FACTORS ANALYSIS IN IMPROVING CUSTOMER SATISFACTION OF HPSM (TRANSPORT/ CAR LOAN) FACILITY OF AL-ARAFAH ISLAMI BANK LIMITED

SUBMITTED TO:

NIGAR SULTANA

ASSISTANT PROFESSOR

DEPARTMENT OF MARKETING

JAHANGIRNAGAR UNIVERSITY

SUBMITTED BY:

MD. SAIFUL ISLAM SUJAN

ID: 1338

DEPARTMENT OF MARKETING

JAHANGIRNAGAR UNIVERSITY

JAHANGIRNAGAR UNIVERSITY

INTERNSHIP REPORT

ON

Factors analysis in improving customer satisfaction of HPSM (Transport/ Car loan) facility of Al-Arafah Islami Bank Limited (AIBL)

Prepared By:

Md. Saiful Islam SujanID: 1338E-mail: sujandcc_bd@yahoo.comDepartment of MarketingJahangirnagar University

Has been approvedSeptember 12, 2013

_____________________

Nigar Sultana Assistant professor

Department of Marketing Jahangirnagar University

Letter of Transmittal

September 12, 2013ToMs. Nigar SultanaAssistant Professor Department of MarketingJahangirnagar University

Sub: Submission of Internship Working Report.

Dear Madam,

Here is my internship working report on Al-Arafah Islami Bank Limited (AIBL). I am submitting this report as the part of my internship in Al-Arafah Islami Bank Limited (AIBL) while preparing this report; I tried my level best to follow your directions and the instructions that have given to me by my organization supervisor.

The entire report is based on my practical experience in the Hemayetpur branch, Al-Arafah Islami Bank Limited. I have tried my level best to provide what I have learned during the internship program at Al-Arafah Islami Bank Limited.

I shall be highly encouraged if you are kind enough to receive this report. If you have any further enquiry concerning any additional information I would be very pleased to clarify that.

Thanking you.

Sincerely yours,

___________

Md. Saiful Islam Sujan

Acknowledgement

It is my great privilege to express gratitude to our creator Allah for such great opportunity. I also have to put my heartened feelings and gratitude for the kindness and assistance that was provided to me to complete my assigned report. Then I must express my deep gratitude to my University supervisor Ms. Nigar Sultana, Assistant professor, Department of Marketing, Jahangirnagar University, for her supervision and directions in conducting the internship program successfully.

I would also like to thank my host organization supervisor Mr. Sayed Ariful Islam, Branch Manager, Al-Arafah Islami Bank Limited (AIBL) for providing me an opportunity to work in the Bank as an intern. I also like to extend my gratitude to Mr. Nazrul Islam, Executive Officer and Mr. Aminul Islam, Executive Officer who helped me to learn many new things during my internship program.

Finally I would like to thank all of the employees at Hemayetpur Branch AIBL and friends who helped me to prepare this report directly and indirectly. To be true to myself I must say that without their help it would be very hard for me to prepare such report. I am thankful to them with all of my feelings.

Executive Summary

The objectives of my study is to improving customer satisfaction of HPSM (Transport/ car loan) facility of Al-Arafah Islami Bank Limited (AIBL) and about what level the customers are assured by competence, courtesy, credibility and security by the bank and its employees. During my study, I used different techniques; i.e. face to face interview, deskwork in different departments and the structured questionnaire to assessing the customer satisfaction of HPSM (Transport/ car loan) facility of Al –Arafah Islamic bank Ltd (Hemayetpur Branch). The data that obtained from the survey was than analyzed and interpreted by using statistical tools. From the interpretation of survey result, a number of findings and recommendations were suggested that may help the organization to take necessary steps to improve their service and get more satisfied customers. This has kind of research are rarely done before, hence research on the functions of the Al-Arafah Islami Bank will help provide access and insight into how Al-Arafah Islami Bank functions and operate within this country and pave the way for future researchers in this field.

This report is a result of my three month internship program where I have learnt many things that enriched my practical knowledge. This report contains a brief summary about AIBL’s information, its product and services, its activities, factors analysis in improving customer satisfaction of HPSM (transport/ car loan) facility of Al-Arafah Islami Bank Limited, my duties at AIBL.

Table of Contents

1.1 Introduction 11.2 Literature Review 2-31.3 Objective of the research 41.4 Research Methodology 4-51.5 Limitation of the study 5

2.1 Background of the Company 62.2 Vision 62.3 Mission 62.4 Objectives of AIBL 72.5 Commitments 72.6 Special feature of the bank 72.7 Branches of AIBL 82.8 Product / services of AIBL 8-9

3.1 Differences between Islamic and conventional banking 10-113.2 Investment 123.3 Bai-Murabaha or simply Murabaha 123.4 Musharaka 123.5 Mudarabah 123.6 Bai-Muajjal 133.7 Bai-Salam 13

4.1 General Banking 144.2 Cash Section 14-154.3 Account Opening 164.4 Cheque Clearing 174.5 SME- Banking 18-194.6 Securities against Investment 19

5.1 Factor analysis 20-225.2 Analysis of improving customer satisfaction 23-265.3 Findings 275.4 Recommendation 27-28

6.1 Conclusion 29

7.1 References 30-317.2 Appendix 32-33

1.1 Introduction:

Al-Arafah Islami Bank Limited started its journey on 18 June 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah. The opening ceremony took place on 27 September 1995. A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the founder chairman of the bank. His progressive leadership and continuous inspiration provided a boost for the bank in getting a foothold in the financial market of Bangladesh. A group of 20 dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah Islami Bank Ltd. has 100 branches and a total of 3017 employees (up to June 2013) and the number of shareholders were 12013. Its authorized capital is Taka 5000 millions and the paid-up capital is Taka 4677.28 millions. Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh. The bank 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 is committed to contribute significantly to the national economy. It has made a positive contribution towards the socio-economic development of the country with 100 branches of which 36 is AD throughout the country.

1.2 Literature Review:

The banking industry of Bangladesh is a mixed one comprising nationalized, private and foreign commercial banks. Many efforts have been made to explain the performance of these banks. Understanding the performance of banks requires knowledge about the profitability and the relationships between variables like market size, bank‘s risk and bank‘s market size with profitability. But today banking function has moved beyond that. This study is only a scratch on the surface of what can be called a shift towards marketing approach. But it is inevitable that changes are occurring. Indeed, the performance evaluation of commercial banks is especially important today because of the fierce competition. Since marketing has always been recognized as crucial function in a company, banking industry has fully used it for their own benefit. Usually marketing communications are associated with the word marketing, but this association is wrong. Marketing is more sophisticate science. It can be virtually divided in two parts: marketing strategy and marketing mix (4P). Marketing strategy usually is associated with segmentation, targeting and positioning. Marketing tactics usually are associated with 4P or product, price, promotion and place. In the context of marketing we should also mention marketing research, marketing performance, consumer behavior, branding, etc. Anyway the main elements are marketing strategy and marketing tactics.

Increasing competition and diversity of service development in banking and financial services sector pressures the banks to become increasingly responsive to market considerations in terms of segmentation, management and market strategies, internal and external infrastructure, their use of information technology and their ability to innovate and differentiate (Zineldin, 1996). Both market segmentation and positioning are vital issues in marketing theory and practice. Positioning is an attempt to distinguish the bank from its competitors along real dimensions in order to be the most preferred bank for a certain market segment or prospect (Zineldin, 1996). As theory, market segmentation is the process of dividing a market into distinct groups of individuals or organizations, who share one or more similar responses to some elements of the marketing mix. Market segmentation can lead to insights about the basic process of consumer behavior. Market positioning also plays imperative role in market strategy by analyzing the market to segment the customer’s requirements based on competitive advantages (Kotler, 1994; Zineldin, 1996). Therefore, effective positioning reflects how customer perceives the products; factors make the customers satisfied and whether customers behave differently with different factors while choosing a bank.

Studies on satisfaction of the customers in financial service sectors have been well known among the academicians since the mid of 80’s. Parasuraman et al. (1988) opened a new window of research in service quality by establishing SERVQUAL model. Their model has been replicated in many countries with multi-dimensional sectors, and found close to a big success. Since, customer satisfaction has close relationship with customer retention especially in markets that are highly competitive and saturated like financial services(Lopez et al. 2007); it is necessary to continuously monitor changes in satisfaction among different segments of customers. The most common interpretations reflect the notion that satisfaction is a feeling which results from a process of evaluating what was received against that expected, the purchase decision itself and the fulfillment of needs or want(Armstrong & Kotler, 1996; Berkowitz et al.1999).

Kotler (1999) also noted that‘s satisfaction is a function of perceived performance and expectations which identifies feelings of a person resulting from comparing a product‘s perceived performance in relation to his or her expectations. For most companies and businesses, obtaining feedback from customers and clients is essential. It provides them with a glimpse into what they are doing right, what they are doing wrong, as well as ways in which operations and relationships could be improved. But obtaining and organizing this feedback in a way it can easily be sorted and delivered to the right people within the company can often be challenging.

Since a conceptual model concerning perceived service quality was proposed by Parasuraman et al. (1988), service quality dimensions have become an area of interest in marketing research (Bolton & Drew, 1991b; Brown & Swartz, 1989; Carman, 1990; Cronin & Taylor, 1992, 1994; Parasuraman et al., 1988, 1994; Teas, 1993, 1994; Zeithaml et al., 1996). One of the important issues related to service quality is the dimensions of service quality, and the measurement tool, SERVQUAL developed by Parasuraman et al.(1988) has been the starting point of the controversy in this area. Parasuraman et al. (1988)identify five quality dimensions that link specific service characteristics to consumer expectations of quality.

Post purchase is one the most popular approach that is used to both produce meaningful and useful findings. Satisfaction feedback is obtained from the individual customer at the time of product or service delivery (or shortly afterwards). This type of satisfaction survey is typically used as part of a CRM (customer relationship management system) and focuses on having a long term relationship with then individual customer.

1.3 Objective of the research:

1.3.1 Broad objective:

The project topic concerns about the improving customer satisfaction of HPSM (transport/ car loan) facility of Al-Arafah Islami Bank Limited. So, broadly, the objective of the research is to identify aspects that satisfy the customer mostly in favor of making purchase of car loan.

1.3.2 Specific Objectives:

To gain idea about the car loan facility.

To know about Al-Arafah Islami Bank limited and its car loan system.

1.4 Research Methodology:

The research is an exploratory one. This study is based primarily on secondary information. Analysis of the findings helps to meet the objectives of this research related to the impact of social media. For this purpose, different recognized census, books, newspapers, national and international journals, periodicals will be consulted. Besides this, internet has been used as another source of information.

1.4.1 Data Collection techniques:

a)      Questionnaire: A structured questionnaire is developed to collect information from the target consumer.

b)      Interview: Respondents would have been interviewed on the basis of a structured interview through questionnaire.

1.4.2 Statistical Analysis:

For the analysis part I have used SPSS software & in order to extract the meaningful information from the data collected I have done factor analysis which was required for the report’s further progress. Collected data/information is analyzed on the basis of the specific objectives. A conclusion is drawn based on the analysis of primary data based on the results of those analyses.

1.4.3 Sources of data:

Both secondary and primary is used for the execution of this research project. Secondary data is collected from various published documents in related books, journals, newspaper, magazines and websites. As for the primary data, relevant persons are interviewed personally to collect the data required in the questionnaire.

1.4.4 Sample Selection Method

To select the sample non-probabilistic sampling method is used and that seems to be a convenient sample. I am keeping sample size within a limit. A sample size of 50 respondents is used to conduct the research. The survey is conducted on the different area of Dhaka city, specially the head office of the bank for the ease of my data collection.

1. 5 Limitations

Objective of the practical orientation program is to have practical exposure for the student. Although this research was carefully prepared, there are still some unavoidable limitations and shortcomings listed below:

The bank confidentially keeps the data.

The data and information related with the topic was not easily available.

This suffers from a narrow data range for analysis.

Communication gap between the related officials and me.

There was some sort of differences between the data collected from different sources of

information of the same topic.

In some cases officers were reluctant in supplying relevant information, which hampers

the authenticity of the report to a certain extent.

2.1 Background of the Company:

Al-Arafah Islami Bank Limited started its journey on 18 June 1995 with the said principles in mind and to introduce a modern banking system based on Al-Quran and Sunnah. The opening ceremony took place on 27 September 1995. A group of established, dedicated and pious personalities of Bangladesh are the architects and directors of the Bank. Among them a noted Islamic scholar, economist, writer and ex-bureaucrat of Bangladesh government Mr. A.Z.M Shamsul Alam is the founder chairman of the bank. His progressive leadership and continuous inspiration provided a boost for the bank in getting a foothold in the financial market of Bangladesh. A group of 20 dedicated and noted Islamic personalities of Bangladesh are the member of Board of Directors of the bank. They are also noted for their business acumen. Al-Arafah Islami Bank Ltd. has 100 branches and a total of 3017 employees (up to June 2013) and the number of shareholders were 12013. Its authorized capital is Taka 5000 millions and the paid-up capital is Taka 4677.28 millions. Wisdom of the directors, Islamic bankers and the wish of Almighty Allah make Al-Arafah Islami Bank Ltd. most modern and a leading bank in Bangladesh. The bank 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.

2.2 Vision:

To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the growth of

the national economy.

2.3 Mission:

Achieving the satisfaction of Almighty Allah both here & hereafter.

Proliferation of Shariah Based Banking Practices.

Fast and efficient customer service.

Quality financial services adopting the latest technology.

Maintaining high standard of business ethics and competitive return on shareholders' equity.

Firm commitment to the growth of national economy.

2.4 Objectives of AIBL:

To establish an interest free economy.

To establish an modern banking system for all kinds of people

To take part in the economic growth of the country.

To eradicate the poverty and to do social services by establishing Schools, Madrashas,

University, Hospitals, Public Library etc.

Finally to achieve ultimate goal i.e. Nazat in Akhirat.

2.5 Commitments:

Al-Arafah Islami Bank is a customer focused modern Islamic bank that want to achieve sound and

steady growth in both mobilizing deposit and making quality investment to keep their position as a

leading Islami bank in Bangladesh.

To deliver financial services with the touch of their heart to retail, small and medium scale enterprises,

as well as corporate clients through their branches across the country.

Their business initiatives are designed to match the changing trade & industrial needs of the clients.

2.6 Special feature of the bank:

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 Quran & Sunnah.

The Bank is committed towards establishing welfare oriented banking system, economic improvement 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 participates in different activities aiming at creating jobs, implementing development projects taken by the Government and developing infrastructure.

The Bank is committed to establish an economic system through social justice and equal distribution of wealth.

2.7 Branches of AIBL:

AIBL started its working at 161, Motijheel C/A with a Branch named Motijheel Branch on 27 th

September, 1995 was the first & main Branch of AIBL and has been operating throughout the country. The Head Office of the Bank was situated at the same holding of Motijheel Branch since its establishment but from 11 January, 2007 it has started its working at its own premises 36, Dilkusha, Dhaka. The age of the Bank is only 18 years and during this short period of time, the Bank has established total 100 Branches over the country and made a smooth network inside the country. The number of Branches as Division wise is mentioned in the following table:

Division No. of Branches Division No. of BranchesDhaka Division 51 Khulna Division 7

Chittagong Division 22 Rajshahi Division 5

Sylhet Division 7 Barisal Division 4

Rangpur 4

2.8 Product / Services of AIBL:

2.8.1 Mudaraba Terms Savings Deposit:

Deposit in monthly installment @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.

2.8.2 Monthly profit based Term Deposit:

Under the above scheme, deposit of Tk. 1.00 lak and multiple thereof are accepted for a term of 5 (five) years and the bank gave profit thereon Tk. 885 per month per lac and proportionately on the rest amount of deposit under the category during the year under review. The aforesaid rate shall, however, be adjustable at the close of calendar year on finalization of accounts.

2.8.3 Monthly Hajj Deposit:

Hajj deposit at monthly installment from 1 (one) year to 20(twenty) years are accepted under the above scheme to enable the account holder to perform Hajj out of the accumulated saving with profit.

2.8.4 Onetime Hajj Deposit :

Under the above scheme, fixed amount of Hajj deposits are accepted from the clients for particular term and as per rules profit is accumulated thereon per year in this regard. As and when the fixed deposit is matured, Hajj expenses are defrayed by the same. Under the scheme, the guardians may also open Hajj account to enable their successors to perform Hajj. Highest amount of profit is paid in the above types of deposit by the bank.

2.8.5 Savings Investment Deposit :

Deposit under the scheme is accepted by monthly installment and after expiry of the term; double amount of such savings is given as investment in feasible sectors by the bank as per choice of the depositors without any collateral security. Any one by saving under the scheme can take business venture on utilization the amount saved under the scheme as well as availing bank investment.

2.8.6 Marriage Savings Deposit :

Fixed monthly installment for a particular period is to be deposited to defray the expenses of marriage and the bank allows double of saving or Tk.30, 000/- which is higher as investment to procure ornaments, furniture, fixture etc., repayable in 24 monthly installments without any collateral security.

2.8.7 Savings Bond Deposit :

Under this scheme the bank has introduced saving bonds for Tk. 10,000/-, Tk.25, 000/- and Tk. 100,000/- for 3, 5 and 8 years.

3.1 Differences between Islamic and conventional banking:

The key difference is that Islamic Banking is based on Shariah foundation. Thus, all dealing, transaction, business approach, product feature, investment focus, responsibility are derived from the Shariah law, which lead to the significant difference in many part of the operations with as of the conventional banking. The foundation of Islamic bank is based on the Islamic faith and must stay within the limits of Islamic Law or the Shariah in all of its actions and deeds. The original meaning of the Arabic word Shariah is 'the way to the source of life' and is now used to refer to legal system in keeping with the code of behavior called for by the Holly Qur'an (Koran). Amongst the governing principles of an Islamic bank are:

The absence of interest-based (riba) transactions; The avoidance of economic activities involving oppression (zulm) The avoidance of economic activities involving speculation (gharar); The introduction of an Islamic tax, zakat; The discouragement of the production of goods and services which contradict the Islamic value (haram)

On the other hand, conventional banking is essentially based on the debtor-creditor relationship between the depositors and the bank on one hand, and between the borrowers and the bank on the other. Interest is considered to be the price of credit, reflecting the opportunity cost of money.

The other principle pertaining to financial transactions in Islam is that there should not be any reward without taking a risk. This principle is applicable to both labor and capital. As no payment is allowed for labor, unless it is applied to work, there is no reward for capital unless it is exposed to business risk.

Thus, financial intermediation in an Islamic framework has been developed on the basis of the above-mentioned principles. Consequently financial relationships in Islam have been participatory in nature.

Lastly, for the interest of the readers, the unique 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 of conventional banks are based on fully man made principles.

1. The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.

2. The investor is assured of a predetermined rate of interest.

2. In contrast, it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur).

3. It aims at maximizing profit without any restriction.

3. It also aims at maximizing profit 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 be a Zakat Collection Centre and they also pay out their Zakat.

5. Lending money and getting it back with compounding interest is the fundamental function of the conventional banks.

5. Participation in partnership business is the fundamental function of the Islamic banks. So we have to understand our customer's business very well.

6. It can charge additional money (penalty and compounded interest) in case of defaulters.

6. The Islamic banks have no provision to charge any extra money from the defaulters. Only small amount of compensation and these proceeds is given to charity. Rebates are given for early settlement at the Bank's discretion.

7. Very often it results in the bank's own interest becoming prominent. It makes no effort to ensure growth with equity.

7. It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.

8. For interest-based commercial banks, borrowing from the money market is relatively easier.

8. For the Islamic banks, it must be based on a Shariah approved underlying transaction.

9. Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations.

9. Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.

3.2 Investment:

The Total investment of the bank stood at Tk.5079.21 million against Tk.3728.41 million during the corresponding period of last year. The percentage of increase is 36.23% as against 13.00% in banking sector. The bank extends investments to the clients under the following modes of investment under Islamic Shariah.

3.3 Bai-Murabaha or simply Murabaha:

The terms Bai-Murabaha have derived from Arabic words Bai and Ribhum. The word .Bai means purchase and sale and the word .Ribhum. Means an agreed upon profit. So Bai-Murabaha means sale for an agreed upon profit. It may be defined as a contract between a Buyers and a Seller under which the seller sells certain specific goods permissible under Islamic Shariah and the word Law of the land to the Buyer at a cost plus and agreed upon profit payable today or on some date in the future in lump-sum or by installments. The profit may be either a fixed sum or based on a percentage of the price of the goods.

3.4 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 Quran, Sunnah and Ijma (consensus) of the scholars. Musharaka transaction may be conducted in the following manner:

One, two or more entrepreneurs approach an Islamic Bank to request the financing required for a project. The bank, along with other partners, provides the necessary capital for the project. All partners including the Bank have the right to participate in the project. The profit is distributed according to an agreed ratio. However, losses are shared in exactly the same proportion in which the different partners have provided the finance for the project.

3.5 Mudarabah:

The term Mudarabah refers to a contract between two parties in which one party supplies capital to the other party for the purpose of engaging in a business activity with the understanding that any profits will be shared in a mutually agreed upon. Losses, on the other hand, are the sole responsibility of the provider of the capital. The first party provides capital and the other party provides the expertise with the purpose of earning lawful profit (approved by Islamic law) which will be shared in a mutually agreed upon proportion.

3.6 Bai-Muajjal:

The term .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. It is basically a contract between a buyer and seller under which the seller sells certain specific goods, permissible under Shariah and law of the country to the buyer at an agreed fixed price payable at a certain fixed future date in lump-sum or in fixed installments.

3.7 Bai-Salam:

The term Bai-Salam is used to define a sale in which the buyer makes advance payment, but delivery is delayed until sometime in the future. Usually the seller is an individual or business and the buyer is the bank.

4.1 General Banking:

General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers through receiving deposits from the customers and meeting their demand for cash by honoring cheques. It opens new accounts, remit funds, issues bank drafts and pay orders etc.

GENERAL BANKING

1 CASH SECTION

2 ACCOUNTS OPENING SECTION

3 CHEQUE CLEARING SECTION

4 REMITTANCE SECTION

5 FDR SECTION

6 ACCOUNTS SECTION

7 ESTABLISHMENT SECTION

4.2 Cash Section:

Cash department is the most vital and sensitive organ of the branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash Al-Arafah Islami Bank are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash Al-Arafah Islami Bank. The figure is called closing Al-Arafah Islami Bank. This closing Al-Arafah Islami Banka is then added to the vault. And this is the final cash Al-Arafah Islami Bank figure for the bank at the end of any particular day.

Functions of Cash Department:

Cash Payment Cash payment is made only against cheque. This is the unique function of the banking system which is known as payment on demand. It makes payment only against its printed valid Cheque.

Cash Receipt It receives deposits from the depositors in form of cash. So it is the mobilization unit of the banking system. It collects money only its receipts forms.

Cash payment or Cheque cancellation process:

Step 1 Receiving Cheque by the employee in the cash counter

Step 2

Verification of the followings by the cash Officer in the computer sectionDate of the Cheque (it is presented within 6 month from issue date) Issued from this branch Amounts in figure and sentence written does not differ Signature of the drawer does not differ Cheque is not torn or damage

Step 3 Gives pay cash seal and sends to the payment counter

Step 4 Payment officer makes payment

Books maintained by this section:

Vault RegisterIt keeps account of cash Al-Arafah Islami Bank in vault in the bank.

Cash Receipt RegisterCash receipt in whole of the day is recorded here.

Cash Payment RegisterCash payments are made in a day are entered here.

Rough Vault .RegisterCash calculation for final entry in vault register is done here, as any error and correction here is not acceptable.

Cash Al-Arafah IslamiBankance Book

Al-Arafah Islami Bankance here is compared with vault register. If no difference is found, indicates no error.

4.3 Account Opening:

This section opens accounts. Selection of customer is very important for the bank because banks success and failure largely depends on their customers. If customer is bad, they may create fraud and forgery by their account with bank and thus destroy goodwill of banks. So, this section takes extreme caution in selecting its customer base.

4.3.1 Accounts opening process:

Step 1Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened

Step 2

The form is filled up by the applicant himself / herself Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken Applicants must submit required documents Application must sign specimen signature sheet and give mandate Introducer’s signature and accounts number verified by legal officer

Step 3Authorized Officer accepts the application

Step 4Minimum Al-Arafah Islami Bankance is deposited. only cash is accepted

Step 5Account is opened and a Cheque book and pay-in-slip book is given

4.3.2 Special Caution or the documents from the Account opener of the

following types:

Partnership Firm Partnership deed must be taken. Mandate from the partners is essential indicating who will operate the account.

Public Limited Company Certificate of IncorporationCopy of Memorandum and Articles of AssociationCertificate of CommencementCopy of Resolution of the Board of Directors

Private Limited CompanyCertificate of Commencement is not necessaryCertificate of IncorporationCopy of Memorandum and Articles of Association

4.4 Cheque Clearing:

This section receives all kinds of Cheques in favor of the client for clearing as the part of their banking service. After receiving the Cheque it is necessary to endorse it and cross it specially. Basically the Cheques for clearing are of following types:

Types Explanation Clearing ProcessInward Clearing Cheque

Cheques received from the Clearing House, of our bank

Party’s A/C ---------------------Dr.AIBL General Account -------Cr.

Outward Clearing

OBC (inward Bills for Collection)

Cheques of otherbranch of Al-Arafah Islami Bank within our clearing house area.

These Cheques are directly sent to the respective branch and request them to send IBCA. When IBCA comes, then customer’s accounts are credited for the amount of the Cheque

Clearing Cheque Cheques of another bank within our clearing house area

These Cheques are sent to clearing house via the Motijheel Branch. When drawee bank honor the Cheques, then the account of Cheque depositors are credited.

OBC (Outward Bills for Collection)

Cheques of another bank which is situatedoutside the clearing area

These Cheques are cleared in two ways: Firstly, if any branch of our bank exists within the clearing house area of drawee bank, then we send the Cheque to that branch of our bank and that branch collects the proceeds through clearing house formalities and sends an IBCA to us. In second way, if there is no branch of our bank, then we directly sends the Cheque to the drawee bank and request them to send the proceeds by TT, MT, or DD or by in any other means

4.5 SME Banking:

Small and Medium Enterprise (SME) is playing a significant role to the growth of overall GDP of the country. Of all industrial productions, a huge part stems from SME. In order to boost up the small and medium enterprises of the country, Bangladesh Bank has recently advised the commercial banks to enhance the flow of investment and offered directives and policies to supervise and monitor this sector. As SME has emerged as a thrust sector, Al-Arafah Islami Bank Ltd. also considers it important to extend and enhance finance for the same. Keeping this idea in the forefront, the bank has prepared an integrated policies, methods and procedures for SME investment.

4.5.1 Purpose:

To facilitate small and medium level entrepreneurs To boost up the small business in the country To facilitate the growth of agro-industries To create employment To broaden the base of Islamic Banking in the society To encourage women entrepreneurs

4.5.2 Modes:

Working Capital InvestmentBai-MuajjalMurabaha / Murabaha TRMPI / MPI- TRMudarabaMusharaka

Fixed Capital InvestmentHPSM (Equity required)MudarabaMusharaka

4.5.3 Eligibility: Permanent resident of Bangladesh

The age must range between 25 years to 60 years Physically fit and capable of working hard Capable of reading & writing Capable of managing his / her business successfully Sufficient Infra-structure and skilled personnel At least 02 (two) years experience in the applied business Having Transparent CIB Report Valid Licenses, such as- Trade License, VAT registration, TIN, NOC from Environment Department (where applicable) other terms and conditions stipulated by the bank

4.6 Securities against Investment:

Personal guarantee of spouse/parents/other family members

In case of limited companies, guarantees of all directors other than nominated directors shall be obtained.

Registered mortgage of immovable properties with registered Power of Attorney (for 2 lac and above).

Third party personal guarantees (at least one).

Post dated cheques for each installment and one undated cheque for full investment value including full mark-up profit.

Hypothecation on the inventory, receivables, advance payments, plant and machinery.

Bank may relax the security for investment amount up to 2 lacs taka for the growth of SME investment.

5.1 Factor Analysis:

Communalities

Initial Extraction

I am familiar with the Al-Arafah Islami Bank Ltd HPSM

(TRANSPORT/ Car loan)

1.000 .793

The documentation process of AIBL car loan is easy 1.000 .673

Interest rate of the Al-Arafah Islami Bank Ltd has effect on

choosing car loan

1.000 .595

The assurance of quality matters in time of car loan service

purchasing

1.000 .476

Web pages help to make pre-purchase decision in car loan 1.000 .761

Payment system of AIBL car loan is attractive (duration,

convenience of payment)

1.000 .783

The availability of the car loan is time consuming 1.000 .635

I am satisfied with the behavior of employee in the

purchasing procedure of car loan

1.000 .703

The promotion works; sponsorship, advertising pursue the

purchase decision of car loan

1.000 .514

Special occasions increases the amount of car loan

purchase

1.000 .336

Extraction Method: Principal Component Analysis.

Initial communalities are estimates of the variance in each variable accounted for by all components or factors. For principal components extraction, this is always equal to 1.0 for correlation analyses.

Extraction communalities are estimates of the variance in each variable accounted for by the components. The communalities in this table are all high, which indicates that the extracted components represent the variables well. If any communality is very low in a principle components extraction, we may need to extract another component.

Total Variance Explained

Comp Initial Eigen values Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings

onent Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

% Total

% of

Variance

Cumulative

%

1 2.059 20.591 20.591 2.059 20.591 20.591 1.885 18.853 18.853

2 1.829 18.295 38.885 1.829 18.295 38.885 1.590 15.897 34.750

3 1.309 13.086 51.972 1.309 13.086 51.972 1.491 14.909 49.659

4 1.072 10.720 62.691 1.072 10.720 62.691 1.303 13.032 62.691

5 .994 9.938 72.629

6 .887 8.867 81.497

7 .729 7.285 88.782

8 .474 4.743 93.525

9 .389 3.895 97.420

10 .258 2.580 100.000

Extraction Method: Principal Component Analysis.

Components:

The familiarity with the Al-Arafah Islami Bank car loan is 1.885 which expresses that the variance is caused by the first factor is 18.853%. In the same way, the variation express that the variance caused by factor documentation process of the car loan is 15.897%, interest rate of the loan and assurance of quality are 14.909% and 13.032%. The results show that these four factors collectively generate 62.691% variance in the data set. The large changes in the individual totals suggest that the rotated component matrix will be easier to interpret than the un-rotated matrix.

The Eigen values, The Total column gives, or amount of variance in the original variables accounted for by each component.

The % of Variance column gives the ratio, expressed as a percentage, of the variance accounted for by each component to the total variance in all of the variables.

The Cumulative % column gives the percentage of variance accounted for by the first n components. For example, the cumulative percentage for the second component is the sum of the percentage of variance for the first and second components.

There are many component variables. The first four principal components form the extracted solution. The last big drop occurs between the fourth and fifth components, so using the first four components is an easy choice.

The second section of the table shows the extracted components. They explain nearly 62.691% of the variability in the original ten variables, so one can considerably reduce the complexity of the data set by using these components, with 37.309% loss of information.

The Scree plot helps you to determine the optimal number of components. The Eigen value of each component in the initial solution is plotted. Generally, you want to extract the components on the steep slope. The components on the shallow slope contribute little to the solution.

5.2 Analysis of improving customer satisfaction:

The principal components analysis with Varimax Kaiser Normalization was used to extract the influential aspects pursuing the improvement of customer satisfaction of car loan facility of Al-Arafah Islami Bank Limited in Bangladesh. It is used to find out the minimum factors which cause the maximum variation. The Physical evidence factors that determine the satisfaction of car loan is divided into four divisions.

They are:

Preference factors

a) Familiarity with the car loan facility

b) Documentation process of car loan

c) Interest rate of car loan

pre-determining mind set up factors

a) Web pages or Web sites for car loan

b) The promotion works

c) Availability of the car loan

Choosing factors

a) The assurance of loan quality

b) Payment system of the loan

The striking factors

a) Behavior of the employee

b) Special occasions

5.2.1 Constructing the Preference Factors:

The preference factor consists of Familiarity with the car loan facility, Documentation process of car loan, Interest rate of car loan.

Preference FactorsName of the variable Factor Loading

a) Familiarity with the car loan facility .793

b) Documentation process of car loan .673

c) Interest rate of car loan .595

The preference factors are strongly correlated with the familiarity with the car loan facility with factor loading (.793). Another factor that is documentation process of car loan also correlated with factor loading (.673).

5.2.2 Pre-determining mind set up factors:

Pre-determining mind set up factors consists of Web pages or Web sites for car loan, Availability of the car loan, the promotion works done by Al-Arafah Islami Bank Limited.

Pre-determining mind set up factors

Name of the variable Factor Loadinga) Web pages or Web sites for car loan .761

b) The promotion works .514

c) Availability of the car loan in time .635

Pre-determining factors are highly correlated with the Web pages or Web sites for car loan (.761). It is also highly correlated with the factor Availability of the car loan in time (.635)

5.2.3 Choosing factors:

Choosing factors consists of the assurance of loan quality and Payment system of the loan.

Name of the variable Factor Loadinga) The assurance of loan quality .476

b) Payment system of the loan .783

The choosing factors are highly correlated with the payment system of the loan that increases the amount of purchase with factor loading (.783).

5.2.4 The striking factors:

Striking factors consists of the packaging of the products and Special occasions that increase the amount of purchase.

Name of the variable Factor Loadinga) Behavior of the employee .703

b) Special occasions .336

The striking factors are highly correlated with the behavior of the employee that increases the amount of purchase with factor loading (.703).

So the Behavior of the employee effects the purchase decisions of the customers more than the other factor available in the striking factors.

Rotated Component Matrixa

Component

1 2 3 4

I am familiar with the Al-Arafah Islami Bank

Ltd HPSM (TRANSPORT/ Car loan)

.041 .196 .189 .847

The documentation process of AIBL car

loan is easy

.114 .093 .805 -.048

Interest rate of the Al-Arafah Islami Bank

Ltd has effect on choosing car loan

.174 .664 .156 .316

The assurance of quality matters in time of

car loan service purchasing

.644 .000 -.010 .249

Web pages help to make pre-purchase

decision in car loan

.027 .857 -.149 .061

Payment system of AIBL car loan is

attractive (duration, convenience of

payment)

-.568 .592 .233 -.233

The availability of the car loan is time

consuming

.659 .072 .060 -.439

I am satisfied with the behavior of

employee in the purchasing procedure of

car loan

-.211 -.063 .790 .174

The promotion works; sponsorship,

advertising pursue the purchase decision

of car loan

.713 .061 -.048 .015

Special occasions increases the amount of

car loan purchase

-.340 -.062 .274 -.375

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 11 iterations.

The first component is most highly correlated with the promotion works; sponsorship, advertising of car loan (.713). The second component is highly correlated with Web pages help to make pre-purchase decision (.857). The third component is highly correlated with the documentation process of AIBL car loan (.805). And the fourth component is most highly correlated with the familiarity of the car loan (.874)

5.3 Findings :

Among all the ten factors it’s the interest rate of the car loan that mostly influence the attitude of the customers at the time of purchasing the car loan.

The promotional factors also influence the purchase decisions of car loan profoundly.

Promotion works and the webpage of the company help the customers to make the pre-purchase decisions.

In times the special occasions increases the purchase of car loan due to cut down the interest rate.

Behavior of the employees also helps to attract more customers to purchase the car loan in time of information collection process.

5.4 Recommendations:

Use of Marketing Research:

The management of Al-Arafah Islami Bank Ltd should regularly execute marketing research in order to keep a regular track of satisfaction levels. A simple research whether on the phone or face-to-face interview or consumer survey keep the management informed about the changing attitude of the customers and thus they can minimize the gap between the customer expectation and the management perceptions of customer expectations. For example, the calling center can call up their customer or when they arrive in the bank, ask them about the services they are being provided and how they can improve it or what measure should take regarding the quality improvement.

Complaint Management:

Al-Arafah Islami Bank Ltd should actively manage the complaints of various customers and encourage customers to give feedback about the services. Through complaint solicitation the management can collect and document complaints of customers, then use that information to identify dissatisfied customers, correct individual problems where possible common service failure points. And also critical incidents studies as it’s powerful and vivid in eliciting customer requirements, in the service encounter level and through this the researcher emerges with a list of desirable and undesirable employee behaviors. This helps the management to train the employee on the facets where they need improvement and learning.

Offering Priority Service:

Indeed, convenience and personal service is what consumers wanted from the banks serving small communities, as they had only few branches. Historically bankers didn‘t know customers well, this lead to a significant drop of customer acquisition. This has compelled the modern banks to know each customer by name, not to be left out; the larger commercial banks today are emphasizing customer service. Many of the big banks like HSBC, SCB are offering priority service which was absent previously. If customers walk into the lobby of almost any major bank today, they will see a desk or window for priority services or special bank customers. Traditional bankers had never thought about priority services. They simply welcomed customers to come to their banks and open accounts. Today At some banks, customers are assigned a personal banker who will handle all of their bank transactions directly. Some preferred customers at BANK can receive a sticker on their cheques, which allows them to avoid standing on line and instead walk right up to a teller that handles special-service clients. This is what was lacking previously.

Efficiency of the staffs:

According to the customer perception, the major problem of the traditional service is the consistency of the efficiency of the staffs. In order to analyze the efficiency there are a number of factors that have been taken into consideration. Some of these factors are responsiveness, attentiveness, helpfulness, ability to provide speedy and correct service, respect and courtesy towards customers etc. Al-Arafah Islami Bank Ltd CDA Avenue Branch has hundreds of customers daily and to be efficient with each of the customer in an equal way is rather impossible. Again, measuring efficiency for Walk in Service is not an easy task. However, it was done through personal survey of complete observation of employees throughout the internship period and by a survey of questionnaire to the customers. An attempt was to consider the answers of the customers who visit the bank for more than two times a month because only they would be able to determine and know the efficiency of the employees in a better way.

6.1 Conclusion:

Today the banking service is very competitive, so the real from the practical materialization of customer dealing procedure during the whole period of my practical orientation in AL-ARAFAH ISLAMI Bank limited I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is must. AL-ARAFAH-ISLAMI Bank Ltd. is a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of G.D.P of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country. AL-ARAFAH-ISLAMI Bank Ltd definitely satisfies their corporate customers and to maintain this scenario in a more efficient and prospective manner the Bank can surely accept this project in a cordial manner. To enrich and maintain a better reputation is the only solution to make a business more progressive. From the starting period of internship I really enjoyed very much. During this period I can learn many things and gather more experience about banking sector activities. Actually I can say that I really enjoyed my internship at AL-ARAFAH-ISLAMI Bank Ltd. from the very first day. I am sure that this Three months internship program at AL-ARAFAH-ISLAMI Bank Ltd Will absolutely helps me to build up my carrier in the job market.

7.1 REFERENCES

Books:

Naresh K. Malhotra , & Satya Bhushan Dash(2010), Marketing Research – An Applied Orientation, 6th edition, Dorling Kindersley Pvt. Ltd.

Aharony, J. and I. Swary, 1981, Quarterly Dividends and Earnings Announcements and Stockholders' Returns: An Empirical Analysis, Journal of Finance, Vol 36, 1-12.

Altman, E.I. and V.Kishore, 1999, The Default Experience of U.S. Bonds, Working Paper, Salomon Center.

Amihud, Y., B. Christensen and H. Mendelson, 1992, Further Evidence on the Risk-Return Relationship, Working Paper, New York University.

Bailey, W., 1988, Canada's Dual Class Shares: Further Evidence On The Market Value Of Cash Dividends, Journal of Finance, 1988, v43(5), 1143-1160.

Barclay, M.J., and C.W. Smith, On Financial Architecture: Leverage, Maturity and Priority, Journal of Applied Corporate Finance, v8(4), 4-17.

Barclay, M.J., C.W. Smith and R.L. Watts, 1995, The Determinants of Corporate Leverage and Dividend Policies, Journal of Applied Corporate Finance, v7(4), 4-19.

Barry, C. B., C. J. Muscarella, J.W. Peavy, III and M. R. Vetsuypens. The Role Of

Venture Capital In The Creation Of Public Companies: Evidence From The Going-Public Process, Journal of Financial Economics, 1990, v27(2), 447-472.

Bartov, E., I. Krinsky and J. Lee, 1998, Some Evidence on how Companies choose between Dividends and Stock Repurchases, Journal of Applied Corporate Finance, v11, 89-96.

Journal: Rahman, A. & Sultana, N. (2008) Physical evidence: Factors determining the

selection of fast-food restaurants among the youth consumer in Dhaka city. Journal of business research, vol. 10, June 2008, pp. 13-26

Supporting Websites:

http://www.bangladesh-bank.org/.[Accessed: 13/08/2013]

http://www.bangladesh-bank.org/pub/annual/anreport/ar0405/chap5.[Accessed: 16/08/2013]

Annual Report of AIBL 2006-2013

http://www.alarafahbank.com/index.php. [Accessed: 13/08/2013]

http://wholesalebanking. alarafahbank.com/en/about/Pages/aboutus.aspx. [Accessed: 13/08/2013]

http://www.al-arafahbank.com/Investment.php. [Accessed: 10/08/2013]

http://www.al-arafahbank.com/profile.php. [Accessed: 19/07/2013]

Egan value, Available from: http://www.ats.ucla.edu/stat/SPSS/output/principal_components.htm

Software:

According to IBM SPSS Statistics (2009), the % of variation means, Available from http://publib.boulder.ibm.com/infocenter/spssstat/v20r0m0/index.jsp?topic=%2Fcom

7.2 APPENDIX:

SURVEY ON “FACTORS ANALYSIS IN IMPROVING CUSTOMER SATISFACTION OF HPSM (TRANSPORT/ CAR LOAN) FACILITY OF AL-ARAFAH ISLAMI BANK LIMITED IN BANGLADESH”

Sir/Madam, Greetings, I am conducting a survey on “Factors analysis in improving customer satisfaction of HPSM (Transport) facility of Al-Arafah Islami bank limited in Bangladesh”. The purpose of the study is purely academic. Your opinion and information will be extremely useful conducting this survey. Your information will be held with high confidentiality. Therefore I earnestly request your cooperation. Here are some questions. Please indicate your degree views to each of the following statements by putting your opinion in the appropriate position or by entering the word asked for.

For each of the following statements, please record the number that best describes the extent to which you agree or disagree with each statement.

1. Strongly agree; 2. Somewhat agree; 3. Neither agree nor disagree; 4.somewhat disagree

5. Strongly disagree.

Name: …………………………………………………………………

Gender: male Female

Age: 15-25 25-35 35-45 45-55 55-above

Occupations: Service Business Housewife Engineer Others

Income: Below 10000 10000-25000 25000-40000 40000-55000 more than 55000

1. I am familiar with the Al-Arafah Islami Bank Ltd HPSM (TRANSPORT/ car loan) ________

2. The documentation process of AIBL car loan is easy _______

3. Interest rate of the Al-Arafah Islami Bank Ltd has effect on choosing car loan service ______

FOR CUSTOMER SERIAL NO.: ……….

4. The assurance of quality matters in time of car loan service purchasing ______

5. Web pages help to make pre-purchase decision in car loan ________

6. Payment system of AIBL car loan is attractive ( duration, convenience of payment) ______

7. The availability of the car loan is time consuming _____

8. I am satisfied with the behavior of employee in the purchasing procedure of car loan _____

9.The promotion works; sponsorship, advertising pursue the purchase decision of car loan_______

10. Special occasions increases the amount of car loan purchase _______

Thank you for your participation