General Banking and Investment Activities of Al Arafah Islami Bank

Main objective of this report is to identify the major products of General banking practiced and and Investment Activities  by Al-Arafah Islami Bank, Dhanmondi Branch and its competitive performance from the year 2007 to 2008. Report also focus on to know about Islami banking system in our country and to focus features and conditions of general banking products Al-Arafah Islami Bank. Finally draw SWOT analysis and make recommendation.



The perception of Islamic banking has been bloomed from the inspiration of building up a society on justice in accordance with basic socio-economic principles of Islam. The difference between Islamic bank and conventional bank is on principles. The functions of this type of bank are completely different. This bank is established on Islamic Shariah and all types of transactions are free from interest. Justified profit is the basis of financial transaction of this bank. This bank is committed to establish socio-economic justice.

The second Islamic Bank of the country, Al-Baraka Bank Bangladesh Limited commenced banking business as a scheduled Islamic bank on May, 20, 1987. A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the founder chairman of the bank. His progressive leadership and continuous inspiration provided a boost for the bank in getting a foothold in the financial market of Bangladesh. Al-Arafah Islami Bank Ltd. has 68 branches and a total of 1432 employees (as of April 2009). Its authorized capital is Taka 2800 million and the paid-up capital is BDT 1748.18 million.



Broad Objectives

To identify the major products of General banking practiced by Al-Arafah Islami Bank Ltd., Dhanmondi Branch and its competitive performance from the year 2007 to 2008.

Specific Objectives

The prime objectives of the report are as follows:

  • To know about Islami banking system in our country.
  • To know about Al-Arafah Islami Bank Limtied.
  • To identify the major products of Al-Arafah Islami Bank Ltd.
  • To understand the General Banking and Investment products used by the Dhanmondi Branch of Al-Arafah Islami Bank Ltd.
  • To focus features and conditions of general banking products Al-Arafah Islami Bank Ltd.
  • To make a bridge between the theories & practical procedures of banking day-to-day operations.



A certain methodology was followed in order to fulfill the objectives of the report, making maximum utilization of the scopes and to avoid the limitations as much as possible to prepare the final outcome of this report.

Data Collection Method

To prepare this report I mostly depend on the experience and secondary information because as an intern it was difficult for me to collect primary information.

I used some documents of Al-Arafah Islami Bank Ltd. like; annual reports, product brochures, Dhanmondi Branch statement of affairs, Dhanmondi Branch monthly reports, etc as the secondary source of information.

Data Analysis Method

In analyzing these data, I used MS-excel to classify the data and locate the pattern to sort out the data under different head and criteria. The statistical tools are used for in-depth ratio analysis.


Organizational Profile

Introduction to Al-arafah Islami Bank Ltd.

Al-Arafah Islami Bank Ltd. is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. Islamic ideology encourages us to succeed in life here& hereafter. With the objective of achieving success here & hereafter by pursuing the way directed by Allah and the path shown by His Rasul (SM), Al Arafah Islami Bank Ltd was established (registered) as a private limited company on 18 June 1995. The inaugural ceremony took place on 27 September 1995. The authorized capital of the Bank is Tk.2500.00 million and the paid up capital is Tk. 1153.18 million as on 31.12.2007. Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is being owned by indigenous shareholders.

The equity of the bank stood at Tk. 2037.50 million as on 31 December 2007, the manpower was 1033 and the number of shareholders was 12013. It has achieved a continuous profit and declared a good dividend over the years. High quality customer service through the integration of modern technology and new products is the tool of the bank to achieve success. The bank has a diverse array of carefully tailored products and services to satisfy customer needs.

The Bank is committed to contribute significantly to the national economy. It has made a positive contribution towards the socio economic development of the country with 47 branches of which 17 is AD throughout the country.

History of AL-arafah Islami Bank

Islam provides us a complete lifestyle. Main objective of Islamic lifestyle is to be successful both in our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of Al-Qur’an and lifestyle of Hazrat Muhammad (Sm.) for our supreme success. Al-Arafah Islami Bank started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Qur’an and Sunnah.

A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the founder chairman of the bank. His progressive leadership and continuous inspiration provided a boost for the bank in getting a foothold in the financial market of Bangladesh.

A group of 13 dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah Islami Bank Ltd. has 53 braches and a total of 1080 employees (upto December 2008). Its authorized capital is Taka 2500 millions and the paid-up capital is Taka 1153.18 millions.

Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh.


Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh.

Mission Statement

  • Achieving the satisfaction of Almighty Allah both here and hereafter.
  • Proliferation of Shariah Based Banking practices.
  • Quality financial services adopting the latest technology.
  • Fast and efficient customer service .
  • Maintaining high standard of business ethics.
  • Balanced growth.
  • Steady and competitive return on shareholders’ equity.
  • Innovative banking at a competitive price.
  • Attract and retain quality human resources.
  • Extending competitive compensation packages to the employees.
  • Involving more in Micro and SME financing.


Special Features of the Bank

As an Islami bank, we are singular in every positive aspect. We provide a bunch of state-of-art banking services within the wide bracket of Shariah. We are unique with our products, strict with our principle and uncompromising with our honesty. Some of our special features that make us notable in Islami banking sector are as follows:

  • All activities of AIBL are conducted under an profit/loss based system according to Islamic Shariah to get the nation rid of Usury.
  • Its investment policies under different modes are fully Shariah compliant and well monitored by the board of Shariah Council.
  • During the year 2007, 70% of the investment income has been distributed among the Mudaraba depositors.
  • In 2008, AIBL has included online banking in its wide range of services. Bangladeshi software has been introduced in this feature to promote the local developers.
  • AIBL regularly arranges its AGMs (Annual General Meeting). Whenever needed EGMs (Extraordinary General Meeting) are also arranged.
  • We regularly pay dividend to our valued shareholders. For the year of 2008, we declared 30% bonus dividend to our shareholders.
  • We believe in providing dedicated services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity.
  • The bank is committed towards establishing a welfare-oriented banking system to meet the needs of low income and underprivileged class of people.
  • The Bank upholds the Islamic values of establishment of a justified economic system through social emancipation and equitable distribution of wealth.
  • Following the Islamic traditions, it is assisting in the economic progress of the socially deprived people; in the creation of employment opportunities and in promotion of rural areas to ensure a balance development of the country.
  • The Bank believes in social and philanthropic activities and has established AIBL English Medium Madrasha and AIBL Library. More endeavors will inshallah follow in future.


Corporate Culture

Al-Arafah Islami bank is one of the most disciplined Banks with a distinctive corporate culture based on Islami Shariah. Here they believe in shared meaning, shared understanding and shared sense making. The people in this bank can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to the bank. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture has developed has not been imposed; it has rather been achieved through their Corporate conduct.

Corporate Social Responsibilities

Al-Arafah Islami Bank Foundation

The bank has a foundation launching philanthropic activities. Al-Arafah English Medium Madrasah and Al-Arafah Islami Bank Staff Welfare Fund are the major two wings for launching philanthropic activities.

Staff Welfare Fund

The Bank always kept a careful eye on the economic security and benefit of its staffs & officers. The Bank operates a contributory provident fund, a social security & benevolent fund and a gratuity fund for its employees. In the year 2007 Tk. 7.5 lac was paid to wife of late Mr. Shahidul Islam, AVP & former branch manager of Joydevpur Branch from bank’s social security & benevolent fund. Till now a total of Tk. 30 lac has been paid from the fund to the families of late officers & staffs 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 of Islam. The prime aim of this madrasah is to contribute towards building human resource and in the broader sense to ensure human welfare. With the view Al-Arafah Islami Bank Foundation has established an English Medium Madrasah at Dhanmondi in 1999. Such institution upto ‘O’ level of its kind is for the first time in Bangladesh.

Al-Arafah Islami Bank Library

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

Varieties of good books were procured in the library, but those were predominantly to enrich Islamic knowledge and culture. To fulfill that goal Al-Arafah Islami Bank distributed a total of 1084 copies of Arabic-BangIa ‘Torjomatul Quran’ to all the upazillas of the country.

Education is the harmonious development of body, mind & soul. If religion is not attached to it the real attitude towards life and values will fail to develop. It is mandatory to learn Elm-e-Din to govern our life in the right way of Islam. To fulfill this noble intention Al-Arafah Islami Bank Library started Dars-ul-Quran (Teachings of Quran) program. This program will cover translation with detail explanation of Quran starting from Sura Fatiha upto Sura Nas gradually. Dars-ul-Quran program takes place every monday after Magrib prayer.

Other than this Al-Arafah Islami Bank Library arranges shows of feature films or documentary films on Islamic life & culture.

Dhanmondi Branch

Dhanmondi Branch was started in 15th December, 1998; to cover the huge and prospective customers from the area of Dhanmondi, Zigatola, Hagaribagh, Rayerbazar Satmasjid Road. It was estimated by them that there are numbers of saver and borrower groups those who are willing to have their economic services through an Islamic bank.

Being the second Islamic bank of the country under Al-Arafah Islami Bank Ltd. opened the Dhanmondi Branch, as their 17th branch at Satmasjid Road, Dhanmondi, Dhaka.  Now, there are twenty two employees. It is a non-ad branch. Which means it doesn’t directly deal with the foreign exchange transactions. It has a large office floor which can accommodate good number of customers comfortably.

The branch has efficient human resources that can meet up customer’s needs. Order wise work load is distributed properly. Besides, interpersonal relationship is remarkable. Most noted strength is customer service.


As this is a non-ad branch, it offers the services of two departments:

  • General banking
  • Investment


Functions of Dhanmondi Branch

General Banking

General banking is the front-side banking service department. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service form bank. On the other hand, there are some customers with who bank are doing its business frequently. It is an important department for all banks because it provides day-to-day service to the customers. Front Desk is the important for general banking. Customers give their deposits and meet their demand for cash by honoring cheques. Besides this a customer opens new accounts, remit funds, issues bank drafts and pay orders etc. There are various sections in this department, which are as follows:

  • Cash Section
  • Accounts Opening Section
  • Cheque Clearing Section
  • Remittance Section

Cash Section

The most vital and important section of the branch is Cash Department. It deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash vault. Opening cash balance is adjusted by cash receipts and payments. This figure is called closing balance. This balance is then added to the vault. This is the final cash balance figure for the bank at the end of any particular day. There is an important clause and duty practiced by the branch is to refund the principal amount that exceeds more than Tk. 1 crore at the principle branch of the bank.

Books Maintained By This Section

  • Vault Register: It keeps account of cash balance in vault in the bank.
  • Cash Receipt Register: Cash receipt in whole of the day is recorded here.
  • Cash Payment Register: Cash payments are made in a day are entered here.
  • Rough Vault Register: Cash calculation for final entry in vault register is done here as any error and correction here is not acceptable. ,
  • Cash Balance Book: Balance here is compared with vault register. If no difference is found, indicates no error.


Accounts Opening Process

Recently, Bangladesh Bank has been declared, designed and enforced a unique format of form for every banks. This format should hold the important document in a same manner and process respectively for different kind of accounts. Al-Arafah Islami Bank Ltd. is not different from this practice. Accounts opening process can be as follows:

Step 1

  • Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened.
  • The form is filled up by the applicant himself/ herself
  • Two copies of passport size photographs from individual are taken and in case of firms photographs of all partners are taken
  • Officer are taken information from customer by key information system

Step 2

  • Applications must submit required documents
  • Applications must sign specimen signature sheet and give mandate
  • Introducer’s signature and accounts number-verified by legal officer

Step 3

  • Filling & signing up KYC or Know Your Customer Form
  • Filling & signing up Owner Information Form

Step 4

  • Authorized Officer accepts the application

Step 5

  • Minimum balance is deposited-only cash is accepted

Step 6

  • Account is opened and a cherub book and pay-in-slip book is given


Clearing Department

Cheques clearing section of Al-Arafah Islami Bank Ltd. receives cheque, demand drafts and pay orders of their clients. Upon the receipt of the instrument the cheque clearing section examines three types of payment modules.

  • Whether the Paying Bank within Dhaka City: The cheques clearing section of Al-Arafah Islami Bank Ltd., Dhanmondi Branch sends Inter Branch Debit Advice (IBDA) to the head office on the receiving day of the instruments. The main branch takes those instruments to the clearing house on the following day. If the instruments are dishonored, Head Office of Al-Arafah Islami Bank Ltd. sends IBDA to the Al-Arafah Islami Bank Ltd., Dhanmond Branch.
  • Whether the Paying Bank of their own branch: The cheque clearing section of Al-Arafah Islami Bank Ltd., Dhanmond Branch sends Outward Bills for Collection (OBC) to the concerned paying branch to get Inter Branch Credit Advice (IBCA) from the paying branch. If the paying branch dishonors the instrument, the paying branch returns it to the Al-Arafah Islami Bank Ltd., Dhanmond Branch describing why the instrument is dishonored.

Types of Cheque Collected by Clearing Department

  • Local Bills Collection Cheques (LBC): Local bills collection cheques are those cheques, which are collected and paid by two different branches of a bank situated in the same city.
  • Outward Bills Collection Cheque (OBC): OBC cheques are those cheques, which are collected and paid by two different branches of same or different bank situated in the outstation.
  • Transfer Cheque: Transfer Cheques are those cheques, which are collected and paid by the same branch of Al-Arafah Islami Bank Ltd.


Clearing House

Clearing house is an arrangement under which member banks agree to meet, through their representatives, at an appointed time and place to deliver instruments drawn on the other and in exchange, to receive instruments drawn on them. The net amount payable or receivable as the case may be, is settled through an account kept with the controlling bank.

Types of Clearing

  • Outward Clearing: Outward clearing means when a particular branch receives instruments drawn on the other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered ad outward clearing for that particular branch.
  • Inward Clearing: When a particular branch receives instruments, which drawn on them and sent by other member bank for collection are treated as inward clearing.



Sending money from one place to another through some charges is called remittance. To pa or receive money of customers in the form of remittance from one place to another, from one person to another inside and outside the national boundary is an earning source of every bank. Dhanmondi Branch, Al-Arafah Islami Bank Ltd. operates both the foreign and local remittance to serve it’s customers. In addition, this service is an important part of country’s payment system. Through this service, people can transfer their funds from one place to another place very quickly.

Foreign Remittance

Foreign remittance is to send money of customers from one place to another, from one person to another outside the national boundary. Though Dhanmondi Branch, Al-Arafah Islami Bank Ltd. is a non-ad branch, it can able to serve the customers by receiving and paying their incoming foreign remittance in the form of local currency. Foreign remittance is received by the bank via some internationally authorized agents. There are two medium of agent for foreign remittance at Dhanmondi Branch, Al-Arafah Islami Bank Ltd.; they are:


Moneygram is a money transfer medium/agent serves both domestic & international services. Its identification number consists 12 digits.


Eldorado is another money transfer agent serves only international services. Its identification number consists 17 digits.

The agents are identified by a serial number which has been supplied by the sender to receiver of customer. After digit identification the dealing also verifies the receiver’s name with documents of sender and e-mail of the agent. Verifying that, send an e-mail to the agent and transfer the amount to the cash department for payment. Any one of the documents required to identify the receiver are as follows:

  • National ID card
  • Voter ID card
  • Salary Statement
  • Statement of tuition fees
  • Academic/ organization’s ID card

Local Remittance

Sending money of customers in the form of remittance from one place to another, from one person to another inside and outside the national boundary is another earning source of every bank. As being a non-ad branch Dhanmondi Branch of Al-Arafah Islami Bank Ltd. only operates the local remittance to serve the customers. In addition, this service is an important part of country’s payment system. Through this service, people can transfer their funds from one place to another place very quickly. There are several techniques for collecting local remittance. These are:

  • Demand Draft (DD)
  • Telegraphic Transfer (TT)
  • Pay Order

Pay Order

Pay order gives the payee the right to claim payment from the issuing bank. It is payment from issuing branch only within the clearing house area of issuing branch. Payment is made through clearing.

  • Examine gentility of the pay order.
  • Enter into Pay Order register and give contra entry
  • Debit, if the fund is sufficient then it is OK for payment.

Charges of pay order are shown in bellow by a chart:

Amount of P.O.CommissionVATTotal


Demand Draft (DD)

This is an instrument through which customer’s money is remitted to another person/ firm/organization in outstation (Outside the clearing house area or from one district to another). Demand Draft Payment is made through the following process:

  • Confirm that the DD is not forged one.
  • Confirm with sent advice.
  • Check the “Test Code”
  • Make payment

Telegraphic Transfer (TT)

This is a mode of transfer/remit customer’s money from a branch of one bank to another branch of the sane bank or to a branch of another bank (with prior arrangement between banks with the Telegraphic Transfer issuing branch) through telephonic message. The issuing branch used to send the message of such transfer to the drawer/payee branch through telephone adding certain code number or test number on the basis of text key apparatus developed by the concerned bank for its different branches. The payment process of Telegraphic Transfer is:

  • Confirm issuing branch
  • Confirm payee A/C
  • Confirm amount
  • Make payment
  • Receive advice

Various Types of Deposit Account

Al-Arafah Islami Bank Ltd. offers following types of deposit account:

  • Mudaraba Savings Deposit Account (MSD)
  • Mudaraba Current Deposit Account (CD)
  • Mudaraba Term Deposit Receipt Account (MTDR)
  • Short Notice Deposit Account (SND)
  • Installment Term Deposit (ITD)
    1. Mudaraba Hazz Account
    2. Mudaraba Pension Scheme
    3. Mudaraba Lakhpoti Scheme
    4. Mudaraba Millionaire Scheme
    5. Mudaraba Kotipoti Scheme
    6. Mudarab Double Deposit Scheme

Mudaraba Savings Deposit Account (MSD)

To maintain smooth and certain life in future Mudaraba Savings Deposit Account is very suitable for middle class groups. The attributes of this are:

  • 500/- is the minimum amount of initial deposit.
  • Client cannot withdraw money more than twice a week,
  • The profit rate is 8% against MD account

For opening of this type of accounts following requirements are necessary:

  • The introducer must be attested photograph.
  • The introducer must be account holder of Al-Arafah Islami Bank Ltd.

Al-Wadia Current Deposit Account

Al-Wadia Current Deposit Account facilitates the account holder to draw money at any times but no profit is given to the current account deposited money. This can be opened by any individual or joint or any name of proprietorship business, private limited company or public limited company, association, clubs, societies, trusts etc. Generally, current account is opened for businessman and traders for easy transaction. By taking this liability, Al-Arafah Islami Bank Ltd. takes a service charge of Tk. 100 for six months.

Mudaraba Term Deposit Receipt Account (MTDR)

It’s a certain period deposited system, which is not repayable before the maturity date of a fixed period. Al-Arafah Islami Bank Ltd. offers higher rates of profit on such deposits. Usually customers are allowed to open this account for a certain period and the rate of profit in accordance with the terms of the deposit. The features of this scheme as follows:

  • Minimum balance: TK 10000.00
Particulars3 months6 months1 year

Short Notice Deposit Account (SND)

Short Term Deposit has following attributes:

  • 6% profit rate against STD.
  • No restriction over withdrawal of money
  • 1000/- is the minimum balance.

Installment Term Deposit (ITD)

Installment Term Deposit (ITD) is a sure investment for a steady return. It can be opened for 5, 8, 10, or 12 years for Tk. 200, Tk. 300, Tk. 500, Tk. 1000, Tk. 1500 and Tk 2000. The savings amount is to be deposited any day of the month. If the depositor has a separate account in the bank for which a standing instruction can be given to transfer the monthly deposit in the schemes’ account. Incase of failure to make the monthly installment in the schedule time 5% on overdue installment amount will be charged. The lowest charge will be Tk. 10 and this will be added with the following monthly installment. After 3 years of savings in this schemed the depositor is eligible for a loan up to 80% of his deposited amount.

Highlights of the Scheme

  • Mudaraba Lakhpoti Scheme
  • Mudaraba Millionaire Scheme
  • Mudaraba Kotipoti Scheme

Mudaraba Lakhpoti Scheme: For Mudaraba Lakhpoti Scheme 3, 5, 8, 10, 12 year’s monthly installments are Tk. 2,375, Tk. 1,275, Tk. 670, Tk. 460 and Tk. 335 respectively and will get Tk. 1 lac.

Mudaraba Millionaire Scheme: For Mudaraba Millionaire Scheme 3, 4, 5, 6, 7, 10, 12, 15 and 20 year’s monthly installments are Tk. 23,950, Tk. 16,950, Tk. 12,750, Tk. 9,950, Tk. 8,000, Tk. 4,600, Tk. 3,345, Tk. 2,170 and Tk. 1,150 respectively and will get Tk. 10 million.

Mudaraba Kotipoti Scheme: This is the most popular & target oriented schemes. One can open for 3,4,5,6,7,10,12,15,18,20 years and have to pay (monthly installment) Tk. 2,39,500, Tk. 1,69,500, Tk. 1,27,500, Tk. 99,500, Tk. 80,000, Tk. 46,000, Tk. 33,450, Tk. 21,485, Tk. 14,330 and Tk. 11,100 respectively and will get Tk. 1 crore.

Condition of these Schemes

  • By filling up a form an account is opened.
  • A non-transferable deposit receipt will provide to the customer after opening the account.
  • If the deposit is withdrawn before a 5-year term, then saving interest rate will be applicable and paid to the depositor. However, no in profit paid if the deposit is withdrawn within 1 year of opening the account and Monthly Income paid to the customer will be adjusted from the principal amount.
  • This scheme will be credited to the loan account until liquidation of the loan amount inclusive of profit. A depositor can avail loan up to 80% of the deposit amount under this scheme.

Mudaraba Double Deposit Scheme: Savings works as the very foundation of development. Savings is the prime source of business investment in a country. So it helps to build up capital. To create more awareness and motivate people to save, Al-Arafah Islami Bank Ltd. offers Mudaraba Double Deposit Scheme. Here people put their money for double return after 6years.

Conditions of the Scheme

  • The deposit can be made in multiplies of TK. 10000.00.
  • This is 6 years period deposit. The deposit cannot be withdrawn at any time with in the maturity date.



In achieving the aforesaid objective of the bank, investment operation of the bank is of paramount importance as the greatest share of total revenue of the band is generated from it, maximum risk is centered in it and even the very existence of band depends on prudent management of its investment portfolio. The failure of a commercial bank is usually associated with the problem in investment portfolio and is less often the result of shrinkage in the value of other assets. In view of the above this investment policy and control guidelines of the bank has been prepared which is subject to amendment, revision, readjustment and refinement from time to time as may be warranted by the change of circumstances due to passage of time to suite the requirement of the bank. There are three sections in this department at the Dhanmondi branch, which are as follows:

  • Bai-Muazzal
  • Hire Purchase Sirkatul Milk
  • Murabaha


Bai-Muajjal may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Islamic Shariah and the Law of the country), to the buyer at an agreed fixed price payable at a certain fixed future date in lump-sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the buyer

In this bank, Bai-Muajjal is treated as a contract between the bank and the client under which the bank sells to the client certain specified goods, purchased as per order and specification of the client at an agreed price payable within a fixed future date in lump sum or by fixed installments.

Investment allowed to individual/firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending, it is a continuous investment. It is allowed under the categories

  • “Commercial Lending” when the customer is other than a industry
  • “Working Capital” when the customer is an industry.


Bai-Murabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Islamic Shariah and the Law of the land), to the buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump-sum or by instalments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods.

Hire Purchase Shirkatul Milk

This is a sale contract between a buyer and a seller under which the ownership of certain goods or asset is transferred by seller to the buyer against agreed upon price paid/to be paid.

Thus, in Hire Purchase under Shirkatul Milk mode both the Bank and the Client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transports etc. Purchase the asset with that equity money, own the same jointly; share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or portion of the asset owned by the Bank is hired out to the Client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of its share / part / portion to the Client against payment of price fixed for that part either gradually part by part or in lump sum within the hire period or after the expiry of the hire agreement.

Investment policy

The investment policy should be updated annually to reflect changes in the economic outwork and evolution of bank’s investment portfolio. The investment proposal should be forwarded to head office for sanction with recommendation showing justification that should include the following

Industry and Business Segment Focus:

The bank shall provide suitable investment services & products for the following sectors, which must meet the other requisites as set by the bank from time to time.

  • Steel & engineering.
  • Food & Allied.
  • Textile & garments.
  • Pharmaceuticals & Chemicals.
  • Paper & paper products.
  • Service industries.
  • Housing & real Estate.
  • Bricks Fields.
  • Edible oil.
  • Assembling industry.
  • Cottage industry.
  • Electronics & Electrical Commodities.
  • Construction Company.
  • Trading (retail/whole sale)

Every year at the time of investment budgeting a clear indication of banks appetite for growth to be reflected approved investment budget shall be strictly followed for the development of the bank.

Investment Categories:

 As initiated by Bangladesh bank vide BCD circular no. 33 dated 16-11-89 different kinds of lending were subdivided into 11 categories w. e. f 01-01-90, which was subsequently reduced to 9 vide BCD circular no. 23 dated 09-10-93 and again to 7 prime sectors vide BCD circular no. 8 dated 25-04-94 for fixation of rates of profit by the individual banks on competitive basis depending on the cost of funds, prevailing market condition and monetary policy of the country.

Single Borrower/Group Limits/Syndication:

Bank may allow investment facilities to a single customer/Group (Funded & non funded) up to its 50% of total capital out of which funded facilities must not exceed 25% of total capital. All proposal submitted to Head Office will also be required to indicate the extent of the Bank’s global exposure to that customer group.

Group exposure shall be deemed to include the total investment facilities as follows:

  • Investment facility in the name of the borrower.
  • Investment facility in the name of the firms & companies in which the borrower or its partner or its director is the proprietor or a partner or a Director.
  • Investment facility in the name of any firm of company in which the borrower or its partner or its director owns 20% or more share even if not a Director.
  • Any Investment facility guaranteed by the borrower or its partner, or its Director.

However, definition of group exposure if given by Bangladesh Bank shall be followed regardless of the above definition

Discouraged Business Type:

The Banks should outline industries or leading activities that are discouraged. As a minimum, the following should be discouraged.

  • Military Equipment/Weapons Finance.
  • Highly Leveraged Transactions.
  • Finance of Speculative Investments.
  • Logging, Mineral Extraction/Mining, or other activity that is ethically of environmentally sensitive.
  • Lending to companies listed on CIB black list or known defaulters.
  • Counter parties in countries subject to UN sanctions.
  • Share lending.
  • Taking an Equity Stake in borrowers.
  • Lending to Holding Companies.
  • Bridge Investments relying on equity/debt issuance as a source of repayment.
  • Tannery Finance.
  • Izara Bill Baia (HB-residential) who has no other business with the bank.


Lending Authority

As sure proper and orderly conduct of the business of the Bank, the Board of Directors’ will empower the Managing Director and other Executives of the Bank to lend up certain amount under certain terms and conditions at their discretion. The lending officer is broadly categorized as follows:

  • Managing Director
  • Deputy Managing Director
  • Executive vice President Asst.
  • Senior vice President
  • Vice President
  • Senior Asst. vice President
  • Vice President.

The amount and scope of each Officer lending authority is a function of the amount and extent of authority required by the officer to carry out his/her responsibilities to the Bank and its clients may prudent, effective manner. It must be emphasized mat an Officer will not be delegated lending authority only on the basis of his position. In other words, an officer does not automatically get lending authority by virtue of his corporate and/ or functional title. Specified lending authority will be delegated by the Managing Director to various Executives after taking into consideration his proven credit judgment, knowledge and experience. The amount of lending authority approved by the Board for various Executives form the upper limits of the authority that may be delegated to an officer holding corporate title. Each individual lending authority will be delegated to him in writing. The managing Director with the Executive Committee/ Board will review all lending authorities periodically.

CIB (Credit Information Bureau)

Bangladesh Bank has established within itself a Credit Information Bureau (CIB), which collects credit information from the banks. Banks are required to furnish such information in respect of credit limit of Tk.50000 and over. They mention the Name of facility, security and charge along with outstanding balance. After consolidating such information in respect of each customer the central bank supplies to the total limits sanctioned to and the number of banks dealing with a party. Thus the banks can find out if any of their customers is having excessive borrowings from the banking system at any particular time.


Findings & Analysis

This chapter is the most vital part of an internship report. It focuses and explains the things I have learned and acquired from the internship period, performance of Dhanmondi branch and specially at that particular period, the profit growth of the overall bank, manpower management system of the branch, marketing strategy of the bank relating to its mission, vision and commitments, SWOT analysis etc.

Dhanmondi branch of Al-arafah Islami BankLtd. is running well to the goals of their philosophy. Though it has shown some cyclical variation in various years but its deposit collection, investment, export & import activities and above all the ultimate target is showing that Dhanmondi branch perform its management expectation satisfactorily.

Performance of Dhanmondi Branch, Al-arafah Islami Bank Ltd.

YearHead of Accounts
Deposit TargetDeposit AchievedAchieved in Percentage
 Investment TargetInvestment AchievedAchieved in Percentage
 Profit TargetProfit EarnedAchieved in Percentage


The Dhanmondi branch’s deposit collection rate is quite well such as in 2007 and 2008. It collected Tk. 1024.80 ml. and Tk. 1235.70 ml. respectively although management targeted Tk.1500 ml. for both the years. The percentage of achievement was good in 2008 but it could not achieve its target in 2007 because for the economic recession and many other reasons.


The Dhanmondi branch’s investment response rate is quite well such as in 2007 and 2008. It collected Tk. 211.10 ml. and Tk. 213.26 ml. respectively although management targeted Tk.500 ml. for both the years. But it could not achieve its target in 2007 and 2008 because for the economic recession and many other reasons.


The Dhanmondi branch’s profit earning rate is not satisfactory in 2007 and 2008. It collected Tk. 11.90 ml. and Tk. 23.50 ml. respectively although management targeted Tk.100 ml. for both the years

Marketing Strategies of Dhanmondi Branch

To attain the above vision, mission and commitments Dhanmondi Branch of Al-arafah Islami Bank Ltd. maintains the following:

  • The main strategy of the bank is using Islami Banking System to attract its market.
  • Providing efficient customer service
  • Maintaining corporate and business ethics
  • Being trusted repository of customers’ and their financial advices
  • Making its products superior and rewarding to the customers
  • Display team spirit and professionalism
  • Sound capital base
  • Enhancement of shareholders wealth
  • Fulfilling its social commitments by expanding its charitable and humanitarian activities
  • Providing high quality financial services in export and import trade.
  • Building tight personal relationship with customers and clients
  • Taking less promotional activities and emphasizing on relationship marketing.

Financial Performance of Al-arafah Islami Bank Ltd.

Sl. No.Particulars20072008
1.       Authorized Capital (Tk. ml.)2,500.002,500.00
2.       Paid up Capital (Tk. ml.)1,153.181,383.81
3.       Total Capital (Tk. ml.)2,245.133,049.34
4.       Capital Surplus/(Deficit) (Tk. ml.)189.82327.31
5.       Total Assets (Tk. ml.)30,182.3239,158.44
6.       Total Deposit (Tk. ml.)23,009.1329,690.12
7.       Total Investment (Tk. ml.)22,906.3729,723.79
8.       Total Contingent Liabilities & Commitments (Tk. ml.)3,887.487,063.93
9.       Investment Deposit Ratio  99.55%93.44%
10.   Ratio of Classified Investment to Total Investment3.72%2.75%
11.   Profit After Tax & Provision (Tk. ml.)347.31668.24
12.   Amount of Classified Investment during the year (Tk. ml.)854.41817.90
13.   Provision kept against Classified Investment (Tk. ml.) 246.48329.78
14.   Provision Surplus/(Deficit) (Tk. ml.)9.3917.16
15.   Cost of Fund10.99%10.46%
16.   Profit Earning Assets (Tk. ml.)25,589.3533,360.83
17.   Non-profit Earning assets (Tk. ml.)4,592.975,797.60
18.   ROA1.15%1.71%
19.   Income from Investment (Tk. ml.)2.6068.68
20.   Earning per Share (Tk.)25.1048.29
21.   Net Income per Share (Tk.)25.1048.29
22.   Price Earning Ratio (Times)14.629.53


Learning Points

In the Dhanmondi Branch, Al-arafah Islami Bank Ltd. I have many things and got practical experience about general banking and investment sector. Here I learned how to issue a cheque to an account holder. Thus, I learn how to open current account and saving account, required documents and papers for different types of account. I did work with clearing department where I have learned how to clear the cheques through clearing house of Bangladesh Bank, OBC etc.

I have also acquired the knowledge of different types of investment operated in Dhanmondi Branch. From the investment sector I know about the legal requirements, documents and papers for different types of investment schemes.

At the end, I would like to say that in my internship period; I have learned official manners, corporate environment and behaviour, customer service, how to deal with customer and earned satisfaction.

I think this is my main learning point to get a job in good organization and apply the experience for better outcome


SWOT Analysis

Not surprisingly, in the competitive arena of marketing era SWOT analysis is a must based on Product, Price, Place and Promotion of a financial institute like private bank. From the SWOT analysis we can figure out ongoing scenario of the bank. So to have a better view of the present banking practices of Al-Arafah Islami Bank Ltd.

In SWOT analysis two factors act as prime movers

  • Internal factors which are prevailing inside the concern which include Strength and weakness.
  • On the other hand another factor is external factors which act as opportunity and threat.


  • Good banker-customer relationship.
  • Online banking system.
  • Islami Shariah based banking system.
  • Energetic as well as smart work force.
  • Competitive profit provider comparing with other Islamic bank.
  • Strong financial position.
  • Efficient administration


  • Reluctance to ad campaign.
  • Existing manual vouchers.
  • Lack of consumer credit scheme.
  • Manpower is not sufficient.
  • Marketing policy is not well setup.
  • Officers have limited experience and not enough trained
  • Many inexpert and laggard assistant officers.
  • The bank has no ATM service
  • Insufficient number of deposit scheme and loan.


  • Huge business area.
  • Introducing consumer credit scheme.
  • Growth of sales volume.
  • Introducing branch banking through online.
  • Develop relations and correspondence with foreign banks.
  • More concentrated Banking based on Islamic Shariah.


  • Competitors have more attractive deposit schemes.
  • Bangladesh Bank has no well established Islami Banking Rules.
  • Different classic services of other banks.
  • Entrance of new private commercial banks.
  • Young, energetic, dynamic, talent and smart work force of competitors.
  • imposes high rate of taxes and VAT.
  • Political unrest and economic recession.
  • Illegal business operation by the some clients.



Islamic banking is now a reality in Bangladesh. It is functioning efficiently, smoothly and satisfactorily despite facing various internal and external threats. The economics of the country may be geared towards Islamic Principles and Teachings in order to realize the full potential of Islamic banks in the long run. However, in the short run, the Islamic banks can take a number of concrete steps to facilitate the Islamic banking in Bangladesh.

This report will give a clear idea about the activities, function and operational strategies of Al-Arafah Islami Bank Limited. Al-Arafah Islami Bank Ltd. started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah. During these 13 years of its operation, the bank had been widely acclaimed by the business community from small businesspersons to conglomerates for forward looking outlook and innovative financial solutions. The Dhanmondi Branch, of Al-Arafah Islami Bank Ltd. conducts general banking activities, investments. As it is a non-ad branch, it does not perform the full of the foreign exchange activities by its own.

The fund of bank strongly depends on deposits and it is has a big influence through the number and amount of deposit. Dhanmondi Branch, Al-arfah Islami Bank Ltd. has a better opportunity to have a huge deposit accounts to increase it fund from the savers unit Rayer Bazar, Zigatola and Hagaribagh. Credit card and ATM cards can play an important role in capturing the unutilized money. The bank has to give huge concentration on better customer service and satisfaction. There are a good number of shoping mall, food courts, small & medium factories in the area. So the branch can gladly introduce SME banking L/C and foreign exchange facilities.



Through my work experience at the Dhanmondi Branch, Al-arafah Islami Bank Ltd.,  I came across a few operational drawbacks – for which the following suggestions can be put forward.

  • The internal decoration of the branch has scope for much improvement
  • More employees should be appointed to manage the increasing customer pressure.
  • The behaviour of security guards must be improved. I have experienced some unwanted incidents that occurred through the carelessness of the guards. Sometimes clients also complain about their misbehaviour.
  • Leaflets containing AIBL’s product description should be made available at the branches. This will help the prospective customers to be informed about existing and new products, and reduce the hassle of counter staffs to describe new products. This will eventually result in increased employee productivity.
  • Upgrade Online Banking.
  • Ensure high level customer service.
  • Bank should introduce ATM system.
  • Bank should introduce consumer credit scheme.
  • Bank should introduce independent ‘Marketing Department’
  • More meetings, seminars, symposiums and get-together should be organized by the Branches to develop the awareness among the clients of the Bank about Islamic Banking and its advantages.
  • The employee of the branch should be trained continuously.

Furthermore, the customers also provided their own suggestions:

  • Provision of car loans.
  • Individual counters to provide one-stop service for cheque payments.
  • More social involvement by AIBL such as providing student scholarship, creating more employment opportunities, rehabilitating the poor.

If the stated recommendations are carried out and the government pays attention to the policy framework of the entire system, then that day would not be far when Bangladesh can proudly focus more on the Islamic banking system than the conventional banking system.