1.1 Introduction:
The
“Al-Arafah Islami Bank Limited” was incorporated as a public limited
company as on 18 day of June 1995 under the Companies Act. 1994. The Bank
started its commercial operation on 27.09.1995. The Bank has made a significant
progress within a very short period of its existence and occupied an enviable
position among its competitors after achieving remarkable success in all areas
of business operation. The authorized capital of the Bank is Tk. 15,000 million
and Paid up capital of the Bank stood at Tk. 8343.24million as on 31 December
2013. The total equity (capital and reserves) of the Bank as on December
31, 2013 stood at Tk14478.06 million.
1.2 Origin of the Report
The
prime objectives of this report are to fulfill the partial requirement for the
degree of BBA. Since, it’s compulsory for all students of BBA program of
Business faculty, Daffodil Institute of IT Bangladesh to undergo three months
long internship program to explore real life business situation.
Al-Arafa Islami Bank Limited is a place where I could learn the business dealings. This
organization has created a positive image to the customer mind by providing
better service. This Bank has introduced some Modern Islamic Banking Scheme
that has high market demand. As it maintain the pace with the competitive
business world, its activities, culture, philosophy and style leads an intern
student to be the best at any field of working life. With
this view, during my internship I was assigned to Kalatia branch, Al-Arafah
Islami Bank Ltd, with other activities I specially tried to observe the
Investment banking procedure and function of this branch.
1.3 Background
The
internship program is full credit subject of the BBA
program of the Daffodil
Institute of IT which constructs a relation between the real life state
of affairs and theoretical concepts.
I
am a student of Bachelor of Business Administration of BBA program prefers to
prepare a report on banking sector rather than other financial institution. I
am assigned an internship report by the Al-arafah Islami Bank Ltd dated January
10, 2015. This internship report is a part of my BBA
program that performed by me as students of Daffodil Institute of IT of finance
Studies. In a formal way, I select the banking sector and my supervisor offered
me prepare the report on title as Investment
Mechanism of Al- Arafah Islami Bank Ltd (A study on Kalatia Branch).
Investment
is done under different modes of investment and before investment some
objective and principles are to follow. Investment practice consists of some
stage Selection of the client, Application stage, Processing and
appraisal, Sanctioning stage, Documentation stage, Disbursement stage,
Monitoring & Recovery stage
1.4 Objectives of the Study:
i) Primary Objectives:
The
primary objective of writing the report is fulfilling the partial requirements
of the BBA program. In this report, I’ve attempted to give an overview of
Investment Mechanism of Al-Arafah Islami Bank Limited. Also in the major part
of the report is Investment Mechanism.
ii) Secondary Objectives:
Ø To
present an overview on Investment Mechanism of Al-Arafah Bank Ltd.
Ø To
present the current situation of Kalatia branch.
Ø To
observe the economic condition of AIBL
Ø To
explain the general banking activities of AIBL.
Ø To
suggest some possible recommendations to overcome the problems.
Ø To
suggest a supportive role in the progress of banking system in financial sector
1.5 Methodology
To
complete this report I’ve followed a systematic study which include working,
inspecting and talking to the executives at different levels of the
organization to know the present scenario of the banking practice. To
facilitate make the report more meaningful and presentable two sources of data
and information have been used widely-
The
primary sources
which
are as follows head to head conversation with the Executives and officers of
Bank.
Ø Unceremonious
conversation with the client.
Ø Realistic
work exposures from the different desks of the various departments of the
Branch covered.
Ø Relevant
file study as provided by the officer’s concerned.
The
Secondary Sources of data and information are as follows-
Ø Annual
Report of Al-Arafah Islami Bank Ltd.
Ø Periodicals
published by Bangladesh Bank, various books, articles, compilations etc,
regarding general banking functions.
Ø AIBL’s website
Ø Internet
and Study of selected reports
1.6 Scope of the Study
This report has been prepared on
the basis of experience gathered during the period of internship. This report will be dealing with the overview of
Al-Arafah Islami Bank Ltd. & mainly with Investment Mechanism of this Bank. But the report will try to cover
overview of Al-Arafah Islami Bank’s objectives, functions, management, business
policy and other activities. This report will also mention some problems of
Al-Arafah Islami Bank’s Operating systems and its solutions.
1.7 Limitations
There were some problems while I
have undergone the internship program. A wholehearted effort was applied to
conduct the internship program and to bring a reliable and fruitful result. In
spite of having the wholehearted effort, there exits some limitations, which
acted as barrier. The following limitations are apparent in the report:
Ø Access to data regarding different performance
indicators of Al-Alarafah Islami bank Ltd.
Ø The report is mainly based on the secondary data
which published by different organization as annually, half-yearly, monthly,
weekly and daily.
Ø Time constraints are additional limitations of this
report.
Ø Getting
relevant papers and documents may be strictly prohibited for an intern
Ø Due to some legal obligation and business secrecy
banks are reluctant to provide data. For this reason, the study limits only on
the available published data and certain degree of informal interview.
Ø The bankers are very busy with their jobs which lead
a little time to consult with.
Ø Finally, some recent data which were needed to
enrich this report but the unwillingness of the executives of the bank due to
confidentiality was made my report limited to data content.
2.1 Background of the Organization
With the objective of achieving success here &
hereafter by pursuing the way directed by Allah and the path shown by His Rasul
(SM), 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 18th June, 1995 with the said principles in mind
and to introduce a modern banking system based on Al-Qur’an and Sunnah.
Al-Arafah Islami Bank incorporated
in Bangladesh as a banking company in 1995 with limited liability by shares. It
started business on 27 September of that year with an authorised capital of Tk
10,000 million. At inception, its paid up capital was Tk 101.20 million divided
into 101,200 ordinary shares of Tk 1,000 each. The authorized capital of the Bank is Tk.15000.00 million and the paid
up capital is Tk. 8343.24
million as on 31.12.2013. 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. 14,478.06 million as on 31 December 2013, the manpower
was 2387 and the number of shareholders was 58466. 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 119 branches of which 23 is AD
throughout the country.
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.
2.2 Vision
To
be the pioneer bank in the banking arena in Bangladesh under the Shariah
guidelines and contribute significantly to the national economy.
2.3
Mission
Ø To
launch a welfare-oriented banking system.
Ø To
invest through different modes that is acceptable under Islamic Shariah.
Ø To
allow customer deposits on profit-loss sharing basis.
Ø To
perform interest free banking.
Ø To
found participatory banking instead of banking on debtor creditor relationship.
Ø To
display team spirit and professionalism.
Ø To
provide high quality financial services in export and import trade.
Ø To
maintain corporate and business ethics.
2.4 Goal and Objective of AIBL
The
maxim of the Al-Arafah Islami Bank Ltd (AIBL) is to discover a new horizon of
innovative contemporary banking creating an automated and computerized
environment providing one stop service and prepare itself to countenance the
new challenges of globalization and 12th century. One of the main
objectives of the bank is to be a provider of high products and services to
cater to the needs of its corporate clients and provides a comprehensive range
of financial services to national and multinational companies. The growing
technological revaluation in the bank is not so-outlying future. Finally to
achieve ultimate goal i.e. Nazat in Akhirat. It has previously introduced
Swift, Online Banking.
2.5 Special features of the AIBL
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. Here are some special features of us that make us notable in
Islami banking sector.
Ø All
activities of AIBL are conducted under an profit/loss based system according to
Islamic Shariah to get the nation rid of Usury.
Ø Its
investment policies under different modes are fully Shariah compliant and well
monitored by the board of Shariah Council.
Ø During
the year 2007, 70% of the investment income has been distributed among the
Mudaraba depositors.
Ø 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.
Ø AIBL
regularly arranges its AGMs (Annual General Meeting). Whenever needed EGMs
(Extraordinary General Meeting) are also arranged.
Ø We
regularly pay dividend to our valued shareholders. For the year of 2007, we
declared 20% bonus dividend to our shareholders.
Ø We
believe in providing dedicated services to the clients imbued with Islamic
spirit of brotherhood, peace and fraternity.
Ø The
bank is committed towards establishing a welfare-oriented banking system to
meet the needs of low income and underprivileged class of people.
Ø The
Bank upholds the Islamic values of establishment of a justified economic system
through social emancipation and equitable distribution of wealth.
Ø 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.
Ø 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.
2.6 Foreign exchange risk Management
Foreign exchange risk is defined
as the potential change in earnings arising due to change in market prices.
International Division independently conducts the transactions and passing of
their entries in books of accounts. All foreign exchange transactions are
revalued at Mark-to Market rate as determined by Bangladesh Bank at the
month-end. All Nostrum accounts are reconciled on monthly basis and outstanding
entry beyond 30 days is reviewed by the Management for its settlement.
2.7 Deposits
The
total deposit of the bank was TK.118683.39 million at 31st December
2012.
Source: Annual Report, 2012
2.8 Deposit Mix 2012
Products Taka in Million
a) Al Wadia Current Account 12,898.84
b) Mudaraba Savings Deposit 9,998.52
c) Other Mudaraba Deposit 76,618.03
d) Mudaraba Term Deposit 18,208.83
e) Bills Payable 959.17
Total 118,683.39
Graph: deposit mix
2.9 Activities of shariah council for the year-2013
Shariah
council consists of 6 members specialized in Fiqhul Muamalat as guideline given
by Bangladesh bank to ensure whether all banking operations are transacted in
accordance with Islami shariah i.e.
Quran, Sunnah, Ijma and Iztihad.
Shariah
council has managed, by the grace of almighty Allah, to contribute a lot to run
all the business activities of the bank according to shariah guidelines.,
honorable members of the shariah
council sit in 7 meetings in the year 2013 to discuss the matters placed before
them by the board and management of the bank to give directive and suggestions
in the field of shariah principles, shariah council advised everybody
concerned to comply shariah
requirements and render all out effort to increase the standard of service
rendered to the standard of service rendered to the standard of service
rendered to the clients.
Muraqibs
of the council have visited all the 78 branches of the bank over the year to
observe the shariah compliance, give necessary instructions on the spot and
submitted report to the council. They have also submitted corrective measures
to rectify the laws in implementing shariah
guidelines into the banking operations and placed those to the bank
management for further follow up. Besides, compensation received from different
branches, interest received from correspondence bank of Nostro a/c as well as doubtful income amounting to Tk.14052662
advised to set aside from bank total halal income.
2.10 Products of AIBL as an Islamic bank
The
AIBL (Al-Arafah Islami Bank Ltd) offers their customers general banking
facilities, which ensures the safety of their money. following are the ways
through which banks collects their deposits from the clients:
- Al-WADIA
CURRENT DEPOSIT (CD)
- MUDARABA SHORT
NOTICE DEPOSIT (MSD)
- MUDARABA SAVINGS
DEPOSIT
- MUDARABA TERM
DEPOSIT (MTD)
- DEPOSIT
UNDER OTHER SCHEMES
- MONTHLY PROFIT BASED TERM DEPOSIT (PTD)
- MONTHLY INSTALLMENT BASED TERM DEPOSIT (ITD)
- MONTHLY INSTALLMENT BASED HAJJ DEPOSIT (MHD)
- ONE TIME HAJJ DEPOSIT (THD)
- MARRIAGE & INVESTMENT DEPOSIT (MIS)
- AL-ARAFAH SAVINGS BOND (ASB)
- FOREIGN CURRENCY DEPOSIT (FCD)
- PENSION DEPOSIT SCHEME (PDS)
- MUDARABA MILLIONAIRE DEPOSIT SCHEME
- MUDARABA DOUBLE DEPOSIT SCHEME
- MUDARABA LACPOTI DEPOSIT SCHEME
- MUDARABA KOTIPOTI DEPOSIT SCHEME
- MUDARABA
STUDENT DEPOSIT SCHEME
A.
Al-WADIA CURRENT DEPOSIT (CD):
Al-Arafah Islami bank Limited receives deposits in their Al-Wadiah
current account. Usually business people runs Al-Wadiah current account.
In Al-Wadiah current account customers can deposit and withdraw money,
whenever they want. In this account, there is no restriction of withdrawing
money. But in Al-Wadiah current account customer’s do not get any
profit. Bank with take some money as service charge.
B. MUDARABA SHORT NOTICE DEPOSIT (MSD):
Short
Notice Deposit account customers can deposit and withdraw money any time
whenever they want. But there is a restriction in withdrawing money. They have
to inform the manager if they want to withdraw big amount. Like Mudaraba Savings Deposit
account the customer’s get profit here. This profit is given every year at a
predefined rate of last year.
C. MUDARABA SAVINGS DEPOSIT:
Al-Arafah Islami bank Limited also receives deposits by Mudaraba Savings Deposit. General people run this accounts. In
Mudaraba Savings Deposit account customers can
deposit money any time whenever they want. But they cannot withdraw money
whenever they want, there is some restriction. Customers can withdraw money two
times in a week and ten times in a month. But if they want to withdraw any big
amount they have to give notice to the manager. If bank earn any profits the
depositors will get at a predetermined percentage and the bank retains the residual
amount as its profit.
D.
MUDARABA TERM DEPOSIT (MTD):
Interest-based banks receive different kinds of Term Deposits
from the depositors. The deposits are generally for 3 months, 6 months, 9
months, one year, 2 years, or 3 years, and the bank pays a stated interest rate
on each of these deposits, which varies depending on the term. In
general, the bank pays a higher rate of interest the longer the term of the
deposit and lower rates for shorter time periods. In addition, a higher rate of
interest is generally paid on term deposits than on saving deposits. Depositors
are not generally allowed to withdraw money from a term deposit until the term
matures. Premature withdrawal may result in penalties in excess of the interest
earned, resulting in a negative return. Once a time deposit matures, the
depositor may wish to reinvest for a new term.
AIBL
Special Savings Scheme:
This
scheme is well known in the market as a well named Deposit Pension Scheme in
other banks. If a client deposit an amount of fixed on the monthly basis often
a few years i.e. 5 and 10 years he gets amount at a time. The bank offers
approx 12% interest for this scheme particulars of which as follows:
SL NO
|
Amount to be Deported
|
Total Amount After 5 Years
|
Total Amount After 5 Years
|
Rate of Interest
|
01
|
500.00
|
40,500.00
|
1,14,000.00
|
11%
|
02
|
1000.00
|
81,000.00
|
2,28,000.00
|
12%
|
03
|
2000.00
|
1,62,000.00
|
4,56,000.00
|
-do-
|
04
|
5000.00
|
Cumulative
Basic
|
-do-
|
Monthly Profit Based Term Deposit (PTD):
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 Hajj 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.
Savings Investment Deposit (MHD):
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.
Al-Arafah Savings Bond:
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
deposited money may increase by 1.5 or even double.
AIBL
Regular Deposit Program:
RDP
is a special services plan that follows to save a monthly basic and get a
handsome amount at maturity. RDP account gives you the convenience of saving
regularly in time with cherished dream RDP in the right solution
To
open RDP account all you need is to be over 18 Years of age and a Bangladesh
Term of
AIBL Regular Deposit Program:
You
need to open a RDP account for 3 or 5 Years i.e. 36 and 60 equal monthly deposits
respectively.
Minimum
and Maximum Monthly Deposit Amount:
Under
the RDP you can chose between a minimum monthly deposit amount of TK.300 and
maximum amount of TK.1000
Monthly Deposit Amount
and Receivable after 3/5 Years:
SL
NO
|
Installment
Amount
|
Matured
Value
3
Years
|
Matured
Value
5
Years
|
01
|
300.00
|
12,500.00
|
22,800.00
|
02
|
500.00
|
20,900.00
|
38,000.00
|
03
|
1,000.00
|
41,800.00
|
76,000.00
|
04
|
2,000.00
|
83,600.00
|
1,52,000.00
|
05
|
2,500.00
|
1,04,500.00
|
1,90,000.00
|
06
|
5,000.00
|
2,09,000.00
|
3,80,000.00
|
07
|
10,000.00
|
4,18,000.00
|
7,60,000.00
|
Mudaraba Lakhopati Savings Scheme:
In
this scheme if a parson Deposit an amount for a period of 3 Years, 5 Years, 8
Years, and 12 Years he will get interest for the Deposit on the monthly basis
in the following rate:
Year of Account
|
Monthly Installment Amount
|
Total Taka
|
3
Years
|
2325.00
|
1,00,000.00
|
5
Years
|
1275.00
|
1,00,000.00
|
8
Years
|
645.00
|
1,00,000.00
|
10
Years
|
450.00
|
1,00.000.00
|
12
Years
|
330.00
|
1,00,000.00
|
Mudaraba Millennium Savings Scheme:
Year of Account
|
Monthly Installment Amount
|
Total Taka
|
3
Years
|
23,200.00
|
10.00
Lack
|
4
Years
|
16,400.00
|
10.00
Lack
|
5
Years
|
12,700.00
|
10.00
Lack
|
6
Years
|
10,020.00
|
10.00
Lack
|
7
Years
|
7,820.00
|
10.00
Lack
|
10
Years
|
4500.00
|
10.00
Lack
|
12
Years
|
3330.00
|
10.00
Lack
|
15
Years
|
2190.00
|
10.00
Lack
|
20
Years
|
11,75.00
|
10.00
Lack
|
Mudaraba
Katipoti Savings Scheme:
Year
of Account
|
Monthly
Installment Amount
|
Total
Taka
|
3 Years
|
2,32,000.00
|
1.00 Kati
|
4 Years
|
164,000.00
|
1.00 Kati
|
5 Years
|
127,000.00
|
1.00 Kati
|
6 Years
|
100,000.00
|
1.00 Kati
|
7 Years
|
78,200.00
|
1.00 Kati
|
10 Years
|
45,400.00
|
1.00 Kati
|
12 Years
|
33,250.00
|
1.00 Kati
|
15 Years
|
21,850.00
|
1.00 Kati
|
18 Years
|
15,800.00
|
1.00 Kati
|
20 Years
|
11,670.00
|
1.00 Kati
|
Grameen & Small
Investment Scheme:
AIBL has
introduced a new investment project as grameen and small investment. The
objective of this project is to introduced Shariah based banking system in
rural and village area, creating employment through financing in low income
group, build up savings attitude, improvement of living standard of rural low
income mass people, creating opportunity to carry out Islamic lifestyle by way
of alleviating poverty and at the same time financially establish career
men/women by investing in small investment projects. Initially, this scheme is introduced
in two branches of AIBL i.e. Gallai, Comilla and Ruposhpur, Srimongol. There is
a plan to expand gradually this project in other rural branches. Thus, within
the scope of grameen and small investment scheme, the following sectors have
been invested:
1.
Fisheries
l0. Vegetables business
2.
Poultry
11. Cultivation of bettle leaf
3.
Cattle
12. Tailoring business
4.
Goat 13. Work of bamboo and
cane
5.
Cow
14. Cultivation of pineapple
6.
Poultry Firm
15. Earthen ware
7.
Preparing Muree 16. Purchasing rickshaw
8.
Preparing sweets
17. Cultivation of lemon
9.
Cosmetics items 18. Small business i.e. rice, paddy,
grocery, medicine
shop, cloth shop, shoe business, library, etc.
• Under this method, after getting the demand
and the giving assurance of credit payment by the customer, bank takes the
authority to purchase the specific goods on behalf of its customer and after
that sells them to that customer.
• In this case bank obviously has to purchase
the goods from a third party and has to keep them under its authority for an
instance. After that, a sale agreement is accomplished between the bank and the
customer.
• Here, goods are firstly delivered to the
customer and payment is made on a specific future time. It is clear that in
this method, goods are reached under the authority before payment is done.
• In this method, bank is not liable to
inform about the buying price and the amount of profit respectively to the
customer. The only tiling mat is mentioned to that client is the selling price
of those goods.
• If the customer fails to pay the payment of
the goods on a specific time and therefore if that customer takes some extra
time to pay it fully, then in that sort of case, bank can not charge any more
profit due to that overtime period.
2.11 Management of AIBL
Management
is the process of planning, leading and controlling the work of organizations
members and of using all available organizational resources to reach stated
organizational goals.
The
strength of a bank depends on the strength of its management team. Al-Arafah
Islami Bank Ltd. is proud to have a team of highly motivated,
well-educated and experienced executives who have been contributing
substantially to the continued progress of the bank. The management is ably
supported and assisted by well motivated and experienced officers and members
of staff.
2.12 Human Resource Department of AIBL
In today’s aggressive business environment, only the quality of human
recourses makes the difference. The bank’s assurance to attract the best
persons to work for it and the adoption of the latest information technologies
is reflected in the efforts of the bank in the in the development of its human
resources. In the faces of today’s global competition Bank envisages to develop
highly motivated workforce and to equip them with latest skills and
technologies. A good working environment promotes a high level of faithfulness
and assurance, devotion and dedication on the part of the employees.
Al-Arafah
Islami Bank has a training centre to develop its employees. Al-Arafah Islami
Bank sent number of officers to Bangladesh institute of Bank Management and
other training institutes for specialized training on various aspects of
banking. The bank has set up a Training institute for providing training
facilities of its executive’s officers. The training institute has already
conducted a number of courses. A number of officers have been sent for foreign
training. Al-Arafah Islami Bank believes in professional excellence and
considers its working force as its most valuable assets and the basis of its
competence and power.
|
Manpower position of Al-Arafah Islami Bank
Ltd.
 |
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 |
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|
|
 |
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|
|
|
 |
|
2.13 Kalatia branch of
Al-Arafah Islami bank Ltd. (AIBL)
The 81nd branch of AIBL is the Kalatia, this branch is situated in Kalatia Keranigonj, Dhaka. This branch is inaugurated at 14thAugust, 2011; the manager of this branch is A.S.K.M Mahfuzur Rahman. He also got the position of AVP of AIBL. This branch has also got 20 efficient and responsible employees. Although this branch has past only three years, it has created positive image not only to the AIBL but also among the customer. The management of this branch always tries to provide better service to its customer and behave well with them. Basically, this branch’s major portion of customers is corporate.
2.14 Managements Organ gram
Management
organ gram of AIBL is given below-
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 |
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 |
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 |
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Source - Management
organogram of AIBL
3.1. Investment Products of AIBL:
A
.BAI-MUAJJAL
Meaning of Bai-Muajjal:
Bai-Muajjal
means credit sale of goods by the bank to the customer. Such contracts provide
for a margin of profit or mark-up to the bank as mutually agreed upon by the
buyer (client) and the seller (bank). Goods are kept at the disposal of the
customer/buyer and the sale price can be paid either in lump sum or in
installments.
The
Bai-Muajjal may be defined as a
contract between a buyer and a 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.
Important Features of Bai-Muajjal:
§ It
is permissible and in most cases, the client will approach the bank with an
offer to purchase a specific good through a Bai-Muajjal
agreement.
§ It
is permissible to make the promise binding upon the client to purchase the
goods from the bank. In other words, the client is required to either satisfy
the promise or to indemnify the bank for damages caused by breaking the promise
without excuse.
§ It
is permissible to take cash/collateral security to guarantee the implementation
of the promise or to indemnify the bank for damages caused by non-payment.
§ It
is also permissible to document the debt resulting from Bai-Muajjal by a Guarantor, or a mortgage or both, like any other
debt. Mortgage/Guarantee/Cash security may be obtained prior to the signing of
the Agreement or at the time of signing the Agreement.
§ Stock
and availability of goods is a basic condition for signing a Bai-Muajjal Agreement. Therefore, the
bank must purchase the goods in accordance with the specifications of the
client, prior to signing the Bai-Muajjal Agreement
with the client.
§ All
goods purchased on behalf of a Bai-Muajjal
agreement are the responsibility of the bank until they are delivered to
the client.
§ The
bank must deliver the goods to the client at the time and place specified in
the contract. The bank may sell the goods at a higher price than the purchase
price to earn profit.
§ The
price is fixed at the time of the agreement and cannot be altered.
§ The
bank is not required to disclose the profit made on the transaction.
Some Observations:
This
type of financing by the bank is considered more risky than the other Islamic
modes of investment previously discussed. Therefore, the
application/proposal for Bai-Muajjal investment
must be reviewed very carefully to ensure the client can ultimately make
payment. .
The
following steps may be taken to ensure the Bai-Muajjal
Investment is a good proposition for the bank:
§
The bank may meet with the prospective
client regarding his investment needs and business experience prior to an
application /proposal is submitted.
§
The bank may review the client’s past
performance and other financing arrangements he may have had with the bank in
the past.
§
The bank may review its current
investment policy regarding this type of financing arrangement to ensure the
proposal meets bank guidelines.
B.
BAI-MURABAHA
Meaning of Murabaha:
The
terms “Bai-Murabaha" means sale for an agreed upon profit. 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 an agreed upon profit
payable today or on some date in the future in lump-sum or by installments. The
profit either may be a fixed sum or based on a percentage of the price of the
goods.
Types of Murabaha:
In
respect of dealing parties Bai-Murabaha may be of two types
§
Ordinary Bai-Murabaha and
§
Bai-Murabaha
Order on and Promise.
Ordinary Bai-Murabaha is a direct transaction between a buyer and a seller.
Here, the seller is an ordinary trader who purchases goods from the market in
the hope of selling these goods to another party for a profit. In this
case, the seller undertakes the entire risk of his capital investment in the
goods purchased. Whether or not he earns a profit depends on his ability to
find a buyer for the merchandise he has acquired.
Bai-Murabaha Order on and Promise involves three parties - the buyer, the
seller and the bank. Under this arrangement, the bank acts as an intermediary
trader between the buyer and the seller. In other words, upon receipt of an
order and agreement to purchase a certain product from the buyer, the bank will purchase the
product from the seller to fulfill the order.
Important
Features of Murabaha:
§ A client can make an offer to purchase particular
goods from the bank for a specified agreed upon price, including the cost of
the goods plus a profit.
§ A client can make the promise to purchase from the
bank, that is, he is either to satisfy the promise or to indemnify any losses
incurred from the breaking the promise without excuse.
§ It is permissible to take cash/collateral security to
guarantee the implementation of the promise or to indemnify any losses that may
result.
§ Documentation of the debt resulting from Bai-Murabaha by a Guarantor, or a
mortgage, or both like any other debt is permissible. Mortgage/Guarantee/Cash
Security may be obtained prior to the signing of the Agreement or at the time
of signing the Agreement.
§ Stock and availability of goods is a basic condition
for signing a Bai-Murabaha Agreement.
Therefore, the bank must purchase the goods in accordance with the
specifications of the client, thereby taking ownership of the goods before
signing the Bai-Murabaha agreement
with the client.
§ Upon acquiring the goods, the bank assumes the risk of
ownership. In other words, the bank is responsible for damages, defects, and
/or spoilage to the merchandise until such time that it is actually delivered
to the buyer.
§ The bank must deliver the goods to the client at the
date, time, and place specified in the contract.
§ The bank sells the goods at a price above the cost to
obtain a profit. The sale price that is charged by the bank is agreed
upon in the Bai-Murabaha. The profit can be stated in terms of a flat
dollar amount or on a percentage of the purchase price. If a percentage
is used, the percentage shall never be expressed in terms of time, in order to
avoid confusion that the price is a form of interest (Riba), which is not
allowed.
§ The price agreed to in the agreement is binding on
both parties.
§ It is permissible for the bank to contract with a
third party to buy and receive the goods on its behalf. This agreement must be
a separate contract.
Steps in Bai-Murabaha:
First Step: The client submits a
proposal regarding his requirements of the bank. The client sends a
proposal with the specifications of the commodity to be acquired from the bank.
The proposal also indicates details regarding the date, time and place of
delivery as well as price and form of payment information. The bank responds by
sending a counter proposal either accepting the buyer’s price or stipulating a
different price.
Second Step: The client promises to
buy the commodity from the bank on a Bai-Murabaha basis, for the
stipulated price. The bank accepts the order and establishes the terms and
conditions of the transaction.
Third Step: The bank informs the client (ultimate buyer) of its
approval of the agreement to purchase. The bank may pay for the goods
immediately or in accordance with the agreement. The seller expresses
its approval to the sale and sends the invoice(s).
Fourth Step: The Bank authorizes the
client or its nominee to receive the commodity. And the seller
sends the commodity to the place of delivery agreed upon. The client undertakes
the receipt of the commodity in its capacity as legal representative and
notifies the bank of the execution of the proxy.
Application of Bai-Murabaha :
Murabaha
is the most frequently used form of finance in Islamic banking throughout the
world. It is suitable for financing the different investment activities of
customers with regard to the manufacturing of finished goods, procurement of
raw materials, machinery, and other required plant and equipment purchases.
C.
BAI-SALAM
Meaning of Bai-Salam:
Bai-Salam
is a term used to define a sale in which the buyer makes advance payment, but
the delivery is delayed until some time in the future. Usually the seller is an
individual or business and the buyer is the bank.
The
Bai-Salam sales serve the interests of both parties:
§ The
seller receives advance payment in exchange for the obligation to deliver the
commodity at some later date. He benefits from the Bai-Salam sale by
locking in a price for his commodity, thereby allowing him to cover his
financial needs whether they are personal expenses, family expenses or business
expenses.
§
§ The
purchaser benefits because he receives delivery of the commodity when it is
needed to fulfill some other agreement, without incurring storage costs.
Second, a Bai-Salam sale is usually less expensive than a cash sale.
Finally a Bai-Salam agreement allows the purchase to lock in a price,
thus protecting him from price fluctuation.
Steps in Bai-Salam:
One-Cash
sale or Sale on Credit : The bank pays the agreed upon price
at the time of the contracts inception. The seller agrees to the delivery of
the commodity some specified date in the future.
Two-Delivery and
Receipt of the Commodity on the Specific due Date:
There are several options for delivery available to the bank
- The bank may receive the commodity
and resell it to another party for cash or credit.
- The bank may authorize the
seller to find another buyer for the commodity.
- The bank may direct the seller to
deliver the commodity directly to a third party with whom the bank has
entered into another agreement.
Three-The Sale
Contract: The bank agrees to sell the commodity for cash or a
deferred price, which is higher than the Bai-Salam purchase price.
The buyer agrees to purchase and to pay the price according to the agreement.
Application of Bai-Salam:
Bai-Salam
sales are frequently used to finance the agricultural industry. Banks advance
cash to farmers today for delivery of the crop during the harvest season. Thus
banks provide farmers with the capital necessary to finance the cost of
producing a crop.
Bai-Salam
sale are also used to finance commercial and industrial activities. Once again
the bank advances cash to businesses necessary to finance the cost of
production, operations and expenses in exchange for future delivery of the end
product. In the meantime, the bank is able to market the product to other
customers at lucrative prices.
In
addition, the Bai-Salam sale is used by banks to finance craftsmen and
small producers, by supplying them with the capital necessary to finance the
inputs to production in exchange for the future delivery of products at some
future date.
Thus as
has been demonstrated, the Bai-Salam sale is useful in providing
financing for a variety of clients, including farmers, industrialists,
contractors and traders. The proceeds in a Bai-Salam sale may be used to
cover the finance of operation costs and capital costs.
Concluding Remark:
The
Bai-Salam agreement is a combination of debt and trading. The capital
provider has no control over the management of capital provided. However the
capital provider takes all of the risk as profits cannot be determined until
the commodity is delivered and the final sale price is determined. In addition
the capital provider incurs the opportunity cost associated with the capital
outlay. Like the other three previously discussed modes of finance there is no
certain rate of return. In addition the cost of capital is uncertain ex-ante.
Also, there is no correlation in the relationship of cost of capital and rate
of return on capital.
D.
MUSHARAKA
Meaning of Musharaka:
The word Musharaka is derived from the Arabic word
Sharikah meaning partnership. In Al-Arafah Islami Bank, a typical 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.
They can also waive this right. The profits are to be distributed according to
an agreed ratio, which need not be the same as the capital proportion. However,
losses are shared in exactly the same proportion in which the different
partners have provided the finance for the project.
Types of Musharaka:
In
respect of dealing parties Musharaka may take two forms
§
Permanent Musharaka and
§
Diminishing Musharaka.
Permanent Musharaka
:
In
this case, the bank participates in the equity of a company and receives an
annual share of the profits on a pre-rate basis. The period of termination of
the contract is not specified. This financing technique is also referred to as
continued Musharaka.
The
contributions of the partners under this mode may be equal or unequal
percentages of capital for the purpose of establishing a new income-generating
project or to participate in an existing one. In this arrangement, each
participant owns a permanent share in the capital structure and receives his
share of the profits accordingly. This type of a partnership is intended to
continue until the company is dissolved. However, one can exit the
partnership by selling his share of the capital to another investor.
Diminishing Musharaka:
Diminishing
or Digressive Musharaka is a special form of Musharaka, which
ultimately culminates in the ownership of the asset or the project by the
client. It operates in the following manner.
The
Bank participates as a financial partner, in full or in part, in a project with
a given income forecast. An agreement is signed by the partner and the bank,
which stipulates each party's share of the profits.
However,
the agreement also provides payment of a portion of the net income of the
project as repayment of the principal financed by the bank. The partner is
entitled to keep the rest. In this way, the bank's share of the equity is
progressively reduced and the partner eventually becomes the full owner.
When
the bank enters into a Diminishing Musharaka its intention is not to
stay in the partnership until the company is dissolved. In this type of
partnership, the bank agrees to accept payment on an installment basis or in
one lump sum, an amount necessary to buy the bank’s partnership interest.
In this way, as the bank receives payments over and above its share
in partnership profits, it’s partnership interest reduces until it is
completely bought out of the partnership.
Concluding
Remark:
Financing
through a Musharaka partnership is investment-based. The capital provider has
full control in the management of the business. In addition, he shares
proportionately in both the profits and losses of the business. Therefore, the
rate of return is uncertain and can be either positive or negative. The cost of
capital is also uncertain and there exists perfect correlation between the
relationship of cost of capital and rate of return on capital.
E.
MUDARABA
Definition of Mudaraba:
The
term Mudaraba 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.
Mudaraba
is a contract of those who have capital with those who have expertise, where
the first party provides capital and the other party provides the expertise
with the purpose of earning Halal (lawful) profit which will be shared in a
mutually agreed upon proportion. This type of business venture serves the
interest of the capital owner and the Mudarib (agent).
The
capital owner may not have the ability or the experience to run a profitable
business. On the other hand, the agent (the Mudarib) may not have adequate
capital to invest in a business or project. Therefore, by entering into a
contract of Mudaraba each party
compliments one another, allowing a business venture to be financed. The
following are the steps of the Mudaraba
contract.
Steps in Mudaraba:
The
bank provides the capital as a capital owner. The Mudarib provides the effort
and expertise for the investment of capital in exchange for a share in profit
that is agreed upon by both parties. One-The
Results of Mudaraba: The two
parties calculate the earnings and divide the profits at the end of Mudaraba. This can be done periodically
in accordance with the terms of the agreement, subject to the legal rules that
apply.
Two-Payment of Mudaraba Capital:
The bank recovers the Mudaraba
capital it contributed before dividing the profits between the two parties
because the profit is considered collateral for the capital.
Three-Distribution of
wealth resulting from Mudaraba:
In the event a loss occurs, the capital owner (the bank) is responsible for the
entire loss. In the event of profits, they are divided between the two
parties in accordance with the agreement between them, subject to the capital
being recovered first.
Concluding Remark:
It
is an investment-based form of financing. The provider of capital in Mudaraba
has no role in the management of the capital. However, he has to bear the risk
of capital loss as well as the opportunity cost of capital for the entire
period of the contract. The rate of return is quite uncertain and the cost of
capital is also uncertain. Hence, there is a perfect correlation between cost
of capital and rare of return on capital.
F.
IJARAH
Meaning of Ijarah :
According
to Islamic Shariah, Ijarah is a contract between two parties – the lessor and
the lessee, where the lessees (Hirer or Mustajir) have the right to enjoy/reap
a specific benefit against a specified consideration/rent/wages from the lessor
– the owner (Muajjir).
Elements
of Ijarah: According the majority of Fuqaha, there are three general and
six detailed elements of Ijarah:
§
The Wording: This includes offer and
acceptance
§
Contracting Parties: This includes a
lessor, the owner of the property, and a lessee, the party that benefits from
the use of the property.
§
Subject Matter of the Contract: This
includes the rent and the benefit.
§
The Lessor (Mujjir): The individual or
organization who leases out/rents out the property or service is called the
lessor.
§
The Lessee: (Mustajir): The individual
or organization who hires/takes the lease of the property or service against
the consideration rent/wages/remuneration is called the lessee (Mustajir).
§
The Benefit (Maajur): The benefit that
is leased/rented out is called the benefit (Maajur).
§
The rent (Ujrat): The consideration either
in monetary terms or in quantity of goods fixed to be paid against the benefit
of the goods or service is called the rent or Ujrat or Aj’r.
G.
HIRE-PURCHASE
Hire-Purchase
under Shirkatul Melk has been developed through practice. Actually, it is a
synthesis of three contracts:
§ Shirkat
§ Ijarah and
§ Sale.
Definition of
Shirkatul Melk:
‘Shirkat’
means partnership. Shirkatul Melk means share in ownership. When two or more
persons supply equity, purchase an asset and own the same jointly and share the
benefit as per agreement and loss in proportion to their respective equity, the
contact is called Shirkatul Melk. In the case of Hire Purchase under Shirkatul
Melk, Islamic banks purchase assets to be leased out, jointly with client under
equity participation, own the same and share benefit jointly until the full
ownership is transferred to the client.
Definition
of Ijara
The
term ‘Ijara’ has been defined as a contract between two parties, the lessor and
the lessee, where the lessee enjoys or reaps a specific service or benefit
against a specified consideration or rent from the asset owned by the lessor.
It is a lease agreement under which a certain asset is leased out by the lessor
or to a lessee against specific rent or rental for a fixed period.
Definition of
Sale Contract
This
is a contract between a buyer and a seller under which the ownership of certain
goods or asset is transferred by the seller to the buyer against agreed upon
price paid by the buyer. In the case of Hire Purchase under Shirkatul Melk, the
lessor bank sells or transfers its title to the asset under a sale contract on
payment of sale price.
Stages of Hire Purchase under Shirkatul Melk:
Hire
Purchase under Shirkatul Melk Agreement has got three stages:
§
Purchase of asset under joint ownership
of the lessor and the lessee.
§
Hire, and
§
Sale and transfer of ownership by the
lessor to the other partner - lessee.
Important Features:
§ In
case of Hire Purchase under Shirkatul Melk transaction, the asset or property
involved is jointly purchased by the lessor and the lessee with specified
equity participation. In which the amount of equity and share in ownership of
the asset of each partner are clearly mentioned. Under this agreement, the
lessor and the lessee become co-owners of the asset under transaction in
proportion to their respective equity.
§ In
Hire Purchase under Shirkatul Melk Agreement, the exact ownership of both the
lessor and lessee must be recognized. However, if the partners wish and
agree the asset purchased may be registered in the name of any one of them or
in the name of any third party clearly mentioning the same in the Hire Purchase
Shirkatul Melk Agreement.
§ The
share of the purchased asset owned by the lessor is put at the disposal
possession of the lessee keeping the ownership with him for a fixed period
under a hire agreement in which the amount of rent per unit of time and the
benefit for which rent to be paid along with all other agreed upon stipulations
are clearly stated. Under this agreement the lessee becomes the owner of the
benefit of the asset not of the asset itself, in accordance with the specific
provisions of the contract that entitles the lessor the rentals.
§ As
the ownership of leased portion of asset lies with the lessor and rent is paid
by the lessee against the specific benefit, the rent is not considered as price
or part of price of the asset.
§ In
the Hire Purchase under Shirkatul Melk agreement the Lessor does not sell or
the lessee does not purchase the asset but the lessor promise to sell the asset
to the lessee only if the lessee pays the cost price/equity price of the asset
as fixed and as per stipulations on which the lessee also gives undertakings.
§ The
promise to transfer legal title by the lessor and undertakings given by the
lessee to purchase the ownership of leased asset upon payment part by part as
per stipulations are affected only when it is actually done by a separate sale
contract.
§ As
soon as any part of lesssor's ownership of asset is transferred to the lessee,
that becomes the property of the lessee and hire contract for that share/part
and entitlement for rent thereof lapses.
§ Shirkatul
Melk contract is effected from the day the equally of both parties deposited
and the asset is purchase and continues up to the day on which the full title of
lessor is transferred to the lessee.
§ The
hire contract becomes effective from the day on which the lessor transfers the
possession of the leased asset in good order and usable condition, so that the
lessee may make use of the same as per provisions of the agreement.
§ Hire
Purchase under Shirkatul Melk are binding contracts, and the parties to it -
the bank and the client - are committed to meet their obligations in accordance
with the relevant agreement.
§ Under
this agreement, the bank acts as a partner, as a lessor and at last as a
seller; on the other hand the client acts as partner, as a lessee and lastly as
purchaser.
§ Under
this agreement the role of lessee is one of a trustee, the leased asset being a
trust in his hands: he will manage, in favor of the interest of thee lessor at
his own cost the exact subject of lessee, except in cases of emergencies and
acts of Allah.
§ The
lessee is responsible for keeping the leased asset (s) in good condition
throughout the whole period of lease, and if the asset is damaged or defrayed
due to transgressions default or negligence of the lessee, he shall be
responsible to compensate for that.
§ The
lessee cannot without obtaining prior written permission of the bank make
changes in the exact item of lease, and or remove it from its place of
installation, and transfer it to another location.
§ In
a hire purchase under Shirkatul Melk agreement, any stipulation may be made,
provided it is not against the nature and requirements of the contract itself,
nor does it violate the Lessee laws of Islam, and is also acceptable to both
parties.
§ Hire
purchase under Shirkatul Melk facileties may be for medium-term and long-term
period, which may be utilized for the expansion of production and services. as
well as housing activities. The duration of hire purchase under Shirkatul Melk
contract shall not exceed the useful life of the subject asset of the
transaction. The bank should not normally enter into a Hire Purchase under
Shirkatul Melk transaction for items with useful life of less than two years.
§ Hire
Purchase under Shirkatul Melk transaction facilitates the client (lessee) to
get benefit from the lease asset in exchange of rental and also to become full
owner of the asset by purchasing it.
Hire
Purchase under Shirkatul Melk Mode is a combination of three contacts. All
rules governing the lease contract should be applicable in this mode also.
Moreover, the rules for Musharakah and sale contracts will also apply to this.
4.1
Different Activities of General Banking Division
The general Banking Department doses the
most important and basic of the Banks. All other departments are liked with
this departments are liked with this department. It also plays a vital role in
deposit mobilization of the branch. Al-Arafah Islami Bank provides different
types of accounts locker facilities and special types of saving Scheme under
General Banking. For proper function and excellent customer services this
department is divided into various sections namely as follow:
·
Accounts opening sections
·
Cash sections.
·
Deposit sections.
·
Bill and clearing sections.
·
FDR sections.
·
Accounting sections.
4.2 Accounts Opening
Section
This section deals with opening of
different types of accounts. It is also deals with issuing of books and
different deposit books to the different accounts openers. A customer can open
different types of accounts through this department such as:
·
Al-Wadia Current Account.
·
Mudaraba Saving Account.
·
Mudaraba Short Notice Accuont.
·
Mudaraba
Monthly Installment term Deposit.
·
Mudaraba Monthly Saving Scheme .
·
Mudaraba Double Benefit Scheme.
·
Mudaraba Kotopati Deposit Scheme.
·
Mudaraba Millionaire Deposit Scheme.
·
Mudaraba Pension Scheme.
·
Mudaraba Lakhapathy Deposit Scheme.
·
Foreign Currency Deposit Scheme.
·
Al- Arafah Monthly Hajj deposit.
Requirements of Opening an Account
There
are some requirements that have to be completed for opening an Account.
Ø Current Account
Current Account is an account where the
account holders can make numerous transactions with in a working day. There is
no restriction on the number and the amount of with drawls from the current
within availability of funds.
As the Banker is under the obligation to
repay this deposit on demand on interest is paid in this account. Generally, Current
Account is opened for Business and trades for easy transaction. But a person
can open CD Account for special purpose. Requirement for the different types of
Accounts holders are discussed.
Ø Proprietorship Firm
There
is a different account opening from for the proprietorship firm by the
Al-Arafah Islami Bank Limited. For this account, a customer must need to submit
the papers with the form:
·
Photograph.
·
Signature and Rubber- stamp seal of the
client.
·
And introducer of Al-Arafah Islami Bank Limited.
Introducer must be account holder.
·
Chairmen certificate of the proprietor.
·
Trade license.
·
Voter ID Card
Current deposit account is opened with
neither a sum of nor less than 2000 The introducer must attest photographs.
Ø Partnership Firm
There is a different account opening
from for the proprietorship firm. Interaction for running an account is giving
in this.
The
following documents are required to open this type of accounts.
·
Photograph.
·
Signature and Rubber-stamp seal of the
service receiver.
·
Chairman certificate of the partners.
·
And introducer of Al-Arafah Islami Limited.
Introducer must be CD Account holder.
·
Trade license.
·
Partnership deed registered by Notary
public.
·
Partnership letter along with address
and signature.
·
Voter ID Card
Current deposit Account is opened with
neither a sum of nor less than Tk. 2000. The photographs must attested by the
introducer.
Ø Limited Company
A separate account from is used for
limited company. There are two kinds of limited company – public company and
private limited company. The Bank always takes precautions for opening this
type of accounts. Several documents are submitted by the clients, which should
be checked carefully by the Bank to be legally in a safe position. Requirements
to open an account are as follows:
Ø Private Limited Company
·
Photograph.
·
Signature and Rubber- stamp of the
client.
·
Chairman certificate of the owner.
·
An introducer of Al-Arafah Islami Bank
of Bangladesh Limited. Introducer must be CD account holder.
·
Trade license.
·
Certified copy of memorandum and articles
of association.
·
Incorporation Certificate.
·
Membership Certificate.
·
Memorandum.
Ø Public Limited Company
·
Photograph.
·
Signature and Rubber- stump seal of the
client.
·
Chairman certificate of the directors.
·
An introducer of Al-Arafah Islami Bank Limited. Introducer must be CD account
holder.
·
Trade license.
·
Certificate of Incorporation.
·
Certificate copy of memorandum and
articles of association.
·
List of directors as per return of joint
stock Company with signature.
Ø Club Society
The following document duly completed
shall be obtained from the customer at the time of current deposit account of
Association/Club/Charity/Trust/Society etc.
·
Photograph.
·
Signature and Rubber-stamp seal of the
client.
·
An introducer of Al-Arafah Islami Bank Limited.
Introducer must be CD account holder.
·
Chairman certificate of the client.
·
Certified true copy of
constitution/By-laws/Trust deed/Memorandum and articles of association.
·
Certified of registration of the
association/Club/Charity/Trust/Society (For inspection and returned only
certified.)
·
List of members of the Governing
body/Executive committee of the Association/Club/Charity/Trust/Society with
their address.
Ø Saving Account (individual/joint)
Saving account (SB) is meant for the
people of the lower and middle classes who wish to save part of their income to
meet future needs and intended to earn an income from their saving. For opening
of this type of accounts the following requirements are necessary:
·
Photographs attested by the introducer.
·
Chairman certificate of the account holder.
·
An introducer of Al-Arafah Islami Bank Limited.
Introducer must be CD account holder.
For
joint of saving deposit and short-term deposit (STD) are as follows.
SL.
NO
|
Name of Account
|
Interest
rate
|
1
|
Saving
Deposit
|
5%
|
2
|
Short
term Deposit(SND)
|
4%
|
Ø Monthly Saving Scheme (MSS)
It is project of Al-Arafah Islami Bank,
which is a Scheme like DPS. The slogan of this Scheme is ‘securing your future
with case. A small saving to day will provide you comfort tomorrow.’
Ø Saving Period and Monthly
Installment Rate
The
saving period is for5, 8, 10, or 12 years. Monthly installment rate is Tk. 500,
Tk. 2000, or Tk. 5000.
Ø Monthly Installment Deposit
·
The saving amount is to be deposit
within the 10th of every month. In case of holidays the deposit
amount is to be made on the following date.
·
The deposits may also be made in
advance.
·
The depositor instruction can be giving
to transfer the monthly deposit in the Scheme’s account.
·
In case the deposit falls to make the
monthly installment in time there will be no charge added with the following
month’s installment.
Ø Withdrawal
·
Generally, withdrawal is not advised
before a five- year term, but if it is withdrawn before the above term, then
interest will be paid saving rate. However,
no interest will be paid if the deposit is withdrawn within one year of opening
the account.
·
In case the depositor to withdraw
between the 5,8,10, or 12 year period then full interest will be paid for a
completed term and saving rate will applicable for the fractional period.
Ø Loan Advantage
After 3 years of saving in this Scheme
the depositor (in an adult) is eligible for a loan up to 80% of his deposited
amount. In that case, interest rates on the loan will be applicable as per
prevailing rate at that time.
Ø Reasons for Disqualification from
this Scheme
·
If the depositor fails to pay three
installments in a raw, then he will be disqualified from this Scheme and
interest will be applicable as mentioned in withdrawal clause.
·
If the depositor fails to five
installments in a raw after completion of 5 years term then the Bank reserve
the right to close the account and interest will be paid as mentioned in
withdrawal clause.
·
In case of death of the depositor the
Scheme will case to function. The amount will be handed over to the nominee of
the deceased depositor. In case of absence of the nominee the bank will hand
over the accumulated amount to the successor of the deceased.
Ø Rule
·
A form has to be filled at the time of
opening the account. NO introduction is needed but attested photographs are
advised.
·
The depositor can select any of the
installment accounts. Which cannot be subsequently changed?
·
In case of minors the guardians may open
and supervise the account in his favors.
·
A single person can open more then one
account for saving under several installment rates.
·
The accumulated deposit with interest
will be returned within one month of completion of a term.
·
The depositor should notify the bank
immediately of any change of address.
·
The government tax will be deducted from
the interest accumulated in this Scheme.
·
If necessary, at the request of the
depositor, the Scheme can be transferred to different branches of the same
bank.
·
The bank reserves the right to change
the rules and regulations of the Schemes as and when deemed necessary.
Ø Monthly Installment Statement
Charge
Years
|
Monthly
Installment
(Tk.)
|
Monthly
Installment
(Tk.)
|
Monthly
Installment
(Tk.)
|
Monthly
Installment
(Tk.)
|
1
|
500
|
1000
|
2000
|
5000
|
5
|
39437
|
78872
|
157743
|
394477
|
8
|
74500
|
149099
|
298172
|
746181
|
10
|
104545
|
209008
|
418340
|
1046469
|
12
|
140811
|
281540
|
563788
|
1410907
|
Source: www.al-arafahbank.com
Ø Monthly Income Scheme (Steady
Money)
Bangladesh is a developing country. But
in our country opportunity of investment is very low. People of our country
always try to save their excess money and there looking for where they can
deposit the money. According to their demand AL-ARAFAH ISLAMI Bank started this
money income Scheme. A monthly income Scheme their really makes good sense. An
investment for steady return.
Ø Highest of the Scheme
·
Minimum deposit Tk. 2,39500.
·
Higher Monthly Income for higher
deposits.
·
The Scheme is for three – year period.
·
Monthly income will be created to the
depositor’s account on the fifth of each month.
·
After three years the Account holder
would received Tk. 10000000.00
Ø Objectives of the Scheme
·
An account is to be opined by filling up
a form.
·
The Bank provides to the customer a
deposit receipt after opening the account. This receipt is non- transferable.
·
If the deposit is withdrawn before a
five years term, then saving interest rate will be applicable and paid to the
depositor. However, no interest will be paid if the deposit is withdrawn within
one year of opening the account and monthly income paid the customer will be
adjusted from the principal amount.
Ø Mudaraba Millionaire Deposit Scheme
Year
|
Monthly
Deposit Amount
|
Revised Provisional
Rate
|
3
|
23550
|
11%
|
4
|
16725
|
11%
|
5
|
13000
|
11%
|
6
|
10300
|
11%
|
7
|
8000
|
11%
|
10
|
4600
|
11%
|
12
|
3345
|
11%
|
15
|
2170
|
11%
|
20
|
1150
|
11%
|
Source: www.al-arafahbank.com
Ø Muduraba Lakhapati Deposit Scheme
Year
|
Monthly
Deposit Amount
|
Revised
Provisional Rate
|
3
|
2360
|
11%
|
5
|
1285
|
11%
|
8
|
670
|
11%
|
10
|
475
|
11%
|
12
|
355
|
11%
|
Source: www.al-arafahbank.com
Ø Muduraba Kotipoti Deposit Scheme
Year
|
Monthly
Deposit Amount
|
Revised
Provisional Rate
|
3
|
235400
|
11%
|
4
|
167250
|
11%
|
5
|
129800
|
11%
|
6
|
102770
|
11%
|
7
|
80950
|
11%
|
10
|
47725
|
11%
|
12
|
35400
|
11%
|
Source: www.al-arafahbank.com
4.3 Cash Section
Cash section of any Bank plays a vital
role in general banking procedure. Because it deals with the most liquid
assets. There are several counter works simultaneously in cash section of
Al-Arafah Islami Bank Kalatia Branch. There are also some electronic counting
machines by which a huge amount of case money can be counted within a few
minutes.
Ø Cash Receiving Procedure:
The work of case receiving counter is
examining deposit slips. Depositor user the prescribed deposit slip supplied by
the Bank for deposit cash, draft, cheque, pay order etc.
In
all types of deposits teller must cheek the following things:
Ø The
slip has been properly filled up.
Ø The
title of the account and its umber.
Ø The
amount in figure and in words is same.
Ø Instrument
signed by the depositor.
After checking all these things the
teller will accept the cash, cheque, draft, pay order etc. Against deposit
slip, the teller will please the cash in the drawer account to denominations.
The teller will place signature affix “cash receipt, rubber stamp seal” and
record in the cash received register book against the account number, at the
end of this procedure, the cash officer passes the deposits slip to the
computer section for posting purpose and returns the customer’s copy.
Ø Accounting Treatment
Date
|
Particulars
|
Debit
|
Credit(Tk.)
|
Cash A/C Dr.
To Customer’s A/C
|
Xxx
|
Xxx
|
Ø Cash payment procedures
In
order to safeguard the position the paying Banker has to observe the following
precaution before honoring the cheque:
·
A cheque must looked whether it is an
opened or closed cheque .
·
The paying officer should see whether
the cheque is drowning on his branch.
·
He must see if the cheque is postdated
.A letter must not pay post- dated cheque.
·
The officer must carefully see the
apparent tenor of the cheque. If it is mutilated of materially altered then the
officer must not honor it.
·
The offer must compare the signature of
the cheque with the signature of the specimen signature card.
·
The officer must verify the regularity
of the endorsement.
·
The officer may allow overdue against a
cheque if prior arrangement is done with the bank.
Ø Padding a Cheque
After verifying the above mentioned
things the offer to make payment by putting ‘pay cash’ seal the cash officer
make it clear to pay. The cash officer gives the cash amount to the holder and
record in the cash paid register.
Account Treatment
Date
|
Particulars
|
Debit(Tk)
|
Credit(TK)
|
Customer A/C Dr.
To Cash A/C
|
Xxx
|
Xxx
|
4.4
Deposit Section
The function of the deposit is very
important. It is fully computerized. The officer of the deposit section
maintains account numbers for different account number of all the customers of
the Bank. They are used different code numbers for different account. By this
section a depositor/drawer can know what is the present position of his/her
account. The officer makes posting three types of transactions such as cash,
clearing and transfer. This section performs the following tasks.
·
Post all kinds of transactions.
·
Provide on demand report.
·
Cheque maintenance.
·
Preparation of day transaction position.
·
Preparation of closing monthly
transaction.
4.5 Accounts Section
This is a very much crucial department
for each branch of a commercial Bank. Recodes of all the trisection of every
department are here as will as with order respective branches. Accounting
department verifies all financial amounts and contents of transaction. If any
discrepancy arises regarding any transaction this department report to the
concerned department.
Ø Tasks of Accounts Department
Accounts department plays vital role in
commercial banking. In privet banking sector accounts department of Al-Arafah
Islami Bank Bangladesh Limited. Performs
its tasks properly.
The
activities of account section are as follows:
·
Record all transaction in the cash book.
·
Record all transaction in the general
subsidiary ledger.
·
Prepare daily fund function, weekly
position, period statement of affairs etc.
·
Prepare necessary statement for
reporting purpose.
·
Make salary statement and pay salary.
·
Branch to branch fund remittance
·
support for accounting treatment.
·
Budgeting for branch.
4.6
General Banking Activities of Al-Arafah Islami Bank Ltd Kalatia Branch
General Banking consists the Management of
deposit, cash, clearing house, bills, account opening, security
instruments handling, customer services, locker facilities and other ancillary
services of the bank besides Advance and Foreign Trade.
Ø General banking services in last
three months,2015 of Kalatia Branch
Name
of Months
|
Name
of Services
|
No.
of Deposit
|
Amount
(lakh)
|
October
|
Al
Wadiah Current Deposit (CD)
|
10
|
30.75
|
Mudaraba
Short Notice Deposit (SND)
|
5
|
12
|
|
Mudaraba
Savings Deposit (MSD)
|
90
|
20.40
|
|
Mudaraba
Term Deposit (MTDR)
|
35
|
190.50
|
|
Monthly
Profit Based Term Deposit (PTD)
|
8
|
35
|
|
Monthly
Installment Based Term Deposit (ITD)
|
40
|
10
|
|
Mudaraba Millionaire
Deposit Scheme (MDS)
|
2
|
20
|
|
Mudaraba
Double Benefit Deposit Scheme (MDBDS)
|
1
|
5
|
|
Mudaraba
Tripal Benefit Deposit Scheme (MTDBS)
|
-
|
-
|
Name
of Months
|
Name
of Services
|
No.
of Deposit
|
Amount
(lakh)
|
November
|
Al
Wadiah Current Deposit (CD)
|
8
|
24.50
|
Mudaraba
Short Notice Deposit (SND)
|
6
|
14
|
|
Mudaraba
Savings Deposit (MSD)
|
80
|
17.20
|
|
Mudaraba
Term Deposit (MTDR)
|
30
|
172
|
|
Monthly
Profit Based Term Deposit (PTD)
|
9
|
39
|
|
Monthly
Installment Based Term Deposit (ITD)
|
36
|
9.20
|
|
Mudaraba Millionaire
Deposit Scheme (MDS)
|
1
|
10
|
|
Mudaraba
Double Benefit Deposit Scheme (MDBDS)
|
-
|
-
|
|
Mudaraba
Tripal Benefit Deposit Scheme (MTDBS)
|
-
|
-
|
Name
of Months
|
Name
of Services
|
No.
of Deposit
|
Amount
(lakh)
|
December
|
Al
Wadiah Current Deposit (CD)
|
12
|
34.50
|
Mudaraba
Short Notice Deposit (SND)
|
3
|
6
|
|
Mudaraba
Savings Deposit (MSD)
|
95
|
23.40
|
|
Mudaraba
Term Deposit (MTDR)
|
42
|
220.50
|
|
Monthly
Profit Based Term Deposit (PTD)
|
10
|
50
|
|
Monthly
Installment Based Term Deposit (ITD)
|
45
|
15
|
|
Mudaraba
Millionaire Deposit Scheme (MDS)
|
1
|
10
|
|
Mudaraba
Double Benefit Deposit Scheme (MDBDS)
|
2
|
8
|
|
Mudaraba
Tripal Benefit Deposit Scheme (MTDBS)
|
-
|
-
|
Sources: Branch Record of Al-Arafah Islami Bank Limited.
4.6 Findings of the
Study
·
In general banking department they
follow the traditional banking system. The entire general banking procedure is
not fully computerized. As a result some processing for example collection
money from the depositors take a long time to perform.
·
The cash counter I think is congested
and the procedure is also traditional.
·
Lack of variety of services is also a
drawback of the general Banking area of the Al-Arafah Islami Bank of Limited.
The Bank provides only some traditional limited service to its client. As
result Bank is falling behind in competition.
·
Shariah Banking is a new phenomenon in
our country. So most of the people of this branch have no proper knowledge
about the activities of the Shariah Bank as well as its investment procedures,
which hamper the large scope of investments of Al-Arafah Islami Bank Limited.
·
Decision making process is very lengthy
and sometimes it creates problems, which is unexpected to the customers. Most
of the cases Head Office control the decision making and it is centralized.
·
Lack of proper explanation of records
and document records keeping system.
·
Al Wadiah Current Deposit is not
expected for the month November.
·
In our country there are no prescribed
Islamic banking guidelines from bank authority (Bangladesh Bank).
·
Account opening sector is slow than
other sectors of general banking activities.
5.1 Recommendations
§ The
entire department of Kalatia Branch of AIBL should be well informed regarding
their goals and objectives. It is essential to execute company objectives into
individual target.
§ The bank can offer to its
customer better service if all of its department are computerized and
incorporated under local area network
§ There
must be a clear allocation of responsibilities authority and accountability.
§ A
handsome number of qualified employees & staffs should be appointed in
Kalatia Branch very soon for maintaining the normal flow of work.
§ Decision
making power should be decentralized effectively so that business can promptly
be enhanced.
§ The
Kalatia Branch should introduce more promotional activities.
§ Filing
and record keeping system of the bank should be modernized. At present
operation system is partially computerized and on line banking should be
started very soon.
§ As
Al Wadiah Current Deposit is not expected, the Bank should appoint an expert in
account opening sector.
§ The
bank has the provision of internship program but there is no organized structure
for the internship program. The bank can properly utilize the internees at
minimum cost.
5.2
Conclusion
The Banking sector in any country plays an important
role in economic activities. Bangladesh is no exception of that because it’s
financial development and economic development are closely related. That is why
the private commercial banks are playing significant role in this regard.
From the practical implementation of customer
dealing procedure during the whole period of my practical orientation in
Al-Arafah Islami Bank Limited. I have reached a firm and concrete conclusion in
a very confident way. I believe that my realization will be in harmony with
most of the banking thinkers. It is quite evident that to build up an effective
and efficient banking system to the highest desire level computerized
transaction is a must.
This report focused and analyzed on General banking
department of Al-Arafah Islami Bank Limited, Kalatia Branch. Al-Arafah Islami
Bank Limited a popular bank in Bangladesh but its contribution in socioeconomic
prospect of Bangladesh has the greater significance. Al-Arafah Islami Bank Limited
is engaged in modern banking. It is expected that Al-Arafah Islami Bank by its
efficient Asset and liability management will be able to maintain its trend of
growth and thus overcome the threat. Neither Al-Arafah Islami bank Limited nor
any other commercial bank can effectively combat risk.
As Al-Arafah Islami
bank Limited is performing good in traditional general banking and there is a
good demand for Islamic Banking and the opining if then (the management) that
the performance of the Bank is getting much better than past. I wish and hope
that in future Al-Arafah Islami Bank Limited will be Number one commercial Bank
in Bangladesh.
References
Ø Books
·
Frand Wood’d. (1912). Business Accounting-1. 16th
Editions. National Publication.
·
John V. Lesiker. (1973). Business Communication. 2nd Editions.
·
K. C. Shekhar. (1956). Banking Theory and Practice. 7th Editions.
Promote Publication.
·
Terry and Franklin. (1966). Principle of Management. 8th Editions.
Ø Annual Report
·
Annual Report of Al-Arafah Islami Bank
Limitd, 2014
Ø Websites
·
www.businessdictionary.com
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