Chittagong Independent University

An Internship Report
on
Exploring the Attitudes of Customers
towards Islamic Banking in Bangladesh
A Study on Al-Arafah Islami Bank Limited,
Muradpur Branch
[This Report is submitted for the Partial Accomplishment of the Degree of Bachelor of
Business Administration with Major in Accounting]

Prepared By:
Nusrat Jahan Nishat
ID- 15301024
Bachelor of Business Administration
School Of Business,
Chittagong Independent University

Supervised By:
Dr. Emon Kalyan Chowdhury
Associate Professor
School of Business
Chittagong Independent University

Internship Duration:
February 01, 2019 – April 30,2019

Date of Submission:
30th April, 2019
Exploring the Attitudes of Customers
towards Islamic Banking in Bangladesh
 Letter of Transmittal
April 30, 2019

The EVP & Relationship Manager

Al-Arafah Islami Bank Limited

Muradpur, Chittagong

Subject: Submission of Internship Report

Dear Sir,

With due respect, I have the pleasure to submit my internship report on “Exploring the Attitudes
of Customers towards Islamic Banking in Bangladesh: A Study on Al-Arafah Islami Bank
Limited, Muradpur Branch” as a partial fulfillment of the requirements for the degree of BBA.
Now I am looking forward your kind appraisal regarding this report. This internship was an
extremely valuable experience for me. I have prepared this report highlighting the overall
performance of Islamic financing and the perception of our young generation towards it. I have
tried my level best to make the report relevant and authentic that might help the Islamic
financing industry to judge their future customer behavior. Without your guidance and support it
was not possible for me to complete the report.
Now, with good pleasure I hereby submit my internship report and I hope that you would be kind
enough to evaluate my performance with respect to the depth and quality of the report. I hope
you will consider the limitation and mistakes made in this report. It would be my great
achievement if you find my report informative.

Thanking You
Sincerely yours,

Nusrat Jahan Nishat

ID- 15301024
Department of Business Administration
Chittagong Independent University
 Letter of Endorsement
This is to certify that Nusrat Jahan Nishat, ID: 15301024, a student of Bachelor of Business
Administration (BBA) under School of Business, Chittagong Independent University, has
successfully completed her assigned Internship Report on “Exploring the Attitudes of Customers
towards Islamic Banking in Bangladesh: A Study on Al-Arafah Islami Bank Limited, Muradpur
Branch.
She was placed in the Al-Arafah Islami Bank Limited which is one of the glorious banks both at
home and abroad. Al-Arafah Islami Bank Limited is also one of the first banks to introduce the
innovative Islami Sharhia based banking service in Bangladesh and the extraordinary customer
service to all the clients.
I am pleased to hereby certify that the data and findings presented in this report are the authentic
work of Nusrat Jahan Nishat
I wish her every success in life.

Dr. Emon Kalyan Chowdhury

Associate Professor
School of Business
Chittagong Independent University
 Acknowledgement
In the name of Almighty Allah it is my pleasure to present this report titled “Exploring the
Attitudes of Customers towards Islamic Banking in Bangladesh: A Study on Al-Arafah
Islami Bank, Muradpur Branch”. This internship report is prepared as a requirement for
BBA completion program under BBA Program of Chittagong Independent University. As an
academic part of the BBA program I was placed in Al-Arafah Islami Bank Ltd. for three
months internship.
I would like to express my deepest appreciation to all those who provided me the opportunity
to complete this report. The accomplishment and completion of this report would not have
been viable without the contribution of some accommodative people, who gave their
valuable time from their busy schedule to guide me in doing my project work. I would like to
extend my heartiest gratitude to all those who directly or indirectly contributed to the
fulfillment of the report.
At the beginning, I would like to convey my gratitude and appreciation to my honorable
academic supervisor Dr. Emon Kalyan Chowdhury for providing valuable guidelines in
preparing the report. I am deeply grateful to him for his supervision during the internship
period. Without his guidance it would not be possible for me to prepare this report.
During this internship I have got cooperation from a number of employees from the
concerned organization. Specially, I would like to express my gratitude to Muhammad
Raihan Uddin (CDCS Assistant VP), Md. Ahidul Alam (FAVP) and so on. Without their
cooperation I couldn’t able to collect the information. They helped me a lot during my
internship program.
In addition, I would like to acknowledge to all the respondents for their participation,
cooperation and enthusiasm in our questionnaire surveys. I appreciate all the respondents
who are willing to spend their precious time to fill up the questionnaire. Last but not the
least; I am grateful to every single person for their cooperation, tolerance and contribution
towards this research project.
 Executive Summary
Though Islamic banking is not a very old concept, it is experiencing a rapid growth and now
competing head to head with conventional banking system not only in Bangladesh but
throughout the globe. In Bangladesh it seems to have a good future prospect and the banks
are trying to tap this market by offering services to the customers based on Islamic Sahriah
principles.
The purpose of this paper is to study the attitude of customers in Bangladesh towards
choosing the Islamic Banks. To prepare this report both primary and secondary sources of
data have been used. Apart from this a questionnaire has been prepared and did a survey on
40 customers of Al-Arafah Islami Bank. The introductory part is actually developed for the
proper execution of the entire report. The remaining part of the paper actually consist the
analysis, findings and conclusion. The report consists of nine chapters. A background of
overall performance of Islamic Banking industry both in national and international level,
starting from the very beginning of the history is described in the introduction which is
entitled as chapter one. Chapter two deals with the research background which explains the
“why” of the study. Moreover, the scope and limitations of the research carried with research
objective is focused in chapter two. Chapter three contains literature review. Previous articles
and researches that are on the similar field are briefly explained with its findings in the
literature review part. The fourth segment of the paper points out the research methodology
which combines the research design, sampling technique & data collection method for this
particular research. A sample size of 40 respondents is drawn to represent the findings of the
report in chapter five including the data analysis and interpretation part. In addition,
justification for choosing the variables is provided in this part that has been used to measure
the performance level. Furthermore, Chapter six represents the brief summary of the data
where the ultimate findings of the research are presented. Later chapter seven summarizes
some recommendation based on customers’ point of view as well as overall observation from
this research. Lastly, Chapter eight & nine covers references and appendix.
Table of Contents
CHAPTER- 1
INTRODUCTION.........................................................................................................................8
1.1 Background of the Study........................................................................................................9
1.2 Rationale of the Study..........................................................................................................10
1.3 Problem statement................................................................................................................10
1.4 Scope of the research...........................................................................................................10
1.5 Limitations of the research...................................................................................................11
1.6 Research objective...............................................................................................................11
1.7 General Objective................................................................................................................11
1.8 Specific Objectives..............................................................................................................11

CHAPTER- 2
THEORETICAL OVERVIEW
2.1 Definition of Concepts.........................................................................................................13
2.1.1 Origin of Islamic banking.................................................................................................13
2.2 Products of Islamic Banking................................................................................................15
2.3 Principles of Islamic Banking:.............................................................................................16
2.4 Difference between Conventional Banking and Islamic Banking.......................................17
2.5 Islamic financing &Bangladesh...........................................................................................19

CHAPTER- 3
ORGANIZATION OVERVIEW...............................................................................................21
3.1 Historical Background of Al-Arafah Islami Bank...............................................................22
3.2 AIBL Core Information.......................................................................................................22
3.3 Vision and Mission..............................................................................................................23
3.4 Objective..............................................................................................................................23
3.5 Commitment.........................................................................................................................24
3.6 Contribute in the country’s Economy..................................................................................24
3.7 Special features of AIBL......................................................................................................25
3.8 Capital Position....................................................................................................................26
3.9 Branches of AIBL................................................................................................................26
 3.10 Corporate Environment of AIBL.......................................................................................27
3.11 Products / Services Offering..............................................................................................27
3.12 Investment Modes of AIBL...............................................................................................28
3.12.1 Microfinance...............................................................................................................29
3.13 Structure of AIBL..............................................................................................................32
3.14 Organogram of AIBL.........................................................................................................33
3.15 Five Years Financial Performance at a Glance..................................................................34

CHAPTER-4 LITERATURE REVIEW...................................................................................35

CHAPTER-5
RESEARCH METHODOLOGY...............................................................................................39
5.1 Data collection.....................................................................................................................40
5.1.1 Primary sources:............................................................................................................40
5.1.2 Secondary Sources:...........................................................................................................40
5.2 Sample size..........................................................................................................................41
5.3: Sampling technique.............................................................................................................41

CHAPTER-6
FINDINGS AND ANALYSIS.....................................................................................................42
6.1: Demographic Profile of Respondents.................................................................................43
6.1.1 Gender, Age group and Marital Status :...........................................................................44
6.1.2 Level of education:............................................................................................................44
6.1.3 Medium of education:.......................................................................................................45
6.1.4 Profession..........................................................................................................................45
6.1.5 Income group:...................................................................................................................46
6.2 Awareness & preference level of Resondents......................................................................47
6.2.1 Banking Relationship:.......................................................................................................49
6.2.2 Banking Preference:..........................................................................................................50
6.2.3 Influential factors to open account in Islamic Banks:.......................................................50
6.2.5 Awareness of Islamic Bank Products:..............................................................................52
6.2.6 Awareness and Usage of Islamic Financing:....................................................................53
6.2.7 Cost of Islamic Banks:......................................................................................................53
6.2.8 Opinion Regarding Islamic Banking Products & Services:..............................................54
 6.2.9 Awareness of Profit rates of Islamic banks:......................................................................55
6.2.10 Customer Satisfaction:....................................................................................................55
CHAPTER- 7
SUMMARY OF FINDINGS, RECOMMENDATION, LIMITATIONS AND
CONCLUSION............................................................................................................................57
7.1 Key Findings:.......................................................................................................................58
7.2 Recommendation:................................................................................................................60
7.3 Limitations and Future Research.........................................................................................63
7.4 Conclusion:..........................................................................................................................64

CHAPTER-8
BIBLIOGRAPHY........................................................................................................................65
8.1 References:...........................................................................................................................66

CHAPTER-9
APPENDIX...................................................................................................................................67
 CHAPTER- 1
INTRODUCTION
1.1 Introduction to the Study

Islamic banking or sharia-compliant finance is defined as the Banking system that is developed
based on the Islamic (Shariah) law and guided for the betterment of Islamic Economics.
According to the Organization of Islamic Conference (OIC) “An Islamic bank is a financial
institution whose status, rules and procedures expressly state its commitment to the principle of
Islamic Shariah and to the banning of the receipt and payment of interest on any of its
operations" (Islamic Banking: Some Conceptual Issues). By the definition of International
association of Islamic Banks (IAOIB), “Islamic Banking is a Banking system which is
established in accordance to Islamic Shariah principle with the objective to improve the Islamic
financing system and to help the both Muslims and non-Muslims (Soud, 2017).

Islamic Finance is one of the fastest growing financial systems along with a huge expansion
around the world. Currently Islamic Banks are operating in 75 countries through 300 institutions
mostly in Middle East & South East Asia. According to Ernst & Young “total Islamic finance
assets of commercial banks rose 17% between 2009 and 2013, hitting $778 billion. Gulf
Cooperation Council (GCC) countries account for around $517 billion, ASEAN countries for
$160 billion and South Asia for $23 billion (These are the top 9 countries for Islamic finance,
2015). The growth rate is two or three times faster than the growth of conventional banks over
the same period (Yueh, 2014). Dusuki& Abdullah (2007) stated that, “The factors that have
promoted the growth of Islamic financing are, innovations, research and development and
financial deregulations” (Asdullah, 2016). Above all, Islamic financing is showing a positive
stimulation in the world economy.

Bangladesh is the third largest Muslim country with around 90% of Muslims. The innovation of
interest-free Islamic banking systems has already been able to show its contribution in the
money market. Since its inception in 1983 its strong growth is reflected in the increased market
share as well as the mobilization in the deposit. Islamic Banking Industry accounted for more
than one-fifth share of the entire banking industry in terms of deposits and investments as per
the quarterly report (2016) provided by WORLD BANK. Though the Islamic Banking industry
has achieved around 20% annual growth rate the country still has the potentials for further
expansion being a Muslim country.
Given the above background information the focus of this report is to understand the customers’
perspective about Islamic banking and thus represent a future prospect of Islamic financing in
context of Bangladesh. As such a survey was conducted mostly among the customers of Islamic
Banks. The reminder of the report provides Literature review, Research design, Findings &
Conclusions.

1.2 Rationale of the Study

Banking system played an important role in the economy. Financial sector of Bangladesh is
dominated by banks as asset of the banking sector holds more than 60 per cent share in the
Gross Domestic Product (GDP) (GULF BASE, 2012) .Since Bangladesh holds majority of
Muslim population, Islamic Financing has a great role to play in the path of Development. Till
1983 no Islamic banking was developed though Interest is completely prohibited in Islam.

After the inception OF Islamic financing it is showing a tremendous growth. Islamic banking
covers 22.72% market share of the country’s entire banking sector in terms of deposits and
investments. Because of its immense popularity the research topic “Banking Behavior of
Students towards Islamic Banking” came into consideration as students demonstrate the future
of the country.

1.3 Problem statement

The study is done based upon the perception of general customers towards Islamic Banking
systems and their preferences. There are controversies that Islamic banking doesn’t follow
Sariah compliance strictly. Moreover, there is strong competition in the banking sector which
force the banks to rethink about the customer satisfaction level as well as forecasting the future
demands.

1.4 Scope of the research

The study is limited to the customers of Al-Arafah Islami Bank Limited, Muradpur branch, Chittagong,
Bangladesh. Specific account and the account holder in this branch are related when preparing the report.
1.5 Limitations of the research

There are various limitations have faced conducting this study. Firstly, the knowledge of people
regarding Islamic banking system is very limited and the number of actual Islamic banking
customers is scarce. Secondly, there is a lack of sufficient records, information and publications
which hampered the findings and analysis of the study. Thirdly, bank officials were unwilling to
disclose the confidential information regarding banking operations. Time limitation was also an
obstacle while preparing the report. Finally, such an in-depth study on Islamic banking system
was a first time experience for me. Therefore inexperience is one of the main obstructions of the
study

1.6 Research objective

Without objectives anything cannot reach the destination. My internship program is also
directed to some particular targets. The main objective of the study is to gain practical
knowledge and experience about perception and attitudes of Muslim and non-Muslims towards
Islamic banking.

1.7 General Objective

The overall aim of this study is to understand customer’s attitude toward Islamic Banking
practice in Bangladesh.

1.8 Specific Objectives

The study pursues four main research objectives:

 To explore the attitude and perception of the consumer regarding the Islamic Banking.
 To identify Islamic bank customers’ history of banking relationship in Bangladesh
 To check the awareness level of the people about various Islamic bank products/services.
 To evaluate the current practice and performances of the Islamic banks in Bangladesh
 To determine the relationship between customers’ knowledge, awareness and
satisfaction with customers’ preference for Islamic banking products and services.
 To recommend actions that may be necessary to solve the problems faced by customers.

CHAPTER- 2
THEORETICAL
OVERVIEW
2.1 Definition of Concepts

2.1.1 Origin of Islamic banking

Islamic banking is a banking system or banking activity that follows the principles of Sharia or
the Islamic Law. In Islam, Sharia prohibits acceptance of specific interest or fees for loans of
money which is known as Riba, whether the payment is fixed or floating. Also the investment in
businesses that provide goods or services considered contrary to Islamic principles is entitled as
Haram. So Islamic banking prohibits Riba or interest. It pays the investor profit-sharing
dividends and offers borrowers fixed repayment rates and conventional interest rates are
considered as Halal or legitimate by Islamic laws (Kelana & Lai, 1998). In the late 20th century
a number of Islamic banks formed to apply these Shariah principles to private or semi-private
commercial institutions within the Muslim community. Eventually Islamic banking directs the
development of Islamic economics. Therefore 'Sharia compliant finance' is the more correct
term of Islamic banking.

The concept of Islamic Banking is several decades old. The first attempt to establish an Islamic
financial institution took place in Pakistan in the late 1950s with the establishment of a local
Islamic Bank in a rural area (Wilson 1983). Some pious landlords who deposited funds at no
interest, and then loaned to small landowners for agricultural development initiated the
experiment. The borrower did not pay interest on the credit advanced, but a small charge was
levied to cover the Bank’s operational expenses. The charge was far lower than the rate of
interest.
The second pioneer experiment of putting principles of Islamic Banking and finance into
practice was conducted in Egypt from 1963 to 1967 through the establishment of the Mit
Ghamar Savings Bank in a rural area of the Nile Delta. The experiment combined the idea of
German savings Bank with the principles of rural Banking within the general framework of
Islamic values (Ahmed 1992). The Bank’s operation was based on the same Islamic principle
i.e. no-interest to the depositors or from the borrower. This was the first Islamic Bank in an
urban setting based in Cairo. The Bank is a public authority with an autonomous status (Ahmed
1992). The principles of operation of the Naser Social Bank are very similar to those of the Mit
Ghamr Savings Bank. However, the latter offers a full range of normal Banking services and a
wide range of investment activities through equity participation.
  Islamic Banking, contemporary to that in Egypt, emerged in Malaysia. It was a financial
institution developed for the pilgrims of Malaysia. These institutions were established in
response to what was the contention of the Malaysian Muslims that money spent on pilgrimage
must be Hallal and free from ‘Riba’ Consequently, Pilgrims Savings Corporation was
established in 1963, which was later on incorporated into the Pilgrims Management Fund Board
in 1969.
Later the Dubai Islamic Bank was established in 1975. Since then, a number Islamic Bank and
financial institutions have been established of different parts of the world and have been
functioning successfully.
A significant development in Islamic Banking has been the granting of an Islamic Bank license
in Saudi Arabia to the fifty-year old “Al-Rajhi Company”, a firm noted for its currency,
exchange and commercial activities, whose assets exceed $ 5 billion. The firm began its
operation in 1985 under the name of “Al-Rajhi Banking Investment Corporation”

Islamic banking offers the same facilities like to make money for the banking institute by
lending out capital as conventional banking system except that it strictly follows the rules of
Shariah or Fiqh al- Muamlat. Islamic banking provides banking services that adherence to
Islamic law and ensure fair play to the customers. The Islamic law reflects the totality of Allah’
commands that regulate all aspects of a Muslim. Also the Islamic finance is directly involved
with spiritual values and social justices. And under Islam there is no separation of mosque and
state or of business and religion (Nicholas, 1994). As in Islam simply lending out money at
interest is prohibited and therefore Islamic rules on transactions which is known as Fiqh al-
Muamalat have been created to prevent these activities. However the basic principle of Islamic
banking is based on risk-sharing which is a component of trade rather than risk-transfer which is
seen in conventional banking. As a result Islamic banking introduces concepts such as profit
sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus
(Murabahah), and leasing (EIjara).
However the Islamic commercial law is actually based on four basic principles. The first
principle of Islamic business is based on profit and loss sharing and the second one is based on
fixed service fees and charges and the third is based on free of cost and no charges. The other
principles are changing with the situation of the business and its operation (Bellalah & Ellouz,
2004). The main and important models of Islamic banking system are as follows:
Mudharabah is a vebture capital that fund an entrepreneur who provides labor while the bank
provide finance so that both profit and risk are shared. Such participatory arrangements between
capital and labor reflect the Islamic view that the borrower must not bear all the risk or cost of a
failure. As a result it brings balanced distribution of income and not allowing the lender to
monopolize the economy.
EIjara wa EIqtina is similar to real estate leasing. Islamic banks handle loans for vehicles in a
similar way like selling the vehicle at a higher-than-market price to the debtor and then retaining
ownership of the vehicle until the loan is paid.
Musharakah is a joint enterprise or partnership structure with profit and loss sharing instead of
interest-bearing loans. It allows each party to involve in a business to share in the profits and
risks. Instead of charging interest as a creditor, the financier will achieve a return in the form of
a portion of the actual profits earned, according to a predetermined ratio.
Murabahah is the sale on the profit which is mutually agreed by both parties. It is actually a
request which is set by the client to the Islamic bank to leverage certain services or goods for
him and in return, the bank provides a definite profit to the client over the cost of the services or
goods.
Wadiah is safekeeping of a deposit. A bank is deemed as a keeper and trustee of funds. A
person deposits funds in the bank and the bank guarantees refund of the entire amount of the
deposit, or any part of the outstanding amount, when the depositor demands it.

2.2 Products of Islamic Banking

Since interest-bearing deposits are prohibited, retail Islamic banks offer customers up to four
different kinds of deposits:

Current Accounts: No return is received in this deposit instead a service charge may be
imposed. The face value of these accounts is guaranteed. Also, these funds don’t follow profit
loss sharing principle; instead serve the liquidity needs of the bank.

Savings Accounts: These funds share profit with depositors. Based on the bank’s regulations,
the bank may decide to pay a premium to holders of a savings account.
Investment Accounts: This represents the major portion of a bank’s financial liabilities which
is based on the principle of Mudharaba. A Mudharaba is a contract between two parties whereby
one party (the depositor) entrusts funds to another party (the bank) to undertake a particular
project. Investment accounts follow a period of maturityand based upon a pre-determined
ratiothe profits or losses from the project are divided between the bank and the depositors.

Special Investment Accounts: These accounts are offeredto high net-worth individuals
or institutional clients and are operated under the Mudharaba principle. These accounts
are considered as a specified project identified by the bank.

Apart from those Islamic Banks provide various retail products and services like ATMs,
internet banking, credit and debit cards, Insurance service and many more without
violating any Islamic laws. In addition, some basic instruments include: cost-plus
financing (murabaha), profit-sharing (mudaraba), leasing (ijara), partnership (musharaka)
and forward sale (bay’salam). These constitute the basic building blocks for developing a
wide array of more complex financial instruments. (Islamic Finance, 2015).

2.3 Principles of Islamic Banking:

Islamic Banking has some exclusive principles by which it can be distinguished from
conventional banking. The core principles of Islamic banking are stated below:

Prohibition of Interest: Interest is strictly prohibited in Islam. Because, Interest is fixed

and predetermined benefit accepted by the lender for lending his money and given by the
borrower for borrowing money. Islamic Shariah prohibits all benefits in transactions.
Interest is called Riba in Islam.

Partnership Business: Islamic banks invest money to the business organization as partner and
they look after business for ensuring the proper use of fund.

Profit and Loss Sharing: It is the basic principle of Islamic banking. Islamic banking
system conducts the business activities based on profit and loss sharing. As bank works as
partner it accepts the losses if any loss occurred in business and participates in profits
when profits gain.

Invest in Shariah approved Heads: Islamic Banking system is concerned in use of fund.
It only invests into Halal businesses that mean Shariah approved business heads.

Shariah Board: In every Islamic bank, there have a special governing committee that
governing the whole activities of the bank is called Shariah Board. This board ensures that
the investment is made to the Halal business and activities are conducted according to
Islamic Shariah.

Riba or Interest:
The word used by the Quran concerning 'interest' is Riba. The literal meanings of Riba are
money increase, increase of anything or increment of anything from its original amount.
However, all increases are not considered as Riba in Islam. Money may increase in
business activities as well. This increase is not at all considered as Riba. Islam prohibits
only those increases that are charged on the loan with a prefixed rate.
In the Shariah, Riba technically refers to the premium that must be paid by the borrower
to the lender along with the principal amount as a condition for the loan or for an
extension in its maturity. In other words, Riba is the predetermined return on the use of
money.

2.4 Difference between Conventional Banking and Islamic

Banking
The distinguishing features of the conventional banking and Islamic banking are shown in terms
of a box diagram as shown below:

Conventional Banks Islamic Banks

1. The functions and operating modes 1. The functions and operating
of conventional banks are based on modes of Islamic banks are based
manmade principles. on the principles of Islamic
Shariah.
2. The investor is assured of a 2.In contrast, it promotes risk
predetermined rate of interest. sharing between provider of capital
(investor) and the user of funds
3. It aims at maximizing profit 3. It also aims at maximizing profit
without any restriction. but subject to Shariah restrictions.
4. It does not deal with Zakat. 4. In the modern Islamic banking
system, it has become one of the
service-oriented functions of the
Islamic banks to collect and
distribute Zakat.
5. Leading money and getting it back 5. Participation in partnership
with interest is the fundamental business is the fundamental
function of the conventional banks. function of the Islamic banks.
6. Its scope of activities is narrower 6. Its scope of activities is wider
when compared with an Islamic bank. when compared with a
conventional bank. It is, in effect, a
multi-purpose institution.
7. It can charge additional money 7. The Islamic banks have no
(compound rate of interest) in case of provision to charge any extra
defaulters. money from the defaulters.
8. In it very often, bank's own interest 8. It gives due importance to the
becomes prominent. It makes no public interest. Its ultimate aim is
effort to ensure growth with equity. to ensure growth with equity.
9. For interest-based commercial 9. For the Islamic banks, it is
banks, borrowing from the money comparatively difficult to borrow
market is relatively easier. money from the money market.
10. The conventional banks give 10. The Islamic banks, on the other
greater emphasis on credit- worthiness hand, give greater emphasis on the
of the clients. viability of the projects.
2.5 Islamic financing &Bangladesh
Bangladesh is the third largest Muslim country in the world with around 160 million
populations of which 90 percent are Muslim. The hope and aspiration of the people to run
banking system on the basis of Islamic principle came into reality after the OIC
recommendation at its Foreign Ministers meeting in 1978 at Senegal to develop separate
banking system of their own. After 5 years of that declaration, Bangladesh established her
first Islamic bank "Islami Bank Bangladesh Limited" in 1983. At present, in Bangladesh,
out of 56 banks, 8 full fledged Islamic Bunks and 16 conventional banks(including three
FCBs) have been working in the private sector on the basis of Islamic Shariah. Alongside,
one non-bank Islamic financial institution named 'Islamic Finance and Investment
Limited' (IFIL) has also been operating in the system as Islamic NBFI since 2001. Islamic
banks and non-bank financial institutions in Bangladesh since their inception have been
gaining popularity in spite of some problems in their operation.

At present, there are 8 full-fledged Islamic banks in Bangladesh:

1) Islami Bank Bangladesh Limited (IBBL:1983),

2) The ICB Islamic Bank Limited (the-then Al-Baraka Bank Ltd and Oriental
Bank Ltd.) (OBBL:1987),
3) Al-Arafah Islami Bank Limited (AIBL:1995),
4) Social Islami Bank Limited (SIBL:1995),
5) Shahjalal Islami Bank Limited (SJIBL:2001),
6) Export Import Bank of Bangladesh Limited (EXIM Bank:2004),
7) First Security Islami Bank Limited (FSIBL: 2009) and
8) Union Bank Limited (UBL:2013).

16 conventional banks have been operating in Bangladesh in line with the Islamic
Shariah. The first Islamic bank, Islami Bank Bangladesh Limited (IBBL) was established
in March, 1983 to conduct banking activities on the basis of the basic tenets of Islamic
Shariah. Later, The Al-Baraka Bank Limited (currently ICB Islamic bank Limited) was
established as the second interest-free Islamic bank in Bangladesh in March, 1987. The
third and fourth Islamic banks of Bangladesh namely Al-Arafah Islami Bank Ltd. and
Social Islami Bank Ltd. started their business in Bangladesh from September 27, 1995 and
November 25, 1995 respectively. In the year 2001, the fifth private sector Islamic bank
"Shahjalal Islami Bank Limited" started her banking operation. The sixth Islamic bank is
the Export Import Bank of Bangladesh Limited. This traditional bank has converted her
banking policies and principles in line with Islamic Shariah in 2004 and started operation
as an Islamic bank. The seventh Islamic bank First Security Islami Bank Limited
converted in 2009 to resume operation in line with the glorious Islamic Shari'ah. The only
foreign Islamic bank "Shamil Bank of Bahrain EC (Islamic Bankers)" which is the largest
Islamic bank in the world opened a branch in Dhaka in August, 1997 (later on, after
several stage of mergers, this bank is renamed now as Bank Alfalah Limited operating in
Bangladesh as an interest based bank having one Islamic banking branch in Dhaka).
Besides, 16 traditional banks have been operating in the country on Islamic Shariah basis
from 18th December, 1995 alongside the Islamic banks. These conventional banks have
also established their own Shariah Supervisory Councils to guide their activities
conforming to Islamic principles.
 CHAPTER- 3
ORGANIZATION
OVERVIEW
3.1 Historical Background of Al-Arafah Islami Bank

Being one of the biggest Muslim nations Bangladeshi individuals are especially careful about the
Islami way of life. The general population here is particularly strict in following the Quran and
the Sunnah of prophet. Therefore to lead a Haram free living they follow Islami rules in every
way possible. This created a lack of Islami shariah banking here in Bangladesh. The foundation
of Al-Arafah Islami Bank Limited on 18 June 1995 is the genuine result of the demand of
individuals for an Islami shariah in banking. This was the core reason Al-Arafah established its
banking from 27 September 1995.
Con-currently the bank is operating with an Authorized Capital 15,000 Million and Paid-up
Capital 9,943.06 Million. The bank is mainly guidance and well balanced control Islami Scholars
and experienced and educated businessmen makes sure that the bank is running according to the
Islami Shariah and there is no sign of giving and earning interest at any part of the financing
system. The bank’s has its full paid up capital is owned by indigenous shareholders.
AIBL has the total equity balance of Tk 22,520.7 million till the dated 31 December 2017, the
current manpower is 3446 and the number of shareholders was 30386.The bank's business
activities produced consistent profit and declared a decent dividend throughout the years for its
shareholders. As far as my findings are concerned the bank furnishes quality support of its clients
with blend of Islami guidelines and current innovation in their day by day exchanges, nonstop
improvement of new plans for the general population is the key of the bank to make progress in
such brutal rivalry in the banking area now a days.
The Bank is committed to contribute fundamentally to the national economy. It has made a
positive commitment towards the financial advancement of the country with 154 branches all
finished the country.

3.2 AIBL Core Information

- Managing Director: Farman R Rahman - Equity 22,520.68 Million

- Opening Ceremony: 27 September, 1995 - Local Partnership of Capital: 100%
- Number of Employees: 3446 - Paid-up Capital: 9, 943.06 Million
- Investment: 235,905.23 Million - Authorized Capital: 15,000.00 Million
- Deposit: 244,806.26 Million - Number of Branches: 154

Source: Annual Report, 2017. Al-Arafah Islami bank Ltd

3.3 Vision and Mission

Vision
 To be a pioneer in Islamic banking in Bangladesh
 Contribute significantly towards the growth of the national economy.
 To establish an interest free transaction in the economy.

Mission
 To achieve satisfaction of Almighty Allah both in this world and even in afterlife.
 To increase the volume of Shariah Based Banking Practices.
 to satisfying diverse needs of its customers through collection of products at a
competitive price by using appropriate technology and providing timely service
 Fast and efficient customer service.
 Maintaining high standard of business ethics.
 To maintain balanced growth.
 To maintain steady & competitive return on shareholders’ equity.
 To introduce innovative banking at a competitive price.
 To capture and retain quality human resource.
 To extend competitive compensation packages to the employees.
 Firm commitment to the growth of national economy.
 To engage more in Micro and SME financing

3.4 Objective

Al-Arafah Islami bank Ltd. believes in its uncompromising commitment to fulfill its customer
needs and satisfaction and to become their first choice in banking.
AIBL is devoted to run all its activities as per Islami Shariah. AIBL throughout its steady
progress and continued success has, by now, earned the reputation of being one of the most
leading private banks of the country. The objectives of AIBL are as under:

 All the activities of AIBL are conducted on interest-free system according to Islami
Shariah.
 Investment is made through different mode permitted under Islami Shariah.
 Investment income of bank is shared with the Mudaraba depositors according to a ratio to
ensure a reasonably fair rate of return on their depositors.
 Its aims are to introduce a welfare-oriented banking system and also to establish equity
and justifies in the field of all economic activities.
 It extends co-operative to the poor, helpless, and low-income group of the people for their
economic enlistment particularly in the rural areas.
 It plays a vital role in human resource development and employment-generation,
particularly for the unemployed youths.
 Its aims are to achieve balanced growth & development of the country through
investment operations, particularly in the less development areas.

3.5 Commitment
 AIBL is a customer focused modern Islamic bank making sound and steady growth in
both mobilizing deposit and making quality Investment to keep our position as a leading
Islamic bank in Bangladesh.
 To deliver financial services with the touch of our heart to retail, small and medium scale
enterprises, as well as corporate clients through our branches across the country.
 Our business initiatives are designed to match the changing trade & industrial needs of the
clients.

3.6 Contribute in the country’s Economy

AIBL is always highly focused to the development of the Economy through following process.
 Generation of work sectors around the country
  Aiding the small and big industries with easy financial solutions.
 Encouraging depositors to deposit by providing security of the fund.
 Flourish Export Import by aiding the exporters and importers through various services
 Encourage small scale savings
 Encourage Charity
 Provides quality financial services
 Gather small funds and use them in engaging big development sector.
 Facilitating easy transfer of money.
 Encourage poor people to contribute in national economy giving financial help.

3.7 Special features of AIBL

 Overall operations of the bank are conducted according to Islami Sharia where profit is
the legal alternative to interest.

 Investment policy of bank follows different means approved by Islami Shariah based on
Quran & Sunnah.

 AIBL is committed towards establishing welfare oriented banking system, economic

enlistment of the low-income group of people, create employment opportunities.

 According to the needs and demands of the society and the country as a whole the Bank
invests money to different Halal business. The Bank is committed to establish an
economic system through social justice and equal distribution of wealth.

 It is committed to bring about changes in the underdeveloped rural areas for ensuring
balanced socio economic development of the country through Investment program.
According to Mudaraba system, the depositors are the partners of the investment income
of the bank. During the period under review, 70% of the investment income has been
distributed among the Mudaraba distributors.

 To render improved services to the clients imbued with Islami spirit of brotherhood,
peace fraternity and by developing an institutional cohesion.
  The Bank is contributing to economic and philanthropic activities side by side. Al Arafah English
Medium Madrasha and AIBL Library are among mentioning that.

3.8 Capital Position

Authorized capital Tk. 15000 million

Paid up capital Tk. 9943.06 million
Total Reserve and Surplus up to 31.12.2017 Tk. 1746.42 million

Source: Annual Report, 2017. Al-Arafah Islami bank Ltd

3.9 Branches of AIBL

AIBL started its working at 161, Motijheel C/A with a Branch named Motijheel Branch on 27
September,1995 was the first & main Branch of AIBL and has been operating throughout the
country. The Head Office of the Bank is however shifted to Purana Paltan in 2018 which is their
permanent premises and head office since then. AIBL is operating for twenty three years and
within this limited time frame the Bank has reached total of 155 Branches over the bangladesh
and also kept a smooth communication network among all the branches country wide,the number
of branchesas Division wise is mentioned in the following table

Divisions No. of Branches

Dhaka 72
Rajshahi 8
Rangpur 5
Khulna 12
Sylhet 7
Barishal 10
Chittagong 41
3.10 Corporate Environment of AIBL

Throughout my internship period I have noticed that the Corporate environment of “Al- Arafah
Islaimi Bank holds the beauty of the Sunnah of Prophet and has a touch of peace in every part of
their action and behavior. I could see in every stage of their movement they had their faith and
conviction, values and proper attitudes which reflected the Sunnah of our prophet.

3.11 Products / Services Offering

 Al Wadiah current account (CD).
 Mudaraba short notice deposit (SND).
 Mudaraba savings deposit (MSD).
 Mudaraba term deposit receipt (MTDR).
 Monthly installment based term deposit (ITD).
 Monthly profit based term deposit (MPTD).
 Al-Arafah monthly Hajj deposit (MHD)
 Al-Arafah term Hajj deposit (THD).
 Monthly installment based marriage savings investment scheme (MIS).
 Al-Arafah savings bond (ASB).
 Foreign currency deposit (FCD).
 Pension deposit scheme (PDS).
 Cash deposit waqf deposit scheme (CWD).
 Mudaraba lakhpoti deposit scheme (LDS).
 Mudaraba millionaire deposit scheme (MDS).
 Mudaraba (special) pension deposit scheme (MSPDS).
 Mudaraba kotipoti deposit scheme (MKDS).
 Mudaraba double benefit deposit scheme (MDBDS).
 Mudaraba triple benefit deposit scheme (MTBDS).
Here are some accounts described in brief which is very commonly used by customers:

1. Mudaraba Term Deposit: This deposit scheme starts from Tk.50000 or above is obtained
under the aforementioned scheme for tenure of 3, 6, 12, 24 and 36 months and the same is
withdrawal with profit at the end of the tenure.
2. Mudaraba Savings Deposit: In order to open a Mudaraba Savings Deposit account by his/her
name with a minimum balance a person will need only Tk. 500. The account holder can operate
this deposit account according to his/her wish. Moreover, they can deposit and withdraw any
amount of money at any time.
3. Short Notice Deposit (SND): Basically it is for the firms. It lets the owner of business to
operate this account. He can deposit any amount at any time, but he have to inform or send a
short notice to the bank authority before seven days of withdrawals.
4. Monthly Hajj Deposit: This deposit is for only hajj purpose as it named by it. This deposit
requires at monthly installment from 1 (one) year to 20(twenty) years. Generally, accepted under
the above scheme to enable the account holder to perform Hajj out of the accumulated saving
with profit.
5. Monthly Installment Term Deposit (ITD) : In this deposit, the monthly installments can be
Tk.300/-, Tk.500/-, Tk.1000/-Tk.1500/- Tk.2000/- is obtained under the aforesaid scheme for a
tenure of 5,8,10 and 12 years and the same is withdrawal with profit at the end of the tenure.

6. One Time Hajj Deposit : In this scheme, fixed amount of Hajj deposits is accepted by bank
from the clients for particular term and according to the rules of profit is accumulated thereon per
year in this regard. As the fixed deposit is matured, Hajj expenses are defrayed by the same.
Through this scheme, the guardians may also open Hajj account to enable their successors to
perform Hajj.

3.12 Investment Modes of AIBL

The investment of the bank stood at Tk. 162,503.14 million against 146,740.36 million during
the corresponding period of last year. The percentage of increase is 10.74%. The bank provides
investments to the clients under the following modes of investment under Islamic Shari’ah:
Bai-Murabaha or simply Murabaha: The word “Bai-Murabaha” have derived from Arabic
words Bai and Ribhum. Here word “Bai” means purchase and sale and the word ‘Ribhum’
means an agreed upon profit. Bai-Murabaha means sale for an agreed upon profit.
Musharaka: The word Musharaka is derived from the Arabic word Sharikah meaning
partnership. Islamic jurists point out that the legality and permissibility of Musharakah is based
on the injunctions of the Holy Qura’n, Sunnah and Ijma (consensus) of the scholars. In
Musharaka transaction may be conducted in the following manner such as one, two or more
entrepreneurs can approach an Islamic Bank to request the financing required for a project.
Mudarabah: The term Mudarabah refers to a contract between two parties in which one party
supplies capital to the other party in order to engaging in a business activity with the
understanding to profits which will be shared in a mutually agreed upon. On the other hand,
losses are the sole responsibility of the provider of the capital.
Bai-Muajjal: These words ‘Bai’ and ‘Muajjal’ are derived from the Arabic words ‘Bai’ and
‘Ajal’ where ‘Bai’ means purchase and sale and ‘Ajal’ means a fixed time or a fixed period. So,
Bai Muajjal is a sale for which payment is made at a future fixed date or within a fixed period. In
short, it is a sale on credit
Bai-Salam: By the word Bai-Salam is used to define a sale in which the buyer makes advance
payment. The delivery is delayed until sometime in the future. Usually the seller is an individual
or business and the buyer is the bank.
SME Banking: Small and Medium Enterprise (SME) is playing an important role to the growth
of overall GDP of the country. With a view to boost up the small and medium enterprises of the
country, Bangladesh Bank has recently advised the commercial banks to enhance the flow of
economy.

Functions and Operations

There are mainly three sections in AIBL, they are:
A. General Banking Division
B. Investment Division and
C. Foreign Exchange Division.
They have small department or units under them. The details of the important sections and
subsections are described below.
General Banking Division
There are certain three sections working together to fulfill the target of the company.
(a) Customer Service
(b) Cash Department
(c) Accounts Department

Customer Service
Different functions of customer service are:
 Accounts opening
 Issuance of Cheque Book
 Issuance of Payment Order
 Issuance of T.T
 Issuance of D.D
 Issuance of Online Transfer.
 Handling transfer transaction.
 Operation of clearing house.
 Executing customer standing instructions.
Cash Department
Different functions of cash department are:
 Receiving cash from the depositors.
 Payment of cash to the client as demanded.
 Checking all areas of deposit slip whether it is clearly written or not (name, account no,
amount)
 Verifying the payment cheque when to pay the money to the clients whether the
information is available or not like dale, amount, account no etc.
 All the received and payment money must be written down in the receipt & payment
register along with account no.
  Cash register must be maintained by the Cash Officer.
 Maintenance of daily cash balance.
 Preparation of monthly cash balance.

Accounts Department
Accounting of AIBL can be broadly classified in the following two groups:
i) General Accounting
ii) Investment Accounting

3.13 Structure of AIBL

AIBL is basically managed by its Board of Directors consisting of 15 members. The Board is
responsible to appoint an executive committee which consists of Sponsor Director (Chairman,
Vice Chairman), its member, Shareholder Director, Ex officer Director, Company Sectary. The
committee is authorized to observe and review major day to day operational functions including
investment plans, budgets and other investment activities. Moreover, the board is responsible for
establishing the company’s policies and reviewing the operational performance of the company
including approval of large investment transactions and major fund procurement. Furthermore,
the board appoints, the Managing Director responsible for managing the company’s overall
operations within the framework of policies of the company.
Shari’ah Board: The scholars of high reputation having extensive experience in law, economics
and banking systems and specializing in law and finance as prescribed by Islamic Shari’ah is
responsible to make up the AIBL's Fatwa & Shari’ah Supervision Board. The Board is appointed
by the bank's Board of Directors. The Shari’ah Board is responsible for the development and
creation of innovative Shari’ah –compliant investment and financing products and services. The
Board is also empowered to issue fatwas on any matter proposed to it by different business units
of the bank. The Shari’ah auditors are authorized to ensure that all the transactions are carried
out in strict compliance to Islamic principles of banking.
3.14 Organogram of AIBL

A layout of Management Structure and Legitimate Hierarchy of Management of AIBL Muradpur

branch are presented as follow
Organogram Al-Arafah Islami Bank Limited

Source: Adapted from Bank Practices, 2017 Al-Arafah Islami Bank Limited
3.15 Five Years Financial Performance at a Glance

Particulars 2013 2014 2011 2012 2017

Authorized Capital 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00
Paid up Capital 8,343.25 9,469.58 9,469.58 9,943.06 9,943.06
Reserve Funds & Other 4,827.20 5,620.87 6,432.32 7,468.16 8,556.96
Reserve
Shareholders’ Equity 16,091.17 18,159.52 19,236.07 21,337.48 22,520.68
(Capital & Reserve)
Deposits 140,980.55 166,851.17 169,887.0 199,703.92 244,806.26
8
Investment 125,715.39 146,740.37 162,503.1 196,519.38 235,905.23
4
Investment in Shares & 7,138.93 9,120.90 8,851.13 9,058.68 10,145.49
Securities
Fixed Assets 2,517.22 2,661.11 3,057.38 3,240.18 3,260.38
Total Assets (Excluding 173,161.63 210,439.01 229,106.6 272,900.04 319,255.29
off-balance sheet items) 6
Total Expenditure 15,000.00 2199.43 2865.05 3575.81 4462.30
Profit before Tax and 4948.56 6333.45 6360.15 7511.03 6955.77
Provision
Profit after Tax 2276.68 2324.95 2097.59 2613.76 2431.38

Total Assets 173161.63 201439.01 229106.66 272900.04 319255.29

Fixed Assets 2517.22 2661.11 3057.38 3240.18 3260.38
Earnings per Share 2.46 2.20 2.25 3.07 3.15
Dividend 13.50% 14% 15% 20% 20%
Source: Annual Report, 2017
 Chapter 4
LITERATURE
REVIEW
Several studies underlined the need to understand the customer’s perspective regarding Islamic
bank during the last decade. Customer satisfaction is directly related to customer’s loyalty, and
an increase in satisfaction also increases the long-term commitment of customer. The customers’
satisfaction has been based upon individual and overall transactions executed by any client,
customer’s perceived service quality and also on the assurance of using Islamic Shari’ah
principles (Hassan et al., 2012).

Erol and El–Bdour (1989) and Erol, Kaynak and El-Bdour (1990) conducted a research on
Jordan where they found three important factors that attracted the customers towards Islamic
Banking. The Factors are: reputation, confidentiality and efficient services. The study showed
that it was not religion that influenced people rather the products and services that is offered by
the Banks. On the Other Hand, Omer (1992) explained, “Customers are attracted to Islamic
Banking due to religious values whereas they are highly unaware of the products and services
that Islamic Financing provide” He further explained the most important factor they consider is
the prohibition of Interest (Riba). (Azhar, 2014)

Yousuf et al. (2014) conducted research on Islamic Banking Scenario of Bangladesh. According
to their findings Convenience of opening accounts or the quality of the services offered does not
have much impact on the consumer’s decision of choosing an Islamic banking system. But for
the Shariah-based activities of the Islamic banks, their reliable commitment to the customer and
their behaviour encourage the Muslim to be attracted by the Islamic banks. Bashir (2013)
indicates that awareness is positively and significant associated with customer satisfaction,
service quality, and product quality in Brunei Darussalam’s Islamic banking.

The proliferation of the Islamic banking institutions throughout the world, as well as the entry of
a huge number of conventional banks into this market, is all undeniable evidence of the growth
of the Islamic banking. (Nadia et al., 2014). In today’s highly competitive corporate
environment, quality of services is an essential element for enhancing customer satisfaction and
customer loyalty. Khan & Fasih (2014) states that service quality and all its dimensions such as
tangibles, reliability, assurance and empathy have significant and positive association with
satisfaction and loyalty of customers towards their respective financial service providing
organizations.

Hassan et al. (2012) assures the enormous significant relationship between customer’s loyalty
and customer’s perception, which is based on the religious and interest-free factor of Islamic
banks. They also find out that switching cost and trust and commitment of customers have a
greater impact on the consumer’s loyalty.

A study conducted by Naser et al. (2013) on Kuwait Finance House (KFH) states that the
respondents were attached a relatively high degree of agreement with the reason that they deal
with both commercial and Islamic banks to diversify their investment. They also showed that the
customers are dealing with Kuwait Finance House (KFH) not for the profitability reasons but for
the confidentiality, bank credibility, confidence in the Shariah Supervisory Committee and belief
in the bank’s management. According to Naser and Mountinho (1997), Islamic banks are facing
competition not only from other Islamic banks but also from conventional banks; bearing in
mind that many usual banks are currently providing Islamic financial services through "Islamic
windows".

Omer (1992) stated that “the higher the religious commitment and the lower the level of general
education, the stronger the preference for Islamic over conventional finance” (Kuehn,
CONVENTIONAL VERSUS ISLAMIC FINANCE: STUDENT KNOWLEDGE AND
PERCEPTION IN THE UNITED ARAB EMIRATES). He conducted a survey of 300 Muslim
respondents in UK and came up with this finding. However, Haron, Ahmad and Planisek (1994)
found that the fundamentals factors that influence Muslims for Islamic Banks are the non-
religious aspects like transactions peed, service quality & friendliness of personnel. He also
added that even though 40% of the total respondents agreed with the fact that religion is the
prime factor, they admitted a poor understanding about the difference between Islamic Bank &
Conventional Banks as well as lack of knowledge about Islamic banking products.

Khan et al. (2007) reveal that majority of the current Islamic bank customers in Bangladesh have
a previous banking relationship with traditional banks. And Services offered by Islamic banks
such as ATM services, SWIFT for international funds transfer, local documentary Bill
purchased, foreign documentary Bill purchased, letter of credit, locker service are very similar to
the ones offered by the conventional banks (excluding implications of interest, if any at all).
Islamic banking is needed consciousness program among people in Pakistan because people are
not aware of it. So a comprehensive awareness campaign is required for the promotion of Islamic
banking (Khan& Ahmad, 2013).

Khattak & Rehman (2010) states that regarding the Islamic banking selection criteria most of the
customers have adopted Islamic banking due to the religious reasons, but there are some other
factors that motivate the customers for the adoption of the Islamic banking system such as, bank
efficiency in the transaction, their confidentiality to its clients, its working hours etc. From the
aspects of Islamic banks, it’s proved that the customers are encouraged because of interest
free loan, Islamic teaching, and shariah, awareness of Islam, and religious up bring in the country
(Begum, 2014). It is found by Akhtar et al. (2011) that customer satisfaction is positively related
to service quality in Islamic banking which comprised of standardizing variables being
followed by Islamic banks. Abduh et al. (2012) confirm that the better the performance of the
Islamic bank services, particularly in the staff-customer relationship, costs and charges applied,
and bank accessibility, the lower the likelihood of the customers to switch from those banks in
Indonesia.

While the literature that is available in this area is still developing, most of the research that is
discussed so far is based on the research done abroad. Bangladesh is still lacking behind in this
arena while the growth of Islamic Banking is so strong. Few statements seem clear from the
understanding of the literature that religion plays a partial role for Islamic financing. At the same
time some other factors are undeniable like reputation, peer pressure, service quality and
profitability. This study seeks to add to this literature the context of Bangladesh by examining
the awareness level and their perception for Islamic financing.
 Chapter 5
RESEARCH
METHODOLOGY
To achieve the objectives of the study both primary and secondary data has been used. But the
study is mainly based on primary data. Primary data was collected through a well-structured
questionnaire using personally interviewing the customers of Islamic banks. The survey
comprises of two sections. The first one is related to the personal information of the respondents
including their age, gender, marital status, educational qualification, profession, and income
level. The second section includes the questions relevant to several factors associated with
customer perception about Islamic banks. Customer trust, satisfaction, and opinions are
measured by a 5-point Likert scale ranging from 1=strongly disagree to 5= strongly agree. The
population of the study comprises of all the existing full-fledged Islamic bank customers in
Bangladesh. This sample selection is a limitation of this study. A wider geographic distribution
of our sample respondents would be an ideal one but due to various constraints, we had to
impound ourselves to one bank only. 40 respondents were selected from Al-Arafah Islami Bank,
Muradpur Branch. Selection of respondents was based on random sampling as well as
convenient sampling method. A total of 40 questionnaires were distributed, of which 36
questionnaires have been received as completely filled-up.

5.1 Data collection

To achieve the objectives of the study both primary and secondary data has been used. But the
study is mainly based on primary data. Primary data was collected through a well-structured
questionnaire using personally interviewing the customers of Islamic banks.

5.1.1 Primary sources:

Data were collected from a survey of around 40 respondents. All of whom are regular customers
and account holders in Al-arafah Islami Bank.

5.1.2 Secondary Sources:

▪ Different Journals, Articles & Publications related to Islamic Financing

▪ Online web sites and E-paper

5.2 Sample size
The survey questions included 21 questions and 40 respondents. The target population consists
of both Muslims and non-Muslims though the number of non-Muslims is kept minimal.

5.3: Sampling technique

The technique that is adopted in this research is probability sampling technique. Here a random
sampling technique is used to match the research purpose. Simple random sampling involves
lesser degree of judgment also it perfectly serves the purpose of this research which is getting an
in general perception of how much students are aware about Islamic Banking.
 CHAPTER-6
FINDINGS AND
ANALYSIS
6.1: Demographic Profile of Respondents
The first section of the questionnaire was designed to gather information about the respondent’s
personal background. Demographic profile [Table-1] includes four attributes. These are
respondent’s age, Gender, level of education & profession.
Table 1: Respondents’ Background
Variables Frequency Percentage
Marital Married 26 64.2
Status Unmarried 14 35.8
Total 40 100
Age group Up to 25 Years 7 18.2
25-35 Years 12 29.2
36-50 Years 17 43.3
Above 50 Years 04 9.3
Total 40 100
Educational Below SSC 01 1.7
qualification SSC 03 6.7
HSC 11 27.5
Graduate 17 40.8
Post Graduate 08 23.3
Total 40 100
Profession Service 10 25.8
Business 13 32.5
Student 12 29.2
Homemaker/Others 05 12.5
Total 40 100
Income level Up to Tk. 20000 19 46.7
Tk. 20001-50000 15 38.3
Tk. 50001-100000 03 9.2
Tk. 100001-200000 03 5.0
Total 40 100

6.1.1 Gender, Age group and Marital Status:

From the data collected from the Islamic banking consumers it is found that maximum consumers of
Islamic banks belong to the age group of 36-50 years. Age group of the sample indicates that
43.3% are between 36 and 50 years of age whereas 29.2% are between 25 and 35 years of age. It
indicates that most of the young people prefer the idea of conventional banking rather than Islamic
banking and the Islamic banking is preferred mostly by much older people. Among 40 respondents,
64.2% are married, and 35.8% are unmarried. Islamic banks should create more awareness about
their products and services among the young and unmarried group of people and introduce newer
services that might attract the youth of the country.

Age Marital Status

9.30%
18.20%
Up to 25 Years
36% Married
25-35 Years Unmarried
36-50 Years
43.30% 64%
29.20%
Above 50 Years

6.1.2 Level of education:

Most of the customers (40.8%) of Islamic bank are Graduate, 27.5% respondents have a post-
graduate degree secondary degree, and 23.3% have a higher secondary degree. Customers are having
an educational qualification Secondary degree and below Secondary level represents 6.7% and 1.7%
respectively.

Education
40%
30%
20% Percantage
10%
0%
C C C te te
SS SS HS d ua dua
w a a
lo Gr Gr
Be t
P os
The collected data suggests that most of the Islamic bank consumers have completed their under-
graduation or post-graduation which means they are well educated. So, the Islamic bank management
needs to develop certain products/services that can attract less educated customers to expand their
customer base.

6.1.3 Medium of education:

The collected data from the respondents suggest that almost all the consumers of Islamic banking
have completed their education in Bangla medium. The consumers, who studied in English medium
most of the time chooses conventional banking instead of Islamic banking. They are more prone to
following western cultural practices and don’t really bother much about the religion. So, the medium
of education do influence the judgment of the banking preference of the consumers.

6.1.4 Profession

It reveals from the survey that 32.5% customers are engaged in business, 25.8% respondents are
service holder and 29.2% are students. A minor portion of the female customers (12.5%) is the
homemaker. Therefore Islamic banks should create more awareness about their products and services
among the female customers and introduce newer services that might attract them.

Profession
35% 32.50%
30% 29.20%
25.80%
25%

20%

15% 12.50%
10%

5%

0%
Service Business Student Homemaker/Others

6.1.5 Income group:

A key segment of the customers (46.7%) of Islamic bank earns between BDT 25001-50000. 38.3%
of the participants earned below BDT25000. A small section of the respondents 9.2%, 5% and 0.8%
belongs to the income level BDT50001-75000, BDT75001-100000 and more than BDT100000
respectively.

Income
50%

40%

30%
Percentage

20%

10%

0%
Upto Tk. 20000 Tk. 20001-50000 Tk. 50001- Tk. 100001-
Income
100000 200000

The collected data indicates that most consumers of Islamic banks belong to the income group of
below Tk. 25000 and between Tk. 25000 to Tk. 50000. Management personnel in Islamic banks need
to provide the range of products and services that suit the needs of the customers in these income
groups. A detailed study of the spending behavior of the customers in this group can provide Islamic
banks with highly useful information that can be used in the development of the appropriate
products/services to those customers.

6.2 Awareness & preference level of Resondents

The second part represents the awareness level and perception of the respondents towards Islamic
financing. This section [Table-2] gives an in general view on how IBS is perceived among the
respondents as well as what are the factors that initially influence them to choose IBS. The depth of
understanding is presented the next section of questionnaire.
Particulars N %
What is the length of your relation with
Al-Arafah Islami Bank Limited ?
Less than 1 year 1 3
1 to less than 3 years 7 17.5
 3 to less than 5 years 21 50.5
5 years and above 11 28
What kind of banking system do you prefer?
Islamic Bank 16 43.6
Conventional Banking 11 24.4
Both Islamic & Conventional 13 32
How did you come to know about Islamic
Banks?
Family/Friends Colleagues 32 81.2
Internet 1 2
Media( Newspaper/TV) 2 5
Bank Employees 5 12.8
If you chose Islamic Bank, what was the
most important reason that attracted you?
Religious Norm 23 57
Profit 06 14
Secure Deposit 07 16
CSR 04 13
Which borowing products offered by Islamic
banks are you familiar with?
Bai-Murabaha 8 20
Bai-Muajjal 9 23
Bai-Musharaka 5 13.2
Ijarah 4 10.5
Quard 11 28.1
All of them 3 5.2
Which Islamic Financning Schemes are you
aware about?
Leasing (Ijara) 5 12
Pay Order/ Demand Draft 3 7.2
Foreign Trade Fcilities 2 4.7
Letter of Credits 4 10.1
All of them 0 0
None of them 26 65
Do you think Islamic banking is more costly
than conventional banking?
Yes 17 42.9
No 15 37.1
Not Sure 8 20
Do you think Islamic banks offer interesting
products that attract customers than regular
banking systems?
Strongly Disagree 2 5
Disagree 12 30.3
Neutral 6 15.7
 Agree 17 43
Strongly Agree 3 6
Islamic bank offers competitive rate of profit
than conventional bank
Strongly Disagree 0 0
Disagree 5 11.5
Neutral 11 29.3
Agree 20 49
Strongly Agree 4 10.2
According to you, which one provides better
service?
Islamic Banking System 16 40.8
Conventional Banking System 24 59.2

6.2.1 Banking Relationship:

 Associated with AIBL

60% 50.50%
50%
40% 28.00%
30% 17.50%
20%
3.00%
10%
0%
ar s s e
ye ar ar ov
1 ye ye ab
n 3 5 d
tha an an an
ss s th s th ar
s
Le les les 5
ye
to to
1 3

According to the collected data most of the consumers of Al-Arafah Islami Bank have maintained
banking relationship with Islamic banks from 3 to less than 5 years. The study reveals that majority
(50.5%) of the customers deal with Islamic banks for 3-5 years, 17.5% have a relation for 1-3 years.
A good portion (28%) has Islamic bank account for above 5 years.
This result shows that there is a relatively high degree of stability of those customers’ relationships
with Islamic banks. This means that their attitudes, behavior and degree of satisfaction with Islamic
bank services will be of significant importance to the Islamic bank management. This result also
indicates that there is a relatively high degree of permanence in the Islamic bank customer base
which allows Islamic bank management to implement various long-term banking activities, such as
long financing schemes, long-term saving programs, and launching long-term advertising campaigns
necessary to achieve a higher rate of growth.

6.2.2 Banking Preference:

 Banking Preferance of Respondents

32% Islamic Banking

Conventional Banking
44%
Both Islamic &
Conventional Banking

24%

From the survey, we can ee thatAlmost half of the respondents (43.6%) prefer Islamic Banking over
Conventional Banking. 24.4% respondents prefer only conventional banks. It is a common practice
by many customers who maintain an account with both conventional and Islamic banking systems. In
this study, 32% have the deal with both Islamic bank and traditional bank. This means that their
attitudes, behavior and degree of satisfaction in Islamic bank services is greater than conventional
banks.

6.2.3 Influential factors to open account in Islamic Banks:

Influential factors to open account in Islamic

banks
13%
5% Family/Friends Colleagues
2%
Internet
Media( Newspaper/TV)
80% Bank Employees

The data collected on Islamic banking customers suggest that almost all (81.2%) the customers have
come to know about Islamic banking products/services from their family, friends or colleagues.
These customers only know about those product/services that are used by their family, friends and
colleagues and thus lacking knowledge about other services provided by Islamic banks. The rest of
the respondents were influenced by persuasion of bank employees (12%). This means that Islamic
banks don’t invest much on promotional activities. In order to expand its customer base and make
customers more knowledgeable about all the products, Islamic banks should start investing on online
advertising and commercials on television and newspaper.
6.2.4 Bank Selection Criteria:

Reasons for choosing Islamic banks

CSR
13%

Secure
Deposit Religious
16% Norm
Profit 57%
14%

According to the data collected on Islamic banking customers it is evident that the factor receiving
the highest degree of importance in the bank selection process is the religious factor. 57%
respondents told that they maintained an account with Islamic bank because it operates under Islamic
rules and regulation. 14% continue an account with Islamic bank because Islamic bank provides a
higher rate of profit than conventional bank, and 16% maintained an account saying Islamic banks
provides secure deposits. 13% have Islamic bank account because of their CSR activities.

This result indicates that Islamic banks enjoy a strong power base among those customers who
emphasize the adherence to Islamic principles in the practices of financial institutions they select.
However, this relative advantage has been threatened in recent years with several conventional banks
launching their Islamic investment units. In case of conventional banks, the single most important
factor in the bank selection decision is “rate of return offered” while it is “the adherence to Islamic
principles” in the case of Islamic banks. From the response of the respondents it is seen that some
Islamic bank customers still consider the rate of return, along with their religious commitment, as key
factors in the choice of their Islamic banks. The convenience of bank location was also found to have
a considerable role in the bank selection decision in case of female customers.
6.2.5 Awareness of Islamic Bank Products:

Respondent's understanding of Islamic products

All
Quard 5% Bai-Murabaha
28% 20%

Bai-Muajjal
23%
Ijarah
11%

Bai-Musharaka
13%
As for various borrowing products that are offered by Islamic banks, customers do not have a high
awareness for any particular one (28% for Bai-Muajjal; 25% for Bai-Murabaha; 18% for hire
purchase under Shirkatul Meelk; 13.2% for Musharaka; 10.5% for Izara Bil Baia; 11% for Bai-
Salam). Also only 5.25 respondents say that they are familiar with all of these products. The reasons
for such low awareness and usage for individual borrowing products may be the following. First,
customers’ needs for borrowing are diverse and hence, diverse products are offered to meet such
needs. So, no individual borrowing product has sole high usage. Second, Islamic banking products
(particularly the ones for borrowing) are named in Arabic terms. Bley and Kuehn (2004) suggest that
the use of Arabic language terms for naming Islamic finance products and services may impede
understanding for non-Arabic speaking Muslims. Third, the majority of the borrowing products are
particularly applicable for corporate customers. The study focuses on individual customers instead of
corporate treasuries. However, among the products, Quard is the most familiar among the users (28%)
The reason may be that Quard is a sort of lending without any profit sharing agreement.

6.2.6 Awareness and Usage of Islamic Financing:

 12%

7%

5%

10%
66%

Leasing (Ijara) Pay Order/ Demand Draft Foreign Trade Fcilities Letter of Credits
All of them None of them

The collected data implies that a significant portion of bank customers are not aware of the Islamic
financing schemes(65%), Leasing (Ijara) facilities(12%), Pay order/Demand draft( 7.2), foreign trade
facilities(4.7) and letter of credits( 10.1) offered by Islamic banks and thus the usage rate of these
products is very low. In today’s highly competitive environment, Islamic banks need to conduct
periodic customer surveys to investigate whether the customers are aware of their products/services
and to know how many of those products and services are being used on a regular basis.

6.2.7 Cost of Islamic Banks:

Are Islamic banks more costly?

50.00%
45.00% 42.90%
40.00% 37.10%
35.00%
30.00%
25.00%
20.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Yes No Not Sure

According to the responds received from the respondents, it was evident that all the customers of
Islamic banking are more or less satisfied with the services provided by their respective Islamic
banks. They think Islamic banks are less costly than conventional commercial banks and even if the
Islamic banks get costly sometime in future they would still prefer Islamic banking.

6.2.8 Opinion Regarding Islamic Banking Products & Services:

Do you think Islamic banks offer more attractive products

than conventional banks?

Strongly Agree 6

Agree 43

Neutral 15.7

Disagree 30.3

Strongly Disagree 5

Percentage
0 5 10 15 20 25 30 35 40 45 50

This is one of the most important statements in the survey where customers were asked about their
opinion regarding Islamic banking products and services. They were asked if they think Islamic banks
offer interesting products that attract customers than regular banking systems. There are some ongoing
debates regarding this issue. Various scholars have various opinions and it is observed in the previous
sections of this paper. 12 respondents (30.3%) believe that there is no significant difference between
conventional bank and Islamic bank. Though 17 respondents (43%) thought that there are significant
difference exist still large chunk of respondent have the different opinion. This was a clear indication that
customers in general have limited knowledge on Islamic banking products and services in Bangladesh. It
also showed that the Islamic banks had not made an adequate effort in marketing their products and
services.
6.2.9 Awareness of Profit rates of Islamic banks:

Islamic banks offer competitive rate of profit than

conventional banks
Strongly Agree 10.2

Agree 49

Neutral 29.3

Disagree 11.5

Strongly Disagree

0 10 20 30 40 50 60

Percentage

Profit or interest rate is an important determinant for choosing bank by the customer. 20 consumers
which makes up for half the number of respondents agree that Islamic banks offer a competitive rate
of profit than the conventional bank while 5 disagrees. 11 respondents remained neutral about this
question which indicates that they don’t have proper idea about profit rates provided by Islamic
banks and conventional banks. This is because customers choose these Islamic banks generally for
religious reasons.

6.2.10 Customer Satisfaction:

 Which banking system provides better service?
70.00%

60.00%

50.00%

40.00% Percentage

30.00%

20.00%

10.00%

0.00%
Islamic Banking Conventional Banking

The data collected on Islamic bank customers suggested that more than half of the customers (59.2%)
preferred services of conventional banks rather than Islamic banks, because they provide economic
benefits in the form of profit and Interest. They agreed that the conventional banks provide better
products and services then Islamic bank. They agreed to have more faith on the conventional banks
regarding their money security because conventional banks have more strong financial position then
Islamic banks.
Results indicates that the customers of both either from Islamic or conventional banks are satisfied
with the facilities provided by the banks, but the customers of conventional banks are more satisfied
than the customers of Islamic banks. Therefore, to maintain the competition with the conventional
banks, Islamic banks should improve their service quality to attract more customers. Banks needs to
promote an awareness of Islamic banking products and services offered. These products and services
need to compete with those of conventional banks. Islamic banking has the potential to expand its
market share and to convince consumers to transfer their business to this sector by offering quality
services and products, and by keeping in line with Shariah-compliance. In order to maintain
sustainable growth, they should be implementing new technology and innovation to ensure better and
prompt service. Further research needs to be carried out in order to identify other factors that
influence consumers’ satisfaction of Islamic banking. In this purpose, they have to identify their
strength and also need to recover their weak sides.
6.2.11 Summary of Findings:
The purpose of the present study is to empirically examine the customers’ attitudes and perceptions
on different aspects of the Islamic bank. A questionnaire survey was conducted among Islamic
banks’ customers. Its intention was to measure the awareness and attitude towards Islamic banks’
various basic elements of service delivery systems. The findings of the research will help the
concerned authority to increase their service quality, and remove their lacking. Based on the response
of the participants, the summary of the findings are given below:

Most of the customers of Islamic banks fall in the age category of 36-50 years. The reason might be
the short history of Islamic banks in Bangladesh. About half of the customers under study fall in the
income category of BDT 20,000-50,000. Customers’ high concentration in this income category is
consistent with the findings of age category since entry and mid-level executives and professionals
both in the private and public sector of the age category 25-35 years tend to have a similar level of
basic monthly income. About three fourth of the customers surveyed were either college/bachelor or
master/PhD. Such a finding indicates that Islamic bank customers have high formal education.

Majority of the current Islamic bank customers have previous banking relationship with traditional banks.
Also, almost half of the customers have 3-5 years of banking relationship with Islamic banks whereas
about one third of the customers have above 5 years of banking relationship with Islamic banks.

High customer awareness and usage exist for current account and saving account, two very basic types of
customers’ investment vehicles. Respondents are also aware to a large extent of and are using the other
two investment products- term deposit and savings bond. As for various borrowing products except
Quard, customers do not have a high awareness for any particular one.

The importance of bank selection criteria are as follows in the order of descending importance: religious
principles, convenient location, family and friends, and rate of return. However, only ‘religious
principles’ demonstrated an above average mean, suggesting that Islamic bank customers still prefer
Islamic mode of banking mostly because the banks follow Islamic principles.

There is relationship between customers’ awareness of Islamic bank products/services and customers’
length of relationship with Islamic banks in case of the following products/services only: Savings Bond,
Bai- Muajjal, Bai- Murabaha, Hire Purchase under Shirkatul Meelk, Letter of Credit, and ATM Services.
Hence, it can be deduced that a customer’s awareness of borrowing instruments tend to depend on how
long customer’s relationship with the bank is.

A number of products/services of Islamic banks have an above-average customer satisfaction. However,

customers did not report an above-average satisfaction with the following products/services, most of
which are borrowing products for customers: Hire purchase under Shirkatul Meelk, Musharaka, Izara Bil
Baia, Local Documentary Bill Purchased, Foreign Documentary Bill Purchased, Bai-Salam, Letter of
credit, and SWIFT.

Factors such as economic benefits, financial position of banks, and interest on deposits, strong global
image and network are motivating customers towards conventional banks rather than Islamic banks.
Interest free loan, financial position of bank, Islamic teaching and Sharia, knowledge on Islam and
religious environment in the city are the factors that are motivating customers towards Islamic banks.
Many respondents said that they receive economic benefits by saving in Islamic Bank in the form of
profit sharing. Most respondents agreed that Islamic bank provides interest free loan and no interest
pays on deposit that motivates them to save in Islamic banks, while many respondents agreed that as
a Muslim they prefer Islamic Bank and it is not opposing Islamic teachings.

According to the responds received from the respondents, it was evident that all the customers of
Islamic banking are more or less satisfied with the services provided by their respective Islamic
banks. They think Islamic banks are less costly than conventional commercial banks and even if the
Islamic banks get costly sometime in future they would still prefer Islamic banking. Apart from the
typical activities of Islamic banking like the interest-free banking system and following the rules of
Islamic Shariyah, customers also highly appreciate the social welfare activities of Islamic banks
toward the poor, helpless and low income group people to establish equity and justice in the field of
economic activities.
 CHAPTER- 7
RECOMMENDATION
AND
CONCLUSION
7.1 Recommendations:
From the conclusions of the study, the following recommendations can be reasonably forwarded
for Islamic banks in Bangladesh.

Promoting existing products:

Islamic banks of Bangladesh have a decent range of product line in order to serve the various
needs of its consumers. Yet, the consumers are not well aware of all the existing products of
Islamic banks. They get to know about only those products which are being used by their family
and friends. In order to make them aware about other non-popular but useful products, Islamic
banks have to invest more on promotional activities. The renowned commercial banks of
Bangladesh like DBBL, Prime Bank Ltd, EBL, SCB, HSBC, Dhaka Bank, City Bank Ltd are
investing a good amount of money on TV commercials and thus making the customers more
knowledgeable about the current products. Islamic banks should also follow their lead and
promote their non-popular products through TV commercial or online advertising to sustain in
the competitive world of business.
In Bangladesh, the Arabic terms of Islamic banks’ product can’t be easily understood by the
client. To make customer familiar with such products, Islamic bank can try to find out some
easier way.

Introducing new products and product segments:

Islamic banks have a decent customer base consisting of people from different educational
background and age group, having different range of income. Islamic banks should divide their
customer base into different segments and categorize their products according to the demands of
different customer segments. They should also think about introducing newer products in the market
to cope up with the standards of conventional commercial banks. For example, almost all the
commercial banks are now providing the facility of opening Student Savings Account for the
students with minimal formalities with a very low amount of minimum deposit. On the other hand,
Islamic banks don’t have such type of facility for the students. That is why; most of the customers of
Islamic banks belong to the age group of 35-60 years. Besides, nowadays all commercial banks are
providing Mobile Banking facilities to their customers which are in fact very useful. In mobile
banking, customers open an account with their mobile number and the deposited money directly goes
to their phone and they can convert them into cash from any authorized store of their locality. It is
very useful, easy and safe way of transaction which the Islamic banks are not considering at all. So, it
is very necessary for Islamic banks to start providing these modern and useful services to their
customers apart from the typical ones.
Target a more Young Age Segment:

Among the age categories, 25-35 years deserve particular attention. Since this is the age category
which has the most usage and more representation in the sample, Islamic banks should target its
marketing mix toward this category. Such a technique will ensure attraction of job-market entering
people towards Islamic bank products/service and also retention of the people who are likely to
remain long-term loyal customers.

Improving Satisfaction of Existing Customers:

Besides religious principles, customers in the lower income category tended to rely on the experience of
their family members and friends in choosing Islamic banks. Hence, Islamic banks should pay an urgent
attention to improve satisfaction of their existing customers. One step towards this would be to find out
ways for improving customer satisfaction with employees and for improving satisfaction with the
products/services that did not receive above average satisfaction from employees.

Development of Human Resource:

Employees are one of the most essential resources of an organization. Employees are the group of
people who represent an organization and keep the company running. An employee who is well
mannered and have sound knowledge about the products and operations of an organization can make
the customers happy. However, most of the employees of Islamic banks have completed their
graduation in Science and Arts subjects. These graduates having no knowledge about business
education understand little about business and cannot handle the customers efficiently and might as
well take some wrong investment decisions. Bank employees must have adequate knowledge
regarding money, banking, finance and accounting. Without sound knowledge of these subjects
efficiency cannot be optimized. So, it is necessary for the Human Resource department of Islamic
banks to recruit graduates from business background or arrange effective training program for
graduates from other backgrounds to get the best result.
Increase the Number of Branches and ATM Booths:

Islamic bank should increase ATM booths at the different central location. Also, they have to ensure
smooth functioning of ATM booth and availability of money at the booth. A large number of
customers of Islamic bank are from countryside areas. Many of the customers suggest opening
branches in rural areas so that they can get services easily.
Offer Competitive Rate of Profit

Many customers complain that Islamic bank provides dissatisfactory profit rate against the deposit.
To ensure customer reliability, they should offer a competitive rate of profit against the different
deposit.

Upgrading Websites and Ensuring Proper Maintenance of Files:

In today’s modern and IT based world, maintaining a website is very crucial for an organization to
sustain in the market. A good website should contain all necessary information about the company
and the details of the products and services offered by the organization. Among the Islamic banks
operating in Bangladesh, Islamic Bank Bangladesh Limited has developed a decent website and
updates it in a regular basis. A website is the easiest source to get to know about a bank and its
services and a well maintained website can actually influence the judgment of consumers’ preference
of choosing a banking service. All the Islamic banks of Bangladesh should develop and maintain a
decent website with all the necessary information updating regularly to attract customer attention and
serve them properly. In addition, Islamic banks try to provide personalized services to its customers
and so the banks maintain customer profile with all the essential information of every customer.
Before giving any service to its customers the staffs of Islamic banks look for the customer document
files kept in the archive room and it takes a lot of time to find a file of a particular customer from a
huge pile of documents. During the rush hours of a bank it is not proper to keep the customer waiting
until the staffs find the customer profile document from the archive room. To solve this problem,
Islamic banks should maintain a database of every customer with essential detail of the customers in
the computer. It would save a lot of time and help to serve the customers without making them
annoyed.
7.2 Conclusion:
Banks play a very vital role in the economic development of the country. The popularity of banks is
increasing day by day which leads to increase competition as well. All the Commercial banks are
offering almost the same products and services. But the way they provide the services are different
from each other. So people choose their bank according to their satisfaction and need. On the other
hand, Banks innovate new products and services to attract their desired customer. Islamic banks are
growing faster in Bangladesh because of its rapid customers’ satisfaction. These banks are committed
to run all its activities as per Islamic Shariah. Al-Arafah Islami Bank through its steady process and
continued success has, by now, earned the reputation of being one of the leading private sector banks
of the country. Other Islamic banks are also playing an important role in establishing Islamic
Economics by combing the economic values with social and moral values. By following the novelty
of Islamic Economics the Islamic banks are trying to make a balance development between spiritual
and material life. AIBL will be more effective in our economy by launching new financial products
to attract deposit as Consumer Credit Scheme, Pension Scheme, and Child Education Scheme and
contribute more to develop the living standard of middle class people. Bangladesh is one of the
largest Muslim countries in the world. The people of this country are deeply committed to Islamic
way of life as enshrined in the Holy Quran and the Sunnah. Naturally it remains a deep cry in their
hearts to direct and design their economic lives in accordance with the principles of Islam. The
establishment and commencement of Islamic banks in Bangladesh, is the true reflection of this inner
urge of its people.
 CHAPTER-8
BIBLIOGRAPHY
8.1 References:
 Annual Report 2013. (2013) (1st Ed.). Dhaka, Bangladesh. Retrieved from http://www.al-
arafahbank.com/AIBL%20Annual%20Report%202013.pdf
 Annual Report 2015. (2015) (1st Ed.). Retrieved from http://www.al-
arafahbank.com/AIBL-Annual-Report-15-Big.pdf
 Annual Report 2017. (2017) (1st Ed.). Retrieved from http://www.al-
arafahbank.com/AIBL-Annual-Report-17-Big.pdf
 Ahmad, K. (2000). Islamic finance and banking: the challenge and Prospects. Review of
Islamic Economics, 9, 57-82.
 Ahsan, M. (2016). Measuring Financial Performance Based on CAMEL: A Study on
Selected Islamic Banks in Bangladesh. Asian Business Review, 6(1), 47-56.
 Ahmad, N. and Haron, S. (2002), “Perceptions of Malaysian corporate customers towards
Islamic banking products and services”, International Journal of Islamic Financial
Services, Vol. 3 No. 4, pp. 13-29.
 Bashir, M (2014) ‘Analysis of customer satisfaction with the Islamic banking sector: case
of Brunei Darussalam’, Asian Journal of Business and Management Sciences, Vol. 2, No.
10, pp.38–50
 Erol, C. and El-Bdour, R. (1989), “Attitude, behaviour and patronage factors of bank
customers towards Islamic banks”, International Journal of Bank Marketing, Vol. 7 No.
6, pp. 31-7
 Khan, M. S. N., Hassan, M. K., Shahid, A. I. (2007), “Banking Behavior of Islamic Bank
Customers in Bangladesh”, Journal of Islamic Economics, Banking, and Finance, pp.
159-194
 Khan, M., and Ahmad, S., “Customer Satisfaction Level of Islamic Bank and
Conventional Bank in Pakistan”, IOSR Journal of Business and Management (IOSR
JBM), vol. 11, no. 1, pp 31-40, May - Jun. 2013.
 Naser, K., Salem, A. A., and Nuseibeh, R., “Customers Awareness and Satisfaction of
Islamic Banking Products and Services: Evidence from the Kuwait Finance House”,
International Journal of Marketing Studies, Vol. 5, No. 6, pp. 185-199
CHAPTER-9
APPENDIX
 QUESTIONNAIRE
Dear Respondent,
The following questionnaire has been prepared for research purpose. Your cooperation in
completing this research by responding as honestly as possible to the following questions would
be greatly appreciated. As all responses are confidential, Please DO NOT sign your name.

 Demographic information:

1. Your age: 4. Your medium of education:

 Less than 25 years  English
 25-35 years  Bangla
 36-50 years  Madrasa
 Above 50 years
5. Your profession:
2. Your marital status:  Service
 Married
 Business
 Unmarried
 Student
 Others: …………………….
3. Your level of education:
 Below high school 6. Your monthly income:
 SSC  Less than TK. 10,000
 HSC  TK 11,000-TK 30,000
 Undergraduate  TK 31,000-TK 50,000
 Post graduate  TK 51,000-TK 70,000
 Information Regarding Banking Activity:

7. What is the length of your relation 11. Which products offered by Islamic
with Al-Arafah Islami Bank banks are you familiar with?
Limited?  Bai –Murabaha
 Less than 1 year  Bai-Muajjal
 1 to less than 3 years  Bai-Musharaka
 3 to less than 5 years  Quard
 5 years and above  All of them

8. What kind of banking system do you 12. Which Islamic Financning Schemes
prefer? are you aware about?
 Islamic Banking  Leasing (Ijara)
 Conventional Banking  Pay Order/ Demand Draft
 Both Islamic and Conventional  Foreign Trade Fcilities
 Letter of Credits
 All of them
9. How did you come to know that  None of them
banks are offering Islamic banking?
 Family/Friends/Colleagues
 Internet 13. Do you think Islamic banking is
 Media (Newspaper/TV) more costly than conventional
 Bank employees banking?
 Yes
 No
10. If you choose Islamic banks, what is  Not sure
the reason that attracts you?
 Religious Norm
 Profit
 Secure Deposit
 CSR
14. Islamic banks offer interesting products that attract customers than regular banking
systems:
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

15. Islamic bank offers competitive rate of profit than conventional bank:
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

16. According to you which one provides better service?

 Islamic Banking System
 Conventional Banking System