Internship Report on

Ratio analysis of Al-Arafah Islami Bank Ltd. For the last five years
25th August, 2011

Human Resource Department

Al-Arafah Islami Bank Ltd

Letter of Transmittal

Dear Sir,

It is a great pleasure for me to submit my report on Ratio analysis of Al-

Arafah Islami Bank Ltd. For the last five years

It was a great opportunity for me to complete my internship in Al-Arafah

Islami Bank Ltd. I have implemented the knowledge that I have learned in
my academic career to work on this report on Ratio analysis of Al-Arafah
Islami Bank Ltd. for the last five years

I tried my level best to make this report to the required standard. I hope that
this report would fulfill your expectation. I therefore, hope that you would be
kind enough to go through this report for evaluation.

Thanking you

. . ...

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 Student Declaration

I would like to declare that I have completed my BBA practicum in and my

report is Ratio analysis of Al-Arafah Islami Bank Ltd. For the last five years
to fulfill the partial requirement of BBA practicum.

It has not been prepared to serve any other purpose.

Hence, it is strictly prohibited to copy, duplicate, or uses this report without

prior permission.

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 Acknowledgement

At first I would like to convey deep gratitude to my honorable supervisor,

Shahgufta Manzoor for giving me the opportunity to present my Internship
Report on Ratio analysis of Al-Arafah Islami Bank Ltd. for the last
five years

It could have been quite impossible for me to carry out the preparations and
proceedings with this report without his courage and continuous support.

I wish to thank the immeasurable grace and profound kindness of Almighty

Allah, the supreme authority of the universe. From the first inception to the
final completion of this report, the success of this study rests not on me
alone but on the contributions of many persons who have inspired, influence
and guided my work. The officials of Al-Arafah Islami Bank Ltd also helped
me in providing vital information regarding the concept of the various
departments and the process followed in the respective departments. They
shared their views & guided me in the preparation of this report. In preparing
this report, I have received cordial and sincere assistance from the officials.
Last but not the least I would like to thank my family members and friends
for encouraging and giving constant support throughout the making of this
report.

Some of the officials of Al-Arafah Islami Bank Ltd who were directly
incorporated with me, in making this report a true worth are:

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Preface

We shall be benefited of by our education if we can effectively apply the

institutional education in practical fields. Hence, we all need practical
education to apply theoretical knowledge in real world. By considering this
importance arranges internship program each semester compulsory for the
students of Bachelor of Business Administration to complete the requirement
of the course. As a part of this program my topic of the study was selected as
Ratio analysis of Al-Arafah Islami Bank Ltd. For the last five years

I tried my best to conduct effective study by collecting current data. Even

though if mistake appears, it is truly undesirable. So I would request to look
at the matter with merciful eyes.

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 Table of Contents

Topics Page no.

Preparatory topics :

- Title fly 1

- Title page 2

- Letter of transmittal 3

- Student Declaration 4

- Acknowledgement 5

- Preface 6

- Executive summery 8-10

- Chapter 1 (Introduction) 11-17

- Chapter 2 (Organizational overview) 18-25

- Chapter 3 (AIBL product and services) 26-30

- Chapter 4 (Overall branch banking) 31-51

- Chapter 5 (Investment) 52-55

- Chapter 6 (Investment Decision) 55-59

- Chapter 7 (Role of CIB in Bangladesh) 60-61

- Chapter 8 (Ratio analysis) 62-97

- My Individual Opinion & suggestions 98-101

- Swat analysis 102-103

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- Conclusion 104
- Recommendation 105
- Bibliography 106

Executive Summary

Through this Internship report an attempt has been made to assess the
performance of Al-Arafah Islami Bank Limited (AIBL). Basically this report
has been developed from the basis of secondary data. The sources of
information are annual report of the bank, internet, newspaper, magazine
etc. My experience also helps me to establish this report by making this
banks ratio analysis and by describing its overall banking system.

Banking is a system of intermediation. Modern commercials banks since their

early days had been doing two main functions. These are Acceptance of
deposits from the public and lending money to the people.

In addition, they also involved themselves in investment. Apart from the

principal function, they also have to render various services to the people.
The ever-changing demands of the society, business and industry have led
the banks to undertake such services for enhancing their utility to the society
at large. Based on nature of these services, they may be classified as under
(a) agency services: collection and payment of cheques, payment on behalf
of customs, purchase and sale of stocks, acting as trustees, acting as agency
(b) General services: opening letter of credit, safe custody, dealing in foreign

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exchange, providing Investment reports, underwriting of loans, providing
remittance facilities, complete service in foreign trade.

The structure of the banking system has changed substantially over the last
few years. NCBs role has gone down. Their share in total assets went down
from 54 percent in 1998 to 34 percent in 2006. On the other hand, PCBs
share went up from 27 percent in 1998 to 65 percent in 2006. The change
reflects adoption and implementation of new policies for the banking sector.

It is unlikely true that default culture in our banking sector is a common

phenomenon which hampers the strength of the banking sector. But arrival of
private bank in our economy has rapidly change this environment. The
classified loan over the total loan of our private bank is between 5%-8%
whereas it is more than 25% in our government bank. As a private
commercial bank we are very much conscious in this regards.One important
challenge that the banking sector is facing is the introduction of information
technology in the banking system in an aggressive manner. This is required
to improve management efficiency, reduce operational cost, improve
customer services, and increase transparency.

The earning and profitability of the banking sector have also improved in
recent years and it is generally measured by return on assets (ROA) and
return on equity (ROE).

Hence, the banking sector would play a vital role in the development of the
country and efficient and sound banking management would led the country
to reach at the highest peak of success.

AIBL aims at maintain in effective relationship with the customers, marketing

of Investment products, exploring new business opportunities etc. AIBL takes

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well calculative business risk while safeguarding its capital, financial
resources and profitability from various risk.

Presently, Al-Arafah Islami Bank Ltd. has got 46 braches and a total of 784
employees working in AIBL (as of June 2006). Its authorized capital is Taka
250 crores and the paid-up capital is Taka 85.40 crores.The bank conducts its
business on the principles of islami sarih. Musharaka, Bai-Murabaha, Bai-
Muajjal and Hire Purchase investment modes are approved by Bangladesh
Bank.

Naturally, its mode and operations are substantially different from those of
other conventional commercial banks. There is a Shariah Council in the bank
who maintains constant vigilance to ensure that the activities of the bank are
being conducted on the precepts of Islam.

The Al-Arafah Islami bank has an Asset Liability Committee (ALCO) that
reviews liquidity requirement of the bank, the maturity of assets and
liabilities, deposit and lending pricing strategy and the liquidity contingency
plan. The prime objective of the ALCO is to monitor and avert significant
volatility in net profit income, investment value and exchange earnings.

AIBL strives hard to optimize profit through conduction of transparent

business operations with in the legal and social framework with malice to
none and justice for all.

To achieve the maximum benefit from the investment both funded and non
funded the major issue is select the sound ones. In this regard project
appraisal as well as evaluation should be considered most. Before financing
in any project the quantities and qualitative judgment is essential. The
financial strength, management structure, business size, business line,
nature of business, competitor etc. should be identified. After financing
strong monitoring is also required. As a member of the banking family we are

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bound to follow the rules and regulation of the government. So we are
conscious enough to conduct our operation abiding by direction of
Bangladesh Bank. For this reason we have to serve different information in
the credit information bureau of Bangladesh Bank.

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Introduction:

The Jews in Jerusalem introduced a kind of banking in the form of money

lending before the birth of Christ. The word 'bank' was probably derived from
the word 'bench' as during ancient time Jews used to do money -lending
business sitting on long benches.

First modern banking was introduced in 1668 in Stockholm as 'Svingss Pis

Bank, which opened up a new era of banking activities throughout the
European Mainland.

In the South Asian region, early banking system was introduced by the Afgan
traders popularly known as Kabuliwallas. Muslim businessmen from Kabul,
Afganistan came to India and started money-lending business in exchange of
interest sometime in 1312 A.D. They were known as 'Kabuliawallas'.

The financial system of Bangladesh consists of Bangladesh Bank (BB) as the

central bank, 4 nationalized commercial banks (NCB), and 5 government
owned specialized banks, 30 domestic private banks, 10 foreign banks and
28 non-bank financial institutions. The financial system also embraces
insurance companies, stock exchanges and co-operative banks

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The structure of the banking system has changed substantially over the last
few years. NCBs role has gone down. Their share in total assets went down
from 54 percent in 1998 to 40 percent in 2006. On the other hand, PCBs
share went up from 27 percent in 1998 to 43 percent in 2006. The change
reflects adoption and implementation of new policies for the banking sector.

One important challenge that the banking sector is facing is the introduction
of information technology in the banking system in an aggressive manner.

This is required to improve management efficiency, reduce operational cost,

improve customer services, and increase transparency.

Hence, the banking sector would play a vital role in the development of the
country and efficient and sound banking management would led the country
to reach at the highest peak of success.

Rational of the study:

With the rapid growing competition (due to free market economy) among
nationalized, foreign and private commercial banks as to how the banks
operates its banking operation and how customer service can be made more
attractive, the expectation of the customers has immensely increased.
Reciprocating the sentiment, commercial/private banks are trying to elevate
their traditional banking service to a better standard, to meet the challenging
needs, demands. Side by side these banks have now concentrated their
attention towards diversification of their products for better performances
and existence. For the above circumstances, it has become necessary for Al-
Arafah Islami Bank Ltd, one of the leading commercial banks, to focus its
attention towards the improvement of the customer service. Thats why it is
quite justified to make an in-depth study about its operation and evaluate the
service provided by this bank and scope for its improvement. The study may
help formulating policy regarding the ideas relating to the feelings of the
customers and bankers.

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Further more, Al-Arafah Islami Bank Ltd executives who are actually
executing the policies undertaken by the top management will have a chance
to communicate their feelings and will have the feedback about their dealing
from the customers.

Scope of the Study:

The scope of this report is to analyze the operation of all departments and to
evaluate the performance of the different departments of Al-Arafah Islami
Bank Ltd.

Methodology:

The methodology of the report is stated below, which was appropriately

exercised in achieving the above stated objective.

Time period of the study:

For the fulfillment of the desired purpose following working days are spend to
various department:

Al-Arafah Islami Bank Ltd. VIP Road Branch,Naya Paltan Dhaka, Bangladesh.

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Sources of Data collection:

The inputs are collected from two sources:

a) Primary Sources:
Discussion with Bank Officers.
Personal observation.
Desk work in different sections/departments.
b) Secondary Sources:
Annual report of the Bank.
Consultation of related book and publications.
Different Statements.
File Balance sheet and various documents.

c) Data Processing:
Collected information is processed by the use of computer system.
Detailed analysis, working variables and working definitions are embodied
in the report.

Objectives of the Report:

The primary objectives of the report are:

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 To submit a report, for the fulfillment of my BBA practical.
The main objective of this report is to find out the Overall Branch
Banking and A Comprehensive Review on Investment of Al-Arafah
Islami Bank Limited..
To gather comprehensive knowledge on overall banking functions and
the expectations of the customers regarding the service level of the
bank.
Identify the factors contributing to the attractive and operative
performance of the local branch of the bank.

To make a study of the facts in order to arrive at certain conclusion

about overall banking operation.
Identify the main objectives of AIBL Investment Disbursement.
To find out the sector in which AIBL provides Investment.
To evaluate financial affairs of the Bank
To visualize the quantitative and qualitative aspects of AIBL

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 LIMITATIONS

To prepare this report I had to collect different types of information from

different sources. While I was collecting informations to complete this report
I faced some problems. Lack of informations in the web sites was the main

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problem. Some required informations were not available in the annual
report. But it was very difficult to find out these informations. I have found
there was not enough published materials. But I have tried my level best to
make this effective and informative enough. If more time was assigned this
paper would have been more pragmatic, informative as well as educative.

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 ]

Organizational Overview of Al-Arafah Islami Bank Ltd:

Al-Arafah Islami Bank Ltd. as the name implies a newly formed commercial
bank in Bangladesh. It has been incorporated in Dhaka, Bangladesh as a
public limited company and its Head Office of the Bank is located at Rahman
Mansion, 161, Motijheel C/A, Dhaka- 1000.In the world of consumerism the

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business organization of the world strive for the consumers satisfaction as a
number one business strategy whatever may be the product of the
organization, either service or non service. Service is the product of bank.
There is a saying that customer service starts rights right from the stairs of
the bank building. The guard at the door is first person pep resents of the
bank, receives a customer with wishes in smiling face.

Historical Background of Al-Arafah Islami Bank Limited:

Al-Arafah Islami Bank Ltd. (AIBL) was incorporated on 18 June,1995 with

authorized capital of Tk.1000 million (100 Crore) and paid up capital of
Tk.10.12 Crore paid up by the Sponsors/Directors and Tk.10.12 Crore was
offered to the public for subscribed portion of public issue of shares. The
Bank was formally inaugurated on 27 th September, 2005 with Motijheel
Branch (Principal Branch).The Management of the Bank is vested in a Board
of Directors consisting of 24 members including the Managing Director of the
Bank. Among 24 Directors 2 (two) Directors came from the public
shareholders. Managing Director is the chief executive of the Bank. There is a
Shariah council of 7 (seven) members in Al-Arafah Islami Bank Ltd. to
monitor the investments whether it invests in Shariah allowed sectors or
not .Since its establishment, AIBL opened 5 branches in 1995, 5 in 1996,10
in 1997, 10 in 1998, 5 in 1999, 2 in 2000, 3 in 2001, 1 in 2005, & 5 in 2006
i.e. at the end of 2006 the Bank Branch reaches to 46.

Total number of employees of the Bank was 771 in 1995 and reached to 912
in 2006 and during the short period of its activities the Bank has made
remarkable progress in various activities. Since commencement of its
activities on 18 June ,1995 the Bank has mobilized the deposit of Tk.6415.79
million and 16775.33 million at the end of the year 1999 and 2006. Foreign

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exchange business handled by the Bank during the year 1999 to 2006 were
Tk.7859.72 million and 11314.18 million respectively and investment was
Tk.3793.71 million and 17423.18 million at the end of the year 1999 and
2006 respectively. The bank earned a profit of Tk.31.70 million in the year
1999 compared to Tk.470.02 million (profit after tax and provision) in the
year 2006.

Al-Arafah Islami Bank Ltd. was established not only to earn profit and to
develop economy of the country but also it had an ultimate goal to get
reward in the Heaven by banning interest in business. Since its
commencement the Bank has been trying to achieve this goal. The Islam
loving people specially who are not interested with interest, should help this

Mission of Al-Arafah Islami Bank Limited:

By establishing an interest free atmosphere in day to day business

transactions, the Promoters, Sponsors & Directors expect the Shafayat from
our beloved Prophet Hadrat Muhammad (S) and the ultimate emancipation
in the Afterwards.

Vision of Al-Arafah Islami Bank Limited:

To establish an interest free transaction in the economy.

Special feature of the bank:

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i) All activities of the bank are conducted according to Islamic Sharia where
profit is the legal alternative to interest.

ii) The Banks investment policy follows different modes approved by Islamic
Shariah based on Quran & Sunnah.

iii) The Bank is committed towards establishing a welfare oriented banking

system, economic enlistment of the low-income group of people, create
employment opportunities.

iv) According to the needs and demands of the society and the country as a
whole the Bank invests money to different Halal business. The bank
participates in different activities aiming at creating jobs, implementing
development projects taken by the Government and developing
infrastructure.

v) The Bank is committed to establish an economic system through social

justice and equal distribution of wealth.

vii) The Bank is contributing to economic and philanthropic activities side by

side. Al Arafah English Medium Madrasha and AIBL Library are among
mention worthy. (Source-Annual Report-2005, P-24)

Objectives of AIBL:

To establish an interest free economy.

To establish a modern banking system for all kinds of people

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 To take part in the economic growth of the country.

To eradicate the poverty and to do social services by establishing Schools,

Madrashas, University, Hospitals, Public Library etc.

Finally to achieve ultimate goal i.e. Nazat in Akhirat.

Auditors:

In terms of Article 149 of the Articles of Association of the Bank M/S Pinaki
and Co. Chartered Accountants were re-appointed as external auditors for
conducting the audit of accounts as 31st December, 2000. The Auditor M/S
Pinaki & Co. Chartered Accountants being eligible offered themselves for re-
appointment for the year 2001. But now M/s Rahman Rahman Hoq becomes
the auditor in the year 2005.

Training and Motivation:

Training and Motivation are utmost important to bring about positive change
in the outlook of the manpower and to increase efficiency. Set of trained and
efficient workforce is indispensable for any commercial bank and they are the
fundamental strength of the bank.

Al-Arafah English Medium Madrasah:

Al-Arafah English Medium Madrasah has been established by the Al-Arafah

Bank Foundation with a view to building next generation according to the
ideals of peace and equality of Islam and to establishing banking and other
aspects of life in the way

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Branches of AIBL:

AIBL started its working at 161, Motijheel C/A with a Branch named Motijheel
Branch on 27th September,1995 was the first & main Branch of AIBL and has
been operating throughout the country. The Head Office of the Bank was
situated at the same holding of Motijheel Branch since its establishment but
from 11 January, 2007 it has started its working at its own premises 36,
Dilkusha (6th, 7th, 8th & 9th floor), Dhaka-1000. The age of the Bank is only 11
years and during this short period of time, the Bank has established total 46
Branches over the country and made a smooth network inside the country.
The number of Branches as Division wise is mentioned in the following table:

Division No. of Br.

Dhaka Division 22

Chittagong Division 10

Rajshahi Division 4

Khulna Division 4

Sylhet Division 5

Barisal Division 1

Total 46

Hierarchy of Position in AIBL Bank:

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Chairman Advisor Board of Director

Assistant Vice President

Senior Principle Officer

Principle Officer

Executive Officer

Assistant Officer

Managing Director

Senior Executive Vice President

Senior ViceOfficer
Junior President

Vice President

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Senior Assistant Vice President
Form of Organization:

Board of Directors

Executive Committee

Audit Committee

Management Committee

Shariah council

Environment of Al- Arafa Islami Bank:

Al- Arafa Islami Bank shall bear the mark of the Sunnah of our prophet
Muhammad (S), of our faith and conviction, our values and attitudes towards
life and that the entire environment of Al- Arafa Islami Bank shall be in
conformity with Sunnah, simple in style, noble and rich in thought, but
dynamic and far reaching in impact, exemplary in efficiency and service to
the customers.

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Mudaraba Terms Savings Deposit:

Deposit in monthly installment @Tk.300/-, Tk.500/-, Tk.1000/-Tk.1500/-

& Tk.2000/- is obtained under the aforesaid scheme for a tenure of
5,8,10 and 12 years and the same is withdrawal with
profit at the end of the tenure.

Monthly Profit based Term Deposit:

Under the above scheme, deposit of Tk. 1.00 lac and multiple thereof are
accepted for a term of 5 (five) years and the bank gave profit thereon Tk.
885 per month per lac and proportionately on the rest amount of deposit
under the category during the year under review. The aforesaid rate shall,
however, be adjustable at the close of calendar year on finalization of
accounts.

Monthly Haj Deposit:

Hajj deposit at monthly installment from 1 (one) year to 20(twenty) years

are accepted under the above scheme to enable the account holder to
perform Hajj out of the accumulated saving with profit.

Onetime Haj Deposit:

Under the above scheme, fixed amount of Hajj deposits are accepted from
the clients for particular term and as per rules profit is accumulated thereon
per year in this regard. As and when the fixed deposit is matured, Hajj
expenses are defrayed by the same. Under the scheme, the guardians may
also open Hajj account to enable their successors to perform Hajj. Highest
amount of profit is paid in the above types of deposit by the bank.

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Savings Investment Deposit:

Deposit under the scheme is accepted by monthly installment and after

expiry of the term, double amount of such savings is given as investment in
feasible sectors by the bank as per choice of the depositors without any
collateral security. Any one by saving under the scheme can take business
venture on utilization the amount saved under the scheme as well as availing
bank investment.

Marriage Savings Deposit:

Fixed monthly installment for a particular period is to be deposited to defray

the expenses of marriage and the bank allows double of saving or
Tk.30,000/- which is higher as investment to procure ornaments, furniture,
fixture etc., repayable in 24 monthly installment without any collateral
security.

Savings Bond Deposit:

Under this scheme the bank has introduced saving bonds for Tk. 10,000/-,
Tk.25,000/- and Tk. 100,000/- for 3,5 and 8 years. After the completion of
the tenure the depot.

Investment:

The Total investment of the bank stood at Tk.5079.21 million against

Tk.3728.41 million during the corresponding period of last year. The
percentage of increase is 36.23% as against 13.00% in banking sector. The
bank extends investments to the clients under the following modes of
investment under Islamic Shariah:

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Bai-Murabaha or simply Murabaha:

The terms Bai-Murabaha have derived form Arabic words Bai and Ribhum.
The word Bai means purchase and sale and the word Ribhum means an
agreed upon profit. So Bai-Murabaha means sale for an agreed upon profit. It
may be defined as a contract between a Buyers and a Seller under which the
seller sells certain specific goods permissible under Islamic Shariah and the
word Law of the land to the Buyer at a cost plus and agreed upon profit
payable today or on some date in the future in lump-sum or by installments.
The profit may be either a fixed sum or based on a percentage of the price of
the goods.

Musharaka:

The word Musharaka is derived from the Arabic word Sharikah meaning
partnership. Islamic jurists point out that the legality and permissibility of
Musharakah is based on the injunctions of the Holy Quran, Sunnah and Ijma
(consensus) of the scholars.

Musharaka transaction may be conducted in the following manner:

One, two or more entrepreneurs approach an Islamic Bank to request the

financing required for a project. The bank, along with other partners,
provides the necessary capital for the project. All partners including the Bank
have the right to participate in the project. The profit is distributed according
to an agreed ratio. However, losses are shared in exactly the same proportion
in which the different partners have provided the finance for the project.

Mudarabah:

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The term Mudarabah refers to a contract between two parties in which one
party supplies capital to the other party for the purpose of engaging in a
business activity with the understanding that any profits will be shared in a
mutually agreed upon. Losses, on the other hand, are the sole responsibility
of the provider of the capital. The first party provides capital and the other
party provides the expertise with the purpose of earning lawful profit
(approved by Islamic law) which will be shared in a mutually agreed upon
proportion.

Bai-Muajjal:

The term Bai and Muajjal are derived from the Arabic words Bai and Ajal
where Bai means purchase and sale and Ajal means a fixed time or a fixed
period. So Bai-Muajjal is a sale for which payment is made at a future fixed
date or within a fixed period. In short, it is a sale on Credit. It is basically a
contract between a buyer and seller under which the seller sells certain
specific goods, permissible under Shariah and law of the country to the buyer
at an agreed fixed price payable at a certain fixed future date in lump-sum or
in fixed installments.

Bai-Salam:

The term Bai-Salam is used to define a sale in which the buyer makes
advance payment, but delivery is delayed until some time in the future.
Usually the seller is an individual or business and the buyer is the bank.

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General Banking practices in Al-Arafah Islami:

Bangladesh is one of the less developed countries. So the economic

development of the country depends largely on the activities of commercial
banks. So we need to

Emphasis whether these commercial banks are effectively and honestly

performing their functions, assigned duties and responsibilities. In thus
respect we need to kno

The cash section of Al-Arafah Islami Bank Ltd deals with all types of
negotiable instruments, cash and other instruments and treated as a
sensitive section of the bank. It includes the vault that is used as the beyond
this limit, the excess cash is then transferred to Bangladesh Bank. This
section performs the following functions:

Cash Packing:

After the banking hour cash is packed according to the denomination. Notes
are counted and packed in bundles and stamped with initial.

Allocation of Currency:

Before starting the Banking hour all tellers give requisition of money through
Teller cash proof sheet. The head Teller writes the number of the packet
denomination wise in Reserve sheet at the end of the day, all the notes
remained are recorded in the sheet.

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Procedure for Opening of Accounts:

Before opening of a currents or savings account, the following formalities

must be completed by the customer:

Submit application on the prescribed form.

Furnishing photographs- 2 (Two) copies.

Introduction by an account holder.

Putting specimen signatures in the specimen card.

Mandate, if necessary.

After fulfilling above formalities, opens an account for the client and provide
the customer with a pay-in-slip book and a checkbook in case of savings
account and currents account.

Types of Deposit Accounts and Their Formalities:

A. Current Account

In this kind of account a customer can deposit his money and can write one
or more check to withdraw their money. For doing this notice is not required.
He can deposit it whenever he/ she wants to and also can withdraw it
whenever he/ she wants to

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In The Name of Individual:

The client has to fill up a light green account opening form. Terms and
conditions are printed on the back of the form. The form contains the
declaration clause, special instructions etc. two copies of passport size
photograph duly attested by the introducer are affixed with the form.

In Joint Name:

In this type, the formality is same as individual account, but in the special
instruction clause, either or survivor or former or survivor clause is
marked.

Proprietorship:

In addition the customer has to submit the valid Trade License and Tax
Paying Identification Number (TIN) along with the application.

Partnership:

In case of partnership account, the bank asks for,

A copy of the partnership agreement (Partnership Deed)

A letter signed by all the partners containing the following particulars.

The name and addresses of all partners

The nature of the firms business

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The name of the partner authorized to operate the account in the name of
the firm, including the authority to draw, endorse and accepting the bills and
mortgage and sell the properties belonging to the firm.

Limited Company:

On having the desire to open an account from a limited company, an EXIM

Bank Officer asks for the following documents:

Registration Certificate from the Registrar of Joint Stock of Companies

Certificate of Incorporation

Certificate of Commencement of Business

Memorandum of Association

Articles of Association

Copies of Annual Accounts

Copies of the Boards resolution, which contains

a). The name of the persons who have been authorized to operate the bank
account on behalf of the company.

b). The name of the persons who are authorized to execute documents with
the bank on companys behalf.

Societies, Clubs and Associations:

In case of these sorts of accounts Al-Arafah Islami Bank Ltd requires the
following documents:

Registration Certificate Under the Societies Registration Act, 1962

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Copies of Memorandum, Articles of Association

Resolution of the Managing Committee.

Power of Attorney to Borro

Non-government Organization (NGO):

The account opening procedure is same but in exception is that the

Registration Certificate from the Social Welfare Department of Government
must be enclosed with the application.

Joint Account in The Name of Minor:

A minor cannot open an account in his own name due to the incapacity to
enter into a contract. He can open an account in Al-Arafah Islami Bank Ltd in
Joint name of another person who will be guardian of him.

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B. Savings Bank Account:

This deposit is basically meant for small-scale savers. There is restriction on

withdrawals in a month. Heavy withdrawals are permitted only against prior
notice. Interest is paid on these types of accounts.

Short-term Deposit (STD):

In Short-term Deposit, the deposit should be kept for at least seven days to
get interest. The interest offered for STD is less than that of savings deposit.
In Al-Arafah Islami Bank Ltd various big companies, Organizations,
Government Departments keep money in STD accounts. Frequent withdrawal
is discouraged and requires prior notice.

Fixed Deposit:

They are also known as time liabilities or term deposits. These are deposits,
which are made with the bank for a fixed period specified in advance. The
bank need not maintain cash reserves against these deposits and therefore,
the bank offers high are of interest on such deposits.

In Al-Arafah Islami Bank Ltd, fixed deposit account is opened in two forms-
Midterm (MTD), which is less then one year & the other is Term Deposit,
which is more than one year.

Opening of Fixed Deposit Account:

The depositor has to fill an application form where in he mentions the

amount of deposit, the period for which deposit is to be made & the name/

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names is which the fixed deposit receipt is to be issued. In case of a deposit
in Joint name Al-Arafah Islami Bank Ltd. also takes the instructions regarding
payment of money maturity of the deposit. The banker also takes the
instructions regarding payment of money on maturity of the deposit. The
banker also takers the instructions regarding payment of money on maturity
of the deposit. The banker also taker specimen signatures of the depositors.

A fixed deposit account is then issued to the depositor acknowledging receipt

of the sum of money mentioned therein. It also contains the rate of interest
& the date on which the deposit will fall due for payment.

Payment of Interest:

It is usually paid on maturity of the fixed deposit. Al-Arafah Islami Bank Ltd
calculates interest at each maturity date and provision is made on that
Miscellaneous creditor expenditure payable accounts is debited for the
accrued interest.

Encashment of F.D.R:

In case of premature FDR, Al-Arafah Islami Bank Ltd is not bound to accept
surrender of the deposit before its maturity date. In order to deter such a
tendency the interest on such a fixed deposit is made cut a certain
percentage less a the agreed rate. Normally savings bank deposit interest
rate is allowed.

Loss of FDR:

In case of a lost FDR, the customer is asked to record a GD (General Diary)

in the nearest Police Station. After that the customer has to furnish an
Indemnity Bond to Al-Arafah Islami Bank Ltd a duplicate FDR is then issued
to the customer by the bank.

Renewal of F.R.D.:

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In Al-Arafah Islami Bank Ltd, the instrument is automatically renewed within
seven days after the date of its maturity if the customer does not come to
en-cash the FDR. The period for renewal is determined as the previous one.

Remittance:

Remittance can be done by telegraph transfer, mail transfer, travelers

Cheque and drafts and Cheque. There are two steps of remittance:

Inland Remittance:

By using ways we can do it. When one bank sends these T.T, M.T, T.C or
Cheque to another bank than it will be called inland remittance. It is done
within the country from one bank to another.

Foreign Remittance:

When a bank got this T.T, M.T, T.C and cheque from outside bank, which is
not situated in the home country than it will be called foreign remittance.
Using these methods also has done it.

Types of Remittance:

- Between banks and non-banks customers.

- Between banks in the same country.

- Between banks in the different centers.

- Between banks and central bank in the same country.

- Between central bank of different customers.

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Types of Credit Activities:

Depending on the various nature of financing all the lending activities have
been brought under the following major heads:

Loan

Long Term Short Term

Commercial
House building loan, Loan
project or industrial
loan and transport loan.

Cash credit (pledge),Cash credit

(Hypothecation), Loan general,

Secured overdraf (SOD), Loan

aganist imported merchandise

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1. Loan (General):Short term and long term loans allowed to individual/
firms/ industries for a specific purpose but a definite period and generally
repayable by installments fall under this head these types of lending are
mainly allowed to accommodate financing under the categories.

a). Large and Medium Scale Industries.

b). Small and Cottage Industries. Very often term financing for agriculture
and others are also included here.

2. House Building Loan (General):

Loans allowed to individual/enterprises construction of house (residential or

commercial) fall under this type of advance. The amount is repayable by
monthly installment within a specified period, advances are known as Loan
(HBL-GEN).

Interest rate:Currently the interest rate is 16%. But it may changes from
time to time depending on the market interest rate. From the customers
point of view this changes have an adverse impact on the customers. Some
times if they have to bear a higher interest on the principal amount which
causes a great burden on them.But from the bank's point of view this is very
good to maintain the markup. Because when the market interest rate raises
1% than they are getting 1% less markup. So for this clause of increasing
interest rate they can have the same markup by increasing the interest rate
changing on the clients. So this is very effective for the Bank to maintain
markup.

Mode of repayment:

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The loan shall be adjusted by monthly installment basis. The repayment will
start from 6(six) months of the date of first disbursement (it may change
according to the terms and conditions of the agreement)

Consumers Credit Scheme of Al-Arafah Islami Bank Ltd.

Introduction:

Consumer Credit Scheme is a major program of Al-Arafah Islami Bank Ltd. In

CCS the bank engages an agent who works on behalf of the Bank. This agent
performs all the works prior to the sanction of the CCS. They do the
inspection and make all the documents necessary for CCS. For this purpose
they get commission.

Clients:

The clients are Service Holders and Businessman. Service holders can be
Government and Private. In case of Government officer, the client must be an
officer in rank.

Products:

Electronic goods, cars, jeeps, microbuses, Mobile telephone, T&T telephone

etc.

Profit Rate:

Down payment is 20% of the CCS amount. It is considered as equity. The

payment is 50% for vehicles.

Advance allowed for retirement of shipping documents w d release of goods

imported through LIC falls under trust with the arrangement that sale
proceeds should be deposited to liquidate the advances within a given period.

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This is also a temporary advance connected with import and known as
post-Import finance and falls under the category "Commercial Banking.

Formalities for Opening Foreign Currency (FC) Account:

The AD may without prior approval of the Bangladesh Bank open Foreign
Currency (FC) account in the name of:

Bangladesh national residing abroad.

Foreign nationals residing abroad/ in Bangladesh and also foreign firms

registered abroad and operating in Bangladesh and abstract.

Foreign Missions and their expatriate employees.

Resident of Bangladesh nationals working with the foreign/ international

organizations operating in Bangladesh provided their salary in paid in foreign
currency.

Procedure for Opening Letter of Credit (L/C):

An importer desirous to have an import Letter of Credit (L/C) limit must have
applied to the designated bank in prescribed form for sanction of margin,
Letter of Credit (L/C) limit it etc.

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L/C Opening flow chart in case of BTB L/C:

Lien of Export L/C Opening of BTB ABP (Accepted

L/C under that Bills For
Export L/C Payment)

Collection/ Purchase Export Made Under Production

of Export Bills

Collection From Nosto A/C Inform To Head

Export L/C issuing Office

Bank

Head Office ETDA Credit Advice to

A/C (Debit) Branch

BTB Payment Respective If PC Facility

Party A/C Then

(Credit) Adjustment

Figure: Letter of Credit (L/C) Opening Process

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Letter of Credit (L/C) Application:

For opening Letter of Credit (L/C) the client is to submit to the bank an
application in the printed format of the designated bank. This is called Letter
of Credit (L/C) application form, which is also an agreement between the
importer and the bank. The form is to be stamped under stamp Act. The
importer must submit the LCA and IMP and Indent or contract / purchase
order/ proforma invoice (duly accepted by the importer) along with Letter of
Credit (L/C) application.

The Letter of Credit (L/C) application must be completed/ filled in and signed
by the authorized person of the importer giving the following particulars.Full
name and address of the supplier or beneficiary and importer.Brief
description of the goods.Last date of shipment and negotiation time (must
not be beyond 30 days from the shipment date).

Examination of Letter of Credit (L/C) Application:

On receipt of Letter of Credit (L/C) application an officer of L/C section must

check it very careful by the following manner.

That the terms and conditions as stipulated in the L/C application are
consistent with the exchange control and import trade regulation and UCPDC
500.That all the information mentioned in above column have been
furnished.That the terms to be imported are eligible according to importers
entitlement.That the goods are not being imported or originated form South
Africa or Israel.If the goods are imported form any member countries of ACU.

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That the validity of the L/C must not exceed the validity of LCA.L/C is opened
within the validity period permitted in the License.For Letter of Credit (L/C)
limit following information are to be furnished by the applicant.

Preparation of Credit Report:

Bank prepares credit report in prescribed forms. Character, Capacity and

Capital, which are known as the three Cs of credit. Instead of the three Cs
some mentions the three Rs i.e. reliability, responsibility and resources. To
these three Cs we may add two more Cs i.e. collateral and conditions.

Position of Letter of Credit (L/C):

Import section will see whether there is sufficient fund available in the
account to cover the margin to be sanctioned, commission, postage, cable or
telex charge etc. If it is found O.K, Letter of Credit (L/C) will be sanctioned.

In all cases the sanction must be informed to the importer for acceptance.
On receiving confirmation from the client then the terms and conditions of
the sanctioned are acceptable, the subsequent documentation/ charge
document are taken up.

Following papers/ documents submitted by the importer before opening of

the L/C:

# Memorandum of (In case of partnership firm).

# Resolution.

# Photo One Copy.

# VAT Registration Certificate.

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Bank will supply the following papers/ documents before opening of the
L/C:

- Letter of Credit (L/C) Application Form.

- LCA Form.

- IMP Form.

- Charge Documents Paper.

- Guarantee Form.

The above papers must be completed duly filled in and signed by the party
and verified the signature.

Maintenance of Register:

The sanction must be recorded in the following registers:

Document Execution Registers. All the charge documents must be recorded

in this register.

- Limit Register.

- Liability Ledger.

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Confidential Report of Beneficiary of Letter of Credit (L/C):

According to exchange control regulations bankers are required to obtain

confidential report of the beneficiary of Letter of Credit (L/C) before opening
the same, if the amount of Letter of Credit (L/C) exceeds Tk. 5 lac. Bank can
open Letter of Credit (L/C) below Tk. 5 lac without obtaining C.R.

Banker can write to their foreign correspondents to supply the C.R. But from
practical experience foreign correspondents of different country are not
supplied timely.To overcome the above situation bankers can conduit
reference book i.e. MUWN/ DUNN/ BRADSTREET/ Trade directory of various
chambers of commerce of different countries in the world.On receipt of C.R.
form any source the banker can accumulate the same in one master file.

LCA Registration:

Letter of Credit (L/C) authorization forms consisting of six copies. 1 st copy for
exchange control purposes, 2 nd copy for the licensing authority, 3 rd and 4th
copies for the CCI and

Procedure or Preparation and Dispatch:

Amendment is to be typed in the Banks printed format. The copies of the

amendment must be dispatched to all concerned as done in dispatching the
L/C. Amendment can be done either by cable/ telex or airmail.

Each and every amendment of L/C must be noted in the L/C file and copies
of each amendment are kept in the L/C file chronologically (date wise).

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Bank Charge:

Amendment commission is to be realized from the party as per instruction of

Bangladesh Bank F.C. circulars.

Accounting Procedure:

- Dr. Partys Account.

- Cr. Commission Account.

- Cr. P & T Account.

Clearing House & Collections of Bill:

According to the Article 37(2) of Bangladesh Bank Order 1972, the banks,
which are the member of the clearinghouse, are called as Scheduled Banks.
The scheduled banks clear the cheques drawn upon one another through the
clearinghouse. This is an arrangement by the central bank where everyday
the representative of the member banks gathers to clear the cheques. Banks
for credit of the proceeds to the customers accounts accept cheques and
other similar instruments.

Procedures for Collection: Crossing of the cheques are done

The following procedures are taken for collection, Payees A/C Credited endorsement

Entries are given in the outward clearing

Register

Clearing seal is given Cheque

Cheques are sorted bank wise and entries are

given to the computer

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Entries are given to the Clearing House

Register
Procedure for Outward Bills for Collection:

Depositing the cheque along with Deposit Slip

Endorsement Payees A/C will be credited on realization

is given

Crossing of the cheques are done indicating Principal

Branch as collecting bank

Entries are given in the outward clearing Register

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Definition of Investment:

Investment, transaction between two parties in which one ( the creditor or

lender) supplies money, goods, services or securities in return for a
promised future payment by the other ( the debtor or borrower). Such
Transaction normally includes the payment of interest to the lender.
Investment may be extended by the public or private institutions to finance
business activities, agricultural operation, consumer expenditures or
government projects.

Introduction of Investment:

Modern Investment management is extended through specialized financial

institutions of which commercial banks are the oldest and most important. In
present days of industrial economics, the banks are able to extend and
increase the supply of Investment by the creation of Investment
management for their loan customers. The lender must judge each loan he
makes on the basis of the charter of the borrower (his intention to pay), (his
capacity to pay), (based on his potential for earning) and his collateral
pledged in case of default on the loan. The terms of Investment transactions
may be publicly regulated to prevent abuses by customers and lenders as
well as to channel Investment in to particular sectors of the economy.

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AIBL 2006 Deposit, Investment and Asset Information:

Deposit:The total deposit of the bank was Tk. 16775.33 million at 31 st

December 2006, of which bank deposit was 611.72 million taka and general
deposit was 16163.61 million taka. At the same time in the last year, the
amount was total deposit was 11643.66 million taka. In this area the growth
rate is 44.07%.

Fig: 1 Deposit

Investment:At the end of the year 2006, the amount of investment of the
bank was Tk. 17423.19 million in comparison to Tk. 11474.41 million of the
last year 2005. the amount of investment has increased 5948.78 million taka
within this period, which is around 51.84%

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 Fig: 2 Investments

Total Assets:

Fig: Total Assets

- Cash in hand 1%

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- B.Bank & S.Bank 7%

- Other Bank 5%

- Investment 82%

- Fixed Assets 1%

- Other Assets 4%

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Lending (Investment) Decision:

The principal function of a Bank is to lend or invest. Lending is a dynamic

activity .It helps to create entrepreneur and thus the country would be
industrialized. When a country becomes industrialized it eradicates poverty
from the society and over all from the country. Bank collects deposits from
common people invest to the people who are willi8ng to run business or to
set up an industry. In this respect the Bank takes collateral security to secure
the invested amount.

Safety:

Safety is the first guiding principle of a prudent banker. A bank is in business

to make money. It mainly uses depositors fund as a means of its earnings.
The money of the depositors being repayable on demand or, after a short
notice, determines the capacity of a bank as to the period for which he can
safety lend it out without an uncalculated risk. Safety should never be
sacrificed for profitability. Once the confidence of the depositors is shaken,
the banker cannot carry on the banking business.

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Liquidity:

Liquidity is the availability of bank funds on short notice. It is not enough

that the money will come back, it is also necessary that it must come back
on demand or in accordance with agreed terms of repayment. The borrower
must be in a position to repay within a reasonable time after a demand for
repayment is made; otherwise, the liquidity position of the bank is
endangered.

Profitability:

Commercial Bank has to distribute its resources in a manner that they meet
the twin requirements of liquidity and profitability. A banker has, therefore to
see that major portion of the assets owned by it are not only liquid but also
aim at earning a good

Purpose:

A Banker would not through away money for any purpose for which the
borrower want. The purpose should be productive so that the money not only
remains safe but also provides a definite source of repayment. The banker
should study the purpose for which loan is required and the resources from
which the borrower is expected to repay. If the funds borrowed are employed
for unproductive purposes like marriage ceremony, pleasure trip, repayment
of old debts etc.

Security:

It is the practice of banks not to invest money without any security. A

banker would normally like to recover the investment from the sell of the

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security. The importance of an adequate and acceptable security can,
however, be hardly over emphasized. Security serves as a safety value for an
unexpected emergency. Security taken by Banks can be classified into two
categories such as: i) Primary Security, ii) Collateral Security.

Disposal:

The investment should be as much broad based as possible and must be in

keeping with the deposit structure. The investments must not be in particular
direction or to one particular industry because adversity may face problems
but diversified investments can minimize the risk.

National Interest:

Banking industry has significant role to play in the economic development of

a country. The banker would lend if the purpose of the investment is for
overall national development plans necessitating flow of credit to priority
sector in the larger national interest. Sometimes, the need of the borrower
may be considered so essential for the benefit of the national economy
despite of heavy risk involved if the investment may be granted.

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Role of CIB in Bangladesh:

Due to irregular and insufficient flow of credit information in the banking

system the proportion of classified loan in relation to total credit is very high.
This proportion of classified loan operated a bad culture in the Banking
sector. In order to eliminate the bad culture & to equip the banks with proper
credit information for loan application processing, proposal for relation of CIB
was put forward by different committee and organizations and it was
established in 1992.

Functions of CIB:

- To standardize information flow on loans/credits within the Bangladesh

Banking system.

- To increase the speed & accuracy with which the credit information is made
available to banker assessing credit role.

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- To combine the information gathered on classified loans with the
information on newly sanctioned loans to the borrowers thereby making
available on integrated information package.

- To integrate the default loan information in the CIB its timely submission to
the banks for loan application processing.

- To collect credit information on quarterly basis from banks

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

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

# Current ratio
# Gross profit margin
# Net profit margin
# Operating expense ratio
# Operating profit margin
# Fixed asset turnover
# Debt ratio

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# Return on asset (ROA)
# Debt equity ratio
# Asset utilization ratio
# Sales turnover or total asset turnover

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

The analysis: -

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 Current
ratio
Sales
Gross
turnover or
profit
total asset
margin
turnover

Asset
Net profit
utilization
margin
ratio

Ratio
analysis
Debt of Operating
equity AIBL expense
ratio ratio

Return on Operating
asset profit
(ROA) margin

Fixed
Debt ratio asset
turnover

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

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 CURRENT RATIO:

In the below there is the current ratio in a chart. This chart belong all the
current ratio of year 2006-2010. In this chart one thing is very much clear
that all the year there have some changes of this ratio. All the years are not
same. Below the chart all the details of every years calculation are given
very clearly.

Current asset
Current ratio = (Times)
Current liabilities

For the year 2006:

In the year of 2006 we can see that there is the calculation is zero. Because
in the year of 2006 the current asset is 394,49,78,380 /- BDT. And there was

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no current liability of this year.In the annual report there was no current
liabilities. So for the calculation it comes zero ratios.

For the year of 2007:

In the year of 2007 there the current asset is 727,59,55,470 /- BDT. And the
current liabilities are 132,00,00,000 /- BDT. And the calculation of the ratio is
5.512087 times. That means the current ratio for this year is more that the
previous year, where the previous years ratio was just nil.

For the year of 2008:

In the year of 2008 the current asset is 943,46,46,990 /- BDT. And the
current liability is 178,00,00,000 /- BDT. So the calculation for this year is
5.300363 times. That means the current ratio for this year is less than the
previous year.

For the year of 2009:

In the year of 2009 the current asset is 1238170259/- BDT. And the current
liabilities is 2620000000 /-BDT. So the calculation of ratio for this year is
4.725840 times. That means this years ratio is decreasing that the previous
year.

For the year of 2010:

In the year of 2010 the current asset is 217,91,40,468 /-BDT. And the
current liability is 568,00,00,000/- BDT. So the calculation of ratio for this
year is 3.836514 times. That means this years ratio is also less then the
previous years ratio.

Lickings arising on current ratio:

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In the current ratio there have some problems. In the year of 2006 there was
no current liability. But for the banking sector sometimes liability is need for
some reason. But if I compare all the year then I can say the ratios of all
year are comparatively small. Where the current asset good but the current
liabilities is always near about the current assets. This is a major problem for
AIBL.

Own opinion and solutions:

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

Gross profit margin:

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In the below there is gross profit margin ratio in a chart. This chart belong all
the gross profit and all the sales revenue for the year of 2006-2010. In this
chart one thing is very much clear that all the year there have some changes
of this ratio. All the years are not same. Below the chart all the details of
every years calculation are given very clearly.

Gross profit
Gross profit margin = (percentage)
Sales revenue

For the year of 2006:

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In the year of 2006 the banks Gross profit is 135,27,67,957 /-BDT. And the
sales revenue is 88,16,82,692 /-BDT. So for this amount this years ratio is
1.534302 %.This years gross profit is more than the sales revenue.

For the year of 2007:

In the year of 2007 the AIBL have Gross profit amount of 132,69,80,567
/-BDT. This years total sales revenue is 61,45,18,980 /-BDT. After calculation
this years total ratio is 2.159380 %. This ratio is more than the previous
year.

For the year of 2008:

In the year of 2008 the AIBL have total Gross profit is 216,67,99,427 /-BDT.
This years total sales revenue is 128,16,78,168/-BDT. After the calculation
the ratio amount is 1.690595 %. This is less then the previous year.

For the year of 2009:

In the year of 2009 the AIBL have total Gross profit is 263,82,93,982 /-BDT.
This years total sales revenue is 133,71,97,611/-BDT. After the calculation
the ratio amount is 1.973002 %. This is comparatively more than the
previous year.

For the year of 2010:

In the year of 2010 the AIBL have total Gross profit is 432,58,72,922 /-BDT.
This years total sales revenue is 94,69,22,517/-BDT. After the calculation the
ratio amount is 4.568349 %. This is comparatively very more than the
previous year.

Problems arising on Gross profit margin:

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In this ratio I think there have some problems as usual. For this ratio the
Gross profit means the total operating income is good but in the year of 2008
it was less because of some company financial weakness. But the next three
years the total operating income is comparatively more than the previous
year. Company need more effort for the operating activities inside of its.

Own opinion and solutions:

As a internship member of this bank I saw their sales revenue is good. As a
Islamic bank their sales revenue is much good. But in the year of 2007 and
2010 they did very well in this gross profit margin. Both those years their
percentage is very good. I suggest them to follow these two years as a result
the up-coming years Gross profit will be far better.

Net profit margin:

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In the below there is Net profit margin ratio in a chart. This chart belong all
the net profit and all the sales revenue for the year of 2006-2010. In this
chart one thing is very much clear that all the year there have some changes
of this ratio. All the years are not same. Below the chart all the details of
every years calculation are given very clearly.

Net profit
Net profit margin = (percentage)
Sales revenue

For the year of 2006:

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In the year of 2006 the banks Net profit is 47,00,18,407 /-BDT. And the
sales revenue is 88,16,82,692 /-BDT. So for this amount this years ratio is
53.309 % .

For the year of 2007:

In the year of 2007 the AIBL have Net profit amount of 34,73,14,166 /-BDT.
This years total sales revenue is 61,45,18,980/-BDT. After calculation this
years total ratio is 56.5180 %. This ratio is little bit more than the previous
year.

For the year of 2008:

In the year of 2008 the AIBL have total Net profit is 66,82,42,288 /-BDT. This
years total sales revenue is 128,16,78,168/-BDT. After the calculation the
ratio amount is 52.1380%. This is less then the previous year.

For the year of 2009:

In the year of 2009 the AIBL have total Net profit is 85,89,87,708 /-BDT. This
years total sales revenue is 133,71,97,611/-BDT. After the calculation the
ratio amount is 64.2379 %. This is comparatively little bit more than the
previous year.

For the year of 2010:

In the year of 2010 the AIBL have total Net profit is 177,69,92,595 /-BDT.
This years total sales revenue is 94,49,22,517/-BDT. After the calculation the
ratio amount is 188.0569 %. This is comparatively much better than the
previous year.

Problems arising on Net profit margin:

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In this ratio I think the company some problem in the net investment income
or net income. Every is their net income vary. Only in the year of 2008 it was
just fall the net profit and sales revenue. As well as the ratio itself.

Own opinion and solutions:

So I hope this problem is just little bit problem. It dont effect in the financial
sector or profit sector of this company if they make their company more
profitable by working hard. In the year of 2010 they did really very well.

Operating expense ratio:

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In the below there is operating expense ratio in a chart. This chart belong all
the operating expense and all the sales revenue for the year of 2006-2010.
In this chart one thing is very much clear that all the year there have some
changes of this ratio. All the years are not same. Below the chart all the
details of every years calculation are given very clearly.

Operating expense
Operating expense ratio = (percentage)
Sales revenue

For the year of 2006:

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In the year of 2006 the banks Operating expense is 382998271 /-BDT. And
the sales revenue is 881682692 /-BDT. So for this amount this years ratio is
43.43 % .

For the year of 2007:

In the year of 2007 the AIBL have Operating expense amount of 570800273
/-BDT. This years total sales revenue is 614518980/-BDT. After calculation
this years total ratio is 92.88 %. This ratio is more better than the previous
year.

For the year of 2008:

In the year of 2008 the AIBL have total Operating expense is 638699566
/-BDT. This years total sales revenue is 1281678168/-BDT. After the
calculation the ratio amount is 49.83%. But this year this is less then the
previous year.

For the year of 2009:

In the year of 2009 the AIBL have total Operating expense is 908465434/-
BDT. This years total sales revenue is 1337197611/-BDT. After the
calculation the ratio amount is 67.93 %. This is again comparatively little bit
more than the previous year.

For the year of 2010:

In the year of 2010 the AIBL have total Operating expense is 1328555555
/-BDT. This years total sales revenue is 944922517/-BDT. After the
calculation the ratio amount is 140.5994 %. This is comparatively very much
better than the previous year.

Problems arising on Net profit margin:

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In this ratio we can see that every year there have changes in this ratio.
Company operating expense and sales revenue is fluctuating in those five
years. I think this is happen because of the financial market problem. But at
the last year they did very well than the previous one.

Own opinion and solutions:

In that case my solution is that company need more sincere about their
operating expense. They are totally unable to maintain their operating
expense. So they need to give more hard work for this.

Operating profit margin:

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In the below there is Operating profit margin ratio in a chart. This chart
belong all the net profit and all the sales revenue for the year of 2006-2010.
In this chart one thing is very much clear that all the year there have some
changes of this ratio. All the years are not same. Below the chart all the
details of every years calculation are given very clearly.

Net profit
Operating profit margin = (percentage)
Sales revenue

For the year of 2006:

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In the year of 2006 the banks Operating profit margin is 470018407/-BDT.
And the sales revenue is 881682692/-BDT. So for this amount this years
ratio is 53.30 % .

For the year of 2007:

In the year of 2007 the AIBL have Operating profit margin amount of
347314166/-BDT. This years total sales revenue is 614518980/-BDT. After
calculation this years total ratio is 56.51 %. This ratio is more better than
the previous year.

For the year of 2008:

In the year of 2008 the AIBL have total Operating profit margin is
668242288/-BDT. This years total sales revenue is 1281678168/-BDT. After
the calculation the ratio amount is 52.13%. But this year this is less then the
previous year.

For the year of 2009:

In the year of 2009 the AIBL have total Operating profit margin is
858987708/-BDT. This years total sales revenue is 1337197611/-BDT. After
the calculation the ratio amount is 64.23 %. This is again comparatively little
bit more than the previous year.

For the year of 2010:

In the year of 2010 the AIBL have total Operating profit margin is
1776992595 /-BDT. This years total sales revenue is 944922517/-BDT. After
the calculation the ratio amount is 187.65 %. This is comparatively very
much better than the previous year.

Problems arising on Net profit margin:

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In this ratio the starting was good enough but in the year of 2008 there was
some mistake by someone as a result the ratio percentage was less than the
previous two years. But at the year of 2010 there was a huge change as well
as the operating expense ratio.

Own opinion and solutions:

In the year of 2010 the ratio goes very high. This is good but if they keep
this change continue. But if this ratio once again fall down then the Bank
must suffer for that. So they need necessary steps for this.

Fixed asset turnover:

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In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the sales revenue and all the fixed asset for the year of 2006-2010. In this
chart one thing is very much clear that all the year there have some changes
of this ratio. All the years are not same. Below the chart all the details of
every years calculation are given very clearly.

Sales revenue
Fixed asset turnover = (Times)
Fixed asset

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 For the year of 2006:
In the year of 2006 the banks Sales revenue is 881682692/-BDT. And the
fixed asset is 17423189761/-BDT. So for this amount this years ratio is 0.05
times.

For the year of 2007:

In the year of 2007 the AIBL have Sales revenue is 614518980/-BDT. This
years total fixed asset is 22906367930/-BDT. After calculation this years
total ratio is 0.02 times. This ratio is more better than the previous year.

For the year of 2008:

In the year of 2008 the AIBL have total Sales revenue is 1281678168/-BDT.
This years total fixed asset is 29723790857/-BDT. After the calculation the
ratio amount is 0.04 times. But this year this is less then the previous year.

For the year of 2009:

In the year of 2009 the AIBL have total Sales revenue is 1337197611/-BDT.
This years total Fixed asset is 36134084793/-BDT. After the calculation the
ratio amount is 0.03 times. This is again comparatively little bit more than
the previous year.

For the year of 2010:

In the year of 2010 the AIBL have total Sales revenue is 944922517/-BDT.
This years total fixed asset is 53582960723/-BDT. After the calculation the
ratio amount is 0.01 times. This is comparatively very much better than the
previous year.

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Problems arising on Net profit margin:

For the year 2007 and 2010 was very low. And I asked the management why
for this and they said to me for 2007 there was the local political riot in all
over the world and for that they cant make their financial activities well and
for 2010 there was some money market falling reason.

Own opinion and solutions:

In the year of 2006 it was totally great and 2008 and 2009 it was good but in
2007 and 2010 there was some problem. And I hope it the government gives
more effort to this I hope itll never be happen again.

Debt Ratio:
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In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the total debt and the entire total asset for the year of 2006-2010. In this
chart one thing is very much clear that all the year there have some changes
of this ratio. All the years are not same. Below the chart all the details of
every years calculation are given very clearly.

Total debt
Debt Ratio = (Percentage)
Total asset

For the year of 2006:

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In the year of 2006 the banks total debt is 19677983839/-BDT. And the total
asset is 21368168142/-BDT. So for this amount this years ratio is 92.09 %.

For the year of 2007:

In the year of 2007 the AIBL have total debt is 28144824936/-BDT. This
years total asset is 30182323406/-BDT. After calculation this years total
ratio is 93.24 %.This ratio is small better than the previous year.

For the year of 2008:

In the year of 2008 the AIBL have total debt is 36452697089/-BDT. This
years total asset is 39158437848/-BDT. After the calculation the ratio
amount is 93.09 %. But this year this is very small less then the previous
year.

For the year of 2009:

In the year of 2009 the AIBL have total debt is 44951058918/-BDT. This
years total asset is 48515787384/-BDT. After the calculation the ratio
amount is 92.65 %. This is again comparatively little bit less than the
previous year.

For the year of 2010:

In the year of 2010 the AIBL have total debt is 67696061857/-BDT. This
years total asset is 75374365400/-BDT. After the calculation the ratio
amount is 89.81 %. This is comparatively very much less than the previous
all years.

Problems arising on Net profit margin:

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In this year there was starting was 92.09 %. But the nest year it increase
and after that the next three years It goes down and down specially in the
year of 2010 it goes more down than the other years. Maximum ratio has fall
down in the year of 2010. This cause for recent share market fall.

Own opinion and solutions:

My only one opinion for this ratio is that only in the year of 2010 they as
usual fall down and they show its reason just the recent money market fall.
And they need to concern for this.

Return on assets (ROA):

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In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the net income and total asset for the year of 2006-2010. In this chart
one thing is very much clear that all the year there have some changes of
this ratio. All the years are not same. Below the chart all the details of every
years calculation are given very clearly.

Net Income
Return on assets (ROA) = (Percentage)
Total asset

For the year of 2006:

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In the year of 2006 the banks total Net income is 470018407BDT. And the
total asset is 21368168142/-BDT. So for this amount this years ratio is 2.19
%.

For the year of 2007:

In the year of 2007 the AIBL have total Net income is 347314166/-BDT. This
years total asset is 30182323406/-BDT. After calculation this years total
ratio is 1.15 %. Next year it fall down.

For the year of 2008:

In the year of 2008 the AIBL have total Net income is 668242288/-BDT. This
years total asset is 39158437848/-BDT. After the calculation the ratio
amount is 1.70 %. This year it increases but not more than the year of 2006.

For the year of 2009:

In the year of 2009 the AIBL have total Net income is 858987708/-BDT. This
years total asset is 48515787384/-BDT. After the calculation the ratio
amount is 1.77 %. This year it also increases than the previous year but not
than the year of 2006.

For the year of 2010:

In the year of 2010 the AIBL have total Net income is 1776992595/-BDT.
This years total asset is 75374365400/-BDT. After the calculation the ratio
amount is 2.35 %. But only this year this ratio gain better than the previous
all years.

Problems arising on Net profit margin:

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Problem is that in the year of 2006 it falls down but from the next year it
again turn around to the increasing level.

Own opinion and solutions:

My only one opinion for this ratio is that only in the year of 2010 they as
usual fall down and they show its reason just the recent money market fall.
And they need to concern for this. So my I think the year of 2007 was really
bad for AIBL.

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 Sales turnover or total asset turnover:

In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the sales revenue and total asset for the year of 2006-2010. In this chart
one thing is very much clear that all the year there have some changes of
this ratio. All the years are not same. Below the chart all the details of every
years calculation are given very clearly.

Net Income
Sales turnover or total asset turnover = (Times)
Total asset

For the year of 2006:

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In the year of 2006 the banks total sales revenue is 881682692/-BDT. And
the total asset is 21368168142/-BDT. So for this amount this years ratio is
4.12 times.

For the year of 2007:

In the year of 2007 the AIBL have total sales revenue is 614518980/-BDT.
This years total asset is 30182323406/-BDT. After calculation this years total
ratio is 20.3times. Its very high.

For the year of 2008:

In the year of 2008 the AIBL have total sales revenue is 1281678168/-BDT.
This years total asset is 39158437848/-BDT. After the calculation the ratio
amount is 3.27 times. This year it decreases more and more.

For the year of 2009:

In the year of 2009 the AIBL have total sales revenue is 1337197611/-BDT.
This years total asset is 48515787384/-BDT. After the calculation the ratio
amount is 2.75 times. This year it decrease little bit.

For the year of 2010:

In the year of 2010 the AIBL have total sales revenue is 946922517/-BDT.
This years total asset is 75374365400/-BDT. After the calculation the ratio
amount is 1.25 times. But only this year this ratio gain very much low than
the previous all years.

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Problems arising on Net profit margin:

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

Own opinion and solutions:

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

Debt Equity Ratio:

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In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the total debt and the entire total equity for the year of 2006-2010. In
this chart one thing is very much clear that all the year there have some
changes of this ratio. All the years are not same. Below the chart all the
details of every years calculation are given very clearly.

Total debt
Debt Equity Ratio = (Times)
Total equity

For the year of 2006:

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In the year of 2006 the banks total debt is 19677983839/-BDT. And the total
equity is 21368168142/-BDT. So for this amount this years ratio is 11.64
times.

For the year of 2007:

In the year of 2007 the AIBL have total debt is 28144824936/-BDT. This
years total equity is 30182323406/-BDT. After calculation this years total
ratio is 13.81 times. This ratio is small better than the previous year.

For the year of 2008:

In the year of 2008 the AIBL have total debt is 36452697089/-BDT. This
years total equity is 39158437848/-BDT. After the calculation the ratio
amount is 13.47 times. But this year this is very small less then the previous
year.

For the year of 2009:

In the year of 2009 the AIBL have total debt is 44951058918/-BDT. This
years total equity is 48515787384/-BDT. After the calculation the ratio
amount is 12.60 times. This is again comparatively little bit less than the
previous year.

For the year of 2010:

In the year of 2010 the AIBL have total debt is 67696061857/-BDT. This
years total equity is 75374365400/-BDT. After the calculation the ratio
amount is 8.81 times. This is comparatively more less than the previous all
years.

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Problems arising on Net profit margin:
Actually for this ratio there are no problems. Just only one have problem is
that in the year of 2010 they have problems as usual.

Own opinion and solutions:

So my only one opinion and suggestion is that they must need take
necessary steps for the year of 2010.

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 Asset Utilization ratio:

In the below there is Fixed asset turnover ratio in a chart. This chart belong
all the operating income and operating asset for the year of 2006-2010. In
this chart one thing is very much clear that all the year there have some
changes of this ratio. All the years are not same. Below the chart all the
details of every years calculation are given very clearly.

Net Income
Asset Utilization ratio = (Percentage)
Total asset

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 For the year of 2006:
In the year of 2006 the banks total operating income is 969769686/-BDT.
And the total operating asset is 21368168142/-BDT. So for this amount this
years ratio is 4.53 %. This starting is very much big.

For the year of 2007:

In the year of 2007 the AIBL have total operating income is 756180294/-
BDT. This years total operating asset is 30182323406/-BDT. After calculation
this years total ratio is 2.50 %. Its very less than the previous year.

For the year of 2008:

In the year of 2008 the AIBL have total operating income is 1528099861/-
BDT. This years total operating asset is 39158437848/-BDT. After the
calculation the ratio amount is 3.90%. This year it increases more high.

For the year of 2009:

In the year of 2009 the AIBL have total operating income is 1729828548/-
BDT. This years total operating asset is 48515787384/-BDT. After the
calculation the ratio amount is 3.56 %. This year it decrease little bit.

For the year of 2010:

In the year of 2010 the AIBL have total operating income is 2997317367/-
BDT. This years total operating asset is 75374365400/-BDT. After the
calculation the ratio amount is 3.97 %. But the last year it goes up. And this
is really very better.

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Problems arising on Net profit margin:

There is little bit problem in 2007. In this year the capital market was down
for some country local political problem.

Own opinion and solutions:

Management need more hard work for every sector of their organization.

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My Individual opinion and suggestions:

While doing Internee and making Internship report I think basically the main
problems of Al-Arafah Islamic Banks are given below. And these problems
play an important role for the ratio analysis fluctuation. For these problems
the ratios of different terms actually fluctuate.

1.Nature of the Problem and Challenges

The Islamic banks in the world have been facing a number of challenges.
Side by side, the Islamic banking in Bangladesh is also facing numerous
problems of challenges. First, they have not yet been successful in devising
an interest-free mechanism to place their funds on a short-term basis. They
face the same problem in financing consumer loans and government deficits.
Second, the risk involved in profit-sharing seems to be so high that almost all
of the Islamic banks in Bangladesh have resorted to those techniques of
financing which bring them a fixed assured return. As a result, there is a lot
of genuine criticism that these banks have not abolished interest but, they
have, in fact, only changed the nomenclature of their transactions. Third, the
Islamic banks do not have the legal support of the Central bank in
Bangladesh, do not have the necessary expertise and trained manpower to
appraise, monitor, evaluate an audit the projects that are required to finance.
As a result, they can not expand despite having huge excess financial
liquidity. The implementation of an interest-free banking in Banking raises a
number of questions and potential problems which can be seen from the
macro and micro operational point of view. A partial list of the issues
confronting Islamic banks in Bangladesh includes:

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2. Problems Related to Macro Operation of the Islamic Banks
- Liquidity and Capital
- Valuation of bank Assets
- Financial Stability
- The Ownership of Banks
- Lack of Capital Market and Interest-free Financial Instruments
- Insufficient Legal protection
- Controlling and Supervision by the Central bank on the Basis of Islamic
Shariah
- Lacks of Unified Shariah Rulings
- Absence of Islamic Inter-Bank Money Market
- New Banking Regulations
-- Accounting principles and Procedures
- Shortage of Supportive and Link Institutions
- Shortage of Skilled and Trained Manpower in Islamic Shariah banking
- Lack of Co-operation among the Islamic Banks
- Lack of Familiarity by International Financial and Non-financial Sector with
Islamic Products and procedures.
- Severe Competitions in the Financial Sector
- Economics slowdown and Political Situation of the Country
- Inadequate Track Record of Islamic Banking
- Absence of Infrastructure for International Islamic Trade Financing
- Defaulting Culture of the Borrowers
- Short-term Asset Concentrations in the Islamic Banks
- Lack of Course or paper on Islamic Economics, Banking and Finance at the
Educational Institutions.
- Lack of Uniform Operational procedure of Islamic Banking
- Lack of Specialized Islamic Banks and Non-Bank financial Institutions

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- Lack of Consortium or Syndication of the Islamic Banks
- Lack of Harmonization of Islamic financial Practices
- Lack of Inter-country Study on the practical Operations of Islamic Banking
- Lack of Secondary Securitization Market
- Lack of Coordinated Research Work on Islamic Economics, Banking and
finance
- Lack of Apex Training Institute for the Islamic Banks.

3. Problem Related to Micro Operation of the Islamic Banks :

- Increased Cost of Information
- Control over Cost of Funds.
- Mark-up Financing and Corrupted Mark-up
- Excess Resort to the Murabaha Mode of Financing
- Utilization of Interest Rate of fixing the Profit Margin in Bai-Modes
- Financing Social Concerns.
- Lack of Positive Response to the Requirement of government Financing.
-Failure of Islamic Banks to Finance High Return Projects.
- Sacrifice of a locative Efficiency
- Loss of Distributive Efficiency.
- Depression of Profit.
- Lack of Full-fledged Shariah Audit.
- Fraud-Forgery or corruption in Islamic Banks.
- Minimum Budget for Research and Development.
- Working Environment.
- Issuance of Letter of Guarantee (L/G)

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- Minimum Budget for Research and Development.
- Lack of Shariah Manual or Guidelines.
- Islamic Investment Risk Analysis and measurement Methodology.
- Non-exemption of Stamp Duty for Purchasing Property by Banks.
- Lack of Co-operation between Islamic Banks and Islamic NGOs for
extending Micro credit.
- Lack of Establishment of Links with other Training Institutes and Shariah
Supervisory Bodies.
- Lack of Intention of the Management to be strict with Shariah Guidelines.

The above problems are some of the burning problems confronting the Al-
Arafah Islami bank in Bangladesh. However it is felt that much operational
work and in-depth research work has to be undertaken to allow the Islamic
banks to flourish with highest quality and strength.

My suggestion is that if the bank management takes necessary steps for

solving these problems then they will be gainer. In my ratio analysis I just
give advice to the AIBL that as early as possible they must have to change
their management and banking environment. Cause those are very poor that
I have seen.

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SWOT Analysis in AIBL:
Every organization is composed of some internal strengths and weaknesses
and also has some external opportunities and threats in its whole life cycle.

Strengths:
-AIBL provides its customer excellent and consistent quality is every service.
-AIBL is financially sound company.
- AIBL utilizes state of the art technology to ensure consistent quality and
operation.
-AIBL provides its works force an excellent place to work
-AIBL already achieved a good will among the cli
-AIBL has research and training division.

Weaknesses:
-AIBL lacks well trained human resource in some area.
-AIBL lacks aggressive advertising.
-The procedure of credit facility is to long compare to other banks.
-Employees are not motivated in some areas.

Opportunities:
-Emergence of on line banking will open more scope for AIBL.
-AIBL can introduce more innovative and modern customer service.
-Many branches can be opened in local remote area as its high demand.
-AIBL can recruit experienced, efficient and knowledgeable officers and staffs
as it offers good working environment.

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Threats:
-The worldwide trend of mergers and acquisition in financial institutions is
causing problems.
-Frequency taka devaluation and foreign exchange rate fluctuation is causing
problem.
-lots of new banks are coming in the scenario with new service.
- Local competitors can capture huge market share by offering similar
products

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Conclusion

Al-Arafah Islami Bank ltd. is a non government commercial Bank in

Bangladesh, which started its business from 1995.I t is a unique combination
of Shariah & Islamic banking. Among non government commercial banks, Al-
Arafah Islami Bank Ltd. is a milestone for economic development. It has been
playing an important role to eradicate the unemployment problem in
Bangladesh. Over 800 employees and 5500 shareholders are getting benefit
from this organization. But most of the people in our country have
misconception about Islamic banking specially Al-Arafah Islami Bank Ltd. &
other Islamic banks. They can not find any difference in its operation
between conventional commercial Banks and Islamic Banks because they
have no clear idea about the activities as well as investment mechanism of
Islamic banks.
The Bank is committed to run its activities as per Islamic Shariah and thus it
has different investment(credit) modes, different repayment schedules,
different disbursement procedure, different mark up system. and also has a
different Credit(Investment) policy. Mark up means adding some additional
value after purchasing the goods but before to sell the same to another
people. This system is accepted in Islamic Shariah because here money is
converted to goods. Money begets money is prohibited in Islamic Shariah.
People is getting more benefit from the dealings of Islamic banking because
here quarterly interest is not charged and there is no possibility of interest
to be converted into principal. It can not take part in call money market.
Mudaraba, Musharaka are another mode of investment in Islamic Banking.
But here honesty is the only pre-requisite. For ensuring more benefit, more
facility from Islamic banks like AIBL we have to be honest and more sincere
to repay the taken money from these banks in time.

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RECOMMENDATIONS

On the basis of observation, SWOT analysis, Ratio analysis, and employees

comments I have some recommendations for Al-Arafah Bank Limited to
capture more market share and to make the Internal environment more
active. I hope these recommendations would help them to compete with their
competitors.

Al-Arafah Bank Limited has the Islamic rules and regulations. So I think they
should follow those rules and regulations for their future betterment.
Al-Arafah Islami Bank Limited does not have enough advertisements for their
products, so Al-Arafah Islami Limited needs more advertisement to promote
their products.Al-Arafah Islami Bank Limited takes more time for CIB report
and prompt service than the other banks. So AIBL should do this kind of job
within a short time.

This is heartiest request to all the governing bodies to maintain proper

environment and proper ways and to give the best customer service for keep
the market strong.

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Bibliography:

# Al-Arafar Bank Ltd VIP branch road.

# Annual report of AIBL (2006-2010)
# www.google.com
# www.wikipedia.org
# Bangladesh Bank website.

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