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Welcome to the Presentation. Group – E. Topic – Environmental forces of ABBL & AIBL. Objectives of the report.

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  1. Welcome to thePresentation

  2. Group – E

  3. Topic – Environmental forces of ABBL & AIBL

  4. Objectives of the report

  5. We tried our best to force the role of AB Bank Ltd. and Al-Arafah Islami Bank Ltd. in the social development of Bangladesh.Our special focus was on the problem of the environmental forces of the company and our objective was to find out the solution of this problem.Our additional focus was on the analysis of the financial state of AB Bank Ltd. and Al-Arafah Islami Bank Ltd.. So we tried to make an analysis view of that state.1. Broad ObjectiveThe prime objective of the report is to analyze “Environmental Forces of AB Bank Ltd. and Al-Arafah Islami Bank Ltd.”

  6. 2. Specific Objective- To present an over view ABBL and AIBL. - To find out the objective of ABBL and AIBL. - Analyzing the position in bank sector of Bangladesh. - To examine the formation of ABBL and AIBL. - To identify the service they provide. - To find out their existing and future programs. - To identify the problems with their management. - Evaluate the contribution in overall economic development. - To have introduction to the functions of general banking section. - To know about the profile of ABBL and AIBL. - To know about performance of the Bank. - To apply theoretical knowledge in the practical field.

  7. Methodology of the report

  8. 1. Type of researchThis report is a descriptive type of research, which briefly reveals the overall activities performed by AB Bank Ltd. and Al-Arafah Islami Bank Ltd. It has also been administered by collecting secondary data. Annual reports of AB Bank Ltd. and Al-Arafah Islami Bank Ltd. were the major secondary data sources in this regard. Environmental forces of social force analysis have also been used as major tools for the financial performance analysis. The study is performed based on the information extracted from different sources collected by using a specific methodology. This report is analytical in nature.

  9. 2. Sources of dataPrimary sources: - Officers - CustomersSecondary data: - Annual Report of the organization. - Different text book and journals. - Various reports and articles related to study. - Some of my course elements as related to this report. - Web base support from the internet.

  10. 3. Data Collection ProcedureSecondary data:For the “Environmental Forces of AB Bank Ltd. and Al-Arafah Islami Bank Ltd.” We are mainly used Secondary data.Primary sources: Besides this we are also collect some information by taking expert opinion from the officers and communicate with their customers.

  11. 4. Sampling planPopulationAll the customers and employees of AB Bank Ltd. and Al-Arafah Islami Bank Ltd. Sample elementIndividual customerSample frameThere was no sample frame found.Sampling procedureNon- probability convenience sampling…..

  12. Sample size

  13. Limitation of the report

  14. - Access to data regarding different performance indicators of ABBL and AIBL. - The report is mainly based on the secondary data which published by different organization as annually, half-yearly, monthly, weekly or daily. - Time constraints are another limitation of this report. - Due to some legal obligation and business secrecy banks are reluctant to provide data. For this reason, the study limits only on the available published data and certain degree of formal and informal interview.

  15. - The bankers are very busy with their jobs, which lead a little time to consult with. - Finally, some recent data which were needed to enrich this report but the unwillingness of executives of the bank due to confidentiality was made my report limited to data content. - Lack of my experience and practical experience.

  16. Overview of ABBL

  17. Vision of the ABBL"To be the trendsetter for innovative banking with excellence & perfection"Mission of the ABBL"To be the best performing bank in the country"Goal of the ABBLTo achieve the desired goal, it has the intention to pursuit of excellence at all stages with a climate of continuous improvement.

  18. Organogram OF ABBL: President & MD Deputy managing Director Credit (CRM) Deputy managing Director (Corporate) Head of retail & consumer banking Deputy managing Director (operator) Head of IT Mkt. Treasury & Foreign Ram CFO & Head of Finance Head of Int. Control &Compliance Regional Relationship Manager/ Head Branch Manager & Relationship Head Concurrent Audit Priority Banking Head of Credit Admin & Monitoring (CAM) Operations Manager Cluster Relationship Manager Trade Finance Financial Control Admin & Secu. & IT Application Credit Admin Officer CAM Relationship Officer (SME) Relationship Officer (CORP) Relationship Officer (REATIL) General Banking Services Customer Services Desk Cleaning & allied Services Account opening & Cheque Mgt Cash operation Remittance Export Import Local Foreign

  19. SWOT Analysis of the ABBL Strengths- Several types of loans and advances with unique features and facilities which are so much helpful for enhancing the economic growth. - Innovator of different new products and services like they are the innovator of ATM booth system. - They demand a standard interest rate on the loan and advances. - High geographic coverage. - Availability of online Banking facility. - Strong and attractive promotional activities.

  20. - Own training institutional which arrange useful and distinctive training program time to time. - Duties and responsibilities of the employees in the RM and CAM department are clearly define. - Co-operative and skilled personal, who are very much specialized in interacting with clients. (Particularly in RM and CAM department.) - ABBL employees are one of the major assets of the company. The employees of ABBL have a strong sense of commitment towards organization and also feel proud and a sense of deluging towards ABBL. The strong organizational culture of ABBL is the main reason behind this strength.

  21. Weaknesses - Various complex requirements demanded by the Bank to give the loan. - This bank mainly provides services to their big corporate clients. - Variability of credit card facility for all customer groups. It provides credit and facility only for the selected customer groups. - They have only one branch for Islamic Banking but it has a great demand in BD.

  22. Opportunities - Possibility to generate very high note of return as compared to fixed rate of interest. - An industry with an endless demand.Name of the products are so easy to understand so people easily their loan facilities. - The use of latest technology in all spheres of banking, which will increase the banks efficiency and service quality more. - Introduction of online banking facility is ennobling the bank to offer its banking service beyond its national border. - Expansion of its existing product services basket.

  23. Threats:- Strong appetite for Islamic financial services among the people of Bangladesh, but AB Bank has only one branch of Islamic Banking. - The upcoming private of ABBL, it is expected that in the next few years more commercial banks will emerge. If that happens the intensity of competitor will rise further and banks will have to develop strategies to compete against and win the battle of banks. - Unfavorable government rules and regulation regarding banking business. - Now day’s different foreign and private banks are also offering similar type of product with an almost similar profit margin. So, if all competitors fight with the same weapon, the natural result is declining profit.

  24. Overview of AIBL

  25. Vision of the AIBLTo be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of the national economy. Mission of the AIBL- Achieving the satisfaction of Almighty Allah both here & hereafter. - Proliferation of Shariah Based Banking Practices. - Quality financial services adopting the latest technology. - financing.

  26. - Fast and efficient customer service. - Maintaining high standard of business ethics. - Balanced growth. - 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 national economy. - Involving more in Micro and SME

  27. Goal of the AIBLAl-Arafah Islami Bank Limited is Islamic Banking institutions that operates with the objectives t implement and materialize the economic and financial principles of Islamic in the banking arena. The objectives of AIBL are not only to earn profit, but also to do good and welfare to the people. The main objectives of AIBL are listed below- - To conduct interest free banking - To establish participatory banking instead of banking on debtor creditor relationship - To invest through different modes permitted under Islamic Shariah

  28. - To accepts deposits on profit loss sharing basis - To establish as welfare –oriented banking system - To extend co-operation to the poor, the helpless and the low income group for their economic up liftmen - To play a vital role in human development and employment generation - To contribute towards balances growth and development of the country through investment operations particularly in the less developed areas - To contribute in achieving the ultimate goal of Islamic economic System.

  29. Organogram OF AIBL: Board of Director Managing Director Deputy Managing Director Executive Vice President Senior Vice President Vice President Assistant Vice President Investment General banking Foreign Exchange Account A/C opening Cash Clearing Export Import

  30. SWOT Analysis of the AIBLLike other organizations, AIBL also have its strength, weakness, opportunities and threats. The following stated the SWOT of the bankCore strength(S) - AIBL was adjudged second among the entire Islamic bank in the country in terms of service and business. The customer service was conducted by the general banking. - AIBL is doing business under the direct supervision of Bangladesh Bank. - Good asset quality - Satisfactory business growth - Diversified product lines - Experienced top management - Good operating efficiency

  31. The following are the core strength of the Islamic bank for which it is now considered to be the emerging sector for success: If we drew the differences between the normal banking and the Islamic bank than it will be clear about the core strength of Islamic bank:One of the key strength of the Islamic bank is that it distributes a significant amount of profit that they earn by investing different areas. On the other hand, in case of conventional banking they provide a fixed amount of return which is called “RIBA” or interest that may not be consistent with the profit positioning of the bank’s operations. So in case of conventional banking, they either sacrifice by bearing losses or they deprived the depositors’ by not paying them the part of profit.

  32. As the Islamic bank has to provide a significant of profit so they have to investment in a proper way to maximize the return. Because if a investment becomes classified which will affect the total profit position of the Bank, that will become the impediments to the profit of the depositors’. Under conventional banking the depositors’ can estimate the income from their deposit that lead them to expand the area of his expense which ultimately increase the inflation. On the other hand, in Islamic bank the depositors’ have to wait for the profit, so that can’t increase the tendency to expense much.Islamic collect deposits by Murabaha Mode whereas they invest by Murabaha, Mishawaka Mode that increase the intimacy with the Bank and with the depositors’.

  33. Meanwhile islami bank provide credit through Murabaha, Bai-muajjal etc. Under these systems banks have full regulatory power that’s why it develops good friendship relation with the Bankers’ and the clients’.Islami banks fulfill its administration expenses from the profit of its investment and from the service charges. So bank ensures close observation to its investment so that the investment profit doesn’t come down as well as its service charges goes up.Islami bank works to the development the socio-economic and value system of the people that is not seen in case of normal banking.Islami bank does not incur losses as it provide the return under the scientific process where as the conventional banks provide interest though they incur losses that ultimately reduce the deposit of the clients.

  34. Islami bank includes the profit suspense system in its investment mode especially in Murabaha and Bai-Muajjl system. Islami banks are following this system prior to the Bangladesh Bank’s FSRP. Islami banks ensure the utilization of credit for which the client received the money. For this reason people have a low scope to use it in other purpose which ultimately ensures the recovery of invested money. Beside observation Islami banks find other sources of investment.Islami banks invest in the human welfare sector. So Islamic bank practices mainly welfare banking. These banks invest only in those sectors where human welfare can be ensured.

  35. If needed islami provide Quard-a-hasana, which means the way to provide credit without any profit. So this system provides benefits to the poor.Islami bank is free from the circle of interest or “Riba”. Interest actually has some bad impact on the society as well as on the economy. A famous economist James Ken said if banks don’t provide any interest but the people will deposit to bank. According him the only reason is safety that the people want from banks. So banking system without interest is the best banking practices.The benefit of interest is mainly upwarding. This means that the interest that middle class people provide ultimately goes to the hand of rich people.So it can be said that the benefits that the Islami has it significant which give the new era to the banking sector around the world as well as the AIBL.

  36. Major weakness:MIS at primary stageLimited Branch networkLimited market shareIslamic banking is guided by some principles but it has some weaknesses, some of the major weaknesses are discussed in below:Lack of profit and loss sharing:Profit Loss Sharing (PLS) dominates the theoretical literature on Islamic finance. Broadly, PLS is a contractual arrangement between two or more transacting parties, which allows them to pool their resources to invest in a project to share in profit and loss. Most Islamic economists contend that PLS based on two major modes of financing, namely Mudaraba and Musharaka, is desirable in an Islamic context wherein reward-sharing is related to risk-sharing between transacting parties..

  37. Almost all theoretical models of Islamic banking are either based on Mudaraba or Musharaka or both, but to-date actual practice of Islamic banking is far from these models. Nearly all Islamic banks, investment companies, and investment funds offer trade and project finance on mark-up 3 , commissioned manufacturing, or on leasing bases. PLS features marginally in the practice of Islamic banking and finance.

  38. Whatever is the degree of success of individual Islamic banks, they have so far failed in adopting PLS-based modes of financing in their business. Even specialised Islamic firms, like Mudaraba Companies (MCo’s) in Pakistan, which are supposed to be functioning purely on a PLS basis, have a negligible proportion of their funds invested on a Mudaraba or Musharaka basis. According to the International Association of Islamic Banks, PLS covered less than 20 percent of investments made by Islamic banks world-wide (1996. Likewise, the Islamic Development Bank (IDB) has so far not used PLS in its financial business except in a few small projects.

  39. Opportunities:AIBL has some opportunities which are given below:About 85% people are Muslims in our country.Other Islami banks do not cover the demand of customer as their requirements as Muslim.People aware of their religious because people dont know the concept of Islami banking before.

  40. Threat(S):First, PLS contracts are inherently vulnerable to agency problems as entrepreneurs have disincentives to put in effort and have incentives to report less profit as compared to the self-financing owner-manager. This argument is based on the idea that parties to a business transaction will shirk if they are compensated less than their marginal contribution in the production process, and as this happens in the case of PLS, the capitalists hesitate to invest on PLS basis.

  41. Second, PLS contracts require well-defined property rights to function efficiently. As in most Muslim countries property rights are not properly defined or protected, PLS contracts are deemed to be less attractive or to fail if used.Third, Islamic banks and investment companies have to offer relatively less risky modes of financing as compared to Mudaraba or Musharaka in the wake of severe competition from conventional banks and other financial institutions, which are already established and hence more competitive.

  42. Fourth, the restrictive role of shareholders (investors) in management and, hence, the dichotomous financial structure of PLS contracts make them non-participatory in nature, which allows a sleeping partnership. In this way, they are not sharing contracts in a true sense; the transacting parties share financial resources without participatory decision-making.Fifth, equity financing is not feasible for funding short-term projects due to the ensuing high degree of risk (i.e., the time diversification effect of equity). This makes Islamic banks and other financial institutions rely on some other debt-like modes, especially mark-up to ensure a certain degree of liquidity.

  43. Sixth, unfair treatment in taxation is also considered to be a major obstacle in the use of PLS. While profit is taxed, interest is exempted on the grounds that it constitutes a cost item. This legal discrimination and its associated problem, tax evasion, make PLS less reliable as a tool for reward sharing.Seventh, secondary markets for trading in Islamic financial instruments, particularly Mudaraba and Musharaka, are non-existent. Consequently, they have so far failed to effectively mobilise financial resources.

  44. Beside the above mentioned limitations of lack of profit and loss sharing banks’ that are operating as Islamic banking philosophy are also facing the following limitations: 1. Islamic banks suffer from serious sort of liquidity problem. Because they don’t have specific Shariah sector on which they can invest their liquid money. The Bangladesh Bank has not yet introduced any profit and loss basis bond, though BB is now discussing to introduce Mudaraba Bond but it is not yet implemented. The problem of this bond is that the sector where it will invest is not said.

  45. 2. Islamic bank deposited 10% cash amount against the BB requirement of SLR & CRR, on which the Islamic banks’ has no chance to earn profit. On the other hand, the conventional deposited only 4% of CRR on without profit basis. From the observation it will be clear that Islamic banks’ are not getting any profit on 6% on cash deposits. 3. Islamic bank don’t get any profit from the FC Clearing Account while same is getting by the Islamic banks. It will be beneficial to provide them on three, seven, fifteen or one month basis that will recover them from loss.

  46. Analysis and Findings of ABBL

  47. Society influences to the Bank to developing their activities and helps to grow the business. After influence, Bank decides by providing different kinds of new and potential products and services to the society. At the same time, banks grow faster and achieve some long –range growth and also society will be satisfied. These are -

  48. Products & Services of ABBLCorporate Banking At AB Bank we provide complete range of solutions to meet Corporate Customers' requirement. Our Corporate Banking solutions include a broad spectrum of products and services backed by proven, modern technologies.

  49. Following are some of the products and financial tools of Corporate Banking: - Project Finance - Working Capital Finance - Trade Finance - Cash Management - Syndicated Finance, both onshore & off-shore - Equity Finance, both onshore & off-shore - Corporate Advisory Services

  50. SME Banking: - SME LoanSME Sectors in which AB Bank has participated so far: - Agro machinery - Poultry - Animal Feed - Dairy Product - Fruit Preservation - Hotel & Restaurants -Garments Accessories

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