AN INTERNSHIP REPORT

ON
Analysis of investment management and performance:
(A study on Muradpur branch of Al-Arafah islami bank
limited) Islam Tower, 69 CDA Avenue,

Asian Highway, Muradpur, Chattogram

SUBMITTED TO: SUBMITTED BY:

Dr. Shahadat Hossain Md . Azadur Rahaman
Associate Professor ID- 14303114
Department of Finance Department of Finance
University of Chittagong University of Chittagong

Date of Submission: 30th May, 2021

 LETTER OF TRANSMITTAL

Date 30/05/2021
To
Dr. Shahadat Hossain
Associate Professor
Department of Finance University of Chittagong
Hathazari, Chattogram.

Subject: Submission of internship report on “Analysis of investment management and performance of

Muradpur branch of Al-Arafah islami bank limited”.

Dear Sir,

This is my great pleasure to submit the Internship report on “Analysis of investment management
and performance of Muradpur branch of Al-Arafah Islami Bank Limited” of my Six weeks long
Internship program at AIBL.

It would be difficult for me to get the work done without your proper supervision & guideline. I tried
my best to work sincerely to cover all aspects regarding the matter. Though I faced some limitations
in preparing this report, I have thoroughly enjoyed in preparing this internship report, which has
contributed significantly to my understanding on the essentials and important practical knowledge.

I therefore hope that the report will fulfill the requisite objectives that you wanted to get done by
me.

Sincerely yours,

Md . Azadur Rahaman
ID- 14303114
Department of Finance
University of Chittagong
 LETTER OF SUBMISSION
SUBMISSION
To

Md. Rayhan Uddin

Manager

Al-Arafah Islami bank Ltd

Muradpur Branch,

Subject: Submission of internship paper on “Analysis of investment management and performance of

Muradpur branch of Al-Arafah islami bank limited”.

Sir,

It is my real pleasure to submit this paper titled “Analysis of investment management and
performance of Muradpur branch of Al-Arafah islami bank limited”. This report is prepared on the
basis of practical working experience gathered from your branch as well as on analysis and judgment
of annual report, investment manual and various literary works done by scholar besides utmost co-
operation from your Investment department. I have tried my best to focus my academic knowledge
and excellence.

I therefore request you to accept my report and oblige me thereby.

Sincerely yours,

Md . Azadur Rahaman
ID- 14303114
Session- 2017-2018
Department of Finance
University of Chittagong
 CERTIFICATE OF SUPERVISOR

This is to certify that Efatul Alam Ashik, bearing ID no- 15303061 has completed his internship
report under my supervision on “Analysis of investment management and performance of
Muradpur branch of Al-Arafah islami bank limited”. During the preparation of the report he
has regularly communicated with me, followed my direction and done accordingly in my
suggested way.

I wish every success in his life.

Dr. Shahadat Hossain

Associate Professor
Department of Finance University of Chittagong
 STUDENT’S DECLARATION

I declare that the report submitted on “Analysis of investment management and performance
of Muradpur branch of Al-Arafah islami bank limited”for fulfillment of BBA program is
prepared by me. During the preparation of the report I tried my level best to reflect my
academic knowledge, guidance of supervisors as well as practical knowledge gathered during
internship program.

Abu Siddiq
ID: 14303013
Session: 2017-2018
Department of Finance
University of Chittagong.
 ACKNOWLEDGEMENT

“Perfection is only a dream, even for the immortal”

First of all, I express my deep gratitude to the almighty Allah. I also have to put my heartfelt
respect and gratitude for the kindness and co-operation that was provided to me to complete
me internship report on the topic “Analysis of investment Management and performance of
Muradpur branch of Al-Arafah islami bank limited”. In preparing my report I have taken great
assistance and support from Muradpur Branch of AIBL specially Md. Rayhan Uddin (AVP &
Manager of the Branch), operation manager, investment incharge, investment officer, Officer.

Finally, sincere thanks again to my internship supervisor, Dr. Shahadat Hossain, professor,
Department of Finance, University of Chittagong, faculty of Business Administration for his
appropriate suggestions, moral support and invaluable co-operation of creating this report
make me able to overcome all the problems during my study and reach the successful
completion of the report at AIBL It is well know that practical knowledge in subject matter is
essential to substantiate the theoretical knowledge gathered in the educational institutions. In
order to resolve the dichotomy between these two areas, I have assigned to prepare a report at
AIBL.

At last I am also grateful to all who have helped me in many ways to prepare this report at all.
 EXECUTIVE SUMMARY

An internship opens the avenue to bridging the gap between theoretical learning and practical
training. My internship has been carried out in Muradpur branch of Al-Arafah islami bank
limited (AIBL) which follows the principles of the Quran and Sunnah in conducting their
transactions as opposed to conventional banking. The study aims at analyzing the performance
with respect to investment taking account of different dimensions at Muradpur branch of AIBL
over the sample period of 2014-2019. The report is developed on both primary and secondary
data. Here analytical techniques like trend analysis, ratio analysis etc. have been used for data
analysis. The report figures out investment performance of Muradpur branch to be unstable
throughout and unfavorable at the end of the period. Growth of its total investment had been
very erratic throughout the period attributable to similar kind of behavior noticed in
mobilization of deposit. Its investment to deposit ratio had also been in sharp decline indicating
growing liquidity which was partly explained by soaring amount of non-performing investment
at the end of the period pointing towards deteriorating asset quality of the branch. The result
was expressly reflected in growth of investment to total asset also falling drastically at the same
time. Therefore, the branch witnessed adverse movements in investment income and growth
of investment income to total income in the end. However, the findings particularly suggest
remedying non performing investments and thereby facilitating the improvement of investment
to deposit ratio to strike a right balance between profitability and liquidity.
Contents
Chapter One: Introduction
Background of the Study..........................................................................................1
Objectives of the Study.............................................................................................2
Data and Methodology of the Study........................................................................2
Data Collection Method............................................................................................2
Analysis of Data........................................................................................................3
Significance of the Study..........................................................................................3
Limitations of the Study............................................................................................3
Organisation of the Study.........................................................................................4

Chapter Two: Literature Review

Literature Review......................................................................................................6

Chapter Three: Overview of AIBL (including Muradpur Branch)

Profile of AIBL...........................................................................................................9
Investment Department.........................................................................................10
Objectives and Principles of Investment................................................................11
Policies and Strategies of Investment....................................................................11
Investment Process of AIBL....................................................................................12
Profile of AIBL- Muradpur Branch..........................................................................13
SWOT Analysis of AIBL- Muradpur Branch.............................................................14

Chapter Four: Findings & Analysis

Investment Information Analysis of AIBL, Muradpur Branch................................16
Investments............................................................................................................16
Investments in Different Modes.............................................................................19
Investment & Non-Investment Income..................................................................21
Investment & Non-Investment Income Growth Rate............................................23
NPI 24
Investment Income Growth Analysis......................................................................26
Ratio Analysis of AIBL (Muradpur Branch).............................................................29
Investment to Deposit Ratio...................................................................................29
ROI 31
Investment to Total Asset Ratio...................................................................................................33
NPI to Investment Ratio................................................................................................................34

Chapter Five: Conclusion & Recommendation

Conclusion & Recommendation..............................................................................38
References:..............................................................................................................40
List of Table
Chapter Three
AIBL at a glance.................................................................................................09
AIBL Muradpur branch at a glance….................................................................13

Chapter Four
Total investments & growth of AIBL.................................................................16
AIBL’s investments in different modes.............................................................19
Investment and non-investment income of AIBL…...........................................21
Investment and non-investment income growth of AIBL.................................23
NPI.....................................................................................................................25
Investment income analysis…...........................................................................26
Investment to deposit ratio..............................................................................29
ROI.....................................................................................................................31
Investment to total asset ratio.........................................................................33
NPI to investment ratio..........................................................................................35
List of Figures
Chapter Three
3.1 Investment process of AIBL...............................................................................12

Chapter Four
Year by year investments..................................................................................17
Growth rate of investment...............................................................................18
Investments in terms of modes........................................................................20
Investment and non-investment incomes........................................................22
Investment and non-investment income growth rate.....................................24
Investment income & NPI.................................................................................25
Investment income analysis.............................................................................27
Investment to deposit ratio..............................................................................30
ROI.....................................................................................................................32
Investment to total asset ratio...............................................................................34
NPI to total investment ratio.................................................................................36
Chapter One
Introduction
Background of the Study

Financial institutions have a very wide range of activities in the economy of a country. Banks are
the most important one in the financial sector as they play a very crucial role for the economy.
Banking business mainly maintains flow of funds from depositors to investors. In doing so, bank
need to collect deposit from the depositors and then distribute those as loan to the investors.
Besides, bank provides assistance in international trade, money transfer, collection and
payment of utility and other bills, etc.

Al-Arafah Islami bank Limited (AIBL) is one of the leading islami banks in our country strive for
customer’s best satisfaction and earn confidence. To manage and operate the bank in the most
effective manner and to identify customer need and monitor their perception towards meeting
those requirements the bank review and updates policies, procedures and practices to enhance
the ability to extend better services to the customers. All activities of the bank are conducted
according to Islamic Shariah where profit is the legal alternative to interest. The bank’s
investment policy follows different modes approved by Islamic shariah based on the Qur’an &
Sunnah. The bank is committed to establish an economic system resulting in social justice and
equitable distribution of wealth. It is committed to bring about changes in the underdeveloped
rural areas for ensuring balanced socioeconomic development of the country through
microcredit program and financing of small & medium enterprises (SME) as well. For the
sustainability of the bank, investment management and investment performance of the bank is
crucial. If the performance is good, it is also important to know whether the performance is
sustainable or not. All these factors have driven me to make an investigation of the investment
performance of AIBL (Muradpur branch).

1|Page
Objectives of the Study

The main objective of the study is to analyze the investment performance of AIBL in general
and Muradpur branch in particular. Under this main objective the following are some specific
objectives :

 To analyze the growth and modes of investment of AIBL over the period 2014-19.
 To compare the investment income and non investment income growth rate.
 To analyze non performing investment (NPI) with regards to investment income.
 Investment income analysis over the period.
 To analyze the investment performance under some ratio analysis like investment to
deposit ratio, return on investment (ROI), investment to total asset ratio, investment to
NPI ratio.

Data and Methodology of the Study

To meet the objectives of the study I’ve applied various qualitative & quantitative techniques
like statistical tools & software and other relevant methods. Formal and oral discussion, direct
observation, questioning clients and printed papers of the bank were found useful.

Data Collection Method

Both primary and secondary sources of data are used to complete this study. The sources are-

Primary data sources: The primary data have been collected from the practical data work, face
to face conversation with officers and staffs, face to face conversational with clients, direct
observation.

Secondary data sources: Most of the data used in the study have come from secondary
sources. Such as- procedure manual published by the AIBL, annual report of the AIBL, different
relevant reports, journals, newspaper, books, Office circular and other published papers,
Website of the AIBL.

Analysis of Data
The data so collected analyzed through the application of -

 Statistical techniques and procedures.

 Several graphs (such as bar diagram, lines and chart) figures and tables are being used in
process of analyzing. The numerical data are being represented graphically whenever
required to make the interpretation easier.

Significance of the Study

The banking system in Bangladesh is mainly two types such as conventional banking which is
interest based another is Islamic banking which is interest free. Islamic banks follow the
principles of Islamic shariah for operating their transactions. There is a lot of research done on
conventional banking but a very few research was done on Islamic banking. But now day by day
the popularity of Islamic shariah based banking is getting so popular as many conventional
banks started to offer Islamic banking services side by side with their conventional banking. But
it is still difficult to implement Islamic banking where conventional banking already adopted the
market. So it is necessary to conduct study for fulfillment of the demand of the time. The paper
will deal with the “Investment Management and performance Activities of AIBL (Muradpur
branch)”. On the basis of working experience for this period I have prepared this report and I
have tried my best to relate the theoretical knowledge with the practical work situation.

Limitations of the Study

The study was thorough & systematic but there were some problems which can be the limiting
factors of the significance of the study:

 Within such a short period of time, it was not possible for me to study everything about
AIBL, Muradpur branch.
  The officers are so much busy that they cannot properly co-operate with me, which is a
problem.
 Bank’s policy of not disclosing some data and information for obvious reason, which
could be very much useful.
 Sometimes the officials were reluctant to give proper information regarding their
activities because they felt hesitation and ambiguity to give data and information.
 Lack of personal knowledge and experience.
 Lack of a useful website of the bank.

Organisation of the Study

The remaining part of this report has been divided into four chapters. They are as follows :

Chapter 2 offers the Literature review of the study.

Chapter 3 offers the organizational overview of AIBL (including Muradpur branch).

Chapter 4 covers the main part of the study which contains findings and analysis of the
investment activities of the AIBL (Muradpur branch).

Chapter 5 presents an evaluation of performance of AIBL in investment activities as conclusion

& recommendation.
Chapter Two
Literature Review

5|Page
Literature Review
Islamic banking is one of the fastest growing segments of the banking industry not only in
Muslim countries along with Islamic banks but also in West. At present, senior managers of
Islamic Shariah based banks believe they must compete on commercial grounds by offering a
more cost-effective financial package to non-Muslim as well as Muslim customers. The main
factor stimulating this dramatic growth is the spread of Islamic religion globally. Islam is the
fastest growing religion of the world and Muslims are increasingly looking for financial
instruments and services that adhere to their principles. According to Brook (1999), Some non-
Muslims believe Islamic banking system to be commercially sound as they are also participating
in Islamic banking.

Islamic banks are supposed to offer products and instruments that are consistent with Islamic
Shariah and cultural characteristics of Muslim societies. Financial instruments should emphasize
profit-loss sharing (equity). Interest is prohibited, which seems to exclude debt contracts.
Shaik & Ali (2009) have revealed that interest free banking is making it compulsory for Islamic
banks to take active part in business profit and loss sharing. Thus, Islamic banks opt to take less
risky.

Islamic financial instruments take the form of contracts between providers and users of funds
to manage risk. On the asset side, Islamic banks engage in investment and trading activities
according to the various contracts available. On the deposit side, funds are mainly mobilized on
the basis of a ‘Mudaraba’ contract. Islamic banking, from a theoretical perspective, is based on
the principle of profit and loss sharing (PLS-mode) in place of interest-based deposit and
lending found in conventional banks. But this has given rise to two conflicting juristic views in
contemporary Islamic banking. Progressive Islamic intellectuals argue that there is no need to
reinvent products offered by conventional banks in a globally competitive banking industry.
Instead, Islamic Shariah based banks should embrace the minimal necessary modifications to
these conventional products to ensure Shariah compliance. Belal et al. (2014) described the
situation of the tendency to emphasize from over substance is symptomatic of ‘big businesses’
driven by profit making maximum. Mahmoud (2006) an Egyptian scholar have found that those

6|Page
intellectuals who oppose conventional financial practice sense that the Islamic banking system
needs to renovate pre-modern contracts by rigorously embedding Shariah and social
responsibility into the banks business practices.

Islamic banks widely use Islamic mark-up contracts such as Murabaha, Ijara and Istisna, but
there is doubt about their acceptance under Islamic law because they can imply a fixed return
on investment for the financing financial institutions. According to Siddiqi and Khan (1987),
many Islamic scholars believe that mark- up contracts, while permissible, still should be avoided
out of fear that these mark-up contracts may open a ‘back door’ to interest. Researchers like
Aggarwal and Yousef (2000) also argue that there is a formal equivalence between mark-up
contracts and debt, but the equivalence isn’t based on the payment of interest.

The current literature shows that knowing the investment performance of a bank is very
important for the bank itself and many other stakeholders for making the right decision. Ratio
analysis is supposed to be an effective method for investment performance analysis.
 Chapter Three
Overview of AIBL (including
Muradpur Branch)
Profile of AIBL
With the objective of achieving success here & hereafter by pursuing the way directed by Allah
& the path shown by His Rasul (SM), AIBL was established (Registered) as a private Ltd company
on June 1995. The inaugural ceremony took place on 27 September 1995. The authorized
capital of the bank is BDT 15000.00 Million & paid up capital is BDT 10649.02 Million.
Renowned Islamic scholars & pious businessmen of the country are the sponsors of the bank.
100% of paid up capital is being owned by indigenous shareholders. It has achieved a
continuous profit and declared a good dividend over the years. High quality customer service
through the integration of modern technology and new products is the tool of the bank to
achieve success. The bank has a diverse array of carefully tailored products and services to
satisfy customer needs.

The bank conducts its business on the principles of Mudaraba, Bai-muajjal and hire purchase
transactions approved by Bangladesh bank. Naturally, its modes and operations are
substantially different from those of another conventional commercial bank. There is a shariah
council in the banks who maintains constant vigilance to ensure that activities of the bank are
being conducted on the precepts of Islam. The shariah council consists of prominent ulema,
reputed bankers, renowned lawyers and eminent economist.

In order to make the holy intention of the bank successful a group of 13 specialized & profound
Islamic persons Of Bangladesh are elected as the member of Board of Directors of the Bank. To
carry out its activities flawlessly AIBL as of June, 2020 has 180 branches & and a total of 3682
employees all over the country. (AlBL, 2020)
 Table 3.1-AIBL at a glance

Bank Name Al-Arafah Islami Bank Limited

Registration 18th June, 1995

1st Branch Motijheel Branch, Dhaka

Opening ceremony 27 September , 1995

Authorized Capital 15000 Million

Paid up Capital 10649.02 Million

Local Partnership of Capital 100%

Investment 261,874.13 Million

No of Branches 180

No. of Employees 3682

Source-Annual report of AIBL 2019

Investment Department

AIBL is a bank of modern times. It is by far responsible for satisfying customers with quality
financial services/products and to aid gross domestic product (GDP) growth of the country by
developing business & boost industrialization, raising export and import. This creates enormous
employment scope and helps to reduce unemployment; poverty thus raises standard of living
of people and develop an overall socioeconomic structure of the country.

In achieving such noble objective investment department of the bank is of sharing equal
responsibility and importance as a vital part of the total revenue of the bank is generated from
it along with maximum risk. The failure of a commercial bank is when the investment
mechanism fails. Therefore Investment Department not only features dominant position in the
asset structure, it is undoubtedly responsible for the success of the bank also, above all this
investment policy and control guidelines of the bank has been prepared which is subject to
amendment, revision, readjustment and refinement from time to time as may be warranted by
the change of circumstances due to passage of time to suite the requirement of the bank.

Objectives and Principles of Investment

The objectives and principles of investment operations of the bank are:

 To invest fund strictly in accordance with the principles of Islamic Shariah.

 To diversify its investment portfolio by the size of investment, by sectors (public &
private), by economic purpose, by securities and by geographical area including
industrial, commercial, and agriculture.
 To ensure mutual benefit both for the bank and the investment-client by professional
appraisal of investment proposals, judicious sanction of investment, close and constant
supervision and monitoring.
 To make investment keeping the socio-economic requirement of the country in view.
 To increase the number of potential investors by making participatory and productive
investment.
 To finance various development schemes for poverty alleviation, income and
employment generation with a view to accelerating sustainable socio-economic growth
and uplift of the society.
 To invest in the form of goods and commodities rather than give out cash money to the
investment clients.

Policies and Strategies of Investment

The investment department is advised to adopt the following policies and strategies for
quality investments:
 To motivate the valued clients with satisfactory performance of other banks to route
their business through us.
 To boost up SME and Micro investment.
 To encourage women entrepreneurs.
 To ensure diversification of investment portfolio by size, sector, economic purpose and
geographical area for minimizing risks of concentrating as well as to ensure equitable
deployment of fund.
 To make investment covered by adequate securities as stated in the norms of existing
business discretionary powers.
 To change the nature, trend of investment depending on the economic activities.
 To sanction investment ensuring proper appraisal as well as actual need of the client.

Investment Process of AIBL

Figure 3.1-Investment process of AIBL

Profile of AIBL- Muradpur Branch

AIBL, Muradpur Branch was started its work from 13th September, 2003. In this time, it has
earned a leading position at Muradpur as an islami bank and it has made a well reputation at
Muradpur. The main target of this branch is the local people of this area, especially business
men, service holders, immigrants. As this branch is located on the busiest and central area of
Muradpur they can easily attract and capture customers.

Table 3.2-AIBL Muradpur Branch at a glance

Branch Name Muradpur Branch

Year of Establishment 13th September, 2003

Address 96 Muradpur C/A,Chattogram.

Telephone 031 713372-3, 711 725, 01819310770

SWLFT Code ALARBDDH069

District Chattogram

Working Days Sunday to Thursday (Except Holidays)

No. of Departments 03

No. of Employees 40

Source-Annual report of AIBL 2019

SWOT Analysis of AIBL- Muradpur Branch
Strength

 Efficient administration
 Usage of bank software
 Co-operation with others
 Good banker-customer relationship
 Energetic workforce
 Online banking system
 Strong non-interest earning base

Weakness

 Some inexpert and laggard assistant officers

 Short time experience of the bank
 Limited ATM services
 Lack of consumer credit scheme

Opportunity
 Huge business area
 More reliable to local public
 Growth of sales volume
 Introducing any branch banking through online

Threat
 Political unrest
 Different services of non bank financial institutions
 Many competitors in the market
 Certain Bangladesh bank rules and regulations.
 Chapter Four
Findings & Analysis

15 | P a g e
Investment Information Analysis of AIBL, Muradpur Branch

Investments
The investment portfolio of AIBL of Muradpur mainly consists of Bai – Muajjal, Hire Purchase.
The branch also has a small portion of its investment in Quard against mudaraba term deposit
receipt (MTDR), Quard inland bills, Murabaha import bills and Trust receipts.

Table 4.1-Total Investments & Growth of AIBL

Year Total Investments (in Million) Growth Rate

2014 250.2

2015 392.2 56.75%

2016 432.9 10.38%

2017 555.3 28.27%

2018 510.8 -8.01%

2019 515.6 0.94%

Source-Data was collected from AIBL, Muradpur Branch

Table 4.1 shows the total amount of investment portfolio and growth rate of AIBL - Muradpur
Branch over the year 2014 to 2019. In 2014, the amount of investment was 250.2 million. And
in the following years i.e. 2015, 2016, 2017, 2018, 2019 the amount of investment collection
was BDT 392.2 million, BDT 432.9 million, BDT 555.3 million, BDT 510.8 million, BDT 515.6
million respectively.

16 | P a g e
The investment growth rate of AIBL was 56.75% in 2015. The growth decreased from 56.75% to
10.38% from year 2015 to 2016. It increased to 28.27% in 2017 but in the following year it again
decreased to negative 8.01%. However, the growth rate seems to recover to positive 0.94% in
2019.

Figure 4.1-Year by year investments

Total Investments

600

500
Taka in million

400

300

200

100

0
2014 2015 2016 2017 2018 2019
Investments 250.2 392.2 432.9 555.3 510.8 515.6

Source-Data was collected from AIBL, Muradpur Branch

From the figure 4.1 it can be easily seen that the amount of Investment portfolio of AIBL
Muradpur branch increased in first 4 years i.e. year- 2014, 2015, 2016, 2017 but decreased in
the year 2018 compared to year 2017. And then the amount of investment collections slightly
increased in 2019 but not in satisfactory margin. Hence the collection of investment wasn’t well
performing in 2018 and 2019 compared to previous years.
 Figure 4.2-Growth rate of investment

Growth Rate of Investment

60.00%
56.75
50.00%

40.00%

30.00% 28.27

20.00%

10.00%10.38

0.00% 0.94
2015201620172018 2019
-10.00% -8.01

-20.00%

Series 1

Source-Data was collected from AIBL, Muradpur Branch

From the figure 4.2 we can say that bank investment growth is very fluctuating in the last five
years which indicates the performance of investment portfolio of the bank is very vulnerable. In
2015, the growth rate of investment is 56.75%. Then the growth rate of investment was
decreased from 56.75% to 10.38% in 2016. The investment growth was increased in 2017 from
10.38% to 28.27% but the growth rate became negative in 2018 and again increased in 2019
from 2018. So, it can be easily seen that bank isn’t performing well in investment.
Investments in Different Modes
The Investment portfolio of AIBL of Muradpur mainly consists of Bai – Muajjal, Hire Purchase. The
branch also has a small portion of its investment in Quard against MTDR.

Table 4.2- AIBL’s Investments in Different Modes(in million)

Year Bai - Muajjal Hire Purchase Other

Instruments

2014 207.9 29.4 22.9

2015 322.5 46.1 33.6

2016 293.5 122.6 26.8

2017 268.7 263.0 33.6

2018 230.7 273.0 17.1

2019 255.7 222.6 47.3

Source-Data was collected from AIBL, Muradpur Branch

Table 4.2 shows the mode wise investments of AIBL, Muradpur branch over the year 2014 to
2019. In 2014, the investments of Bai-Muajjal, Hire Purchase and other instruments were
BDT207.9 million, BDT 29.4 million, BDT 22.9 million respectively. And in the following years i.e.
2015, 2016, 2017, 2018 and 2019 the investments of Bai-Muajjal were BDT 322.5 million, BDT
293.5 million, BDT 268.7 million, BDT 230.7 million and BDT 255.7 million respectively and the
investments of Hire Purchase were BDT 46.1 million, BDT 122.6 million, BDT 263.0 million, BDT
273.0 million respectively and the investments of other instruments were BDT 33.6 million,
BDT26.8 million, BDT 33.6 million, BDT 17.1 million and BDT 47.3 million respectively. From this
table, we have seen that bank invested on Bai-Muajjal modes on BDT 322.5 million in year 2015
which was higher than the rest of the years. The higher investments of higher purchase were
BDT 273 million in the year 2018 in comparison to other years.

Figure 4.3- Investment’s in terms of modes

Investments in terms of Modes

350

300

250
Taka in million

200

150

100

50

0
2014 2015 2016 2017 2018 2019

Bai-MuajjalHire PurchaseOther Instruments

Source-Data was collected from AIBL, Muradpur Branch

From the analysis of the figure 4.3, it is clearly shown that bank of AIBL Muradpur branch is
mainly invests on two investment mode like Bai-Muajjal and Hire purchase and the little portion
of money is invested in other instruments like Quard against MTDR, Quard inland Bills,
Murabaha Import Bills and Trust Receipts.

Investment & Non-Investment Income

The operating income of AIBL of Muradpur branch consists of both investment and non-
investment income, although investment income has the larger contribution.

Table 4.3- Investment & Non-Investment Incomes of AIBL (in million)

Year Investment Income Non-investment Income

2014 29.1 8.05

2015 41.4 9.29

2016 41.5 10.82

2017 52.1 11.33

2018 63.7 17.85

2019 63.1 17.93

Source-Data was collected from AIBL, Muradpur Branch

The table 4.3 presents the investment and non-investment income over the year 2014 to 2019.
The investment and non-investment income were BDT. 29.1 million to BDT. 8.05 million
respectively in year 2014. The amount of investment income was BDT. 41.4 million in 2015,
BDT. 41.5 million in 2016, BDT. 52.1 million in 2017 and BDT. 63.7 million in 2018. It shows an
upward movement of investment income that was increasing year after year. But the amount
of investment income decreased in 2019 in comparison. The amount of non-investment income
was BDT. 9.29 million in 2015, BDT. 10.82 million in 2016, BDT. 11.33 million in 2017, BDT.
17.85 million in 2018 and BDT. 17.93 million in 2019. It also shows an upward movement of
non-investment income that is increasing year after year.
 Figure 4.4-Investment and non investment incomes

Investment and Non Investment Incomes

70

60
Taka in million

50

40

30

20

10

0
2014 2015 2016 2016 2017 2018

investment Income Non Investment Income

Source-Data was collected from AIBL, Muradpur Branch

Figure-4.4 shows the upward movement of investment and non-investment income of AIBL,
Muradpur branch. The bank had highest income in 2018 BDT. 63.7 million among the last 4
years and the bank had highest non-investment income was 2019 BDT 17.93 million.
 Investment & Non-Investment Income Growth Rate

Table 4.4- Investment & Non-Investment Income Growth of AIBL

Year In. Income - Growth Non-in. Income - Growth

Rate
Rate

2015 42.27% 15.40%

2016 0.24% 16.47%

2017 25.54% 4.71%

2018 22.26% 57.55%

2019 -0.94% 0.45%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.4 represents the investment and non-investment income growth rate of AIBL,
Muradpur branch 2015 to 2019. In 2015, the investment and non-investment income growth
were 42.27%, 15.40% respectively. In the following years i.e. year 2016, 2017 and 2018,
investment income growth rate was 0.24%, 25.54%, 22.26% respectively. Investment income
growth rate was negative in 2019.

The non-investment income growth rate was 16.47% in 2016 which was increased from the last
year. The non-investment income drastically increased in 2018 and it became 57.55%. And then
non-investment income growth again drastically decreased from 57.55% to 0.45% in the very
next year, although the amount of investment income was increased in 2019 from last year.
 Figure 4.5 Investment & non-investment income growth rate

Investment & Non Investment Income Growth Rate

70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%

2015 2016 2017 2018 2019

Investment Income- Growth
42.27% 0.24% 25.54% 22.26% -0.94%
Raate
Non Investment Income-
15.40% 16.47% 4.71% 57.55% 0.45%
Growth Rate

Source-Data was collected from AIBL, Muradpur Branch

Figure-4.5 shows the movement of investment and non-investment income growth rate of
AIBL, Muradpur branch. The bank had a negative growth rate in investment income on –0.94%
that result in a downward movement. The highest investment income growth rate was 42.27%
in 2015. And the highest non- investment income growth rate was 57.55% in year 2018. Though
the amount of non-investment income was increased in 2019 but the growth rate was
decreased from 57.55% to 0.45%. So, the line moved downward. From the analysis of the table
we have understood that there is continuous fluctuation between investment income and non-
investment income on year to year basis.

NPI
NPI is the investments in or near default, which is mainly caused by bad investment amount
estimation, nepotism, lack of field employee for monitoring and political or other influences in
time of investment recovery. It is the main hurdle in the path of profitability for the AIBL of
Muradpur branch.
 Table 4.5-NPI

NPI
Year
(in Million)

2018 42.10

2019 89.50

Source- Data was collected from AIBL, Muradpur Branch

Table 4.5 represents the NPI of AIBL, Muradpur branch. The amount of NPI was BDT. 42.10
million in year 2018, which increased to BDT. 89.50 million in 2019.

Figure 4.6-Investment income & NPI

Investment income & NPI

90

80
Taka in million

70

60

50 Investment Income
Non Performing Investment
40

30

20

10

0
2018 2019

Source-Data was collected from AIBL, Muradpur Branch

Figure 4.6 shows the investment income and NPI of AIBL, Muradpur branch from the year 2018
to 2019. In 2018, the investment income and NPI were BDT. 63.7 million and BDT. 42.1 million
respectively. This year investment income is higher than NPI. In 2019, the investment income
and NPI were BDT. 63.1 million, BDT. 89.5 million respectively. This year NPI is greater than non-
investment income. It clearly shows the inverse relation between investment income and NPI.

Investment Income Growth Analysis

Investment income for any bank is usually influenced by Cost of Fund, Total Investment and
NPI.

Investment growth is positively related to investment income as if other factors remain

unchanged more investment is likely to result in more investment income for the bank and vice
versa.

On the other hand, Cost of Fund and NPI are inversely related to investment income i.e. when
cost of fund and NPI increase, the investment income is bound to decrease and vice versa.

As, all these factors was constantly shifting, it is normal that the investment income was also
fluctuating year by year in case of AIBL – Muradpur.

Table 4.6-Investment Incomes Analysis

In. Income - Investment -
Year Cost of Fund NPI - Growth
Growth Growth

2015 42.27% 6.52% 56.75%

2016 0.24% 5.99% 10.38%

2017 25.54% 5.92% 23.27% 89.14%

2018 22.26% 6.11% -8.01% 84.32%

2019 -0.94% 6.48% 0.94% 112.59%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.6 shows the growth rate of investment income, investment and NPI of AIBL, Muradpur
branch over the year 2015 to 2019. It also shows the cost of fund of investment over 2015 to
2019 as it is negatively related to cost. In 2015 growth of investment income, investment and
cost of fund was 42.27%, 56.75% and 6.52% respectively. In the following years i.e. 2016, 2017,
2018 and 2019 the growth of investment income was 0.24%, 25.54%, 22.26% and -0.94%
respectively and the growth of investment was 10.38%, 23.27%, -8.01% and 0.94% respectively
and the cost of fund was 5.99%, 5.92%, 6.11% and 6.48% respectively. And the NPI in the year
2017 was 89.14%, 84.32% in 2018 and 112.59% in 2019. By analyzing data from the table, it can
be seen that investment is positively and cost of fund and NPI is inversely related to investment
income.

Figure 4.7-Investment income analysis

Investment Income Analysis

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%

2015 2016 2017 2018 2019

-20.00%

Investment Income COF Investment NPI

Source-Data was collected from AIBL, Muradpur Branch

In the figure 4.7 growth rate of investment income, investment, NPI and cost of fund of AIBL of
Muradpur is represented in vertical axis and the year over 2015 to 2019 is represented in
horizontal axis. Now we are analysis the investment year after year to know the reason of
fluctuation of investment income.

2015 Investment income of AIBL was high i.e. 42.27% because investment
growth was also high in this year 56.75% though cost of fund was high 6.52% in this
year. In this case investment growth positively influenced the most that’s why
investment income was increased this year.

2016 Investment income was decreased to 0.24% from the last year because
investment growth rate was decreased to 10.38% from the last year though cost of
fund was decreased to 5.99%. But in this case investment growth rate negatively
influenced the most of investment income. That’s why investment income line moved
downward.

2017 Since investment growth and cost of fund was decreased to 23.27% and
5.92% respectively in 2017 from the last year. As a result, investment income was also
increased to 25.54% in comparison to last year. In this case both of investment growth
and cost of fund positively influenced the investment income. So, investment income
line moved upward.

2018 Investment income decreased to 22.26% from the year 2017 because
cost of fund increased to 6.11% and investment growth was negative 8.01% this year.
Though investment income would decrease drastically but it gently decreased this
year because NPI decreased to 84.32% from the last year. In this case, NPI influenced
the most of investment income.

2019 Investment income was drastically decreased to -0.94% from the last year
because cost of fund and NPI increased to 6.48% and 112.59% compare to the year
2018, although investment growth rate increased to 0.94% from the last year. In this
year, NPI was very high and cost of fund also high which negatively influenced the
most of investment income. That’s why the investment graph moved downward.
Ratio Analysis of AIBL (Muradpur Branch)

Investment to Deposit Ratio

Investment to deposit ratio shows that which amount of deposit is used as investment.
Increasing the investment to deposit ratio of AIBL – Muradpur branch would suggest that the
branch is using more and more of its deposit to generate income. On the contrary, decrease in
the ratio can be caused by economic contraction, inadequate investment strategy or the lack of
market research for potential investments, all of which results in decreasing the potential
profitable opportunity for the branch to invest its funds.

Table 4.7-Investment to Deposit Ratio

Total Investments (in Total Deposits (in

Year Ratio
Million) Million)

2014 250.2 567.2 44.11%

2015 392.2 1,013.3 38.71%

2016 432.9 1,255.6 34.48%

2017 555.3 1,823.8 30.45%

2018 510.8 1,819.2 28.08%

2019 515.6 1,964.9 26.24%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.7 represents the investment to deposit ratio of AIBL - Muradpur branch over the
year 2014 to 2019. In 2014, the investment to deposit ratio of the bank was 44.11%. And in
the
following years 2015, 2016, 2017, 2018 and 2019 the investment to deposit ratio of the ]
bank was 38.71%, 34.48%, 30.45%, 28.08% and 26.24% respectively. From the table, it
can be seen that investment to deposit ratio was decreasing gradually.
Figure 4.8-Investment to deposit ratio

2500 50.00%

44.11% 45.00%
1964.9
2000 1823.8 40.00%
38.71% 1819.2
34.48% 35.00%

1500 30.45% 30.00%

1255.628.08% 26.24% 25.00%
20.00%
1013.3
1000

15.00%
567.2 555.3 510.8 515.6
500 392.2 432.9 10.00%
250.2
5.00%

0 0.00%
201420152016201720182019

Total investment Total Deposit Ratio

Source-Data was collected from AIBL, Muradpur Branch

The figure 4.8 represents the amount of investment and deposit in left vertical axis and ratio of
investment to deposit in right vertical axis and horizontal axis is represented by the year.
Looking at the pattern of investment to total deposit it is found that the ratio of investment to
total deposit of AIBL decreased by 5.40% during 2014 to 2015 from a value of 44.11% to 38.71%
which means that little proportion of deposits were made as investment which implies an
increase in liquidity. From the trend, we have seen that the investment to deposit ratio was
decreasing year by year that implies bank holds more liquidity. That’s why the trend moved
downward.
ROI

ROI measures the gain or loss generated on an investment relative to the amount of money
Invested. Expressed in a percentage form ROI is typically used to measure and compare the
profitability of different investments.

The increase in ROI percentile would suggest, the investment performance of AIBL- Muradpur
is getting better year by year.

Table 4.8-ROI

Total Investments Investment Income

Year Ratio
(in Million) (in Million)

2014 250.2 29.1 11.63%

2015 392.2 41.4 10.56%

2016 432.9 41.5 9.59%

2017 555.3 52.1 9.38%

2018 510.8 63.7 12.47%

2019 515.6 63.1 12.24%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.8 shows the ROI of AIBL, Muradpur branch over 2014 to 2019. In 2014 the ratio of ROI
was 11.63%. And in the following years i.e. 2015, 2016, 2017, 2018 and 2019 the ROI was
10.56%, 9.59%, 9.38%, 12.47% and 12.24% respectively. The highest ROI was in 2018 though
the amount of total investment was decreased to 510.8 from the year 2017 and bank also
experienced a negative investment growth rate but investment was high in this year from the
last year.

Figure 4.9-ROI

ROI
600 14.00%

12.00%
Taka in million

500

10.00%
400
8.00%
300
6.00%
200
4.00%

100 2.00%

0 0.00%
2014 2015 2016 2017 2018 2019
Total Investment
Investment Income 250.2 392.2 432.9 555.3 510.8 515.6

29.1 41.4 41.5 52.1 63.7 63.1

Series 3 11.63% 10.56% 9.59% 9.38% 12.47% 12.24%

Source-Data was collected from AIBL, Muradpur Branch

The pattern shows the movement of ROI of AIBL, Muradpur branch over the year
2014 to 2019. The figure 4.9 represents the amount of total investments and
investments income in left vertical axis and ROI in right vertical axis. The year is
represented by the horizontal axis. In 2014, the ROI was 11.63% and then it was
decreased to 10.56% in the year 2015. Then it decreased gently to 9.59% in the
year 2016 that means the investment income was decreased in the year 2015,
2016 and 2017. Then it started to gradually increase and reached 12.47% in the
year 2018 and because of increase in investment income in these years 2018. In
2019, it again falls to 12.24%. Overall, the return on investment experienced a
mixed trend. From the analysis of the figure, we can say that the higher the
percentage of return the higher the efficiency of investments.
Investment to Total Asset Ratio

The growth of total investment to total asset of AIBL- Muradpur branch from the sample
period from 2014 to 2019 is demonstrated below
Table 4.9-Investment to total asset ratio

Total Investment Total Asset

Year Ratio
(in Million) (in Million)

2014 250.2 497.4 50.30%

2015 392.2 638.2 61.45%

2016 432.9 524.9 82.47%

2017 555.3 679.9 82.67%

2018 510.8 685.9 74.47%

2019 515.6 2196.6 23.47%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.9 shows the investment to total asset ratio of AIBL, Muradpur branch over 2014 to 2019.

In 2014 the ratio of investment to total asset was 50.30%. And in the following years i.e. 2015,
2016, 2017, 2018 and 2019 the investment to total asset ratio was 61.45%, 82.47%, 82.67%,
74.47% and 23.47% respectively. The highest investment to total asset ratio was in 2017 though
the amount of total investment was decreased to 510.8 from 555.3 in the year 2018.
Figure 4.10-Investment to total asset

Investment to Total Asset

2500 90.00%
80.00%
Taka in million

2000 70.00%
60.00%
1500
50.00%
40.00%
1000 30.00%

500 20.00%
10.00%
0.00%
0
2014 2015 2016 2017 2018 2019
Total Investment
Total Assets 250.2 392.2 432.9 555.3 510.8 515.6

497.4 638.2 524.9 679.9 685.9 2196.6

Series 3 50.30% 61.45% 82.47% 82.67% 74.47% 23.47%

Source-Data was collected from AIBL, Muradpur Branch

The pattern shows the movement of investment to total asset of AIBL, Muradpur
branch over the year 2014 to 2019. The figure 4.10 represents the amount of
total investment and total asset in left vertical axis and investment to total asset
ratio in right vertical axis. The year is represented by the horizontal axis. In 2014,
the ratio was 50.30% and then it was increased to 61.45% in the year 2015. Then
it increased gently to 82.47% and 82.67 in the year 2016 and 2017 respectively.
Then it started to gradually decrease and reached 74.47% in the year 2018. In
2019, it again falls to 23.47%. Overall, the investment to total asset ratio
experienced a mixed trend.

NPI to Investment Ratio

The NPI ratio, is the ratio of the amount of non-performing investments in a
bank's investment portfolio to the total amount of outstanding investments
the bank holds. It measures the effectiveness of a bank in receiving repayments
on its investments.

Commercial investments are considered nonperforming if the debtor has made

zero payments of shared profit or principal within 90 days, or is 90 days past due.
For a consumer investment, 180 days past due classifies it as an NPI. (IMF
Committee on Balance of Payments Statistics, 2005)

The NPI to investments ratio is helpful for AIBL of Muradpur in determining the
stress in its portfolio of investments. Portfolio with lower than 6% non-
performing investments are deemed healthy. But the higher the ratio the more
trouble the branch is having in the portfolio of that year.

Table 4.10-NPI to investment ratio

Year Total Investments NPI Ratio

(in Million) (in

Million)

2018 510.8 42.10 8.24%

2019 515.6 89.50 17.36%

Source- Data was collected from AIBL, Muradpur Branch

Table 4.10 shows the NPI to total investment ratio of AIBL – Muradpur over the year 2018
and 2019. In 2018, the ratio of the NPI to total investment was 8.24%. But in the following
year, 2019, the ratio of NPI to total investment was more than doubled to 17.36%.

Along with the upward movement, in both years NPI was more than desirable 6% which is big
concern for the branch in the coming days.
Figure 4.11-NPI to total investment

Chart Title
600 20.00%
18.00%
500 16.00%
Taka in million

14.00%
12.00%
400
10.00%
8.00%
300 6.00%
4.00%
200 2.00%
0.00%
100

0
2018 2019
Total Investment
NPI 510.8 515.6

42.1 89.5

Ratio 8.24% 17.36%

Source-Data was collected from AIBL, Muradpur Branch

In the figure 4.11 total investment and NPI is represented in left vertical axis and ratio of total
investment to NPI is represented in right vertical axis. Horizontal axis is represented by the
year and the graph also shows the movement of NPI to total investment ratio. In 2018, the
ratio was 8.24%. In 2019, the ratio was increased to 17.36% which suggests bank did not
estimate the proper invested amount when made an investment, didn’t monitor the
investment after sanctioning or fall a victim to nepotism, political or other influences in time of
recovery.
 Chapter five
Conclusion & Recommendation

37 | P a g e
The study is aimed at measuring and evaluating the investment performance of AIBL, Muradpur branch
within the period of year 2014 to year 2019. Based on the analysis in the previous chapter this chapter
summarizes the most important findings of the analysis and some recommendations based on the
objectives of the report. In the above study both primary & secondary data was used. Different ratio
analysis was also used to evaluate the investment performance AIBL (Muradpur branch). While
preparing the report and analyzing the data, I have identified some major findings. Based on the study
the following are some significant findings:

 Investment collection is increasing gradually except for the year 2018. The branch has
no investment in Bai-Murabaha and Bai-Salam modes of investment.
 As about 62.56%, 31.76%, and 5.68% of total investments are covered by Bai-Muajjal,
hire purchase and other investments in the last 6 years, so an imbalance mode wise
investment exists in this branch.
 There is a opposite relationship in the growth rate of investment income and non-
investment income.
 The investment income of the branch is not increasing in the way it should because of
a drastic increase in NPI.
 It can be seen that investment is positively and cost of fund and NPI is inversely related
to investment income.
 The branch has a lower investment to deposit ratio which means the branch is not making the
proper use of their funds and holding higher liquidity.

 The estimation of the amount to be invested is not always as close to reality as it should
be which leads to a higher NPI rate.
 The bank is facing a fluctuating situation in its ROI over the years.
 With regard to growth of investment to total asset the branch witnessed an enormous
drop of around 51% in the growth of investment to total asset.

AIBL, Muradpur branch is a private sector Islami bank having a small market share of the
industry. It has all the potential tools to penetrate the market. So, if the weaknesses are
addressed appropriately and opportunities are explored with a stable and adroit corporate
governance
38 | P a g e
and modern technology, it can be expected that the branch will step in the ladder of success in
the coming years. Here some of the recommendations based on my study is given below:

 The branch should keep improving their facilities regarding deposits and investments as
these are interlinked with investment income.
 The branch needs to better market its investment products to reach new and potential
client bases.
 The branch should spread their investments in different sectors and expand investment
in emerging sectors like IT, Medicine to better manage its investment portfolio and
reduce fluctuation.
 A balanced form of mode wise investment should be adopted to minimize portfolio risk.
 All the remaining modes of investments like Bai-Murabaha and Bai-Salam should
gradually be introduced and perfectly utilized by the branch.
 The foreign exchange department should perform well so that the bank can earn
additional investment and non-investment income.
 A higher ratio of investment to deposit should be emphasized to avoid excessive idle
funds and to generate more investment income.
 More effort and necessary/ adequate workforce should be devoted to the investment
amount estimation and monitoring to minimize the chance of NPI.
 The branch needs to improve forecasting and swift decision making in times of investing
and recovery to reduce NPI.
 The branch should try to reduce nepotism and political influences to a bare minimum as
those are big contributors to the growing Non-Performing Investment.
References:

Al-arafahbank.com. 2019. Al-ArafahIslami Bank. [Online] Available at:

https://www.al-arafahbank.com/Financial-Statement-final.php. [Accessed 2020]
Al-Arafah Islami Bank, 2020. AIBL at a Glance. [Online] Available at:
https://www.al-arafahbank.com/glance.php. [Accessed 2020]
Al-Arafah Islami Bank, 2020. AIBL Profile. [Online] Available at:
https://www.al-arafahbank.com/profile.php . [Accessed 2020]
Al-Arafah Islami Bank, 2020. Branch Information. [Online] Available at:
https://www.al-arafahbank.com/Branch.php?div=Dhaka. [Accessed 2020]
Al-Arafah Islami Bank, 2020. Deposit. [Online] Available at: https://www.al-
arafahbank.com/Deposit.php. [Accessed 2020]
IMF Committee on Balance of Payments Statistics, 2005. The Treatment of
Nonperforming Loans. Washington, D.C., Statistics Department, International
Monetary Fund.
Aggarwal, R. K., & Yousef, T. (2000). Islamic Banks and Investment Financing.
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https://www.cambridge.org/core/books/islamicfinance/FD60F9CB788309C36
E2C4A1DD113701A
Shaikh, S. A., & Jalbani, A. A. (2009). 67Risk Management in Islamic and
Conventional Banks:A Differential Analysis. Journal of Independent Studies and
Research MSSE, 72, 67–79. Retrieved from
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slamic_and_Conventional_Banks_A_Differential_Analysis
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