INTERNSHIP REPORT ON

GENERAL BANKING ACTIVITIES

AND FINANCIAL PERFORMANCE OF
AL-ARAFAH ISLAMI BANK LTD

SUBMITTED BY

Rusra Sabrin Chaity

ID : 1720730

PREPARED FOR
Zaima Ahmed
Finance department
School of Business

DATE :16th August, 2021

Letter of Transmittal
Zaima Ahmed

16th August, 2021

School of Business
Independent University, Bangladesh

Submission of Internship report

Dear Ma'am

With due respect, I am hereby submitting my internship report, which is a part of the BBA program
curriculum. It was great achievement to work under your active supervision. This report is based on, “Al-
Arafah Islami Bank Limited”. I have got the opportunity to work at this bank in General banking division
for three months, under the supervision of Mr. Engr. Fazlay Morshed Mithun, Officer of Al Arafah Islami
Bank Limited, Sonargaon Janapath Road Branch. This internship gave me both academic and practical
exposures. First of all I learned about the organizational culture of one of the leading Islami bank of the
country. Secondly, this internship gave me the opportunity to develop a network with the corporate
environment.

I shall be highly obliged if you are kind enough to receive this report and provide your valuable
judgment. It would be my immense pleasure if you find this report useful and informative to have an
apparent perspective on the issue.

Sincerely yours,

Rusra Sabrin Chaity

ID:1720730
Acknowledgement

First of all, I would like to convey my heartiest gratitude to my Supervisor Zaima Ahmed ,
Lecturer, Independent University, Bangladesh for giving me the opportunity to conduct my
internship report on the "Al Arafah Islami Bank" and for her continuous support in preparing this
report. It would have been difficult for me to prepare my internship report without her support.
Secondly, I am deeply grateful to Engr. Fazlay Morshed Mithun, Officer of Al Arafah Islami
Bank Limited, Sonargaon Janapath Road Branch, for supervising me in my entire internship
period and providing me with the necessary information required to prepare my report.
Finally, I would also like to thank all the employees of Al Arafah Islami Bank Limited,
Sonargaon Janapath Road Branch for helping me in the workplace. My gratitude goes towards
all my colleagues. Without their co-operation and constant encouragement this internship would
not have been this much enjoyable.
Thank you.
TABLE OF CONTENT

Contents
Executive Summery.....................................................................................................................................5
Company Profile..........................................................................................................................................6
Details of the services...................................................................................................................................7
Operations Details........................................................................................................................................9
Internship experience / observation details.............................................................................................12
Industrial Background/Banking Industry...............................................................................................14
Ratio Analysis.............................................................................................................................................17
Compititor Analysis...................................................................................................................................22
Conclusion..................................................................................................................................................28
Reference....................................................................................................................................................29
Executive Summery

This report is about my internship program with Al-Arafah Islami Bank Limited. I have completed my
three months internship in Al-Arafah Islami Bank, Sonargaon Janapath Road Branch and developed my
report based on my observation. In this report I have given details about the bank right from its
incorporation to the current position. During my internship program, I mainly worked in General Banking
department. All the departments have been discussed in detail and all the policies and procedures have
been described thoroughly. The main objective of this report is to have focused on financial performance
analysis of AlArafah Islami Bank Limited. The objective of the study is to evaluate the financial
performance of Al-Arafah Islami Bank Limited through ratio analysis. Mainly secondary data were used
to gather information which is necessary to prepare this study. The performance of Al-Arafah Islami
Bank during last five years has provided that with strong desire and will power be achieving whatever
target it may have. Last year the bank has increased the total operating profit. Liquidity position of the
bank is satisfactory. The Bank focused in all key areas like capital adequacy, quality asset growth and
strong liquidity thereby ensuring sound revenue. Al-Arafah Islami Bank should be more efficient using its
assets to generate it operating income. It should need to improve its asset quality position by utilizing
assets in right way.
At the end of this report I have pointed out some of the recommendations which were given to evaluate
the position of the bank and how it can perform better in the competition.
Chapter 1

Company Profile

According to the website of Al-Arafah Islami Bank, Al Arafah Islami Bank Ltd was established
(registered) as a public limited company on 18 June 1995. The goal of this bank is to achieve success by
following Islamic ideology. AIBL believes Islamic ideology encourages people to succeed in life here &
hereafter. To achieve this success, a person must follow the way dictated by the Holy Quran and the path
shown by Rasul (SM).
According to the website of AIBL, the inaugural ceremony of the bank took place on 27 September 1995.
As on the end of 2013, the authorized capital of the Bank is Tk 15000.00 million and the paid-up capital
is Tk 8343.24 million. Renowned Islamic scholars and pious businessmen of the country are the sponsors
of this bank. 100% of paid up capital is being owned by indigenous shareholders. As on the end of 2013,
the equity of the bank stood at Tk. 14478.06 million, the manpower was over 2000 and the number of
shareholders was almost 60,000. The bank has achieved a continuous profit and declared a good dividend
over the years. High quality customer service through the integration of modern technology and new
services are the tools of the bank to achieve success.
The bank has a diverse array of carefully tailored services to satisfy customer needs. The bank is
committed to contribute significantly to the national economy. It has made a positive contribution towards
the socio-economic development of the country with over 130 branches of which 23 is AD throughout the
country. As on the end of 2013, the authorized capital of the Bank is Tk.15000 million and the paid-up
capital is over Tk.8000 million.
The bank conducts its business on the principles of Mudaraba, Bai-Muazzal, and hire purchase
transactions approved by Bangladesh Bank. Naturally, its modes and operations are substantially different
from those of another conventional commercial bank. There is a shariah council in the bank who
maintains constant vigilance to ensure that the activities of the bank are being conducted on the precepts
of Islam. The shariah council consists of prominent Islamic scholars and reputed bankers, renowned
lawyers and eminent economist. All activities of the bank are conducted according to Islamic shariah.
The banks investment policy follows different modes approved by Islamic Shariah based on Quran &
Sunnah.
Details of the services

Vision
According to the website of Al-Arafah Bank, the company’s vision is “To be a pioneer in Islami Banking
in Bangladesh and contribute significantly to the growth of the national economy.”
Mission
According to the website of Al-Arafah Bank, the company’s mission are the followings,
 Achieve the satisfaction of Almighty Allah both here and hereafter.
 Proliferation of Shariah Based Banking Practices.
 Quality financial services adopting the latest technology.
 Fast and efficient customer service.
 Maintain high standard of business ethics.
 Balance growth.
 Steady and competitive return on shareholder’s equity.
 Innovative banking at a competitive price.
 Attract and retain quality human resources.
 Extending competitive compensation packages to the employees.
 Firm commitment to the growth of national economy.
 Involving more in Micro and SME financing.

Objectives
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:
 To promote, foster and develop the application of Islamic principles, law and tradition to the
transaction of financial, banking and related business affairs.
 To establish participatory banking instead of banking on debtor creditor relationship.
 To offer contemporary financial services in conformity with Islamic Shariah.
 To contribute towards economic development and prosperity within the principles of Islamic
justice.
 To introduce a well fare oriented banking system and also to establish equity.
 To facilitate efficient allocation of resources.
 To help achieving stability in the economy.

Corporate Department/Division
 General Banking Division
 Investment Division
 Foreign Exchange Division
 Audit & Inspection Division
 Human Resources Division
 Financial Administration Division
 Establishment and Common Services Division
 Marketing and Public Relation Division
 Computer (IT) Division
 International Division
Card Division
 Debit Cards
 Credit Cards

Product of AIBL:
Because of Islam based bank these banks always obey the rules and regulations of Islam. They
are providing their customer many options in GENERAL BANKING by that customers can get
the safest and smartest option for their money. They are providing-

Al Wadea Current Deposit. (CD)

Mudaraba Saving Deposit (MSD)

Mudaraba Term Deposits. (MTD)

Monthly Installment Based Team Deposit. (ITD)

Monthly Installment Based Hajj Deposit. (MHD)

Mudaraba Pension Special Saving Scheme.

Mudaraba Millionaire Deposit Scheme.

Mudaraba Double Deposit Scheme.

Mudaraba Lacpoti Deposit Scheme.

Operations Details

Board of Directors

Chairman

Managing
Director

Deputy Managing
Director

Principal

Ex. Vice Principal

Senior Vice
President

Vice President

Assistant Vice
President

First Assistant
Vice President

Vice Principal

Senior Principal
Officer

Principal Officer

Senior Executive
Officer

Executive Officer

Officer

Assistant Officer

Trainee Assistant
Officer
Organization Structure of Al Arafah Islami Bank Ltd, Head Office
Branch manaager

Executive Officer

First Assistance Senior Executive

Principal Officer Officer
Vice President Officer

Assistant Officer

Or
ganizational Structure of Al Arafah Islami Bank, Sonargaon Janapath Branch.
CSR Activities

From the feeling of doing something good for the general people of the society, CSR is an
important concerned issue now. CSR is an integral part of a corporate culture and ethics. Every institution
has responded positively in every sphere of social activities. From this responsibility AIBL takes
initiatives of doing welfare to the society priority basis. Al- Arafah Islami Bank is very active to social
activities. AIBL is delivering innovative solution to their valued customer and in the same way they are
also doing social activities in different areas through their CSR activities.
The bank has been giving various facilities to their customer to enhance social service as part of
corporate social responsibility. The Bank has facilitated farmers & freedom fighters to open savings
accounts with special facilities of giving profit on daily balance without any account maintenance fee.
The bank also offered same facility to the school students. During the year 2018, they accomplished
different humanitarian and social activities which include allocation of fund Tk. 157.40 million. They
donated to the honorable Prime Minister’s fund for flood victims and blankets to help cold effected
people. The bank also donated an Ambulance to Kurmitola High School. Besides, AIBL has taken a
program to develop manpower and make them employed as well as assisting them for employment in
abroad.
Al-Arafah Islami Bank Foundation
Al-Arafah Foundation the Bank has a Foundation launching philanthropic activities.
1) Al-Arafah Islamic International School & College and
2) Al-Arafah Islami Bank Library
These are major two wings for launching philanthropic activities.
Al-Arafah Islamic International School & College
Al-Arafah Islamic International School & College Al-Arafah Islamic International School &
College has been established by the Al-Arafah Bank Foundation with a view to building next generation
according to the ideals of peace and equality of Islam and to establishing banking and other aspects of life
in the way of Islam. The prime aim of this Islamic International School & College is to contribute towards
building human resource and in the broader sense to ensure human welfare. With the view Al-Arafah
Islami Bank Foundation has established Al- Arafah Islamic International School & College at Dhanmondi
in 1998. Such institution up to O level of its kind is for the first time in Bangladesh.
Al-Arafah Islami Bank Library
Al-Arafah Islami Bank Library is the carrier & reservoir of knowledge. Al-Arafah Islami Bank
has shown that other than generating profit, it can also contribute significantly in the field of providing
good source of knowledge by establishing a public library at 32, Topkhana Road, Chittagong Bhaban (1st
floor), Dhaka, thus strengthening social development. It is situated in a sound, healthy surroundings. It
harbors 23,000 books of reference for the researchers, students, professionals, bankers, physicians,
engineers, politicians, writers or journalists, even for the kids. It is open to all from the year 2000 and well
located & accessible to everybody. It procured some exceptional collection of books on religion,
economics, banking, computer science, business administration, sociology, English & Arabic language
and juvenile literature in Bangla, English, Urdu & Arabic, which are very rare.
Chapter 2

Internship experience / observation details

2.1 Job responsibilities

At Al-Arafah Islami Bank Ltd, I worked in remittance division, which is under General banking
department. Throughout my internship period I have gained a lot of experience and knowledge about
banking activities and working environment.
 Collect account opening documents: In the account opening section, I had to collect all the
necessary documents like two copy passport size photo of both account holder and nominee and
photocopy of National ID card/Passport/Birth Certificate whenever a customer opens an account.
After that I had to fill up the entire application form for the applicant.

 Check and write Account closed: I used to do check old file and write “accounts closed” on the
front page in which accounts confirmed as a closed accounts.

 Checking accounts number: I used to do write down the accounts number of maturity accounts
from the old file and copy that to computer with account number and account holder name.

 Match files and cheques: I have done finding file and cheque from the almirah according to the
account number and cheque number.

 Make entry of thanks letter: I used to write entry of thanks letter in the register book serially with
account number and account holder name and give a serial number to the thanks letter. I have
done the same process with the other documents.

 Maintain register books: I used to maintain different types of register book. I also used to do
filling different documents to the file.

 Numbering cheque books: I used to do numbering the cheque book on the front page and then
keep those at almirah serially. I also have done the entry of cheque number and account number
to the computer in a excel sheet.

 Help the customers: I used to help customers to write cheque for them. I also used to help
customers to fill up the various form like MoneyGram form, XpressMoney form, Western Union
form and other form.

 Verify and approve: I used to go second manager, authorized officer for the signature to verify
and approve in the different documents, cheques, application form and different slips.

2.2 Functions of the department

As an intern I worked in general banking sector which is considered as customer service. So, my
point of view in this report is general banking activities of Al-Arafah Islami Bank Ltd.
General Banking
The division of general banking plays the most significant role in all commercial banks. It is
mainly a liability side. General Banking division of AIBL can be functioned in the following ways: One
who want to open an account, he has to fill up an account opening form. This form is a legal contract
between the bank and prospective customers. The rules and regulations for opening of an account vary
from customer to customer, if he wants to open different types of accounts. First of all, various types of
customers such as individual, joint, proprietorship, partnership, private limited company, public limited
company, associations, clubs, societies, trusts etc.
Account Opening
The relationship between banker and customer begins with the opening of an account by the
customer.
Opening of an account binds the banker and customer into contractual relationship crucial for a
Bank. Al Arafah Islami Bank opens the following accounts:
• Saving Accounts
• Current Accounts
• Fixed Deposit Receipt (FDR)
• Shadhin Account
Cash Section
Cash department, the most vital and sensitive organ of the branch, Deals with all kinds of cash
transactions. This department starts the day with cash in vault. Each day some cash that is opening cash
balance are transferred to the cash officers from the cash vault. Net figure of this cash receipts and
payments are addedto the opening cash balance. The figure is called closing balance. This closing balance
is then added to the vault. And this is the final cash balance figure for the bank, at the end of any day.
Customer Service Department
This department exists to answer to customer’s request, and problems. They help customers to open
account, prepare pay order, take orders for cheque books, debit card, receive documents, maintain locker
access and solve certain problems the customer have.
Clearing section
In clearing section employee Receive cheques of other banks from customers, then the cheques are
verified, scanned, and recorded, and the transaction takes place when the other bank transfer fund to the
clearing bank, then the bank can transfer fund to the customer’s account.
Remittance Section
Remittance is significant part of the general banking. The bank receives and transfers various types of
bills through the remittance within the country. Mercantile bank charges commission on the basis of bills
amount. AIBL remittances are safe, swift, inexpensive and simple compare to other banks.
Chapter 3

3.1 INDUSTRIAL BACKGROUND

In the banking segment, Bank is a financial institution which keeps or gives financial support for a limited
time period for exchanging something. It was 1668 when the first modern banking was introduced in
Stockholm as Savings Pis Bank at Europe.
There are 4 Nationalized Commercial Banks in Bangladesh. Sonali Bank, Rupali Bank, Agrani Bank and
Jonota Bank. Sonali Bank is the biggest public leads privet bank. Also there are 28 Local Privet Banks
and 12 foreign banks, 5 Financial Developments Institute; there are 49 banks in total. Beside those bank
there are also there are some banks like Somobay, Grammen Bank, AnserVDP Bank, Karmanestha bank.
Almost every bank has branches including rural areas. Bangladesh Bank controls all those banks activity.
Immediately after the independence of the country in 1971, the then government nationalized the
commercial banks and organized them into six distinct banks by the Bangladesh Bank nationalization
order 1972.

As saving and investment in the country is very low, to channel saving and investment through the formal
sector and to expand banking services in the remote areas of the country, the nationalization of the
banking sector was considered as one of the major objectives at that time. The central bank, known as the
Bangladesh Bank (BB) is the central body to oversee the banking sector of the country and at that time,
the BB directly controlled the interest rates by fiat.
During this time, bank branches have expanded rapidly, particularly in the rural areas. On the positive
side, the expansion of bank branches reduces transaction costs associated with the mobilization and
transfer of funds and thereby increasing savings and investments, and deposit creation. But due to
corruption, mismanagement, and government interference, many branches of the commercial banks
cannot work properly and some branches incurred heavy losses, and some of these branches were
subsequently closed down. To overcome these problems, the financial sector reform program has started
in earnest since 1990. These reforms include flexible interest rate, convertibility of ‘taka’, the introduction
of 91 days bill, recapitalization of banks, and new procedures for the loan classification system,
introduction of REPO in the money market, and strengthening of money and capital markets. Although
before 1990, open market operations and bank rate policies were hardly used, currently they are getting
emphasis due to change in the post-reform policy environment.
In the initial years after independence, six nationalized commercial banks (NCB’s) dominated the
banking segment. In the post reform period, the structure of the banking system has changed significantly.
Total numbers of scheduled banks are forty seven. As part of the reform program, some NCB’s were
privatized, foreign ownership of banks has been opened up, and additional new commercial banks were
allowed to start and operate. Consequently, the banking system in the country consists of several NCB’s
along with a number of home based privately owned commercial banks (PCB’s), some foreign owned
commercial banks (FCB’s), some privately owned Sharia compliant Islamic banks (IB’s) and some state
owned specialized financial institutions (SFI’s) such as the Bangladesh Krishi (agricultural) Bank and
Bangladesh Development Bank ltd., all under the supervision of the central bank. Besides that, the
Investment Corporation Bank (ICB) also plays vital role as an investment banking .Unfortunately for the
last ten years, their services were not active like previous time periods, though it has been divided into
three wings with the objective of improving its performance.
In spite of many different kinds of banks operating side by side, and even though the central bank no
longer directly control the lending or deposit rates in the post-1990’s reform period; however, a strong
competitive and efficient banking system has not yet developed. The banking system is mired in
corruption, mismanagement, and direct interference from government in power. Further, the commercial
banks still do not determine interest rate under competitive environment. Rather they are determining
interest rates within an oligopolistic framework, possibly following some collusive or cartel type
arrangements. This is perhaps true for all types of banks, nationalized banks, domestic private banks and
foreign owned banks.
The last decade witnessed some major policy shift as the Bangladesh Bank introduced repurchase
agreement in July 2002 and Reverse Repo in April 2003 and reintroduced Bangladesh Bank Bill in 2006.
These were introduced as indirect monetary policy tools for day-to-day liquidity management in response
to temporary and unexpected disturbances in the supply of and demand for money. The initiatives of the
Central Bank to face the situation through reform measures since 1990 no doubt have improved the
capital adequacy, governance, regulation and supervision, and the legal and payment systems in the
economy.The traditional banking business system of the country through depositing and advancing of
money has almost ended. Segmentation in the banking system is required so that banks’ can provide a
broad range of financial services. Through fund management, banks can earn profit.
The banking sector has evolved to become the dominant financial intermediary in Bangladeshi financial
system due to the underdeveloped money and capital markets, limited availability of financial
instruments, and lack of confidence in the financial system as a whole. Bangladesh Bank still cannot
determine monetary policy independently. Government is still playing important role in the financial
sector as borrowers from the banking system. In Bangladesh, there is very limited scope for individuals to
invest in the capital markets and lack of alternative opportunities for investment compelled them to invest
mainly in bank deposits, post office saving certificates and government bonds. Banks operate with old
and outdated banking procedures, lack of coordination between proper manpower planning and bank
schemes, lack of market research for customer psychology analysis, scarcity of financial derivatives,
inefficient banking services, and lack of long term planning, to name a few, are creating bottlenecks
preventing local banks from attaining international standards .Though reform measures in the financial
sector were initiated in the nineties, the overall stability and performance of the banking sector is still not
satisfactory. Financial institution managers in general, and bank managers in particular, in this country
does not properly assess risks as well as the costs of various types of bank sources of funds. While
managing their financial assets, the financial institutions were not cautious about handling funds with the
utmost care. Lack of ethics in the banking sector is a part of a wider and long lasting socioeconomic and
political problems in Bangladesh literature .Loopholes in the financial sector are a part of the overall
corruption that plagued almost all segments in the country. Unhealthy competition among different banks
display lack of ethics in doing banking business. Variation of higher interest rate and profit paid to the
client sometimes involve bankers in immoral practices. In the name of trade unionism, especially
nationalized commercial banks, trade union leaders create unethical work culture in Bangladesh.
Pervasive corruption in Bangladesh is a form of agency problem in which bank management tries to
maximize the amount of its personal gains has been documented in the literature. argued that the half-
yearly monetary policy statement aims to continue the central bank’s tighter monetary policy stance to
rein in credit expansion to control inflation and preserve external sector balance. Economic Trends
indicated that the annual rate of inflation increased to 9.43 percent at the end of August ‘11 from 7.87 per
cent at the end of august ’10. Bangladesh Bank described that in bolstering stability of the financial sector
include mandatory implementation of the BASEK –II capital regime from 2010, with the attendant
shoring up of risk management structures and practices that this will entail. Mandatory periodical stress
testing routines in banking sector have also been introduced to bring out early warnings about their
vulnerabilities. Bangladesh Bank cannot guide commercial banks as evidenced by the fact that
commercial banks are charging higher interest rates, even cross the limit of margin requirements, taking
high spread between buying and selling rate of foreign exchange and devaluation of Bangladesh Taka
against US Dollar has been going on. As such inflation rate is rising and purchasing power of the people
has been declining Moreover, commercial banks are investing in the share market to gain short term profit
since 2005 making depositors deposit risky as in Bangladesh if any bank fails then there is no reinsurance
system from which depositors get their amount. These problems cannot be corrected without the
infrastructure of the more modernized banking sector and proper staffing in the top management level i.e.
Deputy Governor posts where one should be macroeconomic specialist and another one should have
depth knowledge in practical commercial banking and developing an effective and efficient market
economy. Moreover, government should take appropriate steps to develop bond market so that it can
contribute in the growth of Gross domestic Product. From the countercyclical monetary policy time lag
perspective, empirical research suggests that when formulating the current countercyclical monetary
policy, Bangladesh Bank is influenced by its actions taken in the last three quarters and the change in the
real GDP a year ago. The countercyclical monetary policy actions and the change in the real GDP a year
ago affect the current change in the real GDP. Stated differently, it will take two quarters for the
implemented countercyclical policy to achieve it effectiveness fully (Nguyen et al. 2011-a). Customarily,
the time period when the adverse economic condition occurs until the corrective policy action achieves its
effectiveness fully is divided into the recognition lag, the formulating and implementing lag, and
impact.Thus, however long it take for the Bank of Bangladesh to recognize the macroeconomic problem
and to formulate and implement the corrective policy actions, it will take two quarters for the
implemented countercyclical monetary policy to achieve its full effectiveness.

Objective of the Report:

Primary Objective:
The primary goal of this study is to compare the performance of Al-Arafah Islmi Bank to that of
Bangladesh's other four islamic banks.

Some specific objectives are:

➢ To compare the things on the bank's balance sheet.
➢ To determine which areas the banks are failing to meet their goals.
➢ To determine Al-Arafah Islami Banks status.

Methodology:
For the purpose of preparing this study, data was primarily gathered from each bank's annual report and
website. In this report, different ratio analyses are used, which are gathered from bank annual reports and
financial statements, and the ratios that aren't contained in the annual report are determined using the
details given in the annual report. For example, the annual report explicitly states the percentage of own
capital in total assets, the percentage of non-performing loans in total amount of loans, the total assets
ratio, and the return on equity. The growth of capital on total assets can be calculated using these results.
To evaluate the banks, various ratios were chosen, such as return on equity to measure the efficiency of
using equity and total assets ratio to measure the efficiency of using the bank's assets. Since more focus
should be placed on the current year results when analyzing the performance, the financial information
used for the assessment is from the previous five years.
Limitation:
The first limitation is obtaining and analyzing details, as I am unfamiliar with all of the data presented in
the annual report. As a result, some details may be unreliable, as the amount of time spent on the job is
insufficient to learn about the Bank.

3.2 RATIO ANALYSIS

Ratio analysis is a quantitative method of gaining insight into a company's liquidity, operational
efficiency, and profitability by studying its financial statements. Ratio analysis is a cornerstone of
fundamental equity analysis.
Investors and analysts employ ratio analysis to evaluate the financial health of companies by scrutinizing
past and current financial statements. Comparative data can demonstrate how a company is performing
over time and can be used to telegraph likely future performance. This data can also compare a company's
financial standing with industry averages while measuring how a company stacks up against others within
the same sector.
When employed correctly, ratio analysis throws light on many problems of the company and also
highlights some positives. Ratios are essentially whistleblowers, they draw the management’s attention
towards issues needing attention.
Some advantages of ratio analysis are -
 Ratio analysis helps validate or disprove the financing, investment and operating decisions of the
company. They summarize the financial statement into comparative figures, thus helping the
management to compare and evaluate the financial position of the company and the results of
their decisions.

 It simplifies complex accounting statements and financial data into simple ratios of operating
efficiency, financial efficiency, solvency, long-term positions etc.

 Ratio analysis help identify problem areas and bring the attention of the management to such
areas. Some of the information is lost in the complex accounting statements, and ratios will help
pinpoint such problems.
 Allows the company to conduct comparisons with other companies, industry standards, intra-
company comparisons etc. This will help the organization better understand its fiscal position in
the economy.

2016 2017 2018 2019 2020

ROA% 0.08 0.12 0.01 0.07 0.080331

ROE% 12.82 15.70 14.07 10.46 10.05

Debt to Asset 0.913706 0.902944 0.929459 0.930619 0.936627

ration

CURRENT 1.210074 0.297479 0.268417 0.272951 0.237291

RATIO

EPS 3.07 3.15 2.8 2.3 2.28

Return on Assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA
gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its
assets to generate earnings. Return on assets is displayed as a percentage.
Businesses (at least the ones that survive) are ultimately about efficiency: squeezing the most out
of limited resources. Comparing profits to revenue is a useful operational metric, but comparing them to
the resources a company used to earn them cuts to the very feasibility of that company's’ existence.
Return on assets (ROA) is the simplest of such corporate bang-for-the-buck measures.
AL-ARAFAH ISLAMI BANK
ROA
0.13
0.09

ROA 0.05
0.01
2015 2016 2017 2018 2019 2020
Series1 0.06 0.08 0.12 0.01 0.007 0.08033
1424

YEAR

In this chart, we can see that Al-Arafah Islami Bank had their best ROA performance in the year 2016.
They had a rise in ROA up to 2016. Then next 3 year performance wasn’t up to the mark. However, Al-
Arafah islami banks performance in 2020 june is still better than 2019.

Return on Equity

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by
shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE
could be thought of as the return on net assets.
ROE is considered a measure of how effectively management is using a company’s assets to create
profits.

AL-ARAFAH ISLAMI BANK LTD

ROE
0.085
0.065
0.045
ROE

0.025
0.005
2016 2017 2018 2019 2020

Series1 NaN 0.0866 0.0924 0.0847 0.0926 0.0645

YEAR
In this chart, we can see that Al arafah islami bank had their best ROE performance in the year 2017.
They had a very good performance in ROE upto 2019. Then once again the next ONE year was not up to
the mark. However al arafah performance in 2017 to 2019 is not bad comparing to the years 2015-2017.

Debt to ASSET RATIO

The debt to asset ratio is very important in determining the financial risk of a company. A ratio greater
than 1 indicates that a significant portion of assets is funded with debt and that the company has a higher
default risk. Therefore, the lower the ratio, the safer the company. As with any other ratios, this ratio
should be evaluated over a period of time to access whether the company’s financial risk is improving or
deteriorating.

AL-ARAFAH ISLAMI BANK

DEBT TO ASSET RATIO
0.945
DEBT TO ASSET RATIO

0.925
0.905
0.885
2015 2016 2017 2018 2019 2020
Se- 0.913706 0.902944 0.929458 0.930618 0.936627 0.939144
ries1 4747711 4652529 7268885 5018428 4876630 3300993
45 08 88 81 73 12

YEAR

If we look at the chart it visible very clearly 2019 debt to asset equity is very high. It is good for the bank.

Current Ratio

The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its
debts over the next 12 months. Acceptable current ratios vary from industry to industry and are generally
between 1.5% and 3% for healthy businesses. If a company's current ratio is in this range, then it
generally indicates good short-term financial strength
AL-ARAFAH ISLAMIC BANK LTD
CURRENT RATIO
1.3
0.9

CURRENT RATIO
0.5
0.1
2015 2016 2017 2018 2019 2020
Se- 1.210073 0.297478 0.268416 0.272951 0.237291 0.257511
ries1 849 5 854 264 0285 0546
YEAR

In this chart, we can see that Al-Arafah had their best performance in Current Ratio in the year 2015.
They had a rise in Current Ratio upto 2015. Then, the next four years their performance is going down
and down every year.

Earnings per share (EPS)

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares of its
common stock. The resulting number serves as an indicator of a company's profitability. It is common for
a company to report EPS that is adjusted for extraordinary items and potential share dilution. The higher a
company's EPS, the more profitable it is considered.

AL-ARAFAH ISLAMI BANK

EPS
3.25
2.75
2.25
1.75
1.25
EPS

0.75
0.25
2016 2017 2018 2019 2020
Series1 3.07 3.15 2.8 2.3 2.28
YEAR
In this chart, we can see that Al-Arafah’s earning per share is increasing since 2017. In 2018 it decreased
very slightly. In 2019 the earning per share decrease at a fast rate. They had a poor performance in 2016
as well. Al-Arafah’s earning per share fluctuates every year.

3.3. Competitor Analysis

For the comparison, I have selected four other popular banks of our country. I have selected Social Islami
Bank, First Security Islami Bank, Standard Bank Ltd, Exim Bank Ltd to do ratio analysis and to compare
with Al Arafah Islami Bank Ltd. All of these banks are popular in Bangladesh. Just link Al-Arafah Islami
Bank, these four banks also have branches all over the country. In terms of both performance and size of
customers, these five banks are pretty similar.

Return on asset (ROA):

ROA
0.325
0.225
0.125
0.025
2015 2016 2017 2018 2019
SOCIAL ISLAMI BANK 0.04606401 0.04264164 0.0380535 0.0358089 0.0271412
ROA

FIRST SECURITY ISLAMI BANK 0.02495145 0.02697637 0.02881168 0.30114094 0.2828948

AL-ARAFAH ISLAMI BANK 0.06 0.08 0.12 0.01 0.007
STANDARD BANK LTD 0.034655 0.050827 0.04008 0.041534 0.044487
EXIM BANK LTD 0.0442 0.3757 0.0327 0.0329 0.0471

YEAR

SOCIAL ISLAMI BANK FIRST SECURITY ISLAMI BANK AL-ARAFAH ISLAMI BANK
STANDARD BANK LTD EXIM BANK LTD
From the graph above it can be said that all these three banks were having a fluctuation in their ROA last
five years. All these three banks were at their pick during 2017. From then on, three bank’s performance
went downward two are upward. In this graph we can see first security islami bank is higher than other
bank which is more efficiency. ROA that rises over time indicates the bank is doing a good job of
increasing its profits with each investment capital it spends. A falling ROA indicates the bank might have
over-invested in assets that have failed to produce revenue growth, a sign the company may be in some
trouble.as we can see Al-Arafah islami bank is lower ROA than other bank. which is risky for any
organization.

Return on equity (ROE)

ROE
0.85
0.65
0.45
0.25
0.05
2015 2016 2017 2018 2019
social islami bank 0.0064984 0.04264164 0.039757 0.0380535 0.0358089
ROE

first security islami bank 0.6604407 0.6324185 0.84321254 0.83883249 0.81637665

al arafah islami bank 0.152 0.162 0.157 0.141 0.105
standard bank ltd 0.034655 0.05252 0.42246 0.048447 0.44488
exim bank ltd 0.034655 0.05252 0.42246 0.048447 0.44488

YEAR

social islami bank first security islami bank al arafah islami bank
standard bank ltd exim bank ltd

From the graph above it can be said that all these five banks were having an upward in their ROE last five
years social islami bank had their worst ROE in 2015 and from then on they somehow managed to rise in
2016. Other three banks had a constant upward in their ROE. But first security islami bank always
maintain good on ROE. The return on equity, or ROE, is defined as the amount of profit or net income a
company earns per investment dollar. It reveals how much profit a company earns with the money
shareholders have invested. The investment dollars differ in that it only accounts for common
shareholders. This is often beneficial because it allows companies and investors alike to see what sort of
return the voting shareholders are getting, if preferred, and other types of shares that are not counted.

Debt to Asset Ratio

Debt to asset ratio
0.9
0.5
DEBT TO ASSET RATIO

0.1
2015 2016 2017 2018 2019
Social islami bank ltd 0.92803059 0.93769808 0.94866393 0.949864273 0.94984686
first security islami 0.96105876 0.96484355 0.96484355 0.96317519 0.96457089
bank
al arafah islami bank ltd 0.9137 0.9029 0.9295 0.9306 0.9366
standard islami bank 0.998386 0.919736 0.89075 0.089098 0.988122
exim bank ltd 0.937 0.9172 0.9241 0.9325 0.937

YEAR

Social islami bank ltd first security islami bank al arafah islami bank ltd
standard islami bank exim bank ltd

The debt to asset ratio is very important in determining the financial risk of a company. A ratio greater
than 1 indicates that a significant portion of assets is funded with debt and that the company has a higher
default risk. Therefore, the lower the ratio, the safer the company. If we see above the graph we clearly
see standard islami bank is on high risk.

Earning per share (EPS)

Earning per share is the same as any profitability or market prospect ratio. Higher earnings per share is
always better than a lower ratio because this means the company is more profitable and the company has
more profits to distribute to its shareholders.
4.25
3.25
2.25
1.25
0.25
2015 2016 2017 2018 2019

EPS
social islami bank ltd 2.81 3.1 1.97 3.1 1.71
first security islami bank ltd 2.4 4.4 1.8 1.84 2.38
al-arafah islami bank ltd 2.36 3.07 3.15 2.28 2.3
standard islami bank 1.88 1.38 1.29 1.44 1.82
exim bank ltd 0.38 0.46 0.44 0.11 0.44

YEAR

social islami bank ltd first security islami bank ltd al-arafah islami bank ltd
standard islami bank exim bank ltd

Although many investors don’t pay much attention to the EPS, a higher earnings per share ratio often
makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to
look at it but don’t let it influence their decisions drastically. To see this graph we allocate that first
security islami bank, al arafah islami bank and standard bank ltd is quiet good other two bank.

Current Ratio
Current Ratio is a liquidity ratio that measures company's ability to pay its debt over the next 12 months
or its business cycle. Current ratio is a financial ratio that measures whether or not a company has enough
resources to pay its debt over the next business cycle (usually 12 months) by comparing firm's current
assets to its current liabilities. If current ratio is below 1 (current liabilities exceed current assets), then the
company may have problems paying its bills on time. However, low values do not indicate a critical
problem but should concern the management.
current ratio

2.25
1.75
1.25
0.75
0.25
current ratio

2016 2017 2018 2019 2020

social islami bank ltd 0.0948158 0.1043172 1.0452635 0.1109619 0.1036839
first security bank ltd 0.9413452 0.9614533 0.9856733 0.9792776 1.0093418
al arafah islami bank ltd 1.2101 0.2975 0.273 0.2373 0.2575
standard bank 1.51421 1.28739 0.99269 2 2.25408
exim bank ltd 0.9268 0.8674 0.8248 0.7439 0.7146

year

social islami bank ltd first security bank ltd al arafah islami bank ltd
standard bank exim bank ltd

Current ratio gives an idea of company's operating efficiency. A high ratio indicates "safe" liquidity, but
also it can be a signal that the company has problems getting paid on its receivable or have long inventory
turnover, both symptoms that the company may not be efficiently using its current assets. In this graph we
can see clearly standard bank ltd current ratio is high its good for any organization but we cannot say its
good others factor depends. Social Islamic bank and al-arafah islami bank current ratio is below average
witch is not good as well.
3.4 RECOMMENDATION

After completely analyzing the ratio analysis, we will find that these five banks have performed pretty
well more or less. In some criteria, Al Arafah Islami Bank performed better and in some criteria other
four banks outperformed others. They are very popular banks in our country and they have a large
number of customers. They are trying to perform better every year. However, if we focus on profit and
earnings, then we can see that the performance of Al-Arafah Bank is better than the other four banks.
Overall analysis shows us that, Al-Arafah Bank has a slight better average performance than others banks.
But in some criteria Al-Arafah needs to focus on. So that they can improve their overall performance,
maximize shareholders wealth and can contribute in the economy.
 Al Arafah should focus on their deposit growth. The main job of any bank is to collect deposit
from its customers and provide loan to others. From loan it earns interest and that is a bank’s
main way of earnings. If Al-Arafah can increase their deposit they will be able to provide more
loans to the people and earn more number of market share.
 Improvement of market price of share and earning per share will attract more customers to invest
in Al-Arafah. It can collect more capital form the market which will lead to more development of
Al-Arafah. Thus, Al-Arafah should focus on these factors.
 From my working experience at Al-Arafah have come to know that in some upazilas there is no
branch of Al-Arafah. Al-Arafah should open new branches more to capture more customers. As a
result, their deposit will be bigger, and they can give more loans to the customers. More loans
mean more income.
 To attract more customers, better customer service should be offered. If consumers are
dissatisfied with services, the company will suffer a loss.
 Customers who are opening letters of credit should be offered some new services. As a result, the
bank would gain a larger number of loyal customers. A tour package, for example, may be
offered by a bank.
 Employees who are talented and hardworking should be recruited. As a result, they will be able to
improve the bank's efficiency and service quality.

 In today’s world internet banking is very important for all banks. Customers can do their banking
through online staying at home. Al-Arafah also has internet banking service, but it needs to be
developed. So that it will be more user friendly. They need to learn from BRAC Bank, Standard
Chartered Bank or Dutch-Bangla Bank. These banks have the best internet banking system in
Bangladesh.

Recommendation on Internship:

➢ Specify the Work.

The three-month internship is insufficient to learn the workings of a bank, especially the work of
the customer service (general) department. As a result, the internship work should be defined by
the department.

➢ Provide Suitable Working Place.

Interns have a few options at Mutual Trust Bank. Since the bank hires so many interns during the
year, it should have a suitable work environment for them.

➢ Provide Facilities for Learning.

Since bank workers are so preoccupied with their employment, they do not have enough time to
show the intern the details of their work. As a consequence, the learning process is left
unfinished. As a result, the bank should have learning opportunities for the interns.
➢ Provide Printed Pay-Order Slip.
Pay orders are manually written at Mutual Trust Bank. Error is a normal part of life. As a result,
certain issues arise during the writing process, such as misspellings, incorrect addresses, and so
on. If the bank serves a printed pay order, the chances of a mistake are reduced.

4. CONCLUSION

To be an intern and get employed in a bank like Al-Arafah Islami Bank was one of my dreams
when I was an undergraduate level student. I am extremely happy that, I could complete the last
phase of my undergraduate life working in such a bank. For a young blood like me working with
the general banking team of Al-Arafah Islami Bank was a great experience. The office and people
there were great like home. We used to have fun, work lately with high encouragement because
we felt like we are working not only for the customers but also for the nation and its people. It
was a great journey working with so many clients of Al-Arafah which concludes that, it has been
a great learning opportunity for me. This has been a great learning experience for my career. I had
got the chance to get practical knowledge from Al-Arafah Islami Bank. I had learned step by step
banking processes that takes place in a bank every day. I got to know the advantages,
disadvantages and opportunities of working in a bank. Most importantly, the experience that I had
got from internship program will help me in near future to implement my experience into
different working environment. The bank genuinely seeks to please all of its clients, both
individuals and businesses. However, if the bank sets a goal for each of its departments to please
clients, the outcome would be positive. Individuals are dealt with by the general baking and credit
departments. As a result, this department must have distinct facilities for distinct customers. Not
only should the bank consider its clients, but it should also consider its employees as an asset.
Employees should be provided with adequate facilities by the bank. Employees should be
provided with a suitable working environment, a competitive wage, and an exciting bonus. So
that they can put in their best effort in the bank. I analyzed the performance of the five
commercial banks in terms of some financial terms that I am familiar with, but there are some
other financial terms that are also important for proper performance analysis assessment. Since I
am not an expert at reviewing annual reports meticulously and am unfamiliar with every word in
the banking industry, there might be some words that are absent from the comparative review.
Whatever research I've done so far, it's obvious that none of the banks are perfect; each has its
own set of flaws. Both of these banks are committed to providing a sufficient supply of credit to
the communities for both legitimate business and consumer financial needs. When comparing Al-
Arafah Islami banks success to that of some of Bangladesh's best-performing islamic banks, it can
be concluded that, as a young bank, it is on its way to a bright future. It has been stated that the
bank's working atmosphere is very formal and rigid. Employees of Al-Arafah Islami Bank Ltd,
on the other hand, have made it their home and acted as though they were family members. This
is an excellent bonding. I expect Al-Arafah Islami Bank Limited to develop even further in the
future if this trend continues.

REFERENCE

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Al- Arafah Islami Bank Ltd Annual Report (2016-2020)
Social Islamic Bank (2016-2020)
First Security Islami Bank Ltd (2015-2019)
Exim Bank Ltd (2016-2020)
Standard Bank Ltd (2016-2020)