Internship Report

on
An Overview of the Foreign Exchange Performance of Al-Arafah Islami Bank PLC

Prepared By
Md. Taushik Ahamed
Student ID: M210201030
Batch: 13th; Section: A
Session: 2021-22
Department of Accounting & Information Systems
Jagannath University, Dhaka-1100

Supervised By
Mazeda Sultana
Associate Professor
Department of Accounting & Information Systems
Jagannath University, Dhaka-1100

Submitted To
Department of Accounting & Information Systems
Faculty of Business Studies
Jagannath University, Dhaka-1100

Submission Date: 31st May, 2024

Table of Contents

Particulars Page No.

Letter of Transmittal i
Declaration ii
Supervisor’s Certificate iii
Acknowledgment iv
Executive Summary v
Chapter 01 Introduction 01
1.1 Introduction 01
1.2 Objectives 02
1.3 Methodology 02
1.4 Scope of the Report 03
1.5 limitations of the Report 03
Chapter 02 Al-Arafah Islami Bank PLC: An Overview 05
2.1 Background of Al-Arafah Islami Bank PLC. 05
2.2 Company Profile 06
2.3 Mission & Vision of AIB PLC 06
2.4 Value & Commitments 07
2.5 Objective of AIB PLC 08
2.6 Organogram of AIB PLC 09
2.7 Financial Performance of the Bank 10
2.8 Services Provided by AIB PLC 12
Chapter 03 Conceptual Framework of Bank 18
3.1 Foreign Exchange Departments 18
3.2 Import Procedure 18
3.3 Functions of Import Section 18
3.4 Letter of Credit 20
3.5 Importer’s Application for L/C Limit Margin 20
3.6 Parties Involved in a Letter of Credit 21
3.7 Documents Used in Foreign Trade 25
3.8 Export Procedure 27
3.9 Export Pricing and Costing 28
3.10 Formalities and Procedure 29
3.11 Papers Required for New Export 30
3.12 Preparation of Export Documents 30
3.13 Export Financing 31
3.14 Processing and Opening of Back-to-Back Letter of Credit 31
3.15 Export Cash Credit (ECC) 33
3.16 Packing Credit (PC) 33
3.17 Back-to-Back Credit Facility 33
3.18 Foreign Remittance 33
3.19 Remittance Procedure of Foreign Currency 34
3.20 Formalities for opening Foreign Currency (FC) Account 34
3.21 Analysis of 5 Year Foreign Exchange Data of AIB PLC 35
Chapter 04 SWOT Analysis of Al-Arafah Islami Bank PLC 40

Chapter 05: Findings and Recommendations 43

5.1 Findings of the Study 43
5.2 Recommendations of the Study 44
Chapter 06: Conclusions 46
Bibliography
Letter of Transmittal
31st May, 2024

The Supervisor
Internship Program
MBA Program
Department of Accounting and Information Systems
Jagannath University, Dhaka.

Subject: Submission of the report on “An Overview of the Foreign Exchange

Performance of Al-Arafah Islami Bank PLC.”

Respected Madam,
With due respect, I am pleased to submit my internship report on “An Overview of the
Foreign Exchange Performance of Al-Arafah Islami Bank PLC.” Throughout my
internship, I gained valuable insights into the bank's foreign exchange activities, enhancing
my analytical skills and practical knowledge. I have followed the prescribed format and
instructions for a formal report, striving to make it comprehensive and reliable. The
information collected is aimed at achieving the report's objectives, and I hope it serves its
intended purpose. The experience and knowledge gained during this period will significantly
benefit my future professional career.

I would be grateful if you enlighten me with your thoughts and views regarding the report.

Sincerely Your

……………………………
Md. Taushik Ahamed
ID: M210201030
Batch:13 th
Department of Accounting & Information Systems
Jagannath University, Dhaka

I
Declaration of the Student
I, here declare that the internship report namely “An Overview of the Foreign Exchange
Performance of Al-Arafah Islami Bank PLC” under the supervision of Mazeda Sultana,
Associate Professor, Department of Accounting & Information Systems, Jagannath
University, submitted by Md. Taushik Ahamed, ID: M210201030, 13th Batch, Department of
Accounting & Information Systems, Session: 2021-2022, Jagannath University, after
completing 3 (three) months of internship period with Al-Arafah Islami Bank PLC’s existing
activities and its implementation.

I also declare that this report is the original work of my experience and prepared for the
academic purpose which is a part of the M.B.A program and I further affirm that the report is
original and no part of this report has been occupied from elsewhere.

……………………………
Md. Taushik Ahamed
Student ID: M210201030
Batch: 13th; Section: A
Department of Accounting & Information Systems
Jagannath University
Dhaka-1100

II
Certificate of the Supervisor

This is to certify that the dissertation entitled “An Overview of the Foreign Exchange
Performance of Al-Arafah Islami Bank PLC” is done by Md. Taushik Ahamed, Student
ID: M210201030, 13th Batch, Section: A, Session: 2021-2022, Department of Accounting
& Information Systems, Jagannath University, as a fulfillment of the requirement of
Master of Business Administration (MBA) Program from Jagannath University. Being a
regular student under my guidance, he has carried out all relevant work efficiently and
effectively. I believe his profound participation in the intern program would help him build a
future career in Banking.

……………………………
Mazeda Sultana
Associate Professor
Department of Accounting and Information systems
Jagannath University, Dhaka

III
Acknowledgment

At the very beginning, My deepest appreciation and special thanks go to the Department of
Accounting & Information Systems, Jagannath University, Dhaka for providing me an
opportunity to come closer to the real world and helping me enrich my knowledge.

I also express my warm gratitude and cordial to Al Arafah Islami Bank PLC have given me
the chance to work with them and helped a lot by providing the information and enabling me
to prepare this report. I have received their generous help and support.

I would like to express my deepest gratitude to the almighty Allah for giving me the
strength and capability to continue my everyday tasks both inside and outside these
workplaces during the whole period of an internship program to finish the task within the
scheduled time. I would like to thank my honorable supervisor Mazeda Sultana, Associate
Professor, Department of Accounting and Information Systems, Jagannath University,
Dhaka, for guiding me throughout the course of my BBA internship program.

Then, at last, I shall be grateful to those persons who read this report and who shall benefit
from this report in the present and future.

IV
Executive Summary

In Chapter One, I have discussed the introduction of the report, the objective of the report, the
methodology of the report, the limitations of the report, and the scope of the report. After that
in the second chapter, I have provided an overview of Al-Arafah Islami Bank PLC including-
background, vision, mission, objective, value and commitments, and product and service
provided by the bank. In the third chapter, I have shown An Overview of the Foreign
Exchange Performance of Al-Arafah Islami Bank PLC.

In the fourth chapter, I have provided the SWOT analysis of Al-Arafah Islami Bank PLC. In
the fifth chapter, I’ve explained the findings and recommendations of the report. At last, in
chapter six I’ve written the conclusions of my report.

V
CHAPTER-1
Introduction
1.1 Introduction

Bangladesh, one of the largest Muslim-majority countries in the world, has a population
deeply committed to the principles of the Holy Quran and Sunnah. Reflecting this
commitment, Al-Arafah Islami Bank PLC was established on June 18, 1995, and commenced
operations on September 27, 1995. The bank is dedicated to conducting all its financial and
investment activities based on an interest-free profit and loss sharing system, aligning with
Islamic banking principles. This approach has opened new avenues for realizing the long-
cherished aspirations of the Bangladeshi people to conduct banking transactions in
accordance with Islamic teachings.

With the active cooperation and participation of the Islamic Development Bank (IDB) and
several other Islamic banks, financial institutions, and government bodies, Al-Arafah Islami
Bank PLC has secured a unique position as a leading private commercial bank in Bangladesh.
Since its inception, the bank has made significant contributions to the socio-economic
development of the country. Initially, it opened 46 branches and established 16 authorized
dealer points across the country.

As of the latest updates, Al-Arafah Islami Bank PLC continues to expand its footprint and
enhance its service offerings. The bank now operates over 200 branches nationwide,
providing a wide range of services including retail banking, corporate banking, SME
banking, and agricultural banking. It has also embraced digital transformation, offering
internet banking, mobile banking, and other digital services to cater to the evolving needs of
its customers.

The bank's commitment to ethical banking and social responsibility is evident in its various
initiatives aimed at poverty alleviation, education, and healthcare. Al-Arafah Islami Bank
PLC has also focused on sustainable development, financing green projects, and supporting
environmentally friendly practices.

1
Through its unwavering dedication to Islamic banking principles and continuous innovation,
Al-Arafah Islami Bank PLC remains at the forefront of the banking sector in Bangladesh,
driving economic growth and fostering financial inclusion.

1.2 Objectives
General Objectives:

The main purpose of the study is to know the overall financial operational performance of the
Al-Arafah Islami Bank PLC and fulfilling the practical 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. Islam upholds the concept that money, income, and property belong to Allah and
this wealth is to be used for the benefit of the society.

Specific Objectives:
 To observe the foreign exchange operation of AIB PLC and their services and
review the techniques used by the bank to make it lucrative.
 An analysis and discussion of the foreign exchange services of the bank.
 To evaluate the present performance of the bank regarding foreign exchange.
 To search the problems of this branch of AIB PLC.
 Determining the drawbacks of the existing foreign exchange system.
 Recommending some guidelines to improve the effectiveness of foreign exchange
services.

1.3 Methodology

To make the report more meaningful and presentable, two sources of data and information
have been used widely these are Primary Data and Secondary Data. Both primary and
secondary data sources were used to generate the report. Most of the information was
collected from secondary sources.

Primary sources of data:

 Face-to-face conversations with the bank officers & staff.
 Conversation with the clients.
 Different' manuals of AIB PLC

2
Secondary sources of data:
 Procedure manual published by the Al-Arafah Islami Bank PLC.
 Files and documents of the branch.
 Annual reports of Al-Arafah Islami Bank PLC
 Different papers of Al-Arafah Islami Bank.
 DSE library
 Bangladesh Bank Journals

1.4 Scope of the Report

As I was working at the Al-Arafah Islami Bank PLC, I got the opportunity to learn different
parts of the banking system. My supervisor divided my parts so that I could get the
opportunity to work in the Foreign Exchange division to analyze the whole financial
activities.

1.5 Limitations of the Report

The work is mainly based on interpreting primary data. There is an 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.

Though a very comprehensive and well-organized report has been tried to be produced but
there are still some limitations present here.

Since the time allocated for the internship program is twelve weeks, it may have a coercive
effect on this study lowering the actual value and standard.
 The communication gap among the different personnel because of excessive
workload.
 Inexperience with practical work.
 Because of sensitiveness, the department does not want to disclose information about
the financial situation, which leads to do report.
 Lack of accessibility to respondents.
 The bank authorities are so busy that they could not give me sufficient time for
discussion about the Accounting Procedure and its problems.

3
 Dealing with some ambivalent information.
 Problems for lack of research work
 Clients are not always interested in spending time for interviews.
 The main constraint was the insufficiency of information, which is highly required for
the study. It was unable to provide some formatted documents and data for the study.
 Since the bank personnel were very busy, they failed to give me enough time to
complete the report.
 The clients were very busy. So, they were unable to give me much time for an
interview.
 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.

4
CHAPTER-2
Al-Arafah Islami Bank PLC: An Overview

2.1 Background of Al-Arafah Islami Bank PLC.

Al-Arafah Islami Bank PLC was established and functioning with effect from 27 th September
1995 as a scheduled commercial Bank of Bangladesh strictly based on Islamic Shariah
principles. Islamic Banking has been operating in more than 70 countries of the world
including Bangladesh through 218 institutions. It has in the meantime established its
beneficial approach and efficiency in operation.

The Islamic Banking system has its inborn inner strength as follows:

 It gives a fixed percentage of investment income to the depositors. Therefore, in

order to give a better rate of profit its investment portfolio is managed properly so
that better investment income can be earned and paid to the depositors.

 The Management cost is to be borne out of a fixed portion of investment income and
service charge earned by the bank. Therefore, efficient customer service and better
portfolio management are required to be ensured by the management.

 The depositors can calculate their interest income to be earned from conventional
banks and thereby make expenditures with consequential inflation which the
depositors of Islamic Bank cannot do as they cannot foresee profit income.

 Since Islami Bank invests its funds in different Islamic Modes of Finance,
particularly in Mudaraba and Musharaka, and also accepts deposits in Mudaraba
principal Entrepreneurship as well as a sense of belongingness to the Bank is
developed.

5
 In buying &selling modes of financing like Murabaha, Bai-Muajjal, and Ijara, end
uses are ensured strictly as per principles of Islamic Shariah. Thus, funds cannot be
diverted for other purposes.

 Islami Bank attaches importance to human resources development. As such the

employees are trained discreetly, in this regard on which the conventional Bank does
not give much importance.

2.2 Company Profile

Name of The Company Al-Arafah Islami Bank PLC

Nature of Business A public limited company registered in
Bangladesh on 18th June 1995, under the Companies Act
1994, and enlisted in
Dhaka Stock Exchange Ltd. & Chittagong Stock
Exchange Ltd.
Registered Office Head Office, Al-Arafah Tower,63, Purana Paltan, Dhaka-
1000.
SWIFT Code ALARBDDH
E-Mail [email protected]
Webpage: www.aibl.com.bd

2.3 Mission & Vision of AIB PLC

Mission:

 Achieving the satisfaction of Almighty Allah both here & hereafter.

 Proliferation of Shariah Based Banking Practices.
 Quality financial services adopting the latest technology.
 Fast and efficient customer service.
 Maintaining a high standard of business ethics
 Balanced growth.

6
 Steady & competitive return on shareholders' equity.
 Innovative banking at a competitive price.
 Attract and retain quality human resources.
 Extending competitive compensation packages to the employees.
 Firm commitment to the growth of the national economy.
 Involving more in Micro and SME financing.

Vision:

 To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the

growth of the national economy

2.4 Value & Commitments

Value

 Al-Arafah Islami Bank PLC values are based upon the fundamental principles that
define our culture and are brought to life in our attitude and behavior. It is their
values that make us unique and seen from five basic principles:
 Excellence: The market in which AIB PLC operates is becoming increasingly
competitive and their customers now have an abundance of choices.
 Integrity: AIB PLC's success depends upon trust. Their customers are society in
general expect us to process and steadfastly to high moral principles and professional
standards.
 Customer focus: AIB PLC needs to understand fully the needs of its customers and to
adapt our product and service to meet these.
 Meritocracy: AIB PLC believes in giving opportunities and advantages to its
employees on the basis of their ability.
 Progressiveness: AIB PLC believes in the achievement of society through the
adoption of enlightened working practices innovative new products and processes a
sprite of enterprise.

7
Commitments
 Theirs is a customer-focused modern Islamic Banking with sound and steady growth
in both deposit mobilization and making quality Investments to keep our position
intact as a leading Islamic bank in Bangladesh.
 To deliver financial services with the touch of our heart to retail, small and medium
scale enterprises, as well as corporate clients through our branches across the
country.
 To always align our business initiatives with the ever-changing industrial and
business needs of the clients.
 To deliver products and services that create value for the customers.

2.5 Objective of AIB PLC

Al-Arafah Islami Bank PLC is an Islamic Banking institution that operates with the objective
of implementing and materializing the economic and financial principles of Islamic in the
banking arena. The objectives of AIB PLC are not only to earn profit but also to do good and
welfare to the people. The main objectives of AIB PLC are listed below-

 To establish participatory banking instead of banking on debtor-creditor relationships.

 To invest through different modes permitted under Islamic Shariah.
 To accept deposits on a profit loss-sharing basis.
 To establish a welfare-oriented banking system.
 To extend cooperation to the poor, the helpless, and the low-income groups for their
economic uplift.
 To play a vital role in human development and employment generation.
 To contribute towards balancing the growth and development of the country through
investment operations, particularly in the less developed areas.
 To contribute to achieving the ultimate goal of the Islamic economic system.

8
 To conduct interest-free banking.

2.6 Organogram of AIB PLC

9
2.7 Financial Performance of the Bank (Figure in Millions)

10
Particulars 2018 2019 2020 2021 2022 Growth%

11
Income Statement
Investment Income 24956.81 28811.65 26331.28 2344601 25211.42 7.57
Profit paid on Deposit 16256.61 18604.42 16556.64 13072.79 16109.65 23.23
Net Investment Income 8,706.83 10207.23 9774.64 10373.77 9111.77 12.16
Non-Investment Income 3769.39 4037.57 3655.46 4250.17 7516.92 76.86
Non-Investment Expenses 6160.70 6384.18 6742.33 7129.25 8135.17 14.11
Net Non-Investment Income (2391.31) (2346.61) (3086.87) (2879.08) (618.25) (78.53)
Profit Before Tax & Provision 6308.89 7860.62 6687.77 7494.14 8493.52 13.34
Provision For Investment 2177.98 2867.66 1887.90 2655.58 3229.51 21.61
Profit Before Tax 4130.91 4992.96 4799.87 4838.56 5264.01 8.79
Provision For Tax (including
1674.11 2556.33 2228.06 2712.12 3157.38 16.42
Deferred Tax)
Profit After Tax 2456.80 2427.63 2571.81 25126.44 2106.63 (0.93)
Balance Sheet
Authorized Capital 15000.00 15000.00 15000.00 15000.00 15000.00 -
Paid up Capital 10440.22 10659.02 10659.02 10649.02 10649.02 -

Reserve Funds & Other Reserves 266205.48 10318.64 11418.96 11733.35 11733.99 0.01

Shareholders’ Equity
23483.22 24148.24 24455.85 25900.33 25917.49 0.07
(Capital & Reserve)
Deposits 266205.48 297241.8 326023.4 353287.9 394947.83 11.54
Investment 261874.13 288486.0 308620.6 336890.7 406787.79 20.75
Investment in Shares & Securities 12214.67 16170.52 16170.52 30156.14 36946.92 22.52
Fixed Assets 4494.61 4351.93 4351.93 5470.27 5144.43 (5.96)
Total Assets (Excluding off-
338456.30 381051.8 418298.6 462687.5 534756.11 15.58
balance sheet items)
Foreign Exchange Business
Import Business 168573.80 1681111 169378.9 261156.1 300430.90 14.86
Export Business 114481.90 108967 104939.4 135786.9 181070.20 33.35
Guarantee Business 7096.02 8274.25 10511.21 13673.41 17155.91 25.47
Inward Foreign Remittance 36917.20 37713.40 43807.00 52662.10 88531.70 68.11
Capital Measures
Core Capital (Tier-l) 22379.93 22817.41 23930.33 29301.30 29640.35 1.16
Supplementary Capital (Tier-ll) 10078.56 9735.77 15327.20 14359.58 14916.76 3.88
Tier-l Capital Ratio 10.12 10.22 9.59 10.37 9.43 (0.95)
Tier-ll Capital Ratio 4.56 4.36 6.14 5.08 4.75 (0.34)
Total Capital 32458.69 32553.18 39258.09 43660.88 44557.11 2.05

12
Total Capital Ratio 14.68 14.58 15.74 15.46 14.17 (1.28)
Investment Quality
Volume of non-performing
12690.72 13100.41 11769.58 16566.84 22437.37 35.44
Investment
% of NPIs to Total Investment 4.79 4.82 3.80 4.81 5.41 12.47
Provision for Unclassified
1891.00 2157.28 2787.10 3084.10 3372.47 9.35
Investment
Provision for Classified
3946.09 6022.02 636.96 8173.23 10973.86 28.10
Investment
Provision for Off Balance sheet
689.80 778.50 935.50 1093.40 1221.13 11.68
Exposures
Number of Shares Outstanding 1044021750 10690218 10690218 10690218 106690218 -
Earnings per Share (Taka) 2.35 2.28 2.41 1.96 1.95 (0.01)
Book Value per Share (Taka) 20.80 21.13 22.35 22.73 22.75 .02
Market Price per Share (Taka) 19.90 17.20 22.20 26.60 23.60 (3.00)
Price Earnings Ratio (Times) 8.48 7.56 9.22 13.57 12.10 (1.47)
Price Equity Ratio (Times) 0.96 0.81 0.99 1.17 1.04 (0.13)
Dividend per Share
Cash Dividend (%) 15.00 13.00 15.00 15.00 12.00 (3.00)
Bonus Share 2.00 2.00 - - 3.00 3.00
Operating Performance Ratio
Net Profit Margin% 3.42 3.73 3.45 3.26 3.00 (1.15)
Investment /Deposit Ratio 89.87 88.93 86.92 87.57 90.25 2.68
Return on Equity (ROE)% 10.46 14.07 10.10 8.21 8.13 (0.08)
Return on Assets (ROA)% 0.73 0.64 0.61 0.46 0.39 (0.07)
Cost of fund % 8.70 9.02 7.50 6.00 6.46 0.46
Cost /Income ratio in operating
49.41 44.28 50.20 48.75 48.92 0.17
business (%)
Other Information
Number of Branches 168 182 184 201 208 3.48
Number of Employees 3682 3795 3866 4247 5184 22.06
Number of
25793 24276 22142 19146 17186 (10.24)
Shareholders

13
2.8 Services provided by AIB PLC

The importance of the mobilization of savings for the economic development of our country
can hardly be over-emphasized. We considered savings and deposits as the lifeblood of the
bank. The more the deposit, the greater the strength of the bank. The bank intends to launch
various new savings schemes with the prospect of higher returns duly supported by a well-
orchestrated system of customer services. The bank would cater to the credit needs of
individuals as well as corporate clients. Initially, it will emphasize trade finance, which
would be short-term and self-liquidating in nature. Considering the importance of foreign
trade in our national life, financing, and handling of export & import business and also
handling of foreign remittance business would be given topmost priority. Moreover, the bank
operates all of its activities under the rules and regulations of Islamic Shariah. The services
provided by the Al-Arafah Islami Bank PLC are bellowed:

Al-Arafah Islami Bank Limited has 3 departments, providing traditional banking services like
any other commercial bank. The departments are as follows:
1. General Banking department
2. Investment Banking department
3. Foreign Exchange department

 General Banking Services:

The General Banking department works to make the banking experience of the clients easier
and faster by providing the following services.
 Receipt and payment of cash
 Mobilization of deposits
 Handling transfer transactions
 Operations of clearing house
 Maintenance of accounts with Bangladesh Bank and other banks
 Collection of checks and bills

14
 Deposit Products:
AIBPLC has 3 main categories of deposits namely- savings accounts, fixed deposit accounts,
and company accounts. Under these categories, AIBPLC offers its various deposit products
which are guided by the Islamic Shariah in their operations. For various aspects of the client,
the deposit products are as below:

 For Individuals deposits are divided into two broad categories and they are: i) Savings
and ii) Fixed deposit/DPS accounts.
i) Savings deposit services include the following services for clients:
 Mudaraba savings deposit (MSD).
 Al-Wadiah current deposit (AWCD).
 Mudaraba Short notice deposit ( SND).
 Al-Wadiah merchant account.
 Mudaraba student savings deposit account.
 Mudaraba senior citizen savings account.
 Mudaraba farmer's savings account
 Mudaraba Garments worker savings account.
 Resident foreign currency deposit.
 Non-resident foreign currency deposit.

Now for individuals Fixed deposit or deposit scheme services are as follows:

 In case of fixed deposit:

 Mudaraba Term deposit (MTDR)
 Mudaraba monthly profit payable (PTD)
 Mudaraba pensioner deposit scheme (PDS)
 Mudaraba Term Hajj deposit (THD)

 In case of a savings scheme or DPS scheme:

 Mudaraba Installment Term deposit ( ITD)
 Mudaraba probasi kallyan deposit pension scheme
 Mudaraba Aman deposit scheme
 Mudaraba marriage savings and investment scheme

15
 Investment Banking Services:

When money is deposited in the AIBPLC the bank, in turn, makes investments in
different forms approved by the Islamic Shariah with the intention to earn a profit. Not
only a bank, but also an individual or organization can use Islamic modes of investment
to earn profits for wealth maximization. Al-Arafah Islami Bank Limited provides the
following investment modes to clients under which they can invest capital in order to gain
profit. The investment types of AIBPLC can be stated as below:

Bai mechanism Share mechanism Ijara mechanism

(Trading mode) (Partnership) (Leasing mode)

1. Bai Murabaha
1. Hire purchase
2. Bai-Muajjal 1. Mudaraba under shirkatul
3. Bai-Salam 2. Musharaka melk
4. Istishna’a 2. Ijarah

 Foreign Banking Services:

AIB PLC provides comprehensive foreign banking services to support international trade
and financial transactions. The bank's Foreign Exchange Desk plays a pivotal role in
ensuring efficient and effective currency management and exchange services. Here’s a
detailed overview of the services offered:

Foreign Exchange Desk Functions

1. Monitoring Exchange Rate Movements:

 Continuous tracking of exchange rates for USD and other active currencies.

 Analysis of market trends, volatility, and liquidity scenarios to inform

decision-making.

2. Treasury Operations:

 Setting exchange rates for merchant transactions based on market analysis.

16
 Managing the Net Open Position (NOP) to maintain balance and minimize
risk exposure.

 Ensuring optimum liquidity by strategically managing cash flow and reserves.

3. Market-Based Exchange Rates:

 Providing competitive exchange rates to exchange houses.

 Ensuring rates reflect current market conditions to offer value to customers.

4. Offshore Banking Unit (OBU) Management:

 Overseeing foreign currency liquidity for the OBU.

 Facilitating international transactions and investment activities through the

OBU.

Foreign Exchange Services

1. Export Business

 Financial Products and Services:

 Providing exporters with financial tools such as letters of credit, export

financing, and trade credit insurance.

 Helping businesses manage foreign currency exposure and optimize

their international sales strategies.

 Documentation and Compliance:

 Assisting exporters with the preparation and submission of necessary

export documentation.

 Ensuring compliance with international trade regulations and

standards.

 Risk Mitigation:

 Offering hedging solutions to protect against adverse currency

movements.

17
 Providing advisory services to help exporters navigate market risks.

2. Import Business

 Financing Solutions:

 Offering importers various financing options including import loans,

trade finance, and supplier credits.

 Helping businesses manage cash flow and funding requirements for

purchasing goods from abroad.

 Foreign Exchange Services:

 Providing competitive exchange rates for purchasing foreign

currencies.

 Facilitating smooth and cost-effective currency conversions for import

payments.

 Support and Documentation:

 Assisting with import documentation, including bills of lading,

commercial invoices, and customs declarations.

 Ensuring compliance with import regulations and standards to avoid

delays and penalties.

3. Remittance Business

 Money Transfer Services:

 Enabling individuals and businesses to send and receive money across

borders efficiently.

 Providing multiple remittance channels, including online transfers,

bank drafts, and wire transfers.

 Competitive Exchange Rates:

18
 Offering attractive exchange rates to maximize the value of
remittances.

 Ensuring transparency and fairness in the pricing of foreign exchange

services.

 Secure Transactions:

 Implementing robust security measures to protect against fraud and

ensure the safety of funds.

 Providing tracking and confirmation services for peace of mind and

reliability.

19
CHAPTER-3
An Overview of the Foreign Exchange Performance of Al-Arafah Islami Bank PLC
3.1 Foreign Exchange Departments

multifarious functions are usually done by the FED:

3.2 Import Procedure

To import, a person should be competent to be an importer. According to the Import and

Export Control Act, of 1950, the Office of Chief Controller of Import and Export provides
the registration (IRC) to the importer. In an international business environment, buyers and
sellers are generally unknown to each other. So seller of goods always seeks security for the
payment of his exported goods. The bank gives an export guarantee that it will pay for the
goods on behalf of the buyer if the buyer does not pay. This guarantee is called a Letter of
Credit. Thus, the contract between the importer and exporter is given a legal shape by the
banker through a letter of Credit.

3.3 Functions of Import Section

Functions of Import Section: Detailed Breakdown of Form Import
The Form IMP is a critical document used in the import process, capturing essential
information required for the authorization and facilitation of import transactions. Here’s an

20
elaboration of each component:
1. Name and Address of the Authorized Dealers:
 This section identifies the financial institution (bank) authorized to handle the
import transaction. The bank's details ensure that all communications and
funds transfers related to the import are correctly directed.
2. Amount of Remittance to be Permitted:
 Specifies the total amount of money to be remitted abroad for the purchase of
goods. This figure is crucial for financial planning and regulatory compliance,
ensuring the transaction does not exceed authorized limits.
3. LCA Form Number, Date, and Value in Taka:
 LCA Form Number: A unique identifier for the Letter of Credit
Authorization (LCA) form, which facilitates tracking and reference.
 Date: The issuance date of the LCA form.
 Value in Taka: The total value of the import transaction converted to the local
currency, Taka, for local regulatory and financial recording purposes.
4. Description of Goods:
 A detailed description of the goods being imported, including their nature,
type, and specifications. This information is crucial for customs clearance,
duty assessments, and compliance with import regulations.
5. Invoice Value in Foreign Currency:
 The total value of the goods as stated on the commercial invoice, expressed in
the currency of the exporting country. This value is used to determine the
remittance amount and for foreign exchange transactions.
6. Country of Origin:
 Indicates the country where the goods were manufactured or produced. The
country of origin information is important for tariff and duty calculations, as
well as compliance with trade agreements and import restrictions.
7. Port of Shipment:
 The departure port where the goods will be shipped from. This information
helps in tracking the movement of goods and managing the logistics of the
import process.
8. Name of Steamer/Airline:
 The name of the shipping vessel or airline that will transport the goods. This
detail is essential for tracking shipments and coordinating with logistics

21
providers.
9. Port of Importation:
 The destination port where the goods will be received. Knowing the port of
importation is necessary for customs clearance and arranging for the
transportation of goods from the port to their final destination.
10. Indenter’s Name and Address:
 The indenter (or importer) is the entity or individual placing the order for the
goods. This section captures their name and contact details, ensuring proper
identification and communication.
11. Indenter's Registration Number with CCI & E and Bangladesh Bank:
 The indenter's registration numbers with the Chief Controller of Imports &
Exports (CCI & E) and the Bangladesh Bank, ensuring that the importer is
authorized and compliant with national trade regulations.
12. Full Name and Address of the Applicant:
 The applicant, usually the importer or their representative, who submits the
Form IMP. This section includes their complete name and address, providing
essential contact information for correspondence and legal purposes.

3.4 Letter of Credit

A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the
instance of its customer (known as the opener) addressed to a person (beneficiary)
undertaking that the bills drawn by the beneficiary will be duly honored by it (the opening
bank) provided certain conditions mentioned in the letter gave been complied with.

3.5 Importer’s Application for L/C Limit Margin

To have an import L/C limit, an importer submits an application to the Department of Al-
Arafah Islami Bank PLC. furnishing the following information:

1. Full particulars of bank account.

2. Nature of business.
3. Required amount of limit.

22
4. Payment terms and conditions.
5. Goods to be imported.
6. Offered security.
7. Repayment schedule.

Now if the officer thinks the application to open an L/C is not fit, the following entries are
given to realize the L/C, Charges, Postage, and L/C margin.

3.6 Parties Involved in a Letter of Credit

Importer Who applies for L/C

Issuing Bank It is the bank that opens/issues a L/C on behalf of the importer.

Confirming Bank It is the bank, that adds its confirmation to the credit and it, is
done at the request of the issuing bank. Confirming bank may
or may not be advising bank.
Advising or Notifying It is the bank through which the L/C is advised to the exporters.
Bank This bank is actually situated in the exporter's country. It may
also assume the role of confirming and / or negotiating with
banks depending upon the condition of the credit.
Negotiating Bank It is the bank, which negotiates the bill and pays the amount to
the beneficiary- The advising bank and the negotiating bank
may or may not be the same. Sometimes it can also be
confirming bank.
Accepting Bank It is the bank on which the bill will be drawn (as per the
condition of the credit). Usually, it is the issuing bank.
Reimbursing Bank It is the bank, which would reimburse the negotiating bank
after getting payment - instructions from the issuing bank.

The following papers are required when opening a new L/C

When opening a new Letter of Credit (L/C), various documents are required to ensure
compliance with legal, financial, and operational standards. Here is a detailed explanation of
each required paper:

23
1. Certificate of Board of Directors:

 A document certifying the current members of the board of directors. It

verifies the individuals authorized to make decisions on behalf of the
company.

2. Resolution of Commencement:

 A formal declaration by the board of directors indicating the company’s

decision to commence operations or a specific business activity, such as
initiating the import transaction.

3. Resolution of the Board of Directors:

 A written statement from the board of directors approving the opening of the
L/C. It includes details about the transaction and authorizes specific
individuals to sign and manage the L/C.

4. Confidential Report from Previous Bank:

 A report from the importer’s previous bank detailing their financial history,
creditworthiness, and banking conduct. This helps the new bank assess the risk
associated with the importer.

5. Report/Inquiry from the Credit Information Bureau (CIB) of the Bank:

 A credit report from the CIB, which provides comprehensive information

about the importer’s credit history, outstanding debts, and overall credit score.

6. Credit Report from Correspondent Bank or International Agency:

 An assessment from an international correspondent bank or a reputed credit

agency about the supplier’s financial health and reliability. This helps mitigate
the risk of dealing with unknown suppliers.

7. Lender Risk Account (LRA):

 An internal account created by the bank to monitor and manage large

liabilities associated with the L/C. This ensures that the bank can track
exposure and mitigate risk.

24
8. Valid Import Registration Certificate (IRC):

 A mandatory certificate for businesses involved in importing goods. It is

issued by the relevant government authority and proves that the importer is
registered and authorized to engage in import activities.

9. Trade License:

 An official permit issued by local authorities allowing the company to conduct

business within a specific jurisdiction. It ensures that the business is legally
registered and operating within regulatory frameworks.

10. Taxpayer Identification Number (TIN) Certificate:

 A unique identification number assigned to the business for tax purposes. This
certificate is necessary for tracking tax payments and ensuring compliance
with tax laws.

11. VAT Certificate:

 A certificate confirming the company’s registration for Value Added Tax

(VAT). It is required for businesses that deal with taxable goods and services.

12. Income Tax Declaration:

 Three copies of a declaration by the importer stating that they have paid or
submitted their income tax returns for the previous year. This ensures tax
compliance and financial transparency.

13. Membership Certificate of Chamber of Commerce and Industry:

 A certificate proving that the business is a member of the local Chamber of

Commerce and Industry. Membership often provides credibility and access to
business networks and resources.

14. Membership Certificate of BGMEA (for Garment Industry):

 standards and regulations For companies in the garment industry, a certificate

from the Bangladesh Garment Manufacturers and Exporters Association
(BGMEA) is required. It validates the company’s adherence to the industry.

25
15. Bonded Warehouse License (for Export-Oriented Industry):

 A license for operating a bonded warehouse, where goods can be stored

without paying import duties until they are exported or released for domestic
use. This is essential for export-oriented businesses.

16. Letter of Credit Authorization (LCA) Form:

 A form that authorizes the opening of the L/C. It includes details about the
transaction, the importer, and the supplier. This form is crucial for regulatory
approval and processing of the L/C.

17. Insurance Cover Note:

 A document confirming that insurance coverage has been arranged for the
goods being imported. It protects against potential risks such as damage or
loss during transit.

18. Proforma Invoice/Indent:

 An initial invoice provided by the supplier detailing the goods, quantities, and
prices. It serves as a preliminary bill and forms the basis for the L/C.

19. Application for Opening of L/C:

 A formal application submitted by the importer to the bank, requesting the

opening of an L/C. It must be completed, signed, and include all necessary
details about the transaction.

20. Memorandum and Articles of Association:

 Foundational documents of the company that outline its purpose, structure,

and operating procedures. These are required to verify the company’s legal
standing and governance.

21. Certificate of Incorporation with RJSC:

 A certificate issued by the Registrar of Joint Stock Companies and Firms

(RJSC) confirming the company’s incorporation. It verifies that the company
is legally registered and authorized to operate.

26
3.7 Documents Used in Foreign Trade

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 upon the
acceptance of the bill. 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, that 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 a 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

27
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 that 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 the 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.

Invoices

Various types of invoices are required in L/C. Brief descriptions of those invoices are given
below:

Commercial 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:

 Names and addresses of the seller and buyer;

 Details of goods quantity, quality, description, and value;
 Packing details and packing marks;
 Price and amount payable by the buyer;
 Terms of trade, Cost, and Freight (CFR) or Cost, Freight, and Insurance (CFI) etc;
 Details of freight charges, insurance premia, and other chargers;
 Reference to the sale contract in fulfillment of which the shipment is made;
 Name of the vessel in which the goods are shipped; and
 Reference to the license number under which the import is made.

Proforma Invoice:

28
A Proforma Run contains all the details in a commercial invoice. The word 'profit run' is
different from the commercial inventory by appearing. This is not a sales proof. The
following operations may be required in the following forms:

It may be the basis of which the contract of sale is concluded later. When the product is sent
on a consignment basis, a profit invoice that is sent to the vendor's agent can be used only; It
acts as a guide for the price of the product the agent sells.
It may be used to support a tender a sale contract

3.8 Export Procedure

Entering into an Export contract

In order to avoid disputes, it is necessary to enter into an export contract with the overseas
buyer. For this purpose, the export contract should be carefully drafted incorporating
comprehensive but in precise terms, and all relevant and important conditions of the trade
deal.

There should not be any ambiguity regarding the exact specifications of goods and terms of
sale including export price, mode of payment, storage and distribution methods, type of
packaging, port of shipment, delivery schedule, etc. The different aspects of an export
contract are enumerated as under:

 Product, Standards, and Specifications

 Quantity
 Inspection
 Total Value of Contract
 Terms of Delivery
 Taxes, Duties and Charges
 Period of Delivery/Shipment
 Packing, Labeling and Marking
 Terms of Payment– Amount/Mode & Currency

29
 Discounts and Commissions
 Licenses and Permits
 Insurance
 Documentary Requirements
 Guarantee
 Force Majeure of Excuse for Non-performance of contract
 Remedies

Arbitration, It will not be out of place to mention here the importance of an arbitration clause
in an export contract Court proceedings do not offer a satisfactory method for the settlement
of commercial disputes, as they involve inevitable delays, costs, and technicalities. On the
other hand, arbitration provides an economic, expeditious, and informal remedy for the
settlement of commercial disputes. Arbitration proceedings are conducted in privacy and the
awards are kept confidential. The Arbitrator is usually an expert in the subject matter of the
dispute. The dates for arbitration meetings are fixed at the convenience of all concerned.
Thus, arbitration is the most suitable way for settlement of commercial disputes and it may
invariably be used by businessmen in their commercial dealings.

3.9 Export Pricing and Costing

Export pricing should be differentiated from export costing. Price is what we offer to the
customer. Cost is the price that we pay/incur for the product. Price includes our profit margin,
cost includes only expenses we have incurred. Export pricing is the most important tool for
promoting sales and facing international competition. The price has to be realistically worked
out taking into consideration all export benefits and expenses. However, there is no fixed
formula for successful export pricing. It will differ from exporter to exporter depending upon
whether the exporter is a merchant exporter a manufacturer exporter or exporting through a
canalizing agency. You should also assess the strength of your competitor and anticipate the
move of the competitor in the market. Pricing strategies will depend on various circumstantial
situations. You can still be competitive with higher prices but with better delivery packages
or other advantages.

Your prices will be determined by the following factors:

30
 Range of products offered
 Prompt deliveries and continuity in supply
 After-sales service in products like machine tools, consumer durables
 Product differentiation and brand image
 Frequency of purchase
 Presumed relationship between quality and price
 Specialty value goods and gift items
 Credit offered
 Preference or prejudice for products originating from a particular

 Aggressive marketing and sales promotion

 Prompt acceptance and settlement of claims
 Unique value goods and gift items

The exports from Bangladesh are subject to export trade control exercised by the Ministry of
Commerce through the Chief Controller of Export and Imports (CCI & E). No exporter is
allowed to export any commodity permissible for export from Bangladesh unless he is
registered with CCI & E and holds a valid Export Registration Certificate (ERC). The Export
Registration Certificate (ERC) is required to be renewed every year. The Export Registration
Certificate (ERC) is to be incorporated on EXP forms and other documents connected with
exports.

3.10 Formalities and Procedure

1. Export Receipt L / C: Obtain export Letter of Credit (L / C) from export issued by the
importer.

2. Submission of export documents: After supplying the product to the exporter, all the
documents required by the collecting bank will be submitted.

3. Checking the export documents: After checking the document near the banker verify the
documents according to the lock L / C terms.

31
4. Discussion of export documents: If the bank accepts the document and gives the exporters
a standard draft and forwards documents to the provided bank is called a compromise bank. If
the bank does not buy L / C, the bank generally acts as a collecting bank.

5. Revenue earning: This time the issuing bank payment is realized.

6. Report to Bangladesh Bank: According to the instructions of the Bangladesh Bank, the
bank should report the latest payment to the respective division of Bangladesh Bank.

7. Progress Project Certificate (PRC) Issue: To get cash assistance from the bank, the
supplier/exporter will have to issue the export certificate of export L / C.

3.11 Papers Required for New Export

 Export Realization Certificate (ERC).

 Trade License.
 Membership Certificate Form Chamber/ EPB.
 Account To Be Maintained with Bank.
 Export L/C Contract.
 EXP Form to Be Certified.
 TIN Certificate.
 VAT Certificate.
 Memorandum and Article of Association of the Company.
 Confident Credit Report to Be Obtained of the Importer.
 Registered Partnership Deed in Case of Partnership Concern.

3.12 Preparation of Export Documents

 Bill of exchange or Draft.

 Bill of Lading.
 Invoice.
 Insurance Policy/ Certificate.
 Certificate of Origin.
 Inspection Certificate.

32
 Consular Invoice.
 Packing List.
 Quality Control Certificate.
 GSP Certificate.
 Photocopy-sanitary Certificate.

3.13

 Export Cash Credit (ECC).

 Packing Credit (PC)
 Back-to-Back Credit Facility (BTB).
 Foreign Documentary Bills Purchased (FDBP).

3.14 Processing and Opening of Back-to-Back Letter of Credit

In the context of international trade, a Back-to-Back Letter of Credit (L/C) is a financial

instrument that allows an exporter to leverage an import L/C to finance the purchase of goods
needed for export. This arrangement is particularly beneficial for exporters who need to
secure goods without immediate cash outlay. To initiate this process, the exporter must
provide the bank with several key documents that ensure their financial stability, legal
compliance, and operational legitimacy. Here’s a detailed look at the required documents and
their significance:

1. Full Particulars of Bank Account:

 This includes the bank account details of the exporter. It provides the bank
with the necessary information to track financial transactions and ensure that
the exporter has a legitimate banking history. It helps in verifying the financial
credibility of the exporter.
2. Balance Sheet:
 A balance sheet is a financial statement that provides a snapshot of the
exporter’s financial condition, including assets, liabilities, and shareholders'
equity. It helps the bank assess the financial health and stability of the
exporter, determining their ability to fulfill financial obligations under the
Back-to-Back L/C arrangement.

33
3. Statement of Assets & Liability:
 This statement lists all the assets and liabilities of the exporter, offering a clear
picture of their financial standing. The bank uses this information to evaluate
the risk associated with extending credit to the exporter.
4. Trade License:
 The trade license is an official document that authorizes the exporter to engage
in trade activities. It ensures that the business operates legally within its
jurisdiction. The bank requires this to confirm the legitimacy of the business
operations.
5. Valid Bonded Warehouse License:
 A bonded warehouse license allows the exporter to store goods without paying
import duties until the goods are sold or otherwise removed from the
warehouse. This is crucial for businesses involved in importing goods for re-
export. The bank needs this license to verify that the exporter complies with
customs regulations.
6. Membership Certificate:
 This certificate typically indicates that the exporter is a member of a relevant
trade association or chamber of commerce. It serves as an additional validation
of the exporter’s credibility and professional standing within the industry.
7. Income Tax Declaration:
 The income tax declaration confirms that the exporter is compliant with tax
regulations. It provides the bank with assurance that the business is in good
standing with tax authorities, which is a key indicator of financial
responsibility.
8. Memorandum of Articles:
 This document outlines the fundamental principles governing the exporter's
business operations, including the company’s objectives, scope of activities,
and internal regulations. It helps the bank understand the legal framework and
operational scope of the business.

9. Partnership Deed:

34
 If the exporter operates as a partnership, this deed outlines the terms of the
partnership, including the roles and responsibilities of each partner. The bank
requires this to assess the structure and governance of the business.
10. Resolution:
 A resolution is a formal decision made by the company’s board of directors or
partners, authorizing the opening of the Back-to-Back L/C. It indicates that the
decision to enter into this financial arrangement has been duly approved by the
governing body of the business.

11. Photographs of All Directors:

 The bank requires photographs of all the company’s directors for identification
and verification purposes. This helps in establishing the identities of the
individuals who control and oversee the business operations.

On receipt of the above documents and papers, the Back-to-Back Letter of Credit opening
section will prepare a credit report. The branch must obtain sanction from Head Office for
Opening Back-to-Back L/C.

Back-to-back Letters of Credit were opened without Head Office concern because of valued
clients of the Bank. In that case, an officer of the Foreign Exchange Department will send a
Post to the Head.

3.15 Export Cash Credit (ECC)

Export Cash Credit (ECC) is extended to the companies that are involved in exporting goods
and services. Export Cash Credit (ECC) is provided to procure raw materials, Packing List,
Wages, Salaries, Utility, etc. The quantum of Export Cash Credit (ECC) is usually 75% of the
export L/C.

3.16 Packing Credit (PC)

Packing Credit (PC) is granted to export-oriented industries usually the garments industry to
finance their expenses for Utility, Salaries, Wages, etc. The quantum of packing credit is
usually up to 90 % based on the Free on Board (FOB) of the value of the export L/C.

35
3.17 Back-to-Back Credit Facility

Back-to-Back Credit Facility (BTB) is issued to import raw materials for export-oriented
industries usually garments. The primary security of Back-to-Back Credit (BTB) is export
L/C usually the quantum of Back-to-Back Credit (BTB) L/C is of the 75-80% value of
Master L/C.

3.18 Foreign Remittance

This bank is an authorized dealer to deal in foreign exchange business. As an authorized

dealer, a bank must provide some services to the clients regarding foreign exchange and this
department provides these services.

The basic function of this department is outward and inward remittance of foreign exchange
from one country to another country. In the process of providing this remittance service, it
sells and buys foreign currency. The conversion of one currency into another takes place at
an agreed rate of exchange, which the banker quotes, one for buying and another for selling.
In such transactions the foreign currencies are like other commodities offered for sale and
purchase, the cost (convention value) being paid by the buyer in home currency, the legal
tender.

3.19 Remittance Procedure of Foreign Currency

There are two types of remittance:

1. Inward remittance

2. Outward remittance.

Inward Foreign Remittance:

Inward remittance covers the purchase of foreign currency in the form of foreign T.T., D.D.,
and bills, T.C., etc. sent from abroad favoring a beneficiary in Bangladesh. The purchase of
foreign exchange is to be reported to the Exchange Control Department of Bangladesh Bank
on Form-C.

36
Outward Foreign Remittance:

Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts,
Travelers Check, etc. as well as selling foreign exchange under L/C and against import bills.

3.20 Formalities for opening Foreign Currency (FC) Account:

The AD may without prior approval of the Bangladesh Bank open a Foreign Currency (FC)
account in the name of:

1. Bangladesh nationals residing abroad.

2. Foreign nationals residing abroad/ in Bangladesh and also foreign firms
3. Registered abroad and operating in Bangladesh and abstract foreign missions and their
expatriate employees.
4. Resident of Bangladesh nationals working with the foreign/international organization
operating in Bangladesh provided their salary in paid in foreign currency.

Foreign exchange earned through business doves or services rendered in Bangladesh cannot
be put into these accounts.
No payment in foreign currency (FC) may be made to any resident in Bangladesh out of the
foreign currency (FC) account.
All citizens of Bangladesh and other persons residing to Bangladesh who became the owner
of any foreign currency (FC).

Papers required:

 Application duly billed in and signed.

 Photograph (two copies).

 Passport photocopy.

 Work permit from board investment. (In the case of foreign nationals).

37
Packing Credit (PC) is granted to export-oriented industries usually the garments industry to
finance their expenses for Utility, Salaries, Wages, etc. The quantum of packing credit is
usually 10 % to 155% of the value of the export L/C.

3.21 Analysis of 5-Year Foreign Exchange Data of AIB PLC

In this section, I mainly compare the performance of Al-Arafah Islami Bank PLC’s foreign
exchange activities in different for the last five years.

5 years of export data of Al-Arafah Islami Bank PLC

Year BDT (in million)

2022 181,070.20
2021 135,786.90
2020 104,939.40
2019 108,967.10
2018 144,481.90
Table 1: Export data of Al-Arafah Islami Bank PLC

38
Export
190,000.00

170,000.00

150,000.00

130,000.00

110,000.00

90,000.00

70,000.00

50,000.00

30,000.00

10,000.00
2018 2019 2020 2021 2022
Export 144481.9 108967.1 104939.4 135786.9 181070.2

Figure 1: Export data of Al-Arafah Islami Bank PLC

Interpretation

From the table and graphs, I can see the overall export data of Al-Arafah Islami Bank PLC in
the last five years (2028-2022). In,2018 the export business of AIB PLC was 181,070 million.
But in 2019 the export business of the bank declined to 108,967.10 million. During 2020 the
export business also decreased to 104,939.40 million. The main reason for such a decline was
due to the coronavirus pandemic. On the other hand, in 2021 the export business started to
boom. In this year the export business of Al-Arafah Islami Bank was 135,786.90 million. In
the year 2022, the export business drastically increased. The export business went up to
181,070.20 million which was much better than in recent years.
5 Year import data of Al-Arafah Islami Bank PLC
Year BDT (in million)
2022 300,430.90
2021 261,566.10
2020 169,378.90
2019 171,611.70
2018 168,573.80
Table 2: Import data of Al-Arafah Islami Bank PLC

39
Import

325,000.00

275,000.00

225,000.00
Amount in million

175,000.00

125,000.00

75,000.00

25,000.00

2018 2019 2020 2021 2022

Import 168573.8 171611.7 169378.9 261566.1 300430.9

Figure 2: Import data of Al-Arafah Islami Bank PLC

Interpretation:

From the table and graphs, I can see the overall import data of Al-Araf ah Islami Bank PLC
in the last five years (2028-2022). In 2018 we can see the total import business of AIB PLC
was 168,573.80 million. The following year the import business of AIB PLC slightly
increased. The amount was 171,611.70 million in the year 2019. In the year 2020, the import
business slightly decreased to 2019. The amount was 169,378.90 million. The main reason
for that was the coronavirus pandemic. Due to the pandemic situation, the import business of
every Bangladeshi bank was hampered and so did AIB PLC. In the year 2021, the import
business of AIB PLC was drastically increased. The amount of the import business was
261,566.10 million. In 2022 the import business of AIB PLC increased. The amount was
300,430.90 million.

5 Year Foreign Remittance Data of Al-Arafah Islami Bank PLC

Year BDT (in million)
2022 44,557.11
2021 43,660.88
2020 39,258.09
2019 37,731.40

40
2018 36,917.20
Table3: Foreign Remittance data of Al-Arafah Islami Bank PLC

Remittance
47,500.00

42,500.00

37,500.00

32,500.00
amount in million

27,500.00

22,500.00

17,500.00

12,500.00

7,500.00

2,500.00
2018 2019 2020 2021 2022
Remittance 36917.2 37731.4 39258.09 43660.88 44557.11

Figure 3: Foreign Remittance data of Al-Arafah Islami Bank PLC

Interpretation:
From the table and graphs, I can see the overall remittance data of Al-Arafah Islami Bank
PLC in the last five years (2018-2022). In the year 2018, the remittance business was
36,917.20 million. In the year of 2019, the export business was 37,731.40 million. In 2020
the amount slightly increased to 39,258.09 million. In 2021 the amount increased to
43,660.88 million. After the next year, the amount was 44,557.11 million.

Comparison of Export vs Import Activities of Al-Arafah Islami Bank PLC

Year Export Import

2022 181,070.20 300,430.90
2021 135,786.90 261,566.10
2020 104,939.40 169,378.90
2019 108,967.10 171,611.70
2018 144,481.90 168,573.80
Table 4: Export Vs Import Business (2018-2022)

41
Export Vs Import
325,000.00

275,000.00

225,000.00
Amount in Million

175,000.00

125,000.00

75,000.00

25,000.00
2018 2019 2020 2021 2022
Export 144481.9 108967.1 104939.4 135786.9 181070.2
Import 168573.8 171611.7 169378.9 261566.1 300430.9

Figure 4: Export Vs Import Business (2018-2022)

42
CHAPTER 4

SWOT Analysis of Al-Arafah Islami Bank PLC

Strength:
Human
Factor

Opportunity:
Getting new
SWO Threats:
Robbery

T
clients

weakness:
High cost of
Fund

Strengths:

 Wide Image: The main strength of Al-Arafah Islami Bank PLC is it has a wide image
to the people of Bangladesh. The main reason for this the bank facilitates the Islami
Sariah banking system all over Bangladesh.
 Enthusiastic Employee: The employees of Al-Arafah Islami Bank PLCs are very
enthusiastic. They are well-trained in the banking system of the banks. The employees
are well-behaved and try to provide proper service to their clients. The employees are
rewarded according to their performance.
 Excellent Management: The management body of Al-Arafah Islami Bank PLC is
excellent. They are visionary, mission and goal-oriented. The management body
provides different types of schemes to its clients according to Islami Sariah. The
management body also facilitates rewards to its employees who have provided better
service to its clients.
 Satisfactory Environment: The environment of Al-Arafah Islami Bank PLC’s is
excellent. The relationship between employees and higher authority is amazing. The
bank provides all kinds of facilities for its employees which enables the bank to
provide proper services to its clients.

43
Weaknesses:

 It has high-cost funds: The cost of funds is the interest rate that bank are paying on
the funds they use in the business. As of the latest available data, the cost of funds of
Al-Arafah Islami Bank PLC is approximately 6.44%. So the bank has to provide high
rates for acquiring its required funds.
 The Advertising and Promotional activities are Weak: AL-Arafa Islami Bank PLC
engages in various advertising and promotional activities to enhance its visibility and
attract customers. But the advertising and promotional activities are not up to the
mark. Other banks do their advertising and promotional activities in different ways
such as by providing advertising through electronic and print media. Some bank do
their promotional activities through social media to attract new customers. It's very
rare to see the advertising and promotional activities of Al-Arafah Islami Bank PLC,
which is unable to attract new customers.
 Lack of Technological Advancement: Al-Arafah Islami Bank PLC has been facing
network issues primarily due to the need for significant infrastructure upgrades. The
bank is actively working on several key projects to enhance its network and data
management. The bank has been criticized for its slow adoption of modern banking
technologies which can hinder its competitiveness in the digital banking space.
 Branch Distribution: Although the bank has a broad network of branches, its
distribution might not be optimal for reaching all customer segments effectively,
particularly in rural areas. As a result, the bank lost a significant number of customers
every year.

Opportunity:

 Competitiveness among Rival Banks: The competitiveness among Islami banks

encourages Al-Arafah Islami Bank to enhance its service to its clients. Furthermore,
this competitiveness helps the bank to overcome its lackings in various sectors.
Competitiveness gives the motivation to upgrade the network system and enables the
bank to launch different kinds of promotional and advertising activities to attract new
customers.

44
 Growing demand for Islamic banking: There is a rising demand for Sariah-
compliant banking products in Bangladesh, which provides a significant growth
opportunity for Al-Arafah Islami Bank PLC to expand its customer base.
 Digital Transformation: Al-Arafah Islami Bank is now gradually adopting digital
banking services. Investing in digital banking solutions can improve customer service,
and operational efficiency and attract a new customer base.
 Maintain a Good Relationship with a Client: Al-Arafah Islami Bank maintains
good relationships with its clients. The employee of the bank provides the best service
to its customers. The higher management provides different types of schemes in the
market that help the bank to attract new customers.

Threats:

 Economic Instability: The banking system of a country depends on the economic

stability of the country. However, the current economic situation of Bangladesh is not
well. These economic fluctuations and instability can impact the bank’s operation and
profitability.
 Stiff Competition: Currently the banking sector of Bangladesh is highly competitive,
with numerous Islamic and conventional banks competing for market share, which
can affect AL-Arafah Islami Bank PLC’s market position.
 Lake of enough technology for the branch.
 Regulatory Changes: Bangladesh Bank regulates all banks in the country. Changes
in banking regulations and compliance requirements can pose challenges and increase
operational costs.
 Technological Disruption: Rapid technological advancement in the banking sector
requires continuous investment and innovation, and failure to keep pace can result in a
competitive disadvantage.

45
Chapter-5
Findings and Recommendations

5.1 Findings of the Study:

During my internship program, I’ve observed many good sides and some drawbacks of the
bank. In this section, I discussed my findings while I worked as an intern at Al-Arafah Islami
Bank PLC.

My findings are:

 Most of the clients engage with import business. They create import L/C as our
country depends on imports. So, the import business of Al-Arafah Islami Bank PLC is
growing year by year.

 As Our country is not an export-oriented country the export business of Al-Arafah

Islami Bank PLC is not as large as the import.

 The remittance business of Al-Arafah Islami Bank PLC is not very well. The growth
of the remittance business does not increase as expected.

 The majority clients of Al-Arafah Islami Bank PLCs stated that they are happy to the
service that the bank provided to them.

 The bank operates strictly under Islamic Sariah principles, which promote ethical
financial practices. This compliance helps attract customers who prefer banking
systems that avoid interest-based transactions and emphasize profit sharing.

 Al-Arafah Islami Bank PLC provides efficient foreign exchange service through its
specialized branches, which are authorized to deal with foreign exchange activities.

 Some of the clients stated that the L/C opening process of Al-Arafah Islami Bank
PLC takes much more time than other banks. The main reason for this dollar crisis
that has been happening recent years.

 The foreign exchange department’s workload is intense, which often leaves officer
too busy to provide adequate cooperation with their clients.

46
 Al-Arafah Islami Bank PLC’s website and digital presence are not user-friendly as
required for efficient foreign exchange transactions. This can affect the bank’s ability
to serve clients effectively and handle large volumes of foreign remittances smoothly.

 The bank’s policy of withholding certain data and information creates obstacles.
Officials sometimes hesitate to share information, which can lead to inefficiencies and
a lack of transparency in operation.

 The statement of the clients is mixed. Maximum time they are happy with the service
of the bank but in some circumstances, they are not pleasant with the service the bank
provided to them.

5.2 Recommendations of the Study

During my internship program, I identified some steps that a bank can take. Although these
measures may not be efficient to improve the banking system of the bank.

The following are important recommendations of the study:

 As the Al-Arafah Islami Bank PLC operates its business according to Islami Sariah it
must invest the money in various industries which help it to generate more profit and
make a good place in the market.
 The bank needs to increase its pay structure which helps the employees and staff to
get motivated during the work period.
 Al-Arafah Islami Bank PLC needs to hire more employees which enables the bank to
provide service to more customers.
 Al-Arafah Islami Bank PLC needs to change its current advertising and promotional
activities and launch different kinds of promotional campaigns through its website,
social media, and print& electronic media.
 The employee needs to behave well with their customer and treat every customer in
same manner.
 The branch should take the initiative to schedule training, sessions, seminars, and
workshops periodically once every three months. It improves their team member's
skills, and enables them to meet the demands of the cutthroat banking industry.

47
 The foreign exchange department needs to work smartly and pay attention to their
clients.
 Al-Arafah Islami Bank PLC needs to increase its range of Internet banking service.
 Al-Arafah Islami Bank PLC needs to recruit experienced foreign exchange traders
and analysts to improve decision-making and strategy development.
 Al-Arafah Islami Bank needs to form strategic alliances with international banks and
financial institutions to expand foreign exchange operations and access the global
market.

48
CHAPTER 6
Conclusions
The internship at Al-Arafah Islami Bank PLC was an immensely enriching experience that
provided me with a comprehensive understanding of the corporate environment and the
intricacies of the banking sector. Over the three-month period, I had the opportunity to work
in the foreign exchange department, where I encountered the complexities of handling
sensitive data and observed the meticulous nature of banking operations.
My primary responsibility involved verifying the accuracy of information for opening Letter
of Credit (L/C) accounts, ensuring that details such as the Taxpayers Identification Number
(TIN), VAT certificate numbers, and other crucial certificates were correctly stated. This task
highlighted the importance of precision in banking documentation. Additionally, I was
involved in the workflow of export and import procedures, which gave me practical insights
into the bank’s operations. Interacting with clients and noting their feedback about foreign
exchange activities further enhanced my understanding of customer perspectives and service
expectations.
Despite the high workload, the employees in the foreign exchange department were
exceptionally supportive, helping me navigate through various tasks and making sure I
understood the procedures involved in export and import paperwork. Their guidance was
instrumental in my learning process, allowing me to gain a well-rounded experience in the
banking sector. Working in different sections, including export, import, and remittance,
broadened my knowledge and provided a holistic view of the department’s functions.
The internship also allowed me to observe the corporate culture at Al-Arafah Islami Bank
PLC. The employees' dedication to their work and their willingness to assist interns were
commendable. This supportive environment contributed significantly to my professional
growth and helped me adapt to the corporate culture swiftly. The experience I gained from
this internship is invaluable and will undoubtedly aid me in my future career in the banking
industry.
Although I did not receive any financial benefits from this internship, the practical knowledge
and hands-on experience I acquired are far more valuable. I am deeply grateful to my
supervisor, the bank authorities, and all the employees who provided their guidance and

49
mentorship throughout my internship. Their support was crucial in making my internship a
success.
In conclusion, Al-Arafah Islami Bank PLC has significant potential for growth and
improvement. The bank's commitment to ethical banking practices and customer service is
commendable. However, to enhance its competitive position, the bank should address certain
areas, such as technological adoption and promotional activities. By leveraging its strengths
and addressing these areas, Al-Arafah Islami Bank PLC can continue to provide excellent
service to its customers and achieve sustained growth. The insights and recommendations
from this study aim to contribute to the bank’s ongoing development and success. The
experience I gained during my internship has equipped me with valuable knowledge and
skills, preparing me for a successful career in the banking sector.

50
References
 Annual report of AIB PLC 2018-2022

 “A Journal of Islamic Banking” published by Al-Arafah Islami Bank

 Manuals & circulars of Al-Arafah Islami Bank

 Several Booklets from Al-Arafah Islami Bank PLC
 http//www.al-arafahbank.com
 Bangladesh Bank