ASSIGNMENT ON FOREIGN EXCHANGE OPERATIONOF
AL-ARAFAH ISLAMI BANK LTD.
Submitted By:Group Name: Voice of
BoysSL. NO. NAME ID
01 Syed Abdus Salam (GL) MBAFM29152330
02 Md. Mahbubur Rahman MBAWM29152002
03 Md. Mainul Hossain MBAWM29152003
04 Md. Saydul Islam MBAFM29152324
05 Md. Imran Ahmed MBARM29152411
INTRODUCTION
Bangladesh is one of the largest Muslim Countries in the world. The people of this country are deeply committed to lead an Islamic way of life which is based on the principle of Holy Quran and the Sunnah. The Al-Arafah Islami Bank which is established on June 18, 1995 is the true reflection of this inner urge of its people which started functioning with effect from September 27, 1995.
Purpose of the Report: The student of MBA program of Bangladesh Islami University is
required to undergo an assignment for the fulfillment of the International Financial Management course. As a part of the program, we were been placed in Al-Arafah Islami Bank Ltd. with the activities of Foreign Exchange operation of Al-Arafah Islami Bank Ltd.. From this perspective, we have prepared this report. We truly appreciate this assignment and do hope that it will be a great importance in building our future carrier.
OBJECTIVES OF THE REPORT
General Objective of the Report: The main purpose of the study to know the overall Foreign Exchange operational
performance of the Al-Arafah Islami Bank Ltd and fulfilling the requirements of the MBA program. The objective of Islamic banking is not only to earn profit but also to do good and welfare to the people.
Specific Objectives are:1. To have a practical relation & reliability of the topics we have achieved from
textual background in our educational life.2. To develop understanding of Business Communication application in practical field.3. To develop our capabilities as an employee in realistic field of the job market.4. To improve corresponding, report writing ability.5. Presentation of an introduction to the organization Al Arafah Islami Bank Ltd. as a
whole.6. To familiarize with practical job environment.7. To have an exposure on the financial institutions such as banking environment of
Bangladesh.8. To gain experience on different functions of the different departments of the bank.9. To observe banker-customer relationship.10. To relate the theories of banking with the practical in banking
Scope of the Report As we were working for assignment on Al-Arafah Islami Bank
Limited. We have gotten the opportunity to learn different part of banking system as well as Foreign Exchange Operation.
METHODOLOGY:Primary sources: The primary source of information is as
follows:1. Face-to-face conversation with the bank official and staffs.Secondary Sources: The secondary sources of information are:2. Annual report of AIBL.3. Materials and files of AIBL, Foreign Exchange Branch.4. Website of AIBL.5. Unpublished data received from the branch.6. General information of banking activities.
LIMITATION 1. The work is mainly based on interpreting primary data. There is insufficiency of
Secondary data, but for the purpose of the betterment of the present position of the bank’s accounting procedure, collecting, interpreting and integrating primary data has been utilized.
2. Though a very comprehensive and a well-organized report has been tried to be produced but there are still some limitations present here.
3. 4. The communication gap among the different personnel because of excessive workload.5. Inexperience about practical work.6. Because of sensitiveness, the department does not want to disclose information about
the financial situation, which leads to do report.7. Lack of accessibility to respondents.8. The bank authorities are so busy that they could not give me sufficient time for
discussion about Accounting Procedure and its problems.9. Dealing with some ambivalent information.10. Problems for lack of my research work11. Clients are not always interested to spend time for interviews.12. The main constraint was insufficiency of information, which is highly required for the
study. It was unable to provide some formatted documents and data for the study.13. Since the bank personnel were very busy, they failed to give me enough time to
complete the report.14. The clients were very busy. So, they were unable to give me much time for interview.15. Such a study carried out by me for the first time. So, inexperience is one of the main
factors that constituted the limitation of the study.
HISTORICAL BACKGROUND OF AIBL
Islam provides us a complete lifestyle. Main objective of Islam lifestyle is to be successful both in our mortal and immortal life. Therefore in every aspect of our life we should follow the doctrine of Al-Quran and lifestyle of Hazrat Muhammad (sm) for our supreme success. Al-Arafah Islami Bank started its journey in 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah.
Objective of AIBL:1. Al-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the
objectives implement and materialize the economic and financial principles of Islamic in the banking arena. The objectives of AIBL are not only to earn profit, but also to do good and welfare to the people. The main objectives of AIBL are listed below-
2. To establish participatory banking instead of banking on debtor creditor relationship3. To invest through different modes permitted under Islamic Shariah4. To accepts deposits on profit loss sharing basis5. To establish as welfare-oriented banking system6. To extend co-operation to the poor, the helpless and the low income group for their
economic up liftmen7. To play a vital role in human development and employment generation8. To contribute towards balances growth and development of the country through
investment operations particularly in the less developed areas9. To contribute in achieving the ultimate goal of Islamic economic system10. To conduct interest free banking
SPECIAL FEATURE OF AIBL
1. All activities are conducted and interest free system according to the Islamic shariah
2. Its investment policies under different modes are fully shariah complain
3. During the year 2015, 70% of the investment income has been distributed among the Mudaraba depositors
4. It believes in providing dedicated services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity.
5. The bank is committed towards establishing welfare oriented banking system to meet the needs of low income and underprivileged class of people.
6. The bank upholds the Islamic values of establishment of just economic system through social emancipation and equitable distribution of wealth.
FINANCIAL INFORMATION ABOUT AIBL
Particulars 2012 2013 2014
Investment income 10515313 62561393 19725917293
Profit paid to depositors
00 -46198885 -12616773920
Net investment income 10515313 16362508 7109143373
Commission, Exchange and other income
3574590 9521466 1938841572
Total operating income 14089903 25883974 9595019864
Total operating expense
3437916 13846830 3261569623
Profit before tax and provision
10651988 12037144 6333450240
Provision on investment and others
00 9628521 1827328613
Profit before Tax 10651988 2408623 4486590033
Net profit after Tax 7556655 56086 2324953693
Earning per share(EPS) 0.1511 0.0011 2.20
MISSION & VISION OF AIBL
Mission of AIBL:1. Achieving the satisfaction of Almighty Allah both here& hereafter2. Proliferation of Shariah Based Banking practices3. Quality financial services adopting the latest technology4. Fast and efficient customer service5. Maintaining high standard of business ethics6. Balanced growth7. Steady& competitive return on share holders’ equity8. Innovative banking at a competitive price9. Attract and retain quality human resources10. Extending commitment to the growth of national economy11. Involving more in Micro and SME financingVision of AIBL:12. To operate based on Islamic principles of transactions along with ensuring justice and
equity in the economy.13. To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the
growth of the national economy14. To improve Banker customer relationship through improving customer service15. To develop now and innovate product/service through integration of technology and
policy and principle
FINANCIAL PERFORMANCE OF AL- ARAFAH ISLAMI BANK LTD.
At the end of current year, the number of depositors stood at 291928 and the amount deposit has accumulated to TK.27566.33 million. The total numbers investors are 15855 and total investment extended to them was a sum of taka 28854.66 million.
The bank has earned TK.2300.48 million and incurred an expense of TK.1202.71 million in the current year. At the end of the year the profit before tax has stood TK.1099.77 million.
Modes of Investment: HPSM Mudaraba Musharaka Bai-Muajjal Bai- Salam Bai-Istisna Bai-Murabaha
FOREIGN EXCHANGE OPERATION In the Dilkusha branch, we worked mainly in this section. I prepared
several voucher for foreign remittance. Different types of remittance come from different countries. In Dilkusha branch, remittance is an important section. Every day huge remittance comes from several countries. Besides I prepared import file. Every month AIBL have to submit the import, export and remittance file to the Bangladesh Bank.
We have done the following important tasks along with the prudent employees
1. Opening and payment settlement of L/C2. Insurance of shipping guarantee3. Advising L/C4. Preparation of daily and weekly statement5. Voucher making or issuing6. Amendment of L/C and register maintaining
Learning points: We have learnt so many operations about the banking sectors especially AIBL banking
sector. The following statement that I have learnt and that is given below How to open several types of accounts What are the requirements for opening different types of account? How clients can gather their account statement and know the balances. What are the procedures to close an account? How to collect the new cheque. How foreign exchange section operates their operation. How foreign remittance for outward How clearing house operates their operation. I have learnt about several types of investment modes of AIBL. How to collect foreign remittance and how do they reach to clients. How to open Letter of Credit How to import process How to export process I have learnt a systematic life through internship period How to deal with customer I have learnt about TT, DD and PO How each section of the branch provides the services to their clients? How to collect cheque from clients.
FOREIGN EXCHANGE DEPARTMENT
FOLLOWING FLOW CHART DEPICTS THE MULTIFARIOUS FUNCTIONS USUALLY DONE BY THE FED
IMPORT PROCEDURE
To import a person should be competent to be an “Importer”. According to Import and Export control Act 1950, the office of Chief Controller of Import and Export provides the registration (IRC) to the importer. After obtaining this person has to secure a letter of credit authorization from Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests or instructs to open an L/C. he is also called opener or applicant of the credit.
Importer’s Application for L/C Limit MarginTo have an import L/C limit, an importer submits an application to the
Department of Al-Arafah Islami Bank Ltd. furnishing the following information:
1. Full particulars of bank account.2. Nature of business.3. Required amount of limit.4. Payment terms and conditions.5. Goods to be imported.6. Offered security.7. Repayment schedule.
Bill of exchange A Bill of Exchange is an instruction by the exporter (drawer) to the importer
or the importer’s bank to make payment of the amount mentioned in it. A Bill of Exchange is a negotiable instrument and is governed by the Negotiable Instruments Act. The bill under a letter of credit may be drawn in the issuing bank or another drawee bank but not on the importer. If the credit nevertheless calls for a bill on the applicant, the bank will consider such bills as additional documents. The various types of bills are:
D/A and D/P bills A usance bill may be on D/A or D/P terms. If it is on D/a terms
(Documents against acceptance), the collecting bank is to deliver the documents to the drawee on the acceptance of the bill by him. The payment will be made by the drawee on the due date of the bill. For the period from the date of acceptance to the date of payment, the bank remains unsecured. If it is a D/P bill (Documents against payment), the documents will be delivered to the drawee only on payment until which time they are retained by the bank. Therefore, the bank retains control over goods until payment is received.
Inland and foreign bills A bill, which is drawn in Bangladesh and made payable in or drawn upon any
person resident in Bangladesh, is an inland bill. Thus, an inland bill must fulfill both the conditions that (i) it is drawn in Bangladesh and (ii) it is payable in Bangladesh or drawn on person resident in Bangladesh (even though payable abroad). Any bill that does not fulfill either of the conditions is a foreign bill. Thus, a bill drawn in Bangladesh, payable at a place outside Bangladesh by a person resident outside Bangladesh and a bill drawn at a place outside Bangladesh, but payable in Bangladesh are foreign bills.
Marine Insurance Policy The loss or damage to goods during the voyage or shipment would affect any
one or more parties involved in the transaction, viz., the importer, the exporter, the shipping company and the bank which has paid against the documents covering the goods. Marine insurance offers the desired cover against loss of or damage to the goods during the transaction. It allows free flow of international trade by absorbing an important uncertainty connected with it.
Marine insurance may cover the ship (hull insurance) or the goods (cargo insurance). The consideration for which a marine insurance contract is undertaken is the ‘premium’. The insurance may be for either partial loss or total loss. The applicant must submit the insurance cover note and the money receipt with other relevant documents to the advising bank.
InvoicesCommercial Invoice A commercial invoice is a statement containing full details of the
goods sipped. The general contents of a commercial invoice used in foreign trade are:
1. Names and addresses of the seller and buyer;2. Details of goods shipped-quantity, quality, description and
value;3. Packing details and packing marks;4. Price and amount payable by the buyer;5. Terms of trade-FOB, CFR OR CIF, etc;6. Details of freight charges, insurance premia and other chargers;7. Reference to the sale contract in fulfillment of which the
shipment is made;8. Name of the vessel in which the goods are shipped; and9. Reference to the license number under which the import is
made.
EXPORT PROCEDURE
Entering into an Export contract1. Product, Standards and Specifications2. Quantity3. Inspection4. Total Value of Contract5. Terms of Delivery6. Taxes, Duties and Charges7. Period of Delivery/Shipment8. Packing, Labeling and Marking9. Terms of Payment– Amount/Mode & Currency10. Discounts and Commissions11. Licenses and Permits12. Insurance13. Documentary Requirements14. Guarantee15. Force Majeure of Excuse for Non-performance of contract16. Remedies
Export Pricing and Costing1. Range of products offered2. Prompt deliveries and continuity in supply3. After-sales service in products like machine tools,
consumer durables4. Product differentiation and brand image5. Frequency of purchase6. Presumed relationship between quality and price7. Specialty value goods and gift items8. Credit offered9. Preference or prejudice for products originating from a
particular source10. Aggressive marketing and sales promotion11. Prompt acceptance and settlement of claims12. Unique value goods and gift items
Papers Requirement for new Export1. Export Realization Certificate (ERC).2. Trade License.3. Membership Certificate Form Chamber/ EPB.4. Account To Be Maintained With Bank.5. Export L/C Contract.6. EXP Form to Be Certified.7. TIN Certificate.8. VAT Certificate.9. Memorandum and Article of Association of the Company.10. Confident Credit Report to Be Obtained of the Importer.11. Registered Partnership Deed In Case of Partnership Concern.Preparation of Exports Documents12. Bill of exchange or Draft.13. Bill of Lading.14. Invoice.15. Insurance Policy/ Certificate.16. Certificate of Origin.17. Inspection Certificate.18. Consular Invoice.19. Packing List.20. Quality Control Certificate.21. GSP Certificate.22. Photocopy-sanitary Certificate.
Export Financing1. Export Cash Credit (ECC).2. Packing Credit (PC)3. Back-to-Back Credit Facility (BTB).4. Foreign Documentary Bills Purchased (FDBP).Processing and Opening of Back-to-Back Letter of Credit5. Full Particulars of Bank Account.6. Balance Sheet.7. Statement of Assets & Liability.8. Trade License.9. Valid Bonded Warehouse License.10. Membership Certificate.11. Income Tax Declaration.12. Memorandum of Articles.13. Partnership Deed.14. Resolution.15. Photographs of Al Directors.
Findings:1. In year 2015 import of Dilkusha branch of AIBL was in Second highest position where the
amount was TK.600.17 crore.2. In year 2015 the export through Dilkusha branch of AIBL Bank Ltd was in good position.
Dilkusha Br of AIBL in 2015 there was a Second highest position and it was TK.900 Appx. crore.
3. Inward remittance has not seriously affected by economic crisis as other foreign exchange activities. Though the growth rate has slightly decreased, still now it is representing a positive growth.
4. The export of huge manpower in the different country is the main strength of the inward remittance that comes through AIBL.
5. Total import of the branch is less then total export, if we express import as percentage of export than we can see Import is only 25% to 34% of Export.
6. Letter of credit (L/C) opening system for the importer is not an easy process. For processing of L/C document, it requires huge amount of time and money as well.
7. The existing clients of Foreign Exchange activities of the bank get more benefit than newer.8. Though the maximum of the foreign exchange Foreign Exchange clients are giants in
nature, the number of clients is very small in the foreign exchange branch.9. There has a lack of manpower in the foreign exchange division. Some important task of
foreign exchange division are hampered, even some case not accomplished in due time only because of the crisis of manpower.
10. The major sector of Import and Export the foreign exchange branch deal with is the product of readymade garments industry.
11. The bank is circulating in a traditional way. The way of serving customer is not up to the mark.
Recommendations:1. The number of exporter and importer who operate through this bank is not enough to achieve the
goal. So AIBL should offer more facilities to attract them to be their client.2. In addition with the present services they should include more services. It is badly needed to
provide more services to the customer in order to compete in the market.3. Banking is a service-oriented marketing. Its business profit depends on its service quality. That’s
why the authority should always be aware about their service quality.4. Foreign exchange department should be fully computerized that the exchange process would be
convenient for both the bankers and the clients.5. The Bank should increase their number of branches and foreign exchange department in other
branch. Because they cannot compete in the market for their few number foreign exchange department.
6. Bank should offer more facilities to the customers such as credit card, visa card, ATM machine etc to survive in the competition.
7. On-line banking should be introduced for better customer services and to eliminate risk of sending document via post and risk of loss. It also increases quick fund transfer and better satisfaction from customer.
8. Proper Banking software should be used to get best benefit from this department.9. Staff meetings and departmental meetings at the branch level must be increased to develop service
quality as well as problem solving10. The bank should give an aggressive advertisement campaign to build up a strong image and
reputation the potential customer.11. AIBL should use the latest banking technology to provide better services to the customers. It will
also attract the customer’s of international banks.12. AIBL should pursue advertising campaign in order to build a strong image among the people. They
should carry out aggressive marketing campaign to attract clients.13. AIBL should offer different types of loans to their own staffs immediately after confirming their job.
This loan will influence them for better performance.
Conclusion: Because of International Financial Management course, we
got the chance to observe the overall activities of a branch commencing from foreign exchange. We also got the scope to act together with high officials and were informed about their prospects & perceptions about the Bank’s services. During my interaction with the employees & customers, I understood that there is the existence of customer dissatisfaction in some cases. The Bank is developing its general banking & foreign exchange activities day by day with changing industry situation but the rate of change of such speed needs to be increased. The Bank has the opportunity to develop a leadership position in the industry but new significant strategy ought to be made. I would like to say that this assignment about AIBL has developed our practical knowledge of Business Administration & made our MBA education more realistic. I desire all the best for the Bank.
