The Islamia University of Bahawalpur, Pakistan. Page 1 of 300
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Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique Executive Summary The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 1 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique Executive Summary: The whole period of my internship at Bank Islami and the preparation of this report have been really helpful in making me understand Islamic and conventional banking in theory and in practice and my experiences are so vast that I have no words to express them. A bank is a financial institution that accepts deposits and channels those deposits into lending activities. The Banks primarily provide financial services to customers while the main goal is enriching investors. Today banks work in a hybrid fashion providing a variety of services to their customers to yield heavy profits. A valuable advice I learned on the way was; “The days of conventional banking are long gone; it’s the era of customer oriented banking.” Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari'ah and its practical application through the development of Islamic economics. The principles which emphasize moral and ethical values in all dealings have wide universal appeal. Interest free banking is a narrow concept denoting a number of banking instruments or operations, which avoid interest. Islamic banking, the more general term is expected not only to avoid interest-based transactions, prohibited in the Islamic Shariah, but also to avoid unethical practices and participate actively in achieving the goals and objectives of an Islamic economy. The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 2 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique Islamic banking system is based on risk-sharing, owning and handling of physical goods, involvement in the process of trading, leasing and construction contracts using various Islamic modes of finance. As such, Islamic banks deal with asset management for the purpose of income generation. They will have to prudently handle the unique risks involved in management of assets by adherence to best practices of corporate governance. In order to insure that these principles are followed, each Islamic institution must establish and provide itself with an advisory council known as a Sharia'a Board. BankIslami Pakistan Limited (the Bank) was incorporated in Pakistan as a public limited company on October 18, 2004 under the Companies Ordinance, 1984 to carry out business of an Islamic Commercial Bank in accordance with the principles of Islamic Shariah. BankIslami is the Joint venture project of 3 groups with 18.75% equity each, namely Jahangir Siddiqui & Co. Pakistan, DCD Group UK, & Dubai Bank. Irrespective of stiff competition in the market the Bank has successfully managed to grow over 400% during last one year. BankIslami has become a hallmark of innovation and bringing new products and services in the market and by introducing the Bio-Metric ATM facility it became the first bank of the region to offer such services and till date no bank has been able to replicate this service. BankIslami has been able to form a strong image of having authentic basis for its banking operations by using smart marketing ideas that resonate well with the public mind. All branches of BankIslami have the same look and feel irrespective of location. The bank boasts an excellent technological ground for its operations and has a very robust streamlined way of operating. Its staff being kept highly motivated by various strategies and its human resource department, the bank always seems to leave almost all its customers with a smile over their face. The experience whether for an internee or an employee or a customer is always unique and stisfying in its own way. The banks employees play on the human way of thinking naturally since they are a young energetic team collaborating with another instead of redundant conflict siezed people in other organizations. The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 3 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique My eperience with the bank was phenomenal and unforgettable at the same. I loved it and enjoyed the best I could throughout the whole journey of learning and knowledge. It felt as I have vividly expressed throughout my report as though I was always part of a bigger commitment to serve and yet it boosted my individuality to work with its team as well. I felt as though for a brief time period, this technical breathing corporate system accepted me as family, aloowed me on its deepest systems and gave me the opportunity to walk on my own before I am ready to face the big world myself. Thanking the bank simply just seems so less for all this. Nothing short of incredible is the way in which Bank Islami Pakistan Limited functions. The more I learned through my internship, the more I came to respect it. Just as a living creature, the bank survives in the corporate world. I have grown a somewhat thorough understanding ofcourse about the working of the bank and have presented my humble views, time and again where required, to highlight further steps necessary in strengthening this magnificient organization. Over to the end of my wonderful saga of learning and quest of knowledge I have undoubtedly establighed evidently enough that Bank Islami is a force to reckon with in the indusrty and has the best people working for it in the banking sector. Its philosophy of service is truly evident in its sops and surely it compels out of every mind: “Serving You; the Right Way!” The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 4 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique Introduction of Organization The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 5 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique History of Banking and Its Origin History: Banks date back to ancient times. The first banks were most probably the religious temples of the ancient world, and were most likely established sometime during the third millennium B.C. Banks perhaps predated the invention of money, initially deposits consisted of grain and later other goods like metals(gold). Temples were considered the safest places to store gold as they were well built, constantly attended and protected from thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. Banks in Persia and other territories in the Persian Sassanid Empire issued letters of credit known as Sakks during the 3rd century AD. Muslim traders are known to have used the cheque or Sakk system since the time of Harun al-Rashid (9th century) of the Abbasid Caliphate. In the 9th century, a Muslim businessman could cash an early form of the cheque in China drawn on sources in Baghdad, a tradition that was significantly strengthened in the 13th and 14th centuries, during the Mongol Empire. After the fall of Rome, banking was abandoned in western Europe and did not revive until the time of the crusades. The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472. The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 6 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique What is a Bank? A bank is a financial institution that accepts deposits and channels those deposits into lending activities. The Banks primarily provide financial services to customers while the main goal is enriching investors. Government restrictions on financial activities by banks vary over time and location. Banks are important players in financial markets and offer services such as investment funds and loans. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. Today banks work in a hybrid fashion providing a variety of services to their customers to yield heavy profits. The days of conventional banking are long gone; it‘s the era of customer based banking. Size of Global Banking Industry Today: Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009 financial year to a record $96.4 trillion while profits declined by 85% to $115bn in adverse market conditions. The United States has the most banks in the world in terms of institutions (7,085 at the end of 2008) and possibly branches (82,000). As of Nov 2009, China's top 4 banks have in excess of 67,000 branches (ICBC:18000+, BOC:12000+,CCB:13000+,ABC:24000+) with an additional 140 smaller banks with an undetermined number of branches. Japan had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000 branches—more than double the 15,000 branches in the UK. The Department of Management Sciences The Islamia University of Bahawalpur, Pakistan. Page 7 of 300 Internship Report of BankIslami Pakistan Limited. Internee: Mr. Owais Shafique Islamic Banking What is Islamic Banking? There is no standard way of defining what is an Islamic bank is, but broadly speaking an "Islamic bank is an institution that mobilize financial resources and invest that money in an attempt to achieve pre-determined islamically - acceptable social and financial objectives.