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Internship Report on Meezan Bank limited Pakistan

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					                                           September 06 2010




MEEZAN
             INTERNSHIP REPORT
BANK




         Hajvery University Lahore | Nazish Sohail
   Internship Report
    Meezan Bank Limited




       Prepared By:
        NAZISH SOHAIL

          BBA HONS

           106-862




HAJVERY UNIVERSITY LAHORE




                            Page | 2
Acknowledgements


   MY FIRST AND FOREMOST HUMBLE GRATITUDE TO “ALLAH” THE ALMIGHTY FOR GIVING ME
             THE VALOR TO REMAIN DEDICATED TO MAKE THIS INTERNSHIP REPORT.



Apart from it I take the opportunity to acknowledge the real efforts of:



First, I would like to thank my university; HAJVERY UNIVERSITY LAHORE, for the valuable
support and encouragement which it has given to me in the form of this internship
program.




Secondly, I am very greatful to Mr. Mustansar Ali, Branch Manager/VP, Meezan Bank,
New Garden Town Lahore, for giving me the opportunity to be a part of this
organization and to Mr. Tabasher Zaki Malhi, Manager Operations, for being so helpful
and cooperative throughout my internship program.




Likewise, I am indebted to Ms Rabia Aslam, Senior Officer-1, Ms Sana Islam, Senior
Officer-2, Mr. Umar Javeid, Relationship Manager/ Credits Department, Mr Muneeb
Ullah Khan, Manager Foreign Trade, and the entire team of Meezan Bank, NGT, for
their support and the provision of valuable information which helped me a lot during
my internship and in completion of this report.




                                                                                Page | 3
THE OPENING

                    ‘In the name of Allah,
            The most Gracious, the most Merciful.
                  All praise be to God alone,
                  the Lord of all the worlds,
           the All-Merciful, the Ever Mercy-giving,
             the Master of the Day of Judgment.
    You alone we worship, and You alone we ask for help.
                Guide us on the Straight Path,
The path of whom You have blessed, not of those who incur You
                            anger,
                 Nor of those who go astray.’



                     (Al-Fatihah 1: 1-7)




                                                           Page | 4
                                          Mustansar Ali

                                       -The Branch Manager-




   “The conventional definition of management is getting work done
through people, but real management is developing people through work”


                          (Agha Hassan Abedi)




                                                               Page | 5
                    Tabasher Zaki Malhi

                     Manager Operations




Table of Contents
                                          Page | 6
Chapter 1   Executive Summary                           12

Chapter 2   Introduction                                15

                   i.   Company Background              15

Chapter 3   3.1 Company Analysis                        16

            3.2 Operation Analysis                      18

               i.       Business & Branch Network       18

            3.3 Financial Analysis                      20

               I.       Operational Analysis            21

              II.       Balance Sheet Analysis          24

              III.      Ratio Analysis                  26

            3.4 Human Resource Management- Assessment   39

               I.       Board of Directors              39

              II.       Management Team                 39

              III.      Organizational Structure        41

             IV.        Shariah Board                   42

              V.        Executive Committee             42

             VI.        Audit Committee                 42

            VII.        Company Secretary               42

            VIII.       Advisory Board                  42

             IX.        Legal Advisor                   42

              X.        Auditors                        42



            3.5 Marketing Analysis                      44


                                                             Page | 7
              I.    First P- Product                              44

             II.    Second P- Price                               46

             III.   Third P- Place                                47

            IV.     Fourth P- Promotion                           48

             V.     Fifth P- People                               49

            VI.     Sixth P- Process                              50

            VII.    Seventh P- Physical Evidence                  50

Chapter 4   4.1 Environmental Analysis                            52

              I.    Growth Rate Of The Entire Industry            52

             II.    Performance of Islamic Industry               53

            4.2 Competition Analysis                              55

              I.    Major Competitors                             55

             II.    Their introduction                            56

             III.   Their Market Shares                           58

            4.3 Technology Analysis                               59

              I.    Technical Methods that Affect the Industry    59

             II.    Innovation                                    60

Chapter 5   How and why I have selected Meezan Bank?              62

              I.    Reasons for selecting MBL                     62

             II.    Practical Application of the Subjects         63

Chapter 6   Brief on the Departments I worked during internship   65




            and specific/leading contribution made



                                                                       Page | 8
               I.   Brief Introduction                   65

              II.   Department Overview                  65

Chapter 7    Problem Identification                      67

               I.   Weakest areas of MBL‟s Performance   67

Chapter 8    SWOT Analysis                               69

Chapter 9    Conclusion & Recommendations                72

Chapter 10   References                                  76

Chapter 11   Appendices                                  77




                                                              Page | 9
Appendices

Appendix A: Customer Services Department              77

Appendix B: Operations Department                     79

Appendix C: Riba free term deposits offered by bank   83

Appendix D: Cash Department                           87

Appendix E: Credits/Finance Department                88

Appendix F: Other Products Offered                    89

Appendix G: Islamic Modes of Financing                91

Appendix H: Attachments                               93




                                                           Page | 10
LIST OF ABBREVIATIONS

MBL: Meezan Bank Limited

NPL: Non Performing Loan

SBP: State Bank of Pakistan

ROA: Return on Assets

ROE: Return on Equity

EPS: Earnings per Share

M:     Million

BOD: Board of Directors

NGT: New Garden Town

NPF: Non Performing Finance

HR:    Human Resources

IBI:   Islamic Banking Institutions

DFI:   Development Finance Institutions

CAR: Credit Adequacy Ratio

SME: Small Medium Enterprises

FDR: Financing to Deposit Ratio

Dept: Department

L/C:   Letter of Credit

KYC: Know Your Customer



                                          Page | 11
                                       Chapter 1



1. EXECUTIVE SUMMARY

Internship is an integral part of our Bachelors of Business Administration (BBA) program.
It provided me the opportunity to develop practical know how of concepts which
before that were only in theoretical form. My internship in Meezan Bank Limited was full
of learning regarding various aspect of banking. The report contains practical
knowledge, which I gained during my stay at Meezan Bank Ltd.

Banking sector of Pakistan has been transformed within last decade (CY2000-2009)
from a sluggish and government-dominated sector to a much more agile, competitive
and profitable industry. Speed and sequencing on banking sector transformation and
its role in promoting economic growth is now a leading story of a sector success. Within
Pakistan SBP offers the story of effective leadership as a regulator, change
management and corporate governance. Outside Pakistan it is serving to offer rich
lessons in what difference governance regulator can make and how bank
restructuring and privatization can change the landscape of the industry.

Meezan Bank limited is the pioneer Islamic Bank in Pakistan, and it has bright future
forward. Meezan Bank Limited is a publicly listed company first incorporated on
January 27, 1997. The Bank has an internationally renowned, very high caliber and pro-
active Shariah Supervisory Board



I did my eight weeks internship at Meezan Bank, Garden town branch, Lahore. This
branch also serves as a Parent branch to other sub branch. During my internship I was
rotated in different departments but my penetration was developed in CIBD
(Corporate & Investment Banking Division).



                                                                               Page | 12
The work that I did during my internship at Meezan Bank primarily includes voucher
checking, checking account opening pre-requisites, account opening backlog
checking, analyzing the inward and outward clearing, maintaining return mail register,
completion of pay order and demand draft register, zakat register maintenance,
assisting the cheque book issuance department, know-how about the lockers
available and the rules relating to them, analyzing the expenses incurred and
maintain the records thereof. Assisting the officer concern for the creation of expense
approval sheets, understand the working of credits department, and to assist the
foreign trade wing.

One of the strongest reasons for selecting this company-Meezan Bank- was that it is
named after the Quranic word AL-MEEZAN which means BALANCE. Second most
important thing that influenced me for the selection of this bank was that it has the
privilege of being premiere Islamic bank in the Pakistan which is why it is the market
leader among all the Islamic Banks.

Banking sector owes a pivotal importance in the economy of any country through its
variant functions. This basic motivator stressed me to join Meezan bank for Internship
Training. Moreover, the experience and practice learned during this tenure also
proved very helpful and facilitating in the forthcoming professional life.

During my internship program I have discovered many of the courses, I studied at
Hajvery University, were relevant to the work I have done during my internship at
Meezan bank. Chief ones are financial management, banking practice & law,
banking operations, database management system, and Uniform Customs & Practices
600 for the documentary credit respectively.

The weakest area of performance that I identified during my internship program is the
working of HR department. The main problem that I identified during my internship
period was the lack of awareness about the exact job description of employees,
undefined job tasks in operations, excessive documentations as per the policies
                                                                             Page | 13
making it extremely very difficult for the customers to avail their desired services and
more crucial one was the lack of motivation at workplace.

Meezan Bank limited has two major competitors namely Al-Baraka Islamic Bank B.S.C
(E,C), Operations Pakistan and Bank Islami Pakistan Limited respectively. The market
analysis and financial analysis of the competitors shows that the Meezan Bank limited
is current market leader in the pie among the Islamic banks.

Some of the suggestions in this report were that MBL should pursue aggressive
marketing and advertising strategy, introducing job specific training to employees and
adhering to the criteria laid out by the HR department for job advancements in
complete faith and employee training sessions on regional level.

All information in this report is based on my observations, interviews with the customers
and the branch officers and practical involvement in different tasks during my
internship at Meezan Bank.




                                                                               Page | 14
                                             Chapter 2



2. INTRODUCTION

2.1 Meezan Bank

                      Public Limited
 Type                 KSE: MEBL
                      LSE:
 Industry             Islamic Banking
 Founded              Al-Meezan Investment Bank Limited
 Headquarters         Karachi, Pakistan
                     Murabaha, Ijarah, Diminishing Musharakah, ATM/Debit Card,
 Products                          Savings, Consumer Banking etc.


 Revenue              2007 PKR 1.4 billion
 Website             www.meezanbank.com




Vision:
Establish Islamic banking as banking of first choice to facilitate the implementation of
an equitable economic system, providing a strong foundation for establishing a fair
just society for mankind.


Mission Statement:
To be a premier Islamic bank, offering a one-step shop for innovative value-added
products and services to our customers within the bounds of Shariah, while optimizing
the stakeholders‟ value through an organizational culture based on learning, fairness,
respect for individual enterprise and performance.



                                                                                 Page | 15
                                        Chapter 3


3.1 Company Analysis


Meezan Bank Limited is a publicly listed company first incorporated on January 27,
1997. It started operations as an investment banking license under SRO 585-(1)/87 in
August of the same year. In January 2002 in an historic initiative the State Bank of
Pakistan granted Meezan Bank the nation's first full fledged commercial banking
license dedicated to Islamic Banking. And it's started working as commercial bank
from 1st May 2002.
Meezan Bank stands today at a noteworthy point along the evolution of Islamic
Banking in Pakistan. The banking sector is showing a significant paradigm shift away
from traditional means of business and is catering to an increasingly astute and
demanding financial consumer who is also becoming keenly aware of Islamic
Banking. Meezan Bank bears the critical responsibility of leading the way forward in
establishing a stable and dynamic Islamic Banking system replete with dynamic and
cutting-edge products and services.
The MBL has made fundamental and significant progress forward and in doing so has
established a strong and credible management team comprised of experienced
professionals which have achieved a strong balance sheet with excellent operating
profitability.


MBL‟s main shareholders are leading local and international financial institutions
including
      Pak Kuwait Investment Company
(The only AAA rated financial entity in the country,)
      The Islamic Development Bank of Jeddah
      Shamil Bank of Bahrain, > Islamic Development Bank, Jeddah
      Kuwait Awqaf Public Foundation
                                                                                Page | 16
      Saudi Pak Industrial and Agricultural Investment Company (Private) Limited.


That in addition to their strength and stability adds significant value to the Bank
through Board Representation and applied synergies.
The Bank has an internationally renowned, very high caliber and pro-active Shariah
Supervisory Board presided over by Justice (Retd.) Maulana Muhammad Taqi Usmani,
a renowned figure in the field of Shariah, particularly Islamic Finance. He holds the
position of Deputy Chairman at the Islamic Fiqh Academy, Jeddah and in his long and
illustrious career has also served as a Judge in the Shariat Appellate Bench, Supreme
Court of Pakistan. The Bank also has a resident Shariah advisor, Dr. Imran Usmani, who
strictly monitors the regular transactions of the Bank. The board also includes Sheikh
Essam M. Ishaq (Bahrain), and Dr. Abdul Sattar Abu Ghuddah (Saudi Arabia).


At Meezan Bank, they strive to find commonalties with the conventional banking
system with absolutely no compromise on Shariah rulings. The bank has developed an
extraordinary research and development capability by combining investment
bankers, commercial bankers, Shariah scholars and legal experts to develop
innovative, viable, and competitive value propositions that not only meet the
requirements of today's complex financial world, but do so with the world-class service
excellence that our customers demand, all within the bounds of Shariah.


Furthermore, the Bank has built a strong Information Technology and customer
knowledge-based focus that continues to use state of the art technology and systems.
The Bank's Corporate and Investment Banking business unit is geared towards nurturing
and developing a long-term relationship with clients by understanding their unique
financing requirements and providing Shariah compliant financing solutions across the
horizon of corporate banking and structured finance.



                                                                                 Page | 17
The Meezan Bank is also implementing robust and aggressive strategic and tactical
initiatives on the consumer banking side. The Bank has a rapidly growing branch
network across all major cities nationwide. Providing our customers accessibility and
convenience is a prime target, within an atmosphere and culture of dedicated
service and recognition of their needs.


3.2 Operations Analysis

3.2.1 Business & Branch Network
The Meezan bank continued with aggressive branch expansion plan during 2009 and
expanded to 201 branches including sub branches in 54 cities from 166 branches in 41
cities. This has further strengthened Meezan bank‟s ability to create awareness and
deliver Islamic banking products and services throughout the country.

    250
                                                     120000
    200
                                                     100000

    150                                               80000
                                          branches
                                                      60000
    100                                   cities
                                                      40000
     50
                                                      20000
       0                                                  0
           2005 2006   2007 2008   2009                       2005   2006   2007     2008   2009



                   (1)                                                         (2)
Total deposits at December 31st 2009 crossed Rs 100 Billion compared to Rs 70 Billion for
2008, an increase of 43%, compared to the national average of 12.63%. In addition to
a large branch network, Meezan bank also has an effective customer outreach
programme that uses a team of Business Development Officers. The branch liability
sales teams have done a great job and need to be complimented for their efforts.
----------------

Table 1: Branch Network (including sub branches

Table 2: Deposits (rupees in millions

                                                                                                   Page | 18
The Bank is currently segmented into three Regions of Pakistan. The cities in which the
Bank presently operates are as follows:

      Southern Region               Central Region               Northern Region


        Hub (Lasbela)                  Arifwala                    Abbottabad

        Hyderabad                      Bahawalpur                     Attock

          Karachi                      Burewala                  Dera Ismail Khan

        Mirpurkhas                      Chiniot                        Dina

        Nawabshah                       Daska                       Gujar Khan

          Quetta                   Dera Ghazi Khan                    Haripur

          Sakrand                     Faisalabad                     Havelian

           Sukkur                        Gojra                      Islamabad

       Tando Adam                     Gujranwala                      Jhelum

      Tando-Allah-Yar                   Gujrat                         Kohat

                                      Hafizabad                      Mansehra

                                        Jhang                         Mardan

                                         Kasur                      Muzaffarabad

                                       Khanpur                       Nowshera

                                       Khushab                       Peshawar



                                                                                Page | 19
                                         Lahore                       Rawalpindi

                                        Lalamusa                          Swat

                                   Mandi Bahauddin

                                      Mian Channu

                                         Multan

                                          Okara

                                     Rahim Yar Khan

                                       Sadiqabad

                                         Sahiwal

                                        Sargodha

                                       Sheikhupura

                                          Sialkot




3.3 Financial Analysis


Pakistan has continued to suffer from the fallout of the international financial crises that
began in 2008. Since the inception of Meezan bank economic shocks were usual and
banks are not exemption to these shocks. The instability of the economy has also
affected the bank to some extent. Current year‟s profit rating shows the
managements‟ effective policies and viability.


                                                                                  Page | 20
The financial analysis is further classified into:

      Operational analysis
      Balance sheet analysis
      Ratio analysis


3.3.1 Operational Analysis1


Despite the different economic conditions, Meezan Bank has achieved excellent
results. Several historic milestones have been achieved in 2009.

In operational analysis, we‟ll mainly focus on advances, deposits, investments,
earnings per share, loans and capital details respectively. These will be on primary
focus and will be discussed in more details in the coming period.

                                      2009                2008                Growth

 Branch Network                       201 Branches        166 Branches        21% ↑

 Deposits                             Rs. 100 Billion     Rs. 70 Billion      43% ↑

 Profit after taxation- bank          Rs. 1.025 Billion   Rs. 0.621 Billion   65% ↑

 Profit after tax- consolidated       Rs. 1.577 Billion   Rs.0.213 Billion    640% ↑

 Trade Finance Business               Rs. 115 Billion     Rs. 93 Billion      24% ↑

 Financing/advances                   Rs. 44188 Billion   Rs.39528Billion     15% ↑

 Earnings per share                   1.71                1.22                40% ↑


The branch network continued its momentum of growth in operational front. The
branch network of the bank expanded from 166 to 201 in 54 cities by adding 35 new
branches to the bank‟s existing network. This achievement of establishing an extensive

                                                                                       Page | 21
branch network within the span of 8 years enabled Meezan to consolidate its
dominant its dominant position in Islamic banking sector. While the deposits and
advances increased by 43% and 11% respectively. The bank enjoyed the profit before
tax of Rs 1740 Billion as compared to the preceding year‟s profit of Rs 992 Billion. The
bank registered an impressive 65% increase in profit after taxation, from Rs 621 Million
to Rs. 1025 Million. In addition, the consolidated profit after tax increased at the rate of
640% respectively. The bank has been cautious in increasing its financial portfolio due
to the uncertain economic and political environments of the country. The total
financial portfolio grew by only 15% during the year respectively. The bank‟s equity
stood at Rs. 9091Billion at the end of year 2009, increase of 32% over the previous year.



Earnings per Share

Due to increase in profitability, the earnings per share increased from Rs. 122 to Rs 1.71
per share, reflecting an increase of 40%.

Dividend

The board has recommended to issue 5% bonus shares (2008:8.6%) for year 2009
continuing the bank‟s unbroken payout record since the date of listing on the stock
exchange. This will increase the bank‟s paid up capital to Rs 6.98 Billion

Right Shares

The paid up capital of bank was increased to 6.6 Billion during the year after taking
into account the proceeds of the right issue of Rs 1.7 Billion approved by Rating
Company, an affiliate of Japan Credit Ratings Company, maintained the Bank‟s long
term entity rating at A+ and upgraded the outlook from “stable” to “positive”. The
short term rating has been maintained at A1.

Future Outlook and Strategy

                                                                                  Page | 22
The BOD devised a strategic plan in 2006 for the year 2007-2011. One of the key
features of the plan was to aggressively grow the branch network to 200 branches by
the end of 2010 which is already achieved. The highlights of the strategic plan for the
period of 2010 to 2014 are to:

      Improve systems and control
      Maintain growth without any compromise on Shariah compliance
      Continue to build the branch network
      Sustained investment in technology
      Focus on service quality
      Improve staff training



The bank will strive to build high quality financial portfolio. The bank is in the process of
installing the latest T-24 technology to all of its branches. The deployment is in progress
and the entire network will be switched to T-24 by the end of this year.




       1. Financial Report 2009

                                                                                    Page | 23
3.3.2 Balance Sheet Analysis2




-
2. Annual Report 2009
                                Page | 24
The total assets for the year 2009 amounted to Rs. 124182 Million; financing of the bank
had the share of Rs. 44189 Million, followed by the investments made by the bank of
Rs. 23291 Million. The total liabilities of the bank amounted for Rs. 114998 Million for the
year 2009, of which the total deposits and other accounts amounts to Rs.

                                                                                   Page | 25
1003331Million setting 92% of the total liabilities of Meezan bank. The shareholder‟s
equity remained 9091 Million in 2009 after the increase of 31% from 2008‟s equity
respectively. There was an increase of 26%, 9091M, in the share capital of Meezan
bank as compared to the 2008‟s figures (6341 M).




3.3.3 Ratio Analysis

A ratio analysis is very important measure to judge the performance of an organization
and to compare that performance ratio with previous year ratio and future of the
position of the organization. In this portion we‟ll analyze the important financial ratios
of Meezan Bank, also the comparative results in yearly form are depicted to study the
trend of ratios and reasons for increase or decrease shall be explained.


Return on Equity
      Return on Equity    =          Net Profit after Tax / Stockholders’ Equity


                2009      =          (1025351/9090535) x 100      =       11.28%

                2008      =          (621187 / 6341097) x 100     =       9.80 %

                2007      =          (963501 / 5719910) x 100     =       16.84 %

                2006      =          (604251 / 4756409) x 100     =       12.70 %

                2005      =          (419455 / 2970940) x 100     =       14.12 %


          20


          10                                                                        ROE (%)


           0
                  2009        2008          2007         2006         2005
      ROE (%)     11.28       9.8           16.84        12.7         14.12




                                                                                              Page | 26
This ratio shows the profit earned by the company as a percentage of the amount of

equity/ capital invested by the company in the business. I have analyzed last five

years ROE to have a better understanding of the company‟s ratio of investment in the

business. In the year 2005, this ratio was 14 percent but this ratio seems to fluctuate in

the later years. In the year 2007, this ratio improved to 16 percent but again in the year

2008 it is declined to about 10 percent. This is because the company has increased

the amount of capital but the net profit after tax could not be increased according to

that ratio. However in the year 2007, the ratio was increased to the maximum of all the

previous years in spite of an increase in the stockholders‟ equity. This is because the net

profit was increased proportionately to that. However in the year 2009, the situation is

not very bad the bank as compared to the last year‟s ratio. There is a slight increase of

1.48% in the return on equity in the year 2009 which means the amount of profit

increased.


Return on Assets


      Return on Assets    =     Net Profit after Tax / Total Assets


             2009         =     (1025351/124181734) x 100 =           0.82 %

             2008         =     (621187 / 85276070) x 100 =           0.73 %
             2007         =     (963501 / 67178559) x 100 =           1.43 %
             2006         =     (604251 / 46438623) x 100 =           1.30 %
             2005         =     (419455 / 30675822) x 100 =           1.37 %




                                                                                 Page | 27
           2

         1.5

           1                                                                         ROA (%)

         0.5

           0
                   2009       2008           2007        2006        2005
      ROA (%)      0.82       0.73           1.43         1.3        1.37




Return on assets is the ratio that shows the percentage of net profit after tax to total

assets. This ratio is also called the return on investments because investment by the

company in the business is always in the form of different types of assets. This ratio of

Meezan Bank Limited shows that the return earned by the bank on its total investments

is fluctuating from year to year. This is because the bank has continuously increasing its

investments in the total assets but against that investment the bank is not earning

sufficient amount of profits. The situation is somewhat better in the year 2007 where

because of highest of all the years‟ profits, the return percentage is 1.43. The bank

should consider the situation and should try to rectify this.


Net Spread Margin


      Net Spread Margin =            Net return on Loans and Advances / Total Assets


                2009      =          (3612968/124181734) x 100 =     2.7%

                2008      =          (2997559 / 85276070) x 100      =      3.52 %
                2007      =          (1685888 / 67178559) x 10       =      1.98 %
                2006      =          (1117229 / 46438623) x 100      =      1.66 %
                2005      =          (729831 / 30675822) x 100       =      2.38 %

                                                                                         Page | 28
                         4

                         3

                         2                                                    Net Spread Margin (%)

                         1

                         0
                              2009   2008    2007     2006     2005
      Net Spread Margin (%)   2.7    3.52    1.98     1.66     2.38




This ratio shows the gross earnings on financing less the return paid to the deposit

holders as a percentage of total assets. This is some sort of gross profit ratio because

the earning on financing is the main revenue of the bank where the return paid to

deposit holders is the cost of those funds. Here this ratio shows that the situation was

better in the year 2005 but in the year 2006 it is again declined. Then in the year 2007 it

again became better while in the year 2008 surprisingly this ratio is the highest.

Although the net profit after tax in this year is lesser than that of the previous years but

this ratio shows that the bank has become efficient in its core operations and the

problem lies with its other income and other expenses.


Net Other Income Margin


      Net Other Income Margin =             Net Other Income / Total Assets


               2009                  =      (1597804 / 124181734) x 100 =        1.29 %

               2008                  =      (707908 / 85276070) x 100    =       0.83 %

               2007                  =      (1347893 / 67178559) x 100   =       2.01 %

               2006                  =      (690561 / 46438623) x 100    =       1.49 %


                                                                                                Page | 29
               2005                        =      (622151 / 30675822) x 100 =          2.03%


                  2.5
                    2
                  1.5
                                                                              Net Other Income Margin (%)
                    1
                  0.5
                    0
                         2009       2008        2007     2006    2005
      Net Other Income   1.29       0.83        2.01     1.49     2.03
      Margin (%)




Net other income margin is the percentage that shows the return earned by the bank

from the sources other than its core operations. Keeping in view the intense

competition among the banks today, a bank must seriously concentrate on the other

sources because in this sheer competition a bank is not in a position to earn premium

revenue on the finances provided. For Meezan Bank, this ratio shows that there have

been the fluctuations in other income from year to year but the situation is very bad in

the year 2008 where this ratio is the minimum of all the previous years. Due to this

reason the overall performance of the bank declined that year.


Earnings per Share
Earnings per Share              =          Net Profit after Tax / Number of Shares Issued


      2009                      =          (1025351/6650048)             =   Rs.1.71 per Share

      2008                      =          (621187 / 492596.1)           =   Rs.1.26 per Share

      2007                      =          (963501 / 377989.7)           =   Rs.1.96 per Share

      2006                      =          (604251 / 377989.7)           =   Rs.1.88 per Share

      2005                      =          (419455 / 203658.2)           =   Rs.1.46 per Share


                                                                                                      Page | 30
                    2.5

                      2

                    1.5
                                                                        Earnings Per Share
                      1

                    0.5

                      0
                           2009   2008    2007    2006      2005
      Earnings Per Share   1.71   1.26    1.96    1.88      1.46




EPS is the ratio that measures how many rupees the company has earned against one

ordinary share issued to the shareholders. The greater is the ratio, the better it would

be. It is because the company will have the greater amount of profits per share to pay

as dividend to the shareholders. This ratio is the most important ratio from the

shareholders‟ point of view because they also want to know that how much the

company is going to pay them against the number of shares they are having. For

Meezan Bank, this ratio improved from the year 2005 to the year 2007 with a little

exception in 2005 but in the year 2009 there is a slight increase of Rs.1.71 per share

which is because the company has issued bonus shares to its shareholders as a stock

dividend.


Stock Dividend Percentage
                2009               =     5%

                2008               =     8.6 %

                2007               =     20 %

                2006               =     10 %

                2005               =     16 %


                                                                                       Page | 31
                 25
                 20
                 15
                                                                     Stock Dividend Percentage
                 10
                  5
                  0
                       2009       2008       2007      2006   2005
      Stock Dividend    5         8.6         20        10     16
      Percentage




Over the years from 2004 to 2008, the bank has been paying the stock dividend

instead of cash dividend. Although this is not a good sign but we can say that since

this is because of the consent of the shareholders that‟s why it is compromise able. This

ratio shows that the bank has been paying sufficient amount of dividend to the

shareholders from the year 2005 to the year 2007 but in the year 2008 this ratio

declined 11.4%. This was because in the year 2008, the bank had not earned a

handsome amount of profits to justify the larger stock dividends. In the year 2009, the

situation is lot more alarming the already declining dividend further declined to 5%

which is not a good sign because the bank, as compared to last year‟ profit rate, has

earned growth of 65% in 2009 but still the amount of dividend is way too low.


Market Price per Share
               2009           =          Rs.15.74 per Share

               2008           =          Rs.21.48 per Share

               2007           =          Rs.38.55 per Share

               2006           =          Rs.19.50 per Share

               2005           =          Rs.23.25 per Share



                                                                                           Page | 32
                            50
                            40
                            30
                                                                                                Market Price Per Share (Rs)
                            20
                            10
                             0
                                   2009     2008     2007         2006          2005
      Market Price Per Share       15.74    21.48    38.55        19.5          23.25
      (Rs)




The market price per share has been fluctuating from year to year but the overall

impact on the market price is encouraging. However we suggest that the bank should

stop paying stock dividends as this increases the number of shares in circulation and

the ultimate result will be the decline in the market price.


Price Earning Ratio
      Price Earning Ratio =                   Market Price per Share / Earnings per Share


                2009                    =     15.74 / 1.71    =            9.20

                2008                    =     21.48 / 1.26    =            17.03

                2007                    =     38.55 / 1.96    =            15.12

                2006                    =     19.50 / 1.88    =            10.51

                2005                    =     23.25 / 1.46    =            15.92


                     20

                     15

                     10                                                                                 Price Earning Ratio

                       5

                       0
                                 2009       2008       2007              2006           2005
      Price Earning Ratio        9.2        17.03     15.12          10.51              15.92




                                                                                                                        Page | 33
The price earnings ratio is commonly used to assess the owner‟s appraisal of share

value. This ratio measures the amount that investors are willing to pay for each rupee

of company‟s earnings. The level of this ratio indicates the degree of confidence that

investors have in the firm‟s future performance. The highest the P/E ratio greater will be

the investor confidence in the company. The figures calculated above show that the

investors‟ confidence in the company is increasing year by year as this ratio is

increasing from earlier years to the later years. In the year 2006, this ratio was

decreased but soon after that this ratio was improved in 2007 and became even

better in 2008.


Net Profit before Tax Margin


                2009                =     14.87 %

                2008                =     13.21 %

                2007                =     21.43 %

                2006                =     22.98 %

                2005                =     30.42 %




                           40

                           30

                           20                                               Net Profit Before Tax (%)

                           10

                             0
                                  2009    2008      2007    2006    2005
      Net Profit Before Tax (%)   14.87   13.21     21.43   22.98   30.42




                                                                                                  Page | 34
Net profit before tax margin represents the profit earned before tax as a percentage

of gross revenue. The need to calculate this ratio is that the actual performance of the

bank is measured before tax and not after tax. So this ratio shows that the profit

earned by the bank increased in the year 2005 but in the later years this ratio

continued to decline and in the year 2009 this ratio was only 14.87 percent but it was

better as compared to that of year 2008.


Net Profit after Tax Margin
                2009                =   8.76 %

                2008                =   8.27 %

                2007                =   16.27 %

                2006                =   17.80 %

                2005                =   20.15 %


                          25

                          20

                          15
                                                                         Net Profit After Tax (%)
                          10

                           5

                           0
                                 2009   2008      2007    2006   2005
      Net Profit After Tax (%)   8.76   8.27      16.27   17.8   20.15




Net profit after tax margin was about 21 percent in the year 2005 whereas it started

decreasing gradually in the subsequent years. The main reason for this decrease in the

net profit was increase in the other expenses and also because of an increase in the

amount of taxation. Although the better measure for the efficiency of the


                                                                                             Page | 35
management is the net profit before tax margin but since that profit is not on the

disposal of the management so it is better to calculate the net profit after tax margin

so that the disposable income of the organization should be measured. And this ratio

shows that the efficiency of the organization is decreasing year by year. There is only

0.49% increase in the year 2009 which is not a good sign as this ratio shows the

efficiency of the organization.


Operating Expenses to Income


               2009                  =      72.15 %

               2008                  =      77.24 %

               2007                  =      71.21 %

               2006                  =      73.40 %

               2005                  =      67.71 %


                        80

                        75

                        70                                              Operating Expenses to Income (%)

                        65

                        60
                              2009       2008    2007    2006   2005
      Operating Expenses to   72.15      77.24   71.21   73.4   67.71
      Income (%)




The operating expense to income ratio shows that the organization has been able to

control its operating expenses over the year from 2005 to 2009. This ratio was 67.71

percent in the year 2005 and in the year 2009 it is ended with a little increase to 72.15

percent. In spite of the stability of this ratio the net profit margin of the bank declined
                                                                                                     Page | 36
to a considerable extent. This was because of an increase in the other expenses of the

organization. So the bank should focus to decrease its operating expenses so that its

net profit should be improved.


Financing to Deposit Ratio-Net


                2009       =           44.04 %

                2008       =           51.62 %

                2007       =           56.90 %

                2006       =           65.68 %

                2005       =           73.86 %


          80

          60

          40                                                                  FDR (%)

          20

           0
                   2009        2008              2007   2006    2005
      FDR (%)      44.04       51.62             56.9   65.68   73.86




Financing to deposit ratio is perhaps the most critical ratio for a commercial bank. This

ratio represents the amount extended as a loan by a bank to its clients compared to

deposits that the bank receives from its deposit holders. As per the definition of a

commercial bank, the bank is an institution that receives money from those who have

it spare and lends it to those who are in need of them. This ratio of Meezan Bank has

been declining from the year 2005 to the year 2008. The bank should seriously consider

this ratio because these are the core operations of the bank. If the bank could not fully
                                                                                  Page | 37
utilize the funds received from the deposit holders it would have to suffer a loss of its

net income.


Book Value per Share


Book Value per Share                =   Stockholders’ Equity / No. of Common Shares Issued


               2009                 =   9090M / 6650 M       =   Rs.1.36 per Share

               2008                 =   6341 M / 4925 M      =   Rs.1.29 per Share

               2007                 =   5720 M / 3779 M      =   Rs.1.95 per Share

               2006                 =   4763 M / 3779M       =   Rs.1.97 per Share

               2005                 =   3025 M / 2036 M      =   Rs.1.49 per Share


                      2.5

                        2

                      1.5
                                                                             Book Value Per Share
                        1

                      0.5

                        0
                             2009       2008    2007      2006   2005
      Book Value Per Share   1.36       1.29    1.95      1.97   1.49




Book value per share is the ratio that shows that how much value of assets the bank

has to pay to its shareholders in the event of its winding up. If we compare the book

value per share with the market value per share we see that although the book value

per share is much lesser than the market value even then the shareholders are willing

to pay much higher price for the share of the bank. It shows that the shareholders

have confidence in the company that the company will the prosperous in the future.

However since the market price has declined recently, therefore the company should
                                                                                              Page | 38
take corrective actions so that the confidence of the shareholders should be

maintained.


3.4 Human Resource Assessment

3.4.1 Board of Directors

The Board of Directors of Meezan Bank are:

       H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman)
        (Minister of Housing, Ministry of Housing, Kingdom of Bahrain)

       Mr. Naser Abdul Mohsen Al-Marri (Vice Chairman)

       Mr. Jassar Dakheel Al-Jassar

       Mr. Rana Ahmed Humayun

       Mr. Mohammed Azzaroog Rajab

       Mr. Ahmed Abdul Rahim Mohamed

       Mr. Nawal Ahmed

       Mr. Alaa A. Al-Sarawi

       Mr. Mian Muhammad Younis

       Mr. Irfan Siddiqui (President & Chief Executive Officer)

       Mr. Ariful Islam (Chief Operating Officer)



3.4.2 Management team

The Meezan Team

Meezan Bank is managed by a team of professional bankers committed to the cause
of Islamic Banking. This single unifying factor unleashes the tremendous power of a
dedicated and motivated team committed to fulfilling the Vision and Mission of this
Bank.
                                                                               Page | 39
The business segments of the Bank are:

      Corporate Banking
      Investment Banking
      Commercial Banking and SME
      Consumer Banking
      Treasury & Financial Institutions
      Asset Management (managed through a subsidiary Al Meezan Investment
       Management Limited.)
      Retail Banking is organized in seven regions across Pakistan, namely South-I
       Region, South-II Region, South-III Region, Lahore Region, Faisalabad Region,
       Multan Region, and North Region.




                                                                               Page | 40
3.4.3 Organizational Structure




                                 Page | 41
3.4.4 Shariah Board


      Justice (Retd.) Muhammad Taqi Usmani Chairman
      Dr. Abdul Sattar Abu Ghuddah
      Sheikh Essam M- Ishaq
      Dr.Muhammad Imran Usmani


3.4.5 Executive Committee
      Naser Abdul Mohsen Al Marri
      Zaigham Mahmood Rizvi
      Mohammad Abdul Rehman Hussain


3.4.6 Audit Committee
      Zaigham Mahmood Rizvi
      Mohammad Abdul Rehman Hussain
      Irfan Siddiqui


3.4.7 Company Secretary
    Gohar Iqbal Shaikh


3.4.8 Advisory
    Dr. Muhammad Imran Usmani          Shariah Advisor
      Zafar Aziz Osmani                Human Resource Advisor


3.4.9 Legal Advisor
    Rizvi, Isa, Afridi & Angell

3.4.10 Auditors
    A.F. Ferguson & Co




                                                                 Page | 42
  Everybody's saturated with the marketing hype of next-generation consoles. They are
     wonderful, but the truth is that they are as powerful as a high end PC is right now.



                                       John Carmack




                                           Marketing is not the art of finding clever ways
                                             to dispose of what you make. It is the art of
                                                  creating genuine customer value."


                                                                -Philip Kotler




Marketing is the science and art of exploring, creating, and delivering value to satisfy the
 needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It
defines, measures and quantifies the size of the identified market and the profit potential. It
   pinpoints which segments the company is capable of serving best and it designs and
                     promotes the appropriate products and services.


                                         Philip Kotler




                                                                                      Page | 43
3.5 Marketing Analysis

In today‟s highly competitive environment, marketing plays very important role and
banks, like Meezan Bank Ltd, that has remarkable penetration in the market, need to
use their market plan and strategies effectively to attract more customers.

As we all know banking sector falls in the category of services. Process of Marketing is
not confined to the marketing of products only. As of 2003, there is a major shift of
attention noticed among the developed countries towards services sector. Unlike
traditional 4 P‟s of marketing, services marketing includes 3 additional P‟s; Process,
People, Physical evidence to take into account the special nature of services
marketing.

Therefore, I am going to apply the “7 P‟s of Services” in
order to analyze the marketing strategies adopted by
Meezan Bank.

3.5.1 First P- Service Product



Major Product Line:

Now banking products has so much deepened that the customers have to do some
basic analysis before pursuing any product. Keeping in view the intense competition
and the diverse range of banking products available in the market, the product line
offered at MBL is presented as under:

    Riba Free Meezan Providence
    Riba Free - Certificates of Islamic Investment
    Riba Free - Monthly Musharakh Certificate
    Riba Free - Dollar Saving Account
    Riba Free - Rupee Saving Account
    Riba Free - Current Account
                                                                                 Page | 44
     Car Ijarah - Islamic Car Financing


Meezan bank was established under the Islamic principles therefore the entire product
portfolio is Shariah based. Financing is based on the following modes laid out by the
Shariah

Islamic Mode of Financing

     Musharakh
     Mudarbah
     Murabah
     Salam
     Istisna
     Ijarah



Market Segments

There are different market segment and strategies for different banks as per their top
management to target but if we have to draw a generalized segment format for
bankers, the segments would be:

        Individuals

        Salaried persons

        Sole proprietor

        Retailers



-----------------------------------------------------------------------------------------------------------

         Detailed overview of the products offered is given in the Appendix A

         Explanation of the Islamic Modes of financing is given in the Appendix G

                                                                                                              Page | 45
        SME‟s

        Corporate Bodies

        Trusts

        NGO‟s

        Autonomous and semi-autonomous bodies

        Partnerships

        Clubs

        Societies

        MNC‟s



Target Market:

        All the religious sects.

        Followers of Maulana Taqi Usmani

        Age limit: 18- onwards

        Middle class



3.5.2 Second P: Service Price

Pricing is the crucial “P” of services marketing because it determines the revenue that
a company‟s services will earn. Pricing has several components and there are three
basic criterion involved in pricing a service3:




---------------------

         3. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill Publishing
         Company Limited
                                                                                Page | 46
        Cost- sum of all the costs

        Competition- competitive pricing

        Objectives- strategic considerations



Pricing strategy devised at MBL is objectives based. The Meezan bank‟s objectives are
to increase its market share in the market. The prices set for its products and/or services
are very economic and minimal in nature as compared to the other market players of
Islamic banking category.



3.5.3 Third P: Place

Many experts say that location is the key to successful marketing of services. This is
because the customer is often present at the same place where the service
“manufactured” and delivered.

Customer research has shown that in many cases customers will choose a
conveniently located supplier of services over the best service provider located far
away. Therefore a captive audience of customers could be built up by a well located
retailer of consumer goods, or a service4- bank.

The placement in banking sector plays a vital role. The availability of branches in the
business areas and in the areas where it is convenient for the customers to reach and
get their desired banking services is very crucial. MBL has strategically designed the
placement strategies in order to reach maximum number of customers. But the
strategy is little flawed.

------------

         4. Nargundkar, Rajendra. (2007). Services Marketing, Tata McGraw Hill Publishing
         Company Limited

                                                                                 Page | 47
There is a sum total of 37 branches5 running currently in Lahore city. In spite of this
branch number, the branch network is weaker. The customer has to wait too long in
order to get its desired service if his/her account is in some, lets say, MBL (XYZ) branch
and he has tried to get services from, for instance, MBL (PQR)branch.

Apart from this the location of branches is questionable. In some areas the branches
are located closely e.g. NGT branch and Model town branch. Whereas in some
locations the branches are located far away this may be a negative mark on the
placement strategy of MBL.

There are total of 209 branches operating within the 54 cities throughout the country.
This is no doubt a good sign as compared to the branch network of Meezan Bank‟s
competitors.



3.5.4 Fourth P: Promotion

Promotion is vital for any business. But many service businesses do not spend
adequately on promotional activities. The ways through which Meezan Bank Promotes
itself includes:

        Electronic media

        Print media

Electronic Media

Television is the best option to reach a wide audience in an instantaneous manner, not
only because it is cost effective but also in terms of impact and visual appeal,
television is the medium that has the best characteristics.

------------------------------

         5: Branch Network- Financial Report


                                                                                   Page | 48
Television ads for MBL mainly try to emphasize the importance of Islamic Banking and
the services it offers can help you in the time of need which is totally riba free. Various
business channels, like business plus, and commercial channels, like Indus vision,
displays the TV ads respectively.

Another way through which Meezan Bank promotes itself electronically is through its
website, which is designed in an effective manner with detailed information, so that
visitors and the prospective customers can easily get know how about its available
products and/or services.

Print Media

After the selective advertising in the television another medium used by Meezan bank
to promote its products and services is Print media respectively. Print media loosely
consists of major newspapers in the country and few business magazines.

Moreover, Pamphlets are displayed at the branch level to promote forthcoming
products to the potential customers respectively and sometimes billboards are used in
the commercial areas.



3.5.5 Fifth P: People- Love Lock

As most services are dependent on people to deliver them successfully, this element of
“people” is considered to be a key to a service business. Like other services, businesses
“people” plays very important role in the success of the banking industry.


The employees at MBL are fully trained professionals who know how to deal with the
messy customer. They are capable of handling stress involved in keeping large number
of people (customers) happy while not losing their own temper. They are given
suitable level of empowerment required to perform their various job related tasks.
Apart from that they are continuously at on job training in the form of job rotation and

                                                                                  Page | 49
job enrichment. Apart from this the employee turnover rate is very high because of
the job dissatisfaction and the over burden of work. The salaries offered at MBL are
another job dissatisfier that is leading to the high rate of employee turn over.


3.5.6 Sixth P: Service Process


This P involves the number of backend or frontend processes involved in delivering the
final Service to the end customers. In the banking industry, this P is of huge importance.
The very successful example in banking industry is the SINGLE WINDOW CONCEPT.
At MBL, the processes involved in the delivery of the service are little complex. In order
to get the desired services, the customers have to wait too long. For instance, if
someone wants to get the information about the TD‟s the front desk people let him or
her wait too long instead of guiding them to the officer concerned. This weak point
should be overcome because it may become the reason of customer(s) to switch their
bank.


3.5.7 Seventh P: Physical Evidence-Servicescape


Servicescapes is a term used by two American researchers in the field of service
marketing. Philip Kotler has used the term Atmospherics to describe the effect of
servicescape. The service servicescape creates a mood, a longing, an attraction or a
desire to visit the service provider, in the context of a service purchase.


The feelings evoked in a customer can be affected by the physical aspects of the
building housing the service provider, its ambiance, its level of cleanliness, the dress
worn by the service provider‟s employees, and even the number and type of
customers present when he enters or avails of the service being provided.


Servicescape or the design of the MBL branch (es) is carefully and strategically
designed to attract the potential and actual customers. The atmospherics I have
                                                                                   Page | 50
found at MBL, New Garden Town Branch, were little clumsy. The branch size was small
and the traffic was heavy. This was one of the reasons of making the PROCESSES slow
and keeping the customer(s) at WAIT. Apart from that the branch had many indoor
plants, the well dressed staff, cleanliness and abaya worn by female staff creates
Islamic impact and charisma for the new comers.




                                                                              Page | 51
                                            Chapter 4


4.1 Environmental Analysis


4.1.1 Growth rate for the entire industry

Overview

The banking system effectively coped with several challenges emanated from the
economic slowdown both at home and abroad due to strong resilience built over the
years and effective regulatory and supervisory regime. According to the SBP‟s
quarterly performance review6 of the banking system for the quarter ended December
31, 2008 asset base of the banking system grew 2.6% over the quarter to reach Rs 5,653
Billion, well-supplemented by 3.6% and 7% growth in deposit and shareholder‟s equity,
respectively.

The liquidity profile of the banking system remained constrained for most part of the
quarter. However, post quarter statistics indicate a significant easing of the liquidity
profile because of gradual increase in deposits and reduction in bank‟s advances.

The inline with the deterioration in macroeconomic indicators, the credit risk remained
high during the quarter. However, satisfactory earnings enabled the system to cover
these loan losses. The NPLs are covered by loan loss provisions to the extent of 75%, but
on account of these increased loan provisions in absolute amounts, earnings of the
banking system came under pressure and remained lower than the last couple of
years. Return on assets (ROA) was 1.2% for the year 2008 vs 1.5% for 2007 and 2% for
2006. Overall solvency position of the banking system showed an improvement.

-----------------

   6. The growth rate of entire banking industry is compositely gained from SBP‟s
   quarterly performance review of the banking system for the quarter ended
   December 31 2008 and the 1st quarter ended March 31 2009

                                                                                  Page | 52
The Capital Adequacy Ratio (CAR) under Basel-II framework, which also accounts for
the operational risk charge, improved to 12.2% (12.6% for commercial banks) due to
fresh injection of equity and satisfactory earnings. The CAR improved to 13% jointly for
banks and development finance institutions (DFIs). “Banking system shows strong
resilience to unusual shock in major risk factors. This strength of the banking system
largely came from the prudent regulatory and supervisory regime strengthening the
risk management and governance standards in banks as well as the improved
solvency positions7.”

“Going forward, due to constrained economic environment both at home and
globally, the credit risk, earnings and growth rates of the banking system are likely to
remain under some strain in coming quarters,” the report anticipated. The banking
system has gained stability over the last couple of years through sustained growth in
asset and customer-base. Currently, a decline in the demand for credit from different
sectors was witnessed. Banks, as a result, had to divest their asset mix from loans
towards investments. Similarly, further tightening of monetary policy squeezed the
surplus liquidity from the market. (SBP 1HFY08)




4.1.2 Performance of Islamic Industry8

The Islamic Banking Institutions (IBIs) maintained their profitability, though with slight
deceleration during the quarter under review. However, growth in assets remained
higher than that of the conventional banks, thus increasing share of IBIs in the system.


---------------
    7. Business Recorder, March 24, 2009

    8. SBP, Quarterly performance Review September 2009



                                                                                    Page | 53
The balance sheet composition with slight changes remained more or less stable
during the quarter. On the asset side, significant increase was observed in investments
and interbank lending, while financing portfolio contracted. Deposits of the Islamic
Banking increased, despite a decline in deposit base of the banking system. „Due to
financial institutions‟ also increased marginally after declining over a couple of
quarters. Deposit mix of Islamic banks, due to decline in deposits from financial
institutions tilted toward the customer deposits.


Analysis of uses of funds shows a consistent increase in investments of IBIs. During the
quarter under review, investments registered a healthy growth of 21 percent. Most of
the increase in investments resulted from 4th auction of GoP Ijara Sukuk of Rs 14.4
billion in September, 2009. Periodic issues of Ijarah Sukuk have contributed towards the
resolution of key issue i.e. lack of alternative avenues for Islamic banks. So far GoP Ijara
Sukuk of Rs 42.2 billion have been issued, which now represent 65 percent share in
investments of the Islamic Banks. In line with general trend, Financing of Islamic banks
decline by 4.7 percent in Sep-09 and its share in overall assets decreased to 41
percent.


The composition of financing shows a substantial increase in share of Ijarah and a
moderate increase in Istisna. Other modes of financing declined over the quarter, with
considerable decline in Mudarbah and Salam. Group-wise analysis shows that decline
in financing was more pronounced in IBIs.


The financing portfolio of IBIs is concentrated in corporate and consumer with smaller
shares of SMEs and commodity finance, while financing to agriculture is almost
negligible. There is a strong potential for the IBIs to expand into SME and Agriculture
sector. Keeping in view the potential and demand for Agri-finance and to promote



                                                                                  Page | 54
Islamic Financing in this area, SBP has issued „Guidelines on Islamic Finance for
Agriculture‟.


The liquidity position of IBIs improved over the quarter under review, as the decline in
Financing and increase in deposit base led to further lowering in Financing to Deposits
ratio (FDR).


Increasing financing risk continues to pose challenge to IBIs. Increase in NPFs coupled
with drop in financing led to deterioration in asset quality indicators. Since NPLs
increased mainly in Loss category, which attract higher provisioning, provision
coverage ratio improved over the quarter.


Sector wise analysis shows that textile, chemical and individuals have the major share
in financing. However, infection ratio is quite high for cement, electronics and
individuals. While NPFs of individuals are generally adequately secured through
collaterals, low infection ratio for textile sector vis-à-vis conventional banks reflects
upon the better risk management of IBIs.


The year to date profits of IBIs remained higher than the results of corresponding
period of last year, though there was significant increase in provisioning for NPFs.
However, Islamic banks saw a marginal decline in ROA due to shift in the mix of
earning asset towards low-return assets. Incidentally, major part of IBIs profitability is
coming from IBIs of conventional banks and a couple of Islamic banks. Islamic banks,
therefore, need to improve on their operational efficiency for keeping their
competitiveness in the industry in terms of both market share and profitability.


4.2 Competition Analysis

4.2.1 Major Competitors

                                                                                    Page | 55
The augmentation in the banking industry, specifically Islamic banking segments, of
Pakistan has directed to an increase in the number of banks both domestically and
internationally to be established and create a competitive industry. For MBL its
competitors come in the form of a mixture of domestic and international banks
established in Pakistan.

Meezan Bank limited feels that its major competitors are as follows:

        Bank Islami Pakistan Limited

        Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations

        Dubai Islamic Bank Pakistan Limited

        Dawood Islamic Bank Limited

        Emirates Global Islamic Bank



It claims that it has a cut throat competition with:

     Bank Islami Pakistan Limited

     Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations



4.2.2 Their Introduction

4.2.2.1 Bank Islami Pakistan Limited9

Bank Islami Pakistan Limited (“Bank Islami”) is located in Karachi, Sindh, Pakistan. Bank
Islami Pakistan received an Islamic commercial banking license from State Bank of
Pakistan on March 31, 2005. It is the first financial institution in Pakistan that is going to
focus on Wealth Management as the core area of business. It intends to offer retail
banking products, proprietary and third party product, and integrated financial
------------------
9. http://www.bankislami.com.pk/about_us/

                                                                                      Page | 56
planning services. The Bank is expected to start its operations in the last quarter of year
2005.
The epochal idea of Bank Islami was conceptualized by Jahangir Siddiqui & Company
Limited and DCD Group in late 2003. Mr. Hasan A. Bilgrami was appointed as Adviser
to the sponsors on March 16, 2004 to formalize the idea. He presented the concept
paper of Bank Islami to sponsors on March 24, 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 Bank Islami by investing 18.75% in the total
Capital.



4.2.2.2 Albaraka Islamic Bank B.S.C. (E.C.), Pakistan Operations10

Albaraka Banking Group is the biggest Islamic banking group listed on the Bahrain
Stock Exchange in terms of capitalization. It has been rated by Standard & Poor's as
BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment
banking and treasury services strictly in accordance with the principles of the Shari‟ah.
The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about
US$ 1.59 billion.

With assets of US$11.2 billion, the Group has a wide geographical presence in the form
of subsidiary banking Units in 12 countries, which in turn provide their services through
more than 250 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al
Baraka Islamic Bank/ Bahrain, Al Baraka Islamic Bank/ Pakistan, Banque Al Baraka
D'Algerie/ Algeria, Al Baraka Bank Sudan/Sudan, Al Baraka Bank Ltd/ South Africa,



10. http://www.albaraka.com.pk/about/index.php




                                                                                 Page | 57
Al Baraka Bank Lebanon/Lebanon, Bank Et-Tamweel Al- Tunisi Al Saudi/ Tunisia, The
Egyptian Saudi Finance Bank/Egypt, Al Baraka Turk Participation Bank/Turkey,
Albaraka Bank Syria (under establishment), and representative office, Indonesia.

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




4.2.3 Their market shares

There are many criteria on the basis of which we can assign the market share of the
banks in the banking industry. Some calculate it on the basis of its deposits, while
others on the basis of its customer base. Likewise some analysts calculate the market
share on the basis of assets and equity one may have.

Here I have used the data provided by the central bank i-e State Bank of Pakistan, for
the calculation of market shares of MBL and its competitors. The report published by
SBP “Quarterly performance Review September 2009” is used for overall values of
banking sector. There can be different criteria for this calculation but I am considering
the bank‟s deposits and advances for this purpose.

According to the latest calculations of SBP, advances of the Islamic banking sector
stood at Rs133,745 Million, total customer deposits of the Islamic banking sector
reached at Rs. 244,792 Million respectively.




                                                                                 Page | 58
Name of the Banks              Assets    Advances       Deposits     Equity in millions


Meezan                         108,079   37,238         87,681       8,867
DIB Limited                    32,607     20,019        25,451       5,262
Dawood Islamic Limited         13,777     4,664         7,370         5,051
Al Baraka                      25,604    14,192         19,574       2,194
Bank Islami                    29,094    7,248          22,861        4,823
Emirates global Islamic bank   20,185    9,739          14,820        3,659




Meezan Bank Limited is the first and largest Islamic Bank of Pakistan with a 204-branch
network presence strategically spread across 54 major cities in the country. The Bank
has a cumulative annual growth rate of 60% over a period of 5 years and currently
enjoys 42% market share in the Islamic banking industry. Meezan Bank has established
a strong and credible management team comprised of experienced professionals,
which have achieved a strong balance sheet with excellent operating profitability,
including a capital adequacy ratio that places the Bank at the top of the industry11.



4.3 Technology Analysis

4.3.1 Technical methods that affect the industry

Technology is having a major impact on the banking industry. Direct deposits allow
companies and governments to electronically transfer payments into various
accounts. Debit cards, which may also be used as ATM cards, instantaneously deduct
money from an account when the card is swiped across the machine at a stores‟ cash
register. Electronic banking by phone or computer allows customers to access
information such as account balances and statement history, pay bills and transfer
money from one account to another.

----------------

11. www.meezanbank.com/NewsDetail.aspx?iNewsID=2

                                                                               Page | 59
Advancements in technology have also led to improvements in the ways in which
banks process information. The use of cheque imaging allows banks to store
photographed cheques on the computer instead of paper files.

Some of the technical methods that are used and affect the banking industry are as
follows:

              Availability and growing use of credit scoring software allows lending
               departments to approve loans in minutes, rather than days (already in use
               of American bankers). It is a perfect example of electronic decision
               maker; it can give relief to the credits department personnel by way of
               auto calculating the manual calculations by single click.

              Computer networking within branch level is also eroding traditional barrier
               between financial service providers (bank) and technology firms which
               are ultimately boosting revenue for banking and telecom industry.



4.3.2 Innovation

Innovation is a necessity in contemporary times, as it is becoming one of the reasons of
competitive advantage in banking industry. It helps banks to compete in today‟s
highly technologically driven industry. Some of the innovations that the banking
industry is looking forward are:

              Advanced means of connectivity between branches through better and
               advanced software and hardware to maintain connections within banks
               in remote areas and during natural calamities in Pakistan. This includes
               better connection through WiFi or WiMax

              Credit scoring software which allows lending departments to approve
               loans in minutes, it provides the major edge to credit officers in Pakistani
               scenario.

              Information systems in banks that are more protected than prior to
               eliminate any probability of fraud and which are even more users friendly


                                                                                    Page | 60
    to help employees to use them not only to make key decisions but also
    satisfy customer need in a more well-timed manner.

   Advancements in online transfer from inter branch to an even more
    helpful interbank transfers.

   Automation of simple operations task that will not only improve efficiency
    but also reduce costs like stationary and courier services, like automation
    of cheque books etc.

   Digital imaging of cheques is also an innovative technology for Pakistani
    bankers to follow and introduce paper free environment.

   Banks in Pakistan are trying internet, mobile and telephone banking in its
    operations to major extent so that customer driven banking can be
    implemented.




                                                                      Page | 61
                                       Chapter 5




5. How & Why I have selected Meezan Bank?

5.1 Reason for Selecting Meezan Bank

Few decades back, people had no other option to go for except commercial
banking. Some of the reasons for this are that at that time many people were ignorant
of the Islamic values n principles regarding the interest –fixed- paid by the commercial
banks. Secondly, even if they had any information or knowledge and exposure about
the working of banks and the commercial banking they still had to do their
transactions through them as there was not a single bank engaged in Islamic banking.

With the passage of time many Islamic and shariah scholars laid fatwah on the mode
of working of commercial banks and considered the fixed rate of profit and interest
paid by them Haram (unlawful, prohibited). Today, due to the increased exposure,
people are much more inclined to invest or deposit their money in the banks who are
engaged in the Islamic banking. Due to this many banks has taken initiative to open
the branches conducting Islamic banking.

My reason for selecting Meezan bank is that, firstly, it is the pioneer Islamic bank in
Pakistan which is formed on the principles of shariah. A wide range of products are
developed and launched consolidating the Bank‟s position as the premier Islamic
Bank of the country. As in marketing, the pioneer in the market is said to be the market
leader as more people are aware of the company

In 2001, The Shariah Supervisory Board was established at Meezan Bank led by Justice
(Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan sets criteria for
establishment of Islamic commercial banks in private sector and subsidiaries and



                                                                               Page | 62
stand-alone branches by existing commercial banks to conduct Islamic banking in the
country.

Another reason for selecting Meezan is its connection with the Quran. The term
Meezan is derived from the word Al-Meezan which means balance.

The Islamic mode of banking is still an emerging market in Pakistan. It has a broad
future waiting ahead in the Pakistani markets. The competition is multi-folded from last
decade. Currently in this hyper competitive environment it‟s the management,
professional staff and services of Meezan Bank which has increased its worth multi
folded.

Like wise, the most notable reason for selecting Meezan Bank is the atmospherics of
the organization. Based on the Islamic principles, female staff is required to wear
abaya during the working hours of bank. This has inspired me a lot. You don‟t have to
worry about your dressing and about the nasty/ filthy eyes customers.

The how part of the question is answered as: through word of mouth.




5.2 Practical Application of the Subjects

Almost every course assigned to me in Hajvery was somehow or other relevant to the
working of the company. Here is the list of some of the courses that are applicable or
they are applied in real time in the banking environment.

      Banking Practice & Law

      Banking Operations

      International Banking

      Financial Management


                                                                                Page | 63
      Human Resource Management

      Communication Skills

      Accounting

      Management

Well some of the courses were applicable completely like accounting, management,
banking operations, banking practice and law etc. while the others were applicable
to some extent only. As most of the books we have studied during our degree
program were written by the international authors so the procedures differed to some
extent. Things taught to us were same but the way of its application or its essence was
entirely different.

Likewise few things appeared to be entirely bookish if we compare them with the
practical environment of the organization.




                                                                              Page | 64
                                       Chapter 6




6. Brief on the Departments I worked during internship and specific/leading
contribution made.

6.1 Brief introduction

I did my eight week internship at Meezan Bank Limited New Garden Town Branch
Lahore. This branch also serves as a Parent Branch of Model Town Branch. During
internship I was rolled over in departments including accounts opening, remittance,
cheque book issuing, foreign trade, assisting customer Care, but any penetration was
developed in the Credits Department.

The work that I did during my internship at Meezan Bank primarily includes voucher
checking, checking account opening pre-requisites, account opening backlog
checking, analyzing the inward and outward clearing, maintaining return mail register,
completion of pay order and demand draft register, zakat register maintenance,
assisting the cheque book issuance department, developed know-how about the
lockers and the rules related to them, analyzing the expenses incurred and maintain
the records thereof. Assisting the officer concern for the creation of expense approval
sheets, understand the working of credits department, and to assist the foreign trade
wing.



6.2 Department Overview

CIBD (Corporate & Investment Banking Division) or Credits Department, this was the
department which attracted me the most and due to my interest in finance I started
penetrating in CIBD. A very brief overview of this department is that it tends to focus on



                                                                                Page | 65
the corporate lending and somewhat syndications also; indeed it covers the lending
modes in corporate sector.

This department is entirely dependent on some other departments for the sake of
client‟s verification and legal provisions. The lending cases starts at the lower level I-e,
Relationship officer or Relationship Manager. The case is then forwarded to the
Regional level and then the Head office for the final approval.

Documents to be acquired from the prospective client while request of lending is
received are attached in the appendix H.




                                                                                   Page | 66
                                         Chapter 7

7. Problem Identification

The main problems I identified during my internship programs were:

      The lack of awareness among the employees about the exact job description.

      Undefined job tasks in operations

      Lack of IT specialist at branch level.

      Lack of common Room.

      Lack of incentives, performance rewards etc.

      The branch atmospherics sometimes creates low levels of customer satisfaction




7.1 Weakest area(s) of Meezan Bank’s Performance

The weakest area of performance which I have identified during my eight week‟s
internship is Human Resource Department.

HR is responsible for hiring and firing of the work force within the organization. Here at
MBL the HR dept, I believe, needs lot more attention. A low salary, lack of motivation
at workplace, little or no incentives is the crucial things affecting the performance of
the employees. The employees are not given reasonable motivational add on which
results the poor performance of the staff. This poor performance in the end badly
affects the customers of the banks resulting unhappy customers and in extreme cases
product and or service switchers

Likewise, the policies settled by the company are little problematic as they involves
excess documentation.


                                                                                  Page | 67
Second weak area I have identified was the lack of proper Marketing on behalf of the
Meezan Bank Limited. Today Competitive environment, Marketing is considered to be
crucial for the success of any company or its products and/or services. Unfortunately
marketing at meezan Bank has not achieved the level which is required for the better
penetration of the company in today‟s aggressive banking industry where every bank
positions itself strategically from its competitor.

Likewise, the increased level of costs; the cost of particular one branch is extremely
very high that they have to take most of the times approvals from the head office or
regional offices.




                                                                                Page | 68
                                         Chapter 8



8. SWOT Analysis

Meezan Bank being a quality organization strives to provide quality to all its
stakeholders, customers, employees and environment. In Pakistan, it is operating in a
very volatile economic and political environment.

       I have personally conducted interviews of some of the employees of the branch
to do a SWOT analysis of MBL in the light of their experience in the banking field. My
analysis, consolidated with theirs', is given below;

Strengths –Internal

       MBL has the privilege of being the first in the Islamic Banking sector which gives
       MBL a competitive edge over all other banks.

       Having renowned Shariah Scholars, Backed up by the Kuwaiti sponsors who
       held vast knowledge of banking and have high networking and vast range of
       Islamic Products, MBL is enjoying major share in the market.

       “Every branch is your own branch”, there are very nominal service charges
       deducted by the bank for its banking facilities.

       There are many value added features in the products offered by the bank.
       ATM cards are provided with every account. Other features are present in the
       various products. The priority customers enjoy a much-pampered status at the
       bank.

       The employees at the bank provide impeccable customer service to their
       customers.




                                                                                 Page | 69
Weaknesses- Internal

      Lack of proper marketing strategy.

      Delayed performance of the departments.

      High employee turnover rate.

      Low salaries, low employee motivation at workplace.

       201 branches are opened so far but the networking within the branches needs
       to be worked out.

      Excess liquidity.

       Markets are not open from the point of view of investments. Being an Islamic
       bank it has to carefully examine the opportunities available to invest its money.

      Lagging behind technologically wise as compared to the other banks.



Opportunities-External

       Increasing growth of the Islamic banking sector

       MBL can capitalize its first mover‟s advantage

       Development of shariah compliant products

       New markets to explore

       It can establish Full fledged consumer banking menu in Pakistan

       Opportunities are available in the remote area as compared to the big cities.



Threats-External

       Economic downfall of the country.

       New entrants; There is an increasing competition in the Islamic banking sector

       Minimum capital requirement

                                                                                Page | 70
    It may lag behind due to the aggressive marketing strategies adopted by its
    competitors

    Acceptability of Islamic banking as it is still an emerging concept in Pakistan.

    If the growth of the Islamic banking sector is an opportunity it is in the
    meanwhile threat as well.

    Employee turnover rate may increase further if it is not controlled by the
    management by giving incentives.




                                                                                  Page | 71
                                         Chapter 9



9. Conclusion & Recommendations



 “The percent of interns converted to full time e6mployees has increase fro6m 35.6% in
                    2001 to 50.5% in 2008” (NACE, March 2008, P.5)12



Fundamental aspect of landing a good job is getting a good internship. In today's
competitiveness, this is pretty tough to get a good internship. Internships provided you
with the opportunity to get the feel of the real world environment. There are some
things which cannot be taught in a class room and sometimes those are the most
definitive skills that you will need in at workplace.

I had the opportunity to work with one of the leading Islamic banks of the country. By
and large, MBL is enjoying the position of a pioneer Islamic bank in Pakistan. There are
currently six dedicated Islamic banks operating in Pakistan with a total of 475
branches. Having opened 35 new branches in 2009, Meezan bank has a network of
201 branches across 54 cities, making it the largest Islamic Banking Institution in the
country, commanding a 42% share of the total dedicated Islamic Banking network in
Pakistan.

During my internship program I have studied the working of various departments and
the products and/or services offered there to the end customers. The financial and
operational analysis of MBL is somewhat satisfactory. The careful analysis of 7P‟s of

--------------------

12. http://www.insightintodiversity.com/index.php?option=com_content&view=article
    &id=120:the-importance-of-internships-in-a-declining-economy-&catid=50:april-
    2009-issue&Itemid=109
                                                                                  Page | 72
services was not very encouraging. The element of “People”, “Process”, and “Physical
Evidence” needs attention from the top management. “People” are the internal
customers (employee) of the company. With which Processes and Physical Evidence is
closely related (linked), that are overlooked in this service oriented organization. The
employee turnover is very high which they have to cut down as they are losing a
number of good trained employees due to its poor policies.

During my internship period I have identified number of weak points that may erode
the success factors of the organization in the future. As per my expertise, I am
suggesting the following measures to overcome the very crucial bottlenecks to
enhance the performance of every department and more specifically “People”.

      First of all, I would I like to suggest that the bank must pursue a very aggressive
       marketing and advertising strategy so that it can create awareness in the
       general public about its Islamic products and services. Aggressive Marketing
       strategy is extremely very necessary in today‟s cut throat competitive
       environment. For this purpose MBL must hire efficient marketing personnel to
       increase its market penetration.


      Healthy Customer (internal & external) relationship must be developed in order
       to sustain its market leadership.


      The employee turnover rate is way too high. There is a need of creating
       satisfaction among employees. They do not feel any attachment to the
       organization. There is a requirement for building up their loyalties so that the
       bank can curtail the dissatisfaction and turnover among employees.


      Eroded Management/HR policies must be redefined. There is a lot of excessive
       paper work involved in the banking processes. The personnel in the bank should

                                                                                   Page | 73
    not be overstressed with workload. The workload is of a destructive level. At that
    level of load the employees loose all the comfort in their work and remain tense
    and frustrated.


   Develop the healthy and sound competition between employees and bosses.
    Listen to the employees, effective surveys can be taken from them in this regard.
    Develop the system of internal control- performance and workforce satisfaction
    wise (internal audit).


   Meezan bank does not provide job security to the employees. Mostly are hired
    on contractual basis. More people must be employed on permanent basis/
    providing job security and satisfaction.



   Employee motivation level is very low. There must be motivational add on‟s
    ,which may be in the form of increased salaries, recognition, incentives scheme,
    appreciation, job security, recreational and informational trips, that may
    increase the employee motivation at work place which will ultimately become
    the source of customer satisfaction. The performance reward linkage should be
    making strong as it is said “A happy employee delivers more than he receives
    from the organization". The MBL should also try to make its employees happier.


   Introduction of job specific training to the employees and adhering to the
    criteria laid out by the HR department for job advancements. There is no
    separate department for the training of new employees. There should be
    establishment of a separate department for the training of the new employee
    and experienced teaching staff should be hired for their training.




                                                                            Page | 74
   Active R&D should continuously try to gather information about the present
    actions of its competitors and expected future actions. So in this way more
    effective strategies can be formulated.
   New schemes should be introduced and maximum privileges should be given to
    customer, so that to win money market.



   The clumsy processes for providing the banking facilities to the end users must
    be properly managed in order to decrease the customer dissatisfaction and the
    waiting involved in getting their desired services.



   A proper IT department should be established in all branches, with professionals
    having the knowledge to maintain a secured connection with other banks.
    Scheduled computer data backup should be done within the bank.




    "We have the duty of formulating, of summarizing, and of communicating our
    conclusions, in intelligible form in recognition of the rights of other free minds to
                        utilize them in making their own decisions"

                                      - Ronald Fisher




                                                                                 Page | 75
                                     Chapter 10



10.1 Web References

     www.meezanbank.com

     www.sbp.org.pk

     www.brecorder.com

     www.albaraka.com.pk

     www.bankislami.com.pk

     www.ibp.com.pk

     www.google.com.pk

     www.learnislamicfinance.com



10.2 Documental References

     Annual Report 2009 (MBL)

     Annual Report 2009 (Bank Albraka)

     Annual Report 2009 (Bank Islami)

     Quarterly Performance Report 2009 (SBP)

     Nargundkar, Rajendra (2007). Services Marketing, Tata McGraw Hill Publishing
      Company Limited

     Brigham, F. Eugene, Ehrhardt C. Micheal (2003). Financial Management. (11th
      ed). McGraw Hill Publishing Company Limited




                                                                            Page | 76
                                              Chapter 11



Appendix A:

CUSTOMER SERVICES DEPARTMENT

Account opening and closing is the function of customer services dept. The bank’s customers includes
individuals (single or joint), firm (partnership/proprietorship), Autonomous corporations, Limited
companies, Charitable Institutions, associations, Educational Institutions or local bodies.

Products offered by this department:

       a) Riba Free Rupee Savings Account
                  Current account
                  Saving Account
       b) Riba Free Dollar Savings Account
                  Foreign Currency Account



BASIC OF ACCOUNT OPENING

Account opening is the basic and first relationship, which is established between Bank and the customer.
In account opening extreme care has to be exercised in case of completion of account opening
documentation.
Whenever a client comes in the bank in order to open an account the first information that is given to
him/her about the types of accounts, which can be opened, so far this purpose the client is given detailed
information about the accounts and their respective profit rates.

TYPE OF ACCOUNTS OPENED
      CURRENT
      SAVING
      TERM DEPOSIT


ACCOUNTS OF ILITERATE [Photo Account]
These accounts can be opened individually or jointly.
For men, the right hand thumb impression and for women, the left hand thumb impression is taken on
account opening form.
                                                                                              Page | 77
The customer is given advice to come to bank himself in order to withdraw any cash or deposit the
cheque.
Requirements:
      Photocopy of NIC of Account Holder.
      Two-three passport size photographs.


Sub-categories of Accounts and the Basic Requirements are given in the Appendix____


THINGS TO BE CONSIDERED BEFORE OPENING AN ACCOUNT:
      Verification of the customers’ credentials.
      The suitability of the prospective customer.
      State Bank’s rules and regulations.
      The Bank’s own policy.
      The prospective profitability of the relationship.



             i. PROCEDURES FOR ACCOUNT OPENING:
First of all, after inquiring from the customer what type of account he/she wants to open, the account
opening form is got filled from the customer and signed it. Along with the account opening form, the
customer is also signed two Specimen Signatures Cards.

After fulfilling all the formalities of account opening, the computer generated account number is given
to the customer that is of special series depending on the type of account.

REQUISITION SLIP

A requisition slip is given to the customer to sign it so that the customer can get chequebook.
Chequebook is issued after one day of receiving the requisition slip.

             ii. LETTER OF THANKS
After opening the account “A Letter Of Thanks” is send to the customer in order to thank the customer
for opening an account in the Bank. This letter tells all the information regarding his/her account, which
are kept very confidential.

            iii. ACCOUNT OPENING REGISTER



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After an account is opened, an entry is made in the account opening register, which has the following
columns:

      Date
      Account Number
      Name & Address
      Telephone Number
      Initial Deposit
Customer Services Officer enters the new account opened in computer and the Specimen signature
Cards are also scanned so that whenever a cheque of the respective account comes for encashment, the
signatures can be verified.


Overall functions performed by Customer Services Department:
      ACCOUNT OPENING
      ACCOUNT CLOSING
      GENERAL CLIENT DEALING




Appendix B:
OPERATIONS DEPARTMENT

FUNCTIONS PERFOMED:
       a) CLEARING
       b) REMITTANCE

CLEARING
        Inward clearing
        Outward clearing


      2) INWARD CLEARING
In the morning, the bank receives its own cheques, which have been presented by the customers in some
other bank to be deposited in their account. NIFT provides the facility of bringing cheques for inward
and also takes the cheques of outward clearing to other banks. The cheques received in inward clearing
are the cheques drawn on bank and the bank has to pay for them. For this purpose the bank makes
clearing in computer by checking the balances of the respective customer, if their balances are up to the

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mark then that cheque is cleared and the respective customer account is debited with the respective
amount. If the balances are short then that cheque is bounced back to the related bank.

Reasons for returning a cheque:

      All required stamps of Clearing, Crossing and Endorsement are not present on cheques.
      Cheque is post date.
      Refer to drawer
      Effects not cleared, may be presented again
      Amounts in words and figures differ.


If any of these reasons exists then that cheque is returned through NIFT and deducts Rs. 300 from
customer’ account as cheque returned charges.


Then the report of returning any cheque is sent through fax to the head office Karachi. After this put the
entry in Cheque return register showing the following columns:
              Date
              Title of account
              Account number
              Cheque number
              Bank and Branch name
              Reason to return


     (ii) OUTWARD CLEARING:
All the cheques of other banks which are deposited to MBL are presented in outward clearing. This is
said as outward clearing because they are presented on the very next day after depositing a cheque.
In outward clearing, the entry is made like:
Customer Account                           Cr.
State Bank of Pakistan                     Dr.
 This entry is made when we come to know about the clearing of all cheques, which are sent to other
banks.

   (iii) SERVICES PROVIDED
          I. TRANSFER OF AMOUNT
         II. TELLING ACCOUNT BALANCES

        a) I. TRANSFER OF AMOUNT
If a customer holds two accounts in the bank and he/she wants to transfer money from one account to
other account, customer writes a cheque and fills deposit slip in which he/she writes account number to

                                                                                              Page | 80
which amount is to be transferred. After making transfer entry in the computer, affix transfer stamp in
the middle of the cheque, crossing on the upper left and bank’s endorsement stamp on the backside of
the cheque.

       b) II. TELLING ACCOUNT BALANCES

       c)   Whenever clearing officer receives phone call from the customer inquiring about his/her
            account balance after confirming the name, address and other information he tells the
            balance through computer.



        i) REMITTANCE
       a) Pay order
       b) Demand drafts
       c) Inward collection
       d) Outward collection

            a. a) PAY ORDER:
Pay order is an order to pay money but this payment is to be made within city. In other words it can be
said that the payee and the payer should be in one city.
In pay order the payment can be made in:
       A) Cash
       B) Clearing
       C) Transfer

      2) PROCEDURE:
 In case of pay order first of all the customer has to fill a pay order application form in favoring section:
name, account number, amount, beneficiary name, address, etc.
The data is entered in already set format of pay order in computer and pay order print out is taken. An
authorized person and manager operations are signed pay order.
The original copy of the pay order is given to the customer and carbon copy is kept with bank for office
record.

      3) b) DEMAND DRAFT
An order to pay money to the payee who is residing outside the city. DD can be for a customer who may
or may not have an account in the bank but the other person’s account must be maintained with the bank
for which the payer has demanded the DD.

             i. c) INWARD COLLECTION
When the bank receives cheques of any other bank from its any branch situated in the some other city,
and then those have been dealt as inward collection.

                                                                                                 Page | 81
OTHER FUNCTIONS UNDER OPERATIONS DEPARTMENT


CHEQUE BOOK ISSUANCE
It is also the duty of department to issue a chequebook when an officer receives request from the
customer.
LOCKERS
Lockers operations shall not be permitted under power of attorney of a customer. A customer wishing to
allow another person or agent may be requested to open a new locker account under joint names and
close the existing account.
In offering this facility branches have to be selective and should provide lockers to the customers whose
identity and integrity is verified, who should maintain account with the branch and have potential for
deposits and other banking business. It is reiterated that honesty, creditability and good reputation of the
customer is of utmost importance in the selection of customer for lockers.

KEY FEATURES:
      Available in selected branches
      Available in 3 sizes
      For all eligible Account Holders
      Key security Deposit      PKR 3000

Procedure
    Application on Prescribed Form duly filled
    Saving/Current Account with MBL
    02 Passport size Photographs



Charges
   Key Deposit          PKR 3000/
   Small                PKR 1000/Year
   Medium                      PKR 1500/Year
   Large                PKR 2000/Year
   Locker breaking charges Rs 3000


Cheque Books Handling
    Application for New Cheque Book

CHARGES
   PKR 03/Leaf for Saving Account Cheque Book
   PKR 01/Leaf for Current Account Cheque Book
                                                                                                Page | 82
       PKR 01/Leaf for FCY Account




Appendix C:

RIBA FREE TERM DEPOSITS OFFERED BY BANK
    Certificate of Islamic Investment
    Monthly Mudarabah Certificates
    Dollar Mudarabah Certificates
    Meezan Amdan Certificates
    Meezan Providence Certificate

Certificate of Islamic Investment

Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a COII holder, the customer enters into a relationship, based on Mudarabah, with
Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the
Manager (Mudarib) of the funds deposited by the customers.

The bank allocates the funds received from the customers to a deposit pool. These funds are utilized to
provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and
Ijarah.


Tenor
                  3 Months
                  6 Months
                  1 Year
                  2 Years
                  3 Years
                  5 Years

Profit Payment Options

3 Months             on maturity
6 months             on maturity
1 year         monthly or quarterly min investment 200K
2 year         monthly or quarterly min investment 200K
3-5 year             monthly or quarterly min investment 200K

There will be different rate of profit according to the profit payment option and amount and tenor.

                                                                                              Page | 83
Pre-mature encashment
In case of pre mature encashment the profit rate will be calculated according to the completed tenor, if
extra profit is paid that will be recovered

          No pre-mature encashment penalty in MBL

   Payment of Premium
Bank pay premium from its own share of profit to high depositors.

   Premium Rate
      5M-9.99M                1%
      10M-29.99M              1.25%
      30M-49.99M              1.50%
      50M+                    2%


Karobari Munafa Account
Riba-Free Karobari Munafa Account works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah.
On agreeing to become an account holder, the customer enters into a relationship based on Mudarabah
with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is
the Manager (Mudarib) of the funds deposited by the customers.
The bank allocates the funds received from the customers to a deposit pool. These funds from the pool
are utilized to provide financing to customers under Islamic modes that include, but are not restricted to,
Murabaha and Ijarah.
          Profit calculated on daily basis and paid monthly
          No minimum balance requirement
          No restriction on deposit/withdrawals
          Free Cheque Books, Pay Orders and Online Banking
          Dedicated Account/Relationship
          High return for high depositors


Monthly Mudarabah Certificates

RibaFree Monthly Mudarabah Certificates is a flexible investment product which has been designed to
give you a monthly return which is Halal. The minimum investment required is only Rs. 100,000 and
you receive profit for each complete month of investment with the Bank.




                                                                                               Page | 84
How                 Monthly                  Mudarabah       Certificates            works?
Riba-Free Monthly Mudarabah Certificate (MMC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MMC holder, the customer enters into a relationship based on Mudarabah with
Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the
Manager (Mudarib) of the funds deposited by the customers.

The bank allocates the funds received from the customers to a deposit pool. These funds from the pool
are utilized to provide financing to customers under Islamic modes that include, but are not restricted to,
Murabaha and Ijarah.

Features:
    Minimum requirement of PKR 100K
    Profit disbursement on maturity
    Tire system for profit payment (Refer Rate Sheet)
    No payment on premature encashment


Dollar Mudarabah Certificates

On agreeing to become a DMC holder, the customer enters into a relationship based on Mudarabah with
Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the
Manager (Mudarib) of the funds deposited by the customers.

The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool
are utilized to provide financing to customers under Islamic modes that include, but are not restricted to,
Murabaha and Ijarah.

Requirements:
    In USD only
    Individuals and Corporate
    Minimum investment 10K and above

Tenor:
    3Months
    6Months
    1Year
    3Years

Profit payment Options:
    3Months              Maturity
    6Months              Maturity
    1year          6 Monthly or Maturity
    3years         6 Monthly or Maturity

                                                                                               Page | 85
Meezan Amdan Certificates

The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an
exceptionally high monthly profit designed especially for those individuals and corporations who are in
need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate with
a variety of free packaged benefits.
Working

The Riba-Free Meezan Aamdan Certificate (MAC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MAC holder, the customer enters into a relationship based on Mudarabah with
Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the
Manager (Mudarib) of the funds deposited by the customers.

The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool
are utilized to provide financing to customers under Islamic modes that include, but are not restricted to,
Murabaha and Ijarah.

Features:
    Long Term Product
    Tenor 5-1/2 years & 7 years
    Profit 9.5% 10.50% (Last month)
    For Individuals and Corporate
    Minimum deposit PKR 100 K
    (50K for old citizens and widows)


Meezan Providence Certificate (MPC)

A long-term investment product specially designed to cater to the needs of corporate and business
concerns for purposes of investing their Provident, Pension and Gratuity Funds.

How                  Meezan                   Providence     Certificate             works?
Riba-Free Meezan Providence Certificate (MPC) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.

On agreeing to become a MPC holder, the customer enters into a relationship based on Mudarabah with
Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the
Manager (Mudarib) of the funds deposited by the customers.

      Min. deposit 01 Million

Tenor
    5 Years

                                                                                               Page | 86
      7 Years

Other options:
    Provident and Pension Fund of large corporate
    Premature encashment facility available

Meezan Islamic Institution Deposit Account

The Meezan Islamic Institution Deposit Account (MIIDA) is a unique product, tailored exclusively for
Islamic Financial Institutions (IFIs). With MIIDA, any IFI now has the opportunity to manage excess
liquidity in an immediate and profitable manner, by maintaining a checking account with Meezan Bank.
All eligible Islamic Banks can enter into a Mudarabah relationship with Meezan Bank. Under this
relationship, the respective Islamic Banks are the Investors (Rab ul Maal), and Meezan Bank is the
Manager (Mudaarib) of the funds deposited by them. Meezan Bank allocates the funds received from the
Islamic Banks to a deposit pool consisting of financing under Islamic modes that includes, but is not
restricted to, Murabaha and Ijarah.

Features:
    For Islamic Financial Institutions deposit
    To invest their access liquidity
    Min. investment PKR 10 M and multiplies there of
    Max investment 01 B


Appendix D:

CASH DEPARTMENT
The cash department is the most important department of the bank. It receives cash from customers and
then deposits it into the accounts of the customers and maintained their balances.
In cash department following books are maintained.
      Scroll book
      Paying book
      Cash balance book

SCROLL BOOK
When cash is received at the customer it is recorded in the scroll book.

PAYING CASH BOOK
The cashier makes entry in the paying cashbook when cash is paid.

CASH BALANCE BOOK
The consolidated figure of receipt and payment of cash is entered in cash balance book.

                                                                                          Page | 87
Appendix E:

CREDIT / FINANCE DEPARTMENT

Islamic Financing for the following:
              Corporate
              SME
              Personal

Details are mentioned in Appendix ______



Easy Home
Easy home works under the Diminishing Musharakah where customer participates with Meezan Bank in
joint ownership.
Easy Home finance is available for:

Purchase
    3-20 year
    Max. Finance 85%

Construction
    2-20 year
    Max. Finance 70%

Renovation
    2-7 year
    Max Finance 85%

Replacement
    3-20 year

Eligibility
     Pakistani National
     Age 25—65 (till maturity)
     Professional Experience

Salaried person:
    2 year of consecutive experience in same industry
    Min salary 20 k per month

Business
    3 years business experience
                                                                                     Page | 88
      Min. business income Rs 50K per month

       Processing Charges
      Businessmen Rs 12500
      Salaried Person      Rs 8500
      (Up to Rs 4 M, 2000 Additional for above)
      Time Frame 3-4 Weeks



Car Ijara
Ijara is a rental agreement under which bank purchase a vehicle and give the same on rent to customer
Car Ijarah is Pakistan’s first "Interest Free" car financing based on the Islamic financing mode of Ijarah
(Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an
interest-based transaction.

Scope of Facility
    Domestic Vehicle                (Local made)
    Commercial Vehicle              (Local+Imported)
    Used/Imported Vehicle           (1st Transfer only)

Rates offered:
                          (For New)       (For used)
                         3 year    14%          15%
                         4 year    15%          15.50%
                         5 year    16.50%       18%

1% higher than normal for commercial+imported+used vehicle


Eligibility:
     Pakistani National
     Salaried individual, self-employed, professional or businessperson
     Minimum 3 years of work/business/professional experience
     6 month working with present employer
     Net income exceeds three times of monthly rental



Appendix F:

OTHER PRODUCTS OFFERED

On line Real Time ATM
               Free ATM Card
                                                                                              Page | 89
                  Per Day Limit of PKR 20K
                  Rs 15 charges for use of other ATM Network
                  Acceptable at all ATM outlets
                  Debit card at Orix out lets (PKR 50k/Day)


On line Real Time Facility
    Absolutely free from all branches of MBL
    Collection of Cheques absolutely free
    Available to PKR current, saving & Karobari Munafa acc.

Banking Facility at all MBL Branches for
    Mon - Sat       9-5
    Friday 9-12-30 & 3-5
    Saturday        9-12-30

24/7 Call Center
              24/7 call center provides you access to a wide range of Tele-banking solutions and
personalized banking service.

Key Features
       Check account balances
       Instruct issuance of pay orders and demand drafts
       Transfer funds between your own accounts
       Order issuance of cheque book
       Check transaction history of accounts
       Receive information on MBL products and services
       Issue stop payment instructions
       Report loss of your cheque book
       Request or change T-PIN
       ATM PIN Re issuance
       Report loss of ATM/Debit Card or cheque(s)


Internet Banking
       Internet Banking allows having access to accounts regardless of where they may be in the world.

Key Features
                  Balance inquiry
                  Statement viewing
                  Statement download
                  Cheque status
                  Cheque blocking
                  Pay order request
                  Complaint logging and follow-ups

                                                                                           Page | 90
                 Funds transfers between own accounts at MBL
                 Change of address request
                 Cheque book request


Alerts and Notification by E-mail
              Low/High balance alert
              Credit/Debit transaction alert
              Request resolution alert
              Complaint resolution alert

Future Features
                 Alerts by SMS/Fax
                 Utility bill payments
                 Inter bank funds transfers
                 Payment to nominated accounts at MBL
                 Standing orders for repeated payments




Appendix G:

Overview of Islamic Modes of Financing

   1. Mudarbah (Passive Partnership)

       This is a contract between two parties: a capital owner (rabb-al-mal) and an investment manager
       (mudarib). Profit is distributed between the two parties in accordance with the ratio that they
       agreed upon at the time of the contract. Financial loss is borne by the capital owner; the loss to
       the manager being the opportunity cost of his own labor, which failed to generate any income for
       him.


   2. Musharakh (Active Partnership)

       A musharakh contract is similar to that of the mudarbah, with the difference that in the case of
       musharakh both partners participate in the management and provision of capital and also share in
       the profit and loss. Profits are distributed between partners in accordance with agreed ratios, but
       the loss must be distributed in proportion to the share of each in the total capital.



   3. Diminishing Partnership
                                                                                              Page | 91
       This is a contract between a financier (the bank) and a beneficiary, in which the two agree to
       enter into a partnership to own an asset, but on the condition that the financier will gradually sell
       his share to the beneficiary at an agreed price and in accordance with an agreed schedule.


   4. Murabah (sales contract at a profit margin)

       Under this contract, the client orders an Islamic bank to purchase for him a certain commodity at
       a specific cash price, promising to purchase such commodity from the bank once it has been
       bought, but at a deferred price, which includes an agreed upon profit margin called markup in
       favor of the bank.

   5. Ijarah (leasing)

       The subject matter in leasing contract is the usufruct generated over time by an asset, such as
       machinery, airplanes, ships or trains. This usufruct is sold to the lessee at a pre-determined price.
       The lessor retains the ownership of the asset with all the rights as well as the responsibilities that
       go with ownership.


   6. Istisna

       Al-Istisna is a contract in which a party orders another to manufacture and provide a commodity,
       the description of which, delivery date, price and payment date are all set in the contract.
       According to a decision of the OIC Fiqh Academy, this type of contract is of a binding nature,
       and the payment of price could be deferred.


   7. Salam

       Salam is a sales contract in which this price is paid in advance at the time of contracting, against
       delivery of the purchased goods/services at a specified future date. Not every commodity is
       suitable for a Salam contract. It is usually applied only to fungible commodities.



AIMS-UK Islamic Banking & Finance | Online Certifications | Training & Consultancy



                                                                                                 Page | 92
Appendix H: Attachments

     Accounts opening form.

     L/C Form.

     Locker opening form.

     Labbaik travel Asan form.

     Form M.

     Form I.

     Form R.

     Term Deposit Form.

     Remittance Application Form.

     Profit Rate List.

     Account Closure Request.

     Customer Due Diligence form.

     Stop Payment Request.

     Sms Alerts Reques.t

     KYC.

     Locker insurance letter.

     List of information required for funded/non funded facility.

     Basic Documents Required for Account Opening.

     Account Statement Request.

     Undertaking for the difference of signatures.

     Change of address and signatures.

     Housewife/Retired Person/ Household Resident Declaration.

     Activation of Dormant Account.

     Cheque Book Application.

     MBL News teller.
                                                                     Page | 93

				
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Description: meezan bank limited is the pioneer of islamic banking in pakistan. i have the privilege of working as an internee in meezan bank limited