should be strictly on merit with no other favor given to any candidate. Selection should be on the basis of test and interview as like Muslim Commercial Bank (MCB) and other banks etc. this will ensure the entry of competent and worthy employees into the bank. Scholarship programs for senior employees Scholarship programs should be designed for senior employees and branch managers. The ABPL should get into contract with top foreign universities. Every year the bank should finance and send their senior managers for further education abroad. After completion of higher education employees

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will be in a better position to attain the strategic objectives of the bank and increase the overall business and profitability portfolio of the bank. Increase in no. of branches The branch network should be improved and number of branches should be increased to reach and provide services to maximum number of customers. Took steps for up dating knowledge ABPL should conduct meaningful refresher courses, seminars and workshop with a view to improve the knowledge of the staff. Information counter To provide proper information to consumers, information counter should be set where true professionals guide consumers. Cheque Book is not printed: Al-baraka must use printed cheque book in order to ease the Account opening officer as it was a hectic job to print too many leaves of cheque book with precision. So printed cheque book eases the tasks of account opening officer. More office boys: Al-baraka has only one office boy and he has to obey all the employees simultaneously so it get difficult for him to do his job timely so Al-baraka hire more than 1 office boys. Research: Al-baraka has very few innovative products it should focus on research and development for attracting the prospective customer as it is crucial to work with differentiated products in neck to neck competition. Inadequate workforce:

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Al-baraka has lack of work force as one employee is on leave whole work is suffer so there should be a person who perform its activities when someone is on leave. Steps to change ideology of people It should clear the minds and change the ideology of those people who did not find any difference in Conventional and Islamic banking which I think will be fruitful in future. Rotation of employees in various departments The top management should immediately start thinking in terms of rotating the employees in various departments, as this transforms work force into human capital. If a particular individual keeps on employing his / her efforts in one sphere of banking it would not only create a sense of monotony and boredom, but also not help improving the skill set of ABPLemployees. Priority to people having knowledge of islamic banking for

employment Priority should be given to those who have knowledge about Islamic banking in employment. Fair distribution of work load Work burden should be fairly distributed

BIBLIOGRAPHY:

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History of bank, retrieved from www.google.com.pk 10/08/2011

retrieved on

data

relating

to

products

&

services,

retrieved

from

www.albaraka.com.pk retrieved on 10/08/2011

management of whole bank retrieved from www.albaraka.com.pk retrieved on 10/08/2011

Annual audited reports of Al Baraka Islamic Bank, retrieved from www.google.com.pk retrieved from 05/08/2011

organizational hierarchy obtained from accounts officer Mr. Irfan Azhar (ABPL)

Discussion on SWOT analysis with branch employees on 12/08/2011

Difference between Islamic and conventional banking, discussed with vice president of ABPL , dated 28/07/2011

letter of credit info retrieved on 23/07/2011 consulted with foreign trade manager

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GLOSSARY

D Diminishing Musharakah: (The promise can be made enforceable at the time of need). The Holy Quran and the Sunnah of the Holy Prophet are very particular about fulfilling promises. The Holy Quran says: And fulfill the covenant. Surely, the covenant will be asked about (in the Hereafter) (Bani Israil: 34)

G
Gharar An unknown fact condition. An element which must be avoided in Islamic banking transactions since excessive gharar may render the contract null and void.

H
Hadith (plural, ahddith): A report on the saying, deed or tacit approval of the Prophet,

I
Ijarah / Ijarah: Letting on lease. Ibra

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Giving up of a right. In an Islamic banking transaction, a creditor gives up part or all of his right to a debtor usually for early settlement of the debt.

M
Murabaha: Sale on profit; Cost plus profit, sale at stated cost price and mark-up, sale at a specified profit margin. Musharkah: It is an agreement under which the Islamic bank provides funds which are mingled with the funds of the business enterprise and others. The profit is distributed among the partners in pre-determined ratios, while the loss is bome by each partner in proportion to his contribution. Profit is based on the agreement of the parties, but loss is always subject to the ratio of investment. All the conditions agreed upon by the Muslims are upheld, except a condition which allows what is prohibited or prohibits what is lawful. Mudaraba /Mudarabah: The term refers to a form of business contract in which one party brings capital and the other personal effort. The proportionate share in profit is determined by mutual agreement. But the loss, if any, is borne only by the owner of the capital, in which case the entrepreneur gets nothing for his labor.

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Quran: The Holy book containing the actual words of Allah revealed to the Prophet Muhammad

R
Riba: Riba literally means increase, addition, expansion or growth. It is, however, not every increase, or growth, which has been prohibited by Islam. In the Shariah, Riba technically refers to the premium that must be paid without any consideration. According to the jurists of Islam.

Rahnu Making an asset as a security for a debt or a right of claim.

S
Shariah The Islamic law which is derived from various sources the Quarn, the Hadith, the Sunnah, Ijma (consenus of Muslim scholars), qiyas (analogy) and ijtihad (personal reasoning) of the Muslim jurists. It covers every aspect of life.

Z
Zakat The obligatory payment of a certain proportion of the wealth and each and every kind of property liable for zakat. This is paid annually for the benefit of eligible Muslim in the community. It is a major economic means for establishing social equity and leading the Muslim society to prosperity.

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