ACKNOWLEDGEMENT For the completion of our report I am indebted to plenty of people for their very sincere cooperation that they extended to me at various stages. First and foremost problem that every student faces is the selection of a Report. I am very thankful to my supervisor Mr. Mr. Asad Shahjan for helping me out in time of confusion. During our course and the execution of my report, I had a real chance to learn from his vast experience and immense knowledge. I am very thankful to staff members of Bank Islami Branch Mansehra that they guided and provided me valuable information regarding my report especially Mr. Shafqat Hussain (operational manager). Finally I am thankful to the most merciful and Almighty Allah who gives me the strength that I fulfill my task efficiently. 1
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ACKNOWLEDGEMENT
For the completion of our report I am indebted to plenty of people for their very sincere
cooperation that they extended to me at various stages. First and foremost problem that every
student faces is the selection of a Report. I am very thankful to my supervisor Mr. Mr. Asad
Shahjan for helping me out in time of confusion. During our course and the execution of my
report, I had a real chance to learn from his vast experience and immense knowledge.
I am very thankful to staff members of Bank Islami Branch Mansehra that they guided and
provided me valuable information regarding my report especially Mr. Shafqat Hussain
(operational manager).
Finally I am thankful to the most merciful and Almighty Allah who gives me the strength that
I fulfill my task efficiently.
1
EXECUTIVE SUMMARY
A good banking system plays important role in development of country’s economy. The aim
of this report is to show knowledge and observation of study during my six weeks internship.
During internship I came to know about procedures and activities of banking.
Bank Islami Pakistan limited is publically listed company was established on October 18,
2004 in Pakistan.
The report is divided into different chapters that cover all aspects of Islamic banking sector.
The first chapter describes purpose and background of study.
Second chapter shows the department’s products and value added services offered by BIPL.
Third chapter is about activities performed and learnt by internee during period of internship.
Fourth chapter is about financial analysis of different statements of BIPL and their
comparison with another Islami bank i.e. Meezan bank limited.
Fifth chapter is about SWOT analysis of BIPL and its cornparison with MBL.
Last chapter consist of weaknesses and recommendations which is necessary for bank to
being change in order to satisfy their customers.
BIPL is one of the few banks in Pakistan which has authentic deposits franchise, and offering
both wholesale and retail banking products and services through its wide network.
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LIST OF ACRONYMS
BIPL Bank Islami Pakistan Limited
SBP State Bank of Pakistan
IPO Initial Public Offering
ATM Automated Teller Machine
DD Demand Draft
PO Pay Order
CDR Call Deposit Receipt
RTC Rupees Traveler Cheque
NIFT National Institution al Facilitation Technology
NTN National Tax Number
CNIC Computerized National Identity Card
IBCA Inter Branch Credit Advice
SWOT Strength, Weaknesses, Opportunities, Threats
WTC World Trade Center
MBL Meezan Bank Limited
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Table of Contents
Chapter No. Contents Page No.
Chapter No. 1 Introduction of Study
1.1 Background of Study
1.2 Purpose of Study
1.3 Research Methodology
1.4 Scheme of Study
Chapter No. 2 Introduction to Banking
2.1 Banking in Pakistan
2.2 Overview of Organization
2.2 a Bank Islami Idea
2.2 b Accreditation by Sate Bank of
Pakistan
2.2 c IPO of Bank Islami
2.2 d Network expression
2.3 Nature of Organization
2.3 a Deposited Franchise
2.3 b Technology Infrastructure
2.3 c Management Team
2.4 Business Volume
2.5 Financial High Lights at Glance
2.6 Share Holding Structure
2.7 Future Prospects of Organization
2.7 a Vision Statement
2.7 b Mission Statement
2.7 c Objectives
2.7 d Strategic Planning
Chapter No. 3 Product services and Departments
3.1 Introduction
3.2 Departments
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3.2.1.1 Nature of the Deposits
3. 2.1.2 Procedures for account opening
3.2.1.3 Remittances Management
3.2.1.4 Cash Management
3.2.2 Credit Department
3.2.2.1 Musharakah Financing
3.2.2.2 Mudarabah Financing
3.2.2.3 Working Capital Finance
3.2.3 Consumer banking
3.2.3Online Banking
3.2.3.1 Inter Bank Transfer Fund
3.2.3.2 ATM or Debit Card
Chapter No. 4 Analysis
4.1 Financial Analysis of BIPL through
statements
4.2 Ratio Analysis
Chapter No. 5 SWOT Analysis
5.1 SWOT Analysis of BIPL
5.2 Comparison of SWOT Analysis of
BIPL with MBL and Albaraka Bank
5.2.1 SWOT analysis of MBL
5.2.2 SWOT Analysis of Albaraka Bank
5.3 Comparison
Chapter No. 6 Findings and Recommendations
6.1 Weaknesses of Organization
6.2 Recommendations
References
Annexure
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Chapter No. 1
INTRODUCTION TO STUDY
1.1 Background of study
Bank Islami was established on October 18, 2004 in Pakistan and is the second full-fledge
Islamic commercial bank in Pakistan and expanding its branches throughout the country and
also offering different products to customers.
1.2 Purpose of studies:
The purpose of study is to get information about structure and functioning of
department of BankIslami limited Pakistan
To analyze, intercept and evaluate the financial data of BIL and comparing these data
or information with current financial practice.
To analyze the operations done in each department of BIL and work there practically.
To evaluate financial performance of BIL and compare it with other Islami Banks.
To improve the interpersonal communication skills.
1.3 Research Methodology
In this study data is collected through primary as well as secondary sources but mostly
information is based on my personal observations which help me to collect the data about this
specific branch.
Primary sources:
Discussion with customer manager and interview taken from staff numbers.
Personal observation.
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Secondary sources:
Most of the useful information was obtained from already available manuals, journals,
website of organization, annual reports, of BIL etc. information regarding bank policies,
procedures and rules can be obtained from bank’s records and documents.
1.4 Scheme of study:
The report is divided into five chapters
1st chapter is about introduction of study, which includes its background, purpose
research methodology, introduction to BankIslami including its nature, performance,
business volume, objectives and strategies.
2nd chapter is about departments of bank including account opening department, cash
3rd chapter is about activities performed by interne.
4th chapter is about SWOT and financial analysis of bank and comparison with other
banks and also including ratio analysis.
5th chapter is about shortfalls of organization and recommendations.
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Chapter NO.2
Introduction to banking
Banks are very useful for utilization of country’s resources and for growth of economy.
Banks help in capital information by deposit surplus from public and advance these surplus in
form of loans to businessman and industrialists, agriculturists under different scheme.
There are different views about origin of word banking. Some says it deceived from an Italian
word “banque” means bench. According to other view it derived from German work “bane”
means a joint stock firm.
According to Growther, there are three ancestor of banker i.e.
The Mechanls the gold smith, money lenders.
In short bank is a financial institution at lower rate of interest and give at higher rate of
interest to those who need them.
Banking in Pakistan
Banking is one of the fastest growing industries in all over the world. Banks play important
role in economic development of country.
Pakistan Banks Association established in 1953, its main objective is to co-ordinate the
efforts of banking industry. At the time of partition, Pakistan was in difficult situation to run
its own banking system with out resources. Therefore it was recommended that reserve bank
of India have continue to wok in Pakistan until 30th September 1948. Before establishment of
SSBP all banking activities were conducted by reserve bank of India. By 1970, Pakistan
started flourishing in banking sector. Now all banks follow and are working under banking
ordinance 1962 and controlled by SB and now there are three types of banks sewing in
Pakistan i.e. Government banks, Private banks and Foreign banks.
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OERVIEW OF THE ORGANIZATION
Bank Islami-The Idea:-
The idea of BankIslami was conceptualized by Jahangir Siddiqui & Company Limited and
DCD Group in late 2003. The idea was formulized by Mr. Hassan A. Bilgrami, appointed as
Adviser to the sponsors on March 16, 2004. A detailed business plan was then prepared and a
formal application was submitted to the State Bank of Pakistan on May 26, 2004. On
September 26, 2005, Dubai Bank joined the Sponsors and became one of the founding
shareholders of BankIslami by investing 18.75% in the total Capital.
Accreditation by State Bank of Pakistan:
The State Bank of Pakistan issued a No Objection Certificate on August 19, 2004 and
BankIslami Pakistan Limited, the second full-fledge Islamic Commercial Bank in Pakistan,
was established on October 18, 2004 in Pakistan.
BankIslami Pakistan Limited was the first Bank to receive the Islamic Banking license under
the Islamic Banking policy of 2003 on March 31, 2005. The Bank focus on Wealth
Management as the core area of business in addition to Shariah compliant Retail Banking
products, Proprietary and Third party products, and integrated financial planning services.
Initial Public Offering of BankIslami:
BankIslami Pakistan Limited made a public offering of Rs. 400 Million, at par, from 6th to
8th March. The Initial public offering (IPO) of BankIslami received great response from the
general public as the applications received were 9 times higher than offered, fetching nearly
Rs. 3.5 Billion, against the demand of Rs. 400 Million.
Network Expansion:
BankIslami started its operations on 7th April 2006 with its first branch in SITE, Karachi.
9
The Bank had 10 branches, nine in Karachi and one in Quetta by the end of 2006. By the end
of year 2007, its branch network grew to 36 branches in 23 cities. In 2008, the Bank opened
66 new branches nationwide which expanded its network to 102 branches in 49 cites. This
gives BankIslami the distinction of having the fastest expanding network in Pakistan.
NATURE OF THE ORGANIZATIONNATURE OF THE ORGANIZATION
BankIslami Pakistan Limited is the 2BankIslami Pakistan Limited is the 2ndnd largest Islamic Bank in Pakistan. It offers both largest Islamic Bank in Pakistan. It offers both
wholesale and retail banking products and services through its distribution network.wholesale and retail banking products and services through its distribution network.
Deposit FranchiseDeposit Franchise
BIPL is one of the few banks in Pakistan which has a genuine deposits franchise. Instead ofBIPL is one of the few banks in Pakistan which has a genuine deposits franchise. Instead of
targeting large, rate sensitive accounts, BIPL as strategy focused on retail customers who aretargeting large, rate sensitive accounts, BIPL as strategy focused on retail customers who are
stable, less rate sensitive and loyal. Current and Saving Accounts recorded impressivestable, less rate sensitive and loyal. Current and Saving Accounts recorded impressive
growth. Even growth in Fixed Deposits was propelled by our five and ten depository productsgrowth. Even growth in Fixed Deposits was propelled by our five and ten depository products
which now accounts for 21% of the deposit base.which now accounts for 21% of the deposit base.
BIPL technology infra-structure was further strengthened during the year with fullBIPL technology infra-structure was further strengthened during the year with full
deployment of state of art shariah complaint core banking system, iMAL. BIPL is the largestdeployment of state of art shariah complaint core banking system, iMAL. BIPL is the largest
user of Linux in Pakistan which has helped to have a stable, cost effective platform compareduser of Linux in Pakistan which has helped to have a stable, cost effective platform compared
to their peers. BIPL market share in ATM transactions has improved to 11to their peers. BIPL market share in ATM transactions has improved to 11 thth position amongst position amongst
1-LINK members1-LINK members
Management TeamManagement Team
Most of the BIPL's senior management team has had work experience at global banks andMost of the BIPL's senior management team has had work experience at global banks and
10
have strong execution track record.have strong execution track record.
Profit/ Loss before tax 44.54 (579.66) 233.00 102.89
Taxation 2.01 89.83 177.55 64.29
Profit/ loss after tax 46.55 (489.82) 55.45 (38.60)
Balance sheet
2010 2009 2008 2007
Assets 45,036 34,272 19,085 14,446
Financing 16,670 10,457 6,343 3,931
Deposits 38,198 27,987 12,478 9,934
Share Capital 5,280 5,280 5,280 3,200
Shareholder fund 4,766 4,725 5,188 3,843
Number of staff 1,347 1,471 1,188 563s
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2010 2009 2008 2007
Number of branches 102 102 102 36
Total DepositsRS in million
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2008 2009 2010
Total AssestsRS in million
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2008 2009 2010
13
Total Financing RS in million
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2008 2009 2010
Branck Network RS in million
0
20
40
60
80
100
120
2008 2009 2010
SHARE HOLDING STRUCTURESHARE HOLDING STRUCTURE
Sponsors:Sponsors:
Bank Islami is a joint venture among three shareholders namely, DCD Group, DubaiBank Islami is a joint venture among three shareholders namely, DCD Group, Dubai
Bank & Jahangir Siddique & Co. Ltd. Bank & Jahangir Siddique & Co. Ltd.
14
SHARE HOLDERSSHARE HOLDERS RS IN MILLIONRS IN MILLION %%
Dubai bank PJSCDubai bank PJSC 1,310.531,310.53 24.8224.82
Jahangir Siddique & Co LimitedJahangir Siddique & Co Limited 1,112.561,112.56 21.0721.07
DCD GroupDCD Group 1,028.481,028.48 19.4719.47
M.Hssan A BilgramiM.Hssan A Bilgrami 5.81 5.81 0.11 0.11
BankIslami is strongly committed towards its core values of:
Product authenticity
Customer focus
Meritocracy
Integrity
Team work
Humility
Innovation
Vision StatementVision Statement
“The Vision of BankIslami is to be recognized as the leading Authentic Islamic Bank”“The Vision of BankIslami is to be recognized as the leading Authentic Islamic Bank”
Mission StatementMission Statement
The Mission of BankIslami is to create value for our stakeholders by offering Authentic,The Mission of BankIslami is to create value for our stakeholders by offering Authentic,
Sharia Compliant and Technologically advanced product and services. We differentiateSharia Compliant and Technologically advanced product and services. We differentiate
ourselves through:ourselves through:
AuthenticityAuthenticity
InnovationInnovation
Understanding our Client's needUnderstanding our Client's need
Commitment to excellence, andCommitment to excellence, and
Fast, efficient and seamless delivery of solution. As a growing institution, theFast, efficient and seamless delivery of solution. As a growing institution, the
foundation for our performance lies on our human capital and BankIslami remainsfoundation for our performance lies on our human capital and BankIslami remains
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committed to becoming an employer of choice, attracting, nurturing and developingcommitted to becoming an employer of choice, attracting, nurturing and developing
talent in a transparent and performance driven culture.talent in a transparent and performance driven culture.
Objective:Objective:
To achieve sustained growth and profitability in all areas of business. To build andTo achieve sustained growth and profitability in all areas of business. To build and
sustain a high performance culture, with a continuous improvement focus.sustain a high performance culture, with a continuous improvement focus.
To develop a customer service oriented culture with special emphasis on customerTo develop a customer service oriented culture with special emphasis on customer
care and convenience.care and convenience.
To effectively manage and mitigate all kinds of risks inherent in the banking business.To effectively manage and mitigate all kinds of risks inherent in the banking business.
To maximize use of technology to ensure cost effective operations, efficientTo maximize use of technology to ensure cost effective operations, efficient
management information system, enhanced delivery capability and high servicemanagement information system, enhanced delivery capability and high service
standards.standards.
To manage the bank portfolio of the business to achieve strong and sustainableTo manage the bank portfolio of the business to achieve strong and sustainable
shareholders return and to continuously build share holders value.shareholders return and to continuously build share holders value.
To explore new avenue for growth and profitability.To explore new avenue for growth and profitability.
Strategic Planning:Strategic Planning:
To comprehensive plan for future to ensure sustained growth and profitability.To comprehensive plan for future to ensure sustained growth and profitability.
To facilitate alignment of the vision, mission, corporate and with the business goals.To facilitate alignment of the vision, mission, corporate and with the business goals.
To provide strategic initiatives and solutions for projects, products, policies andTo provide strategic initiatives and solutions for projects, products, policies and
procedures.procedures.
To provide strategic solutions to mitigate weak areas and to counter threats to profits.To provide strategic solutions to mitigate weak areas and to counter threats to profits.
To identify strategic initiatives and opportunities for profits.To identify strategic initiatives and opportunities for profits.
To create and leverage strategic assets and capabilities for competitive advantage.To create and leverage strategic assets and capabilities for competitive advantage.
Future prospectus is to improve risk management, which considered being one of theFuture prospectus is to improve risk management, which considered being one of the
17
essentials for sustainable success in the business. Based on the risk managementessentials for sustainable success in the business. Based on the risk management
guidelines issued by state bank of Pakistan; a risk management strategy has beenguidelines issued by state bank of Pakistan; a risk management strategy has been
developed for accessing and mitigate / controlling risk.developed for accessing and mitigate / controlling risk.
Chapter No. 3
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PRODUCT, SERVICES & DEPARTMENT
3.1 Introduction
BankIslami Mansehra branch is newly opened branch in Mansehra city; also bankIslami
history is not too much old. It’s all about to 5 to 6 year old. The organization of BankIslami
Mansehra branch is a complete banking system but it is covering modern technologies like
ATM. This banking system is collection of interrelated departments that works together to
achieve the objectives of the organization. BankIslami is a hierarchical system in that it
includes other sub departments and these are integrated to work together.
In the internship of six weeks I worked in different departments to see how the practical work
is done and compared it with the theories I studied during my bachelor courses. Each
department has its own importance and value to the organization. But the basic thing was that
departments have to integrate to improve the performance.
3.2 DEPARTMENTS:
BankIslami Mansehra branches divided into different departments.
• Credit Department
• Operations Department
• Consumer Banking.
a) Credit Department
The main purpose of this department is to extend loans to its clients for the productive
purpose. Credit Department is also called Corporate Banking Group.
Bank is offering different type of financing in her branches. This type of financing are based
upon Islamic mode of financing. Just like MUSKUN home financing, Islami Auto Ijara-new
vehicle and same with imported vehicles.
b) Operations Department:
Operations department of the BankIslami is responsible for the overall operations of the bank,
Total other expenses 1,918,661 1,766,120 1,033,895 510,590 159,28
8
44,543 (562,909) (229,152) (100,463) (34,39
9)
Extra ordinary / unusual items
LOSS BEFORE TAXATION 44,543 (562,909) (229,152) (100,463) (34,39
9)
42,268
Taxation -Current - (12,549) (87) (4,004) (1,021)
-Prior years (4,276)
-Deferred 2,007 96,519 176,309 67,444 27,332
46,550 83,970 176,222 63,440 26,311
LOSS AFTER TAXATION (592,225) (478,939) (52,930) (37,023) (8,088)
Accumulated loss brought forward (9,310) (98,307) (45,377) (8,354) (4,529)
Accumulated loss carried forward (554,985) (577,246) (98,307) (45,377) (12,61
7)
Horizontal Analysis
32
Cash and Cash Balances
Cash and cash balances are increasing every year.
Balances with other banks:
Balances are increased in 2006 and 2007 and decreased in 2009 and 2010. It is due to
advances and investments. These two years BIPL used these funds in investments and
advances rather than keeping balances with other banks.
Investment:
BIPL investment are increased years by years for last five years . The reason is fewer funds
are used in investment in fully paid up shares of listed companies and unlisted terms finance
certificates.
Advances:
In BIPL there was increase in advances year by year.
Operating fixed assets:
Operating fixed assets are increased through out years
Other assets:
Ratio of the other assets is also showing the trend towards increase for last five years data.
Liabilities:
Bills payable:
In BIPL five years comparison of bills payable shows that in the year 2004 to 2007 ratios are
slightly increase but in year 2008 & 2009 it increased quickly.
Ø Other liabilities:
Ø It also shows the increase
Ø Share Capital:
Ø In BIPL share capital increased in 2004 but remains the same in 2008 to 2010.
33
Horizontal Analysis of the profit and loss account
Markup/return/interest expense
There is an increase in 2007 to 2010 in the markup/return/interest expense because return on
deposits are increased due to increase in rate on deposits and increase the amount of fixed
deposits.
Administrative Expense
The administrative expenses are increasing every year because of expansion of the branch
network.
4.2` Ratio Analysis
Liquidity Ratios:
Liquidity represents the ability of a bank to efficiently and economically accommodate
deposits withdrawal as well as fund increase in assets.
1-Current Ratio:
The current ratio measures the number of the firms current assets cover its current liabilities.
Current ratio = Current assets / Current Liabilities
2006
Current Assets 2,103,975
Current liabilities 243,779
34
Current Ratio 863.07%
2007
Current Assets 5,436,837
Current liabilities 668,465
Current Ratio 813.33%
2008
Current Assets 5,365,639
Current liabilities 1,418,824
Current Ratio 37818%
2009
Current Assets 11,449,108
Current liabilities 1,559,100
Current Ratio 734.34%
2010
Current Assets 1,21,64,583
Current liabilities 20,70,997
Current Ratio 587.37%
Analysis of Current ratios of BIPL
Current ratio shows a firm's ability to cover its current liabilities with its current assets. If
value of current ratio is grater then one it means that firm can pay all its current liabilities
from its current assets but if value of current ratio is less then one it means that firm is unable
to pay its currents liabilities from its current assets. For last five years current ratio in BIPL
35
are strong.
2-Working Capital Ratio
Working capital is the difference between current assets and current liabilities.
Working capital is used to check liquidity of the organization.
Working Capital = Current Asset- Current Liabilities
2006
Current Assets 2,103,975
Current Liabilities 243,779
Working Capital 1,860,196
2007
Current Assets 5,436,837
Current Liabilities 668,465
Working Capital 4,768,372
2008
Current Assets 5,365,639
Current Liabilities 1,418,824
Working Capital 3,946,815
2009
Current Assets 11,449,108
Current Liabilities 1,559,100
Working Capital 9,890,008
2010
Current Assets 1, 21, 64,583
Current Liabilities 20, 70,997
36
Working Capital 1, 00, 93,586
Analysis of Working CapitalAnalysis of Working Capital
Working capital is better in 2010 which means that assets are utilized more efficiently inWorking capital is better in 2010 which means that assets are utilized more efficiently in
2010 as compared to other years.2010 as compared to other years.
Cash RatioCash Ratio
Cash and cash equivalent are the most liquid assets. It is used check the liquidity of theCash and cash equivalent are the most liquid assets. It is used check the liquidity of the
Analysis of cash ratio of BIPLAnalysis of cash ratio of BIPL
Higher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. CashHigher cash ratio also shows the higher rate of satisfaction like other liquidity ratios. Cash
ratio is more important liquidity ratio. In 2005 cash ratio was 6.51%, it increased quickly inratio is more important liquidity ratio. In 2005 cash ratio was 6.51%, it increased quickly in
2006 to 28.05%, but it shows declining trend in 2007 to 2009. In 2010 it decreases2006 to 28.05%, but it shows declining trend in 2007 to 2009. In 2010 it decreases
dramatically to 8.007 %.dramatically to 8.007 %.
Leverage RatiosLeverage Ratios
Leverage ratios of a firm show the extent to which a firm finances its operation from theLeverage ratios of a firm show the extent to which a firm finances its operation from the
outside sources and money. The leverage can be determined from analysis of owner equity inoutside sources and money. The leverage can be determined from analysis of owner equity in
business, total liabilities, current and long-term liabilities. Long-term assets and total assetsbusiness, total liabilities, current and long-term liabilities. Long-term assets and total assets
of the business. of the business.
Debt to Total Assets RatiosDebt to Total Assets Ratios
Its shows that how much assets have been financed by liabilities.Its shows that how much assets have been financed by liabilities.
Debt RatioDebt Ratio
Debt Ratio = Total Debt / Total AssetsDebt Ratio = Total Debt / Total Assets
20062006
Total Debts Total Debts 2,021,787 2,021,787
Total Assets Total Assets 4,024,6744,024,674
Debt RatioDebt Ratio 50.2350.23
20072007
Total Debts Total Debts 10,602,74710,602,747
Total Assets Total Assets 14,447,473 14,447,473
38
Debt RatioDebt Ratio 73.3973.39
20082008
Total Debts Total Debts 13,896,77913,896,779
Total Assets Total Assets 19,088,60019,088,600
Debt RatioDebt Ratio 72.8072.80
20092009
Total Debts Total Debts 29,546,47829,546,478
Total Assets Total Assets 34,987,37834,987,378
Debt RatioDebt Ratio 84.4584.45
20102010
Total Debts Total Debts 40,269,31740,269,317
Total Assets Total Assets 45,035,70345,035,703
Debt RatioDebt Ratio 89.4189.41
Analysis of leverage ratioAnalysis of leverage ratio
Financial leverage is the extent to which a firm is financed with debt. In BIPL, 2010 isFinancial leverage is the extent to which a firm is financed with debt. In BIPL, 2010 is
heavily financed because debt was the major source of financing in 2010.heavily financed because debt was the major source of financing in 2010.
Debt to Equity Ratio:Debt to Equity Ratio:
Debt equity is calculated by dividing total liabilities of the bank by the tall owner equity.Debt equity is calculated by dividing total liabilities of the bank by the tall owner equity.
Debt to Equity Ratio = Total debt / shareholders equity or Debt ratio / 1- Debt ratioDebt to Equity Ratio = Total debt / shareholders equity or Debt ratio / 1- Debt ratio
Analysis of the Debt to equity ratioAnalysis of the Debt to equity ratio
Greater the debt greater risk for the firms shareholders. In 2006 risk for the shareholders wasGreater the debt greater risk for the firms shareholders. In 2006 risk for the shareholders was
very low as compared to the other years decrease debt to equity ratio was very small on thevery low as compared to the other years decrease debt to equity ratio was very small on the
contrast risk was very high in 2010 because of heavy financing.contrast risk was very high in 2010 because of heavy financing.
Equity multiplierEquity multiplier
Owner equity to fixed assets ratioOwner equity to fixed assets ratio
“Owner equity to fixed assets ratio” shows that how much money does owner in relation to“Owner equity to fixed assets ratio” shows that how much money does owner in relation to
fixed assets invest. If the owner equity is greater then the fixed assets, it means that ownerfixed assets invest. If the owner equity is greater then the fixed assets, it means that owner
40
finances a part of current assets. When owner equity is less than fixed assets it means thatfinances a part of current assets. When owner equity is less than fixed assets it means that
creditor's obligations have been used to finance a part of fixed assets.creditor's obligations have been used to finance a part of fixed assets.
Total owner equity divided by fixed assetsTotal owner equity divided by fixed assets
Equity Multiplier = Total assets / shareholders equityEquity Multiplier = Total assets / shareholders equity
Analysis of the equity multiplierAnalysis of the equity multiplier
41
In BIPL it is a better in 2010 it means that bank has about 8.53 in total assets of 100 ofIn BIPL it is a better in 2010 it means that bank has about 8.53 in total assets of 100 of
equity.equity.
Coverage AnalysisCoverage Analysis
Coverage ratios analysis the ability of a firm to cover or service its financial obligations. Coverage ratios analysis the ability of a firm to cover or service its financial obligations.
Gross Spread Ratio:Gross Spread Ratio:
This ratio shows the firms overall effectiveness of operation. Gross profit divided by netThis ratio shows the firms overall effectiveness of operation. Gross profit divided by net
sales.sales.
20062006
Net Markup / Interest incomeNet Markup / Interest income 81,34381,343
Interest earnedInterest earned 100,008100,008
Gross spread ratioGross spread ratio 81.3481.34
20072007
Net Markup / Interest incomeNet Markup / Interest income 298,218298,218
Interest earnedInterest earned 602,060602,060
Gross spread ratioGross spread ratio 49.5349.53
20082008
Net Markup / Interest incomeNet Markup / Interest income 739,160739,160
Interest earnedInterest earned 1,468,6881,468,688
Gross spread ratioGross spread ratio 50.3350.33
20092009
Net Markup / Interest incomeNet Markup / Interest income 971,722971,722
42
Interest earnedInterest earned 2,193,8912,193,891
Gross spread ratioGross spread ratio 44.2944.29
20102010
Net Markup / Interest incomeNet Markup / Interest income 17, 48,67617, 48,676
Analysis of gross spread ratioAnalysis of gross spread ratio
It is measure of the efficiency of the firm's operation. Gross spread ratio of BIPL is high inIt is measure of the efficiency of the firm's operation. Gross spread ratio of BIPL is high in
2005 as compared to the other years. Only because of low expenses during the year. 2005 as compared to the other years. Only because of low expenses during the year.
Investment to Total assets RatioInvestment to Total assets Ratio
Investment / Total assetsInvestment / Total assets
20062006
InvestmentInvestment 493,008493,008
Total AssetsTotal Assets 4,024,6744,024,674
RatioRatio 12.2512.25
20072007
InvestmentInvestment 3,864,0273,864,027
Total AssetsTotal Assets 14,447,47314,447,473
RatioRatio 26.7526.75
20082008
InvestmentInvestment 5,019,5255,019,525
Total AssetsTotal Assets 19,088,60019,088,600
RatioRatio 26.3026.30
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20092009
InvestmentInvestment 6,813,1916,813,191
Total AssetsTotal Assets 34,286,77134,286,771
RatioRatio 19.8719.87
20102010
InvestmentInvestment 1, 37, 32,1321, 37, 32,132
Total AssetsTotal Assets 4, 50, 35,7034, 50, 35,703
RatioRatio 30.4930.49
Advances to Total Assets RatioAdvances to Total Assets Ratio
Advances/ Total AssetsAdvances/ Total Assets
20062006
AdvancesAdvances 959,133959,133
Total AssetsTotal Assets 4,024,6744,024,674
RatioRatio 23.8323.83
20072007
AdvancesAdvances 3,962,8673,962,867
Total AssetsTotal Assets 14,447,47314,447,473
RatioRatio 27.4327.43
20082008
AdvancesAdvances 6,527,5316,527,531
Total AssetsTotal Assets 19,088,60019,088,600
RatioRatio 34.2034.20
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20092009
AdvancesAdvances 13,282,15213,282,152
Total AssetsTotal Assets 34,286,77134,286,771
RatioRatio 38.7438.74
20102010
AdvancesAdvances 1, 66, 70,1251, 66, 70,125
Total AssetsTotal Assets 4, 50, 35,7034, 50, 35,703
RatioRatio 37.0137.01
In 2010 advances to total asset ratio of BIPL decreases to 37.01.In 2010 advances to total asset ratio of BIPL decreases to 37.01.
Operating Expense RatioOperating Expense Ratio
Non Markup Expense / Gross IncomeNon Markup Expense / Gross Income
20062006
Non Markup ExpenseNon Markup Expense 159,288159,288
Gross IncomeGross Income 124,889124,889
RatioRatio 127.54%127.54%
20072007
Non Markup ExpenseNon Markup Expense 510,590510,590
Gross IncomeGross Income 410,127410,127
RatioRatio 124.50%124.50%
20082008
Non Markup ExpenseNon Markup Expense 1,033,8951,033,895
Gross IncomeGross Income 804,743804,743
RatioRatio 128.48%128.48%
20092009
Non Markup ExpenseNon Markup Expense 1,766,1201,766,120
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Gross IncomeGross Income 1,203,2111,203,211
RatioRatio 146.78%146.78%
20102010
Non Markup ExpenseNon Markup Expense 19, 18,66119, 18,661
Gross IncomeGross Income 19, 63,20419, 63,204
RatioRatio 97.73%97.73%
Cost to Sales RatioCost to Sales Ratio
The ratio is obtained by dividing cost of sales by net sales. The following are the cost of salesThe ratio is obtained by dividing cost of sales by net sales. The following are the cost of sales
of BIPL over five years of operations.of BIPL over five years of operations.
Markup expense divided by markup earned.Markup expense divided by markup earned.
20062006
Markup ExpenseMarkup Expense 18,66518,665
Markup EarnedMarkup Earned 100,008100,008
Cost to sales ratioCost to sales ratio 18.6618.66
20072007
Markup ExpenseMarkup Expense 303,482303,482
Markup EarnedMarkup Earned 602,060602,060
Cost to sales ratioCost to sales ratio 50.4150.41
20082008
Markup ExpenseMarkup Expense 729,528729,528
Markup EarnedMarkup Earned 1,468,6881,468,688
Cost to sales ratioCost to sales ratio 49.6749.67
20092009
Markup ExpenseMarkup Expense 1,222,1691,222,169
Markup EarnedMarkup Earned 2,193,8912,193,891
Cost to sales ratioCost to sales ratio 55.7155.71
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20102010
Markup ExpenseMarkup Expense 20, 57,53320, 57,533
Markup EarnedMarkup Earned 38, 06,20938, 06,209
Cost to sales ratioCost to sales ratio 54.0554.05
Chapter NO 5Chapter NO 5
SWOT ANALYSISSWOT ANALYSIS
5.1 SWOT Analysis of BIPL5.1 SWOT Analysis of BIPL
Due to globalization and management studies now organizations cannot survive until theyDue to globalization and management studies now organizations cannot survive until they
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compete with their surroundings and then internationally. SWOT analysis is the kind of toolcompete with their surroundings and then internationally. SWOT analysis is the kind of tool
which is used to analyze the organization’s performance in relation to its internal and externalwhich is used to analyze the organization’s performance in relation to its internal and external
environment strength; weakness, opportunities and threats face by BIPL are as follow.environment strength; weakness, opportunities and threats face by BIPL are as follow.
StrengthsStrengths
It has a competitive advantage of doing less marketing as compassed to conventionalIt has a competitive advantage of doing less marketing as compassed to conventional
banking and as a result better cost control.banking and as a result better cost control.
For speculative motive less money is used due to which there is reduction in volatilityFor speculative motive less money is used due to which there is reduction in volatility
in investment and chances of investment failure.in investment and chances of investment failure.
It is feasible location wise and geographicallyIt is feasible location wise and geographically
To attract new customers and retain potential customers by beginning innovativeTo attract new customers and retain potential customers by beginning innovative
products and service like BIPL offers e-banking, phone banking etc.products and service like BIPL offers e-banking, phone banking etc.
As bank made on name of Islam in Pakistan so, it have advantage of religious positionAs bank made on name of Islam in Pakistan so, it have advantage of religious position
in a country.in a country.
Saving can be mobilized and increasing deposits of banks using as charities and zakatSaving can be mobilized and increasing deposits of banks using as charities and zakat
fund schemes etc. fund schemes etc.
WeaknessesWeaknesses
To complete with conventional banks a lot of capital is required and large amount of
recourses have to maintain to meet any loss situation in Islamic finance modes of
investment.
To do job efficiently and serve Islamic financial services, training is required for
improving skills of management and staff.
Staff of BIPL is less experienced and young
Work I more than the employee's working houses
Main weakness o BIPL is lack of specialization i.e. employees are rotated from one
job to another job of totally different characteristic
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OpportunitiesOpportunities
Due to Islamic banking new markets have emerged like Islami mortgage, Islamic
insurance and other investment projects etc
BIPL offers value added services and products to customers
ThreatsThreats
Market demand is less as compared to conventional interest based banking.
After 9/11 attacks on WTC environment of Islamic banking in west has declined.
For implementation of Islamic banking a lot of legislation is required especially in
non-Muslim countries.
Increasing competition in Islamic banking sector
Poor economic condition of country.
5.2 COMPARISON OF SWOT ANALYSIS OF BIPL WITH MBL & AL-5.2 COMPARISON OF SWOT ANALYSIS OF BIPL WITH MBL & AL-
BARAKA BANKBARAKA BANK
5.2.1 SWOT ANALYSIS OF MEEZAN BANK:
Strengths
Continued to expand its branch net work.
It is the strength of Meezan bank that I provides healthy and fair working
environment.
Shareholding is very strong.
Full fledged Islamic bank
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Highly invested in technology.
Weaknesses
Charges are very high for different activities as compared to competitors.
Low promotion and advertisement of produce and services.
Restricted shariah based policies.
Few services are offered by Meezan bank as compared to competitors.
There is no credit card facility
No long term relations maintain with customers.
Opportunities
Increasing demand of Islamic financial products and services.
Market share in creases through branch expression through out the country.
Due to Islamic banks (Meezan) people are moving from conventional banking to
Islamic banking.
Threats
Charges in govt policies
Political instability
High interest rate change by SBP
Due to changes in foreign exchange rates value of financial instruments fluctuates
Entry of new competitors.
5.2.2 SWOT Analysis of al-Baraka bank strength:
Commitment to Islamic shariah
Staff are qualified and experience in field of management and banking
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Relationship of manager with staff and staff with customers is quite good.
High job satisfaction
Environment is friendly and co-operative
Senior management is competent.
Weaknesses
Centralized decision making which results loss of confidence among employees and
mgt.
Lack of marketing effort
Less internal recruitment for new posts.
Lack of training at all levels
Lengthy process of recruitment.
Opportunities
Better Management
Location of branch is very suitable place
Proper utilization of internal expertise being major change in organization
Threats
Increasing competition in both domestic and foreign market.
Good job opportunities offer outside attract our current employees.
Other organizations are using better HR Technique.
5. 3 Comparison
Meezan bank has 204 branches through out the country while BIPL has 102 branches
so; Meezan bank has strength of increasing market share in country through
expending its branch net work.
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Meezan bank provides training facility to their staff members as compared to BIPL.
Location wise BIPL is better that Meezan bank.
Work is over loaded to employees in BIPL as compared to Meezan Bank.
Services and financial instruments offered by Meezan bank are charged highly as
compared to its competitor BIPL.
As compared to other conventional banks BIPL,MBL and Albaraka bank are notAs compared to other conventional banks BIPL,MBL and Albaraka bank are not
following marketing strategies like advertisement.following marketing strategies like advertisement.
Few services are offered by Albaraka bank than BIPL and MBL.Few services are offered by Albaraka bank than BIPL and MBL.
Process of recruitment is lengthy in Albaraka and MBL than in BIPL.Process of recruitment is lengthy in Albaraka and MBL than in BIPL.
Chapter NO 6Chapter NO 6
FINDINGS AND RECOMMENDATIONSFINDINGS AND RECOMMENDATIONS
6.1 SHORT FALL / WEAKNESSES OF ORGANIZATION6.1 SHORT FALL / WEAKNESSES OF ORGANIZATION
According to my observation, it is pointed out that there are some short comings inAccording to my observation, it is pointed out that there are some short comings in
BankIslami Mansehra. BankIslami Mansehra.
Low Job Satisfaction:Low Job Satisfaction:
It is becoming clear that the true lasting competitive advantage comes through humanIt is becoming clear that the true lasting competitive advantage comes through human
resources and how they are managed. BIPL is not focusing on this critical issue as the jobresources and how they are managed. BIPL is not focusing on this critical issue as the job
satisfaction level of the employees working at BIPL, was quite low.satisfaction level of the employees working at BIPL, was quite low.
Lack of Specialization:Lack of Specialization:
The employees are constantly rotated from one job to another job of the totally differentThe employees are constantly rotated from one job to another job of the totally different
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characteristic in and they do not have know-how of the working in other unrelatedcharacteristic in and they do not have know-how of the working in other unrelated
departments. But I think this is not a very good tactics used by the management. Otherwisedepartments. But I think this is not a very good tactics used by the management. Otherwise
the situation might be like this “ Jack of all and master none'.the situation might be like this “ Jack of all and master none'.
Centralization:Centralization:
There is a high degree of centralization in the bank. Almost all the decision-making is in theThere is a high degree of centralization in the bank. Almost all the decision-making is in the
hands of the upper management. But centralization is effective up to a certain level otherwisehands of the upper management. But centralization is effective up to a certain level otherwise
it becomes inefficient and at times costly too. I personally observed that delay occurred in theit becomes inefficient and at times costly too. I personally observed that delay occurred in the
operations of the employees only due to the fact that they had not got any instructions fromoperations of the employees only due to the fact that they had not got any instructions from
the head office.the head office.
Lack of Training Facilities:Lack of Training Facilities:
Presently there is no specific training program arranged for the new recruiters. They have toPresently there is no specific training program arranged for the new recruiters. They have to
learn based on their observations and also their mistakes. It takes a bit time for the fresh onelearn based on their observations and also their mistakes. It takes a bit time for the fresh one
to learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetaryto learn the banking the result is huge amount of blunders, mistakes etc. resulting in monetary
and non-monetary losses for the bank. There is pressure not only on the new learner but alsoand non-monetary losses for the bank. There is pressure not only on the new learner but also
on the person placed upon with this responsibility.on the person placed upon with this responsibility.
Less Experienced Staff:Less Experienced Staff:
The no. of experienced and well trained staff is very low. Majority of the staff working in theThe no. of experienced and well trained staff is very low. Majority of the staff working in the
bank branches is quite young and inexperienced. If the bank failed to bring down its highbank branches is quite young and inexperienced. If the bank failed to bring down its high
employees turnover, then it would be lacking the most important resources of an organizationemployees turnover, then it would be lacking the most important resources of an organization
i.e. the experienced staff.i.e. the experienced staff.
Customers unawareness about chargesCustomers unawareness about charges
Mostly customers are unaware about charges for DD, TT, PO etc. so manager should tellMostly customers are unaware about charges for DD, TT, PO etc. so manager should tell
them charges before giving form, through which wastage of time minimize.them charges before giving form, through which wastage of time minimize.
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Overburdened workOverburdened work
Employees are overburdened, so they have to stay at branch till late at night. Due to highEmployees are overburdened, so they have to stay at branch till late at night. Due to high
work load efficiency of employees are effected.work load efficiency of employees are effected.
Lack of appreciationLack of appreciation
Sometimes bank ignored the good performance of employees. If hard work of employees areSometimes bank ignored the good performance of employees. If hard work of employees are
not appreciated, then they become dishearten and losses his interest in work. not appreciated, then they become dishearten and losses his interest in work.
RECOMMENDATIONS
It was an interested experience to do internship in BankIslami Pakistan Limited. The staff
was very cooperative and due to their help I learned big deal about modern banking.
I suggest that such an internship program highly integrative for the students of commerce
education so that the students should be inquired with the knowledge of practice world .I
do summarize that it would be a great help to me in selection of job or future field of
work.
Here I am putting some suggestions, which will enable the bank to compete with other
banks more effectively & efficiently.
It is observed that the employees were overburdened so they have to stay at branch till late
at night. In this way their efficiency is affected and hiring more employees can reduce
their work.
The employees should be assigned jobs for specific period and than they should rotated to
other department so that they gain knowledge/ experience of other jobs.
BankIslami should properly advertise and Communicate to public about the services
provided by it, so that more customers will be attracted.
The bank’s management should give more incentives and pay scale of officers should be
revised & improved.
System and operations should be more defined and organized.
Administration drawbacks should be improved by the strict control of general issues.
Expenditures must be control, which are very high.
BankIslami has not strong position in market. So BankIslami should do heavy
advertisement both electronically and print media to create public awareness.
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Branch manager should also arrange training programmers for existing employees to
improve their performance.
Proper distribution of work should follow to run the organization in smooth way.
There should be a complaint box in bank for hearing complaints of customers because
most of the people feel hesitation to go to manager for complaint.
IT department should be establishing in order to maintain connection with other banks.