Analysis of Financial Reporting on Al Arafah Islami Bank and Islami Bank Bangladesh Ltd

 Statement of the problem

Although modern Islamic banking is considered to be a recent development, Muslims were able to access financial systems operating without interest since the beginning of Islamic history. The system was used to recognize resources, finance productive activities and meet consumer needs. This system has proven to be quite effective during the development of Islamic civilization.

Islamic banks today exist all parts of the world, and are looked upon as a viable alternative system which has many thing to offer. While it was initially developed to fulfill the needs of Muslims, Islamic banking has now gained universal acceptance. Islamic banking is recognized as one of the fastest growing areas in banking and finance. Since the opening of the first Islamic bank in Egypt in 1963, Islamic banking has grown rapidly all over the world.

The purpose of financial statement analysis is to evaluate the financial performance and position of a company and define its strengths and weaknesses by analyzing past and current records of its financial activities. The major benefit of financial statements analysis is that the investors get enough idea to decide about the investments of their funds in the specific company. They are prepared to meet external reporting obligations and for decision making purposes by estimating future risks and potential based on company’s trends and relationships. Financial analysis consists of an examination of financial statements of the company. This includes notes to the financial statements that explain the accounting policies of the company and provide details of how those policies were applied along with supporting details. The examination also includes the auditor’s report which indicates whether audited financial fairly present the company’s financial position in accordance with generally accepted accounting standards.

Business world is becoming very much complex day by day. Without sufficient practical experience business becomes difficult and in some cases impossible. So, in the business world, practical experience is regarded as a media through whom we have an acquaintance with the real world. I have tried my level best to put more emphasis on the welcome pack and its recovery process. This report is to be used only for the academic purpose. I have collected all the necessary and relevant data from various primary & secondary sources. The data is truly and strictly confidential and no one can use its components in full or partial.

Objective of the Study

The main objective of the study is to analyze the Financial statement of Al-Arafah Islami bank & Islami Bank Bangladesh Limited.

To achive the main objective, the specific objectives are:

1.  To observe  & Find out the economic condition of Al-Arafah Islami bank &

     Islami Bank Bangladesh Limited.

2.  To shows the current financial position of the Al-Arafah Islami bank &

     Islami Bank Bangladesh Limited.

3.  To get an overview of financial matter of Al-Arafah Islami bank & Islami

     Bank Bangladesh Limited.

4.  To suggest some recommandations About Finding.

Rationale of the study

This Report titled on “Critical Analysis Of Financial Reporting On Al-Arafah Islami bank & Islami Bank Bangladesh Limited” are submitted in practical requirement for the fulfillment of the Degree of Bachelor  of Business Administration (BBA) under Department of Business Administration of IIUC, Dhaka campus. Internship program is the systematic process of gathering, recording, analyzing and presenting data about the subject that a student goes to learn on the program. The aim of this report is to connect practical knowledge with theoretical knowledge since everyone must be expert in both theoretical and practical knowledge to survive in the competitive world.

Methodology of the Study

In order to make the report more meaningful and presentable two sources of data and information have been used widely. Both primary and secondary sources were used to collect data. For preparing this report, I also collected the information from various personnel & website of the Al-Arafah Islami bank & Islami Bank Bangladesh Limited. I have presented my experience and findings by using different figures and tables in the various part.

Primary Sources of Data:

I have discussed with the executives & officials of the Al-Arafah Islami bank & Islami Bank Bangladesh Limited and found the approximate data, which has been presented in the report.However, followings were the primary sources:

1        Manager & others officers of some branches.

2        Informal conversation with the clients.

      3   Relevant file study provided by the officers concerned.

      4   Personal observation.

 Secondary Sources of Data:

The finding part of the report has been also prepared on the basis of secondary data. However to find out the secondary data the following sources have been used-

  1.  Annual Report oF Al-Arafah Islami bank & Islami Bank Bangladesh

      Limited.

  2.  Manuals of Al-Arafah Islami bank & Islami Bank Bangladesh Limited.

  3.  Different books, booklets, papers, brochures, reports, information.

  4.  Instruction circulars published by Al-Arafah Islami bank & Islami Bank

      Bangladesh Limited.

  5. From the bank web site www.al-arafahbank.com  & web site

      www.islamibankbd.com.

 6. File Study.

 7. Internet.

  8. Progress report of Bank & Insurance.

  Limitations of the study

Form the beginning to end; the study has been conducted with the intention of making it as a complete and truthful one. However, many problems appeared in the way of conducting the study.

During the study, I have faced the following limitation:

• The time period of this preparing report is very short. I had very short time in my hand to complete this report, which was not enough. It is very difficult to collect all the required information in such a short period.
• Due to some legal obligation and business secrecy banks reluctant to provide data. For this reason, the study limits only on the available published data and certain degree formal and informal interview.
• The bankers & Insurance officers are very busy with their jobs, which lead me little time to consult with.
• All the Branches of the sample banks were not physically visited.
• To collect data and information, it is a common tendency of any departments to keep back their departmental data and information.

• Unavailability to required published documents.

• Lack of my experience and efficiency to prepare the standard report.

• I observed that unskilled persons are available in AIBL & Islami Bank

Bangladesh Limited; they are not able to teach us various aspects.

Literature and Theoretical Review

Literature Review

This literature review illustrates the concept of financial analysis of Islamic banking. Islamic banking has great contribution and rewards to its customers and economy. The financial performance of Islamic banking scheme and made comparative analysis with their mainstream banks’ performance.

( Avkiran, 1995 ) discussed  that Generally, the financial performance of banks and other financial institutions has been measured using a combination of financial ratios analysis, bench marking, measuring performance against budget or a mix of these methodologics. Asset management, the bank size, and operational efficiency are used together to investigate the relationships among them and the financial performance.

(Hempel G. Coleman, 1986 ) Simply stated, much of the current bank performance literature describes the objective of financial organizations as that of earning acceptable returns and minimizing the risks taken to earn this return.There is a generally accepted relationship between risk and return, that is,the higher the risk the higher the expected return. Therefore, traditional measures of bank performance have measured both risks and returns.

The increasing competition in the national and international banking markets, the change over towards monetary unions and the new technological innovations herald major changes in banking environment, and challenge all banks to make timely preparations in order to enter into new competitive financial environment.

( Spathis, and Doumpos, 2002 ) investigated the effectiveness of Greek banks based on their assets size. They used in their study a multi criteria methodology to classify Greek banks according to the return and operation factors, and to show the differences of the banks profitability and efficiency between small and large banks.

(Chien Ho, and Song Zhu, 2004 ) showed in their study that most previous studies concerning company performance evaluation focus merely on operational efficiency and operational effectiveness which might directly influence the survival of a company. By using an innovative two-stage data envelopment analysis model in their study, the empirical result of this study is that a company with better efficiency does not always mean that it has better effectiveness.

( Elizabeth Duncan, and Elliott, 2004 ) discussed that a paper in the title of efficiency, customer service and financing performance among Australian financial institutions & showed that all financial performance measures as interest margin, return on assets, and capital adequacy are positively correlated with customer service quality scores.

( English M. and Warng, 1993 ) discussed that generally, the concept of efficiency can be regarded as the relationship between outputs of a system and the corresponding inputs used in their production. Within the financial efficiency literature, efficiency is treated as a relative measure which reflects the deviations from maximum attainable output for a given level of input. However, there have been numerous studies analyzed the efficiency of financial institutions.

 ( Rangan N. and Grabowski,1988 ) use data envelopment analysis to analyze

  technical efficiency in US banking into pure technical and scale efficiency.

 ( Aly H., and Rangan 1990 ) extend this analysis to contain analysis of

  allocative efficiency, and ( Field, 1990 ), ( Dark, 1992 ), ( Chu-Meiliu, 2001 ),

  ( Tser ) have conducted some studies into banking efficiency.

In general, method analysis of prior studies on examining of financial performance of Islamic banks with ratios analysis can be categorized into two categories. First, studies examine the performance of Islamic banks during certain period (e.g. Sarker, 1999; Arief, 1989; Wibowo and Saptutyningsih, 2004). Studies under this category generally examine performance Islamic banks during several years and make inter-temporal comparison. Second, studies examine the performance of Islamic Banks and compare that with conventional banks’ performance (e.g. Samad, 1999; Samad and Hassan, 2000; Rosly and Bakar, 2003).

In terms of studies that examine the financial performance of Islamic banks during certain period, Sarker (1999) analyzed efficiency of Islamic banks under conventional banking framework in Bangladesh. The result revealed that Islamic banks could not operate with its full efficiency level if it operated under a conventional banking framework. He argued further that Islamic product had different risk characteristic, so that different prudential regulation should be established.

In Malaysia situation, Arief (1989) examined the financial performance of Bank Islam Malaysia Berhad (BIMB). He found that, during the first six years of its establishment, BIMB indicated imposing progress.

In Indonesia environment, Wibowo and Saptutyningsih (2004) examined the financial performance of two main Islamic banks: BMI and BSM, during period 2000-2003 with tool called CAMEL-modified. The result revealed that performance of BMI was superior to performance of BSM.

In more recent study, Utami, et al. (2006) tried to define profile of Baitul Maal Wat Tamwil (BMT) in Banyumas Regency based on its financial performance.

The result showed that, in most BMTs being surveyed, the level of financial ratio, which included liquidity, solvability, business risk, and productivity of the employee’s ratio, increased from the year 2000 until 2002.

In global level, Zaman and Movassaghi (2001) reviewed the growth of the Islamic banks on a global basis and assessed its financial performance. This study covered Islamic banks located in some regions such as South Asia, Africa, Southeast Asia, Middle Asia, Europe and America. They ranked performance of Islamic banks around these regions based on some figures extracted from financial statement ended in year 1996. The result showed that Islamic banks located in Middle East and South Asia dominated the rank.

In recent study, Rosly and Bakar (2003) examined the financial performance of Islamic banking scheme and made comparative analysis with their mainstream banks’ performance. The result showed that mainstream banks were more efficient than Islamic banking scheme.

In Bangladesh environment, Hassan (1999) examined performance of Islamic Bank Bangladesh Limited and compared that with other private banks in Bangladesh. The result revealed that, in terms of deposit growth and investment growth, performance of Islamic Bank Bangladesh Limited was better than performance of private banks during period 1993-1994.

In Bahrain situation, Samad (2004) examined comparative financial performance of Islamic banks and the conventional banks during 1991-2001.The result indicated that there was no significant difference between Islamic banks and conventional banks with respect profitability and liquidity.

 Defining Financial Analysis:

Financial analysis is the process of evaluating financial and other information for decision-making.

According to Business Dictionary,Financial Analysis is use and transformation of financial data into a form that can be used to monitor and evaluate the firm’s financial position, to plan future financing, and to designate the size of the firm and its rate of growth. Financial analysis includes the use of financial statement analysis and funds-flow-adequacy ratio.

Goals of Financial analysts:

Financial analysts often assess the following elements of a firm:

1. Profitability – its ability to earn income and sustain growth in both the short- and long-term. A company’s degree of profitability is usually based on the income statements, which reports on the company’s results of operations;

2. Solvency – its ability to pay its obligation to creditors and other third parties in the long-term;

3. Liquidity – its ability to maintain positive cash flow, while satisfying immediate obligations; Both 2 and 3 are based on the company’s balance sheet, which indicates the financial condition of a business as of a given point in time.

4. Stability – the firm’s ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company’s stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators. etc.

 Significance of Financial Analysis:

To make  comparison of a firm’s performance within the firm or with that of other firms in the same line of business.

To reveal its current strengths and weakness.

To show whether the firm’s performance is either improved  or deteriorated.

Types of Financial Analysis:

Fundamentals: This type deals with the forecast of any company, commodity, currency.

Technical: This type uses charts and past behavior.

Cycle: This type looks at the stage of the investment, is it in its growth stage or in its top.

Inter Market: This type looks at the effect if one thing on other investments.

Objectives of Financial Analysis:

From the view points of  Shareholders,

i)  To judge the financial stability of an enterprise.

ii) To measure the enterprise’s short-term and long-term solvency.

iii)To measure the enterprise’s operating efficiency and profitability.

iv) To compare intra-firm position, inter-firm position and pattern position within industry.

v)  To assess the future prospects of the enterprise.

From the view point of Lender,

 i) To assess managerial  Performance

ii) To assess the cash flow pattern

iii) To assess the economic performance

From the view point of Government,

i) To assess the contribution to society

ii) To ascertain business and products backgrounds

iii) To evaluate the inflation effects

 Tools & Techniques of Financial Analysis:

1. BEP or C-V-P  analysis
2. Capital  budgeting technique
3. Cash flow analysis
4. Ratio analysis
5. Variance analysis
6. Leverage analysis

7. Risk analysis & control  technique.
8. Earned value analysis.
9. Sensitivity analysis.
10. Simulation analysis.

 Financial ratio:

A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise’s financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm’s creditors. Financial analysts use financial ratios to compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.

Sources of data for financial ratios:

Values used in calculating financial ratios are taken from the balance sheet, income statement, statement of cash flows or (sometimes) the statement of retained earnings. These comprise the firm’s “accounting statements” or financial statements. The statements’ data is based on the accounting method and accounting standards used by the organization.

Ratio Analysis:

Financial ratios are useful indicators of a firm’s performance and financial situation. Financial ratios can be used to analyze trends and to compare the firm’s financials to those of other firms. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

 1. Profitability ratios

2. Dividend policy ratios

3. Debt management ratios

4.  Liquidity ratios

Definition of Islamic banking:

Islamic banking is banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba or usury) for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam (forbidden). While these principles have been applied in varying degrees by historical Islamic economies, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Definition of Bank:

• A financial Intermediary accepting deposits and granting loans In fact a bank cab be treated as  “Financial Department Stores”.

• According to the Banking Companies Act, 1991 ‘Banking’ means the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdraw able by draft, order or otherwise.

Data Analysis and Finding

Profitability Ratios Of AIBL & IBBL:

For AIBL:

Gross profit margin:

The Gross profit margin of AIBL has change rapidly from 2008 to 2010.In 2008 their gross profit margin was 0.19 and in 2010 gross profit margin has speedily amplified 0.44. That is a good sign of development of this bank.

Return Of Asset (ROA):

The return on asset ratio of AIBL has increased in 2008 to 2010 year. In 2008 it was 0.0171 & in 2010 it was 0.0245.This is an actually good sign for AIBL because it shows that AIBL has generated less income than by utilizing more amount of asset.

Return On Equity (ROE):

ROE of this bank was Higher in year 2008 (0.25) than year 2009 (0.24). At next year in 2010 that was also  decreased this was 0.18. Return on equity decreased that is a good sign of investors.

Operating profit margin:

The operating income is 0.62, 0.66 & 1.06 respectively (2008-2010). In 2008 to 2010 operating profit margin was increased swiftly.

For IBBL:

Gross Profit Margin:

The Gross profit margin of IBBL has change rapidly from 2008 to 2010.In 2008 their gross profit margin was 0.14 and in 2010 gross profit margin has speedily amplified 0.18. That is a good sign of development of this bank.

Return of Asset (ROA):

The return on asset ratio of IBBL has increased in 2008 to 2010 year. In 2008 it was 0.0116 & in 2010 it was 0.0135.This is an actually good sign for IBBL because it shows that IBBL has generated less income than by utilizing more amount of asset.

Return on Equity (ROE):

ROE of this bank was Higher in year 2008 (0.19) than year 2009 (0.17). At next year in 2010 that was also increased this was 0.19. Return on equity increased that is a bad sign of investors.

Operating Profit Margin:

The operating income is 0.58, 0.59 & 0.63 respectively (2008-2010). In 2008 to 2010 operating profit margin was increased swiftly.

Efficiency Ratios of AIBL & IBBL:

For AIBL:

Total Asset Turnover :

Total asset turnover ratio in 2008 was 0.09.In 2009 (0.08) that was decreased than 2008. At last in 2010 (0.06) total asset turnover ratio of AIBL also decreased than 2008 and 2009. It is indicating that the bank used all of its assets little bit less effectively in 2010 compared to 2008 and 2009.

Fixed asset turnover :

Fixed asset turnover ratio at AIBL in 2008 was 8.83.In the next year 2009 (6.11) that was decreased quickly & asset turnover ratio again fall down at AIBL.This position was not stable long period in 2010 (8.88) it’s again increased. Fixed asset turnover is one kind of major issue of financial analysis of AIBL.

For IBBL:

Total Asset Turnover :

Total asset turnover ratio in 2008 was (0.0846).In 2009 (0.0767) that was decreased than 2008. At last in 2010 (0.0748) total asset turnover ratio of IBBL also decreased than 2008 and 2009. It is indicating that the bank used all of its assets little bit less effectively in 2010 compared to 2008 and 2009.

Fixed asset turnover :

Fixed asset turnover ratio at IBBL in 2008 was 4.44.In the next year 2009 (3.28) that was decreased quickly & asset turnover ratio again fall down at IBBL. This position was not stable long period in 2010 (3.67) it’s again increased. Fixed asset turnover is one kind of major issue of financial analysis of IBBL.

Debt Management  Ratio (leveraging Ratio) Of

AIBL & IBBL:

This ratio indicates how much the company is leveraged (in debt) by comparing what is owed to what is owned. A high debt to equity ratio could indicate that the company may be over-leveraged, and should look for ways to reduce its debt.

For AIBL:

Debt Ratio Of AIBL:

Equity and debt are two key figures on a financial statement, and lenders or investors often use the relationship of these two figures to evaluate risk. The ratio of the business equity to its long-term debt provides a window into how strong its finances are. Equity will include goods and property the business owns, plus any claims it has against other entities. Debts will include both current and long-term liabilities. The above analysis shows that AIBL has a strong finance.

For IBBL:

Debt Ratio Of IBBL:

Equity and debt are two key figures on a financial statement, and lenders or investors often use the relationship of these two figures to evaluate risk. The ratio of the business’ equity to its long-term debt provides a window into how strong its finances are. Equity will include goods and property the business owns, plus any claims it has against other entities. Debts will include both current and long-term liabilities. The above analysis shows that IBBL has a strong finance.

Liquidity ratios Of AIBL & IBBL:

For AIBL:

Current Ratio (CR):

This ratio indicates the capability of firm to meet the current liability with the current asset. The high value of this ratio indicates that firm is more liquid.

Cash Deposit Ratio (CDR):

The Cash Deposit ratio of AIBL has increased in 2008 to 2009 year. In 2008 it was 0.08 & in 2009 it was 0.10. At last in 2010 Cash deposit ratio of AIBL also decreased than 2009.In 2010 the lower value of this ratio shows that a firm has low liquid.

For IBBL:

Current Ratio:

The Current ratio of IBBL has increased in 2008 to 2009 year. In 2008 it was 0.02 & in 2009 it was 0.03. At last in 2010 Current ratio of IBBL also decreased than 2009.In 2010 the lower value of this ratio shows that a firm has low liquid.

Cash Deposit Ratio (CDR):

The Cash Deposit ratio of IBBL has decreased in 2008 to 2010 year. In 2008 it was 0.16 & in 2010 it was 0.13.At last in 2010 the lower value of this ratio shows that a firm has low liquid.

Financial Highlights:

Operating Profit of AIBL & IBBL:

From the graph we can see that every year except 2008 Operating Profit of Bank is increasing. In 2008 the Operating Profit of Al-Arafah Islami Bank was BDT 1528.09 Million and in 2010 it was 3059.95 Million. That is within 3 year it increased by 66.74%.

From the graph we can see that every year except 2008 Operating Profit of Bank is increasing. In 2008 the Operating Profit of IBBL was BDT 7478.43 Million and in 2010 it was 9569.69 Million. That is within 3 year it increased by 42.66%.

Operating revenue of AIBL & IBBL:

From the graph we can see that operating Operating revenue of AIBL is increasing every year. In 2008 the Operating revenue of AIBL was BDT 2172.68 Million and in 2010 it was 4388.56 Million. That is within 3 year it increased by 67.33%.

From the graph we can see that operating Operating revenue of IBBL is increasing every year. In 2008 the Operating revenue of IBBL was BDT 11594.23 Million and in 2010 it was 15657.01 Million. That is within 3 year it increased by 45.01%.

Deposits of AIBL & IBBL:

From the graph we can see that Deposits of AIBL is increasing every year. In 2008 the Deposits of AIBL was BDT 29690.12 Million and in 2010 it was 52973.97 Million. That is within 3 year it increased by 59.47 %.

From the graph we can see that Deposits of IBBL is increasing every year. In 2008 the Deposits of IBBL was BDT 202115.45 Million and in 2010 it was 291934.60 Million. That is within 3 year it increased by 48.15%.

Investment of Al-Arafah Islami Bank:

From the graph we can see that Deposits of AIBL is increasing every year. In 2008 the investment of AIBL was BDT 27742.57 Million and in 2010 it was 53582.96 Million.That is within 3 year it increased by 64.38%.

From the graph we can see that Deposits of IBBL is increasing every year. In 2008 the investment of IBBL was BDT 180053.93 Million and in 2010 it was 263225.13 Million.That is within 3 year it increased by 48.73%.

Paid-up capital of AIBL & IBBL:

From the graph we can see that paid-up capital of AIBL is increasing every year. In 2008 the paid-up capital of AIBL was BDT 1383.81 and in 2010 it was 4677.27. That is within 3 year it increased by 112.67 %.

From the graph we can see that paid-up capital of IBBL is increasing every year. In 2008 the paid-up capital of IBBL was BDT 4752.00 and in 2010 it was 7413.12. That is within 3 year it increased by 52%.

Profit after tax & Provision AIBL & IBBL:

From the graph we can see that profit after tax & provision of AIBL is increasing every year. In 2008 the profit after tax & provision of AIBL was BDT 668.24 and in 2010 it was 1776.99. That is within 3 year it increased by 88.64%.

From the graph we can see that profit after tax & provision of IBBL is increasing every year. In 2008 the profit after tax & provision of IBBL was BDT 2674.79 and in 2010 it was 4463.47. That is within 3 year it increased by 55.62%.

Earning per share of AIBL & IBBL:

From the graph we can see that Earning per share of AIBL is increasing every year. In 2008 the earning per share of AIBL was 3.7 taka and in 2010 it was 4.05 taka. That is within 3 year it increased by 36.48 %.

From the graph we can see that Earning per share of IBBL is increasing every year. In 2008 the earning per share of IBBL was 43.30 taka and in 2010 it was 60.21 taka. That is within 3 year it increased by 46.35%.

Number of shares outstanding Of AIBL & IBBL:

From the graph we can see that number of shares outstanding of AIBL is increasing every year from 2008 to 2010. In 2008 number of shares outstanding of AIBL was 1383.81  and in 2010 it was 4677.27. within 3 years it increased by 112.66%.

From the graph we can see that number of shares outstanding of IBBL is increasing every year from 2008 to 2010. In 2008 number of shares outstanding of IBBL was 4752.00 and in 2010 it was 7413.12. Within 3 years it increased by 52%.

Finding:

• The Gross profit margin, return on asset ratio, operating income of AIBL are increased day by day. On the other hand Return on equity decreased rapidly. Return on equity decreased that is a good sign of investors. Another bank is IBBL whose Gross profit margin, return on asset ratio, operating income increased but Return on equity increased that is a bad sign of investors. It indicates that economic condition is good for both bank.

• Total asset turnover ratio of AIBL & IBBL also decreased rapidly. It is indicating that the bank used all of its assets little bit less effectively and Fixed asset turnover ratio increased. It is one kind of major issue of financial analysis of AIBL & IBBL.

• Debt ratio of AIBL & IBBL are decreased rapidly. A low debt to equity ratio could indicate that AIBL & IBBL has a strong finance.

• Current ratio of AIBL is increased day by day.It indicates that firm is more liquid.On the other hand Current ratio of IBBL is decreased day by day. It indicates that firm is low liquid. Another is Cash deposit ratio of AIBL & IBBL also decreased rapidly. It indicates that lower value of this ratio shows that a firm has low liquid.

• They have not sufficient efficient employees to operate different department in the bank.  So they should increase efficient employees in different department.

• Staff meetings and departmental meetings at the branch level does not held or very few which is very essential to develop service quality as well as problem solving. But this practice is very few. So it may create major problem in future.

• ATM booth service is an online popular service. The bank’s online service is very poor. So if they want to survive in competition, they should introduce online service as early as possible.

• Advertising and promotion are the weak points of AIBL & IBBL. AIBL & IBBL does not have any effective marketing activities. Other banks have better marketing strategy.

• In Islamic Banking System Loan is very lengthy process. But it is lengthier in AIBL & IBBL, because branch managers do not have the power to give loan. For every loan, managers have to send proposal to head office. Management does not want to take any risk.

• AIBL & IBBL does not give any personal loan, because it is against the rules of Islamic Banking System. However, personal loan is very popular in other banks, because the rate of interest is very high for personal loan.

• Some international and local savings bonds give high rate of returns. AIBL & IBBL does not buy these because it is against the rules of Islamic Banking System.

• Majority of people have no proper knowledge about the activities of Islamic Banking as well as its investment mechanism and services to customers procedures are not  similar with traditional Bank.

• People think that Private bank is less confidential than nationalized bank to investment.

• Most of the people in our country have a bad impression of AIBL & IBBL’s operations regarding indirect generation of interest which meaning no difference between investment of IBBL .
• AIBL & IBBL has contract with other bank transaction by without interest thus, it generate low profit .
• This Bank can’t invest in all economic sectors, which are prohibited by the law of Islam.
• AIBL & IBBL has no strong promotional activities to increase investment by motivate investors.
• Absence of Islamic money market is also a mjor problem of Islamic banking operation
• Lack of manpower having proper Islamic Banking knowledge.
•  Muslims investment clients have no Shariah knowledge especially in respect of Riba, halal & haram.

Main Finding :

From this Analysis operating Profit, operating revenue, Deposits, Investment, Paid-up capital, Profit after tax & Provision, Earning per share, Number of shares outstanding of  AIBL & IBBL are increase year to year. So I findout that both bank’s financial condition are good.

 Recommendation & Conclusion

 Recommendations

1. Banking is a service-oriented marketing. Its business profit depends on its service quality. That’s why the authority should always be aware about their service quality.
2. Proper Banking software should be used to get best benefit from this department.
3. Staff meetings and departmental meetings at the branch level must be increased to develop service quality as well as problem solving
4. Payment to the workforce should be such that will encourage the employees to work more. Remuneration package must be impressive and inconsistent with work performance.
5. AIBL & IBBL should offer different types of loans to their own staffs immediately after confirming their job. This loan will influence them for better performance. The interest rate on this loan must be less then other banks interest rate.

6. In Islamic Banking System loan is very lengthy process. AIBL & IBBL should take steps to minimize the process of loan system. Because Customers don’t like lengthy process.

7. AIBL & IBBL should give equal priorities to the female candidates in terms of recruitment.

1. AIBL & IBBL needs to utilize modern technologies to give better services to customer.

1. AIBL & IBBL needs to recruit skilled human resources which can turn the bank ahead.

10. The bank should offer facilities such as credit card, visa card etc.

11. AIBL & IBBL investment processing should become easier than other conventional banks.

12. AIBL & IBBL may make its investment scheme more attractive for availing high-return projects.

13. I AIBL & IBBL should deserve immediate attention in the promotion of the image of Shariah based banks as PLS (profit loss sharing) banks.

14.  AIBL & IBBL IBBL can diffuse its scope of investment through focusing shariah concept regarding investment among the bank officers; employer and the clients by strong training workshop.

Conclusion

Today the banking service is very competitive. Al-Arafah Islami bank & Islami Bank Bangladesh Limited are a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of G.D.P of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country. Al-Arafah Islami bank & Islami Bank Bangladesh Limited are definitely satisfies their corporate customers and to maintain this scenario in a more efficient and prospective manner the Bank can surely accept this project in a cordial manner. To enrich and maintain a better reputation is the only solution to make a business more progressive.

Modern Islamic Banking is exacting business. The reward are modest, the penalties for bad looking are enormous. And Islamic banks are great monetary institutions, important to the general welfare of the economy more than any other financial institution. It has a vastly sobering and exacting responsibility. Al-Arafah Islami bank & Islami Bank Bangladesh Limited playing a vital role in financing the people of the country. Without Bank’s co-operation, it is not possible to run any business or production activity in this age. So, Al-Arafah Islami bank & Islami Bank Bangladesh Limited has to clearly justify the customers from a neutral point and gather the current information about the market.

Al-Arafah Islami bank & Islami Bank Bangladesh Limited are regarded as a very reliable bank and the growing number of its customers indicates its increasing acceptance among clients. Since Al-Arafah Islami bank & Islami Bank Bangladesh Limited has been able to rapidly increase the total number of Account-holders, it now should focus the on the level of customer satisfaction.

From the total analysis, we can summarize that Al-Arafah Islami bank & Islami Bank Bangladesh Limited has been doing pretty good through out the years. It is true that last year there return did decline but it is still pretty much satisfactory. Therefore, we can conclude that, Al-Arafah Islami bank & Islami Bank Bangladesh Limited are good company to invest on. One thing definitely worth mentioning is that all customers were highly satisfied at the attitude and product presentation and selling skills of all the officer of Al-Arafah Islami bank & Islami Bank Bangladesh Limited. This is a very good sign that all are very carefully trained. Since selling requires huge amounts of interpersonal skills, the responses of the customers show that Al-Arafah Islami bank & Islami Bank Bangladesh Limited has a competitive in terms of persuading the customers.

Success in the banking business largely depends on effective lending and advanced foreign exchange facilities. Less the amount of loan losses, the more the income will be from Credit operations. Besides this, successful foreign exchange activities can provide more profit to the bank and also create a positive image of the country in the international trade.

Though there are some drawbacks in some sectors of Al-Arafah Islami bank & Islami Bank Bangladesh Limited are still modern banking technology and employee and employer sincerity may lead to increased profit.

So, if the Al-Arafah Islami bank & Islami Bank Bangladesh Limited takes some action regarding my recommendations stated in this report, it may achieve strong competitive advantage and improve its position in the long run.

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