bank islami final report edited

ACKNOWLEDGEMENT

For the completion of our report I am indebted to plenty of people for their very sincere

cooperation that they extended to me at various stages. First and foremost problem that every

student faces is the selection of a Report. I am very thankful to my supervisor Mr. Mr. Asad

Shahjan for helping me out in time of confusion. During our course and the execution of my

report, I had a real chance to learn from his vast experience and immense knowledge.

I am very thankful to staff members of Bank Islami Branch Mansehra that they guided and

provided me valuable information regarding my report especially Mr. Shafqat Hussain

(operational manager).

Finally I am thankful to the most merciful and Almighty Allah who gives me the strength that

I fulfill my task efficiently.

1

EXECUTIVE SUMMARY

A good banking system plays important role in development of country’s economy. The aim

of this report is to show knowledge and observation of study during my six weeks internship.

During internship I came to know about procedures and activities of banking.

Bank Islami Pakistan limited is publically listed company was established on October 18,

2004 in Pakistan.

The report is divided into different chapters that cover all aspects of Islamic banking sector.

The first chapter describes purpose and background of study.

Second chapter shows the department’s products and value added services offered by BIPL.

Third chapter is about activities performed and learnt by internee during period of internship.

Fourth chapter is about financial analysis of different statements of BIPL and their

comparison with another Islami bank i.e. Meezan bank limited.

Fifth chapter is about SWOT analysis of BIPL and its cornparison with MBL.

Last chapter consist of weaknesses and recommendations which is necessary for bank to

being change in order to satisfy their customers.

BIPL is one of the few banks in Pakistan which has authentic deposits franchise, and offering

both wholesale and retail banking products and services through its wide network.

2

LIST OF ACRONYMS

BIPL Bank Islami Pakistan Limited

SBP State Bank of Pakistan

IPO Initial Public Offering

ATM Automated Teller Machine

DD Demand Draft

PO Pay Order

CDR Call Deposit Receipt

RTC Rupees Traveler Cheque

NIFT National Institution al Facilitation Technology

NTN National Tax Number

CNIC Computerized National Identity Card

IBCA Inter Branch Credit Advice

SWOT Strength, Weaknesses, Opportunities, Threats

WTC World Trade Center

MBL Meezan Bank Limited

3

Table of Contents

Chapter No. Contents Page No.

Chapter No. 1 Introduction of Study

1.1 Background of Study

1.2 Purpose of Study

1.3 Research Methodology

1.4 Scheme of Study

Chapter No. 2 Introduction to Banking

2.1 Banking in Pakistan

2.2 Overview of Organization

2.2 a Bank Islami Idea

2.2 b Accreditation by Sate Bank of

Pakistan

2.2 c IPO of Bank Islami

2.2 d Network expression

2.3 Nature of Organization

2.3 a Deposited Franchise

2.3 b Technology Infrastructure

2.3 c Management Team

2.4 Business Volume

2.5 Financial High Lights at Glance

2.6 Share Holding Structure

2.7 Future Prospects of Organization

2.7 a Vision Statement

2.7 b Mission Statement

2.7 c Objectives

2.7 d Strategic Planning

Chapter No. 3 Product services and Departments

3.1 Introduction

3.2 Departments

4

3.2.1.1 Nature of the Deposits

3. 2.1.2 Procedures for account opening

3.2.1.3 Remittances Management

3.2.1.4 Cash Management

3.2.2 Credit Department

3.2.2.1 Musharakah Financing

3.2.2.2 Mudarabah Financing

3.2.2.3 Working Capital Finance

3.2.3 Consumer banking

3.2.3Online Banking

3.2.3.1 Inter Bank Transfer Fund

3.2.3.2 ATM or Debit Card

Chapter No. 4 Analysis

4.1 Financial Analysis of BIPL through

statements

4.2 Ratio Analysis

Chapter No. 5 SWOT Analysis

5.1 SWOT Analysis of BIPL

5.2 Comparison of SWOT Analysis of

BIPL with MBL and Albaraka Bank

5.2.1 SWOT analysis of MBL

5.2.2 SWOT Analysis of Albaraka Bank

5.3 Comparison

Chapter No. 6 Findings and Recommendations

6.1 Weaknesses of Organization

6.2 Recommendations

References

Annexure

5

Chapter No. 1

INTRODUCTION TO STUDY

1.1 Background of study

Bank Islami was established on October 18, 2004 in Pakistan and is the second full-fledge

Islamic commercial bank in Pakistan and expanding its branches throughout the country and

also offering different products to customers.

1.2 Purpose of studies:

The purpose of study is to get information about structure and functioning of

department of BankIslami limited Pakistan

To analyze, intercept and evaluate the financial data of BIL and comparing these data

or information with current financial practice.

To analyze the operations done in each department of BIL and work there practically.

To evaluate financial performance of BIL and compare it with other Islami Banks.

To improve the interpersonal communication skills.

1.3 Research Methodology

In this study data is collected through primary as well as secondary sources but mostly

information is based on my personal observations which help me to collect the data about this

specific branch.

Primary sources:

Discussion with customer manager and interview taken from staff numbers.

Personal observation.

6

Secondary sources:

Most of the useful information was obtained from already available manuals, journals,

website of organization, annual reports, of BIL etc. information regarding bank policies,

procedures and rules can be obtained from bank’s records and documents.

1.4 Scheme of study:

The report is divided into five chapters

1st chapter is about introduction of study, which includes its background, purpose

research methodology, introduction to BankIslami including its nature, performance,

business volume, objectives and strategies.

2nd chapter is about departments of bank including account opening department, cash

department, remittance department, cleaning department.

3rd chapter is about activities performed by interne.

4th chapter is about SWOT and financial analysis of bank and comparison with other

banks and also including ratio analysis.

5th chapter is about shortfalls of organization and recommendations.

7

Chapter NO.2

Introduction to banking

Banks are very useful for utilization of country’s resources and for growth of economy.

Banks help in capital information by deposit surplus from public and advance these surplus in

form of loans to businessman and industrialists, agriculturists under different scheme.

There are different views about origin of word banking. Some says it deceived from an Italian

word “banque” means bench. According to other view it derived from German work “bane”

means a joint stock firm.

According to Growther, there are three ancestor of banker i.e.

The Mechanls the gold smith, money lenders.

In short bank is a financial institution at lower rate of interest and give at higher rate of

interest to those who need them.

Banking in Pakistan

Banking is one of the fastest growing industries in all over the world. Banks play important

role in economic development of country.

Pakistan Banks Association established in 1953, its main objective is to co-ordinate the

efforts of banking industry. At the time of partition, Pakistan was in difficult situation to run

its own banking system with out resources. Therefore it was recommended that reserve bank

of India have continue to wok in Pakistan until 30th September 1948. Before establishment of

SSBP all banking activities were conducted by reserve bank of India. By 1970, Pakistan

started flourishing in banking sector. Now all banks follow and are working under banking

ordinance 1962 and controlled by SB and now there are three types of banks sewing in

Pakistan i.e. Government banks, Private banks and Foreign banks.

8

OERVIEW OF THE ORGANIZATION

Bank Islami-The Idea:-

The idea of BankIslami was conceptualized by Jahangir Siddiqui & Company Limited and

DCD Group in late 2003. The idea was formulized by Mr. Hassan A. Bilgrami, appointed as

Adviser to the sponsors on March 16, 2004. A detailed business plan was then prepared and a

formal application was submitted to the State Bank of Pakistan on May 26, 2004. On

September 26, 2005, Dubai Bank joined the Sponsors and became one of the founding

shareholders of BankIslami by investing 18.75% in the total Capital.

Accreditation by State Bank of Pakistan:

The State Bank of Pakistan issued a No Objection Certificate on August 19, 2004 and

BankIslami Pakistan Limited, the second full-fledge Islamic Commercial Bank in Pakistan,

was established on October 18, 2004 in Pakistan.

BankIslami Pakistan Limited was the first Bank to receive the Islamic Banking license under

the Islamic Banking policy of 2003 on March 31, 2005. The Bank focus on Wealth

Management as the core area of business in addition to Shariah compliant Retail Banking

products, Proprietary and Third party products, and integrated financial planning services.

Initial Public Offering of BankIslami:

BankIslami Pakistan Limited made a public offering of Rs. 400 Million, at par, from 6th to

8th March. The Initial public offering (IPO) of BankIslami received great response from the

general public as the applications received were 9 times higher than offered, fetching nearly

Rs. 3.5 Billion, against the demand of Rs. 400 Million.

Network Expansion:

BankIslami started its operations on 7th April 2006 with its first branch in SITE, Karachi.

9

The Bank had 10 branches, nine in Karachi and one in Quetta by the end of 2006. By the end

of year 2007, its branch network grew to 36 branches in 23 cities. In 2008, the Bank opened

66 new branches nationwide which expanded its network to 102 branches in 49 cites. This

gives BankIslami the distinction of having the fastest expanding network in Pakistan.

NATURE OF THE ORGANIZATIONNATURE OF THE ORGANIZATION

BankIslami Pakistan Limited is the 2BankIslami Pakistan Limited is the 2ndnd largest Islamic Bank in Pakistan. It offers both largest Islamic Bank in Pakistan. It offers both

wholesale and retail banking products and services through its distribution network.wholesale and retail banking products and services through its distribution network.

Deposit FranchiseDeposit Franchise

BIPL is one of the few banks in Pakistan which has a genuine deposits franchise. Instead ofBIPL is one of the few banks in Pakistan which has a genuine deposits franchise. Instead of

targeting large, rate sensitive accounts, BIPL as strategy focused on retail customers who aretargeting large, rate sensitive accounts, BIPL as strategy focused on retail customers who are

stable, less rate sensitive and loyal. Current and Saving Accounts recorded impressivestable, less rate sensitive and loyal. Current and Saving Accounts recorded impressive

growth. Even growth in Fixed Deposits was propelled by our five and ten depository productsgrowth. Even growth in Fixed Deposits was propelled by our five and ten depository products

which now accounts for 21% of the deposit base.which now accounts for 21% of the deposit base.

Technology InfrastructureTechnology Infrastructure

BIPL technology infra-structure was further strengthened during the year with fullBIPL technology infra-structure was further strengthened during the year with full

deployment of state of art shariah complaint core banking system, iMAL. BIPL is the largestdeployment of state of art shariah complaint core banking system, iMAL. BIPL is the largest

user of Linux in Pakistan which has helped to have a stable, cost effective platform compareduser of Linux in Pakistan which has helped to have a stable, cost effective platform compared

to their peers. BIPL market share in ATM transactions has improved to 11to their peers. BIPL market share in ATM transactions has improved to 11 thth position amongst position amongst

1-LINK members1-LINK members

Management TeamManagement Team

Most of the BIPL's senior management team has had work experience at global banks andMost of the BIPL's senior management team has had work experience at global banks and

10

have strong execution track record.have strong execution track record.

BUSINESS VOLUMEBUSINESS VOLUME

(Rs. in 000)

2007 2008 2009 2010

Deposits 9,934,282 12,477,955 27,987,378 3,81,98,320

Advances 3,962,867 6,527,531 13,282,152 1,66,70,125

Investments 3,864,027 5,019,525 681,3191 1,37,32,132

Total Assets 1,447,473 19,088,600 34,286,771 4,50,35,703

Shareholders

Equity

3,844,726 5,191,821 4,740,293 47,66,386

Loss After

Tax

(37,023) (52,930) (478,939) (46,550)

11

Financial Highlights at a glance

Profit and loss account

Rupees in million

2010 2009 2008 2007

Return Earned 3,806.20 2,177.14 1,464.84 599.64

Profit paid 2,057.53 1,222.17 729.53 303.84

Net spread 1,748.67 954.97 735.32 295.79

Fee, Commission,

Brokerage & Exchange

148.10 315.91 141.39 71.46

Income from core

banking

1,896.77 1,270.88 876.71 367.25

Provisions 7.42 (111.20) (130.56) (28.37)

Other income 59.01 26.78 54.75 68.83

Operating Expenditure (1,918.66) (1,766.12) 1033.90 510.59

Profit/ Loss before tax 44.54 (579.66) 233.00 102.89

Taxation 2.01 89.83 177.55 64.29

Profit/ loss after tax 46.55 (489.82) 55.45 (38.60)

Balance sheet

2010 2009 2008 2007

Assets 45,036 34,272 19,085 14,446

Financing 16,670 10,457 6,343 3,931

Deposits 38,198 27,987 12,478 9,934

Share Capital 5,280 5,280 5,280 3,200

Shareholder fund 4,766 4,725 5,188 3,843

Number of staff 1,347 1,471 1,188 563s

12

2010 2009 2008 2007

Number of branches 102 102 102 36

Total DepositsRS in million

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2008 2009 2010

Total AssestsRS in million

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2008 2009 2010

13

Total Financing RS in million

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2008 2009 2010

Branck Network RS in million

0

20

40

60

80

100

120

2008 2009 2010

SHARE HOLDING STRUCTURESHARE HOLDING STRUCTURE

Sponsors:Sponsors:

Bank Islami is a joint venture among three shareholders namely, DCD Group, DubaiBank Islami is a joint venture among three shareholders namely, DCD Group, Dubai

Bank & Jahangir Siddique & Co. Ltd. Bank & Jahangir Siddique & Co. Ltd.

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SHARE HOLDERSSHARE HOLDERS RS IN MILLIONRS IN MILLION %%

Dubai bank PJSCDubai bank PJSC 1,310.531,310.53 24.8224.82

Jahangir Siddique & Co LimitedJahangir Siddique & Co Limited 1,112.561,112.56 21.0721.07

DCD GroupDCD Group 1,028.481,028.48 19.4719.47

M.Hssan A BilgramiM.Hssan A Bilgrami 5.81 5.81 0.11 0.11

Chief Justice ® Mahboob AhmedChief Justice ® Mahboob Ahmed 1.31 1.31 0.02 0.02

General PublicGeneral Public 1,821.00 1,821.00 34.4934.49

TOTALTOTAL 5,2805,280 100100

Reference: BIPL annual report 2009Reference: BIPL annual report 2009

Future Prospects of the Organization

15

Button5

Values Statement

BankIslami is strongly committed towards its core values of:

Product authenticity

Customer focus

Meritocracy

Integrity

Team work

Humility

Innovation

Vision StatementVision Statement

“The Vision of BankIslami is to be recognized as the leading Authentic Islamic Bank”“The Vision of BankIslami is to be recognized as the leading Authentic Islamic Bank”

Mission StatementMission Statement

The Mission of BankIslami is to create value for our stakeholders by offering Authentic,The Mission of BankIslami is to create value for our stakeholders by offering Authentic,

Sharia Compliant and Technologically advanced product and services. We differentiateSharia Compliant and Technologically advanced product and services. We differentiate

ourselves through:ourselves through:

AuthenticityAuthenticity

InnovationInnovation

Understanding our Client's needUnderstanding our Client's need

Commitment to excellence, andCommitment to excellence, and

Fast, efficient and seamless delivery of solution. As a growing institution, theFast, efficient and seamless delivery of solution. As a growing institution, the

foundation for our performance lies on our human capital and BankIslami remainsfoundation for our performance lies on our human capital and BankIslami remains

16

committed to becoming an employer of choice, attracting, nurturing and developingcommitted to becoming an employer of choice, attracting, nurturing and developing

talent in a transparent and performance driven culture.talent in a transparent and performance driven culture.

Objective:Objective:

To achieve sustained growth and profitability in all areas of business. To build andTo achieve sustained growth and profitability in all areas of business. To build and

sustain a high performance culture, with a continuous improvement focus.sustain a high performance culture, with a continuous improvement focus.

To develop a customer service oriented culture with special emphasis on customerTo develop a customer service oriented culture with special emphasis on customer

care and convenience.care and convenience.

To effectively manage and mitigate all kinds of risks inherent in the banking business.To effectively manage and mitigate all kinds of risks inherent in the banking business.

To maximize use of technology to ensure cost effective operations, efficientTo maximize use of technology to ensure cost effective operations, efficient

management information system, enhanced delivery capability and high servicemanagement information system, enhanced delivery capability and high service

standards.standards.

To manage the bank portfolio of the business to achieve strong and sustainableTo manage the bank portfolio of the business to achieve strong and sustainable

shareholders return and to continuously build share holders value.shareholders return and to continuously build share holders value.

To explore new avenue for growth and profitability.To explore new avenue for growth and profitability.

Strategic Planning:Strategic Planning:

To comprehensive plan for future to ensure sustained growth and profitability.To comprehensive plan for future to ensure sustained growth and profitability.

To facilitate alignment of the vision, mission, corporate and with the business goals.To facilitate alignment of the vision, mission, corporate and with the business goals.

To provide strategic initiatives and solutions for projects, products, policies andTo provide strategic initiatives and solutions for projects, products, policies and

procedures.procedures.

To provide strategic solutions to mitigate weak areas and to counter threats to profits.To provide strategic solutions to mitigate weak areas and to counter threats to profits.

To identify strategic initiatives and opportunities for profits.To identify strategic initiatives and opportunities for profits.

To create and leverage strategic assets and capabilities for competitive advantage.To create and leverage strategic assets and capabilities for competitive advantage.

Future prospectus is to improve risk management, which considered being one of theFuture prospectus is to improve risk management, which considered being one of the

17

essentials for sustainable success in the business. Based on the risk managementessentials for sustainable success in the business. Based on the risk management

guidelines issued by state bank of Pakistan; a risk management strategy has beenguidelines issued by state bank of Pakistan; a risk management strategy has been

developed for accessing and mitigate / controlling risk.developed for accessing and mitigate / controlling risk.

Chapter No. 3

18

PRODUCT, SERVICES & DEPARTMENT

3.1 Introduction

BankIslami Mansehra branch is newly opened branch in Mansehra city; also bankIslami

history is not too much old. It’s all about to 5 to 6 year old. The organization of BankIslami

Mansehra branch is a complete banking system but it is covering modern technologies like

ATM. This banking system is collection of interrelated departments that works together to

achieve the objectives of the organization. BankIslami is a hierarchical system in that it

includes other sub departments and these are integrated to work together.

In the internship of six weeks I worked in different departments to see how the practical work

is done and compared it with the theories I studied during my bachelor courses. Each

department has its own importance and value to the organization. But the basic thing was that

departments have to integrate to improve the performance.

3.2 DEPARTMENTS:

BankIslami Mansehra branches divided into different departments.

• Credit Department

• Operations Department

• Consumer Banking.

a) Credit Department

The main purpose of this department is to extend loans to its clients for the productive

purpose. Credit Department is also called Corporate Banking Group.

Bank is offering different type of financing in her branches. This type of financing are based

upon Islamic mode of financing. Just like MUSKUN home financing, Islami Auto Ijara-new

vehicle and same with imported vehicles.

b) Operations Department:

Operations department of the BankIslami is responsible for the overall operations of the bank,

Customer Services Department, Remittance Department, Clearing Department, Accounts

Department, etc. all come under it.

19

c) Consumer Banking

Consumer banking is the Marketing Department of the BankIslami. At BankIslami,

consumers are treated very well. They are of the opinion that customers must be satisfied

with the services provided by the Bank. All of the Branches try to make sure that customers

are satisfied with the services being provided by the Bank.

3.2.1 Operations Department:

BankIslami accounts are same as other commercial banks accounts but in some accounts they

can offer Islamic mode transactions. Accounts are given below.

3.2.1.1 Nature of the deposits

Bank deposits can be broadly classified as

• Islami current Accounts

• Islami foreign current Account

• Islami Bachat account

• Islami Mahana Munafa Account

• Islami Amadni Certificate

a) Islami current Accounts

With Islami Current Account, you can have complete peace of mind that your funds are safe

and utilized in Halal avenues only. Islami Current Account is ideal for customers who have

frequent transaction needs and require unlimited access to their account to meet their personal

or business expenses. Also, customer has access to entire online network of for convenience

of instant and secure intercity transactions. So enjoy full control over your funds in a Shariah

compliant manner.

• A minimum balance of Rs. 1,000/- only to open the account

• Joint Account facility up to four joint account holders

• Access to the entire online branch network

• Free unlimited online intercity transactions

• Free 1 Card, BankIslami's ATM & Debit card

• Access to all ATMs linked to MNET and 1 Link throughout Pakistan

• Interbank Funds transfer facility through ATM

• Facility of making instant payments at Orix terminals for grocery, fuel ,dining and

other purchases

20

• Free Internet Banking service

• Free Account statement facility

• Hold mail and Stop payment facility

b) Islami foreign current Account

BankIslami Islami Foreign Currency account is ideal for businesses and individuals who

would like to diversify their investment in different currencies to ensure security against

currency fluctuations or want to keep foreign currency account to meet their business needs.

Also, customer can have easy access to foreign currency with no hassles of foreign exchange

conversion when you have to travel abroad or remit funds abroad to meet education, leisure

or business needs.

• Safe Deposit Lockers

• Hold Mail & Stop payment facility

• A minimum balance of USD 100/-or equivalent in GBP or EURO to open the account


• Available in USD, GBP & EURO



c) Islami Bachat Account

Islami Bachat account is of bundle of benefits. It helps customer to keep up with tradition of

savings with the convenience and safety of a professional and understanding bank. Also,

customer can earn highly attractive profits on customer savings with the flexibility of making

as many transactions on customer account as you want. Islami Bachat Account is ideal for

customers who need to draw money for monthly expenses but would also like to earn on your

hard earned savings. Corporate Employers can also avail this account to provide convenience,

flexibility and halal profits to their employees by opening their salary accounts with us.

• Monthly profit/loss payment on daily product basis

• Differential and specific pool allocation possible for large deposit holders

• Profit announcement at the end of every month

• A minimum balance of Rs. 5,000/- only to open the account


• Access to the entire on line network of 102 Branches in 49 Cities

• Unlimited over the counter deposits and withdrawals, free of charge

21

• No restrictions on intercity transactions

• Free 1 Card, BankIslami's ATM & Debit card

• Access to all ATMS linked to MNET and 1 Link throughout Pakistan

• Facility of making instant payments at Orix terminals for grocery, fuel ,dining and

other purchases


d) Islami Mahana Munafa Account

Long term investments yield high returns but delayed profit payment. With our Islami

Mahana Munafa Account you don't compromise on any. Now you can enjoy the freedom of

halal monthly gains for a prosperous present while building your wealth for a secure future.

Also, Islami Mahana Munafa Account will provide you with security, convenience and

flexibility of investment tenure to suit your needs.

• Free Internet Banking Service

• Hold Mail & Stop payment facility

• Safe Deposit Lockers

• 100% interest free

• Available in Pak Rupees

• Tenure of investment are 1, 2, 3, 5 & 10 years

• Minimum amount of investment is Rs. 10,000/- only

• Profit/loss payment on monthly basis until the maturity date

• Payment of amount of investment on the maturity date


• Profit announcement at the beginning of every month

• Free facility of transfer of profit and invested funds in nominated Islami Current or Is-

lami Bachat Account

• Monthly profit/loss payment on daily product basis

• Free Six monthly Account Statement facility

e) Islami Amadni Certificate

Why take interest when you can earn Halal profit on your investment. With Islami Amadni

Certificate customer hard earned investment works harder to yield high expected profits so

you can build your wealth for a prosperous future. You get the best of both worlds in a safe,

secure and flexible package to perfectly meet your needs.

22

If you are a salaried individual, a businessperson or a corporate entity with some long term

investment funds to spare, our Islami Amadni certificate is an ideal solution for you. With our

Islami Amadni Certificate, the higher your investment the higher will be your return and that

too in a Shariah compliant manner. Also, you have the flexibility to choose amongst various

investment tenures to suit your personal or business needs.

Islami Amadni Certificate offers you the following key salient features:

• Available in Pak Rupees

• Investment can be done for 1, 3, 6, 12, 24, 36 or 60 months

• Minimum amount of investment is Rs. 10,000/- only

• Payment of profit/loss and amount of investment on the maturity date

• Quarterly profit payment for investment of 12 months and above


• Profit announcement at the end of every month


• Free facility of transfer of profit and invested funds in nominated Islami Current or Is-

lami Bachat Account

• Free Internet Banking service having free Term deposit enquiry facility

• Facility of premature encashment available. In such a case, the corresponding period

weight age would apply, unless stated otherwise

3.2.1.2Procedures for account opening

In order to operate an account with the bank, a customer has to open an account. In large

branches Grade 1, II or III officers is made responsible for opening new accounts. However

in small branches, the manager himself fulfills all the formalities for opening new accounts. It

is necessary because in case of fraud unintended overdraft, or negligence, the bank will have

a source to trace out the customer. Such source is established by asking the customer to bring

an existing customer of the bank that will introduce him to the bank. In order to protect

against losses resulting from fraud or unintended overdraft the account opening activity has

been formalized through certain steps. These steps include

• Formal Application: Customers are required to fill in the prescribed account opening

form, which the bank provides to the customers free of cost. In this basic information

about himself is provided by the customer like his name, address, occupation and na-

ture if account he wants to operate.

23

• Obtaining introduction: Introductory references are quid pro quo for opening the ac-

count. For this it is necessary that an existing customer verify the authenticity of the

facts provided in the account opening form.

• Specimen Signature: The customer gives the banker a specimen signature generally

taken on a card specially designed for this purpose. Name of the customer and ac-

count number are entered on it. This specimen signature is used later on by the bank

to verify the signature on cherubs drawn on the bank by comparing these signatures

on the card and the other on the cheques.

• Minimum Initial Deposits: The customer has to make a certain minimum deposits to

open an account. However, later on customer can withdrawn part of this amount but

must maintain minimum deposits to avoid closure of the account or service charges.

• Operating the Account: When the account is opened banker customer relationship is

established. The customer in order to be able to operate the account is given the fol-

lowing documents:

• Pay-In-Slip Book: This book is issued to the customer containing slips upon which

money is deposited. Each slip contains blank spaces for amount, account number,

date, depositor signature and name of the account holder.

• Cheque Book: The customer to withdraw the money from the bank uses Cheque-

book. Chequebook consists of 10, 25, 100 leaves. When new cheque book is required

by the customer he has to fill in the cheque book” requisition slip” with two signature

on it and give it to the concerned officer who on verification of the signature will is-

sue new cheque book.

• Qualification of the Customer: The relation of the banker and the customer is purely

a contractual one. Therefore any person who is capable of entering into a contract ac-

cording to the Section 11 of the contract Act 1872 can be a customer. However the

following qualifications are necessary for a person to become a customer.

• He must be of the age of majority

• He must be of sound mind

• He must not be disqualified under any law.

3.2.1.3 Remittances Management

One of the important functions of a bank is to transfer funds for customers from one location

to another. Remittances department deals with the transfer of money for customer from one

bank to another or from one branch to another.

24

3.2.1.4 Cash Management

Cash department basically handles cash receipts and cash payments. The procedure for which

is given below

a) Receipts

Cash department receives money from customers for crediting it to their respected accounts

for which then used for paying their bills or remitting to their creditors and suppliers as the

case may be. When depositing cash the client fills the prescribed form of pay and slips

wherein he provides basic information like the amount to be deposited, date, account nature

and number etc. then he hands over the form and paying slip along with the money to the

cashier to the counter. The cashier signs and stamps the form or paying slips and returns one

copy of the same to the depositors. After the hours, all pay and slips to the computer section,

which credits the same, their respective accounts.

b) Payments

When bank receives money from customers, it undertakes to repay the same upon demand.

The money can be withdrawn through cheques, drafts or pay orders. However before making

payments, bank satisfies itself that the instrument is valid and there is sufficient balance in the

customer account to support the payment. For making payments the procedure followed.

Cheque is first presented to token clerk. Token clerk notes down date, amount on the cheque,

and account number in token register, assign token number to cheque on the back of it gives

token to the customer and then forwards the cheque to an officer to the check the signature

and verify it with signature on specimen card which the customer signed at the time of

opening the account. The cheque is then forwarded to the computer department for

verification of the balance. The cheque is then forwarded to the cashier who makes payment

to person who presents the token.

The process may differ from what mentioned above depending the nature of cheque.

A cheque is defined as written order of a depositor to pay to or to order of a designated party

or bearer, a specified sum of money on demand.

3.2.2 Credit Department

BankIslami offer different mode of financing according to Islamic mode. There are main two

types of Financing modes in bankislami Mudarabah and Musharakah. Other modes of

financing are divided in two categories Short term financing and long term financing.

25

3.2.2.1 Musharakah Financing

In Musharakah, a joint enterprise is formed for conducting some business in which all

partners share the profit according to a mutually agreed pre-determined ratio, whereas, the

loss is shared in the ratio of capital investment. From Shariah perspective, Musharakah is one

of the preferred modes of financing.

The scope of Musharakah is broad. Musharakah can be applied to fulfill project financing

needs as well as working capital financing needs of Corporate Clients. Since Musharakah

transactions are based on pure profit and loss sharing arrangement, therefore, the risks

associated with such transactions are greater as compared to other financing modes. Due to

this reason, Musharakah transactions are executed subject to satisfactory review of feasibility

of the proposed transaction/project.

3.2.2.2 Mudarabah Financing

Mudarabah is a kind of partnership where one partner gives money to another for investing in

a commercial enterprise. The investment comes from the first partner who is called 'Rabb-ul-

Maal' while the management of the business is an exclusive responsibility of the other, who is

called 'Mudarib'. The profits generated are shared according to a mutually agreed pre-

determined ratio, whereas, loss is borne by Rabb-ul-Maal unless the loss is due to negligence

of Mudarib.

3.2.2.3 Working Capital Finance (shot term financing)

At BankIsami, we understand that your business needs constant access to low cost and

flexible financing, in order to meet day-to-day funding needs. Our teams of experienced

Relationship Managers with wide sector experience offer you effective cash flow

management by way of financing arrangements suitably structured to your needs and your

risk profile.

Cash is the lifeline of your business. Let your business have a blooming & prosperous life

with our Working capital finance facility. To fulfill your working-capital financing

requirements, BankIslami offers a wide range of products as follows:

a) Murabahah Financing:

Murabahah is a type of sale in which the seller discloses the cost of goods and profit to the

26

buyer. Through this short-term financing mode, BankIslami can finance the asset purchase

requirement' of the Corporate Customers.

The Customer, intending to utilize the Murabahah facility, identifies the commodities

('assets') it needs to purchase through Murabahah facility. BankIslami purchases the assets

from Supplier and then sells the same to the Corporate Customer against an agreed price

(including disclosed profit portion) on deferred payment basis.

b) Istisna Financing:

Istisna is a contract of sale of specified items to be manufactured/constructed, with an

obligation on the part of the manufacturer/seller to deliver them to the buyer upon

completion.

Istisna can be used for made-to-order commodities where the buyer (BankIslami) would

order a specific good with some specifications to be manufactured by the Corporate Client in

a particular period of time and deliver to BankIslami after completion.

c) Salam Financing:

Salam is a sale, whereby, the seller undertakes to supply some specific commodity to the

buyer at a future date in exchange for an advanced price fully paid on the spot. As a matter of

principle, the sale of a commodity which is not in the possession of the seller is unlawful.

Thus, the practice of Salam is legalized as an exception and is allowed under certain term and

condition. Salam is allowed for commodities only which are homogeneous and fungible in

nature i.e. every unit of the commodity should be identical and substitutable in nature e.g.

sugar, rice, wheat etc. Therefore, Salam is an ideal mode for financing for agricultural

concerns. Salam financing can also fulfill all working capital requirements of

manufacturers/traders dealing in homogeneous commodities.

3.2.2.4 Project Financing (medium and long term)

BankIslami offers medium and long-term financing facilities for infrastructure, BMR and

industrial projects in all sectors directly or on syndication basis.

a) Ijarah:

Ijarah is a contract, whereby, BankIslami will lease out an asset to the Corporate Client and

receive periodical rentals from the Client for the use of that asset. The asset will remain in the

ownership of the Bank throughout the term of Ijarah. At the end of the Ijarah term, the asset

can be purchased by the Client at an agreed price.

Ijarah is mainly used for long and medium term fixed asset financing for infrastructure, BMR

27

and industrial projects.

b) Diminishing Musharakah:

The product of Diminishing Musharakah is offered on the basis of 'Shirkat-ul-Milk'. Shirkat-

ul-Milk means partnership of persons in an undivided property. Process of Diminishing

Musharakah financing involves BankIslami taking share in the ownership of a specific asset

along with the Corporate Client and then gradual purchase of the Client of BankIslami's

ownership share in the asset throughout the term of Diminishing Musharakah. At the end of

the Diminishing Musharakah term, Client becomes the sole owner of the asset. Diminishing

Musharakah is mainly used for long and medium term fixed asset financing for

infrastructure, BMR and industrial projects. Diminishing Musharakah is also an ideal mode

for Real Estate Financing.

3.2.3 Consumer banking

Same as other BankIslami offers same services as online banking, Transfer funds, Lookers

facilities, ATM card facilities.

3.2.3.1 Online Banking

BankIslami's has a wide network of 102 Branches in 49 Cities all of which provide Online

Banking services. Online Banking means that all our 102 Branches in 49 Cities are connected

with each other so that you can instantly access your account and make transactions in any

BankIslami Branch. The following are the key benefits that you will get out of using our

online branch network:

• Cash Deposit for immediate credit to a remote branch.

• Remote Cheque Encashment from any online branch.

• Instant Funds Transfer between any 2 online branches.

• Balance Enquiry and Statement of Account from any Online branch

3.2.3.2 Inter Bank Transfer Fund

Do you want to provide ease and convenience to your friends, family, colleagues and

business associates. With our Interbank funds transfer (IBFT) facility you can easily transfer

funds in their accounts via your ATM. Now, when dealing with you they can ensure hassle

free funds transfer in their accounts. No nuisance of waiting for Cheque clearance or going to

the branch to deposit Cash or Cheque.

28

IBFT facility enables you to send and receive funds Online from and to any Account holder

of 1Link IBFT participating member Banks. Following are the key benefits that you will get

out of using our IBFT facility:

3.2.3.3 ATM or Debit Card

It is a Shariah compliant ATM/Debit card, all in one, which acts as a complete replacement

for cash. Now you have the freedom to access your Bank account 24 hours a day to make

instant and cashless payments at a multitude of shops, outlets and restaurants in addition to its

use on our ATM network.

ATM Card:

You can withdraw cash anytime and anywhere from around 2,500 ATMs countrywide linked

to both the M-Net and 1-Link switches.

Debit Card:

You can buy grocery, fill fuel, dine-out and make purchases at over 3,600 retail outlets linked

to the Orix Network countrywide.

Chapter NO 4

29

ANALYSIS

4.1 Financial Analyses of BIPL

BALANCE SHEETAS AT 31ST DECEMBER

(Rupees in 000)

ASSETS 2010 2009 2008 2007 2006

Cash and Balances with treasury banks 3.035.148 4,217,515 2,175,413 1,433,166 338,222

Balances with other banks 569.622 2,059,550 2,207,490 2,577,491 790,709

Due from Financial institutions 4.513.132 4,018,813 40,351 625,037 412,131

Investments 13.732.132 6,813,191 5,019,525 3,864,027 493,008

Financing 16.670.125 13,282,152 6,527,531 3,962,867 959,133

Operating fixed assets 2.066.680 2,395,304 1,910,648 1,093,324 441,428

Deferred tax assets 402.183 347,016 265,257 90,418 27,130

Other assets 4.046.681 1,153,230 942,385 801,143 562,913

Total Assets 45.035.703 34,286,771 19,088,600 14,447,473 4,024,674

LIABILITIES

Bills payable 563,020 485,608 353,646 84,998 23,830

Due to financial institutions 353,000 156,160 245,939 70,000 50,000

Deposits and other accounts 38,198,320 27,987,378 12,477,955 9,934,282 1,778,008

Sub-ordinate loan - - - - -

Liabilities against assets subject to finance

lease

- - - - -

Deferred tax liabilities - - - - -

Other liabilities 1,154,977 917,332 819,239 513,467 169,949

30

Total of Liabilities 40,269,317 29,546,478 13,896,779 10,602,747 2,021,787

NET ASSETS 4,766,386 4,740,293 5,191,821 3,844,726 2,002.887

REPRESENTED BY

Share capital 5279,679 5,279,679 5,279,679 3,200,000 2,000,000

Reserves 9,310 - -

Accumulated loss (554,985) (577246) (98,307) (45,377) (8,354)

4,734,004 4,702,433 5,181,372 3,154,623 1,991,646

Advance against future issues of share capital - 681,409 -

Surplus on revaluation of assets-net of

deferred tax

32,382 37,860 10,449 8,694 11,241

4,766,386 4,740,293 5,191,821 3,844,726 2,002,887

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31ST DECEMBER

(Rupees in 000)

2010 2009 2008 2007 2006

Profit / return on financing, investments and

placements earned

3,806,209 2,193,891 1,468,688 602,060 100,00

8

Return on deposits and other dues expensed 2,057,533 1,222,169 729,528 303,842 18,665

Net spread earned 1,748,676 971,722 739,160 298,218 81,343

Provision against non-performing financings - net (7,424) (89,780) (130,556) (28,372) (1,001)

Provision for diminution in the value of investments - (15,000) -

Provision against sukuk murabaha - (6,418) -

Bad debts written off directly -

(7,724) (111,198) (130,556) (28,372) (1,001)

Net spread after provisions 1,756,100 860,524 608,604 269,846 80,342

OTHER INCOME

Fee, commission and brokerage income 87,821 37,854 112,117 61,207 3,430

Dividend income 1 - 1,741 23,150 13,569

Income from dealing in foreign currencies 60,276 278,054 29,273 10,248 740

31

2010 2009 2008 2007 2006

Gains on sale of securities - 2,356 31,273 41,922 24,179

Unrealized Gain / (loss) on revaluation of

investments classified as held for trading

- (926)

Other income 59,006 24,423 21,735 37,54 3,555

Total other income 207,104 342,687 196,139 140,281 44,547

1,963,204 1,203,211 804,743 410,127 124,88

9

OTHER EXPENSES

Administrative expenses 1,895,476 1,755,503 1,028,232 507,252 145,52

6

Other provisions / write offs 11,528 -

Other charges 11,657 10,617 5,663 3,338 13,762

Total other expenses 1,918,661 1,766,120 1,033,895 510,590 159,28

8

44,543 (562,909) (229,152) (100,463) (34,39

9)

Extra ordinary / unusual items

LOSS BEFORE TAXATION 44,543 (562,909) (229,152) (100,463) (34,39

9)

42,268

Taxation -Current - (12,549) (87) (4,004) (1,021)

-Prior years (4,276)

-Deferred 2,007 96,519 176,309 67,444 27,332

46,550 83,970 176,222 63,440 26,311

LOSS AFTER TAXATION (592,225) (478,939) (52,930) (37,023) (8,088)

Accumulated loss brought forward (9,310) (98,307) (45,377) (8,354) (4,529)

Accumulated loss carried forward (554,985) (577,246) (98,307) (45,377) (12,61

7)

Horizontal Analysis

32

Cash and Cash Balances

Cash and cash balances are increasing every year.

Balances with other banks:

Balances are increased in 2006 and 2007 and decreased in 2009 and 2010. It is due to

advances and investments. These two years BIPL used these funds in investments and

advances rather than keeping balances with other banks.

Investment:

BIPL investment are increased years by years for last five years . The reason is fewer funds

are used in investment in fully paid up shares of listed companies and unlisted terms finance

certificates.

Advances:

In BIPL there was increase in advances year by year.

Operating fixed assets:

Operating fixed assets are increased through out years

Other assets:

Ratio of the other assets is also showing the trend towards increase for last five years data.

Liabilities:

Bills payable:

In BIPL five years comparison of bills payable shows that in the year 2004 to 2007 ratios are

slightly increase but in year 2008 & 2009 it increased quickly.

Ø Other liabilities:

Ø It also shows the increase

Ø Share Capital:

Ø In BIPL share capital increased in 2004 but remains the same in 2008 to 2010.

33

Horizontal Analysis of the profit and loss account

Markup/return/interest expense

There is an increase in 2007 to 2010 in the markup/return/interest expense because return on

deposits are increased due to increase in rate on deposits and increase the amount of fixed

deposits.

Administrative Expense

The administrative expenses are increasing every year because of expansion of the branch

network.

4.2` Ratio Analysis

Liquidity Ratios:

Liquidity represents the ability of a bank to efficiently and economically accommodate

deposits withdrawal as well as fund increase in assets.

1-Current Ratio:

The current ratio measures the number of the firms current assets cover its current liabilities.

Current ratio = Current assets / Current Liabilities

2006

Current Assets 2,103,975

Current liabilities 243,779

34

Current Ratio 863.07%

2007


Current liabilities 668,465


2008


Current liabilities 1,418,824

Current Ratio 37818%

2009




2010

Current Assets 1,21,64,583



Analysis of Current ratios of BIPL

Current ratio shows a firm's ability to cover its current liabilities with its current assets. If

value of current ratio is grater then one it means that firm can pay all its current liabilities

from its current assets but if value of current ratio is less then one it means that firm is unable

to pay its currents liabilities from its current assets. For last five years current ratio in BIPL

35

are strong.

2-Working Capital Ratio

Working capital is the difference between current assets and current liabilities.

Working capital is used to check liquidity of the organization.

Working Capital = Current Asset- Current Liabilities

2006


Current Liabilities 243,779

Working Capital 1,860,196

2007


Current Liabilities 668,465


2008


Current Liabilities 1,418,824


2009


Current Liabilities 1,559,100


2010

Current Assets 1, 21, 64,583

Current Liabilities 20, 70,997

36

Working Capital 1, 00, 93,586

Analysis of Working CapitalAnalysis of Working Capital

Working capital is better in 2010 which means that assets are utilized more efficiently inWorking capital is better in 2010 which means that assets are utilized more efficiently in

2010 as compared to other years.2010 as compared to other years.

Cash RatioCash Ratio

Cash and cash equivalent are the most liquid assets. It is used check the liquidity of theCash and cash equivalent are the most liquid assets. It is used check the liquidity of the

organization.organization.

20062006

Cash Equivalent Cash Equivalent 1,128,9311,128,931

Total Assets Total Assets 4,024,6744,024,674

Cash RatioCash Ratio 28.0528.05

20072007




2008 2008

Cash Equivalent Cash Equivalent 4, 383,,0584, 383,,058



20092009




20102010

Cash Equivalent Cash Equivalent 36, 06,01136, 06,011

37



Analysis of cash ratio of BIPLAnalysis of cash ratio of BIPL

Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. CashHigher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash

ratio is more important liquidity ratio. In 2005 cash ratio was 6.51%, it increased quickly inratio is more important liquidity ratio. In 2005 cash ratio was 6.51%, it increased quickly in

2006 to 28.05%, but it shows declining trend in 2007 to 2009. In 2010 it decreases2006 to 28.05%, but it shows declining trend in 2007 to 2009. In 2010 it decreases

dramatically to 8.007 %.dramatically to 8.007 %.

Leverage RatiosLeverage Ratios

Leverage ratios of a firm show the extent to which a firm finances its operation from theLeverage ratios of a firm show the extent to which a firm finances its operation from the

outside sources and money. The leverage can be determined from analysis of owner equity inoutside sources and money. The leverage can be determined from analysis of owner equity in

business, total liabilities, current and long-term liabilities. Long-term assets and total assetsbusiness, total liabilities, current and long-term liabilities. Long-term assets and total assets

of the business. of the business.

Debt to Total Assets RatiosDebt to Total Assets Ratios

Its shows that how much assets have been financed by liabilities.Its shows that how much assets have been financed by liabilities.

Debt RatioDebt Ratio

Debt Ratio = Total Debt / Total AssetsDebt Ratio = Total Debt / Total Assets

20062006

Total Debts Total Debts 2,021,787 2,021,787


Debt RatioDebt Ratio 50.2350.23

20072007

Total Debts Total Debts 10,602,74710,602,747

Total Assets Total Assets 14,447,473 14,447,473

38


20082008




20092009




20102010




Analysis of leverage ratioAnalysis of leverage ratio

Financial leverage is the extent to which a firm is financed with debt. In BIPL, 2010 isFinancial leverage is the extent to which a firm is financed with debt. In BIPL, 2010 is

heavily financed because debt was the major source of financing in 2010.heavily financed because debt was the major source of financing in 2010.

Debt to Equity Ratio:Debt to Equity Ratio:

Debt equity is calculated by dividing total liabilities of the bank by the tall owner equity.Debt equity is calculated by dividing total liabilities of the bank by the tall owner equity.

Debt to Equity Ratio = Total debt / shareholders equity or Debt ratio / 1- Debt ratioDebt to Equity Ratio = Total debt / shareholders equity or Debt ratio / 1- Debt ratio

20062006

Total Debts Total Debts 2,021,787 2,021,787

Share holder equityShare holder equity 2,000,0002,000,000

Debt to equity RatioDebt to equity Ratio 1.011.01

39

20072007




20082008




20092009




20102010




Analysis of the Debt to equity ratioAnalysis of the Debt to equity ratio

Greater the debt greater risk for the firms shareholders. In 2006 risk for the shareholders wasGreater the debt greater risk for the firms shareholders. In 2006 risk for the shareholders was

very low as compared to the other years decrease debt to equity ratio was very small on thevery low as compared to the other years decrease debt to equity ratio was very small on the

contrast risk was very high in 2010 because of heavy financing.contrast risk was very high in 2010 because of heavy financing.

Equity multiplierEquity multiplier

Owner equity to fixed assets ratioOwner equity to fixed assets ratio

“Owner equity to fixed assets ratio” shows that how much money does owner in relation to“Owner equity to fixed assets ratio” shows that how much money does owner in relation to

fixed assets invest. If the owner equity is greater then the fixed assets, it means that ownerfixed assets invest. If the owner equity is greater then the fixed assets, it means that owner

40

finances a part of current assets. When owner equity is less than fixed assets it means thatfinances a part of current assets. When owner equity is less than fixed assets it means that

creditor's obligations have been used to finance a part of fixed assets.creditor's obligations have been used to finance a part of fixed assets.

Total owner equity divided by fixed assetsTotal owner equity divided by fixed assets

Equity Multiplier = Total assets / shareholders equityEquity Multiplier = Total assets / shareholders equity

20062006

Total AssetsTotal Assets 4,024,6744,024,674

Share Holder EquityShare Holder Equity 2,000,0002,000,000

Equity MultiplierEquity Multiplier 2.012.01

20072007




20082008




20092009




20102010

Total AssetsTotal Assets 4, 50, 35,7034, 50, 35,703

Share Holder EquityShare Holder Equity 52, 79,67952, 79,679


Analysis of the equity multiplierAnalysis of the equity multiplier

41

In BIPL it is a better in 2010 it means that bank has about 8.53 in total assets of 100 ofIn BIPL it is a better in 2010 it means that bank has about 8.53 in total assets of 100 of

equity.equity.

Coverage AnalysisCoverage Analysis

Coverage ratios analysis the ability of a firm to cover or service its financial obligations. Coverage ratios analysis the ability of a firm to cover or service its financial obligations.

Gross Spread Ratio:Gross Spread Ratio:

This ratio shows the firms overall effectiveness of operation. Gross profit divided by netThis ratio shows the firms overall effectiveness of operation. Gross profit divided by net

sales.sales.

20062006

Net Markup / Interest incomeNet Markup / Interest income 81,34381,343

Interest earnedInterest earned 100,008100,008

Gross spread ratioGross spread ratio 81.3481.34

20072007


Interest earnedInterest earned 602,060602,060


20082008


Interest earnedInterest earned 1,468,6881,468,688


20092009


42

Interest earnedInterest earned 2,193,8912,193,891


20102010

Net Markup / Interest incomeNet Markup / Interest income 17, 48,67617, 48,676

Interest earnedInterest earned 38, 06,20938, 06,209


Analysis of gross spread ratioAnalysis of gross spread ratio

It is measure of the efficiency of the firm's operation. Gross spread ratio of BIPL is high inIt is measure of the efficiency of the firm's operation. Gross spread ratio of BIPL is high in

2005 as compared to the other years. Only because of low expenses during the year. 2005 as compared to the other years. Only because of low expenses during the year.

Investment to Total assets RatioInvestment to Total assets Ratio

Investment / Total assetsInvestment / Total assets

20062006

InvestmentInvestment 493,008493,008


RatioRatio 12.2512.25

20072007

InvestmentInvestment 3,864,0273,864,027



20082008




43

20092009




20102010

InvestmentInvestment 1, 37, 32,1321, 37, 32,132



Advances to Total Assets RatioAdvances to Total Assets Ratio

Advances/ Total AssetsAdvances/ Total Assets

20062006

AdvancesAdvances 959,133959,133



20072007

AdvancesAdvances 3,962,8673,962,867



20082008




44

20092009




20102010

AdvancesAdvances 1, 66, 70,1251, 66, 70,125



In 2010 advances to total asset ratio of BIPL decreases to 37.01.In 2010 advances to total asset ratio of BIPL decreases to 37.01.

Operating Expense RatioOperating Expense Ratio

Non Markup Expense / Gross IncomeNon Markup Expense / Gross Income

20062006

Non Markup ExpenseNon Markup Expense 159,288159,288

Gross IncomeGross Income 124,889124,889

RatioRatio 127.54%127.54%

20072007

Non Markup ExpenseNon Markup Expense 510,590510,590



20082008

Non Markup ExpenseNon Markup Expense 1,033,8951,033,895



20092009

Non Markup ExpenseNon Markup Expense 1,766,1201,766,120

45

Gross IncomeGross Income 1,203,2111,203,211


20102010

Non Markup ExpenseNon Markup Expense 19, 18,66119, 18,661

Gross IncomeGross Income 19, 63,20419, 63,204


Cost to Sales RatioCost to Sales Ratio

The ratio is obtained by dividing cost of sales by net sales. The following are the cost of salesThe ratio is obtained by dividing cost of sales by net sales. The following are the cost of sales

of BIPL over five years of operations.of BIPL over five years of operations.

Markup expense divided by markup earned.Markup expense divided by markup earned.

20062006

Markup ExpenseMarkup Expense 18,66518,665

Markup EarnedMarkup Earned 100,008100,008

Cost to sales ratioCost to sales ratio 18.6618.66

20072007


Markup EarnedMarkup Earned 602,060602,060


20082008


Markup EarnedMarkup Earned 1,468,6881,468,688


20092009

Markup ExpenseMarkup Expense 1,222,1691,222,169

Markup EarnedMarkup Earned 2,193,8912,193,891


46

20102010

Markup ExpenseMarkup Expense 20, 57,53320, 57,533

Markup EarnedMarkup Earned 38, 06,20938, 06,209


Chapter NO 5Chapter NO 5

SWOT ANALYSISSWOT ANALYSIS

5.1 SWOT Analysis of BIPL5.1 SWOT Analysis of BIPL

Due to globalization and management studies now organizations cannot survive until theyDue to globalization and management studies now organizations cannot survive until they

47

compete with their surroundings and then internationally. SWOT analysis is the kind of toolcompete with their surroundings and then internationally. SWOT analysis is the kind of tool

which is used to analyze the organization’s performance in relation to its internal and externalwhich is used to analyze the organization’s performance in relation to its internal and external

environment strength; weakness, opportunities and threats face by BIPL are as follow.environment strength; weakness, opportunities and threats face by BIPL are as follow.

StrengthsStrengths

It has a competitive advantage of doing less marketing as compassed to conventionalIt has a competitive advantage of doing less marketing as compassed to conventional

banking and as a result better cost control.banking and as a result better cost control.

For speculative motive less money is used due to which there is reduction in volatilityFor speculative motive less money is used due to which there is reduction in volatility

in investment and chances of investment failure.in investment and chances of investment failure.

It is feasible location wise and geographicallyIt is feasible location wise and geographically

To attract new customers and retain potential customers by beginning innovativeTo attract new customers and retain potential customers by beginning innovative

products and service like BIPL offers e-banking, phone banking etc.products and service like BIPL offers e-banking, phone banking etc.

As bank made on name of Islam in Pakistan so, it have advantage of religious positionAs bank made on name of Islam in Pakistan so, it have advantage of religious position

in a country.in a country.

Saving can be mobilized and increasing deposits of banks using as charities and zakatSaving can be mobilized and increasing deposits of banks using as charities and zakat

fund schemes etc. fund schemes etc.

WeaknessesWeaknesses

To complete with conventional banks a lot of capital is required and large amount of

recourses have to maintain to meet any loss situation in Islamic finance modes of

investment.

To do job efficiently and serve Islamic financial services, training is required for

improving skills of management and staff.

Staff of BIPL is less experienced and young

Work I more than the employee's working houses

Main weakness o BIPL is lack of specialization i.e. employees are rotated from one

job to another job of totally different characteristic

48

OpportunitiesOpportunities

Due to Islamic banking new markets have emerged like Islami mortgage, Islamic

insurance and other investment projects etc

BIPL offers value added services and products to customers

ThreatsThreats

Market demand is less as compared to conventional interest based banking.

After 9/11 attacks on WTC environment of Islamic banking in west has declined.

For implementation of Islamic banking a lot of legislation is required especially in

non-Muslim countries.

Increasing competition in Islamic banking sector

Poor economic condition of country.

5.2 COMPARISON OF SWOT ANALYSIS OF BIPL WITH MBL & AL-5.2 COMPARISON OF SWOT ANALYSIS OF BIPL WITH MBL & AL-

BARAKA BANKBARAKA BANK

5.2.1 SWOT ANALYSIS OF MEEZAN BANK:

Strengths

Continued to expand its branch net work.

It is the strength of Meezan bank that I provides healthy and fair working

environment.

Shareholding is very strong.

Full fledged Islamic bank

49

Highly invested in technology.

Weaknesses

Charges are very high for different activities as compared to competitors.

Low promotion and advertisement of produce and services.

Restricted shariah based policies.

Few services are offered by Meezan bank as compared to competitors.

There is no credit card facility

No long term relations maintain with customers.

Opportunities

Increasing demand of Islamic financial products and services.

Market share in creases through branch expression through out the country.

Due to Islamic banks (Meezan) people are moving from conventional banking to

Islamic banking.

Threats

Charges in govt policies

Political instability

High interest rate change by SBP

Due to changes in foreign exchange rates value of financial instruments fluctuates

Entry of new competitors.

5.2.2 SWOT Analysis of al-Baraka bank strength:

Commitment to Islamic shariah

Staff are qualified and experience in field of management and banking

50

Relationship of manager with staff and staff with customers is quite good.

High job satisfaction

Environment is friendly and co-operative

Senior management is competent.

Weaknesses

Centralized decision making which results loss of confidence among employees and

mgt.

Lack of marketing effort

Less internal recruitment for new posts.

Lack of training at all levels

Lengthy process of recruitment.

Opportunities

Better Management

Location of branch is very suitable place

Proper utilization of internal expertise being major change in organization

Threats

Increasing competition in both domestic and foreign market.

Good job opportunities offer outside attract our current employees.

Other organizations are using better HR Technique.

5. 3 Comparison

Meezan bank has 204 branches through out the country while BIPL has 102 branches

so; Meezan bank has strength of increasing market share in country through

expending its branch net work.

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Meezan bank provides training facility to their staff members as compared to BIPL.

Location wise BIPL is better that Meezan bank.

Work is over loaded to employees in BIPL as compared to Meezan Bank.

Services and financial instruments offered by Meezan bank are charged highly as

compared to its competitor BIPL.

As compared to other conventional banks BIPL,MBL and Albaraka bank are notAs compared to other conventional banks BIPL,MBL and Albaraka bank are not

following marketing strategies like advertisement.following marketing strategies like advertisement.

Few services are offered by Albaraka bank than BIPL and MBL.Few services are offered by Albaraka bank than BIPL and MBL.

Process of recruitment is lengthy in Albaraka and MBL than in BIPL.Process of recruitment is lengthy in Albaraka and MBL than in BIPL.

Chapter NO 6Chapter NO 6

FINDINGS AND RECOMMENDATIONSFINDINGS AND RECOMMENDATIONS

6.1 SHORT FALL / WEAKNESSES OF ORGANIZATION6.1 SHORT FALL / WEAKNESSES OF ORGANIZATION

According to my observation, it is pointed out that there are some short comings inAccording to my observation, it is pointed out that there are some short comings in

BankIslami Mansehra. BankIslami Mansehra.

Low Job Satisfaction:Low Job Satisfaction:

It is becoming clear that the true lasting competitive advantage comes through humanIt is becoming clear that the true lasting competitive advantage comes through human

resources and how they are managed. BIPL is not focusing on this critical issue as the jobresources and how they are managed. BIPL is not focusing on this critical issue as the job

satisfaction level of the employees working at BIPL, was quite low.satisfaction level of the employees working at BIPL, was quite low.

Lack of Specialization:Lack of Specialization:

The employees are constantly rotated from one job to another job of the totally differentThe employees are constantly rotated from one job to another job of the totally different

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characteristic in and they do not have know-how of the working in other unrelatedcharacteristic in and they do not have know-how of the working in other unrelated

departments. But I think this is not a very good tactics used by the management. Otherwisedepartments. But I think this is not a very good tactics used by the management. Otherwise

the situation might be like this “ Jack of all and master none'.the situation might be like this “ Jack of all and master none'.

Centralization:Centralization:

There is a high degree of centralization in the bank. Almost all the decision-making is in theThere is a high degree of centralization in the bank. Almost all the decision-making is in the

hands of the upper management. But centralization is effective up to a certain level otherwisehands of the upper management. But centralization is effective up to a certain level otherwise

it becomes inefficient and at times costly too. I personally observed that delay occurred in theit becomes inefficient and at times costly too. I personally observed that delay occurred in the

operations of the employees only due to the fact that they had not got any instructions fromoperations of the employees only due to the fact that they had not got any instructions from

the head office.the head office.

Lack of Training Facilities:Lack of Training Facilities:

Presently there is no specific training program arranged for the new recruiters. They have toPresently there is no specific training program arranged for the new recruiters. They have to

learn based on their observations and also their mistakes. It takes a bit time for the fresh onelearn based on their observations and also their mistakes. It takes a bit time for the fresh one

to learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetaryto learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetary

and non-monetary losses for the bank. There is pressure not only on the new learner but alsoand non-monetary losses for the bank. There is pressure not only on the new learner but also

on the person placed upon with this responsibility.on the person placed upon with this responsibility.

Less Experienced Staff:Less Experienced Staff:

The no. of experienced and well trained staff is very low. Majority of the staff working in theThe no. of experienced and well trained staff is very low. Majority of the staff working in the

bank branches is quite young and inexperienced. If the bank failed to bring down its highbank branches is quite young and inexperienced. If the bank failed to bring down its high

employees turnover, then it would be lacking the most important resources of an organizationemployees turnover, then it would be lacking the most important resources of an organization

i.e. the experienced staff.i.e. the experienced staff.

Customers unawareness about chargesCustomers unawareness about charges

Mostly customers are unaware about charges for DD, TT, PO etc. so manager should tellMostly customers are unaware about charges for DD, TT, PO etc. so manager should tell

them charges before giving form, through which wastage of time minimize.them charges before giving form, through which wastage of time minimize.

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Overburdened workOverburdened work

Employees are overburdened, so they have to stay at branch till late at night. Due to highEmployees are overburdened, so they have to stay at branch till late at night. Due to high

work load efficiency of employees are effected.work load efficiency of employees are effected.

Lack of appreciationLack of appreciation

Sometimes bank ignored the good performance of employees. If hard work of employees areSometimes bank ignored the good performance of employees. If hard work of employees are

not appreciated, then they become dishearten and losses his interest in work. not appreciated, then they become dishearten and losses his interest in work.

RECOMMENDATIONS

It was an interested experience to do internship in BankIslami Pakistan Limited. The staff

was very cooperative and due to their help I learned big deal about modern banking.

I suggest that such an internship program highly integrative for the students of commerce

education so that the students should be inquired with the knowledge of practice world .I

do summarize that it would be a great help to me in selection of job or future field of

work.

Here I am putting some suggestions, which will enable the bank to compete with other

banks more effectively & efficiently.

It is observed that the employees were overburdened so they have to stay at branch till late

at night. In this way their efficiency is affected and hiring more employees can reduce

their work.

The employees should be assigned jobs for specific period and than they should rotated to

other department so that they gain knowledge/ experience of other jobs.

BankIslami should properly advertise and Communicate to public about the services

provided by it, so that more customers will be attracted.

The bank’s management should give more incentives and pay scale of officers should be

revised & improved.

System and operations should be more defined and organized.

Administration drawbacks should be improved by the strict control of general issues.

Expenditures must be control, which are very high.

BankIslami has not strong position in market. So BankIslami should do heavy

advertisement both electronically and print media to create public awareness.

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Branch manager should also arrange training programmers for existing employees to

improve their performance.

Proper distribution of work should follow to run the organization in smooth way.

There should be a complaint box in bank for hearing complaints of customers because

most of the people feel hesitation to go to manager for complaint.

IT department should be establishing in order to maintain connection with other banks.

REFERENCES

Annual Report

BIPL's Annual Report 2010




Staff of BIPL Mansehra Branch

WEBSITE:

www.bankislami.com.pk

55

http://www.bankislami.com.pk/

Annexure-I

MANAGEMENT OF THE BRANCH

DESIGNATION NO OF EMPLOYEES

Branch Manager 01

Operation Manger 01

Officer Level I 02

56

Officer Level II 01

Officer Level IV 02

Cashier 01

Service quality Officer 01

Telephone Operator 01

Gunman 02

Peons 03

Annexure-IIAnnexure-II

MANAGEMENT OF THE BANKISLAMI- (In Alphabetical order)MANAGEMENT OF THE BANKISLAMI- (In Alphabetical order)

Mr. Adnan HamidMr. Adnan Hamid Head, Administration & General ServicesHead, Administration & General Services

Mr. Arsalan VohraMr. Arsalan Vohra Head, Risk ManagementHead, Risk Management

Mr. Asad AlimMr. Asad Alim Head, Information SystemHead, Information System

Mr. Khawaja Ehrar ul HassanMr. Khawaja Ehrar ul Hassan Head, ComplianceHead, Compliance

Mr. Faisal ShekhMr. Faisal Shekh Head, Product DevelopmentHead, Product Development

Mr. Farooq AnwarMr. Farooq Anwar Head, OperationsHead, Operations

Mr. Hassan A. BilgramiMr. Hassan A. Bilgrami Chief Executive OfficerChief Executive Officer

Mr. Muhammad FurqanMr. Muhammad Furqan Head, Credit AdministrationHead, Credit Administration

Mr. Muhammad ImranMr. Muhammad Imran Head, Consumer & Retail BankingHead, Consumer & Retail Banking

Mr. Muhammad Shoaib KhanMr. Muhammad Shoaib Khan Head, Treasury & Financial InstitutionsHead, Treasury & Financial Institutions

Mr. Rehan Shuja ZaidiMr. Rehan Shuja Zaidi Head, Internal AuditHead, Internal Audit

Mr. Shamshad AhmedMr. Shamshad Ahmed Head, Trade FinanceHead, Trade Finance

Ms. Sheba Matin KhanMs. Sheba Matin Khan Head, Human ResourcesHead, Human Resources

Mr. Syed Akhtar AusafMr. Syed Akhtar Ausaf Head, CreditHead, Credit

Mr. Syed Mujtaba H. KazmiMr. Syed Mujtaba H. Kazmi Head, Corporate FinanceHead, Corporate Finance

Mr. Syed Shah Sajid HussainMr. Syed Shah Sajid HussainHead, FinanceHead, Finance

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Annexure -IIIAnnexure -III

MANAGEMENT HIERARCHY MANAGEMENT HIERARCHY

58

Chairman

Board of Directors

Chief Executive

Officer

Head of Departments

Regional Managers

Area Operations Managers

Area Managers Button5

Annexure IV

PROVINCE WISE BREAK UP OF BRANCHES

SIND PUNJAB BALOCHISTAN NWFP ISLAMABAD AJK TOTAL

37 37 13 8 5 2 102

Annexure Annexure

Management of the branchManagement of the branch

DesignationDesignation NameName

Branch ManagerBranch Manager Mr. Zulfiqar AliMr. Zulfiqar Ali

Operation ManagerOperation Manager Mr. Shafqat HussainMr. Shafqat Hussain

Customer Service Executive (AccountCustomer Service Executive (Account

Opening) Opening)

Mr. Sarmad ImtiazMr. Sarmad Imtiaz

Customer Service Officer (Clearing andCustomer Service Officer (Clearing and

Remitance)Remitance)

Mr. Yasir AliMr. Yasir Ali

Customer Service Officer CashCustomer Service Officer Cash Mr. Mazher Lodhi Mr. Mazher Lodhi

59

bank islami final report edited

Economy & Finance

bank islami idea2

financial analysis of

swot analysis of bipl5

swot analysis of mbl5

islami banks

bank transfer fund3

bank tobeing change

fledgeislamic commercial