Internship Report on Meezan Bank

8/6/2019 Internship Report on Meezan Bank

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Meezan is a publicly listed company first incorporated on January 27, 1997. It started

operations as an investment bank in August of the same year. In January, 2002 in an

historic initiative, Meezan Bank was granted the nation's first full-fledged commercial

banking license dedicated to Islamic Banking, by the State Bank of Pakistan.

Our Vision

Establish Islamic banking as banking of first choice to facilitate the implementation of an

equitable economic system, providing a strong foundation for establishing a fair and just

society for mankind.

Our Mission

To be a premier Islamic bank, offering a one-stop shop for innovative value added

products and services to our customers within the bounds of Shariah, while optimizing the

stakeholders value through an organizational culture based on learning, fairness, respect

for individual enterprise and performance.

Introduction of Products

Riba Free Meezan Providence

Riba Free - Certificates of Islamic Investment

Riba Free - Monthly Musharakah Certificate

Riba Free - Dollar Saving Account

Riba Free - Rupee Saving Account

Riba Free - Current Account

Car Ijarah - Islamic Car Financing

Riba Free Meezan Providence:



Islamic Mode of Financing

Musharakah

Mudarabah

Murabaha

Salam

Istisna

Ijarah

Net Profit

Years 2005 2006 2007 2008 profit 20.15 17.80 16.27 8.27

Share Price in Stock Market

Years 2005 2006 2007 2008Share Price 23.25 19.50 38.55 21.48

MBL is incorporated in Pakistan and engaged in Islamic and commercial banking. It is

listed on all the stocks exchanges in Pakistan. The bank’s registered office and principal

office are situated the adoption of new technology and offering new products has made

MBL one of the best domestic bank of Pakistan.

According to the department internship program I completed my eight weeks internship at

MBL Rahim Yar Khan.

General banking department is concerned with daily operation of the branch. This

department is divided into four sections which are Cash section, Clearing section,



Remittance section and fixed deposit section. Cash section performs cash related function

like receipt of cash, payment of cash and collection of utility bills. Clearing section

performs the clearing of cheques for collection. Remittance section performs transferring

of funds from one branch to another or from one account to another.

Credit department issues short term and long-term loan. MBL offer two types of loans or

finances, fund based finances and non-fund based finances. Funds based finances include

running finance, demand finance, cash finance and staff finance. Non fund base finance

include letter of credit and guarantees like performance guarantees, mobilization

guarantees shipping guarantees, bid bonds and security deposit guarantees.



Meezan bank is a premier Islamic bank and publicly listed company first

incorporated on January 27, 1997. It started operations as an investment bank in

August of the same year. In January, 2002 in an historic initiative, Meezan Bank

was granted the nation's first full-fledged commercial banking license dedicated to

Islamic Banking, by the State Bank of Pakistan.

Meezan Bank stands today at a noteworthy point along the evolution of Islamic

Banking in Pakistan. The banking sector is showing a significant paradigm shift

away from traditional means of business and is catering to an increasingly astute

and demanding financial consumer who is also becoming keenly aware of Islamic

Banking. Meezan Bank bears the critical responsibility of leading the way forward

in establishing a stable and dynamic Islamic Banking system replete with dynamic

and cutting-edge products and services.

The Bank has made fundamental and significant progress forward, and in doing sohas established a strong and credible management team comprised of experienced

professionals, which have achieved a strong balance sheet with excellent

operating profitability, including a capital adequacy ratio that places the Bank at

the top of the industry, a long-term entity rating of A+, and a short-term entity

rating of A1+, the highest short-term rating.

The Bank's main shareholders are leading local and international financialinstitutions, including Pak-Kuwait Investment Company, the only AAA rated

financial entity in the country, the Islamic Development Bank of Jeddah, and the

renowned Shamil Bank of Bahrain, that in addition to their strength and stability,

add significant value to the Bank through Board representation and applied

synergies.



We believe in adding value to our customers' lives and businesses through

dynamic and competitive products and services that fulfill their needs while

conforming completely with the dictates of Shariah. At the same time, we

endeavor to deliver competitive risk adjusted returns to our stakeholders.

1.1 History of Islamic banking in Pakistan

Al-Meezan Investment Management Limited (AMIM) was established in 1995 as

a joint venture between Pakistan Kuwait Investment Company (PKIC), NationalInvestment (Trust) Limited, and Jardine Fleming Investment Management

International Limited (Jardine Fleming). AMIM has over the years benefited

immensely from domestic investment management expertise of PKIC and

National Investment (Trust) Limited and international expertise of Jardine

Fleming.

Jardine Fleming made a substantial contribution towards the development of systems and procedures for AMIM during its six years of association with the

company. The key investment professionals of Jardine Fleming, Hong Kong who

served as Directors of AMIM for these six years, contributed to the development

of strategic plans and investment policies of the company.

The Holy Quran "We must work our destiny in our own way and present to the works an economic

system based on true Islamic concept of equality of manhood and social justice

"Quaid's concept of Islamic Banking [Opening Ceremony of The State Bank of

Pakistan on July 1, 1948]



What is Riba?

The Holy Quran did not give any definition for the term for the simple reason that

it was well known to its immediate audience. But many scholars defined Riba in

the following words.

“Riba is Arabic word. It means increase, addition, expansion or growth.

Imam Abubakr Al-Jassas (D.380 AH) in his famous work Ahkamul Quran has

explained riba in the following words:

“And the riba which was known to and practiced by the Arabs was that they used

to advance loan in the form of Dirham (silver coin) or Dinar (gold coin) for a

certain term with an agreed increase on the amount of the principal advanced.”

Shariah Board

The members of the Shariah Board of Meezan Bank are Internationally-renowned

scholars serving on the boards of many Islamic banks operating in different

countries.

The members of the Shariah Board are:

Justice (Retd.) Muhammad Taqi Usmani

Dr. Abdul Sattar Abu Ghuddah

Sheikh Essam M. Ishaq

Dr. Muhammad Imran Ashraf Usmani - Shariah Advisor

Permanent Member International Islamic Fiqh Academy, Jeddah

Vice President, Darul Uloom Karachi



Chairman, Shariah Council AAOIFI, Bahrain

Member, Islamic Fiqh Academy of Rabita-al-Alam-e-Islami, Makkah

Member, European Council of Fatwa and Research, Dublin, Ireland

Chairman, Center for Islamic Economics Pakistan since 1991

Chairman, Shariah Board Dow Jones Islamic Market Index, New York

Chairman, Shariah Board, Bahrain Monetary Agency, Bahrain

Chairman, Shariah Board, Amana Investments Limited, Sri Lanka

Chairman, Shariah Board Abu Dhabi Islamic Bank, UAE

Chairman, Shariah Board Islamic House of Britain plc, UK Member, Shariah Board, First Islamic Investment Bank, Bahrain

Member Shariah Board, Islamic Corporation for Development of the

Private Sector, (ICD) an organ of IDB, Jeddah.

Member Shariah Board, Guidance Financial Group, USA

Member Shariah Board, Saudi American Bank

Member Shariah Supervisory Board, First Islamic Investment Bank

BOARD OF DIRECTORS

H. E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman)

(Undersecretary, Ministry of Finance & National Economy, State of Bahrain)

Naser Abdul Mohsen Al-Marri (Vice Chairman)

Yousif Saleh Khalaf

Zaigham Mahmood Rizvi



Mohammad Hussain

Tarik Kivanc

Mazen Khalid Al-Braikan

Irfan Siddiqui (President & Chief Executive Officer)

Ariful Islam (Chief Operating Officer)

Rana Ahmad Humayun



Meezan bank is provide services in the market to their customers and shareholders

its nature is reflected by its admission statements.

Our Vision

Establish Islamic banking as banking of first choice to facilitate

the implementation of an equitable economic system, providing a strong

foundation for establishing a fair and just society for mankind.

Our Mission

To be a premier Islamic bank, offering a one-stop shop for

innovative value added products and services to our customers within the bounds

of Shariah, while optimizing the stakeholders value through an organizational

culture based on learning, fairness, respect for individual enterprise and

performance.



Islamia University Of Bahawalpur (Rahim Yar Khan Campus) 15



Introduction of Products

Types of products offered

Riba Free Meezan Providence

Riba Free - Certificates of Islamic Investment

Riba Free - Monthly Musharakah Certificate

Riba Free - Dollar Saving Account

Riba Free - Rupee Saving Account


Car Ijarah - Islamic Car Financing

Riba Free Meezan Providence:

It is a long term investment product especially designed for the need and to fulfil

the requirements of the corporate and business concerns for purpose of

investing their provident, pension and Gratuity Funds as any sensible and wise person who wants to invest his earning, his main concerns would be total security

along with the best returns possible, especially as these earnings or funds are a

trust from his employees and one that bears an important responsibility.




Meezan Providence rests on the well known and solid financial strength of

Meezan Bank, which has a strong and credible balance sheet with excellent

operating profitability, including a capital adequacy ratio that has placed the Bank

at the top of the industry.

Furthermore, its sterling track record shows consistently beneficial and highly

competitive returns for their broad range of investors. Finally, comes the benefit

of truly Halal returns, a benefit you may not have had the opportunity to enjoy

before and one that you can now pass on to your employees, many of whom

would be grateful for such an opportunity.

Key Features of Meezan Providence

A 100% hilal investment in strict compliance with Shariah

High returns

Long Term security ensured

Minimum investment amount: PKR 1,000,000

Available tenures of 3, 5 and 7 years.

Pre-mature withdrawal options available




Riba –Free-Certificates of Islamic Investment:

This investment product is designed to meet the short term and long term

needs. The minimum investment is PKR 50,000 and it is available in tenures

of 3 and 6 months, 1, 2, 3 and 5 years.

Furthermore, these certificates can be encashed at any time without any charge or

penalty, only the profit rates will be adjusted according to the tenure completed.

You can earn profit on your investment on the following basis:

Monthly profit on 1, 2, 3 and 5 years

Quarterly profit on 1, 2, 3 and 5 years

At maturity profit payment for all tenures

In the Riba Free COII, you enter into the Musharakah agreement that is strictly

in conformity with the principles of Islamic Shariah. The deposits of the

customers together with the Bank ’ s contribution are invested in a pool that

consists of Ijarah and Murabaha financing. The profit/loss on this pool iscalculated every month on the basis of profit sharing ratio determined by

assigning weightings. Such weightings are assigned at the beginning of every

month and are displayed on the bank notice board and website. This facility is

available during the course of investment. However, profit shall be paid only

after completion of one month of investment.

Riba Free-Monthly Musharakah Certificate:

The riba free Monthly Musharakah Certificates are a flexible investment product

which has been designed to give the depositor a monthly return which is

Halal. The depositors participate with the bank in the pool of investments




which is comprised of Murabaha and Ijarah transactions. The minimum

investment required is required is only PKR 100,000 and you receive profit

for each complete month of investment with the bank. The profit rate, so

calculated, is applied to all investments which mature between the periods starting

from the 6thday of each month to the 5thday of the next month. During your

relationship with us, you would be entitled to receiving the following additional

benefits.

• Personalized cheque books.

• No restriction on withdrawals.

• Call centre facilities.

• Monthly profit payment to your current or saving account with us.

• Free bank balance certificates

• Personal financial consultancy services

• Access to priority desk

Riba Free-Dollar Saving Account

With a minimum of only $100 you can open a Dollar Saving Account with

us under a Mudarabah arrangement that is strictly in conformity with the

principles of Islamic Shariah. The return earned on the Mudarabah pool is

calculated every month and the profit ratio for all investors is declared at the

beginning of the month. If you maintain a minimum average monthly balance of $

500, you shall be eligible to receive profits that shall be disbursed to you every

month. Apart from first class service and personalized attention that our

customers get when they bank with us, we offer the following additional

conveniences to our customers.




• Personalized cheque books

• No restriction on withdrawals or number of transactions.

• Call centre facilities

• Monthly profit payment

• Free bank balance certificates

• Taking stop payment instructions.

• Taking hold mail instructions.

• Issuance of duplicate statement of account.

• Personal financial consultancy services.

• Access to priority desk.

Riba Free-Rupee Saving Account

With a minimum of only PKR 10,000 THE Rupee Saving Account can be opened

under musharakah agreement. The profit earned is calculated every month. And if

the client maintains a monthly balance of PKR 10,000 the client is eligible for the

profits that will be disbursed every month. However, the clients of COII may

open this account with any minimum balance.

Profit calculation is based on weight ages in the following tiers:

PKR 10,000 up to PKR 9,999,999

PKR 10,000,000 up to PKR 49,999,999

PKR 50,000,000 up to PKR 99,999,999

PKR 100,000,000 and above





In this type of account the client is allowed to deposit or withdraw money as helikes. He may, thus, deposit or withdraw several times in a day as he likes.

Usually the bank allows this and charges service charges are deducted by the

bank from current deposit account. It gives advantage for paying debts by the

convenient and safe means of sending cheques through the post thus avoiding the

trouble and loss. This bank account that is ideal for businesses and individuals

looking for Shariah compliant banking and ease of access. With a minimum

amount of only Rs.10,000 this product offers you a range of benefits

including personalized checking facility, no restrictions on the number of

transactions, free Call Centre facilities, free balance certificates, priority

banking and much more.

Car Ijarah – Islamic Car Financing

Car Ijarah is Pakistan's first "Interest Free" car-financing based on Islamic

financing mode of Ijarah or Islamic leasing. This product is ideal for

interest averse individuals, looking for a car financing that provides the

convenience of a well designed product while avoiding an interest based

transaction. Car Ijarahtotally halal auto finance facility that is very affordable,

with quick processing and minimal documentation. Car financing that is very

competitively priced, hassle-free, and totally Halal.

As Ijarah is basically is the transfer of usufruct of a fixed asset to another person

for an agreed period, at an agreed consideration. Under car Ijarah agreement the

car will be given to the customer for the period agreed on the time of contract. In




car Ijarah the asset remains in the ownership and risk of bank and the customers

only pay the rentals for use of the asset: just like house rent. The product

has grown all over the country with a portfolio of Rs 291 million as of 31st

December with non-performing contracts.

Key Features of Car Ijarah

No application fee

Ease of acquiring any new locally assembled car

No upfront Insurance Payment

No advance Rental

Available in tenures of 3, 4 and 5 years

Minimum security deposit as low as 20%

Islamic Mode of Financing

These modes of financing have been written by Maulana Taqi Usmani who is the

former Chairman of Shariah board of Meezan Bank. After studying these we will

be in a position to understand the 90% working of the bank. The important modes

of financing are:

1. Musharakah

2. Mudarabah

3. Ijarah




Musharakah

Hadees-e-Qudsi Allah Subhan-o-TAllah has declared that He will become a partner in a

business between two Mushariks until they indulge in cheating or breach of trust

(Khayanah).

Introduction:-'Musharakah' is a word o f Arabic origin which literally means sharing. In the

context of business and trade it means a joint enterprise in which all the

partners share the profit or loss of the joint venture. It is an ideal

alternative for the interest-based financing with far reaching effects on both

production and distribution. In the modern capitalist economy, interest is the

sole instrument indiscriminately used in financing of every type. Since Islam has

prohibited interest, this instrument cannot be used for providing funds of anykind. Therefore, 'Musharakah' can play a vital role in an economy based on

Islamic principles.

Difference between Interest and Musharakah

Interest' predetermines a fixed rate of return on a loan advanced by the financier

irrespective of the profit earned or loss suffered by the debtor, while Musharakahdoes not envisage a fixed rate of return. Rather, the return in Musharakah is based

on the actual profit earned by the joint venture. The financier in an interest-

bearing loan cannot suffer loss while the financier in Musharakah can suffer loss,

if the joint venture fails to produce fruits. Islam has termed interest as an unjust

instrument of financing because it results in injustice either to the creditor or to




the debtor. If the debtor suffers a loss, it is unjust on the part of the creditor to

claim a fixed rate of return; and if the debtor earns a very high rate of profit, it is

injustice to the creditor to give him only a small proportion of the profit leaving

the rest for the debtor.

The Concept of Musharakah

“Musharakah” is a term frequently referred to in the context of Islamic

modes of financing. The connotation of this term is a little limited than the

term "Shirkah" more commonly used in the Islamic jurisprudence. For the

purpose of clarity in the basic concepts, it will be pertinent at the outset to explain

the meaning of each term, as distinguished from the other.

"Shirkah" means "Sharing" and in the terminology of Islamic Fiqh, it has been

divided into two kinds:

Some objections on Musharakah Financing

1) Risk of Loss

2) Dishonesty

3) Secrecy of the Business

4) Clients' Unwillingness to Share Profits

Let us now examine some objections raised from practical point of view against

using Musharakah as a mode of financing.

Risk of Loss:-

It is argued that the arrangement of musharakah is more likely to pass on losses of

the business to the financier bank or institution. This loss will be passed on to




depositors also. The depositors, being constantly exposed to the risk of loss, will

not want to deposit their money in the banks and financial institutions and thus

their savings will either remain idle or will be used in transactions outside of the

banking channels, which will not contribute to the economic development at

national level.

This argument is, however, misconceived. Before financing on the basis of

musharakah, the banks and financial institution will study the feasibility of the

proposed business for which funds are needed.

Even in the present system of interest-based loans the banks do not advance loans

to each and every applicant. They study the potentials of the business and if they apprehend that the business is not profitable, they refuse to advance a

loan. In the case of musharakah, they will have to carry out this study with more

depth and precaution.

Moreover, no bank or financial institution can restrict itself to a single

musharakah. There will always be a diversified portfolio of musharakah. If a

bank has financed 100 of its clients on the basis of musharakah, after studying

the feasibility of the proposal of each one of them, it is hardly conceivable

that all of these Musharakah or the majority of them will result in a loss. After

taking proper measures and due care, what can happen at the most is that some

and them make a loss. But on the other hand, the profitable Musharakah are

expected to give more return than the interest-based loans, because the actual

profit is supposed to be distributed between the client and the bank.

Therefore, the Musharakah portfolio, as a whole, is not expected to suffer loss,

and the possibility of loss to the whole portfolio is merely a theoretical possibility which should not discourage the depositors. This theoretical

possibility of loss in a financial institution is much less than the possibility of loss

in a joint stock company whose business is restricted to a limited sector of

commercial activities. Still, the people purchase its shares and the possibility of




loss does not refrain them from investing in these shares. The case of the bank

and financial institutions is much stronger, because their Musharakah

activities will be so diversified that any possible loss in one Musharakah

will be more than compensated by the profits earned in other Musharakah.

Apart from this, 'an Islamic economy must create a mentality which

believes that any profit earned on money is the reward of bearing risks of the

business. This risk may be minimized through expertise and diversifying the

portfolio where it becomes a hypothetical or theoretical risk only. But there is noway to eliminate this risk totally. The one, who wants to earn profit, must accept

this minimal risk. Since this understanding is already there in the case of normal

joint stock companies, nobody has ever raised the objection that the money of the

shareholders is exposed to loss. The problem is created by the system which

separates the banking and financing from the normal trade activities, and which

has Compelled the people to believe that banks and financial institutions deal in

money and papers only, and that they have nothing to do with the actual results

emerging in trade and industry. Therefore, it is argued that they deserve a fixed

return in any case. This separation of financing sector from the sector of trade

and industry has brought great harms to the economy at macro-level.

Obviously, when we speak of Islamic banking, we never mean that it will follow

this conventional system in each and every respect. Islam has its own values and

principles which do not believe in separation of financing from trade and industry.

Once this Islamic system is understood, the people will invest in the

financing sector, despite the theoretical risk of loss, more readily than they

invest in the profitable joint stock companies.




of dishonesty is more severe for the Islamic Banks and Financial institutions

working in isolation from the main stream of conventional banks. They have

not much support from their respective governments and central Banks. They

cannot change the system, nor can they impose their own laws and regulations.

However, they should not forget that they are not just commercial institutions.

They have been established to introduce a new system of banking which has its

own philosophy. They are duty bound to promote this new system, even if they

apprehend that it will reduce the size of their profits to some extent. Therefore,

they should start using the instrument of musharakah, at least on a selective basis.

Each and every bank has a number of clients whose integrity is beyond all doubts.

The Islamic banks should, at least, start financing them on the basis of truemusharakah. It will help setting good precedents in the market and induce others

to follow suit. Moreover, there are some sectors of financing where musharakah

can be used easily. For example, the

use of musharakah instrument in financing exports has not much room for

dishonesty. The exporter has a specific order from abroad. The prices are

agreed. The cost is not difficult to determine. Payments are normally secured by

a letter of credit. The payments are made through the bank itself. There is no

reason in such cases why the musharakah arrangement should not be adopted.

Similarly, financing of imports may also be designed on the basis of

musharakah with some precautions, as explained earlier in this chapter.

Secrecy of the Business:

Another criticism against musharakah is that, by making the financier a partner in

the business of the client, it may disclose the secrets of the business to the

financier, and through him to other traders.

However, the solution to this problem is very easy. The client, while entering into

the musharakah, may put a condition that the financier will not interfere with the




Termination of Musharakah without closing the business If one of the

partners wants termination of the musharakah, while the other partner or

partners like to continue with the business, this purpose can be achieved by

mutual agreement. The partners who want to run the business may purchase the

share of the partner who wants to terminate his partnership, because the

termination of musharakah with one partner does not imply its termination

between the other partners.

However, in this case, the price of the share of the leaving partner must be

determined by mutual consent, and if there is a dispute about the valuation of the

share and the partners do not arrive at an agreed price, the leaving partner maycompel other partners on the liquidation or on the distribution of the assets

themselves.

The question arises whether the partners can agree, while entering into the

contract of the musharakah, on a condition that the liquidation or separation

of the business shall not be effected unless all the partners, or the majority of

them wants to do so, and that a single partner who wants to come out of the

partnership shall have to sell his share to the other partners and shall not force

them on liquidation or separation.

Most of the traditional books of Islamic Fiqha seem to be silent on this question.

However, it appears that there is no bar from the Shariah point of view if the

partners agree to such a condition right at the beginning of the musharakah. This

is expressly permitted by some Hanbali jurists. This condition may be justified,

especially in the modern situations, on the ground that the nature of

business, in most cases today, requires continuity for its success, and the

liquidation or separation at the instance of a single partner only may cause

irreparable damage to the other partners.




If a particular business has been started with huge amounts of money which has

been invested in a long term project, and one of the partners seeks liquidation in

the infancy of the project, it may be fatal to the interests of the partners, as well as

to the economic growth of the society, to give him such an arbitrary power of

liquidation or separation.

Murabaha

IntroductionMost of the Islamic banks and financial institutions are using "Murabaha" as an

Islamic mode of financing, and most of their financing operations are based on

"Murabaha". That is why this term has been taken in the economic circles today

as a method of banking operations, while the original concept of "Murabaha" is

different from this assumption.

"Murabaha" is, in fact, a term of Islamic Fiqh and it refers to a particular kind of sale having nothing to do with financing in its original sense. If a seller agrees

with his purchaser to provide him a specific commodity on a certain profit

added to his cost, it is called a "Murabaha" transaction. The basic ingredient

of "Murabaha" is that the seller discloses the actual cost he has incurred in

acquiring the commodity, and then adds some profit thereon. This profit may be

in lump sum or may be based on a percentage.

Some Basic Rules of Sale

'Sale' is defined in Shariah as 'the exchange of a thing of value by another

thing of value with mutual consent' . Islamic jurisprudence has laid down




is totally unacceptable, because Murabaha can be used only where a commodity is

intended to be purchased by the customer. If funds are required for some other

purpose, Murabaha cannot work. In such cases, some other suitable modes of

financing, like musharakah, leasing etc. can be used according to the nature of the

requirement.

2. In some cases, the clients sign the Murabaha documents merely to obtain

funds. They never intend to employ these funds to purchase a specific

commodity. They just want funds for unspecified purpose, but to satisfy the

requirement of the formal documents, they name a fictitiously commodity.

After receiving money, they use it for whatever purpose they wish.

Obviously this is a fictitious deal, and the Islamic financiers must be very careful

about it. It is their duty to make sure that the client really intends to

purchase a commodity which may be subject to Murabaha. This assurance

must be obtained by the authorities sanctioning the facility to the customer. Then,

all necessary steps must be taken to confirm that the transaction is genuine.

For example:

(a) Instead of giving funds to the customer, the purchase price should be

paid directly to the supplier.

(b) If it becomes necessary that the client is entrusted with funds to purchase the

commodity on behalf of the financier, his purchase should be evidenced by

invoices or similar other documents which he should present to the financier.

(c) Where either one of the above two requirements is not possible to be

fulfilled, the financing institution should arrange for physical inspection of

the purchased commodities.




Anyhow, the Islamic financial institutions are under an obligation to make sure

that Murabaha is a real and genuine transaction of actual sale and is not

being misused to camouflage an interest-based loan.

3. In some cases, sale of commodity to the client is effected before the

commodity is acquired from the supplier. This mistake is invariably committed

in transactions where all the documents of Murabaha are signed at one time

without taking into account various stages of the Murabaha. Some

institutions have only one Murabaha agreement which is signed at the time of

disbursement of money, or in some cases, at the time of approving the facility.

This is totally against the basic principles of Murabaha. It has already been

explained in this article that the Murabaha arrangement practiced by the banksis a package of different contracts which come into play one after another at

their respective stages. These stages have been fully highlighted earlier

while discussing the concept of 'Murabaha Financing'. Without observing this

basic feature of Murabaha financing, the whole transaction turns into an

interest-bearing loan. Merely changing the nomenclature does not make it

lawful in the eyes of Shariah.

The representatives of the Shariah Boards of the Islamic banks, when they check

the transactions of the bank with regard to their compliance with Shariah, must

make sure that all these stages have been really observed, and every transaction is

effected at its due time.

4. International commodity transactions are often resorted to for liquidity

management. Some Islamic banks feel that these transactions, being asset-

based, can easily be entered into on Murabaha basis, and they enter the field

ignoring the fact that the commodity operations as in vogue in the

international markets, do not conform to the principles of Shariah. In many

cases, they are fictitious transactions where no delivery takes place. The

parties end up paying differences. In some cases, there are real commodities but




Consumer goods financing

House financing

Vehicle financing

Land financing

Shop financing

PC financing

Ijarah

"Ijarah" is a term of Islamic fiqh. Lexically, it means 'to give something on rent'.

In the Islamic jurisprudence, the term 'Ijarah' is used for two different

situations. In the first place, it means 'to employ the services of a person on

wages given to him as a consideration for his hired services."

The employer is called 'musta jir' while the employee is called 'ajir'.

Therefore, if A has employed B in his office as a manager or as a clerk on a

monthly salary, A is musta jir, and B is an ajir. Similarly, if A has hired theservices of a porter to carry his baggage to the airport, A is a musta jir while the

porter is an ajir, and in both cases the transaction between the parties is termed as

Ijarah. This type of Ijarah includes every transaction where the services of a

person are hired by someone else. He may be a doctor, a lawyer, a teacher, a labor

or any other person who can render some valuable services. Each one of them

may be called an 'ajir' according to the terminology of Islamic law, and the

person who hires their services is called a 'musta jir', while the

wages paid to the ajir are called their 'ujrah'.

The second type of Ijarah relates to the usufructs of assets and properties, and not

to the services of human beings. 'Ijarah' in this sense means 'to transfer the

usufruct of a particular property to another person in exchange for a rent




and all the rules concerning the transaction of loan shall accordingly apply. Any

rent charged on this invalid lease shall be an interest charged on a loan.

4. As the corpus of the leased property remains in the ownership of the

lessor, all the liabilities emerging from the ownership shall be borne by the

lessor, but the liabilities referable to the use of the property shall be borne by the

lessee.

Example:-

A has leased his house to B. The taxes referable to the property shall be borne by

A, while the water

tax, electricity bills and all expenses referable to the use of the house shall be borne by B, the lessee.

5. The period of lease must be determined in clear terms.

6. The lessee cannot use the leased asset for any purpose other than the purpose

specified in the lease agreement. If no such purpose is specified in the agreement,

the lessee can use it for whatever purpose it is used in the normal course.

However if he wishes to use it for an abnormal purpose, he cannot do so unless

the lessor allows him in express terms.

7. The lessee is liable to compensate the lessor for every harm to the leased asset

caused by any misuse or negligence on the part of the lessee.

8. The leased asset shall remain in the risk of the lessor throughout the lease

period in the sense that any harm or loss caused by the factors beyond the control

of the lessee shall be borne by the lessor.




Example (2):

In the above example, A puts a condition in the agreement that the rent of Rs.

2000/- per month is fixed for the first year only. The rent for the subsequent years

shall be fixed each year at the option of the lessor. The lease is void, because the

rent is uncertain.

The determination of rental on the basis of the aggregate cost incurred in the

purchase of the asset by the lessor, as normally done in financial leases, is

not against the rules of Shari„ah, if both parties agree to it, provided that all

other conditions of a valid lease prescribed by the Shari„ah are fully adhered

to.

14. The lessor cannot increase the rent unilaterally, and any agreement to to this

effect is void.

15. The rent or any part thereof may be payable in advance before the

delivery of the asset to the lessee, but the amount so collected by the lessor

shall remain with him as 'on account' payment and shall be adjusted towards the

rent after its being due.

16. The lease period shall commence from the date on which the leased asset has

been delivered to the lessee, no matter whether the lessee has started using it or

not.

17. If the leased asset has totally lost the function for which it was leased, and no

repair is possible, the lease shall terminate on the day on which such loss has been

caused. However, if the loss is caused by the misuse or by the negligence of

the lessee, he will be liable to compensate the lessor for the depreciated

value of the asset as; it was immediately before the loss.




• Saving Deposit accounts

• Term Deposit accounts

• I knew about different types of saving accounts like MBA (Meezan Bachat

Account), KMA (karobari Munafa Account), COII, MMC, MAC and etc. these

are MUDARABA based deposits products.

• I learnt about the profit rates of the accounts and procedures to open these

accounts.

I learnt about also CDR (Call Deposit Receipts) and its procedure and knew its purposeand how to fill it an proceed.

2nd

& 3rd

week

I started this week with the lectures of the Bank officer about bank and its performance. I

learnt the actual means of practical work in the bank. First of all I started my work in the

ACCOUNT OPPENING DEPARTMENT of the bank in which I learnt how an account

can be opened in a bank, which documents are necessary to attach it with the account

opening form and how many kinds of account are used in bank like

• Single

• Joint personal

• Sole proprietorship

The requirement for opening these types of a/c are

• Select the nature of a/c

•

Attested photo of applicant• Then the permanent address

• NIC copy.

• occupation




• The reference of any person who has already the a/c or any respected

personality

• The other information related to the a/c filled on choice of applicant.

• The signatures are done on form as well as on the specimen signature card

from where the signature will be scanned as a record in computer

Partnership

Limited company

Trusts

Clubs

Association etc.

The requirement for opening these types of a/c are

For partnership

• Attested photocopy of CNIC of all partners

• Attested copy of Partnership Deed duly signed by all partners of firm.

• Attested copy of Registration Certificate with register of Firm. In case the

partnership is unregistered this fact should be clearly mentioned on the a/c opening form

• Authority letter, in original, in favor of the person authorized to operate on the a/c

of the firm.

For Joint Stock Company

• Resolution of Board of Directors for opening of a/c specifying the person(s)

authorized to operate the company a/c

• Memorandum and articles of association.

• Certificate of incorporation




• First of all I learnt about ATM PIN ISSUANCE procedure and knew why it is

necessary for customer or account holder.

• Then he showed us module in computer that how he enters the data of customer

and how it proceeds.

• After proceeding computer shows a pin number that is issued for that customer

who filled the form for ATM. And this work is done means pin issuance by Head

Office.

Then I learnt about the term ATM Cash Replenish . He told us that how it works and

what its procedure and why it is used.

5 th Week

I started my working day with some work, which has to complete from the previous week

with account opening forms.

• I learnt about inward and out ward clearing and learnt how the transactions are

made.

• I learnt how to write the inward clearing cheques in the transaction record book.

• I learnt to deduct the return cheques from the added amount of all cheques.

• I learnt the entry of pay orders in the record book.

• Know how of employees.

THEN

I started my work again in Accounts Department. The officer also does/handle the other

work Like REMITTANCE department.




• I learnt about the PAY ORDER and DEMAND DRAFT. He told us the difference

of Pay Order and DD.

• I learnt also about the procedure of it. I also saw the Pay Order cheque and knew

about its attributes.

• But DD is not made in Sahiwal Branch. But sometimes if necessary then they

made it. But mostly Pay Orders are made and send it to other cities also. Only

Meezan Bank provide this opportunity of Pay Order to send outside the city also.

• I also learnt about the facility of LOCKERS and its functions.

• Lockers have 3 types of it:

Small Size Lockers

Medium Size Lockers

Large Size Lockers

• The officer told us its functions and charges and I knew about that how can hold

locker and which documents are required for getting the lockers. Lockers are the

fire proof.

I attended the weekly meeting of bank manager with employees and attended thelecture about modern way of banking delivered by the bank manager for the

success if the branch’s business.

6 th & 7th week

I started my day with the daily lecture and general discussion about banking and scope of

banking in Pakistan in coming years.

• I revised all practices according to account opening departments and cleared

my all confusion related to that department trough got work in that field.




• I gave my feedback as a internee about the environment of the bank and about

my work experience in that department

• I started my day with the daily lecture about Bank.

• After that I went to ACCOUNTS DEPARTMENT and started my work. First

of all I cleared my all confusions about the previous topics then I started to

learn further.

• I learnt about FTT (Foreign Telegraphy Transfer) also known as SWIFT

Message.

• In it I knew that how can get and send money from and to foreign countries.

• He told us its procedure and function. I knew about how the message can

create and what sources are used for it.

• Then I learnt about SMS ALERTS . He told us its function and I knew about

that what information is required for its activation and what information it

gives to customer through SMS.

• I learnt what are the Local Posting and Online Transferring and how it is

done.

• Then I learnt what Stop Payment is and how it is performing and what its

terms and conditions.

• I knew about what Account Closing is and what its procedures to close it and

what charges are required for it.

• Then I saw the module of daily Accounts and Expense Entries posting. And

knew about the reason of entering it.

8 th Week

I started my 8 th week of internship with the lecture of the Bank Manager who is Mr.

Shoaib, the lecture was about Islamic banking and its differences in convention banking.




• I knew about the Shariah and the sources of Islamic Shariah .

• Then I learnt about Islamic Banking and knew what its actual meaning.

• In Islamic Banking a term Riba Free is used which means “Avoid Interest”.

• Islamic Banking is a system of Trade where Goods and Services are sold and

Capital is invested to earn Halal profit by taking Risk.

• Interest Free Banking is subset of Islamic Banking concept representing a number

of Banking Operations which avoid Interest.

• I learnt about Convention Banking which is based on Pricing money and earning

Interest.

• Apparently Islamic and Convention Banking may look same but Islamic Banking

is permissible means “Allah has permitted trade and forbidden Riba”.

• I learnt about difference b/w Islamic and Convention Banking up to some extent.

• Then I moved to next department that was ACCOUNTS DEPRTMENT.(with the

hold of IT deptt, Remittance deptt)

• I started my work in Accounts Department.

• The Officer who is Mr. Faysal gave the overview of his working that he does.

• I learnt about cheques how to fill them and knew about its functions.

• I learnt that in banking cheque is known as Dr. Instrument.

• Then I learnt about cross cheque and cross cheque has two types :

Simple crossing

Special crossing

• I knew also another type of cheque that is Order Cheque and its purpose and

function. That day I learnt about cheque procedure and its use in different ways.




Net Profit

Years 2005 2006 2007 2008 profit 20.15 17.80 16.27 8.27

Net Profit

0

5

1015

20

25

1 2 3 4

2005 2006 2007 200

From above we can analyze that growth are decreasing as per year so the bank has to

work over to improve their net profit. Bank has to remove if there is any barrier.

Market Share

With the Strategic Plan in place our task for 2008 will be very challenging in the current

political situation and economic slow down witnessed in the last three months. However,

the Bank has a positive outlook for the country and believes that the future government

will continue with the growth policies. Therefore, the Bank will continue to build market

share through an aggressive branch expansion plan supported by a strong technology

backbone. Meezan Bank plans to expand its branch network to approximately 140




branches by the end of the year that will further increase its customer out-reach

INSHALLAH.

With 166 Branches (including 35 sub-branches) in 40 cities across Pakistan, Meezan

Bank is clearly positioned as the leading Islamic Bank in the country. Work starts on the

construction of Meezan Bank’s new Head Office building.

The financing and investment portfolio of local Islamic banks reached Rs. 185 billion in

December 2008 compared to Rs. 137.6 billion in December 2007. Market share in the

overall banking increased to five per cent at end December 2008 compared with four per

cent at end December 2007. Total assets of Islamic banking reached Rs. 271.1 billion in

December 2008 compared to Rs. 205.2 billion in December 2007.

Volume of Assets (millions)

Years 2005 2006 2007 2008

Total Assets 30676 46439 67179 85276

0

20000

40000

60000

80000100000

Valu e oAssets

1 2 3 4

2005 2006 2007 2

Asset




Share Price In Stock Market

Years 2005 2006 2007 2008Share Price 23.25 19.50 38.55 21.48

Share P ric

0

10

2030

40

50

1 2 3 4

2005 2006 2007 20

Series1

From above we can analyze that the share price is low as compared to previous year, so

we have to keep focus on it. Make a plan to improve or increase price to attract previous

share holders.

Number of Employees

Meezan Bank continued to attract and recruit staff through 2008 for its aggressive branch

expansion plan as well as for its Head Office departments. Meezan Bank believes that its

3000+ employees are its greatest asset and a major reason for its growth and success.

Years 2005 2006 2007 2008Employees 786 1389 2205 3170




Liquidity Ratio

It is the relationship between the current assets and current liabilities of a concern.

Current Ratio = Current Assets/Current Liabilities

Year 2005 2006 2007 2008Current assets 6812761 10212269 9373577 7108685Current liabilities 3242446 4848440 3607766 5065513Current Ratio 2.1 2.10 2.59 1.4

Liquidity Current Ratio

2.1 2.12.59

1.4

0

1

2

3

1 2 3 4

2005 2006 2007 2008




Solvency Ratio

Debt equity Ratio = Debt liabilities/ Net assets

Year 2005 2006 2007 2008Debt liabilities 24408794 36826824 57864137 74325579Net assets 6812761 10212269 5706656 5974978Debt equity Ratio 3.58 3.60 10.13 12.4

Debt Equ ity Ra

0

10

20

2005 2006 2007 2

Ser ies1 3.58 3 .6 10.13 12.4

1 2 3 4




Capital Adequacy Ratio (Capital to Risk (Weighted) AssetsRatio)

Year 2005 2006 2007 2008Average Ratio 1.67 1.57 1.70 .82Average Equity 16.70 15.64 10.30 18.39

Average Ratio

1.67 1.57 1.7

0.82

0

0.5

1

1.5

2

1 2 3 4

2005 2006 2007 2008




Average Equity

16.7 15.64

10.3

18.39

0

5

10

15

20

1 2 3 4

2005 2006 2007 208




“Authentic marketing is not the art of selling what you make but knowingwhat to make. It is the art of identifying customer needs and creating

solutions that deliver satisfaction to the customers, profits to the producer

and benefits to the stakeholders”.

Philip Kotler

A small survey was conducted by asking some of the bank employees to do a SWOT

analysis of the bank in light of their experience in the banking field. My analysis,consolidated with theirs', is given below:

Strengths

• First exclusive Islamic bank.

• The largest Islamic Bank in Pakistan with a network of over 166 branches in 40

cities. And ending this year they have increase his branches in Pakistan to 180

branches.• Strong growth of its Islamic banking SBU.

• The members of the Shariah Supervisory Board of Meezan Bank are

Internationally-renowned scholars, serving on the boards of many Islamic banks

operating in different countries.




• Meezan Providence Certificate is a long-term investment certificate specially

designed to cater to the needs of corporate and business concerns for purposes of

investing their Provident, Pension and Gratuity Funds. As any prudent investor,

your main concerns would be total security along with the best returns possible,

especially as these funds are a trust from your employees and one that bears an

important responsibility.

• Karachi, August 20, 2008: Meezan Bank, the largest Islamic Bank in Pakistan has

been conferred the Best Islamic Bank Award by Rawalpindi Chamber of

• Commerce and Industry. The Chief Minister of Punjab Mr. Shahbaz Sharif

bestowed this award to Mr. Saleem Khan Regional Manger - North, Meezan Bank

at 21st RCCI achievement awards ceremony held at the Convention Center in

Islamabad.

• Dedicated and professional staff

• Shariah board of renowned scholars

• Healthy working environment

• Strong shareholding

Weaknesses

• High charges for different activities such as online or Demand Draft as comparedto competitors.

• lack of promotions and advertising of their products and services.

• Lengthy & extensive documentation

• Centralized procedures making process slow




• Weak marketing strategy, Target market not identified

• Offering fewer services than the competitors

• Risk Averse, approach of Head office.

• The Islamic economic system is not something that can work in isolation of the

geo-political and legislative system, as well as, and more importantly the society's

behaviors towards the injunctions of Islamic Shariah in personal and collective

matters. Accordingly, one can easily imagine that in an economy whereby most of

the businessmen are not honest in fairly presenting the financial statements of

their businesses, how difficult it is to introduce a profit-and-loss sharing based

financial solution.

• Meezan Bank Limited has no Credit card facility

• Restricted Shariah based policies

Opportunities

• House financing sector can be targeted to maximize the profit.

• Growing demand of Islamic financial product and services.

• Venturing into Islamic groups out side the countries as opportunity to expand business in UAE and Golf states. i-e financial institutions.

• Coming up with. Products for the SME to targeting the medium level customers.

• Doing business with companies having Islamic mindset. I-e Islamic financialInstitutions.

• Increase branch network within the country.




Threats

• New competitors setting up their Islamic banking sections and they have the

infrastructure, skill, ability, resources & attitude to capture the market more thanthe Meezan bank.

• High Interest Rate from SBP

• SBP has not special policy regarding Islamic Banking.

• Disassociation of Maulana Taqi Usmani from the Shariah advisory board of Meezan Bank.

• Govt. policies are mostly for conventional banking system not for speciallydesigned for Islamic banking.

• Change in Government's attitude towards Islamic banking.

• Fears on the credibility of Islamic banking ethical compliance and monitoringsystems.

Reviewing this SWOT analysis from time to time would help evaluate the bank's

position. It would help the management in comparing their strengths of the past withthose of the present and to what extent the management has been able to overcome the

weaknesses.




I spent eight weeks of my internship in MBL RYK Branch. During these eight weeks, Ifelt myself to be a part of bank. Even, this was my first experience of working in a bank,

but I learned a lot from this experience. Based on my experience & observation regarding

the operations and policies of Meezan Bank, I have tried to stipulate some

recommendations for further improvement.

Meezan Bank Limited should establish a Department of Human Resource

Management.

Meezan Bank Limited should continue to expand its business, by increasing its

deposit portfolio through aggressive market penetration strategies.

Meezan Bank Limited needs to improve its website.

More information relating to financial performance of the bank should be

available on the website.

Management should distribute work equally among different employees.

Some of the employees are overburdened while some sections are overstaffed.

Related jobs should be assigned to the employees so that they can work more

efficiently.

Cheques, which are drawn on Meezan Bank Branch and returned unpaid in

clearing, are not reflected in the Statement of Account of the customers. These




cheques must be reflected in the accounts so that credibility of the customers may

be assessed.

The employees should be signed jobs for specific period and than they should

shifted to other department so that they gain knowledge of other jobs. Lockers,

ATM, all these facilities should be provided to attract more customers.

Increase the Size of waiting room.

For Future

Here it been a conventional bank equipped with an extensive network and complete

portfolio of products, we would have proposed….

"Early to bed, early to rise

Work like hell & ADVERTISE"

But this is not the case with Meezan Bank. The network and the portfolio of the products

offered are limited. For this we would propose...“Early to bed, early to rise

Work like hell & IMPROVISE"

In this particular scenario, the word IMPROVISE stands for;

• Innovation

• Market perceptions

• Prudence

• Rifle approach

• Objectives clearly understood

• Vision




• Identifying & understanding customer needs

• Satisfying customer needs

• Educating the customers

• TV. Advertising

• Press Advertising

• Spreading awareness through Dars• Wall clocks for mosques

• Awareness through curriculum

• Umra and Haj packages

• It will ensure proper auditing and monitoring, which will in turn inspire public

confidence in the bank.

• RIBA FREE COMMERCIAL BANKING to be set up in all countries of the

world/ Muslims & non-Muslims. This will greatly facilitate international exportimport trade without the fear of being involved in any riba dealing

• Increase consumer banking

• Develop the healthy and sound competition b/w employees and bosses.

• Meezan bank does not provide job security to the employees. Mostly are hired on

contractual basis. More people must be employed on permanent basis/ providing

job security and satisfaction.

•

There is no separate department for the training of new employees. There should be establishment of a separate department for the training of the new employee

and a competent teaching staff should be hired for their training.

• MBL should become very specific about its competitors, so that it can understand

whose its competitor is in the first degree and who is in the second degree. Then

the first-degree




One of the most important aims of the student life is to express him / her correctly andadequately. This was believed in my mind when I first decided to go to Islamic Meezan

Bank Limited to complete my internship program.

The organization has been not growing both in size and profit for past few years

and but repute in the market is good. The employee turnover is very high which they

have to cut down as they are losing a number of good trained employees due to its poor

policy. The year 2007 is expected to offer increased competition in the secured assets

business as more Islamic banks are in the market. With their focused strategy and product

development initiatives planned for the year, Meezan Bank is strongly positioned to meet

these challenges. The bank has very well repute in the market. Overall bank is going well

and doing a good business but there are few problems for that I have tried to give few

recommendations that might help company to improve. So finally this internship program

has helped me a lot in gaining practical knowledge of job that will help me in the

practical life once I complete my BBA.




Reference& sources :

I used following references to prepare my reports

Manager of the branch

1I collect information from manager in the form interviews

Operation manger

Employees of the branch

1I collect information from other staff members of the branch in the form

interviews.

Pamphlet or brochure

I also study the different pamphlet of the different products and department

Friends and teachers

The most important of me in the preparation in my reports are my friends and my

teachers who help me and guided at each step.

Internet

The very important source where I collect data about the Meezan bank is the

internet. I visit cite of the Meezan bank and AL-Meezan investment group.

Following are both the websites are.

www.meezanbank.com.pk

www.almeezan.com.pk


http://www.meezanbank.com.pk/

http://www.almeezan.com.pk/

http://www.meezanbank.com.pk/

http://www.almeezan.com.pk/



Annual Report 2007, 2008


Internship Report on Meezan Bank

Documents

Transcript of Internship Report on Meezan Bank