Internship Report  

                                                     On  
Investment Management and Performance analysis of Al- Arafah
Islami Bank Limited (AIBL) 
Supervised To: 
 

 
 Supervised By: 
 
Submitted By: 

Letter of Transmittal 
 
Date; NOVEMBER 00,2022 
 
To 

Principal and Associate Professor 

Eastern university
Subject: submission of Internship report 
 
Honorable sir,  
I am Farhana Akter Srabani a regular student of Daffodil Institute of IT. I have got an
opportunity to work practically in AL Arafa Islami Bank Limited and prepared my Internship
Report on An Analysis of INVESTMENT performance OF Al Arafa Islami Bank Limited. I was
assigned as a BBA student, which was part of my academic curriculum. Through working in
this environment, I have learned much practical knowledge. Through this report I tried to
highlight key element relating to the Investment Performance of Al Arafa Islami Bank Limited.
I would be grateful if you consider that from excusable point. 
I therefore pray and hope that you would be kind enough to grant my prayer and oblige
thereby. 
 
Sincerely Yours 

 
Farhana Akter Srabani 
Registration number:16501003352 
BBA program 
Major- Finance 
Daffodil Institute of IT(DIIT) 
 Certificate of Approval 
 
  Acknowledgement 
 
First of all, I am expressing my heartful gratitude to the Almighty Allah, for this special
kindness to give me the opportunity to complete my internship program successfully. 
I would like to acknowledge my supervisor Professor Dr. Mostafa Kamal sir not only for giving
the opportunity to prepare the report but also given me a lot of support to improve the
report. Also, I thanks to Lakkhan Chandra Robidas sir who will also give a lot of support when
I needed his help. I am also thankful to Md.Gulam Sarwar( senior vice president Manager) for
giving me the opportunity to conduct my internship with Al Arafa Islami Bank Limited. I am
also grateful to the entire team of Mirpur Branch of Al Arafa Islami Bank Limited because
they had always been there for me when I needed them most. Their active participation
during my internship has made this journey a true success. I would like to mention name here
Mahbubur Rahman (second officer of Mirpur branch), Arif Billah (branch manager) thus the
persons are very kind. Thanks to all of them for providing suggestions and information to
prepare this report. It was my immunity and I feel truly thankful with honored working with
such a wonderful team. 
 
Finally, I am very thankful to my family members principally my parents for their respective
support and inspiration to accomplish my study.

 
 
 
 
 
Executive Summary 
 Table of Contents 

Chapters Topics Pages

Pre page Letter of Transmittal i.

Certificate of Approval ii.

Acknowledgement iii.
Executive Summary iv.
Chapter:1 Introduction

1.0 Introduction
1.1 Background of the report
1.2 Origin of the report
1.3 Objectives of the study
1.4 Significance of the study
1.5 Methodology of the study
1.6 Limitation of the study
Chapter:2 Organizational overview
2.1 Background of the Al Arafah Islami Bank Limited
2.2 Vision
2.3 Mission
2.4 Al –Arafah Islamic Bank Limited Commitment
2.5 Features of AIBL
2.6 Objectives of AIBL
2.7 Corporate structure
2.8 Distinguishing features of conventional & AIBL
2.9 Corporate information
2.10 Auditor information
2.11 Product & service of AIBL
 2.12 Financial highlights of AIBL
Chapter:3                            Investment Management

3.1 Definition of investment

3.2 Investment sector of AIBL
3.3 Investment policy of AIBL
3.4 Investment objective of AIBL
3.5 Importance of investment
3.6 Investment strategy of AIBL
3.7 Investment activity of AIBL
3.8 Source of fund
3.9 Investment products of AIBL
3.10 Investment mode of AIBL
3.11 Share mechanism of AIBL
3.12 Bai-mechanism of AIBL
3.13 Ijara mechanism of AIBL
3.14 Hire purchase
3.15 Investment processing of AIBL
3.16 Limit of Investment
3.17 Document needed for preparing investment proposal
3.18 Causes of over dues
3.19 Monitoring & recovering stage.
Chapter:4 Analysis of investment performance of AIBL

4.1 Year wise Investment & growth rate of Investment of

AIBL
4.2 Graphical chart of five year investment of AIBL
4.3 Graphical expression of growth rate of investment
4.4 Year wise deposit & growth rate of Deposit of AIBL
4.5 Year wise Investment to Deposits ratio Analysis
4.6 Mode wise investment in 2021 is shown by pie-chart
4.7 Trade of Mode wise Investment
 Chapter:5 Findings, Recommendation and Conclusion
5.1 Finding
5.2 Recommendation
5.3 Conclusion
Bibliography

List of Figures
Figures Topic Pages
Figures: 1 Corporate structure of AIBL
Figures:2 distinguishing features of conventional & AIBL
Figures:3 Corporate information of AIBL.
Figures:4 financial highlights of AIBL
Figures:5 Modes of investment at AIBL
Figures:6 Year wise Investment
Figures:7 Graphical expression of growth rate of investment
Figures:8 Deposit Rate
Figures:9 Growth rate of deposit
Figures:10 Investment to Deposit Ratio
Figures:11 mode wise investment performance
Figures:12 Investment in Mudarabaha
Figures:13 Investment in Bai- Muazzal
Figures:14 Investment in hire purchase
Figures:15 Investment in Qurad
Figures:16 Other investment

Chapter one
 Introduction

Chapters  1 Introduction
1.0 Introduction
1.1 Background of the report
1.2 Origin of the report
1.3 Objectives of the study
1.4 Significance of the study
1.5 Methodology of the study
1.6 Limitation of the study

1.0Introduction:
Bangladesh is one of the biggest Muslim countries in the world. The people of this country are
really committed to Islamic way of life as enshrined in the Holy Quran and the Sunnah. Actually,
it remains a deep cry in their hearts to fashion and design their economic lives in accordance
with the periscope of Islam. The establishment of Al-Arafah Islami Bank Limited on 18 June
1995 is the true reflection of this inner urge of its people, which started functioning with effect
from27 September 1995. This Islamic Banking is banking activity that is consistent with the
principles of shariah and its practical application through the development of Islamic
economies. As such a more correct term for ‘’ Islamic banking’’ is shariah compliant finance.
Shariah prohibits acceptance of specific interest or fees for loans of money, whether the
payment is fixed. Investment in business that provide goods or services considered contrary to
Islamic principles is also haram, these prohibitions have been applied historically in varying
degrees in Muslim countries to prevent Islamic practices, only in the 20th century were a
number of Islamic banks formed to apply these principles to private or semi- private
commercial institutions within the Muslim community. Islamic banking connected operations in
Bangladesh in1983. There are eight Islami Shariah based banks in Bangladesh and they execute
banking activities according to Islami shariah based principles i.e. Profit-loss sharing mode.

1.1 Background of the report 

The internship report has been prepared under the internship program, a crucial part of the
Bachelor of Business Administration (BBA) program. For internship purposes, I have chosen Al-
Arafah Islami Bank Limited, which is an interest-free organization. I have selected my topic
‘‘Investment Management & Performance of Al-Arafah Islami Bank Limited.’’ This disquisition
report is an integral; part of the BBA program of the university. It is compulsory to undertake
such a task for students who desire to complete and successfully end up their BBA degree. This
also provides an opportunity for the students to minimize the gap between theoretical and
practical knowledge. Students are required to work on a specific topic based on their
theoretical and practical knowledge during the period of the internship program & then submit
it to their respective authorities. That's why I prepared this report.

1.2Origin of the report

For Bachelor Business Administration (BBA) student’s only theoretical knowledge is not enough
for the real-life situation. So, an internship is a great opportunity for the student to know about
real-life operations. This report is prepared for fulfilling a practical requirement for both BBA &
the internship program. In this regard, I have been posted in Al-Arafah Islami Bank Limited,
Mirpur branch. After completing of BBA course Two (2) month duration internship program and
have been advised by the honorable management to submit my practical learning in written
form at different phases.

Al-Arafah Islami Bank Limited is a financial institution whose rules, procedures, and also its
commitment to the principle of Islamic shariah. Al-Arafah Islami Bank operates on the Islamic
principle of profit & loss sharing and this organization strictly avoids the interest. In this report, I
decided analysis on ‘‘Investment Management & Performance of Al-Arafah Islami Bank
Limited.’’

1.3Objectives of the Study

The main objective can be divided into two parts & there are:

General objective:

 The general objective of the study is to investment management and performance of

AIBL.

Specific objectives:

 To fulfill the partial requirement of the BBA program

 To understand the different investment activities of AIBL.
 To understand the investment policy of AIBL.
 To analyze the investment performance of 2017 to 2021.
 To make recommendations based on the findings.
1.4 Significance of the Study

This internship report is an important requirement of my four years BBA program. Though it is
an academic requirement also it has some important parts-

 Helps to gain experience in various banking fields.

 Helps also in adding experience to the career.
 Help in developing interpersonal skills.
 Helpful in building career networking.
 Helpful in achieving confidence to work in the corporate field.

1.5 Methodology of the Study

For preparing this report I have followed/ collected data from two sources.

Primary sources:

1. Face-to-face conversation with the respective officers & staff of the branch

2. Practical work exposure from the investment desks of the branch.

Secondary sources:

1. Annual report of AIBL (2017-2021).

2. From the important publications of AIBL.

3. AIBL website
1.7 Limitations of the study

Any research work needs a high degree of investment regarding the collection of information,
creation of a database, and analysis of data. While doing the task many limitations arise even
though I always try to avoid them. In conducting the present study, the following limitations
have been faced-

 The main constraints of the study are insufficiency of information, which is highly
needed for the study.
 Every organization has its secrecy that is not revealed to others. While collecting those
data through the employees, they did not disclose much information.
 Bank policy was not disclosing some data and information for various reasons.
 Personal limitations like inability to understand some official terms, office decorum, etc.
created a few problems.`
 As, I am students it is typically for me to follow all the rules of preparing internship
report.

Chapter Two
Organizational overview
 Chapter: Organizational overview
2
2.1 Background of the Al Arafa Islami Bank Limited
2.2 Vision
2.3 Mission
2.4 Al –Arafah Islamic Bank Limited Commitment
2.5 Features of AIBL
2.6 Objectives of AIBL
2.7 Corporate information
2.8 Distinguishing features of conventional & AIBL
2.9 Corporate information
2.10 Auditor information
2.11 Product & service of AIBL
2.12 Financial highlights of AIBL

2.1 Background of the Al Arafah Islami Bank Limited

To achieve success here and hereafter by pursuing the way directed by Allah and the path
shown by his Rasul (SM), Al-Arafah Islami Bank Limited was established 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 15000.00 million and the paid-up capital is Tk. 10440.22million
as of 31.12.2018. Renowned Islamic Scholars and pious businessmen of the country are the
sponsors of the bank 100% of paid-up capital is owned by indigenous shareholders.

The equity of the bank stood at Tk. 2348.32 core as on 31 December 2018, the manpower was
3682 and the number of shareholders was 25793. 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 or services to satisfy customer needs.

The bank is committed to contributing significantly to the national economy. It has made a
positive contribution towards the socio economic development of the country with 201
branches of which 25 are AD throughout the country.

2.2 Vision

To be a pioneer in Islami Banking in Bangladesh & contribute significantly to the growth of the
national economy.

2.3 Mission

 Achieving the satisfaction of Almighty Allah here and hereafter.

 Proliferation of Shariah Based Banking practice.
 Quality financial services adopting the latest technology.
 Fast and efficient customer service
  Maintaining a high standard of business ethics.
 Balanced growth
 Steady and competitive return on shareholder’s equity.
 Innovative banking at a competitive price
 Attract and retain quality human resources.
 Extending competitive compensation packages to the employees.
 Firm commitment to the growth of the national economy.
 Involving more in Micro & SME financing.

2.4 Al –Arafah Islamic Bank Limited Commitment

 Ours is a customer-focused modern Islamic banking sound and steady growth in both
mobilizing deposits and making quality Investment to keep our position as a leading
Islami Bank in Bangladesh.

 To deliver financial services with the touch of our heart to retail, small and medium-
scale enterprises as well as corporate clients through our branches across the country.
 Our business initiatives are designed to match the changing trade & industrial needs of
the clients.

2.5 Features of AIBL

As an Islami bank AIBL is singular in every aspect. AIBL provides a bunch of state of art banking
services within the wide bracket of shariah. AIBL is unique with its products, strict with its
principal, and uncompromising with its honesty. Some of AIBL's special features that make us
notable in the Islamic Banking sector are as follow:
  All activities of AIBL are conducted under a 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 the Shariah Council.
 The bank committed to establishing welfare oriented banking system to meet the needs
of low-income and underprivileged classes of people.
 We believe in providing dedicated services to clients imbued with the Islamic spirit of
brotherhood, peace, and fraternity.
 The bank upholds the Islamic values of the establishment of a justified economic system
through social emancipation and equitable distribution of wealth.
 AIBL regularly arranges AGMs (Annual General Meetings). Whenever EGMs
(Extraordinary General Meetings).
 Following the Islamic traditions, it is assisting in the economic progress of the socially
deprived people; in the creation of employment opportunities, and the promotion of
rural areas to ensure a balanced development of the country.
 The bank believes in social activities and has established AIBL English Medium Madrasha
and AIBL library. More endeavors will inshaallah follow in the future.

2.6 Objectives of AIBL

The objective of Al-Arafah Islami Bank Limited is not only to earn profit but to provide good
welfare to the people. The main objectives of AIBL are-

 Al-Arafah Islami Bank Limited believes in its commitment to complete choice in banking.
The bank is committed to running all its activities as per Islamic Shariah.
 It aims to introduce a welfare-oriented banking system and also establish equity &
justification in the field of all economic activities.
  Investment is made through different modes permitted under Islamic Shariah.,
 All the activities are conducted on an interest-free system.
 It plays a vital role in human resource development and employment-generation,
particularly for the unemployed minority.
 Investment income of the bank is shared with the Mudaraba depositors to ensure a fair
rate of return on their depositors.
 It aims to achieve balanced growth & development of the country through investment
operations.
 It extends co-operative to the poor, helpless, and low-income groups of people for their
economic unlisted, and particularly in rural areas.

2.7 Corporate structure

Board of director

Managing director
 Deputy Managing director

Executive Vice President

Senior Vice President

Vice President

Assistant Vice President

General Banking Investment Foreign Exchange

A/C Cash Clearing Account Export Import

opening

Figures 1: corporate structure of AIBL

2.8 Distinguishing features of conventional & AIBL 

Al-Arafah Islami Bank Limited

Conventional Banks

The function & opening modes of The functions & opening modes of AIBL are based
conventional banks are based on on Islamic Shariah.
manmade principles.
The interest is assured of a In contrast, it promotes risk sharing between
predetermined rate of interest. providers of capital and the user of funds.

It aims at minimizing profit without any It also aims at minimizing profit but is subject to
restriction. shariah restrictions.

It does not deal with Zakat. In the modern AIBL system, it has become one of
the service-oriented functions of the AIBL to
collect and distribute Zakat.

The scope of activities is narrower when The scope of activities is wide when compared
compared with AIBL. with a conventional bank.
        Figures 2: distinguishing features of conventional & AIBL.
        2.9 Corporate information

Date of registration 18 June, 1995

 
1st branch Motijheel Branch, Dhaka

Opening ceremony 27 September, 1995

Chairman Alhajj Abdus Samad Labu

Vice chairman Alhajj Abdus Salam

Local partnership of capital 100%

Equity 25,900.33 million

Authorized capital 15,000.00 million

Deposit 353287.97 million

Investment 336890.72 million

Paid up capital 10649.02million

Number of shareholder 19146

Number of Branches 201

Rural Branches 120

City Branches 81

Figure 3: Corporate information of AIBL.

2.10 AIBL contribute in the country’s economy

AIBL is always highly focused on the development of the Economy through the following
process.
  Generation of work sectors around the country
 Aiding small & big industries with easy financial solutions.
 Encouraging depositors to deposit by providing security of the fund.
 Encourage small-scale savings
 Encourage charity
 Provides quality financial services
 Gather small funds and use them in engaging the big development sector.
 Facilitating the easy transfer of money
 Encourage poor people to contribute to the national economy by giving financial help.

2.11 Product & service of AIBL

AIBL successfully marketed its products designed to fulfill the various socio-economic sectors.
Attractiveness features of the products have given a distinctive image among private banks. The
bank has continuously offered new products and services. As a commercial bank, they provide
all traditional banking services, which are:

 General Banking Department

 Foreign Exchange Department
 Investment Department

General Banking Department

 Receipt & Payment cash

 Mobilization of deposit
 Handling transfer transaction
 Operations of clearing house
 Maintenance of accounts with Bangladesh Bank and other banks.
 Collection of cheques and bills.
Deposit products:

 Al-wadeah's current deposit(AWCD)

 Mudaraba Savings Deposit( MSD)
 Mudaraba Special Savings Deposit
 Mudaraba Term Deposit Account( MTDR)
 Mudaraba Monthly Installment Term Deposit(ITD)
 Mudaraba Kotipoti Deposit Scheme.

Investment products and scheme:

 Bai-Murabaha
 Bai-Muajjal
 Bai-Salam
 Mudaraba
 Musharaka
 Hire Purchase under Shirkatul Melk( HPSM)
 Musharaka Documentary Bill in foreign currency

Remittance Service:

 Payment of spot cash remittances

 Central crediting Account

Alternative Delivery Service:

 ATM/ VISA debit card

 Banking

2.12 Financial highlights of AIBL

Million
Sl.no. particulars 2017 2018 2019 2020 2021

1 Investment income 20491.03 24,956.81 18,604.42 26,331.28 23,446.01

2 Profit paid on deposit 11784.20 16,256.61 10,207.23 16,556.64 13,072.79

3 Paid up capital 9943.06 10,440.22 10,649.02 10,649.02 10,649.02

4 Authorized capital 15000.00 15,000.00 15,000.00 15,000.00 15,000.00

5 Deposits 244806.26 266,205.48 297,241.8 326,023.41 353,287.97

1

6 investment 235905.23 261,874.13 288,486.0 308,620.66 336,890.72

2

7 Shareholders’ equity 22520.68 23,483.22 24,148.21 25,455.85 25,900.33

8 Fixed asset 3260.38 4,494.61 4,351.93 5,833.88 5,470.27

9 Net profit margin% 3.87 3.42 3.73 3.45 3.26

10 investment/deposit ratio 89.95 89.87 88.93 86.92 87.57

11 Return on equity% 14.07 10.46 10.05 10.10 8.21

12 Return on asset% 0.99 0.73 0.64 0.61 0.46

13 Cost of fund% 7.50 8.70 9.02 7.50 6.00

14 cost/income ratio in 43.28 49.41 44.82 50.20 48.75

operating business%

15 Number of employees 3446 3,682 3,795 3,866 4,247

16 Number of shareholders 30386 25,793 24,276 22,142 19,146

                 Figure 4: financial highlights of AIBL

Chapter Three
 Investment Management 

Chapter 3 Investment Management

3.1 Definition of investment

3.2 Investment sector of AIBL
3.3 Investment policy of AIBL
3.4 Investment objective of AIBL
3.5 Importance of investment
3.6 Investment strategy of AIBL
3.7 Investment activity of AIBL
3.8 Source of fund
3.9 Investment products of AIBL
3.10 Investment mode of AIBL
3.11 Share mechanism of AIBL
3.12 Bai-mechanism of AIBL
3.13 Ijara mechanism of AIBL
3.14 Hire purchase
3.15 Investment processing of AIBL
3.16 Limit of Investment
3.17 Document needed for preparing investment proposal
3.18 Causes of over dues
3.19 Monitoring & recovering stage.

3.1 Definition of investment

An investment is an asset that’s purchased with the hope that it will generate income in the
future.

In an economic sense, an investment is the purchase of goods that are not consumed today but
are used in the future to create wealth.

In finance, an investment is a monetary asset purchased with the idea that the asset will
provide income in the future.

3.2 Investment sector of AIBL

i. Investment in Agricultural Sector.

ii. Investment in Industrial Sector.
iii. Investment in Business Sector.
iv. Investment in Foreign trade.
v. Investment in Construction & housing.
vi. Investment in transportation sector.
vii. Hire Purchase (HPSM).
viii. Investment scheme in Mosque & Madrasa (MMIS).
ix. Village & Small Investment Schemes (GSIS).
x. Small Enterprise Investment Scheme (SEIS).
xi. Consumer Investment Scheme (CIS).

3.3 Investment policy of AIBL

The investment operation of a bank is highly vital because the greatest share of total revenue is
arising from it and most risk is targeted in it. so, the existence of the Bank largely depends on
the well-management of its Investment mechanism. The economical preparation of mobilized
resources in a profitable, safe, and acceptable Investment Policy is important.

One of the important features of the investment policy of the bank is to invest based on Islamic
Shariah. Profit generation is the individual motive, the objective behind this investment
scheme, and the bank's attention is actively participating in social goods according to the Quran
& Sunnah.

To implement the Investment policy adopted by a Bank at 7 years the long-term plan has been
drawn up for years between 1995to2002. Then another 5-year investment plan has been taken
for the year 2003 to 2008. These plans aim at expanding the investment by size, sector
geographical area, economic purpose, and securities of the economy.

3.4 Investment objective of AIBL

 The funded investments are strictly maintained with the principle of Islam.
 To diversify investment portfolio according to investment, economical, geographical and
agricultural.
 Increase the number of potential investors by making profitable investments.
 Take various developments for alleviation poverty, increase income and employee
generation.
 Invest in the form of goods and commodities.
 Encourage social enterprise that work for the betterment of the society.

3.5 Importance of Investment

Investment plays an important role in national economy in the following ways-

 It provides working capital for industrialization.

 It helps to create employment opportunities.
 Investment controls almost all kinds of production activities of the country.
 It brings social equity.
  Cash generation occurs for its successful activities.
 Business cycle can run well with the help of lending policy.
 Economic stabilization.
 Increase standard of living.

3.6 Investment strategy of AIBL

Risk within the investments and come on that are associated. Associate investment policy that
emphasizes a high income should settle for comparatively high risk. Associate investment policy
that may tolerate solely a bit of risk should be ready to simply accept a comparatively low
income.

Considering all aspects following pointers shall be followed as strategy for bank investment.

 If two portfolios have an equivalent risk however with completely different returns, the
portfolio having higher income shall be most preferred.
 If the two portfolios have constant expected returns however completely different types
of risk, the portfolio with blower risk shall get preference.
 Visible risk issue the bank shall maintain flexibility in determining the rate of return on
investment on case to case thought of the risk part concerned within the several
investments.
 Investment facilitates shall be extended for institution and enlargement of export
orienting forward and import substitute industries.
 The bank requires retaining 10% of its total deposit liability as statutory liquidity ratio
including 4% cash reserve ratio with the central bank. The bank may go for investments
up to 90% of its total deposit. The prospective investment plan is being formulated
 quantifying the allocation of investments size wise, sector wise, geographical wise,
economic wise etc and 20% projected growth of deposit each year.
 Safety, security, p[profitability and liquidity of Bank’s investment.
 Enhance the extending limit of goods investment customers.
 Each branch invest at least 50% of its deposited locally
 Adoption of modern technology.

3.7 Investment activity of AIBL

Investment is the action of using funds with the decision & expectation that they will earn a
positive return for the owner. Funds may be invested in either real assets or financial assets.
When resources are used for purchasing fixed and current assets in production purposes then it
turns into real investment.  Specific examples of financial investments are: Deposit of money in
a bank account and the purchase of Mudaraba savings in a company. Since Islam criticize
hoarding savings and a 2.5% annual tax (Zakat) is imposed on savings, the owner of excess
savings, if he is unable to invest in real assets, has no option but to invest his savings in financial
assets.

3.8 Source of fund

Al-Arafah Islami Bank Limited, in general collects funds from reserves and funds arise through
borrowings from IBG accounts. The main part of their operational funds is borrower, derived
from the different categories of deposits accepted on the Islamic principles of Al-Wahdiah and
Mudarabah. AIBL Mirpur 1 branch has the opportunity to collect funds two ways such as
primary and secondary sources. These sources are described below-

Primary Sources:

 Reserves
 The central bank ensures that every Islamic bank shall maintain a reserved fund. Before
any dividend is declared AIBL shall transfer to the reserved fund out net profits of each
year after due providing zakat.

 Liquid asset

 AIBL is further required to keep at all time a minimum amount of liquid asset against its
deposit liabilities expressed as a certain percentage of the deposits, as preserved from
time to time notice in writing by the central bank.

 Borrowing from IBG

To risk a temporary liquidity shortage AIBL, as member banks are entitled to borrow
from the central bank.

 Inter- Bank borrowing

AIBL has established interest rate free fund arrangements with local and foreign banks on the
basis of mutuality. Normally the Islamic banks keep surplus funds with selected banks.

Secondary sources:

 Mobilization of deposit

The main function of AIBL  is to mobilize savings and provide financial support to the
entrepreneurs. Islamic banking is a response to such demands. It mobilizes savings of
the common people in line with Islamic Shariah.

 Al Wadiah Account

AIBL banks receive deposits in their Al Wadiah account. This account is similar to the
demand deposit account. Depositories may withdraw all or a part of funds that they
 deposited without any restriction. The term Al Wadiah means deposit of money
allowing somebody to claim the funds in the account.

 General Mudarabah Account

The account of AIBL is different from the checking account of an interest based bank.
Mudarabah is a form of business contract where one party supplies money and the
manager the business by investing labor and time. Profit generated contract.

3.09 Investment products of AIBL

1. Bai-Mudarabah
2. Bai-Mushraka 
3. Bai-Murabaha
4. Bai-Muajjal ( commercial & real statue)
5. Bai -Salam
6. Bai-Istiana
7. Bai-Ijarabil
8. Bai- Murabaha (Trust receipt)
9. Hire purchase Sirkatul Melk
10. Consumer Investment Scheme
11. Masjid-Madrasa Investment Scheme
12. Small Enterprise Investment Scheme
13. Agriculture & Rural Small Investment Scheme etc.

3.10 Investment mode of AIBL

When money is deposited in the AIBL, the bank makes investments different from those
approved by the Islamic Shariah with the goal to earn a profit. Not only a bank but also an
individual or organization can use Islamic modes of Investment to earn profits. Some popular
modes of investment of AIBL are discussed below-
 Mode of Investment

Share Bai- Ijara

mechanism mechanism mechanism

H.P.S.M Ijara
Mudarab Mushrak

Bai Bai Bai salam Bai istiana

mudaraba mushrak

Figures 5: Modes of investment at AIBL

3.11 Share mechanism of AIBL

Share mechanism also has two parts. That are-

 Mudarabah 
 Mushrak 
 Mudarabah: 

 It is a form of partnership where one one party gives funds while the other party provides the
expertise, labor and the letter referred to at least Mudarabah.

Features: 

 Bank supplies capital as Sahib-al-Mall and client invest if in the business with his
experience
 The bank management are maintained by client
 Profit is parted as per agreement.
 Bank bears the actual loss alone.

Musharaka: 

The term shirkat and Muaraka have been taken from Arabic words Shairkah and Sharika.
The word shirkah means a partnership between more than one partner. So the
Musharaka means a partnership established between two or more partners for the
purpose of a commercial venture participating both in the capital and management
where the profit may be shared between the partners.

Features:

 The investment customer has to run and manage the business

 The bank should take part in the policy and decision making as well as analyzing
the operations of the business.
 As the investment customer shall manage the enterprise, the bank may give
more share of profit to him than that of his proportionate capital contribution.
 Loss if any shall be divided equally to both on the basis of capital ratio.
3.12 Bai-Mechanism of AIBL
Bai-Mechanism also has four parts. That’s are-

 Bai-Mudarabaha:
 Bai –Murabaha:
 Bai- Muajjal: 
 Bai-Istisna

Bai-Mudarabaha:

The term Bai and Murabaha have been derived from Arabic words, ‘Bai’ means purchase and
sale and the word Mudarabaha means in cash. Bai Mudarabaha means sale for which payment
is in cash.

Features: 

 A client can make an offer to purchase particular goods from the bank for a specific
price.
 A client can make the promise to purchase from the bank, he is either to satisfy the
promise ort any losses incurred from the breaking the promise without excuse.
 It is allowed to take cash to guarantee to keep the promise.
 Documentation of the debt resulting from Bai-Mudarabaha by a guarantor.

Types of Mudarabaha

In respect of dealing two types of Mudarabaha with their client.

 Ordinary Bai-Mudarabaha
 Bai -Mrabaha
Ordinary Bai-Mudarabaha:

When there are only two parties, the seller and the customer where the seller is an ordinary
trader purchase the goods from the market without depending  on any order and sell those to a
buyer for cost plus profit.

Bai –Murabaha:

This is when there are three parties, the buyer, the seller and the bank as an media between
the buyer and seller, where the Bank upon receipt order from the buyer with specification and
a prior promise to buy the goods from the bank, purchase the ordered goods and sells those to
the ordering buyer at a cost plus agreed profit, the sale is called Bai- Mudaraba on Order.

Bai- Muajjal: 

The term Bai and Muajjal have been taken from Arabic words Ajal and Bai. The word Bai stands
for purchase and sale and the word Ajal is a fixed time. Bai Muajjal means sale for which
payment is made on a fixed date.

In short, it is a sale on credit.

Features:

 The client goes to the bank with a deal to purchase a specific good by the Bai-Muajjal
agreement.
 The client must have to give security to guarantee for payment on the last date
 If the bank wishes it may sell the goods at higher price to earn more profit
 The bank is not liable to show the profit made on transaction.
Bai-Salam:

Bai and Salam are the terms that have been derived from Arabic words. Bai means sale and
purchase and Salam means Advance. Bai Salam means Advance sale and purchase.

Features: 

 Normally, Industrial and agricultural products are bought or sold in advance.

 It is allowed to obtain equal security from the seller client to secure the investment.
 It is allowed to obtain a mortgage from a third party as security before the signing of the
agreement.

Bai-Istisna

Istisna is a word that has been borrowed from the word Istisna which means
Manufacturing Enterprise. So Istisna means goods manufactured by placing orders to a
manufacturer.

3.13 Ijara mechanism of AIBL

Ijarah means lease, rent or wage. Generally, the ijarah concept refers to selling the
benefit for a fixed price. Under this concept, the Bank makes available to the customer
the use of assets such as plant, office automation, motor vehicle for a fixed period.

3.14 Hire purchase

The term ijarah has been derived from the Arabic words Ajarah and Ujrut which means
consideration, return, wages or rent. This is really the exchange value or consideration, return,
wages rent of an asset or service.Ijarah has defined two parties the hire and hirer where the
Hirer enjoys a specific service on benefit from the asset owned by the Hire. It is an hire
agreement under which a certain asset is hired out by the hire to a hirer against for a specific
time period.

Hire purchase under Shirkatul Melk:

Hire purchase under Shirkatul Melk is a special type of contract which has been developed
through practice. It is a combination of three contracts; Shirkat, Ijarah and sale. Shirkat means
partnership. Shirkatul Melk means to share an ownership. When two or more persons supply
equity, purchase an asset, own the same jointly and bear the loss in proportion to their
respective equity, the contract is called Shirkatul contract.

Stages of hire purchase under Shirkatul Melk

Hire purchase under Shirkatul Melk agreement has got three stages:

 Purchase under joint ownership

 Hire and
 Sale of ownership to the other partner hirer.

3.15 Investment processing of AIBL

Generally, a bank takes certain steps to deliver its proposed investment to the client. But the
process takes deep analysis. Because an investor's fund is not a bank fund. So every bank
should maintain a strong application on investment proposals. Al-Arafah Islami Bank Limited
makes its investment decision by successfully passing some steps-

At first, Investment takers talk to any branches of AIBL. Then he talked to the manager or
investment officer.
Secondly, banks consider the five C’s of the client ( character, capacity, capital, collateral,
condition). After their conversation, the bank selects the client for its proposed investment. It’s
to be noted that the client must agree with the bank's rules regulations and procedures before
turning to investment.

Application stage:

In this stage, the bank will collect all necessary information about the client. For this reason, the
bank informs the client to provide information that is needed for the initial investment
proposal. Documents that are necessary for getting an investment in AIBL are given below-

 Trade license photocopy

 Income statement
 Attested copy of partnership deed ( for partnership business)
 Three years audited balance sheet (for joint stock)
 Three years business transaction statement for the Musharakah / Mudarabah
investment.
 Attested copy of the Memorandum and Articles of Association for the joint stock
company
 Attested copy of the Tax Identification Number including the final statement.
 A detailed summary of the varied debtors and creditors.
 Summary of the personal movable and immovable assets and others.

Appraisal Stage:

At this stage, the bank evaluates the client and his organization. It is the most important stage
for a bank. In this stage, the bank can go for sanctioning the proposed investment. If anything
goes wrong the bank can stop making investments.

In order to appraise the client, AIBL provides a standard F-167B form to the client for gathering
all information. The content of the appraisal report is listed below:
  Companies or client information
 Owner’s information
 Purpose of investment
 Details of the proposed investment
 Break up of present outstanding
 Other liabilities of the client
 Previous banker information
 Details of allied concerns
 Allied deposits as on
 Business analysis
 Relationship analysis
 Asset-liabilities position of the client as per audited balance sheet
 Working capital assessment
 Risk grade
 Particulars of the go down for storing goods
 Insurance coverage
 Audit observation
 Security analysis

Sanction stage:

In this stage, the bank can officially approve the investment proposal of the client. Then the
client receives a bank sanction letter. Al-Arafah Islami Bank sanctioning the letter hold in the
following elements-

 Investment limit in millions

 Mode & amount of investment
 Purpose of investment
 Period of investment
 Rate of return
  Securities:
 Primary- stock of goods in the primary security
 L/C bills- related document
 Mudarabah post investment - Mudarabaha goods
 Bai - Mudarabaha- Lien on goods to be released
 Bai- mudarabah- 25% cash security on cost price to be subsequently converted to goods
security
 TR- without cash recruits
 Collateral- Investment properties.

3.16 Limit of Investment

Investment is offered in the area of single borrower liabilities limit as fixed by the Bangladesh
Bank From time to time.

3.17 Document needed for preparing Investment proposal

 Application for investment facility

 Trade license
 IRC for importer
 ERC for exporter
 Membership Certificate of Chamber of Commerce
 TIN( Tax Identification Number)
 VAT registration certificate
 Bank account statement
 Account statements from another bank
 Stock valuation report
 Account payable
 Particular the properties
  Other asset statements
 CIB( Credit Information Bureau) report

3.18 Causes of over dues:

General Causes of over dues:

 Selection of the client

 Violation of discretionary power
 Command area
 The net worth of the party
 Market report and confidential report
 Cash flow
 Proper purchase and sale
 Proper documentation

Causes over dues at Mudaraba Investment:

 Quality and Quantity

 Overpricing
 Slow moving item
 control & supervision of going down
 Inception
 Excess delivery
 Handling of keys of the storehouse.
 Storing of goods
 Bank signboard
 Stack card
 Delivery order
  Insurance

Causes over dues at Bai- muajjal Investment:

 Party must have a shop

 Assessment of investment need
 Supervision
 Stock in Business
 Insurance
 Follow-up

Causes over dues Hire purchase under Shirkatul Melk Investment:

 Obtain of equity
 Model & Make
 Supervision.

3.19 Monitoring & Recovering stage

At this final stage of investment processing, Al-Arafah Islami Bank Limited will contact the client
repeatedly such as; the Bank can obtain a yearly stock report from the client. Here the bank will
keep its eye on the investment taker. If the bank will physically verify the client's operations,
the bank feels that nothing is going wrong and the bank can recover its investment.

Procedure to be followed for Recovery of Irregular and Time-Barred Investment

Irregular Investment:

An investment is said to be irregular when regular repayment is not made as per the schedule
of repayment, improper documentation leads to non-repayment and the value of the security
falls down and security does not patch the investment outstanding.

Stuck up investment:
An investment is said to be stuck up when repayment is stopped as a result of the closing of
business, the death of the investment client, and any other unforeseen circumstances that the
investment client is unable to pay.

Over dues investments:

An investment is said to be Over dues when repayment does not come within the period of
investment or expired the limit.

Some procedure to be followed for recovery above investment is listed below:

 Connecting with the client in writing and meeting personally

 Sending resume of investment to Head Office
 Civil prison in case asset of the judgment debtor.
Chapter:4 Analysis of investment performance of AIBL

4.1 Year wise Investment & growth rate of Investment of

AIBL
4.2 Graphical chart of five year investment of AIBL
4.3 Graphical expression of growth rate of investment
4.4 Year wise deposit & growth rate of Deposit of AIBL
4.5 Year wise Investment to Deposits ratio Analysis
4.6 Mode wise investment in 2021 is shown by pie-chart
4.7 Trade of Mode wise Investment

Chapter: 4

Analysis of investment performance of AIBL

4.1Year wise Investment & growth rate of Investment of AIBL

Year Amount of Investment

2017 235905
2018 261874
2019 288486
2020 308620
2021 336890

Source Annual report of AIBL

 Figures 6: Year wise Investment

4.2 Graphical chart of five year investment of AIBL

Last five years Investment of AIBL

400000
350000 336890
308620
300000 261874 288486
235905
250000
200000
150000
100000
50000
0
2017 2018 2019 2020 2021

Chart: 1 year wise investment

Interpretation: The graph shows that the amount of investment increased over the years. The
amount was Tk.235905 million in 2017 and 336890million in 2021.

4.3 Graphical expression of growth rate of investment

Growth rate of investment is given below:

Year Growth Rate of Investment

2017 20%
2018 11%
 2019 10.16%
2020 6.98%
2021 9.16%

Figures 7: Graphical expression of growth rate of investment

Graphical expression of growth rate of investment:

Growth Rate of Investment

25%

20%

15% Growth Rate

10%

5%

0%
2017 2018 2019 2020 2021

Chart 2: growth rate of investment:

4.4 Year wise Deposits and Growth Rate of Deposit of AIBL

Here last years of deposits and growth rate of deposit of AIBL is given below:

Year Amount of Deposit (Tk. In

Million)
2017 244806
 2018 266205
2019 297241
2020 326023
2021 353287
Source: Annual report of AIBL

Figure 8: Deposit Rate

Graphical Chart of last five years Deposits of AIBL

Last five year Deposits of AIBL

400000
350000 353287
297241 326023
300000
250000 244806 266205
200000
150000
100000
50000
0
2017 2018 2019 2020 2021

Chart 3: Deposit Rate

Interpretation: Above graph shows that the year wise deposit of AIBL has been increasing.
From the above chart, we can see that the highest amount was Tk. 353287 million in2021 and
the lowest value is 244806 million in 2017. This increasing trend of deposit is mainly due to
expansion of branches and better customer service.

Growth rate of deposit is given below

Year Growth rate of deposit

2017 23%
 2018 8.74%
2019 11.66%
2020 9.68%
2021 8.36%

Figure 9: Growth rate of deposit

Graphical expression of growth rate of deposit:

Growth Rate of Deposit

25
20
15 Growth Rate

10
5
0
2017 2018 2019 2020 2021

Chart4: Growth rate of Deposit

4.5 Year wise investment to deposit ratio analysis

Investment to deposit ratio measures the portion of deposit used for investment in loan
products. The more the ratio the more the bank is using as deposit as an investment.

Investment to deposit ratio: (Total investment/ Total Deposit)*100

Year Total investment Total deposit Investment to

 deposit ratio
2017 235905 244806 96%
2018 261874 266205 98%
2019 288486 297241 97%
2020 308620 326023 94%
2021 336890 353287 95%

Figure10: investment to Deposit Ratio

Graphical expression of Investment to Deposits Ratio Analysis:

Investment to Deposit Ratio

99
98
97 Investment to Deposit
96 Ratio
95
94
93
92
2017 2018 2019 2020 2021

Chart 5: Investment to Deposits Ratio

4.6 Mode wise Investment of AIBL in 2021

Here mode wise investment performance of AIBL in 2021 is given below:

SL. NO. Mode Amount ( in millions)

1 Bai- Muajjal 129337.79
2 Mudaraba 86322.08
3 Hire- purchase 107165.27
4 Quard 2200.82
5 Bai- salam 6007.04
 6 Other investment 5857
7 Total 336890

Figure11: Mode wise Investment of AIBL

Here, mode wise investment of AIBL is shown by a pie-chart:

Mode wise Investment

2200.82 6007.04 5857

bai-muazzal
murabaha
hire purchase
107165.27 129337.79 qurad
bai-salam
others

86322.08

Chart3: Mode wise Investment of AIBL

4.7 Trade of Mode wise Investment

Investment in Mudarabaha:

Years Total Investment Investment in Investment in

under all modes Mudarabaha Mudarabaha as
percentage of
total investment
 2017 235905 87943 37%
2018 261874 74671 28%
2019 288486 83514 28%
2020 308620 84060 27%
2021 336890 86322 25%

Figure12: Investment in Mudarabaha

Investment in Mudarabaha
40
35
30
25 Investment in Mudarabaha
20
15
10
5
0
2017 2018 2019 2020 2021

Chart4: Investment in Mudarabaha

Investment in Bai- Muazzal:

Years Total Investment Investment in Bai- Investment in

under all modes Muazzal in Bai- Muazzal
as percentage
of total
investment
2017 235905 88080 37%
 2018 261874 89934 34%
2019 288486 102249 35%
2020 308620 109678 35%
2021 336890 129337 38%

Figure13: Investment in Bai- Muazzal

Investment in Bai- Muazzal

39
38
37 Investment in Bai-
36 Muazzal
35
34
33
32
2017 2018 2019 2020 2021

Chart4: Investment in Bai- Muazzal

Investment in Hire Purchase:

Years Total Investment Investment in hire Investment in hire

under all modes purchase purchase as
percentage of total
investment
2017 235905 63373 26%
2018 261874 79644 30%
2019 288486 88118 30%
2020 308620 96221 31%
 2021 336890 107165 32%
Figure14: Investment in hire purchase

Investment in hire purchase

35
30
25 Investment in hire
20 purchase
15
10
5
0
2017 2018 2019 2020 2021

Chart 5: Investment in hire purchase

Investment in Qurad:

Years Total Investment Investment in Qurad Investment in Qurad

under all modes as percentage of
total investment
2017 235905 8417 3.5%
2018 261874 1304 0.5%
 2019 288486 3159 1.1%
2020 308620 22039 7.1%
2021 338690 2200 0.6%
Figure15: Investment in Qurad

Investment in Qurad
8
6
Investment in Qurad
4
2
0
2017 2018 2019 2020 2021

Chart 6: Investment in Qurad

Investment in others investment:

Years Total Investment Investment of others Others

under all modes Investment as
percentage of
total investment
2017 235905 21665 9.1%
2018 261874 38090 14%
2019 288486 39299 13%
2020 308620 56944 18%
2021 336890 58570 17%
 Figure16: Other investment

Other investment
20
18
16
14
12 Other investment
10
8
6
4
2
0
2017 2018 2019 2020 2021

Chart 6: Investment in Other investmen

Chapter:5

Findings, Recommendation and Conclusion