INTERNSHIP REPORT ON

AL-BARAKA ISLAMIC BANK

Page 1 of 69 AL BARKAH BANK PAKISTAN LTD

PRESENTED TO :

Sir faisal ioqbal

Co ordinator internship vivas

M.BA Evening Session 2012-2015

UNIVERSITY OF THE GUJRAT

GUJRANWALA CAMPUS

Page 2 of 69 Executive summary

Since it is required by the students of mba to commence a report on manufacturing or service organization as Internships provide an opportunity to link theory with practice in order to cope the gap between theoretical study and actual practices for better understanding that how it is performed in actual. To fulfill this mandatory requirement I was assigned by my MENTOR to do a six week internship. The key purpose of this report is to critically scrutinize and realize banking operations and propose measures in the form of solid and weighted recommendations for their more perfection. I decided to do a complete analysis of bank with respect to technology it has, its prevailing culture and also its financial analysis. And then give concrete recommendations and suggestions.

To achieve my mission stated above the first step was to choose the organization so I got the opportunity to do internship in“Al Baraka Bank (Pakistan) Limited (ABPL) a pioneer in Islamic banking” my key purpose was to study how Conventional banking is different from Islamic banking I realized main difference is on the part of operations and use of funds.

I joined a 6 week internship for a practical exposure of banking world I work from 9.00 to 3.00 pm Daily I have one day off in every week. I find Al-baraka is performing its banking business in line with the set of laws of SBP. As the Al-baraka Gujranwala is a foreign subsidiary so its main products are the similar as being offered at head office. The vision and mission of Al baraka are also stated in report along with the complete detail of hierarchy of bank. Then the work done by me during the internship is also discussed and the ratio analysis years 2009-2010. Then I have done the SOC analysis on the report to know about the strengths, opportunities and challenges which are being faced by the bank and they will have to face in the near future, by doing the SOC analysis I give conclusion on the bank performance and some

Page 3 of 69 recommendations. I have used my maximum efforts to achieve my mission stated above. I am sure that my effort would b fruitful for users. In this short span of time I feel the environment of al-baraka is quite friendly because I did not feel any professional jealously, leg pulling and any other such thing

HISTORY OF (AIB - BAHRAIN)

Al Baraka Islamic Bank – Bahrain (AIB - Bahrain) established 1984 in Bahrain and up the years has pioneered the development of Islamic banking and finance. The Bank is registered with the Bahrain Ministry of Industry &, Commerce CR no. 14400 and is authorized by Central Bank of Bahrain (CBB) as Retail Bank, with an authorized capital of US$ 600 Million, of which US$ 122 Million has been issued and fully paid.

AIB - Bahrain is one of the Banking Units of Al Baraka Banking Group’s (ABG). ABG is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Sharia'a. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.5 billion. The Group has a wide geographical presence in the form of subsidiary banking Units in 12 countries, which in turn provide their services through more than 240 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank – Bahrain, Al Baraka Islamic Bank/ Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Ltd/ South Africa, Al Baraka Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/ Tunisia, The Egyptian Saudi Finance Bank/Egypt, Al Baraka Turk Participation Bank/Turkey, Al

Page 4 of 69 Baraka Bank Syria (under establishment), and Representative office, Indonesia.

AIB - Bahrain with a longstanding track record of delivering excellence, innovation and superior results, the Bank ranks among the leading providers of Islamic investment banking products and services to a growing global clientele, focused exclusively on the development and delivery of unique investment solutions of Sharia'a compliant. Thanks to its ability to consistently deliver innovative, yet simple investment strategies grounded in the breadth and depth of its experience and resources, including a senior management team with a collective background in numerous areas of Islamic banking. The Bank recently has fully merged with Al Amin Bank, Bahrain (Al Amin), and a sister company and member of ABG. Al Amin will continue serving its unique short term assets back securities "Isdaraat Al Amin" within the merged entity. Al Amin has to date managed over US$ 4 billion in funds on behalf of leading financial institutions and high net-worth customers seeking unmatched short term investment solutions that rend long-term financial benefits.

AIB - Bahrain supported by the long tradition of strength and robust financial position of its parent company ABG, count on quality of investments, strength of performance and a sound financial position, the Bank have enjoyed a commendable market reputation as the leading short-term liquidity manager for institutional investors. The resources and capabilities available to the Bank guarantee its success in executing its firm strategies.

BOARD OF DIRECTORS:

Shaikh Saleh Abdullah Kamel (Chairman):

Shaikh Saleh, Saudi Arabian national, is a well-known and highly respected international businessman from Saudi Arabia. Shaikh Saleh Abdullah Kamel holds a Bachelor of Commerce degree. He is the founder and President of

Page 5 of 69 Dallah Al Baraka Group and the founder of the Al Baraka Banking Group. He serves as a director on the boards of a number of organisations and associations across the world. Currently he is Chairman of the following organisations: General Council for Islamic Banks and Financial Institutions; Jeddah Chamber of Commerce & Industry; Council of Saudi Chambers; Federation of GCC Chambers and the Islamic Chamber of Commerce and Industry. As a renowned pioneer of Islamic banking and in recognition of his achievements and his role in promulgating Islamic economic principles – encapsulated in the message of his group: Reconstruction of the Earth - Shaikh Saleh Kamel has been awarded the highest of certificates, trophies, and accolades by many countries and organisations over his lifetime.

Mr. Abdulla A. Saudi (Vice Chairman) :

Mr. Saudi, Libyan national, is a world-renowned and respected international Banker. He holds a Certificate in Management and Accounting. He worked at the Central Bank of Libya for 14 years, holding various positions including that of Manager of the Banking Department and Head of the Foreign Investment Department. He was the founder of Libyan Arab Foreign Bank, where he served as Executive Chairman between 1972 and 1980, establishing branches of the Bank worldwide. He was the founder of Arab Banking Corporation (B.S.C.), Bahrain and served as its President & Chief Executive from 1980 to 1994. He also founded Arab Financial Services (E.C.), Bahrain in 1982. In addition to being voted one of the “Most Innovative Bankers†by the representatives of governments and international commercial bankers attending the International Monetary Fund and World Bank meetings in 1980, Mr. Saudi has won many international accolades, including an award at Georgetown University and the award “Best Banker†from the Association of Arab American Banks in New York in 1991. He was the first to receive the “Arab Banker of the Year†award, in 1993, from the Union of Arab Banks. In recognition of his role in the development of banking relationships between Arab and European states, Mr. Saudi has

Page 6 of 69 received, over his career, several gold medals and awards, notable amongst which are those awarded in 1977 by the King of Spain and the President of Italy and that given to him by the President of Tunis in 1996. He is currently the Executive Chairman of ASA Consultants W.L.L., Bahrain

Mr. Abdullah Saleh Kamel (Vice Chairman):

Mr. Abdulla, Saudi Arabian national, is a respected Saudi businessman, educated in Economic Studies at the University of California, USA. Mr. Abdulla Kamel has held a number of executive positions over the years at Dallah Group. He headed the real estate and property management and central logistics division during the period 1988-1989, was President’s Assistant for Trade Affairs 1989-1995 and held senior positions at Dallah Al Baraka Holding Company over the period 1995-1999. Mr. Abdulla Kamel is currently the Chairman of Aseer Company, Amlak Real Estate Development and Finance, Al Tawfeek Financial Group, Al Tawfeek Company for Investment Funds and Vice-Chairman of Bank Al-Jazira in Saudi Arabia and King Abdullah Economic City. He is also a Member of the Boards of Saudi Research & Marketing Group and Okaz Corporation for Journalism and Publishing. Mr. Abdulla Kamel has been and remains very active in public activities through his membership in many international and local organizations and associations, such as Jeddah Chamber of Commerce (of which he is a past Member), Young Presidents’ Organization, Friends of Saudi Arabia, The Centennial Fund and the Board of Trustees of the Prince of Wales Business Leaders Forum. Currently he is the Chief Executive Officer of Dallah Al Baraka Group – a position that he has held since 1999.

Mr. Saleh Al Yousef (Member):

Mr. Al Yousef, Kuwaiti national, holds a Bachelor’s Degree in Commerce from Kuwait University. Mr. Al Yousef is a Kuwaiti businessman with extensive

Page 7 of 69 experience in the Banking industry. He served as Chairman and Managing Director of The Industrial Bank of Kuwait K.S.C. from 1988 to 2005. Prior to that, Mr. Al Yousef held a number of executive positions with The Industrial Bank of Kuwait and the Central Bank of Kuwait. He has been Chairman of ABC Islamic Bank (E.C.), Bahrain and Chairman of ABC’s consultants council, Frankfurt. He served as a Director of the Financial Securities Group during 1986. He has also served on the boards of a large number of other financial institutions, including Gulf Bank K.S.C., Kuwait, Arab Banking Corporation (B.S.C.), Bahrain and Ahli United Bank B.S.C., London. He was Chairman and Managing Director of Afkar Holding Co. until September 2010 and a Director of Gulf Investment Corporation until April 2010. He currently serves as a Commissioner with the Kuwaiti Capital Markets authority.

Mr. Adnan Ahmed Yousif (Board Member and President & Chief Executive):

Mr. Yousif, Bahraini national, holds a Master Degree in Business Administration, University of Hull, UK. Mr. Yousif has been a Director of Al Baraka Banking Group since its inception and President & Chief Executive since August 2004. He is also Chairman of Jordan Islamic Bank, Banque Al rie, Al Baraka Turk Participation Bank, Al Baraka Bank©أ Baraka D’Alg Ltd., South Africa, Al Baraka Bank Egypt, Al Baraka Bank, Lebanon, Al Baraka Bank Syria and Al Baraka Bank (Pakistan) Ltd., whilst holding directorships in Al Baraka Bank Sudan, Al Baraka Islamic Bank, Bahrain and Al Baraka Bank Tunisia. He has over 34 years’ international banking experience and has twice been the recipient of the “Islamic Banker of the Year†Award at the World Islamic Banking Conference, in December 2004 and December 2009. He was appointed Chairman of the Union of Arab Banks in May 2007 and has been re-elected for a further four year term in May 2010.

Dr. Anwar Ibrahim (Member):

Page 8 of 69 Dr. Ibrahim, Malaysian national,is a well-known and respected international figure. He resides in Malaysia, where he is a Member of Parliament. He has served his country in many ministerial capacities including those of Education Minister, Finance Minister and deputy Prime Minister of Malaysia. He was formerly a visiting professor at Georgetown University in Washington D.C. and was appointed Honorary President of the London based organization Accountabiltiy (Institute of Social and Ethical Accountability). Dr. Ibrahim has been an independent nonexecutive director of Al Baraka Banking Group since March 2006.

Mr. Abdul Elah Sabbahi (Member):

Mr. Sabbahi, Saudi Arabian national, holds a Bachelor of Science degree in Accounting from the Faculty of Economics & Administration, King Abdul-Aziz University, Saudi Arabia. Mr. Sabbahi has had over 30 years’ experience in international banking, the last 20 of which with the Dallah Al Baraka Group in Saudi Arabia. He is currently Vice President, Dallah Al Baraka Group. He also holds positions as Chairman of Al Baraka Bank Tunisia, Arab Leasing de Promotion du Lac de ©أ t©أ International Finance, Saudi Arabia, La Soci Tunis, and BEST Lease, Tunis. Mr. Sabbahi is also a Member of the Boards of Dallah Al Baraka Holding Co. E.C., Bahrain; Algerian Saudi Leasing Ltd.; Al Amin Investment Co., Jordan; United Albanian Bank, Albania and a number of ther international companies

Mr. Ibrahim Fayez Al Shamsi (Member):

Mr. Al Shamsi, U.A.E. national, holds a Bachelor Degree in Commerce. He brings with him over 37 years’ varied experience in the financial services industry and in service of the U.A.E. Government. He is currently Chief Executive Officer of Emirates Islamic Bank and has been a Director of Arab Fund for Economic & Social Development, Kuwait since 1983. Mr. Al Shamsi has been a Director of Al Baraka Banking Group since August 2006.

Page 9 of 69 Mr. Jamal bin Ghalaita (Member):

Mr. Ghalaita, U.A.E. national, holds a Bachelor of Science and Business Administration degree from the University of Arizona, USA. He is a Banker whose career spans over 20 years with Emirates Bank, during which he established a string of specialisations in Corporate banking, Retail banking, Trade Finance, Human Resources, Private Banking, Asset Management and Consumer Finance. He is currently Chairman of Emirates Money and a director of Emirates Islamic Bank, in addition to being Group Deputy CEO and General Manager – Consumer Banking and Wealth Management at Emirates NBD.

Mr. Yousif Ali Fadil Bin Fadil (Member):

Mr. Fadil, U.A.E. national, is a Banker with a Bachelor’s Degree in Mathematics & Computer Science from Gonzaga University, Spokane, Washington State, USA. During the period 1985– 1998, Mr. bin Fadil held a number of senior positions in the National Bank of Umm Al Quwain. He then served Dubai Islamic Bank as Executive Manager for Investment over the period 2000-2002. In 2003 he was appointed General Manager of the Emirates Financial Company. During the period 2004-2006 he served Abu Dhabi Islamic Bank as Deputy Chief Executive Officer. Mr. bin Fadil has also served as member of the board of directors of several financial institutions including, amongst others, Union Insurance Company, U.A.E., Bahrain Islamic Bank and Bosnia International Bank. Currently he is the General Manager of Al Sahil Equity Center.

Mr. Samer Mohammed Farhoud (Member):

Mr. Farhoud, Saudi Arabian national, holds a Bachelor of Computer Science and Engineering Degree from the University of Petroleum and Minerals, Dhahran, Saudi Arabia. Eng. Farhoud has had over 24 years’ experience

Page 10 of 69 in banking and has held a number of senior positions in his career, including that of Deputy Treasurer at Al Rajhi Bank in Riyadh for two years to December 2007 and Chief Executive Officer of Fahad Abdulla Al Rajhi Holding Co., Riyadh between January 2007 and August 2010. Prior to that he held various positions including Head of Treasury Sales and Marketing Unit in Arab National Bank, Riyadh; Manager of Treasury Sales & Services Unit in United Saudi Bank in Riyadh; Senior Corporate Relationship Manager in Saudi American Bank, Riyadh; Senior Dealer in Saudi American Bank in Riyadh and Computer Engineer for SAMBA Data Center in Saudi American Bank. He is currently Chief Executive Officer of Deutsche Gulf Finance.

Dr. Bassem Ibrahim Awadallah (Member):

Dr. Awadallah, Jordanian national, holds Ph.D. and M.Sc. degrees in Economics from the London School of Economics and Political Science in the United Kingdom (1985 and 1988) and a Bachelor of Science in Foreign Service degree from Georgetown University in the United States of America (1984). Dr. Awadallah worked in the investment banking field in the United Kingdom from 1986 to 1991. He then held a succession of positions in Jordan: as Economic Secretary to the Prime Minister of Jordan (1992-1996); Economic Advisor to the Prime Minister of Jordan(1996-1999); Director of the Economic Department at the Royal Hashemite Court (1999- 2001); Minister of Planning and International Cooperation of Jordan (October 2001-February 2005); Minister of Finance of Jordan (April 2005-June 2005); Director of the Office of His Majesty King Abdullah II of Jordan (April 2006-November 2007) and as Chief of the Royal Hashemite Court, Jordan (November 2007- September 2008). Dr. Awadallah was chosen as a Lee Kuan Yew Fellow and a Young Global Leader, by the World Economic Forum in 2005 and is the

Page 11 of 69 recipient of the Al Hussein Medal for Distinguished Service, the Al Kawkab Decoration of the First Order of the Hashemite Kingdom of Jordan and the Al Istiqlal Decoration of the First Order of the Hashemite Kingdom of Jordan. In addition he has been awarded a number of high decorations from several countries in Europe and Asia. Dr. Awadallah is currently the Chief Executive Officer of Tomoh Advisory, a financial and strategic advisory practice based in Dubai, UAE.

Mr. Mohyedin Saleh Kamel (Member):

Mr. Mohyedin, Saudi Arabian national, studied economics at the University of San Francisco, USA. He is a prominent Saudi businessman with many years’ experience, currently serving as Deputy Chief Executive Officer of Dallah Al Baraka Holding Company and Deputy Chief Executive Officer for Projects at Arab Media Company (AMC). Mr. Mohyedin Kamel also serves on the boards of many other companies and institutions, including the following: Chairman of the Board of Directors of Al Rabie Saudi Foods Co. Ltd. and of Dallah Media Production Company; Managing Director of Sports Events International Company and member of the Board of Directors of: Dallah Real Estate Consulting Company – Egypt; Almaza Real Estate Development Company Egypt; Arab Company for Real Estate and Tourism Investment “

PACRA ASSIGNS RATINGS TO AL BARAKA BANK (PAKISTAN) LIMITED The Pakistan Credit Rating Agency (PACRA) has assigned the long-term and short-term entity ratings of “A” (Single A) and “A2” (A Two) respectively to Al Baraka Bank (Pakistan) Limited (Al Baraka Bank). These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitment. The ratings reflect Al Baraka Bank's association with a strong

Page 12 of 69 sponsoring group – Al Baraka Banking Group (ABG). It incorporates the impact of positive synergies emanating from the recent merger in terms of common operating platform, improved profile, and extended market outreach. While progressing towards the integration process, the management is well geared to benefit from the expanded franchise through developing a sound business plan. However, the management's ability in developing a profitable business stream in the mediumterm while successfully restraining the high cost structure remains to be seen. The efficacy of the risk management framework aimed at improving the overall asset quality of the bank also remains important. About the bank: Al Baraka Bank (Pakistan) Limited (formerly Emirates Global Islamic Bank Limited) commencing its operations in February 2007, operates with a network of 89 branches. Al Baraka Bank is currently 49.6% owned by ABG through its subsidiary Al Baraka Islamic Bank B.S.C. – Bahrain (ABIB). The remaining shareholding is mainly held by Emirates Investment Group (EIG), UAE and Al Rajhi family, Saudi Arabia. ABIB is in the process of increasing its stake in Al Baraka Bank by end-Dec10. Subsequently, a right issue of PKR 800mln will be done within 1QCY2011 to meet the MCR requirement of PKR 7bln as at December 2010. Al Baraka Banking Group (ABG), incorporated in the Kingdom of Bahrain, is one of the largest Islamic banking and financial services institution in the world. ABG with an asset base of USD 15bln at end-Sep10 and rated “BBB-” for longterm and “A3” for short-term by Standard and Poor's has an international network of 11 subsidiaries and 2 representatives offices with over 300 branches in 13 different countries in Asia, GCC region, middle east and Africa. Going forward, the bank would have eleven member BoD comprising representatives of sponsoring groups and three independent directors. Mr. Shafqaat Ahmed – CEO – is a professional banker with over four decades of experience.

Page 13 of 69 AL-BARAKA IN PAKISTAN

Al Baraka Islamic Bank (Aib) has the honor of being the pioneer of Islamic banking in Pakistan and has been operating in the country as branches of Al Baraka Islamic Bank Bahrain since 1991. Over the years, the bank has successfully developed and maintained its identity as one of the leading providers of a host of banking products and services in strict compliance with Shari’ah principles.

Currently operating with 29 branches in 17 major cities of the country, AIB offers a wide array of Islamic financing products such as Murabaha, Ijara, Musharaka and Islamic Export Refinance, etc., catering to a diverse cross-section of the economy, including the Corporate, SME and Consumer sectors. Moreover, various Shari’ah compliant deposit schemes are available for customers to invest their funds in, along with a variety of other ancillary services such as online banking, ATM/debit card, safe deposit lockers and utility bill payments etc.

Al Baraka Islamic Bank (AIB) is a member of Al Baraka Banking Group (ABG) which is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. ABG is committed to expanding its presence in Pakistan, which is evident from the rapid growth being undertaken by Al Baraka Islamic Bank in the country and its plans to have its Pakistan operations localized as a Bank registered in Pakistan, over the next few weeks. Building on the expertise and experience of its workforce and the growing awareness of Shari’ah- compliant banking solutions among the masses, AIB has successfully developed itself as a major unit of ABG operating in the region, capitalizing on the Group’s geographical presence and high quality research and development in Islamic financial products for its business expansion in the country. Faced with growing challenges in this rapidly developing market, AIB strongly relies on its ability to be an effective and efficient market player

Page 14 of 69 through renewed focus on superior customer service, development of Islamic alternatives to conventional financing facilities, and strict adherence to Shari’ah rulings and principles.

Albaraka Banking Group is the biggest Islamic banking group listed on the Bahrain Stock Exchange in terms of capitalization. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Shari’ah. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.59 billion. With assets of US$11.2 billion, the Group has a wide geographical presence in the form of subsidiary banking Units in 12 countries, which in turn provide their services through more than 250 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank / Bahrain, Al Baraka Islamic Bank / Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Ltd / South Africa, Al Baraka Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/ Tunisia, The Egyptian Saudi Finance Bank/Egypt, Al Baraka Turk Participation Bank/Turkey, Albaraka

Bank Syria (under establishment), and representative office, Indonesia.

Page 15 of 69 BRANCHES IN PAKISTAN

SOUTHERN REGION

S.

No. Branch Name Cod Addr Telephone Fax No. E-mail e ess No.

01 Karachi Main Lakhani 021- 021- Centre, 2636261 2635045 [email protected] I.I. 021- k Chundri 2636262 gar 021-111- Road, 742-742 Karachi . 02 Karachi Gulshan Provinci 021- 021- [email protected] al Trade 4824510-13 4813240 m.pk Centre, Block 13-B, Gulsha n-e- Iqbal, Karachi . 03 Karachi Korangi LPlot # 021- 021- [email protected] 1-A, 5114001-4 5114005 m.pk Sector 23,

Page 16 of 69 Korangi Industri al Area, Karachi . 04 Karachi Clifton Garnet 021- 021- [email protected] Centre, 5360901-4 5360906 m.pk Khayab an-e- Jami, Block -8, CLifton, Karachi . 05 Karachi City 021- 021- [email protected] Shahrah-e-Faisal Tower, 4373201 4373200 m.pk Plot # 33-A, Block -6, PECH Society, Sharah- e- Faisal, Karachi 06 Karachi - SITE Plot No. 021- [email protected] Area C-18/A, 6011390 Estate Avenue, SITE, Karachi 07 Gadap Gulshan- Plot No. 021- 021- Imran.nizami@albara e-Meymar SB-13, 6350931-3 6833332 ka.com.pk Sector- Z, Sub Sector- IV, Gulsha n-e- Meyma

Page 17 of 69 r, Gadap 08 Hyderabad Shop 022- 022- [email protected] No. 2636962-4 2634990 k A/2616, WARD- A, Noor Moham mad High School Road

CENTRAL REGION

S. Branch Cod Ad Telephon Fax No. E-mail No. Name e dre e No. ss

01 Lahore Main 95-B, 042- 042- Hali 5756016 5756877 albaraka@albarak Road, 042- a.com.pk Gulberg 5756074 -II, 042- Lahore, 5756084 Pakistan 042-111- . 742-742

02 Lahore Circular 64- 042- 042- [email protected]. Road Circular 7674801 7674802 pk Road, 042- Lahore 7674803 042- 7674804

03 Lahore DHA 80-Y 042- 042- [email protected]. Block, 5692771-5 5721482 pk Defence Housing Authorit y,

Page 18 of 69 Lahore Cantt.

04 Lahore - 5, Race 042- 042- [email protected] Shadman Course 6366913 6362533 .pk Road, Lahore.

05 Lahore - Faisal 806-C, 042- 042- Town Faisal 5160263-4 5160388 Town, Lahore

06 Faisalabad 816-C 041- 041- [email protected] Main 2637321-3 2634377 .pk Faisal 041-111- Lane, 742-742 Civil Lines, Faisalab ad.

07 Multan 76 061- 061- [email protected] Abdali 4500371-4 4500375 .pk Road, Multan.

08 Gujranwala Anwar 055- 055- [email protected] Industri 4273172 4273190 .pk es 055- Comple 4273177 x, G. T. Road, Gujranw ala.

09 Gujrat Lamcy 0533- 0533- Hotel, 530513-15 530516 Opp. Go Well CNG Station, GT Road, Gujrat

Page 19 of 69 10 Sahiwal 183-B/7, 040- [email protected] Sarwar 8059040 .pk Shahee d / Kutcher y Road, Sahiwal

11 Sialkot 1/1437, 052- [email protected] Paris 3006118 .pk Road, Sialkot

NORTHERN REGION

S. Branch Name Code Addr Telephone Fax No. E-mail No. ess No.

01 Islamabad Main 11-W, 051- 051- [email protected] Blue 2206829-31 2206832 .pk Area, 051-111- Jinnah 742-742 Avenue, Islamab ad.

02 Islamabad – F-10 7-G, 051- 051- Lords 2111945-7 2111948 Plaza, F- 10 Markaz, Islamab ad

03 Rawalpindi Mall Block 3, 051- 051- [email protected] Road Services 5792030-33 5792034 m.pk Plaza, 262, The Mall, Rawalpi

Page 20 of 69 ndi.

04 Rawalpindi 137-B, 051- 051- rwp_rcc@albaraka Chandni Chowk Chandni 4571128-30 4571127 .com.pk Chowk, Main Murree Road, Rawalpi ndi.

05 Abbottabad Main 0992- 0992- [email protected] Manseh 343112–14 343227 m.pk ra Road, Opposit e Radio Station, Jhangi, Abbotta bad.

06 Peshawar UG 39- 091- 091- [email protected] 40, 5250191-94 5250195 m.pk Deans Trade Centre, Islamia Road, Peshaw ar Cantt. Peshaw ar.

07 Mirpur Plot # 058610- 058610- [email protected] 8, Sub 48361-65 48363 m.pk Sector B-3, Part-2, Allama Iqbal Road, Mirpur, Azad

Page 21 of 69 Kashmir .

08 Rawalpindi City A-65. 051- 051- [email protected] City 5777411-15 5777410 .pk sadder, Jinnah Road, Rawalpi ndi

09 Wah Cantt. Plot No. 051- 051- CB-1, 4540861-3 4540864 Sadat Plaza, The Mall, Wah Cantt.

10 Mansehra Zulfiqar 0997- 0997- [email protected] Plaza, 304178-80 303159 m.pk Abbotta bad Road, Manseh ra

Page 22 of 69 CORE VALUES PARTNERSHIP Our VisionOur Mission

Partnership : DRIVEN We believe thatTo society meet the needs financial a fair needsand equitable of communities financial across system the world by Our shared beliefsNEIGHBOURLY which create rewards strongconducting effort and bonds contributesbusiness thatethically to the form developmentin accordance the of basis with the the ofSharia, long term relationships withPEACE customers OF MIND practicingand staff. thecommunity. highest professional standards and sharing the mutual benefits with the customers, staff and shareholders who Driven: participate in our business success.

We have the energy and perservance it will take to make an impact in our customer’s lives and for the greater good of the society.

Neighborly :

We value and respect the communities we serve. Our doors are always open; our customers always experience a warm-hearted, hospitable welcome and accommodating service.

Peace of mind :

Our customers are rest assured that their financial interests are being managed by us to the highest ethical standards Commitment.

AL BARAKA’S COMMITMENT TO ISLAMIC BANKING

Al Baraka Islamic Bank and Albaraka Banking Group are fully committed to develop and promote an integrated Islamic Financial System. Compliance with the rules and principles of Islamic Shariah is the core of the banking and financial activities and its philosophy. All its banking activities are very closely regulated by a Board of Shariah Advisors based at the Head Office in Bahrain and a Shariah Advisor based in Pakistan, to ensure strict compliance with the highest standards of Islamic Banking principles.

Page 23 of 69 PAKISTAN MANAGEMENT

Board Of Directors:

 Mr. Adnan Ahmed Yousif, Chairman

 Mr. Tariq Mahmood Kazim, Deputy Chairman

 Mr. Shafqaat Ahmed, Chief Executive Officer

 Mr. Abdulrahman Shehab, Director

 Mr. Nadeem Amjad Khan, Director

 Mr. Syed Tariq Hussain, Director

 Mr. Abdul Ghaffar Fancy, Director

 Mr. Federico Tauber, Director

 Mr. Tariq Hamid

 Mr. Salman Ahmed

 Mr. Imtiaz Ahmad Pervez

Board Executive Committee (BEC):

 Mr. Tariq Mahmood Kazim Chairman  Mr. Tariq Hamid Member  Mr. Salman Ahmed Member  Mr. Abdul Ghaffar Fancy Member  Mr. Nadeem Amjad Khan Member  Mr. Shafqaat Ahmed Member

Page 24 of 69  Mr.MuhammadSiddique Secretary of BEC Memon HR Board Remuneration Committee (HRRC):

 Mr. Adnan Ahmed Yousuf Chairman  Mr. Tariq Mehmood Kazim Member (ABL) Country Head  Mr. Abdul Ghaffar Fancy Member (EFH)  Mr. Federico Tauber (MAK) Member  Mr. Mukkarram Jafri Secretary of HRRC Board Audit Committee (BAC): Central Region South Region North Region  Mr. Imtiaz Ahmad Pervez Chairman  Mr. Abdulrahman Shehab Member  Mr. Salman Ahmed Member Regional Mr. Manager Hanif Asharf Secretary to BAC MR Amjad Ali Branch Manager Board Risk Committee (BRC):Mr Muhammad Arshad Mr Muhammad Arshad  Mr. Tariq Hamid Chairman  Mr. Imtiaz Ahmad Pervez Member  Mr. Nadeem Amjad Khan Member  Mr. Syed Tariq Husain Member Operational Manager Foreign trade Manager Credit & Marketing Umer Musadiq Mr. Federico Tuaber MR AsadMember Meer Manager  Mr. Ayyaz Ahmed Secretary to BRC Mr Hafiz Ullah Khan Shari'a Advisor: Assistant Manager MR Irfan  Justice (R) Khalil-ur-Rehman Khan Assistant Manager Officer MR Aamir MR Salman A/c opening Mufti Officer Abdullah Najeebul Haq Siddiqi Miss Anum

Cash Officer Mr Raheel

Clearing Officer Mr Ramzan MANAGEMENT HIERARCHY

Clearing Officer Mr Saqib Page 25 of 69 DEPARTMENTS & SERVICES

OPERATION DEPARTMENT

It is also called front office. The ABPL’s operations department has number of interrelated departments that works together to achieve the specific goals and objectives of the organization. The ABPL has built hierarchical system that Operation department perform functions relating to

 Clearance

 Settlement

 opening of accntous

 collecting the bills for Government

 Collecting the fees on the behalf of universities and other agency functions.

This department keeps customer records and handles the day-to-day monitoring of margin positions.

It basically divided into these sub departments.

 Deposits/account department  Cash department  Clearing department  Remittances department All these departments come under the operations, which is headed/ controlled by the Manager Operations. These are are sub departments but jointly known as operation department.

Page 26 of 69 DEPOSITS DEPARTMENT

CATEGORIES OF ACCOUNTS: Bank offer following type of account to their customers. Individual accounts: Individual accounts are the most common personal investment accounts. Opened by single person. Joint Account: A joint account occurs when two or more than two customers have one account. Theparties to a joint account are considered in law as they are one person. Business accounts: Business accounts can be opened by institutions, companies, partnerships, trusts and non-profit organizations. Following documents are required.

TYPES OF ACCOUNTS: Deposits are collected by opening account. Major types of accounts offered in ABPL are following:-  Current Account  Saving account  Profit and loss saving account  Khazana accont

 Foriegn currency account

Page 27 of 69  Current account  Saving account

 Term Deposit Account

Current Account: This type of account is payable to the customer on demand, hence called currentliabilities due to their nature. No profit is given at this account. Minimum amount for opening these types of accounts is normally about Rs: 1,000/-.

Saving account: Saving account of two types is offered in ABPL  P & L saving account  Khazana account PLS Saving Account: The objective of saving account is to inculcate the saving habit in the general public because profit is paid with fix rate of 5.25%. Khazana account: It is same like PLS Saving Account with difference that profit rate is decided on monthly, quarterly, half yearly or yearly basis according to the terms of the account. Note The rate of profit is high if the term of taking profit is haigh e.g profit rate of quarter will be less than the half year term account. Foreign Currency Accounts (FCAs) Foreign Currency Account in ABPL can be opened in three major currencies of the world,i.e., U.S. Dollars, European Euro and UK Pound Sterling. Only authorized branches of ABPL can deal in foreign currency account. The accounts can be opened both by Pakistancitizens and foreigners by introduction and following other procedures required for general accounts

Page 28 of 69 with one exception for foreigners that they will have to submit a copy of their passport. Amount deposited in the foreign currency account must be in four currencies, which are mentioned earlier. When the customer will withdraw the money,he/she will receive the amount in the same foreign currency/profit will also be in thesame foreign currency.There are two types of foreign currency accounts:

 Current Account  Saving Account These accounts are treated in the same manner as Pak Rupee Accounts.

Term Deposit Accounts In this category Fixed or Term Deposit accounts are offered by the bank. In these types of accounts the deposit can be withdrawn after a specified period of time. Since the amount in these types of accounts is deposited for a fixed period so the bank can easily invest them in any profitable activity and can get return because there is no burden of withdrawal by the customer.

OPENING OF ACCOUNT Following is the procedure to open an account Requirements for Opening an Account:  At the time of opening an account the customer must have following characteristics:  Must be an adult/adult guardian.  Must not be bewared under any law from entering into any contract.

Page 29 of 69  Should be known to the any of the banking staff according to KYC policy. Account Opening Procedure: The following procedure is followed for opening of all the accounts.  Filling of the application form.  Signing the specimen card/SS Card.  Submission of proper legal documents.  Allotment of account number.  Issuing of check book. Method of Judging the Fraud:  The original CNIC card is checked.  For more confirmation,after scanning the photocopy of CNIC copy it is mailed to headoffice. Head office sends back the verysis after confirming it from NADRA  Face is matched with the picture on the ID card.  Expiry of the CNIC is also checked.  The signature of the customer is checked. In case if customer is illiterate then his photo is attached and thumbs expression is given.  After the account is opened a letter of thanks is issued to the customer.

Purpose of sending letter of thanks: The purpose is verification of address If the customer had given the wrong address the letter will come back and the account is marked as doubtful.

TYPES OF ENTITIES: Bank offer account of following types to these entities.  Individual account  Businessman

Page 30 of 69  Salaried person  Student  Minor  House wife  Photo account  Joint account  Sole proprietorship  Partnership  Public /private Ltd. Company  Trust/club/society  Others

DOCUMENTS REQUIRED

The following documents are required from the different type of customers.It is important to mention that documents are demanded from customers with a view to ensure the source of income of respected entity.

Types of documents

Two types of documents are demanded from respected entity.

 Business documents

 Personal documents

HOW TO CLOSE AN ACCOUNT

Procedure for closing an account:

 The customer can close the account. The customer is required to submit an application for closing the account. Then the account is closed out

Page 31 of 69 and his balance is paid to him after deducting the Closing charges Rs. 232 and the application is filed in Account closing file.

 Internal circular is circulated in the whole branch for checking if any liability arises.

 If any liability existed then account can’t be closed.

Cheque book is returned back to bank and the officer cancel and the remaining cheques in cheque book by marking the stamp VOID. And all other facilities if the customer was taking from the customers are surrendered.

The range of checks in the checkbook returned is also jot down in the account closing form.

After deducting the account closing charges and bringing the balance of account being closed to zero the statements of all the years are printed out.

Acoount closing form is attachd with account opeing form of relevevnt account and the account apening form is mar

I used to learn how my instructor keeps the record of check book being issued to customer and remaining cheque books in hand.

General Rules for Various Types of Accounts Following are some general rules, which are applicable to all kinds of accounts:

 Not more than one account of each category may be opened in one and the same branch except joint account with any other individual.

Page 32 of 69  In the event of the death of an account holder the credit balance in the account shall be paid to the legal heirs of the account holder.  The account holder wishes to close the account should surrender all unused checks.  In case of minor account, when minor become major then it is responsibility of bank to close its minor account and open simple account  If a person is agriculturist then he is required to submit FARD  Any professional is required to submit the proof of hie professionalism for example Doctor is required to submit MBBA certificate or appointment letter  If some one for example labor does not have any strong evidence or proof of his earning then he is required to submit application having request of opening account

CASH DEPARTMENT The Major function of this system is Receipts & payments to the customers, on behalf of their account, through Cheque or any other negotiable instruments.The cash system mainly encompasses following areas:  Receipts  Payments Receipts: The Account holder deposits in their accounts through a deposit slip. The deposit slip contains the account number and the title of account. The amount in figure and words is also written on both side of the slip. The customer then deposits the amount to the cashier, which is dully signed by the cashier and an officer .At last amount is deposited in customers account. Payments: Kinds of checks:  Cross cheques

Page 33 of 69  Ordinary cheques

CLEARING DEPARTMENT The function of this department is getting payment of check, demand draft, paymentorder, telegraphic transfer, mail transfer or dividends warrants deposited by the customer of the branch and other branch of the same bank. SBP acts as a clearing house. Clearing House In Pakistan, State bank of Pakistan acts as Clearing House to settle the claims of the different banks through their representatives and this function was earlier performed by the National Bank of Pakistan where there is no branch of SBP but now National Institutional Facilitation Technologies (NIFT) is performing the function of Clearing House for all the Banks including ABPL. Clearing Procedure The following procedure is fulfilled for clearing items.  All instruments for collection (check, drafts, pay orders, etc) received for clearing tobe deposited by the customers are be entered on the bank’s general pay-in slip alongwith all the details, especially the bank name/code and the document number. The clearing official of the bank affixes the bank’s crossing and clearing stampsalong with his/her signature.  All these instruments are sorted and posted in the system.  The next day they are presented for clearing in NIFT.  In case there is no objection the customers account is credited.For dishonored instrument the fine is charged from the customer

REMITTANCES DEPARTMENT

The function of the remittance department is the transfer of money/funds from onebank/branch to the other.

Page 34 of 69 Modes/Instruments of Remittance The Bank of Punjab, like other Commercial Banks undertakes to remit or transfer moneyfrom one place to any part of the country and outside the country. The money is remitted mostly by means of:  Demand Draft (DD)  Pay Order (PO)  Mail Transfer (MT)/Telegraphic Transfer (TT)  Outward Bills for Collection (OBC)  Inward Bills for Collection (IBC)

Demand Draft (DD) A demand draft is an order instrument issued for payment of a certain sum of money tothe order of certain person and drawn on one office of the bank by another office.It is made by the banks against payment of cash. The bank recovers different types of charges from the applicant on issuance of DD, covering its commission and other postal charges. Pay Order (PO) It is a check drawn by a bank on itself. The payment orders are generally issued for thepayment with in the city where payment through checks is not possible. The bank chargesfixed commission for clearing this instrument. Mail Transfer/Telegraphic Transfer These are the faster ways to transfer money. The following procedures are fulfilled in thisregard:-  Check the test numbers at the arrival  Verify the signatures of the bank official.  Entered in the relevant register.  Make payment.  In Telegraphic transfer the specific codes are exchanged by the bank official ontelephone but this is normally not followed. Outward Bills for Collection

Page 35 of 69  Bills sent to other cities’ banks for clearing are called outward bills for collection.  Checks are entered in the OBC register, the number is written and clearing stamp is affixed along with the test number entry.  The OBC advice is prepared.  The respective checks are attached with the advice.  This is sent to the relevant city.  Upon clearing that bank credits the bank account and gives advice to the bank. Inward Bills for Collection  Bills received from other banks out of city for the local clearing are called inward billsfor collection.  The bank received the clearing advice along with the check/draft.  The checks/drafts are recorded in the inward mail and entered in the IBC register.  The checks are lodged for clearing.  After realization the advice is mailed to the branch and its account is credited.

Foreign Remittances To facilitate its customers in the area of Home Remittances ABPL has taken a number of measures to Increase home remittances through the banking system and Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries. CREDIT DEPARTMENT

Credit department deals with funded and non funded facility. In other words it can be said that it covers with both long-term and short- term

Page 36 of 69 requirements. Murabha, Istasna and Salam meet working capital needs whereas Ijarah and Diminishing Musharakh fulfill long-term financing requirements for plant and machinery.

As an Islamic Bank the Credit department of ABPLprovides the goods to the customers not cash like Conventional Banks which makes the transaction Halal according to the Islam. Credit is divided into the following Categories:

 Funded  Non-Funded Basic rules for Murabaha financing:

The following are four basic rules for the implementation of Murabha contract according to Islam,

 Asset to be sold must exist.

 Sale price should be determined.

 Sale must be unconditional.

 Assets to be sold: should not be used for un-Islamic purpose, should be in ownership of the seller at the time of sale, and should be in physical or constructive possession of the seller.

Types of Murabaha Murabaha sale is divided into two types: Ordinary Murabaha sale:

Page 37 of 69 There are two parties to it, the seller and the buyer. The seller is an ordinary trader who buys a commodity without depending on a prior promise of purchase, and then he displays it for Murabaha sale for a price and a profit to be agreed upon.

Murabaha sale connected with a promise:

There are three parties to it. The seller, the buyer and the bank as an intermediary trader between the buyer and the seller. The bank here does not purchase unless the buyer specifies his desire and a prior outstanding promise to purchase.

The mode of Murabaha sale connected to a promise is used by the Islamic banks which undertake the purchase of commodities according to the specifications requested by the customer and then resell them on Murabaha to the one who promised to buy for its cost price plus a pre-agreed profit. There are different forms to the application of Murabaha sale connected to a promise of purchase. Some of these forms are determined by whether the promise is binding or not. Other forms are determined by how the bank receives the commodity in the case of the first sale. The bank may receive the commodity directly or through one of its agents or it can authorize the buyer to receive the commodity.

Features:

 Flexible repayment terms

 Competitive pricing

 Fixed/Reducing balance basis

 Minimum Murabaha finance: USD 50,000/-

Page 38 of 69  Variable tenors

 Demand Promissory Note.  Provisional Transactional Note.  Bill  Cheque / DD/ PO The following are the other charge documents,

 Personal Guarantee  Demand Promissory Note (for total)  GFCA  Statement of Lien  Statement of Set off

 Agent/Customer informs ABPLthat it has purchased cotton of Rs.10 Million and has also taken its delivery/possession on the bank’s behalf. The Agent then makes an offer to purchase it at Rs. 15 Million to be paid after one year by signing the Declaration and submits  Murabaha purchase evidence in the form of an invoice, bill or some other documentary evidence. ABPLsells the goods to the customer on Murabha (i.e. cost plus profit basis). Negotiation:

Exporter comes to the bank and submits the shipping documents along with LC (letter Of Credit) exporter bank received the documents with LC. Checks the documents with LC, take indemnity or guarantee from the exporter and after approving from the branch manager and head office, gives value of the

Page 39 of 69 documents to the exporter. In other words negotiation means payment of documents in export by the bank to the beneficiary (exporter).

FOLLOWING BODIES MAKES THE ROLES AND REGULATIONS ABOUT LC

State bank manual:

State bank foreign exchange manual 2002 states the roles and regulations which guide how the transaction would be carried out across the border.

International Chamber of Commerce:

International chamber of commerce make a set of rules about Liberalization; Energy; IT, E-Commerce and Telecommunications; Transport, Shipping and Logistics; IPR and Copyright, and Arbitration.

ISBP 2002: The widely acclaimed International Standard Banking Practice (ISBP) for the Examination of Documents under Documentary Credits was selected in 2007 by the ICCs Banking Commission. First introduced in 2002, the ISBP contains a list of guidelines that an examiner needs to check the documents presented under the Letter of Credit. Its main objective is to reduce the number of documentary credits rejected by banks.

UCPDC GUIDELINES: Uniform Customs and Practice for Documentary Credit (UCPDC) is a set of predefined rules established by the International Chamber of Commerce (ICC) on Letters of Credit. The UCPDC is used by bankers and commercial parties in more than 200 countries including India to facilitate trade and payment through LC.UCPDC was first published in 1933 and subsequently updating it throughout the years. In 1994, UCPDC 500 was released with only 7 chapters containing in all 49 articles. The latest revision was approved by

Page 40 of 69 the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCPDC600, formally commenced on 1 July 2007. It contains a total of about 39 articles covering the following areas, which can be classified as 8 sections according to their functions and operational procedures.

In negotiating a contract, an exporter must determine who is to meet the various charges as they are incurred. The more common terms of contract are:

C & F (cost and freight):

It means that the price will include the cost of goods and freight paid in connection with the delivery of goods on board the carrying vessel for unloading at the port or airport of destination named in the contract. Documents needed are:

 Commercial invoice.  A full set of bills of lading evidencing that the goods have been shipped on board the carrying vessel and stating that freight has been paid by the exporter. FOB (free on board):

It means that the exporter has only arranged the space and shipped the goods without payment of freight. Thus the freight charges are to be paid by the consignee at the port or airport of destination.

IMPORT

There are three types of import:

 Letter of credit  Firm’s contract  Advance payment

Page 41 of 69 LC (Letter of credit):

It means guarantee to pay by the issuing Bank if either of the parties (importer or exporter) defaults/unable to pay at sight (immediately /arrival of documents) or at payment in due date in acceptance.

Advance payment:

In advance payment method the exporter is trusted to ship the goods after receiving payment from the importer.

Cash in advance before shipment may seem to be the most desirable method of all, since the shipper is relieved of collection problems and has immediate use of the money if a wire transfer is used. Payment by check, even before shipment, may result in a collection delay of four to six weeks and therefore frustrate the original intention of payment before shipment. On the other hand, advance payment creates cash flow problems and increases risks for the buyer. Thus, cash in advance lacks competitiveness; the buyer may refuse to pay until the merchandise is received.

Advance Payment

LC

Contract

REMITTANCES

Remittances are of two types:

 Inward Remittance.  Outward Remittance.

Page 42 of 69 Inward Remittance :

The Bank receive inward message through SWIFT for credit to the beneficiary account being maintained either in Pak rupees or FC account. In case of Pak rupees account mentioned in the SWIFT Message. The receiving bank converts the FC account into Pak rupees by applying TT Buying Rate of the value date of that day.

Remittance Outward :

Until and unless special approval /permission have being granted by SBP. The FC amount can be duly remitted through FC account only by depositing FC cash.

IJARAH

Ijarah means “to give something on rent.” It is a long term financing agreement”

Mode of Financing

The chosen mode of financing would be the Ijarah agreement, where the Bank acquires an asset (plant & machinery, vehicle) and the rents it to the client for an agreed period.

Car Ijarah in ABPL

 A rent arrangement is executed between the AIB and applicant (customer), where the Bank will provide an asset (vehicle) after the mutual agreement to the term laid down the Ijarah contract.

Page 43 of 69  The customer agrees to a monthly payment (rent) to the Bank for use of the vehicle. At the completion of the agreed period, the Bank gives the customer an option to purchase the asset (vehicle).

The following table details some of the macro-features of the applicable mode of financing:

Documentation of Ijarah

There are a number of documents involved in an Ijarah financing transaction.

The following documents are required for the approval of credit.

 Credit Application

 CIB

 Other Bank Opinion

 Spread

 Last Three Years Financials

 Borrowers Basic Facts Sheets (BBFS)

 Request Letter (RL)  Call Report  Risk Rating

Transactional documents for Ijarah are as follow:

 Purchase Agreement

Page 44 of 69  Agency Agreement.  Possession Report.  Description of assets Report.  Demand Promissory Note.  Provisional Transactional Note.  Bill  Cheque / DD/ PO The following are the other charge documents,

 Personal Guarantee  Demand Promissory Note (for total)  GFCA  Statement of Lien  Statement of Set off

Diminishing Musharaka

Musharaka is a contract whereby the bank and a customer agree to combine their financial resources for the establishment or running of a business or project, or for undertaking any type of business activities. The two parties agree to manage the project in accordance with the terms of the contract. The profit or loss will be apportioned between the parties pro rate their participation in the invested capital. Unlike the sharing of loss, the sharing of profit may be or may be not pro rata the share of the parties in the capital, depending on the additional work or responsibilities that either of the two parties may shoulder.

In a Diminishing Musharaka the banks share decreases gradually as a result of a gradual sale of its shares to the customer against the payment of installments. The bank makes profit by selling the share at a price which is higher than its original value.

Page 45 of 69 TYPES OF SECURITIES

The word security means any thing given to protect or safeguard the repayment of an advance and to justify this term the thing so given should itself be safe; otherwise the object for which it is given is defeated.

The ABPLusually takes three types of securities from its customers just for the sack to secure its client’s deposits

These types are: -

 Pledge

 Hypothecation

 Mortgage

In each case the bank does not become the owner of the, property but the bank has only the right over the property until the borrower makes payment of his debt.

Pledge:

In a pledge, the possession of the property but not the ownership passes to the creditor. The pledgee is entitled to the exclusive possession of the property until the debt is repaid but the ownership remains in the pledgor subject to the pledgee’s right.

Hypothecation:

In case of hypothecation, the property in goods is charged as security for a loan from the bank. But the ownership and possession is left with the borrower. In case of hypothecation, neither the property in goods and nor the possession of property pass to bank, but only the security is granted in a

Page 46 of 69 form of letter of hypothecation, which usually gives the banker'’ charge on the hypothecated goods.

Mortgage:

In a mortgage, the property in the thing mortgage is conveyed to the mortgagee conditionally. The possession, until default in repaying the loan, generally, remains in the original owner subject to the mortgagee’s rights.

MY AREA OF INTERNSHIP

I did my internship in banking sector, AlBaraka Bank Pakistan Ltd. , Gujranwala branch situated at Anwar Industrial Complex, G.T Road.

ABPL is working in Pakistan as a foreign bank since 1991; in Gujranwala it starts its work from 31st December, 2007. This branch within a short time gets better position in market. During my internship I got the opportunity to work in different departments like

 OPERATIONS DEPARTMENT  CREDIT DEPARTMENT  FOREIGN TRADE DEPARTMENT I learnt a lot about the practical work of different departments under the supervision of the department managers. I was given full authority to do tasks so I gained a lot by the favor of certain individuals at bank. Although I worked in all these departments but I gained most from foreign trade department due to the manager of the department because he was very cooperative and adept in his work. And I also give the credit to the branch manager who gives me freedom to go all the departments for learning

My work

As I have mentioned earlier that it is mendatory for the students of masters of commerce to join internship for the period of six weeks. The purpose is to

Page 47 of 69 learn the things practically. To fulfill this requirement I choosed the banking sector. As i studied the subject of Islamic banking in my 2nd semester so I was curious to know the real working of Islamic banking.

I was fully ambitious to learn maximum in this short spam of time. To achieve my ambition I choosed the Islamic bank abpl Gujranwala branch situated at Anwar Industries Complex, G.T Road. I feel it necessary to describe that the manager of branch and the credit and marketing department were too much cooperative and helping. It made workme feel confident and I was able to work in all the departments freely.

During my internship branch manager go for UMRA and the credit & marketing manager worked in place of him he was too much co-operative and motivated us to learn as much as you can and assured us for any kind of help if needed. He also assured us for any kind of help needed for preparation of report.

During my internship I worked in three departments

 Foreign trade department  Credit department  Operations department

Page 48 of 69 First work

At first day I was very passionate as after giving my last semester I was going to last step of my masters of commerce. Now it was time of practically viewing the working of an organization. During my internship I came to know that there is a big difference in real working and bookish knowledge.

I spend my first week in foreign trade department. Here Mr. ASAD MEER guided us as he is foreign trade manager in this branch. he shared us his views about the need of the establishment of this department. In this department I was able to know about the activities involved for import and export in the foreign trade department.

In this department I keenly observed all the documents involved in import. I also asked the meaning of some technical terms found in these documents and there purpose. He told us the whole process of import in detail. We did not learn too much about export as he said that the process of export is exactly opposite to the process opf import.

Mr ASAD MEER also told us the regulating laws of foreign trade which are followed durion the whole process of import. I also viewed the registers in which entries are made.

FOREIGN TRADE DEPARTMENT

First thing I learned was letter of credit, and then I viewed import and export documents.

LETTER OF CREDIT:

Letter of credit is the guarantee given by the importer bank to the exporter bank that if the importer fails to pay the money, the importer bank also called Applicant’s bank pay on his behalf.

TYPES OF L/C:

There are several methods for making payment of an import or export transaction. These are listed below:

Page 49 of 69  Irrecoverable Letter Of Credit The issuing bank (importer’s bank) gives a lasting undertaking to accept and pay bills drawn upon it, to the exporter, upon fulfilling the terms and conditions stipulated in the Letter of Credit (LC). It gives complete protection to the exporter.

 Recoverable Letter of Credit The issuing bank (importer’s bank) can modify the LC without any obligation on its part. These are usually not accepted by the exporters.

 LC at sight When exporter ships goods and present documents of shipment in its bank, exporter sends these documents to importer’s bank. Importer has to make payment within 5 working days. In case of default, foreign bank can claim markup. This is called LC at sight.

2nd day we ask Mr. ASAD MEER about the remaining types of LC. He was tolding us in very detailed way. The remaining kinds of LC are:  LCDA It is supplier credit LC. It facilitates importer. Payment is made at predefined future date which may be 30, 60, 90 days. Goods are delivered before payment. Acceptance arrangement is made b importer’s bank.

 Deferred payment LC It is just like LCDA but no acceptance is involved. Importer bank sends schedule to exporter bank of deferred payment according to phases defined. Pre defined date is not given as production may be completed earlier.

 Transferable LC In transferrable LC, exporter can transfer full LC or part of it.

 Non-Transferable LC In this kind, LC cannot be transferred to any other party.

 Confirmed Letter of Credit

Page 50 of 69 This kind of LC has the protection of the credit standing of the importer’s as well exporter’s banks. The exporter’s bank which confirms this LC, takes full responsibility of making payment if the importer’s bank fails to do so.

 Unconfirmed Letter of Credit Though the issuing bank gives a commitment to honor the drafts, however, it does not give any guarantee. From the exporter’s point of view confirmed irrecoverable LC is the best form of receiving payment.

As there are so many kinds of LC it was a new thing 4 me so I was feeling it difficult to digest them easily so the concerned manager advised us to revise the work of previous 2 days. So In my 3rd day of internship I revised the previous 2 days work and learned about some other kinds of LC briefly.

Some other kinds are:

 Freely negotiable LC  Clean LC  Special LC  Red clause LC  Green clause LC  Documentary LC  Fixed LC  Revolving LC  Back to Back LC

Other modes like L/C

L/C transfers equal risk to parties involved that’s why it is considered favorable as compare to others.

Page 51 of 69 Open account:

In this mode, major risk is of exporter. As he sends goods before receiving payment, importer may or may not make payment. No bank is involved in this transaction. Payment is made simply through accounts of businesses.

Import contracts:

It is just like L/C. transaction is committed between importer and exporter. Importer submits import contract to bank just like Performa invoice. Security of supplier is less as compare to L/C. importer’s bank does not give any acceptance, payment is only made when importer makes payment. A certificate is issued by the importer named registration of certificate. It is for security of supplier.

Advance payment:

Importer makes payment in advance. Major risk is of importer, as exporter may or may not send goods, or he may send improper goods. To avoid any discrepancy resulting from cultural or language differences, HS-code is introduced. Formerly ITC was applied.

Communication system

In ancient times L/C was used to send through Letter head of business. Then it was used to send through “Telex”. It is just like typing machine. More reliable system of communication is “SWIFT”.

L/C confirmation

It is needed in case of any issue which may be political or economical. If L/C is not being used by a renowned bank, beneficiary bank may ask for confirmation from renowned bank. Security is given by both of the banks. Confirmation charges are charged by confirming bank. upon confirmation, L/C may be accepted

Codes used by SWIFT:

707- Amendment

Page 52 of 69 103- Funds transfer

202- Bank to bank payment

700- Credit issue

Modes of shipment

Shipment is made mostly through sea as it is economical as compare to other shipments. Modes of shipments are as follows:

 Shipment through sea  Shipment through air  Shipment through road  Shipment through rail  Shipment through truck etc. Documents of shipment

 Bill of lading is prepared in case shipment is made through sea. This bill is prepared by booking officer or agent or captain of ship. Usually 4 copies are prepared each for exporter, importer, importer’s bank, captain.  Air way bill is prepared in case shipment is made through air.  If shipment is made through truck, truck receipt is prepared. In 4th day of my internship I asked them the payment methods he told us that there are many modes of payments which are offered to customers according to the needs of customers.

MODES OF PAYMENT

There are four modes payments which are as follows:

 Deferred Credit  Sight Credit  Acceptance Credit

Page 53 of 69  Negotiation Credit Deferred Credit The draft is issued by the importer and presented to the bank by the exporter along with documents (bill of loading, invoice, and insurance). The payment is made by the bank on maturity of draft.

Sight Credit The draft is issued by the importer and presented to the bank by the exporter along with documents (bill of loading, invoice, and insurance). The payment is made by the bank if it finds the documents correct.

Acceptance Credit Bank confirmed that document has been received and payment would be made within certain time period.

Negotiation Credit The issued L/C can discount at any bank and got the amount money that he required against L/C issued by the bank.

SHIPPING GUARANTEE

In case documents are not received by the importer and goods have been reached on the port. Authorities inform the importer to get goods immediately. Importer may request importer’s bank to issue shipping guarantee. Bank guarantees at his request and ensures that documents will be presented when received. It is called shipping guarantee.

In 5th day of my 1st week I learned about the main documents of which are asked by ICC and some other rules of ICC which are applied between whole process of import and export. He also told us about some terms which are used in foreign trade world.

IMPORTS & EXPORTS Main document is UCP for DC according to ICC publication # 600. ICC is regulatory body. Its head office is located at Paris. All countries are its members. UCP is set of rules to avoid complications & discrepancies among countries.

Page 54 of 69 Rules of ICC: URR--means uniform rules for reimbursements

URC-- means uniform rules for collection

URDG-- means uniform rules for demand guarantees

These rules are applicable internationally. Some of them are being followed in Pakistan.

Foreign exchange regulations:

General rules:

Foreign exchange rules

Special rules:

Import policy order

Export policy order

Inco terms: (international commercial terms)

It is series of ICC. New series is Inco term 2010. It defines liabilities of seller and buyer. Inco terms come with price quotations.

 FOB  CFR/CNF/C&F  CIF  FAS  DAF  DDU  FOT  CPT

Page 55 of 69 Terms allowed in Pakistan are FOB and CFRIn my last day of internship at foreign trade department I understand some ending processes of import and export and then I spend the remaining time in discussing some other issues related to import and export.

IMPORTS

When the goods arrive at port or dry port, the importer will file the Bill of Entry giving the detail of imports, Value of imports, Rate of duty & Tariff.

Customs appraisal officer will carry out an assessment of goods according to the rules/tariff manual. Depending upon the assessment following taxes will be remitted by the importer: Custom duty based upon ad valorem, specific rate or both. Sales tax - 15% of ad valorem + custom duty.

With-holding tax 4% of ad valorem + custom duty + sales tax, Regulatory duty as imposed by the government from time to time under the power of customs act.

EXPORTS To dispatch the shipment, the exporter will submit shipping bill. The customs appraisal officer will examine the goods for correctness of declared description, value, and claimed duty drawback. Thereafter the goods will be allowed for shipping.

I spend my third & fourth week of internship in Credit department. In this department I came to know the main purpose and benefit of the establishment of this department & the necessary points which are kept in mind while deciding that the credit should be granted or not. During my internship I concluded that it is the toughest department of the bank. Here I learned about the different modes of Islamic financing & about the facilities for which the credit is granted keeping in view the important points in mind as before granting credit different activities are performed on basis of which it is decided that credit should be granted or not e.g customer rating sheet is made which includes the rates assigned to different indicators.

Page 56 of 69 I also viewed the documents involved while performing activities in this department.

2 ND WEEK

I spent 2nd week in credit authorization department and 1 st day I learned about the documents of credit, I keenly observed them which raised many questions in my mind I cleared some of them some of those documents are as follows:

 Transaction document

 Charge document

 Title documents

Transaction documents:

Murabahah: General sale and purchase

Ijarah: Rental based transaction is involved

In second day in this department I learned about different modes of Islamic financing.

ISLAMIC MODES OF FINANCING:

Murabahah:

An agent is appointed, a document named “agency agreement” is signed b the agent appointed by the bank. Agent goes into the market and selects the required goods from the market and informs the bank. Bank purchases this on behalf of customer and sell it to the customer, who is also agent of the bank. In Murabahah, cost is known to the customer. Profit is also declared to the customer.

Ijarah:

Ijarah is basically rental based. Car is rented out to the customer for specific time period which may be 3, 4, 5 years. Customer pays the rent. Ownership is not transferred in this case. If customer uses this even for number of years it will not come under the ownership of the customer. Only price is declared to the customer.

Musharakah:

Page 57 of 69 It is just like partnership. Two or more partners share their investment and profit. Profit is distributed in agreed ratio.

Mudaraba:

Two parties are involved in this case. One party invests capital in the business and other party provides services. Services may be related to managing of money to earn profit for the business.

 Rab-ul-Maal is the investor

 Modarib is the person who gives services and manages the money

At 3rd day in this department I learned about the sale based products

SALE BASED PRODUCTS:

Salam:

Order is placed and payment is made in advance before goods are produced and delivered. Payment is made in full only.

Istisna:

Production starts after placement of order and payment is made when goods are delivered. Manufacturer uses its own material to produce goods. Payment can be made in installments or in full.

In 4th day of 2nd week I revised the previous 2 days work as te concerned manager was busy and I assuming it as an opportunity I questioned him about previous ambiguities.

In 5th day of this department I learned about the main points which are kept in mind while taking decision that credit sould be granted or not.

Credit authorization:

Three operations are performed:

 Identify existence of opportunity

 Assessment of person reputation in market

 Valuation of person through dealings

Page 58 of 69 Valuation of customer is done through checking tangible and intangible securities.

Securities are of two kinds, prime security and secondary security.

In 6th day which was my last day in this department I learned about the different risks involved in taking any decision related particularly related with the credit granting also learned about the documents involved for performing the whole credit process.

There are three types of risks:

 Current risk

 Business risk

 Operations risk

After approval of credit, documents to be attached are:

Personal guarantee

This guarantee is given by any person. In case of default in paying back loan, that person wills pay the loan amount on behalf of client.

General financing

It includes the parties of financing like customer and bank and they are interested in what kind of financing is also mentioned.

Letter of lien

It means, take the right of accounts to charge.

Letter of set off

This letter is for payment of stamp charges.

Sanction advice

It contains information about sanctioning of advance. What amount of finance is sanctioned and it will be paid. It is prepared after approval of loan and is signed by the client. All above documents need signature from the client.”

DORMANT ACCOUNT:

Page 59 of 69 In case banker do not operate his account or do not make any transaction for six months, his account will be blocked apparently. Letter is sent to the customer one month before blocking account, this letter is called “pre-dormant letter”. After blocking, a letter is also sent to the customer, which is called “post-dormant letter”.

If he wants to activate his account, he needs to sign the request and perform at least one transaction. No charges are deducted by the bank. He needs to submit his CNIC copy.

KNOW YOUR CUSTOMER:

A transaction profile is maintained by the bank in which important data relating to customer is included. The data entered may be “no of possible transactions performed during the month” and “total amount of these transactions”. Source of income and nature of business is also mentioned in this. If the customer has to transact more than the defined limit because of expansion in his business, the bank update “KYC”. If customer transact more than the defined limit and does not inform the bank, the bank may inquire this. Customer sometimes transacts their black money to convert it to white money. To avoid this, concept of KYC was introduced.

4 TH WEEK

I spent second week in operation department doing billing and remittances. Operations officer gave me some knowledge about these things. Purpose of these products is to ensure safe payment. It is in favor of payee only. There are less chances of its miss use because these can be deposited only in payee account. in case of loss, bank will be responsible.

DEMAND DRAFTS (DD)

DD is a written order given by the branch of the bank on behalf of the customer to other branch of the same bank to pay the certain amount to the customer. DD are issued for the particular place other than place of issuance. A draft is a Cheque drawn by a bank on its own branch or any other branch of another bank at a different place requesting it to pay on demand a specified amount of money, which is already received, to the person named on it. DD is of following two types:

 DD payable  DD Paid Suspense a/c

Page 60 of 69 In the first type as advice reaches for payment the immediately pay to the customer while in later as DD presented by the customer, it is paid and the suspense account is debited.

Documentation:

A printed application form is provided for filling in completely and signing by the applicant. After depositing an amount of draft and commission of the bank, duly completed and signed by two authorized officers, then it is handed over the applicant and credit order is dispatched to drawer branch. Following are the pre-requisites for the processing of DD:

 Bank Serial No  No. of Rs.60 Postage charges  0.02% Withholding tax In 2nd day of 4th week I learned about the other clearing instrument called as pay order in detail and also get knowhow about CDR.

PAY ORDER For this kind of remittance the payer must have the account in the issuing bank. Pay order are more liquid as compared to cheques because cheques may be dishonored while PO can’t be. It is written order issued by the bank drawn and payable on itself. It is used for local transfer of money from one person to another person. The public also uses it for depositing money with Government or Semi Government department.

Documentation:

The party who requires a pay order will get a printed application from the bank. He will fill it and deposits the amount and commission. The bank charges are same as on demand draft.

 Bank Serial No.  No. of PO  Central No.  0.02% withholding tax In case DD and PO gets dormant after 6 months of issue. Dormant account needed to revalidate. Issuer should go to drawer branch and request for revalidation, bank changes the date and

Page 61 of 69 authorized signatory signs the document again. Credit advice is generated having information about company on which it is generated in the favor of which company. One copy is sent to drawee branch and the other is sent to head office.

CALL DEPOSIT RECEIPT:

Bank has no advantage of issuing DD and PO. CDR is issued for Govt. contracts. CDR can be issued only to account holder

This day I learned about other clearing instruments known as Bills collection.

BILL COLLECTIONS

Bills department performs the following functions.

 Inward Bills for Collection (IBC)

 Outwards Bill for Collection (OBC)

Inward bills for collection (IBC)

These are bills or cheques etc., which are collected locally. They are received from outstation branches banks and parties. If intercity clearing services of NIFT are not available in the area in which branch of our bank is located. Cheques and DD’s are sent through IBC & OBC.

Outwards bill for collection (OBC)

These are bills or cheques etc., which are sent intercity for collection.

Clean bills:

These are negotiable instruments, drawn on outstation branches, bills sent for collection on behalf of the customers i.e. cheques, drafts or treasury bills etc.

Documentary bills:

These are bills accompanied by documents such as R.R.T.R Bills of landing etc. having title to goods, collected by the bankers on behalf of their customers.

4th day I learned about clearing , its types, its documents and stamps marked in detail.

CLEARING

Page 62 of 69 In old times one representative of each bank had to go to SBP every day for record of clearing. This was hard task to perform. To avoid this time taking task, SBP made contract with OCS and made an institution called “NIFT”.

Representative of “NIFT” collects outwards in the evening and provide inwards in morning time.

Types of clearing:

Inward clearing:

Checks of Al-Baraka bank if submitted in other banks, those banks sends the checks to Al- Baraka bank for clearing, this is called inward clearing.

Outward clearing:

Cheques of other banks if submitted by customer in Al-Baraka bank, the bank sends cheques to other banks for clearing, this is called outward clearing. It is drawn by our bank on other.

Local clearing:

Within city clearing is named as local clearing.

Same day clearing:

Cheques having amount more than Rs. 100,000/- can be cleared in same day clearing. Only specific branches are members of same day clearing. If cheques are objectionable, they can be returned back. In this case Standard hours for NIFT service is 24 hours

Inter city clearing:

Clearing between the cities in which NIFT provides its services i.e. Karachi, Lahore, Peshawar, Gujranwala etc. if cheque is cleared through intercity clearing, there will be no deduction in the amount of cheque. Standard hours are 48.

If SBP does not play its role in clearing then NBP is authorized to perform this function.

Instruments of clearing:

 cheque

 Pay order

 Demand draft

Page 63 of 69  Challan form

Stamps on clearing cheque:

 Stamp of crossing

 Stamp of clearing

5th day I was absent while 6th day I spent in clearing my ambiguities and revising the work done in this department.

CREDIT

Work done in 5th week

I spent 5th week in credit & marketing department with Assistant vice president of the bank. Mr. Hafeez Ullah Khan in this department I got the opportunity to learn about how bank valuate their customers before lending them money.

1st day I spent in this department in learning its objective of learning and existence and how a customer is captured.

CREDIT & MARKETING

Main objective of this department is to identify the parties who are interested to get loan. After identifying them, bank investigates whether that party has the capability and willingness to pay back the loan. I viewd the documents and information needed For this purpose.

2nd day I learned the main objective of financial institutions and came to know that it is very important for an economy.

Functions of financial institutions

Main functions of financial institutions are as follows:

 To enlarge economy

 To make flow of funds more better

Financial system is a system which ensures the flow of funds between demanders and suppliers of funds. It creates interface between supplier and demanders of funds.

Page 64 of 69 Categories to perform lending function

 Credit marketing

 Risk management

 Credit administration

This day we properly started to learned the real working of this department.

CREDIT MARKETING:

Main objective of this category is the identification of clients in the market who needs credit. The main role of this category is “to develop credit portfolio for investment of money”.

RISK MANAGEMENT:

In this category risk attached to credit is managed. Main role of category is “risk evaluation of proposal and if it matches to credit rules of SBP”.

CREDIT ADMINISTRATION:

Main role of this category is the “legal documentation of risk management”.

Analysis performed:

 Economic analysis

 Industry analysis

 Firm analysis

If bank want to lend some amount to a specific firm, it needs to analyze the economy at first, then it need to analyze the whole industry. After that analysis of the firm is conducted. In analyzing we do see two things, one is Risk and other is Return.

Financial system hesitates to give credit to dying industry or sector like textile etc. rising industry is food and livestock. It would be beneficial for banks to give credit to this industry.

4th day I learned the main thing of this department and that was the process of developing a relationship with a customer.

Develop relationship:

Page 65 of 69 After identifying particular industry, we find ways to create relationship with that industry. For developing relationship, the following tasks are performed like:

 Detail study of credit rating

 Identify the risk involved

 Identify areas of risk

Components of credit:

 Capacity of repayment

 Willingness to pay

5th day I spent in discussing my various queries related with my previous work done in this department and then learned about the 5c’s of credit analysis which are kept in mind while granting money to any customer.

5 C’s of credit analysis:

 Character

Personal attributes of any person are determined in this analysis.

 Capacity

Capacity to repay is checked through this.

 Cash flow

Operating cycle to generate cash flow is determined to find that whether person has sufficient cash to repay.

 Capital

Company’s equity against debt is determined to find that whether the firm’s position

 Conditions

Past, present and future condition of firm is determined.

Page 66 of 69 Bank sometimes conduct PEST analysis to make decision of lending. PEST means political, economical, social and technological analysis.

6th day I further discussed queries which were arised in my mind and learned more which something was new for me.

CPRMG:

It stands for credit policy and risk management group. Function of risk management is performed by this group in head office of bank. This group implements the credit risk policy and manages risk. It tells the bank, to which industry bank should advance credit.

 It ensures the credit policy implementation

 It manages deviations from policy

In credit policy deviation, CPRMG checks that whether the procedure adopted is according to policy defined and if there is any deviation. It gives approval upon certain terms and conditions.

Credit authorization department checks the compliance of terms and conditions given by CPRMG relating to issues of credit and its approval.

6th C added to credit risk components is “collateral”, which is security against credit. It is the most latest in components.

WORK DONE IN 6 TH WEEK

6th week was last week of my internship. During internship, I was relatively confident as I keenly observed the overall operations of branch and concluded that it is better than its other branches. The evidence of this is that this branch stood 2nd in profitability in central zone.

I got very good experience there because of cooperative environment. I conducted detailed SWOT analysis and became capable to discuss it in my report. I discussed this analysis with employees of bank and they were agreed to me. I also collected some annexure for my report and got my letter of internship. I spent time in all departments and asked some questions relating my internship.

During internship I did some following practical work:

 I filled deposit-clips

Page 67 of 69  I reviewed and rechecked the particulars of account opening form

 I reviewed the forms of dormant account

Employees have been very cooperative to me in all my internship. Their cooperative nature and politeness is the key to success for them.

LAST DAY AT BANK

Last day is full of happiness because it was a tiring job for me to sit the entire day one place I appreciate the employees who did not get irritated from sitting for hours.

I enjoyed to learnt a lot from bank but I personally dislike to have this as my profession as I fed up to see same routine duties there is less opportunity to gain much knowledge as does teaching job entail.

Last day I personally went to each person who guided me during this short time of my internship. And presented the thank you card to them

Thank God I have completed my internship successfully!!!

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