Al-Arafah Islami Bank: Annual Report 2018

Transcription

3. Allah has permitted trading and forbidden (Riba) usury. Surah 2 Al-Bakara-275
4. Contents Qur ’anic Verses on Interest 04 Hadith on Interest 05 Opinion of other Religions and Great Men on Interest 06 Board of Directors 07 Executive Committee, Audit Committee, Shariah Supervisory Committee 08 Management Team 09 Vision, Mission and Commitments 11 Corporate Information 12 Notice of the 24th Annual General Meeting 14 5 Year Financial Highlights 15 Economic Impact Report 16 Value Added Statements 17 Chairman’s Address 21 Managing Director’s Address 23 Board of Directors’ Report 31 Report of the Shariah Supervisory 75 Implementation Status of Integrity under National Integrity Strategy 77 Report of the Board Audit Committee 79 Activities of the Board Risk Management Committee in the year 2018 81 Auditors’ Report & Financial Statements for the year 2018 83 Disclosures on Risk Based Capital (Basel-III) 151 Auditors’ Report on the Financial Statements of AIBL Capital Market Services Limited 167 Auditors’ Report on the Financial Statements of AIBL Capital Management Limited 187 Auditor’s Report on the Financial Statements of Millennium Information Solution Limited 201 Branches of AIBL 221 Proxy Form 227
5. Verses on Interest Qur ’anic I am seeking refuge in Allah from Shaitan, the outcast (the cursed one). In the Name of Allah, the Most Gracious, the Most Merciful. “Those who consume interest cannot stand (on the Day of Resurrection) except as one stands who is being beaten by Shaitan into insanity. That is because they say, ‘Trade is just like interest’ whereas Allah has permitted Trading and has forbidden (Riba) Usury. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah. But whoever returns to (dealing in interest) those are the companions of the Fire; they will abide eternally therein”. (Surah 2 Al-Bakara : 275) “O you who believe! Be afraid of Allah and give up what remains (due to you) from (Riba) Usury, if you are (really) believers. If you do not do it, then take a notice of war from Allah and His Massenger (Rasul)”. (Surah 2 Al-Bakara : 278-279) 5 Al-Arafah Islami Bank Limited Annual Report 2018
6. • “Jabir bin Abdullah (R) said that Rasul (Allah’s Messenger) (S) cursed the acceptor of They are all equal. (Sahih Muslim) • Abdullah Ibn Masud (R) has quoted a Hadith of Rasul (Allah’s Messenger) (S) as saying: Whenever adultery and usury become rampant in a community, it is inevitable that wrath of Allah will befall upon them. (Abu Yala) • Abu Huraira (R) has narrated that Rasul (Allah’s Messenger) (S) said: Allah as his unique right will not allow four categories of people to enter the heaven and also refrain them from taking taste of his bounties 1) Drunkard 2) Usury 3) Devourers of orphan’s wealth and 4) Disobedience of parents. (Mustadarake Hakim) • Abu Huraira (R) has narrated that Rasul (Allah’s Messenger) (S) said: you should protect yourself from 7(seven) destructive issues ‘what are those’? -asked his companions. He said those are 1) Join in worship others with Allah 2) Mesmerizing 3) Killing someone unlawfully 4) Usury 5) Devourers of orphan’s wealth 6) Flight from the battle field and 7) To charge against chaste women. (Sahih Al-Bukhari, Sahih Muslim and Sunan Abu Daud) • Samura Ibn Zundub (R) has narrated that Rasul (Allah’s Messenger) (S) said: I saw in a dream that two persons came to me and took me to a sacred place. Thereafter three of us proceeded to a river full to blood and saw that a man was swimming in the river and another was standing on the bank with huge rocks in front of him. When the swimmer approached the bank, the man standing on it hit the swimmer with the rocks so heavily that he receded to his original place. Whenever the swimmer tried to approach the bank of the river again, the standing person did the same as before. Rasul (Allah’s Messenger) (S) asked ‘who is this man in the river’ One of the angels said ‘He is a usurer’. (Sahih Al-Bukhari) Al-Arafah Islami Bank Limited Annual Report 2018 6 Hadith on Interest (Riba) Usury and its payer, and the one who records it, and the witness; and he said
7. Opinion of other Religions and Great Men on Interest • Interest has been banned in the two books of Hazrat Musa (A.), which are considered as the scriptures of Jews. The 22nd line of Exodus goes as saying, ‘If you lend money to a poor man, don’t become money lenders and don’t realize interest from him.’ • Similarly in 23rd line of ancient scripture of the Jews entitled “Deuteronomy” states, ‘You don’t lend money to your brother for interest -i.e interest on money, interest on foodstuff and interest on anything lent.’ • Hebrewism is known as Musaic or Jewism. Musaic laws or commands of Musa are the basis of Hebrewism. Interest was totally prohibited in Musaic law. This rule was exclusively practiced by the Jews. In this ideology, there are clear directions on interest as other aspects of economics. In Hinduism, usury business was restricted within the ‘Baithayas’. • One Jew couldn’t take interest by lending money from another. But, taking interest was in practice by lending money to the people of other religions. • Some writers quoted from the book, ‘Talmud’ that the Hebrew prophets forbade interest not only from Jews but from all. (Eric Roll, A history of Economic Thought: Page 48) • Interest was prohibited from the beginning of the Christianity to the advent of the Reform Movement and from the Church under pope in Rome to the division of other Churches, Christ said, ‘Lend hopping for nothing again.’ (Luke VI 35, Hanley: History of Economic Thought 1964, Page 101) 7 Al-Arafah Islami Bank Limited Annual Report 2018
8. Chairman Board of Directors Alhajj Abdus Samad Labu Vice Chairman Alhajj Abdus Salam Member Hafez Alhajj Md . Enayet Ullah Alhajj Salim Rahman Alhajj Md. Liakat Ali Chowdhury Md. Amir Uddin PPM Alhajj Nazmul Ahsan Khaled Alhajj Abdul Malek Mollah Alhajj Md. Harun-ar-Rashid Khan Alhajj Md. Anowar Hossain Alhajj Badiur Rahman Alhajj Engr. Kh. Mesbahuddin Ahmed Alhajj Ahamedul Haque Alhajj Abu Naser Mohammad Yeahea Alhajj Niaz Ahmed Alhajj Mohammed Emadur Rahman Dr. Md. Shafiul Haider Chowdhury (Alternative Director of Alhajj Badsha Meah) Alhajj Anwar Hossain (Alternative Director of Alhajj Mohammed Haroon) Khalid Rahim FCA Alhajj M. Kamaluddin Chowdhury Ex Officio Director Managing Director Farman R. Chowdhury Company Secretary Md. Mahmudur Rahman Al-Arafah Islami Bank Limited Annual Report 2018 8
9. Board of Directors Executive Committee (EC) Chairman Hafez Alhajj Md. Enayet Ullah Vice Chairman Alhajj Salim Rahman Member Alhajj Nazmul Ahsan Khaled Alhajj Md. Harun-ar-Rashid Khan Alhajj Engr. Kh. Mesbahuddin Ahmed Alhajj Ahamedul Hoque Alhajj Abu Naser Mohammad Yeahea Board Audit Committee (BAC) Chairman Md. Amir Uddin PPM Member Alhajj Abdus Salam Alhajj Abdul Malek Mollah Alhajj Niaz Ahmed Khalid Rahim FCA Risk Management Committee (RMC) Chairman Alhajj Md. Liakat Ali Chowdhury Member Alhajj Abdus Samad Alhajj Abdus Salam Alhajj Mohammed Emadur Rahman Md. Amir Uddin PPM Shariah Supervisory Committee Chairman Mufti Sayeed Ahmad Muzaddedi Member Mufti Muinul Islam Mufti Shahed Rahmani Mohammad Abul Hossain Al-Azhari Mawlana Mohammad Abdul Hai Nadvi Al-Hajj A.Z.M. Shamsul Alam Alhajj Abdus Samad Labu Secretary Md. Abdur Rahim Khan 9 Al-Arafah Islami Bank Limited Annual Report 2018
10. Md . Abdur Rob Md. Nazim Uddin Muazzem Hossain Deputy Managing Director Md. Fazlul Karim Muhammad Mahmoodul Haque S. M. Jaffar Mohammed Zubair Wafa Executive Vice President Muhammed Nadim FCA Syed Masodul Bari Md. Atiqur Rahman Md. Mujibul Quader Abed Ahmed Khan M. Tariqul Islam Md. Abdullah Al- Mamun Md. Abdur Rahim Duary Manir Ahmad Md. Manjur Hasan Md. Mahmudur Rahman A. N. M. Mofidul Islam Md. Aminul Islam Bhy. Engineer Md. Habib Ullah S. M. Kowsar Mohammed Hossain S. M. Abu Jafar A. T. M. Mostafizur Rahman Md. Monjurul Alam Senior Vice President A. K. M. Amzad Hossain Md. Sharif Uddin Pramanik Iqbal Hossain Ahmed Md. Asaduzzaman Bhuiyan Md. Golam Sarwar Md. Idris Ali Aktar Kamal Md. Mazharul Islam Md. Obaydul Islam Md. Zakir Hossain Bhuiya Md. Soheb Ahmed M. A. S. Jalal Azad Md. Masudur Rahman Mohammad Azam Md. Sanaullah Md. Nizamul Hoque Chy. Md. Rajibul Islam Bhuiyan Md. Yahya Md. Azharul Islam Md. Zahidul Islam Md. Mostafizur Rahman Md. Showkat Islam Md. Sharif Chowdhury Kamal Hossain Md. Zakir Hossain M. M. Saiful Islam Md. Fazlur Rahman Al-Arafah Islami Bank Limited Vice President A. K. M. Sazzad Hossain Md. Abdur Rahim Sarder Md. Mizanur Rahman Md. Sultan Mahmud Monir Ahammad Md. Abul Kalam C. G. M. Asaduzzaman Md. Shah Jalal Sheikh Md. Aminul Islam Masudur Rahman Khalifa Md. Monir Hossain Ishtiaq Ahmed Md. Habibullah Bahar Md. Mainul Islam Mahbub Hasan Md. Asif Chowdhury Md. Hashim Uddin Md. Lokmanur Rahman Ashraf Hossain Jashim Ahmed Chy Mohammad Ullah Md. Azmal Hoque Md. Abdul Mannan Akhand S. M. Zabidul Haque Md. Ferdous Hassan Jalal Ahmed Md. Majiber Rahman Md. Jahangir Alam Md. Nahid Hossain Md. Shamsul Huda Babar Md. Salamat Ullah Md. Kabir Ahamed Touhid Siddique Md. Abdul Mobin Jahangir Alam Md. Shahjahan Jalal Ahmad Md. Abdur Rahim Khan Md. Zahurul Hoque Mirza Mohidul Islam Khondoker Monirul Hoque Md. Rafiqul Islam Ashik Ahmed Siddikey Imroz Chowdhury Md. Shamsul Kabir Mohammad Alamgir Md. Aminur Rahman Md. Shafi Mahmood Md. Jahangir Alam Md. Nazmul Huda Md. Ibrar Md. Ashraful Hoque M. Shamsuddin Ahmed Annual Report 2018 10 Management Team Managing Director Farman R. Chowdhury
11. Management Team Senior Assistant Vice President Md . Zahid Hasan A. K. M. Fokhrul Islam Md. Nurul Karim Khandaker Nazmul Islam Md. Amjad Hossain Sharif Golam Kawsar Md. Shah Alam Motahar Uddin Ahmed Mohd. Salahuddin Mamun Md. Ashaduszzaman Md. Kamrul Islam Nur Mahbub Khan Md. Moklesur Rahman Khan Kazi Mohammad Sadik Md. Anowarul Alim Khan Md. Jamal Uddin Mahmud Abdul Malek Md. Abu Hanif Md. Reazul Hoque Md. Shahid Hossain Mohammad Azizul Hoque Assistant Vice President Md. Asaduzzaman Khan Md. Mahbubul Hoque Md. Rafiqul Islam Md. Mizanur Rahman A. M. M. Arif Billah Mithu M. M. Shamsul Alam H. M. Zakir Khan Md. Kamruzzaman Md. Zahid Hossain A. S. M. Gouch Uddin Siddiquee Shahadat Ali Md. Mustafizur Rahman Md. Mustaque Ahamed Mollah Md. Kamrul Islam Md. Alauddin Syed Ariful Islam Md. Enayet Fakir Syed Taslim Alam Md. Delowar Hossain Mahbubul Amin Md. Ashiqur Rahman Md. Abul Hossain Md. Abdur Rahim Sarder Md. Yusuf Sharif Md. Golam Quddus Talukder Md. Abul Hossain Saju Md. Humayun Kabir Sardar Md. Mujibur Rahman Md. Momtazul Hoque Md. Golam Arfin Md. Zamshed Hossain Sarker Md. Mushfiqur Rahman Talukder Md. Maniruzzaman Md. Akber Hussain Md. Maynal Hossain Syed Ariful Bari Md. Shakhawat Ullah Mollah Khalilur Rahman Md. Mijanur Rahman Md. Ismail Hossain Gazi Abdur Rahman Aminy Md. Towhidul Islam Md. Abdur Rahman Bhy. Ahamuduzzaman Md. Anwarul Quader Chy. Md. Moinul Haque Nashir Ahmed Md. Taslim Hossain M. Mohiuddin Sharifi Md. Eleaus Md. Humayun Kabir Md. Zakir Miah Md. Wares Uddin Mahmud Md. Rafiqul Islam Mohammed Ishaque K. M. Shahadat Husain Md. Asadur Rahman Khan Md. Abu Bakar Siddique Md. Shamsul Areafin Md. Kutub Uddin Md. Monirul Islam Bhuiyan Syed Saleh Ahmed Mostaque Ahmed Khandaker Saiful Islam A. K. M. Anwarul Haque Syed Zulfiquer Ali Mahbub Md. Zahurul Islam Patwary Md. Masud Parves Md. Ali Farhad Md. Mahbubur Rahman Munshi Sanaur Rahman Md. Ziaul Haque Malik Md. Bashir Uddin Md. Syful Islam Md. Anisul Islam Mahmud Md. Imran Miah Md. Zahirul Haque A. K. M. Tusher A. K. M. Ariful Islam Md. Saiful Islam Shakhawat Hossain Md. Shahidul Islam 11 Humayun Kabir Md. Iqbal Hossain Syed Monirul Haque Mohammed Abul Kashem Md. Mohiuddin Khan Azad Md. Basirul Islam A. K. Md. Rezwan Mohiuddin M. M. Rafikul Islam Md. Mustahidul Bashar Md. Khairul Alom Md. Mizanur Rahman Bhuiyan A. K. M. Younus Ali Kazi Md. Elias Md. Abdul Mannan Md. Faruk Ahmed Khan Md. Raihan Uddin Md. Rafique Ullah Md. Zillur Rahim Md. Enamul Hoque Mohammad Nizam Uddin Bhuiyan Mohammad Elyas Mohd. Mahfuzur Rahman Md. Shariful Alam Md. Golam Hossain Kazi Shafiqul Islam Md. Neyamat Ullah Md. Koysor Khan Md. Belal Uddin Md. Maniruzzaman Khan Md. Serajummuner Saif Mohammad Zulker Naeen Md. Anisur Rahman Md. Nurul Karim Kh. Kamranur Rahman Shovon Md. Rabiul Alam Md. Zahidul Islam Mollah Masum Billah Azadi A. K. M. Mizanur Rahman Himal Pasha Md. Mijanur Rahman Md. Moin Uddin Md. Mizanur Rahman A. K. M. Faisal Kabir Md. Murtaza Md. Rofiqul Islam K. M. Jalal Uddin Niaz Ahmed Rashed Asaduzzaman Bhuiyan Kazi Rokibul Anwar Yasmin Aziz Nilufer Yesmin Mohammad Oli Ullah Al-Arafah Islami Bank Limited Annual Report 2018
12. growth of the national economy . Mission • Achieving the satisfaction of Almighty Allah both here & hereafter. • Proliferation of Shariah Based Banking Practices. • Quality financial services adopting the latest technology. • Fast and efficient customer service. • Maintaining high standard of business ethics. • Balanced growth. • Steady & competitive return on shareholders’ equity. • Innovative banking at a competitive price. • Attract and retain quality human resources. • Extending competitive compensation packages to the employees. • Firm commitment to the growth of national economy. • Involving more in Micro and SME financing. Commitments • Ours is a customer focused modern Islamic Banking making sound and steady growth in both mobilizing deposit and making quality Investment to keep our position as a leading Islami Bank in Bangladesh. • To deliver financial services with the touch of our heart to retail, small and medium scale enterprises, as well as corporate clients through our branches across the country. • Our business initiatives are designed to match the changing trade industrial needs of the clients. Al-Arafah Islami Bank Limited Annual Report 2018 12 Mission & Commitments • To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the Vision Vision
13. Information Corporate Date of Registration 18 June , 1995 1st Branch Motijheel Branch, Dhaka Opening Ceremony 27 September, 1995 Authorized Capital 15,000.00 Million Paid-up Capital 10,440.22 Million Local Partnership of Capital 100% Equity 23,483.22 Million Number of Branches 168 Deposit 266,205.48 Million Investment 261,874.13 Million Number of Employees 3,682 Number of Shareholders 25,793 Honorable Chairman, Directors & Managing Director of AIBL are seen on the dais at the 23rd Annual General Meeting 13 Al-Arafah Islami Bank Limited Annual Report 2018
14. Corporate Information Auditors HODA VASI CHOWDHURY & CO. Chartered Accountants BTMC Bhaban (8th Level) 7-9 Kawran Bazar C/A Dhaka- 1000 RAHMAN MOSTAFA ALAM & CO. Chartered Accountants Paramount Heights (7th Floor D2,C1 & A) 65/2/1 Box Culvert Road Purana Polton ,Dhaka- 1000 Company Secretary Md. Mahmudur Rahman Registered Office Al-Arafah Tower, 63, Purana Paltan, Dhaka-1000. Tel : +88-02-44850005 PABX : 44850005-20 SWIFT : ALARBDDH E-mail : info@al-arafahbank.com Web : www.al-arafahbank.com Section of the honorable Shareholders attending the 23rd Annual General Meeting of the Bank Al-Arafah Islami Bank Limited Annual Report 2018 14
15. NOTICE OF THE 24th ANNUAL GENERAL MEETING (AGM) Notice is hereby given that the 24th Annual General Meeting of the Shareholders of Al-Arafah Islami Bank Limited will be held on Saturday the 22nd June, 2019 at 11.00 a.m. at “Own Premises of AIBL, 63/1, Purana Paltan (Beside of Al-Arafah Tower), Dhaka-1000” to transact the following businesses: AGENDA 1. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended December 31, 2018 along with the Reports of the Directors’ and the Auditors’ thereon. 2. To approve Dividend for the year ended December 31, 2018 as recommended by the Board of Directors. 3. To appoint auditors of the company for the term until the next Annual General Meeting and to fix their remuneration. 4. To confirm appointment of Auditors for the year 2018 and to appoint for the year 2019 regarding certification on compliance of conditions of Corporate Governance Code and fix remuneration. 5. To elect/re-elect/confirm Directors 6. To transact any other business with the permission of the chair All Hon’ble Shareholders of the company are requested to make it convenient to attend the meeting in time. By order of the Board (Md.Mahmudur Rahman) SEVP & Company Secretary Date: Dhaka 24th April, 2019 Phone: +880-2-44850027 NOTES: (1) Shareholders whose names appear in the Register of members as at the close of business on the ‘’Record Date’’ i.e. 19th May, 2019 will be eligible to attend the Annual General Meeting (AGM) and vote there at. (2) A member will be eligible to attend and vote at the Annual General Meeting (AGM) may appoint a proxy to attend and vote on his/her behalf. Proxy Form duly stamped must be submitted at the Registered Office of the Company not later than 48 hours before the time of holding the meeting; (3) The Shareholders, who are interested to put questions, are requested to send the same to the Share Department, (Level -04) 63, Purana Paltan, Dhaka-1000 before 7 days of AGM. (4) Attendance of the Members/Shareholders/Attorney/Proxy’s will be recorded up to 10.30 A.M. at the Registration Counter on the day of the meeting ; (5) Election rules and schedule thereto will be available at the Share Department, (Level-04) 63, Purana Paltan, Dhaka-1000. (6) We would like to request to our Hon’ble Shareholders to update their BO Accounts with mailing address, contact number, Bank details, e-mail address and E-TIN numbers (12 digits) with their respective DPs (Depository Participants) before Record Date. (7) The concerned Brokerage Houses are requested to provide us with a statement having details of Margin Loan Holders (i.e. Shareholder’s name, BO ID Numbers, Client-wise shareholding position, gross dividend receivable, applicable tax rate and net dividend receivable) as on the Record Date along with the name of the contact person of Brokerage House to the company’s Share Department at Registered Office on or before 16thJune, 2019. The Brokerage Houses are also requested to provide us with their Bank name, A/C number and routing number etc. (8) No gift or benefit in cash or kind shall be paid/offered to the Shareholders in the 24th AGM as per BSEC Circular No. SEC/ CMRRCD/ 2006-193/154 dated 24.10.2013. (9) As per Bangladesh Securities and Exchange Commission notification no. BSEC/CMRRCD/2006-158/208/Admin/81 dated 20th June, 2018 soft copies of the Annual Report 2018 will be forwarded to all the Members at their respective email addresses through their BO Accounts held with the depository. The soft copy of the Annual Report 2018 along with Notice, Proxy Form and Attendance will also be available in the company’s web-site (www.al-arafahbank.com). 15 Al-Arafah Islami Bank Limited Annual Report 2018
16. 5 Year Financial Highlights Particulars Income Statement Investment Income Profit paid on Deposit Net Investment Income Non Investment Income Non Investment Expenses Net Non Investment Income Profit Before Tax & Provision Provision For Investment Profit Before Tax Provision For Tax (including Deferred Tax) Profit After Tax Balance Sheet Authorized Capital Paid up Capital Reserve Funds & Other Reserve Shareholders’ Equity (Capital & Reserve) Deposits Investment Investment in Shares & Securities Fixed Assets Total Assets (Excluding off-balance sheet items) Foreign Exchange Business Import Business Export Business Guarantee Business Inward Foreign Remittance Capital Measures Core Capital (Tier-l) Supplementary Capital (Tier-ll) Tier-l Capital Ratio Tier-ll Capital Ratio Total Capital Total Capital Ratio Investment Quality Volume of Non-Performing investment % of NPIs to Total investment Provision for Unclassified investment Provision for Classified investment Provision for Off Balance sheet Exposures Share Information Number of Shares Outstanding Earning per Share (Taka) Book Value per Share (Taka) Market Price per Share (Taka) Price Earning Ratio (Times) Price Equity Ratio (Times) Dividend per Share Cash Dividend (%) Bonus Share Operating Performance Ratio Net Profit Margin% Investment /Deposit Ratio Return on Equity (ROE)% Return on Assets (ROA)% Cost of fund % Cost /Income ratio in operating business (%) Other Information Number of Branches Number of Employees Number of Shareholders Al-Arafah Islami Bank Limited 2014 2015 2016 2017 2018 19,725.91 12,616.77 7,109.14 2,485.88 3,261.57 (775.69) 6,333.45 1,846.86 4,486.59 2,161.64 2,324.95 18,568.00 11,073.01 7,494.99 2,511.94 3,646.78 (1,134.84) 6,360.15 1,796.68 4,563.47 2,097.59 2,465.88 18,830.15 9,957.73 8,872.42 2,791.54 4,152.93 (1,361.39) 7,511.03 1,547.87 5,963.16 2,613.76 3,349.40 20,491.03 11,784.20 8,706.83 3,557.36 5,308.42 (1,751.06) 6,955.77 1,354.89 5,600.88 2,431.38 3,169.50 24,956.81 16,256.61 8,700.20 3,769.39 6,160.70 (2,391.31) 6,308.89 2,177.98 4,130.91 1,674.11 2,456.80 21.79 37.95 (0.08) 5.96 16.06 36.56 (9.30) 60.75 (26.25) (31.15) (22.49) 15,000.00 9,469.58 5,620.87 18,159.52 166,851.17 146,740.37 9,120.90 2,661.11 210,439.01 15,000.00 9,469.58 6,432.32 19,236.07 169,887.08 162,503.14 8,851.13 3,057.38 229,106.66 15,000.00 9,943.06 7,468.16 21,337.48 199,703.92 196,519.38 9,058.68 3,240.18 272,900.04 15,000.00 9,943.06 8,556.96 22,520.68 244,806.26 235,905.23 10,145.49 3,260.38 319,255.29 15,000.00 10,440.22 9,365.62 23,483.22 266,205.48 261,874.13 12,214.67 4,494.61 338,465.30 5.00 9.45 4.27 8.74 11.01 20.40 40.04 6.02 101,244.70 75,843.90 3,365.27 8,541.10 107,049.80 79,362.90 4,471.41 9,498.00 118,786.60 88,152.20 4,981.34 11,735.40 156,700.00 104,540.00 6,443.41 20,700.00 168,573.80 114,481.90 7,096.02 36,917.20 7.58 9.51 10.13 78.34 17,181.97 1,732.06 12.74 1.28 18,914.03 14.03 18,244.48 4,828.03 13.17 3.48 23,072.51 16.65 20,359.39 5,095.97 11.92 2.98 25,455.36 14.91 21,459.85 5,488.97 10.40 2.66 26,948.82 13.06 22,379.93 10,078.56 10.12 4.56 32,458.49 14.68 4.29 83.61 (0.28) 1.90 20.44 1.61 6,982.60 4.50 938.27 1,518.78 305.01 7,713.67 4.66 1,090.27 2,100.27 346.75 8,994.98 4.54 1,352.83 2,586.67 449.88 9,921.51 4.10 1,723.04 3,096.15 570.42 12,690.72 4.79 1,891.00 3,946.09 689.80 27.91 0.69 9.75 27.45 20.93 946,958,503 2.20 19.18 14.90 6.77 0.78 946,958,503 2.25 20.31 14.70 6.53 0.72 994,306,428 3.07 21.46 15.90 5.18 0.74 994,306,428 3.15 20.88 24.10 7.64 1.15 1,044,021,750 2.35 20.80 19.90 8.48 0.96 5.00 (0.66) (0.08) (4.20) 0.45 (0.20) 14.00 - 10.00 5.00 20.00 - 15.00 5.00 15.00 2.00 (3) 5.88 84.58 12.80 1.10 10.85 33.99 4.91 88.59 12.82 1.08 9.18 36.44 4.60 88.50 15.70 1.23 7.92 35.60 3.87 89.95 14.07 0.99 7.50 43.28 3.42 89.87 10.46 0.73 8.70 49.41 (0.45) (0.08) (3.61) (0.27) 1.20 6.12 119 2,649 52,007 129 2,810 44,427 140 3,070 36,695 154 3,446 30,386 168 3,682 25,793 9.09 6.85 (15.12) Annual Report 2018 16 Growth%
17. Economic Impact Report Economic impact can be defined as any increase or decrease in productive potential of an economy . By analyzing the economic impact we can understand how a bank adds value to the society. Economic impacts can be broadly categorized as: i) Direct Impact ii) Indirect Impact Direct Impact Direct impacts are the immediate economic effects resulting from the banks financial transactions. Bank’s direct contribution to the economy resulted in the creation of employment opportunities, payment of tax to the government and maximization of shareholders wealth. Indirect Impact Indirect impacts are the spill over economic effects that occur through Bank’s normal course of operations. Banks generate indirect impact by addressing the deficiency of capital in the economy by mobilizing deposit and channelizing the same to prospective investors. Through catering financial services, the Bank helped distribute the wealth among all the stakeholders for example shareholders received dividend, depositors and investors got profit, employees received compensation and other benefits, the under privileged reaped benefits out of CSR while the government earned tax revenue. In 2018, total value added by AIBL was BDT 8,649.60 million as against BDT 9,430.52 million in 2017. Bank’s direct contribution to the economy was BDT 1,674.11 million in the form of corporate income tax. The Bank distributed BDT 4,135.51 million for its total 3,682 officials in 2018 as against that of BDT 3,587.79 million for 3,466 in 2017. At the end of 2018, the Bank mobilized total deposits of BDT 266,205.48 million and aided the economy in meeting its growth target by deploying BDT 279,000.00 million as investment to different sectors of the economy. Apart from these, the Bank performed significant import and export business. 17 Al-Arafah Islami Bank Limited Annual Report 2018
18. distributed among stakeholders , including the Government, employees and shareholders. (BDT in Million) Particulars 2018 2017 28,726.20 24,048.39 (17,898.62) (13,262.98) Value added by Banking Services 10,827.58 10,785.41 Provision for Investment & Off balance Sheet Items (2,177.98) (1,354.89) Total Value Addition 8,649.60 9,430.52 4,135.51 3,587.79 811.46 1,086.49 1,674.11 2,431.38 390.10 276.67 Retained Earnings 1,638.42 2,048.19 Total Value Distributed 8,649.60 9,430.52 Income from Banking Service Cost of Services & Supplies Value Distributed To Employees To Statutory Reserve To Government as Income Tax Depreciation Distribution of Value of Addition Al-Arafah Islami Bank Limited Annual Report 2018 18 Value Added tivities. The statement of value added shows the total wealth created and how it was Statement Value added is a measure of wealth created by the Bank through various business ac-
19. Economic Value Added Statement Economic Value Added (EVA) indicates the true economic profit of the company. EVA is an estimate of the amount by which earnings exceed or fall short of the required minimum return for shareholders at comparable risk. EVA of the Bank stood at BDT 2,859.94 million as on 31 December 2018 as against that of BDT 2,535.78 million in 2017 (BDT in million) Particulars 2018 2017 Shareholders’ Equity 23,483.22 22,520.68 Total Income 28,726.20 24,048.39 Total Expenses 22,417.31 17,092.62 Corporate Tax 1,674.11 2,431.38 Capital charge 1,774.84 1,988.61 Economic value Addition 2,859.94 2,535.78 * Capital Charges = Paid up capital X percentage of Dividend 19 Al-Arafah Islami Bank Limited Annual Report 2018
20. Statement indicates how much wealth has been created for the capital providers in a particular period of time . A high market value addition indicates that the company has created substantial wealth for the equity holders. (BDT in million) Particulars 2018 2017 Market value of Total Equity 24,307.96 28,755.34 Book value of Total Equity 23,483.22 22,520.68 824.74 6,234.66 Market value Addition Chairman Alhajj Abdus Samad Labu and Vice Chairman Alhajj Md Abdus Salam handed over a cheque of Tk.5 crore to Hon’ble Prime Minister Seikh Hasina as a Donation to the Prime Minister’s Relief Fund under Corporate Social Responsibility (CSR) on April 13, 2018 at Ganobhaban Al-Arafah Islami Bank Limited Annual Report 2018 20 Value Added Statement company and the book value of equity invested in that company. Market Value Added Market Market Value Added (MVA) is the difference between the equity market value of the
21. Market value of total equity 22 ,520.68 23,483.22 28,755.34 24,307.96 Value Addition Market (BDT in million) Book value of total equity 2018 2017 Total number of share outstanding: 1,044,021.750 (994,306,428)* Market value per share: BDT 19.90 (24.10)* * Previous Year’s figures in brackets. Representatives of Bangladesh Association of Banks (BAB) were present at Ganobhaban to congratulate Her Excellency, Sheikh Hasina, The Honorable Prime Minister – Government of the People’s Republic Bangladesh for triumphantly winning a 4th Prime Ministerial Term with a landslide victory 21 Al-Arafah Islami Bank Limited Annual Report 2018
22. Al-Arafah Islami Bank Limited Annual Report 2018 22 Address Chairman ’s Bismillahir Rahmanir Rahim All praise be to the Almighty Allah, Lord of the Universe and peace and blessings of Allah be upon the Prophet Mohammad (SM) and his descendants & companions. Dear Shareholders Assalamu Alaikum Wa Rahmatullahi Wa Barakatuh. It is my great pleasure to welcome you all to the 24th Annual General Meeting of the Shareholders of the Bank. On behalf of the Board of Directors and myself, I would like to express my heartfelt thanks and profound gratitude to all of you for your continuous support and guidance to run the Bank. Alhamdulillah, we have successfully closed the books & accounts of the company for the year 2018. All of us know that due to some unavoidable circumstances, the business in the year 2018 was not good enough for any of the banks and financial institutions in the country. In spite of that we have achieved all business targets for the year 2018. As trusted by you with the great responsibility to take care of this institution, the Board of Directors is always keen and active to take actions in favour of the Bank. This year we are focusing on developing the quality of our human resources, increasing the amount of low cost deposit which will ultimately enhance the deposit mix and also on the SME sectors. We are concentrating to make our human resources more capable and technologically developed so that they can cope with the changing environment and serve our valued clients efficiently and effectively. Sensing the upcoming threats and adverse business situation, I as the Chairman of the Board of Directors have strictly advised our Management to be cautious in all areas of business including quality of investments, recovery process as well as overhead expenses. Trusting upon Almighty Allah, believing our Shareholders confidence on us and knowing our abilities to achieve the goal, I have declared the year, the year when we start our mission, to be “The Best Islami Bank” in the country. I believe with all our honesty, integrity, efficiency and most of all with our strictness to comply with Shari’ah and Regulatory directions in every point, Insha Allah we shall be able to reach our goal to be recognized as the best Islamic Bank in Bangladesh. Overall Performance By the grace of Almighty Allah (SWT) Al-Arafah Islami Bank has overcome the challenges of 2018 and made satisfactory profit and growth in most of the areas of business. The Bank took a strategy of quality growth of its assets by adhering to compliance in all spheres of operation particularly in respect of Shari’ah and regulatory laws and guidelines. As a continued policy, the Bank remained focused in all the key areas covering capital adequacy, good asset quality, sound management, good earnings and strong liquidity. The Bank’s operating profit stood at Tk. 6,308.89 million during the year an decrease by Tk. 646.88 million over the previous year. The return on equity recorded at 10.46% while earnings per share (EPS) stood at Tk. 2.35. Total assets of the Bank rose to Tk. 338,465.29 million during the year showing a growth of 6.02% over the previous year. Deposits of the Bank stood at Tk. 266,205.48 million increased by Tk. 21,399.22 million during 2018 and growth rate 8.74%. Our Bank always maintained investment-Deposit Ratio (IDR) at required level throughout the year and thus the Bank maintained its risk free liquidity ensuring maximum earnings from the deployed fund. We have tried our best to make investment maintaining its quality and ensuring well diversification to mitigate the potential risks. Investment portfolio of the Bank has grown by 11.01% during the year. Overdue investment stood at Tk. 9,097.52 million as on 31st December 2018 as against Tk. 6,095.69 million as of December, 31 last year. Total overdue increased by Tk. 3,001.83 million during the year 2018 bringing the same to 3.43% of our total investment as against 2.52% in the previous year. Corporate Branch Manager, Zonal Head and Branch manager are advised for adopting strategies to arrest the situations. Rescheduled investment increased by Tk. 3,304.27 million from Tk. 9,653.30 million to
23. Tk . 12,957.57 million (Term Tk. 6,398.96 million + Continuous & Demand Tk. 6,558.61 million) which was 4.89% of total Investment. Recovery against rescheduled investment during the year 2018 was Tk. 1,138.62 million. Classified investment increased by Tk. 2,769.21 million from Tk. 9,921.51 million to Tk. 12,690.72 million representing 4.79% of total investment as against 4.10% in the previous year. During the year 2018, recovery against classified investment stood at Tk. 3,149.17 million while recovery against SMA was Tk. 2,075.27 million and against Written off Tk. 173.40 million building a total recovery of Tk. 6,536.46 million including recovery Tk. 1,138.62 million from rescheduled investment. SME & Retail Banking Our Bank is now focusing on investment to SME and Retail sector in line with the policies and guidelines of Bangladesh Bank. During the year we have achieved above 136% of our set target in this area by providing investment to major three categories of enterprises viz. Industry, Trade and Services. Off-Shore Banking Unit (OBU) Our best efforts had been being continued since 2012 to obtain permission from Bangladesh Bank for introducing Off-Shore Banking Unit (OBU) in our Bank. The necessary formalities, in this regard, were also done. Finally, we got approval of Bangladesh Bank to operate one Off-Shore Banking Unit (OBU) at Motijheel Branch, Dhaka. Operations of the Unit have already been started. Risk Mitigation Risk-taking is an inherent element of the banking business and indeed profit is the reward for successful risk taking i.e. mitigating the risk to a tolerable limit. Considering the above, Bangladesh Bank has issued necessary guidelines to all the scheduled banks and in line with that guideline we have taken necessary steps and measures including establishment of a separate division with skilled manpower. Subsidiary Companies As part of diversification of our business, we have established the following 4 (Four) subsidiary companies, in addition to our normal banking business: AIBL Capital Market Services Limited AIBL Capital Market Services Limited was incorporated as subsidiary company of Al-Arafah Islami Bank Limited with an authorized capital of Tk. 10 billion and paid-up capital of Tk. 4 billion of which AIBL holding is 60.50%. The main objectives of the company are to carry out the business of Stock Broker and Dealer in the Capital Market. During the year 2018 the company earned Operating Profit (Before provision for investment & taxation) of Tk 78.51 million with Earning per Share (EPS) Tk.0.02 AIBL Capital Management Limited AIBL Capital Management Limited, a subsidiary company of Al-Arafah Islami Bank Limited, was incorporated with an authorized capital of Tk. 2 billion and paid-up capital of Tk. 500 million. The main objectives of the company are to carry out the business of Merchant Banking in all its aspects including Issue Management (IPO, Right Share Issue, Bond Issue etc.), Portfolio Management, Underwriting, Corporate Advisory Services, PreIPO Placement, Investment Analysis and Research etc. During the year 2018 the company earned Operating Profit (Before provision for investment & taxation) of Tk.11.20 Million with Earning per Share (EPS) Tk.0.14. Millennium Information Solution Limited Al-Arafah Islami Bank Ltd. owned 51% shares of Millennium Information Solution Limited a subsidiary company of Al-Arafah Islami Bank Limited Millennium Information Solution Limited, a private limited Company was incorporated in Bangladesh under the companies’ act 1994 on February 11, 2001. The main objective of company is to carry on activities relating to developing software products and providing maintenance and support services both the domestic and international clients. Over the years, MILS has established itself as the leading software developer, implementation and service provisioning company in Bangladesh which adheres to the rules of Islamic Shariah. During the year 2018 the company earned Net Income before Tax Tk. 7.66 Million with Earning per Share (EPS) Tk.0.35. AIBL Asset Management Co. Ltd. Another subsidiary company in the name of AIBL Asset Management Co. Ltd. has already been incorporated with Authorized Capital of Tk. 500 million and Paid up Capital of Tk. 100 million to carry out the business of Asset Management, Portfolio Management, Capital Market Operation and other financial services. The shareholding ratio of AIBL and its another subsidiary AIBL Capital Market Services Limited is 9:1. We hope that the company will start its functioning very soon. Concluding Appreciation We would now like to extend our sincere thanks and appreciation to all the regulatory authorities, our depositors, investment clients, Shareholders and all other Stakeholders for their unbound confidence. Our deepest gratitude to our fellow Board Members, members of the Shari’ah Supervisory Committee, all the Bank officials for their continuous and consistent support, encouragement, wisdom, input, guidance for development and progress. Finally, we would like to offer our whole hearted commitment that we are accountable to Almighty Allah (SWT) and answerable to our Stakeholders and to the people of our beloved country. May Allah the Almighty bestow his bountiful blessings upon us all. Allah Hafiz Ma-assalam Sincerely, Alhaj Abdus Samad Chairman Date: 22nd June 2019 23 Al-Arafah Islami Bank Limited Annual Report 2018
24. Respected Shareholders , Assalamu Alaikum Wa Rahmatullahi Wa Barakatuhu. It is my great pleasure and opportunity to present the performance and future aspirations of your esteemed Bank. At the beginning I would like to convey my heartfelt gratitude to Bangladesh Bank for their time-befitting policies, guidance and supports. Now, I would like to express my sincerest thanks to the valued stakeholders for their endless support in the Bank’s continued success. I take this chance to thank the members of the Board and Management of the Bank for extending me and my predecessor the opportunity to steer the Bank toward its mission and vision. I also place my appreciation for the dedicated and committed service put in by all the officials of the Bank. Overall Banking Scenario Banks’ Deposit: Total Deposit (excluding interbank items) of the scheduled banks increased by Tk. 951,680.00 million representing 9.59% point to point growth from Tk. 9,921,460.00 million as on 31 December 2017 to Tk. 10,873,140.00 million as on 31 December 2018. Islamic Banks’ Deposit: All Islamic Banks’ Deposit stood at TK.2,373,669.10 million during the year 2018 as against Tk. 2,143,155.20 million in the previous year 2017 and the deposits increased by Tk.230,513.90 million registering growth of 10.76% in 2017. The share of Islamic Banks’ Deposits as of 31December 2018 stood at 21.83% as compared to 21.60% as of 31 December 2017. Banks’ Advance/Investment: Total Advance/Investment (excluding bills) of the scheduled banks increased by Tk. 1,160,101.00 million representing 14.60% point to point growth from Tk 7,948,547.0 million as on 31 December 2017 to Tk. 9,108,648.00 million as on 31 December 2018. Islamic Banks’ Investments: All Islamic Banks’ Investment stood at Tk. 2,309,072.80 million during the year 2018 as against Tk. 2,010,995.90 million in the previous year 2017 and the deposits increased by Tk. 298,076.90 million registering growth of 14.82% in 2018. The share of Islamic Banks’ Investment as of 31 December 2018 stood at 25.35% as compared to 25.30% as of 31 December 2017. Operating Profit: Despite a tough start of the year 2018 Banks in Bangladesh managed to earn a reasonable amount of operating profit for the year. But The growth of profit was slim owing to low credit/investment demand, cautious lending/investment policy, lowering lending/ investment profit rates and the sluggish business environment. In terms of operating profit earned, Islami Bank Bangladesh Limited (IBBL) is the higest and thus topping the list of Banks. Al-Arafah Islami Bank Limited (AIBL) ended up being 5th which is exactly the same like 2017. However in an apple to apple comparison (i.e. Islami to islami) AIBL is only second to IBBL, the oldest and biggest Islami Bank in Bangladesh. Deposit and Borrowing The total deposit and Borrowing of the bank reached Tk. 286,739.95 million recording 92.50% achievement of the target of Tk.310,000.00 million as on 31December 2018 as against Tk. 276,546.29 million at 31st December 2017. The deposit and Borrowing increased by Tk. 10,193.66 million registering a growth of 3.69% in 2018 as against national growth of 9.05%. Our deposit target for the year 2019 has been fixed at Tk.345,000.00 million expecting a growth of 20.32% over last years. Major Business Ratios Major comparative business ratios i.e. Yield on Investment, Cost of Deposit & Borrowings, Spread, Cost of Admin, Cost of Fund, Non-Funded Income and Net Spread for the year 2017 and 2018 are appended below: Al-Arafah Islami Bank Limited Annual Report 2018 24 Director’s Address At the very outset, we express our deep sense of gratitude to Almighty Allah (SWT), the Lord, and the Merciful for granting us a good result in overall business performance of the Bank during the challenging year of 2018. Managing Bismillahir Rahmanir Rahim
25. Particulars 2017 2018 Yield on Investment 8 .75% 9.07% Cost of Deposit & Borrowings 5.28% 6.47% Spread 3.47% 2.60% Cost of Administration 2.22% 2.23% Cost of Fund 7.50% 8.70% Non- Funded Income 1.62% 1.62% Net Spread 2.87% 1.99% 2017. The investments increased by Tk.23,170.68 million recording 9.58% growth in 2017 as against national growth of 12.68%. The target for investment for the year 2019 has been fixed at Tk. 310,000.00 million with anticipated growth of 16.92%. All the Branches, as they have done in the past, will render their best efforts to make quality investment complying with the Shariah principles and ensure constant follow up and supervision for maintaining the quality and ensuring timely recovery. All concerned are advised to adopt the following policies and strategies for quality investments- Deposit Mix Cost of Fund of the Bank, inter alia, depends on efficient management of Deposit Mix. Deposit Mix of the Bank is shown below: Deposit Mix Achievement 2018 Targeted 2019 Cost Free Deposit 10.00% 12.00% Low cost Deposit 18.00% 28.00% High Cost 72.00% 60.00% Total 100.00% 100.00% • • • • • Plan and Strategies for Deposit Mobilization: Our plan and strategies for mobilizing deposits are given below, which shall be followed meticulously by all concerned. • Deposit shall be mobilized giving due importance to deposit mix. For the year 2019 the mix of no cost, low cost and high cost deposit has been set at 12% , 28% and 60% respcetively. • To increase the cost free and low cost deposit, AIBL capitalizes on : 3 Better customer service. 3 Good business relationship with all the local industrialists, businessmen, professionals etc. 3 Focusing on small private/personal deposits for a solid deposit base. 3 Focusing on School Banking. 3 Opening of big Corporate Client Accounts having high volume transactions. 3 Induction of Clients having large Foreign Exchange Portfolio so that cost free deposit i.e. margin account, FC held etc. can be maintained. 3 Expediting the opening of more Current, Savings and SND Accounts and FC Accounts. 3 Encouraging the opening of collection accounts of different service oriented institutions like DPDC,DESCO, PDB, NGOs, Schools, Colleges, Universities, Titas Gas, Bakhrabad Gas, Mosques, Madrasahs etc. Investment Total Gross investments of the bank stood at Tk. 265,132.45 million recording 95.03% achievement of the Target of Tk. 279,000.00 million as on 31st December 2018 as against Tk. 241,961.78 million on the same day of previous year To motivate the valued clients with satisfactory performance of other banks to route their business through us To boost up SME and Micro investment To encourage Women Entrepreneurs. To ensure diversification of investment portfolio by size, sector, economic purpose and geographical area for minimizing risks of concentration as well as to ensure equitable deployment of fund To make investment covered by adequate securities as stated in the norms of existing business discretionary powers To change the nature, trend of investment depending on the economic activities To sanction investment ensuring proper appraisal as well as actual need of the client Operating Profit The bank earned operating profit of Tk. 6,308.89 million during the year 2018. The operating profit of the Bank during the year 2017 was Tk 6,955.77 million and thus the Bank attained negative growth of 9.30% in respect of operating profit. During this challenging year, it was unexpected to earn such a volume of profit. However, with the blessings of Almighty Allah (SWT), it was possible due to the prudent and timely decisions of the Policy Makers and quick implementation of such decisions by the Management along with efficient and effective fund management. Considering all the factors, Operating Profit target for the year 2019 has been fixed at Tk 7,500.00 million which equals a growth of approximately 20% from that of the previous year. Our plan and strategies for increasing operating profit are• • • • • • • • 25 to ensure quality investment to arrest non-performing investment to increase ancillary business to increase cash recovery from nonperforming investment to increase cash recovery from written off and rescheduled investment. to comply 100% Shariah principles so that no-income shall be considered doubtful. to control expenditure focusing on off balance sheet income. Al-Arafah Islami Bank Limited Annual Report 2018
26. International Banking Wing (IBW) Comparative position of Treasury operation: (Tk. In million) We are now more capable and confident of handling Foreign Exchange Business. Presently, we have 26 AD Branches through which we have handled total foreign exchange business of Tk. 319,972.90 million during the year 2018 as against the target of Tk. 355,000.00 million . Our Foreign Exchange business has increased by Tk.38,032.90 million recording a growth of 13.49%. Target of International Trade for the year 2019 has been fixed at Tk. 405,000.00 million with an expected growth of 26.57%. Particulars Exchange Gain Income from placement to OBU & EDF Export Business Total Export business of the bank for the year 2018 stood at Tk. 114,481.90 million during the year 2018 as against Tk. 104,540.00 million in year 2017 and thus recorded a growth of 9.51% over that of the previous year. Our target for Export business for the year 2019 has been fixed at Tk 145,000.00 million with an expected growth of 26.66%. Remittance Total remittance of the bank stood at Tk.36.917.20 million during the year 2018 as against Tk. 20,700.00 million, in the previous year. Our remittance business recorded a remarkable 78.34% growth in 2018 over 2017. Target for Remittance business for the year 2019 has been fixed at Tk. 50,000.00 million and thus expecting growth of 35.44% over last year. Treasury Operations: Total Income 2017 Growth % 892.00 860.10 3.71% 91.60 90.00 1.78% 418.00 283.90 47.23% 1,401.60 1,234.00 13.58% Rebate Income (Rebate sharing by FI FI Correspondents) Import Business Total import business of the bank for the year 2018 stood at Tk. 168,573. 80 million as against Tk 156,700.00 million in the previous year. We recorded a 7.58% growth in import business in 2018 over 2017. Target for Import business for the year 2019 has been fixed at Tk. 210,000.00 million with an expected growth of 24.57%. 2018 Our local Treasury operation functioned to ensure efficient fund management to maintain CRR & SLR matching with total Deposit flow & Investment requirements along with the growth targets of the bank. While Foreign Treasury remained active throughout the year 2018 for utilizing available FC fund, exploring interbank and overseas markets to meet up the extended demand against off-balance sheet commitments and Off-Shore Banking Unit. Moreover, Treasury Division of the Bank kept itself competitive throughout the year in terms of provisional deposit rates, rate of return of investment, exchange rate and diversified Treasury products. Professional Development Programs for Foreign Exchange Officials: With the financial support of the Bank and close supervision a total of 56 officials of our bank have been qualified as CDCS (Certified Documentary Credit Specialist), 2 officials as CSDG and 2 officials as ACAMS till date. SWIFT Sanctions Screening: We have already implemented SWIFT Sanctions Screening solution to our Core Banking Software for screening of all incoming and outgoing transactions to minimize the AML/ CFT risks which has increased our acceptability and goodwill to our all correspondents home and abroad. Being an integrated unit, AIBL Treasury manages the day to day liquidity in foreign currencies and all other Foreign Exchange Risks. Treasury Division, is engaged in foreign currency Fund Management and ALM activities. Prudent ALM and Foreign Exchange Operations however contribute a significant profit and exchange earning for the bank. In FX treasury, we participate interbank market, conduct transactions with central bank and with Foreign Banks/FIs. We always adhere to the policies and guidelines of the bank and regulatory bodies. Our plan and Strategies for Foreign Exchange Business goal for year 2019 From January to December 2018 BDT has recorded of almost 7% depreciation and the country faced a huge foreign exchange gap resulting in a large trade deficit. With the wave and ditch of market, Treasury Division of the bank tried to take maximum market opportunities and succeeded. • We have earned revenue of Tk. 1,401.60 million during 2018 as against Tk 1234.00 million in 2017 recording a 13.58% growth through Treasury Operation. Al-Arafah Islami Bank Limited Annual Report 2018 • • • • • • • 26 To diversify our import and export portfolio for minimizing potential risks To ensure routing of all import and export business of our clients through us To induct best import and export clients from the market To boost up cash import business. To give special attention in remittance service at branch level. To maintain a progressive growth, we have to enhance our capacity by acquiring professional and technical knowledge and skill. Introduce Remittance Software for compile Automation alone with international marketing (Meeting, Remittance Program, remittance fair, overseas visits etc.) Implementation of Sanction Screening for remittance payment.
27. • • • • • • • • • • • Increase of Remittance Drawing Arrangement. Arrangement of real time Vessel Tracking System. Strengthening the Hajj Management system . To keep Treasury positions within set benchmark. To cope up with new products/market dynamics with the extended FX volume. To maintain optimum liquidity in all seasons. To achieve set earning target for 2019. To ensure maximum adherence with organizational goal. To spread treasury networks through diversified functions/products within policy. To enrich treasury officials with local/foreign training. To remain updated with the treasury tools/dealing room equipments and be at par with international standard. Asset Quality Overdue investment stood at Tk.9,097.52 million as on 31st December 2018 as against Tk. 6,095.69 million as of December, 31 last year. Total overdue increased by Tk.3,001.83 million during the year 2018 bringing the same to 3.43% of our total investment as against 2.52% in the previous year. Corporate Branch Managers, Zonal Heads and Branch managers are advised to adopt proactive strategies to arrest the situations. Rescheduled investment increased by Tk. 3,304.27 million from Tk. 9,653.30 million to Tk. 12,957.57 million (Term Tk. 6,398.96 million plus Continuous and Demand Tk.6,558.61million) which was 4.89% of total Investment. Recovery against rescheduled investment during the year 2018 was Tk. 1,138.62 million. Classified investment increased by Tk. 2,769.21 million from Tk. 9,921.51 million to Tk. 12,690.72 million representing 4.79% of total investment as against 4.10% in the previous year. During the year 2018, recovery against classified investment stood at Tk. 3,149.17 million while recovery against SMA was Tk. 2,075.27 million and against Written off was Tk. 173.40 million building a total recovery of Tk. 6,536.46 million including recovery of Tk. 1,138.62 million from rescheduled investment. Plan and Strategies to Improve the Asset Quality• • • • • • to ensure constant supervision and follow-up for timely recovery of investment and prevent it from becoming overdue afresh. to fix individual target from very beginning of the year for recovery of non-performing investment. to give special attention on top classified investment clients for early settlement/ adjustment/regularization. to keep constant follow up and monitoring to ensure timely recovery of installment against rescheduled investment. to address chronic NPI clients by taking effective steps and applying prudence. to initiate necessary steps to settle the court cases quickly and even the cases can be settled outside the court through persuasion and mutual understanding. • • • to be more vigilant to keep NPI at the lowest possible level. to deploy level best efforts for recovery of Written off investment. to keep a close eye on the SMA bucket so that SMAs, do not graduate to classified accounts. Ancillary Business The ancillary business contributes a lot in the overall profitability of the Bank. We have earned Tk. 2,729.47 million from Commission Income during the year 2018 as against Tk. 2,790.68 million during 2017. The target for our ancillary business during the year 2019 has been fixed at Tk. 3,400.00 million with an anticipated growth of 24.57%. As our objective is to cover our entire Salaries and Allowances out of ancillary income, we have no other alternative but to maximize our ancillary business. Capital Adequacy Ratio (ACR) As per Bangladesh Bank requirement, Bank has to maintain a Capital of 11.875% of its Risk Weighted Assets or Tk.4,000.00 million whichever is higher. Accordingly, we have maintained our capital with full compliance. As on 31.12.2018 our Eligible Capital (Solo Basis) stood at Tk. 30,564.17 million as against Tk. 25,104.77 million in December 2017 , Tk. 23,704.16 million in December 2016 ,Tk. 21,342.97 million in December 2015 and Tk. 17,352.63 million in 2014, recording growth of 21.75% in 2018, 5.91% in 2017, 11.06% in 2016, 23.00 % in 2015 and 19.85% in 2014. Risk Weighted Assets (RWA) of Tk.221,140.10 million (Consolidated Basis) and Tk. 212,580.05 million (Solo Basis) recording a Capital Adequacy Ratio (CAR) of 14.68% (Consolidated Basis) and 14.38% (Solo Basis) in December 2018 as against 12.28% in 2017 14.41% in 2016,15.30% in 2015,13.53% in 2014 and 13.52% in 2013 In the year 2015 AIBL issued Mudaraba Subordinated Bond for Tk. 3,000.00 million and in the year 2018 for Tk. 5,000.00 million that meet the qualifying criteria for Tier- 2 Capital as per annex 4 of Basel III Guidelines. Outstanding balance of AIBL Mudaraba Subordinated Bond was Tk.7,400.00 million as at 31-12-2018. Money Laundering and Terrorist Financing Prevention Banks in Bangladesh work closely under the supervision guidance of BFIU. AIBL (in business for 22+ years) has an established framework for AML/CFT compliance. It has formulated its own AML Risk Management Policy Guidelines, approved by BOD. The policy guidelines establishes standards of AML/CFT compliance that is applicable in all sphere of its business (branches /zones /departments /divisions/ wings) and also ensures compliance with existing laws and regulatory requirements. We are pleased to confirm that all reasonable steps are taken to effectively : • • • 27 maintain and verify the identity of customers via KYC (Know Your Client); periodically update information via CDD/EDD; classify accounts as High and Low risk. Higher level of Al-Arafah Islami Bank Limited Annual Report 2018
28. due diligence and monitoring is required for High risk (per Master Circular 19 by BFIU); • monitor and Report of Suspicious Transactions (includes large and structured transactions on/above a specified threshold level). • Arrange seminar, workshop for awareness buildup and training of the employees on a regular basis. Shariah Compliance Our Bank based on Islamic Shariah and therefore strict adherence to Shariah principles is the core strategy of our banking business. So, we have no other alternative but to comply with Shariah rules in all our activities under the guidance of our competent Shariah Supervisory Committee. Besides, we must understand the Maqasid al-Shariah and disseminate the same to our portfolio management. Our Shariah Supervisory Committee contributes a lot to run all the business activities of the Bank in accordance with Islamic Shariah. During the year 2018, Shariah Secretariat of the Bank under the direct supervision of the Shariah Supervisory Committee undertook different programs for ensuring Shariah compliance in the Bank. Agent Banking Agent Banking services is one of the new dimensions of banking services in Bangladesh which are provided through engaged agents under valid agency agreement. Agent is the owner of one or more than one outlet(s) who conducts banking transactions on behalf of the bank. This type of banking is comparatively a new idea that can help the formal banking sector reach out to the marginalized segment of population of the society through agents. It is playing a pragmatic role in paving the way for financial inclusion. We have already launched 200 Agent Banking outlets through 133 Agents as on December 2018 with a view to bringing the un-banked population under banking services. We have already covered 112 Upazillas under 44Districts. With some restrictions and limitations, a number of services are available in agent banking operation. Most of the beneficiaries are living in rural areas and were totally unbanked in their life-time. Total deposit of Agent Banking is Tk. 9440.60 million and the figures are increasing rapidly. Agent Banking Performance At a Glance (As on 31-12-2018) Particular Al-hamdulillah, during the year 2018, 168 branches including 14 new branches were inspected under the Shariah Supervisory Secretariat by the Shariah Secretary and Muraquibs. As per their report, investment Income of Tk. 32.62 million of all 168 Branches and Head Office has been segregated as Doubtful Income. 133 Total Number of Outlets 200 Total Deposit (Tk.) of Agent Bank Number of Foreign Remittance disburse through Agent Bank Amount of Foreign Remittance (Tk.) disburse through Agent Bank Financial Inclusion Financial inclusion is a delivery of financial/banking services at an affordable cost to the vast sections of disadvantaged and low-income segments/group of society. Financial inclusion means that households and businesses have access and can effectively use appropriate financial services. Such services must be provided with responsibility and sustainability, in a well regulated environment. Total Number of Agents Number of Accounts For effective compliance of Shariah in all the areas, some important programs i.e. Shariah Training and Awareness Programs, Clients Get-together -etc. shall be conducted, inter alia, during the year 2019 Insha-Allah. Year 2018 1,36,434 9,440.64 million 2,23,154 8,684.71 million Number of Polly Bidyut Bills Collection 7,18,122 Amount of Polly Bidyut Bills Collection (Tk.) 377.32 million Number of Covered District Number of Covered Upa-zilla 44 112 Cottage, Micro, Small and Medium Enterprises Investment (CMSME) Actually, financial inclusion means not only opening of account but also to deliver financial services to each person with an affordable cost where the clients can deposit or withdraw their money using comfortable way like cash, check, debit/credit card, mobile banking, agent banking and internet banking etc. Cottage, Micro, Small and Medium Enterprises (CMSME), works as the platform for job creation, income generation, and development of forward and backward industrial linkages and fulfillment of local social needs. MSMEs occupied a unique position in the economy of Bangladesh. Here, the MSMEs account for about 40% of manufacturing value addition. They account for about 80% of industrial employment, about 90% of total industrial units and about 25% of total labour force. According to the Bangladesh Bank Guidelines, Al-Arafah Islami Bank Ltd. has already started various schemes and initiatives to include the un-banked marginal people as the process of financial inclusion. The important initiatives are as follows: In the light of the definition given by Bangladesh Bank, AlArafah Islami Bank Ltd. has put utmost priority over CMSME financing in three categories of enterprises viz. Industry, Trade and Services. Al-Arafah Islami Bank Limited Annual Report 2018 28
29. CMSME Investment at a glance Figure in Million Description 2017 2018 Total CMSME Portfolio 104 ,743.90 105,909.20 % of CMSME Portfolio to Total Portfolio 43.29% 39.94% Target of CMSME Investment 55,000.00 58,000.00 Total CMSME Disbursement 9,5684.43 78,981.30 % of Achievement 173.97% 136.174% Promotion in the television media got a major hike during the Ramadan this year. Since we program in 13 major TV channels which included NTV, ETV, Bangla TV, Jamuna TV, Channel-9, Boishakhi TV, SA TV and many more. The Bank sponsored 20 different programs to encourage true Islamic values. The initiative was praised by the stakeholders which had a positive impact on the business of the bank. Investment on Women Entrepreneurs About 50% of the population of Bangladesh are women. Women’s participation in the mainstream of economic activities especially in the productive sectors is crucial for attaining sustainable economic growth, poverty reduction and their empowerment. But women participation in economic sector is inadequate and the number of women entrepreneurs is very low compared to that of their male counterparts. Description Figure in Million Total SME Portfolio in Women Entrepreneurs 5,318.58 Amount of Disbursement to Women Entrepreneurs 6,266.30 our all-around activities. More than 180 news items of the Bank were broadcasted in 800 news coverages through 18 different TV Channels during the year 2018. We continued with news branding on 8 major satellite TV channels such as, Bangla TV, ETV, Channel-i, Bangla Vision, ATN Bangla and ATN News, Desh TV, DBC TV. Agricultural Investment To promote agricultural sector properly, our collateral free agricultural schemes are: Rural Agricultural Investment Scheme (RAIS) & Khamarbari Investment Scheme. Those schemes are running in all rural Branches. Skilled and experienced staffs are recruited in the concerned branches to ensure proper development of marginal farmers. Rural Agricultural Investment Scheme (RAIS) On the basis of socio-economic development of marginal and lessee farmers, this agricultural based programme named ‘Rural Agricultural Investment Scheme (RAIS)’ is running in this Bank. Development of country’s internal food production as well as socio-economic sectors of farmers is the main focus here. We have already listed 2,325 farmers under this scheme and total investment is Tk. 29.10 million of which outstanding is Tk. 28.00 million. Branding & Public Relations Improvements in branding and media relations were priorities during the year 2018. In response to the overwhelming expansion in Bank’s business, we extended our publicity to fulfill the market demand. We brought new dimension in our branding and publicity for establishing a positive image of the Bank. We acquired encouraging national attention towards AIBL throughout the year with Positive branding was one of the vital supports that led the Bank to hold a firm position in the market. More than 15 interviews and talk shows of the Managing Director and other top executives were published or broadcasted in several media. The Bank proved its engagements with the people by sponsoring several events. Banking Fair, SME Fair, School Banking Conference, Anti-Money Laundering Conference, Fair of Chittagong Metropolitan Chamber of Commerce & Industry and many more people-oriented gatherings were sponsored by the Bank. These activities cemented the relationship with clients and uplifted the image as a people oriented bank. We had 3450 Press Release items published in more than 60 different leading Newspapers and Media throughout the year. Besides, more than 800 advertisements were published in 120 different publications during that year. For 2019 our advertisement plan will focus to achieve the best outcome using available media and resources. We shall go into Electronic Media vastly this year, including Radio Branding. Besides, we have taken action to boost-up our promotion in social media. Information Technology Information and Communication Technology (ICT) has become the heart of the banking sector as it is the heart of every robust economy. ICT is helping the banking sector to improve its efficiency and effectiveness of services offered to the customers and enhancing business processes, managerial decision making, and workgroup collaborations which strengthens their competitive position in this rapidly changing and emerging economies. Every bank is rendering their financial services, DATA analysis and classifications, making the ultimate decision with a truly automated system accomplished by the ICT division. AIBL started it’s journey and Automation from 2006 and went LIVE with Online Operation in 2008 and we have grown from strength to strength ever since with zero down time till date. Beside Core Banking System (CBS) we are also using other tech based services to automate, secure and speedup our internal activity as well as to offer the better services to our valued customers. The peripheral softwares are: 29 Al-Arafah Islami Bank Limited Annual Report 2018
30. i . ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. RTGS, BEFTN, BACH, ISS Report, BPA, CIB, goAML- CTR, RIT Reporting, i-Banking, Sylvia (HRMS), Agent Banking, Utility Bill Collection, Sanction Screening Saheban for hassle free International transaction during Hajj. xiv. xv. xvi. xvii. FATCA Compliance, SWIFT, Asset Management, Centralized Anti Virus Management, xviii. Mail Server, xix. OBU, xx. Treasury, xxi. ATM Service, xxii. Mobile ATM Service, xxiii. Debit Card, xxiv. Credit Card, xxv. SMS Alertetc. Card Division of AIBL is working round the clock to provide efficient and satisfactory service to our valued customers. Adapting technological advancement, AIBL Card Division will provide modern day Banking service to our customers Insha Allah. Sustainable Finance Unit There are some Technology based initiatives taken by the bank management to improve the customer services with a view to becoming the best bank in Bangladesh: 1. 2. 3. 4. 5. 6. 7. To become one of the top three Technologically advanced banks in the country within next 3 years Ensure 100% Regulatory Compliance by taking highest possible ICT security measures within a year. To take necessary steps to earn highest possible satisfaction of end-users in ICT Supports Service by 2019. Considering a huge unbanked population across the country, AIBL has been working to commercialize Mobile Financial Services (MFS) soon. Full-phased Internet Banking along with E-Commerce and Payment Gate way will be started very soon. The process of launching of E wallet named- ISLAMI WALLET is nearing completion and expected to go live by this year. Introduce Booth Services as per Bangladesh Bank guideline. Card Division Modern day Banking is unimaginable without digital and alternative payment platform. The synonym of Card is now “Plastic Money”. In busy day to day life, businesses and consumers are interested in faster, safer and more convenient payment methods. At present we are providing wide range of Card products like Debit Card, Credit Card, Instant Card, Pre-Paid Card and Hajj Card. More than 1.50 lac AIBL card holders can use AIBL’s own ATMs as well as other Banks ATM through NPSB network and MasterCard enabled ATMs. We are the principal member of MasterCard, world’s largest retail electronic payment network. We have already introduced most secured EMV certified chip based card. A We are one of the largest Islami Banks of Bangladesh, we are strictly maintaining the Shariah principles while issuing La-Riba Credit Card. As such we are operate on ‘Quard’ concept as far as the LA RIBA card is concerned . We are offering Credit card to our customer with wide range of modern and digitalized services. By that, La-Riba Credit Card has been able to make a positive impact in our customers mind. We are going to provide Hajj card to respected Hajji Saheba and Saheban. Addition to that, we will issue pre-embossed La-Riba Pre-Paid Card from our Hajj booth at Hajj Camp to facilitate respected Hajji Saheba and Al-Arafah Islami Bank Limited Annual Report 2018 This unit aims at achieving stable economic growth along with social development and preserving natural environment. For sustainability we have to utilize all our resources optimally. From this perspective, different policies on environmental protection and social welfare are implied in its business operation. Among those some initiatives are as follows: ESRM (Environmental and Social Risk Management): As per instruction of Sustainable Finance Department, Bangladesh Bank, Al-Arafah Islami Bank Ltd has formulated ESRM guidelines hass been approved by its Board which covers the environmental issues and social aspects in details. Tree Plantation-2018 : In 2018 Al-Arafah Islami Bank has participated Tree Plantation Program in 2018 through its 59 rural branches where12,000 trees were planted. Green Finance: From the beginning till now, AIBL has financed in diversified green areas like LED bulb/Tube Assembly Plant, ETP construction, recycling waste and green brick manufacturing etc. In 2018 total green finance disbursement were BDT 7083.53 million. Corporate Social Responsibility (CSR) Under CSR activities the bank always focuses social development and fulfilling its needs on priority basis. Our Bank is always responsible for social development in addition to business activities. During the year 2018 our total expenditure in CSR was BDT 121.57 million which is shown sector wise in the table below: (Amount in Million BDT) Sl No. Particulars 1 Health Sector 2 Education Sector 2017 2018 10.80 15.03 8.10 15.83 3 Disaster Management 2.60 01.83 4 Cultural Activities 0.90 6.36 5 Environment 1.70 7.13 6 Others Total 133.30 75.39 157.40 121.57 Special Education Scholarship Program: We are also very much aware and conscious about United Nation’s Sustainable Development Goal (SDG). From this perspective we initiated program titled “Al-Arafah Islami Bank Education Scholarship-2018” for achieving 4th SDG’s goal of Quality Education. At the beginning total estimated expenditure would be approximately Tk. 9.00 million for this purpose. Initially about 800 students who are mainly from 30
31. underprivileged portion of the society will be covered under this program within next 4 years . Human Resources Credit Rating Credit Rating Information and Services Limited (CRISL) has adjudged rating for Al-Arafah Islami Bank Limited as follows: Well educated and skilled manpower is the best capital of any organization banks are also no exception to it. We put utmost importance on recruitment and development of human resources. In recruiting process, we put emphasis on attracting talented young stars. Total 291 employees in different categories/ranks joined our fleet during the year 2018 raising our total employees to 3,682 including 262 Executives as on 31.12.2018. We nominated 489 employees in outside training course viz. BIBM, BBTA, BAB etc. in 2018 and they have completed the courses successfully. Long Term : AA (pronounced Double A Two) Short Term : ST-2 Based on : Audited Financial Statement 2016 Date of Rating : 28 June 2018 Validity : 27 June 2019 Outlook : Stable Year-wise Comparative Rating Position: We motivate and facilitate our deserving employees to complete international standard professional degrees like CDCS, CSDG and ACAMS. Presently, we have 56 CDCS, 2 CSDG and 2 ACAMS officials of which 8 and 2 officials have completed CDCS and ACAMS respectively during the year 2018. Date of Rating Long Term Short Term Outlook 30 June 2018 AA ST-2 Stable 30 June 2017 AA ST-2 Stable 30 June 2016 AA ST-2 Stable Activities of AIBTRI 30 June 2015 AA 2 ST-2 Stable Training is an accepted and effective mechanism for human resources development. Training involves the development of skills that are usually necessary to perform comprehensive banking activities. It brings positive changes in Knowledge, Skills, Attitude (KSA) and builds confidence of the human capital, so that they can be efficient in performing their duties and responsibilities. Al-Arafah Islami Bank Training & Research Institute(AIBTRI) keeping pace by putting its best efforts to respond to the need for capacity building of all the officials for achieving the goal of the bank. 30 June 2014 AA 3 ST-2 Positive At present banking activities are being operated by complying with the management of 7 core risks including environment risk, Green/Sustainable Financing and Environment Risk Management, Basel-III and Islami banking guidelines etc. So, building of capacity, vis-à-vis efficiency and acquiring absolute knowledge of all the respective officials of the bank on the aforesaid Core Risks and Islami Banking guidelines is very important now-a-days. So, a Training Policy Guidelines 2018 was approved by the Board of Directors of the bank. The purpose of the Training Policy Guidelines is to create awareness and to equip the employees with proper knowledge on all the existing and new issues/products/ banking laws/rules/regulation/Islamic banking and core risk management guidelines of Bangladesh Bank and other regulators. Training position in 2018: AIBTRI conducted a total number of 106 Training Courses/Workshops/EDPs and Outreach Training Programs where 5,471 participants attended during the period from January to December, 2018. This year AlArafah Islami Bank Ltd. had the privilege of organizing the daylong workshops on “Money Laundering Prevention and Combating Financing of Terrorism” as the Lead Bank nominated by Bangladesh Bank in Cumilla. AIBTRI, CAMLCO and Money Laundering & Terrorist Financing Prevention Division of HO jointly arranged the workshop with Branch Managers and BAMLCOs of all the Banks of Cumilla Region. Interpretation: AA+, AA, AA-(Double A) ( High Safety) : Securities rated in this category are adjudged to be of high credit quality and offer higher safety. The level of rating indicates a security with sound credit profile and without significant problems. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. ST-2 (High Grade): High certainty of timely payment. Liquidity factors are strong and supported good fundamental protection factors. Risk factors are very small. Concluding Remarks Finally, I would recall the valuable suggestions and support of all concerned for which we were able to take the Bank to this level and offer my heartfelt thanks to all of them. Let us pray to Almighty Allah (SWT) to give us courage and strength to achieve our set vision and mission and hope that our sailing through success shall continue in the years to come Insha Allah. (Farman R. Chowdhury) Managing Director Date: 22nd June 2019 31 Al-Arafah Islami Bank Limited Annual Report 2018
32. Dear Shareholders , Assalamu Alaikum Wa Rahmatullahi Wa Barakatuhu. The Board of Directors of the Bank takes the privilege to welcome you all to the 24th Annual General Meeting and has the pleasure of placing before you the Annual Report and the financial statements comprising the Balance Sheet, Profit & Loss Account, Cash Flow Statement and Statement of Changes in Equity of the Bank along with the report of the Auditors and Shariah Supervisory Committee for the year ended 31 December 2018. Economy Analyses World Economy Outlook The International Monetary Fund has cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates. The IMF said that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October. Unveiling its forecast at the World Economic Forum in Switzerland, the fund left its prediction for U.S. growth this year unchanged at 2.5%. But it trimmed the growth outlook for the 19 countries that use the euro currency to 1.6% from 1.8%. Growth in emerging-market countries is forecast to slow to 4.5% from 4.6% in 2018. The IMF expects the Chinese economy the world’s second biggest to grow 6.2% this year, down from 6.6% in 2018 and slowest since 1990. The World Bank and the Organization for Economic Cooperation and Development have also downgraded their world growth forecasts. Rising trade tensions pose a major risk to the world economy. Under President Donald Trump the United States has imposed import taxes on steel, aluminum and hundreds of Chinese products, drawing retaliation from China and other U.S. trading partners. “Higher trade uncertainty will further dampen investment and disrupt global supply chains,” said IMF chief economist Gita Gopinath. Rising interest rates in the U.S. and elsewhere are also pinching emerging-market governments and companies that borrowed heavily when rates were ultra-low in the aftermath of the 2007-2009 Great Recession. As the debts roll over, those borrowers have to refinance at higher rates. A rising dollar is also making things harder for emergingmarket borrowers who took out loans denominated in the U.S. currency. But two things that are particularly concerning, the IMF says, are a potential “no deal “withdrawal of the U.K. from the EU and slower economic growth in China. Retaliatory tariffs between the U.S. and China already contributed to a decline in global economic growth last year, and the IMF says it’ll only get worse if the trade war continues. Bangladesh Economic Outlook Bangladesh Bureau of Statistics (BBS) has estimated Bangladesh’s GDP growth at 7.86 per cent in FY18, which exceeds the official target of 7.40 per cent by 0.46 percentage point. The higher GDP growth in FY18, which also exceeds the previous year’s growth by 0.58 percentage point, occurred due to all-round expansion in i) agriculture, ii) manufacturing, iii) electricity, gas and water, iv) construction, and v) several services sub-sectors. The 7.86 per cent growth in Bangladesh GDP is no doubt impressive, when compared to many other developing countries, but still it remains below the country’s true potential. The high and steady economic growth experienced over the recent years has not resulted in the desired increase in employment generation and eradication of poverty and inequality. Inadequate infrastructure, lack of investor confidence in the economy, and shortage of power & energy are now the major impediments to the country’s development. These impediments must be removed to boost prospects of achieving accelerated economic growth. In terms of US Dollar, the value of GDP in current market prices increased by 9.77 per cent Al-Arafah Islami Bank Limited Annual Report 2018 32 Board of All praise is to be the Almighty Allah, Lord of the Universe and blessings of Allah be upon the Prophet Mohammad (SM) and his descendants & companions Directors’ Report Bismillahir Rahmanir Rahim
33. to US $274,114 million in FY18 from US$249,724 million in the previous fiscal year. Per capita GDP stood at US$1,675 in FY18, compared toUS$1,544 in FY17, showing an increase of 8.48 per cent. The general point-to-point inflation (average) increased by 0.34 percentage points to 5.78 per cent in FY18 from 5.44 per cent in FY17. Between end-June of 2017 and 2018, the Taka depreciated by 3.63 per cent in terms of US dollar. Gross foreign exchange reserves rose to US$32.916 billion in the last working day of FY18 (28 June 2018). The amount was sufficient to cover the country’s import bills for more than six months. Banking sector analysis After the independence, banking industry in Bangladesh started its journey with 6 nationalized commercialized banks, 2 State owned specialized banks and 3 Foreign Banks. In the 1980’s banking industry achieved significant expansion with the entrance of private banks. Now, banks in Bangladesh are primarily of two types: Scheduled Banks: The banks which get license to operate under Bank Company Act, 1991 (Amended up to 2013) are termed as Scheduled Banks. Non-Scheduled Banks: The banks which are established for special and definite objective and operate under the acts that are enacted for meeting up those objectives, are termed as Non-Scheduled Banks. These banks cannot perform all functions of scheduled banks. There are 57 scheduled banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and Bank Company Act, 1991. Scheduled Banks are classified into following types: State Owned Commercial Banks (SOCBs): There are 6 SOCBs which are fully or majorly owned by the Government of Bangladesh. There are now 4 non-scheduled banks in Bangladesh which are: • • • • Ansar VDP Unnayan Bank Karmashangosthan Bank ProbashiKollyan Bank Jubilee Bank A. Private Commercial Banks (PCBS): There are 39 private commercial banks which are majorly owned by the private entities. PCBs can be categorized into two groups: B. Conventional PCBS: 31 conventional PCBs are now operating in the industry. They perform the banking functions in conventional fashion i.e interest based operations. C. Islami Shariah Based PCBS: Al-ArafahIslami Bank Limited Exim Bank Limited First Security Bank Limited Islami Bank Bangladesh Limited ICB Islami Bank Limited ShahjalalIslami Bank Limited Social Islami Bank Limited Union Bank Limited Overall Banking Scenario Banks’ Deposits: Total Deposits (excluding interbank items) of the scheduled banks increased by Tk. 951,680.00 million representing 9.59% point to point growth from Tk. 9,921,460.00 million as on 31 December 2017 to Tk. 10,873,140.00 million as on 31 December 2018. Islamic Banks’ Deposits: All Islamic Banks’ Deposits stood at TK.2,373,669.10 million during the year 2018 as against Tk. 2,143,155.20 million in the previous year 2017 and the deposits increased by Tk.230,513.90 million registering growth of 10.76% in 2017.The share of Islamic Banks’ Deposits as of 31December 2018 stood at 21.83% as compared to 21.60% as of 31 December 2017. Banks’ Advances /Investment: Total Advances/ Investments (excluding bills) of the scheduled banks increased by Tk. 1,160,101.00 million representing 14.60% point to point growth from Tk 7,948,547.0 million as on 31 December 2017 to Tk. 9,108,648.00 million as on 31 December 2018. Islamic Banks’ Investments: All Islamic Banks’ Investments stood at TK 2,309,072.80 million during the year 2018 as against Tk. 2,010,995.90 million in the previous year 2017 and the deposits increased by Tk. 298,076.90 million registering growth of 14.82% in 2018. The share of Islamic Banks’ Investments as of 31 December 2018 stood at 25.35% as compared to 25.30% as of 31 December 2017. Operating Profit: Banks in Bangladesh managed to log in profits for 2018 despite a tough start to the year 2018. The growth of profit was slim owing to low credit/investment demand, cautious lending/investment policy, lowering lending/ investment profit rates and the sluggish business environment. In this situation, Islami Bank Bangladesh Limited registered the highest profit in the top in 2018. The listed second highest National Bank Limited and Al-Arafah Bank logged in profits of Tk.6,308.89 million and placed 5th position in 2018. Among the Islamic Bank, Al-Arafah stood 2nd position. Islami Banking Practices Islami Banking System is becoming more and more attractive day by day to peoples irrespective of nations, religious, colors and species. More than 300 Banks & financial institutions are serving Islami banking throughout the world. At present in our country 8 full fledged Islamic Banks are working successfully. And other traditional banks have Islami Banking Wings conducting Shariah based banking activities. Recent Development of Bangladesh Government Islamic Investment Bond (BGIIB) is the milestone for shariah based banking practices in Bangladesh. Al-ArafahIslami Bank Limited With the objective of achieving success in life here & hereafter following the way directed by the Holy Quran and the path shown by Rasul (SM) Al Arafah Islami Bank Ltd was established(registered) as a public limited company on 18 June 33 Al-Arafah Islami Bank Limited Annual Report 2018
34. Performance at a glance (in Million taka) 2014 2015 Renowned Islamic Scholars and pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is being owned by local shareholders. The equity of the bank has stood at Tk. 23,483.22 million as on 31 December 2018, the manpower was 3,682 and the number of shareholders was 25,793. It has achieved a continuous profit and declared a good dividend over the years. High quality customer service through the integration of modern technology and new products is the tool of the bank to achieve success. The bank has a diverse array of carefully tailored products and services to satisfy customer needs. The Bank is committed to contribute significantly to the national economy. It has made a positive contribution towards the socio economic development of the country with 168 branches of which 26 is AD throughout the country. We are pledge-bound to convert the Bank into an Islami Bank on global standard which will be dynamic in actions, progressive in ideas, honest in dealings, correct in judgment, futuristic in attitude, fair in approach, polite in behavior and devoted to high quality service to customers. Our aims are for boosting modern management, advanced technology, good profitability and steady growth transparency. We are also firmly committed to disclosure and compliance to shariah and regulatory authorities. Today the bank is an agile organization which promotes innovation, encourages improvement, values sense of urgency and develops people who accept challenges and turns them into opportunities. 6,308.89 6,955.77 The bank is contributing to economic and philanthropic activities. AIBL English Medium Madrasah, AIBL library and Al-ArafahIslami Bank Foundation Kidney Dialysis centre patronizes by the Bank are such examples. Activities of Shariah Supervisory committee for the year 2018 Al-hamdulillah, Shariah Supervisory committee consists of 6members specialized in Fiqhul Muamalat (Islamic Commercial Law) according to guidelines given by the Bangladesh Bank to ensure whether all banking operations are transacted in accordance with Islami Shariah i.e. Qur’an, Sunnah, Ijma and Iztihad. Special Features of Al-Arafah Islami Bank Ltd. • 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 Annual Report 2018 2018 approved by Islamic shariah based on the Qur’an & Sunnah. • The bank is committed towards establishing welfare oriented banking system, economic upliftment of the low income group of people, create employment opportunities. • According to the need and demand 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 of the government and creating infrastructure. • The bank is committed to establish an economic system resulting in social justice and equitable distribution of wealth. It is committed to bring about changes in the underdeveloped rural areas for ensuring balanced socioeconomic development of the country through microcredit program and financing of SME’s as well. • According to Mudaraba system, the depositors are the partners of the investment income of the bank. About70% of the investment income is distributed among the Mudaraba depositors. • To render improved services to the clients imbued with Islamic spirit of brotherhood, peace and fraternity and by developing an institutional cohesion. 1995. The inaugural ceremony took place on 27 September 1995. The authorized capital of the Bank is Tk. 15,000.00 million and the paid up capital is Tk. 10,440.22 million as on 31.12.2018. Al-Arafah Islami Bank Limited 2017 23,483.22 244,806.26 7,511.03 2016 22,520.68 199,703.92 6,360.15 21,337.48 162,503.14 169,887.08 19,236.07 146,740.37 6,333.45 18,159.52 166,851.17 Profit before Tax & Provision 196,519.38 Investment 235,905.23 Deposit 261,874.13 266,205.48 Shareholders Equity 34
35. Shariah Supervisory committee has by the grace of Al-mighty Allah managed to contribute a lot to run all the business activities of the Bank according to Shariah guidelines . During the year 2018 with some unavoidable circumstances our Honorable Members of the Shariah Supervisory Committee sat in 5(Five) General Meetings and 1(one) Emergency Meeting to discuss the matters of the Bank to give opinions & directives and given solutions thereof from the view point of Shariah Principles. Muraqibs of the Supervisory committee have visited all branches of the Bank during the year to observe the Shariah compliance, give necessary instructions on the spot and submitted report to the Council. They have also submitted corrective measures to rectify the laws in implementing Shariah guidelines into the banking operations. They identified Tk 32.62 million as doubtful income of the branches of the Bank. Besides, after analyzing balance sheet, the Supervisory committee identified Tk. 469.90 million as compensation realized in different branches and Tk. 1.79 million, Tk. 5.48 million as interest income received from NOSTRO A/Cs of foreign correspondent bank and Bangladesh Bank FC Clearing Account respectively. As a result it is advised to finalize the Balance Sheet of 2018 keeping doubtful in-come amounting to Tk 39.89 million apart from basic income and spend after tax the same on the basis of Shariah prescribed modes. At Last, as per Shariah Inspection Report of 2018, the Doubtful Income of the Bank has been reduced comparatively and we hope that this reducing figure will be continued and necessary steps would be taken time to time, Insha-Allah. A library has been established in the Shariah Council Secretariat of Al-ArafahI slami Bank having about 500 books on Qur’an,Hadith, Fiqh, Islamic Economics and Islami Banking. Honorable members of the Council give Shariah guidelines to run the Bank’s operations taking necessary consultations and data from those books after exhaustive research and study. May Allah give us tawfiq to do all activities at His pleasure, Ameen. AIBL Capital Market Services Ltd. AIBL Capital Market Services Limited is a subsidiary company of Al- Arafah Islami Bank Limited. The Company is incorporated under the company’s Act, 1994 as a public limited company by shares with an authorized Capital of BDT 10 billion (10,000million) and paid up capital of BDT 4 billion (4,000.00 million)to provide stock brokerage services. The paid up capital of the company is subscribed by Al- Arafah Islami Bank Limited and other individuals at the ratio of 60.50:39.50. During the year 2018 the company earned Operating Profit (Before provision for investment & taxation) of Tk 78.51 million with Earning per Share (EPS) Tk.0.02 AIBL Capital Management Limited AIBL Capital Management Limited (AIBLCML), a Subsidiary of Al-Arafah Islami Bank Limited, was incorporated under the companies Act, 1994 on October 25, 2011 with a view to runand manage the operations of Merchant Banking Services with an authorized Capital of BDT 2 billion (2,000 million)and paid up capital of BDT 500 million (500 million). It aims to be one of the leading Merchant Banks of the country by rendering quality Merchant Banking Services with a high level of professional expertise and integrity. During the year 2018 the company earned Operating Profit (Before provision for investment & taxation) of Tk.11.20 Million with Earning per Share (EPS) Tk.0.14. AIBL Assets Management Limited AIBL Assets Management Limited (AIBLAML), a Subsidiary of Al-Arafah Islami Bank Limited, was incorporated under the companies Act, 1994 on January 01, 2014 with a view to run and manage the operations of Assets Management services with an authorized Capital of BDT 500 billion (500 million) and paid up capital of BDT 100 million (100 million). It aims to be one of the leading Assets Management Services of the country by rendering quality Management Services with a high level of professional expertise and integrity. Millennium Information Solution Limited Al-Arafah Islami Bank Ltd. owned 51% shares of Millennium Information Solution Limited a subsidiary company of AlArafah Islami Bank Limited Millennium Information Solution Limited, a private limited Company was incorporated in Bangladesh under the companies act 1994 on February 11, 2001. The main objective of company is to carry on activities relating to developing software products and providing maintenance and support services both the domestic and international clients. Over the years, MILS has established itself as the leading software developer, implementation and service provisioning company in Bangladesh which adheres to the rules of Islamic Shariah. During the year 2018 the company earned Net Income before Tax Tk. 7.66 Million with Earning per Share (EPS) Tk.0.35. Off-shore Banking Unit (OBU) The Bank obtained the Off-shore Banking Unit (“the Unit”) License on 17 February’14 vide letter # BRPD (P3)744(121)/2014-934 from Bangladesh Bank. The Bank commenced operation of this unit from 22 may 2014. The Off-shore Banking Unit is governed under the rules and guidelines of the Bangladesh Bank. Its office is located at AIBL Motijheel Branch, 161, Motijheel Commercial Area , Dhaka 1000. The principal activities of OBU are to provide Mudaraba Investment against payment of import bills under UPAS (Usance Payment at Sight) and Musharaka Documentary Bills in foreign currency (MDB F.C) to its customers. Total finance under UPAS in 2018 was USD 167.16 million and under MDB FC was USD 40.27 million. Our Plan and Strategies for Foreign Exchange Business• to diversify our import and Export portfolio for minimizing potential risks • to ensure routing of all import and export business of our clients through us • to induct best import and export clients from the market • to boost cash import business • to give special attention for remittance service at branch level • to maintain a progressive growth we have to enhance our capacity by acquiring professional and technical knowledge & skill. 35 Al-Arafah Islami Bank Limited Annual Report 2018
36. Position in the Stock Market 14 .68 13.06 14.91 14.03 16.65 Capital Adequacy Ratio Bank’s share sustained a steady strong position since its induction at Dhaka Stock Exchange & Chittagong Stock Exchange in 1998. In Dhaka Stock Exchange the face value of taka 10 of our share was traded at taka 25.40 highest in 2018. The market trend of our bank’s share in Dhaka Stock Exchange from January 2018 to December 2018 is stated in the list: Position in the Stock Market in the list: Month Opening High Low Closing January 24.30 25.20 23.30 23.60 February 23.70 24.60 21.70 24.20 March 24.20 25.10 22.10 23.60 The Consolidated and Solo Basis capital adequacy ratio of the Bank as on 31.12.2018 are appended below: April 24.00 28.40 23.10 25.40 Consolidated Basis May 22.70 24.30 21.00 23.30 June 23.00 23.60 22.20 22.70 July 21.40 22.30 19.20 19.40 August 19.90 22.40 19.40 21.30 September 21.10 21.40 18.10 18.30 October 18.20 19.70 18.00 19.10 November 18.80 19.20 17.90 18.00 December 18.30 20.00 17.90 19.90 2014 2016 2018 a) Core Capital (Tier-I ) 2018 2017 Paid up Capital 10,440.22 9,943.06 Statutory Reserve 8,388.04 7,576.58 Retained Earnings 1,908.96 2,259.16 Non Controlling Interest 1,768.42 1,761.50 Total 22,505.64 21,540.30 Less Good will and other Intangible assets Total Core Capital 125.71 80.45 22,379.93 21,459.85 b) Supplementary Capital (Tier-II) At the end of 2018, the number of depositors stood at 1,779,600 and the accumulated deposit was Tk. 266,205.48 million. The total number of investors stood at 168,102 and total investment extended to them was Tk 261,874.12 million. During the year 2018 the total income was Tk.28,726.20 million and total expenditure was Tk. 22,417.31 million. At the end of the year the profit before tax and provision stood Tk. 6,308.89 million. Provision for Unclassified Investment 2,580.80 2,293.46 488.78 488.78 AIBL Sub Ordinate Bond 7,400.00 3,000.00 Less: Revaluation Reserves for Fixed Assets, Securities & Equity Securities. (391.02) (293.27) Total Supplementary Capital 10,078.56 5,488.97 Assets Revaluation Reserve Capital Adequacy & Reserve Fund According to BRPD Circular the Bank will have to maintain Tk.4,000.00 million Capitals from 1st July 2011. In compliance with the new provision, the bank has raised its Capital from Tk. 26,948.82 million to Tk. 32,458.49 million (Consolidated Basis) and Tk. 25,104.77 million to Tk. 30,564.17 million (Solo Basis). Outstanding balance of AIBL Mudaraba Subordinated Bond Tk. 7,400.00 million as at 31st December 2018. In the year 2015 AIBL issue Mudaraba Subordinated Bond Tk. 3,000.00 million and in the year 2018 for Tk. 5,000.00 million that meet the qualifying criteria for Tier 2 Capital as per annex 4 of Basel III Guidelines. The paid up capital of the bank was at Tk. 10,440.22 million at 31st December 2018. The total reserve fund has stood at Tk.9,365.62 million in the current year against Tk.8,556.96 million at 31st December 2017. In this account, the bank experienced a growth of 9.45%. The Bangladesh Bank has fixed the ratio of minimum capital adequacy (MCR) against Risk-Weighted Assets at 11.875% or Tk. 4,000 million whichever is higher. Annual Report 2018 2017 Tk. in million Progress Analysis Al-Arafah Islami Bank Limited 2015 Total Capital (a+b) 32,458.49 26,948.82 c) Capital Adequacy Ratio 14.68% 13.06% Solo Basis Tk. in million a) Core Capital (Tier-I ) Paid up Capital Statutory Reserve Retained Earnings Total Less Good will and other Intangible assets Total Core Capital 36 2018 2017 10,440.22 9,943.06 8,388.04 7,576.58 1,783.06 2,176.61 20,611.32 19,696.25 125.71 80.45 20,485.61 19,615.80
37. Deposit Mix (%) b) Supplementary Capital (Tier-II ) Provision for Unclassified Investment 2,580.80 2,293.46 Assets Revaluation Reserve 488.78 488.78 AIBL Sub Ordinate Bond 7,400.00 3,000.00 Less: Revaluation Reserves for Fixed (391.02) (293.27) Assets, Securities & Equity Securities. Total Supplementary Capital 10,078.56 5,488.97 Total Capital (a+b) 30,564.17 25,104.77 c) Capital Adequacy Ratio 14.38% 12.28% Products 25,396.00 9.54% b) Low Cost Deposit 48,555.89 18.24% c) High Cost Deposit 192,253.59 72.22% Total 266,205.48 100.00% Deposit Mix as % 2017 23,483.22 22,520.68 19,236.07 21,337.48 18,159.52 2016 2018 Deposits The total deposit of the bank was Tk. 266,205.48 million at 31st December 2018 as against Tk. 244,806.26 million at 31st December 2017 a growth of 8.74% of which Tk. 8,245.70 million was bank deposit and Tk. 257,959.78 million was general deposit. The present strategy is to increase the deposit base through maintaining competitive profit rates and having low cost of funds to ensure a better spread with an average return on investment. Deposit Growth 2016 2017 266,205.48 244,806.26 169,887.08 2015 199,703.92 166,851.17 (In million Taka) 2014 2018 The mix deposit of the bank on December 31, 2018 was as follows: Deposit Mix Products Taka in Million a) Al Wadia Current Account 24,454.57 b) Mudaraba Savings Deposit 37,678.76 c) Other Mudaraba Deposit 152,181.78 d) Mudaraba Term Deposit 49,467.88 e) Bills Payable Total Deposit Mix (%) 10 (In million Taka) 2015 2,422.49 266,205.48 % of Total a) Cost Free deposit Shareholders Equity 2014 Taka in Million 18 72 Cost Free deposit Low Cost Deposit High Cost Deposit Various deposit product of the Bank in 2018: Sl.No Types of Deposit 1. Mudaraba Term Deposit a. 36 Months b. 24 Months c. 12 Months d. 06 Months e. 03 Months f. 01 Month 2. Mudaraba Savings Deposit 3. Short Notice Deposit (SND) 4. Monthly Hajj Deposit 5. Monthly Installment Term Deposit (ITD) 6. Monthly Profit Based Term Deposit (PTD) 7. Monthly Savings Investment (SID) 8. One Time Hajj Deposit 9. (a) Al-Arafah Savings Bond (3 Years) 10. (b) Al-Arafah Savings Bond (5 Years) 11. (c) Al-Arafah Savings Bond (8 Years) 12. Marriage Saving Investment Scheme (MSIS) 13. Pensioners deposit scheme 14. Special Saving (Pension) Scheme 15. Cash WAQF 16. Lakhopati Deposit Scheme 17. Kotipati Deposit Scheme 18. Millionaire Deposit Scheme 19. Double Benefit Scheme 20. Triple Benefit Deposit Scheme 21. Probashi Kallyan Deposit Pension Scheme 22. Mudaraba Student (Minor) Savings A/C 23. Mudaraba Farmers, Freedom fighters Savings A/C 24. Mudaraba Education Savings Scheme 25. Mudaraba Swadhin Savings Scheme 37 Al-Arafah Islami Bank Limited Annual Report 2018
38. AIBL Mudaraba Subordinated Bond : of 3rd, 4th, 5th, 6th and 7th year of maturity at 20% of the bond value respectively. The issue has been proposed to be transferable but will not be listed with any bourses. The Prime Bank Investment Limited is the lead arranger of this issue and Green Delta Insurance Company Limited is the trustee. AIBL Mudaraba Subordinated Bond’ of Tk. 3,000.00 million: AIBL Mudaraba Subordinated Bond’ of Tk. 3,000.00 million issued in 2015. The total profit/ return on the bond (for bond holders) will be calculated by Benchmark Mudaraba Term Deposit Profit rate of the issuer plus a predetermined additional profit rate. The Benchmark Mudaraba profit rate will be issuer’s prevailing highest Mudaraba term deposit profit rate in 6-12 months tenor; to be applied semiannually. The highest prevailing published Mudaraba Term Deposit profit rate in 6-12 months tenor of the issuer will be applicable in semi annual profit rate fixation. Investors are getting an additional profit rate of 2.50% per annum to be paid semi annually along with the benchmark profit by the issuer. The Mudaraba Bond will be redeemed at the end of 3rd, 4th, 5th, 6th and 7th year of maturity at 20% of the bond value respectively. In the mean time 20% of the Bond amount was redeemed at the end of 31st December 2018. The issue has been proposed to be transferable but will not be listed with any bourses. The Standard Chartered Bank is the lead arranger of this issue and Green Delta Insurance Company Limited is the trustee. The details of Implementation Schedule of Mudaraba Subordinated Bond are stated as under: Instrument Name 1,500/- raba Subordi- Disbursement to the Investment Clients of nated Bond AIBL against Bond money received 1,500/- Term Deposit with other Banks (from Bond money received). 2,500/- Disbursement to the Investment Clients of AIBL against Bond money received 2,500/- AIBL 2nd Mudaraba AIBL 2nd Mudaraba Subordinated Bond’ of Tk. 5,000.00 million issued in 2018. The total profit/ return on the bond will be calculated 1.25 times of highest 6 (six) month term Mudaraba Term Deposit profit rate for the preceding 180 days. After each financial year-end, the Issuer will give adjustment to the Bondholders if there is any additional profit reported in the respective financial year for Mudaraba Term Deposit Profit Rate for 6 months tenor. The Benchmark Mudaraba profit rate will be issuer’s prevailing highest Mudaraba term deposit profit rate in 6-12 months tenor; to be applied semiannually. The highest prevailing published Mudaraba Term Deposit profit rate in 6-12 months tenor of the issuer will be applicable in semi annual profit rate fixation. The Mudaraba Bond will be redeemed at the end Amount in Million BDT Term Deposit with other Banks (from Bond money received). AIBL Muda- AIBL 2nd Mudaraba Subordinated Bond’ of Tk. 5,000.00 million: Particulars Subordinated Bond Investment The investment of the bank has stood at Tk.261,874.13 million as on 31st December 2018 as against Tk. 235,905.23 (Net off PR) million in the previous year showing an increased by 11.01%. The investment portfolio of the bank is well diversified and covers a broad spectrum of businesses and industries including readymade garments, textile, edible oil, ship scraping, steel & engineering, chemicals, pharmaceuticals, cement, telecommunication, construction, health care, real estate, education, transport and investment under consumer schemes. We have geared up efforts to Hon’ble Governor of Bangladesh Bank handed over scholarships to meritorious students at ‘AIBL Scholarship Program 2018’ Al-Arafah Islami Bank Limited Annual Report 2018 38
39. improve the recovery rate of disbursed investment and also taken adequate measures for converting the classified investment into performing assets . As a result, classified investment of the bank could be kept at a low level far below the national average. It is 4.79% in our bank as on 31 December 2018. Miscellaneous Total (Including Profit Receivable Less Unearned Profit on Investment Total Investment Growth 3 1 Sectorwise Investment (%) 28 261,874.13 235,905.23 196,519.38 162,503.14 146,740.37 (In million Taka) 6,929.42 269,914.49 8,040.36 261,874.13 Agriculture,Fishing and Forestry Industry Construction 1 3 Water Works & Sanitary Services 51 Transport & Communication 1 Storage 12 Trade Finance Miscellaneous Income 2014 2015 2016 2017 2018 The bank gives top-most priority to the creation of quality assets and does appropriate risk grading while approving commercial, trade and project investment to different clients. Sector wise Investment 2018 Sectors Agriculture, Fishing and Forestry Industry Construction Water works & Sanitary Service Transport & communication Storage Trade Finance Taka in million 3,210.50 138,791.50 33,689.80 1,758.50 9,369.40 1,405.50 74,759.87 Investment income: The investment income was Tk. 24,956.81 million during the year 2018 which was growth of 21.79% over the previous year. Investment income is 86.88% of the total income of Tk.28,726.20 million. Income from other than investment: The bank has earned Tk. 3,769.39 commission income, exchange income, locker rent etc. in the current year which is 13.12% of the total income. It indicates 5.96% growth over the year 2017. Expenditure Profit paid to depositors: The Bank has paid the depositors Tk. 16,256.61 million which is 65.14% of the investment income and 72.52% of the total expenditure for the year2018. It was 37.95% growth over the year 2017. Administrative and Other Expenses: The administrative and other expenses were Tk. 6160.70 million during the year showing 16.06% growth over the year2017. It is 27.48% of the total expenditure. The Bank Achieved ‘Best Corporate Award’ from ICMAB for outstanding performance on Shariah-based Banking 39 Al-Arafah Islami Bank Limited Annual Report 2018
40. Import Business Total Income & Expenditure (In million Taka) Total import business of the bank stood at Tk. 168,573. 80 million during the year 2018 as against Tk 156,700.00 million, Tk.118,786.60 million and Tk.107,049.80 million in the previous year 2017, 2016 and 2015 respectively. Our import business increased by Tk. 11,873.80 million i.e. 7.58% growth in 2018 as compared to increase of Tk. 37,913.40 million i.e. 31.92% growth in 2017 and increase of Tk 11,736.80 million i.e. 10.96% in 2016 respectively. Target for Import business for the year 2019 has been fixed at Tk. 210,000.00 million expecting growth of 24.57%. 22,417.31 28,726.20 24,048.39 17,092.62 21,621.69 14,110.66 21,079.94 14,719.79 15,878.34 22,211.79 Total Income Total Expenditure Import Business Growth 2014 Operating Profit 2017 37,913.40 7.58% 2018 Total Export business of the bank stood at Tk. 114,481.90 million during the year 2018 as against Tk. 104,540.00 million, Tk 88,152.20 million, Tk. 79,362.90 million in the previous year 2017, 2016 and 2015 respectively. Our export business increased by Tk. 9,941.90 million i.e. 9.51% growth in 2018 as compared to increases of Tk. 16,387.80 million i.e. 18.59% growth in 2017, Tk. 8,789.30 million i.e. 11.07% in 2016. Our target for Export business for the year 2019 has been fixed at Tk 145,000.00 million expecting growth 26.66%. 6,308.89 6,955.77 7,511.03 6,360.15 6,333.45 4,948.56 4,755.54 4,326.78 3,223.27 2016 Export Business (In million Taka) 1,729.83 2015 156,700.00 11,873.80 The bank earned operating profit of Tk. 6,308.89 million during the year 2018. The operating profit of the Bank during the year 2017 was Tk. 6,955.77 million and thus the Bank attained negative growth of 9.30 % in respect of operating profit. The provision for income tax for the year amounted to Tk.1650.79 million and divisible profit available for appropriation amounted to Tk.1,595.06 million. 5,805.10 Operating Profit 5.73% Import Growth (Amt) Growth % 2018 10.96% 168,573.80 2017 107,049.80 2016 11,736.80 31.92% 2015 101,244.70 2014 118,786.60 (In million Taka) Export Business Growth 2017 2018 Export Growth (Amt) Growth % International Banking Wing (IBW) International Trade We are now more capable and confident to handle Foreign Exchange Business. Presently, we have 26 AD Branches through which we have handled total foreign exchange business of Tk. 319,972.90 million during the year 2018 as against Target of Tk. 355,000.00 million 2018. Our Foreign Exchange business increased by Tk.38,032.90 million recording a growth of 13.49%. Target of International Trader for the year 2019 has been fixed at Tk. 405,000.00 million with 26.57% growth. Al-Arafah Islami Bank Limited Annual Report 2018 40 2014 2015 2016 2017 114,481.90 2016 9,941.90 9.51% 2015 16,387.80 18.59% 2014 88,152.20 2013 8,789.30 11.07% 2012 79,362.90 2011 3,519.00 4.64% 2010 75,843.90 2009 104,540.00 (In million Taka) 2018
41. Remittance Total remittance of the bank stood at Tk .36.917.20 million during the year 2018 as against Tk. 20,700.00 million, Tk.11,735.40 million and Tk. 9,498.00 million in the previous year 2017, 2016 and 2015 respectively. Our remittance increased by Tk. 16,217.20 million i.e. 78.34% in 2018 as compared to increases of Tk.8,964.60 million i.e. 76.39% in 2017, Tk. 2,237.40 million i.e. 23.56% in 2016 respectively. Target for Remittance business for the year 2019 has been fixed at Tk 50,000.00 million expecting growth 35.44%. Comparative position of Treasury operations: (Tk. In million) Particulars Exchange Gain (In million Taka) 36,917.20 2017 78.34% 2016 16,217.20 20,700.00 8,964.60 76.39% 2015 11,735.40 2,237.40 23.56% 2014 9,498.00 956.90 11.20% 8,541.10 Remittance Growth (Amt) Growth % 2018 Treasury Operations: Being an integrated unit, AIBL Treasury manages day to day Liquidity in foreign currencies and all other Foreign Exchange Risks. Treasury Division, IBW engages in foreign currency Fund Management and ALM activities. Prudent ALM and Foreign Exchange Operations however contribute significant profit and exchange earning of the bank. In FX treasury, we participate interbank market, conduct transaction with central bank and with Foreign Banks/FIs. We always try to adhere within the laid down policies and guidelines of the bank and regulatory bodies. Year 2018 was a high challenging year for Treasury in terms of managing FX Risk, Profit Rate Risk and Liquidity Risk of the Bank in the sideways economic activities. The demand of BDT observed over the year although overnight borrowing dependencies will be reflected in the year end balance sheet of some renowned Banks. Liability pricing shifting up from June and jumped in December this year for bringing IDR/ADR within limits. From January to December 2018 almost 7% BDT has depreciated from January to December 2018 and the country has been suffering huge foreign exchange gap and running with large trade deficit. With the wave and ditch of market, Treasury Division of the bank tried to take maximum market opportunities. We have earned revenue of Tk. 1,401.60 million during 2018 as against Tk.1,234.00 million in 2017 recording 13.58% growth through Treasury operation. 2017 Growth % 892.00 860.10 3.71% Rebate Income (Rebate sharing by FI FI Correspondents) 91.60 90.00 1.78% Income from placement to OBU & EDF 418.00 283.90 47.23% 1,401.60 1,234.00 13.58% Total Income Remittance Business Growth 2018 Our local Treasury operations it’s functioned to ensure efficient fund management to maintain CRR & SLR matching with total Deposit flow & Investment requirements of the bank along with the growth targets of the bank. While Foreign Treasury remained activity throughout the year 2018 for utilizing available FC fund, exploring interbank and overseas markets to meet up the extended demand against off-balance sheet commitments and Off-Shore Banking Unit. Moreover, Treasury Division of the Bank kept itself competitive throughout the year in terms of provisional deposit rates, rate of return of investment, exchange rate and diversified Treasury products. Foreign Trade Processing: There was no Centralized processing Hub in the bank before 2014 and then all Foreign Exchange related products were processed at branch level. IBW has setup its long desired Foreign Trade Processing Department (FTPD) and started functioning since 2014. FTPD got its focus to maintain proper relation with the most esteemed correspondents. The division is doing major portion of foreign trade business of the bank with limited manpower and ensures the cost effectiveness. As the cash LC/back to back LCs are issued and all sorts SWIFT message correspondence conduct from a single point - it’s easy to minimize the sanction risk and monitor other internal and external regulatory risk. Moreover, FTPD check the general ledger balancing regarding LC liability, bills liability and cash security and very keen to ensure there is no mismatch at any point of time along with this. FTPD is focusing that all relevant charges are realized as par Head Office approval. By this way, FTPD is targeting to minimize the internal control and compliance risk and exposure to foreign exchange risk. EDF Operations: EDF operations are now being handled under shariah Base Restricted Mudarabah mode between AIBL & Bangladesh Bank and allowing investment to the client under Mudarabah Foreign Currency Investment (MFCI). Meanwhile Bangladesh Bank also introduced online based EDF management software for smooth handling of EDF application, disbursement and repayment related works. In 2018, we have received EDF fund from Bangladesh Bank for USD 141.15 Million. Off-shore Banking Operation: Our Off-shore Banking Unit (OBU) has been performing its operation at our Motijheel Branch since 2014. Total finance under UPAS in 2018 was USD 167.16 million and under 41 Al-Arafah Islami Bank Limited Annual Report 2018
42. • To keep Treasury positions within set benchmark. • To cope up with new products/market dynamics with the extended FX volume. • To maintain optimum liquidity in all seasons. • To achieve set earning target for 2019. • To ensure maximum adherence with organizational goal. • To spread treasury networks through diversified functions/products within policy. • To enrich treasury officials with local/foreign training. • To match and keep updated treasury tools/dealing room equipments in touch. MDB FC was USD 40.27 million. As on 31.12.2018 total outstanding UPAS was USD 78.92 million and under MDB FC was USD 12.64 million and Foreign Currency borrowing for Off Shore Banking Unit was USD 45.01 million. Introduction of Shariah Based Products for Handling of Import & Export Business: Export Products: Musharaka Documentary Bill (MDB in BDT): Inland post export facility was allowed only under QIBP mode before 2014. The Musharaka Documentary Bill (MDB) mode has been introduced and now investment is parallelly made under Shariah based MDB mode. Internal Control & Compliance Wing MDB (FC): No export finance in the form of F/C was allowed before 2014. The AD Branches are now also allowing export finance under Musharaka Documentary Bill (MDB-FC) against Deemed Export by borrowing fund from OBU. Internal control is a process, effected by a bank’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance (COSO). Internal control is a process, rather than a structure. The board of directors and senior management are responsible for establishing the appropriate internal control environment & culture to facilitate an effective internal control process and for monitoring its effectiveness on an ongoing basis and each individual within an organization must participate in the process. It is not a separate activity disconnected from the rest of business activities, rather is an integral part of those activities. Internal control plays a critical role in managing risks of Financial Institutions. Murabaha Foreign Currency Investment (MFCI) Product The product Named ‘Murabaha Foreign Currency Investment’ (MFCI) has been introduced for allowing investment in FC. Now we are allowing facilities under EDF under MFCI mode. Mudaraba Foreign Currency Deposit (MFCD) A/C AD branches are maintaining “Exporters FC A/C” after disbursement of MDB FC under this Account. Export Development Fund is also deposit under MFCD A/C. Professional Development Programs for Foreign Exchange Officials: Under bank finance and close supervision till now 56 officials of our bank are qualified as CDCS (Certified Documentary Credit Specialist), 2 CSDG and 2 ACAMS from 2013 to 2018. The perfect effectiveness of Internal Control system doesn’t depend on ICCW alone. Rather it depends on the collaborative functions of the following components of control environment. The components of Internal Control Environment are Board of Directors, Board Audit Committee, Management, Organizational Structure, Independent audit mechanism, Shariah Supervisory Committee, Concurrent Audit, Whistle Blowing System, Zonal Office, Information and Communication Technology (ICT), Management Information System (MIS), Policy/Manuals/Guidelines/Circulars, Risk Management System, External Auditors Board of Directors, Board Audit Committee, Management, Organizational Structure, Independent audit mechanism, Shariah Supervisory Committee, Concurrent Audit, Whistle Blowing System, Zonal Office, Information and Communication Technology (ICT), Management Information System (MIS), Policy/Manuals/ Guidelines/Circulars, Risk Management System, External Auditorsand finally all employees of the Bank. SWIFT Sanctions Screening: We have already implemented SWIFT Sanctions Screening solution to our Core Banking Software for screening of all incoming and outgoing transactions to minimize the AML/ CFT risks which has increased our acceptability and goodwill to our all correspondents home and abroad. Our plan and Strategies for Foreign Exchange Business goal for year 2019 • To diversify our import and export portfolio for minimizing potential risks • To ensure routing of all import and export business of our clients through us • To induct best import and export clients from the market • To boost up cash import business. • To give special attention in remittance service at branch level • To maintain a progressive growth, we have to enhance our capacity by acquiring professional and technical knowledge & skill. • Introduce Remittance Software and Automation. • Legal and international marketing (Meeting, Remittance Program, remittance fair, Overseas visit) • Implementation of Sanction Screening for remittance payment. • Increase of Remittance Drawing Arrangement. • Arrangement of On-line base Vessel Tracking System. • Strengthening the Hajj Management system of our Bank. Al-Arafah Islami Bank Limited Annual Report 2018 Internal Control and Compliance Wing of the bank consists of 3 (three) division’s viz. (i) Audit & Inspection (A&I) Division, (ii) Compliance Division and (iii) Monitoring Division (MoD). Activities of ICCW in 2018 are briefly appended below: Internal Control & Compliance Wing is working directly or indirectly with an aim for establishment of Sound Corporate Governance. Activities performed by several divisions under ICCW in the year 2018 are as follows: a) Audit & Inspection Division: i) Risk Based Internal Audit:- As per approved audit plan, Audit & Inspection Division has completed 100% audit including 42
43. surprise & special audit in the branch and Head Office. ii) In 2018, total 1, 76,947 lapses have been detected by Internal Audit in the Branches and 30% of lapses has been rectified on spot. iii) In 2018, Internal Audit & Inspection team detected income leakage of Tk. 153.84lac regarding nonrealization of commission, charges, fees etc. and realized Tk. 12.10lac on spot and tk. 108.46 lac through compliance division. b) Compliance Division: There are two parts of Basic Compliance Functions: (i). Preventive Part: a. Policy-Procedure Formulation b. Knowledge & Awareness Dissemination c. Liasion with Regulators. (ii). Corrective Part: a. Correction of existing Policy-Manuals. b. Internal Audit Compliance c. External Audit Compliance d. Bangladesh Bank Inspection Compliance. Circulars, Manuals& Guidelines and disseminates the same to all branches, departments, divisions, wing & zonal offices in order to perform the banking activities properly.An archiving system has been introduced by uploading all the Circulars, Instruction Circulars, Manuals and Policy Guidelines (issued from 2012) in the DocuDEX 3.0 system of Business Process Automation (BPA) under the supervision of ICCW.Under the system, the officials of the Bank (who have an user ID) can easily access in the DocuDex 3.0 system & able to go through, download the expected Circulars, Manuals, Policy Guidelines and can enriched their Banking knowledge. Procedures of download from BPA are follows: Followings are the compliance functions of this Division: (i). Internal Audit Compliance:In 2018, total no. of 1,13,318 lapses have been rectified out of total uncomplied lapses 1,71,388 (2014-2017: 73,351& 2018: 98,037) through follow-up (66.12%). CHROME/MOZILA http://192.168.5.135/login User ID & Password DocuDEX 3.0 Search Documents Documents Option-1 Option-2 Option-3 Document ID/ ReferenceNo. Key word of subject Matter Create Date (Before Date of Circular Issue Date) Search Search Search Date from Calendar Apply Search (ii). Bangladesh Bank Inspection Compliance:All Bangladesh Bank Inspection Compliance report has been sent to Bangladesh Bank in time. In the meantime, 98.20% lapses have been rectified and correspondence are continuing for complianceof rest lapses. Others: Other works performed by the division are assessing branch ICC Performance Gradation (based on Audit); submission of Report before Board, BAC regarding Implementation status of Board, BAC decisions& Bangladesh Bank Inspection Compliance report etc. (iii). Memo Submission: The division has submitted 10memos of branches, 6memos of Head Office 47memos of important miscellaneous issues to the BAC and Board on the basis of risk prioritization. iv) Weekly Communication Meeting: The following issues are discussed in the Weekly Communication Meeting: • Settlement procedure of Very Serious Lapses (VSL). • How to strengthen branch ICC performance gradation. • Pending compliance of Bangladesh Bank inspection. • Discussion on Branch business exposure and performance. • Nature wise residual lapses of Independent Concurrent Auditor. C) Activities of Monitoring Division (MOD): 1. The Performance of Independent Concurrent Auditor at the branches: Concurrent Audit is a systematic and timely/spot examination of financial transactions on a regular basis to ensure accuracy, authenticity and compliance with procedures and guidelines. Al-Arafahislami Bank is the pioneer of this system. The main objectives of Concurrent Audit is to strengthen Internal Control System of the Branches/Divisions by timely detecting of irregularities and taking appropriate measures to prevent errors/lapses, fraud/forgery etc. immediately after occurrences and/or shortage possible time. Now 18 (eighteen) branches have been brought under the circumference of Concurrent Audit system. Based on 31st December 2018, 70% business of the Bank are covered where Independent Concurrent (IC) Auditor have started their activities.Evaluation of the performance articulates that the percentage of rectification of identified irregularities is 71%. Concurrent Audit system bears a fruitful outcome in terms of prompt rectification and Branches are well ahead towards the regularization of the lapses with robust internal control. Monitoring Division prepare memo on major irregularities (VSL and SL) on the basis Compliance Division has made arrangement of total 12Weekly Communication Meetings (WCM) in 2018 where total number of 960 VSLs have been discussed of which 334 VSLs have been settled. v) Audit File Closed:Total audit files closed in 2018 are134 of which 46 audit files are of 2016 and 88 files are of 2017. vi) Archiving Circular, Instruction Circular, Manual and Policy Guidelines: Every year our Bank issues many Circulars, Instruction 43 Al-Arafah Islami Bank Limited Annual Report 2018
44. of monthly reports of concurrent auditors and submit to the Board Audit Committee (BAC) for future guidance. 2. Follow up of Zonal heads visit reports. To monitor the activities of the branches, The Zonal Heads visit all the branches under the Zone and submitted the visit report to the MD’s secretariat and afterwards send it to the Monitoring Division for needful follow-up. During the year 2018Monitoring Division received 668 reports and needful follow-up done accordingly: Statements of Self Assessment of Anti-fraud Internal Controls have been prepared on half yearly basis and sent to Bangladesh Bank in time. Sustainable Finance Unit 3. Watch Tower activities: Monitoring Division works as watch tower of the overall control system of the bank through offsite monitoring and Online Monitoring. As a part of online monitoring activities while random sampling checking of Abnormal Changes in GL items of branches, Monitoring Division identified some deviations in various accounts heads (GL heads)during the year-2018& those are all rectified subsequently. 4. Follow-up of MPI/Murabaha Godown visit report: Concurrent auditors (General and Independent) of branches are being submitted stock report of MPI/ Murabaha of respective Branches. The submitted reports have been analyzed and necessary follow-up done from this division as well as referred to IAD. 5. Monitoring of Quarterly Operation Report (QOR), Employees/Staff Account, Mandatory Leave (ML) and Employee Transfer: Monitoring Division follow-up the Quarterly Operation Report (QOR), Employees/Staff Accounts, Mandatory Leave, Employee Transfer and communicates with the respective Division / Brance for rectification if found any deviation. 6. Self Assessment of Anti-fraud Internal Controls: The main goal of this unit is to ensure balance between economic growth, environmental sustainability and social welfare. All elements existing in our surrounding environment such as air, water, soil, forests, mineral resources etc. all are complimentary to each other. All components are useful and essential to us in any way. Over exploitation or destruction of this resources with the growth of business activities and modern civilization may ruined the balance of the environment which may cause various types of natural disasters and threat to life of all living beings.For sustainability we have to utilize all our resources optimally (such as water, electricity, paper etc.).From this perspective SFU is constituted to incorporate environmental safe keeping and other social responsibility in its ethical business activities. To achieve sustainable goal, AlArafahIslami Bank has taken following step as per Bangladesh Bank instruction time to time. ESRM (Environmental and Social Risk Management): According to instruction of Sustainable Finance Department, Bangladesh Bank, Al-ArafahIslami Bank Ltd has newly formulated and approved ESRM guideline by its board. This new guidelines includes environmental issues in an extended manner and social aspects as new consideration. From now onwards all investment proposals will be treated to assess environmental and social risk under new rules of this guidelines. This is will be a newly added advantage in risk management leading to achieve our business development goals in all respects. Bangladesh Bank Islamic Refinance under Green Banking Activities: Al-Arafah Islami Bank Ltd. has financed clients through different branches Tk. 40.00 million from Bangladesh bank Islamic Refinance fund for ensuring working environment safety at work place. Our rate of return is 9% at Blankets were donated to the Honorable Prime Minister’s Relief Fund to help cold-affected people Al-Arafah Islami Bank Limited Annual Report 2018 44
45. client level . Mostly this will encourage clients to be complied with the environmental rules and regulations which will boost the economic growth as well as the environmental and social protection. Tree Plantation-2018 : Similar to other years, Al-Arafah Islami Bank Ltd observed a month long Tree Plantation Campaign starting from 08.08.2018where 59 branches located in rural area were participated. In this program approximately 12,000 seedlings of different trees were planted in those regions under direct supervision of the branches where budgeted expenses was of tk. 11,91,355/= . Besides this, each branch has also arranged rally, seminar, road show and tree distribution and plantation program on different school, college, madrasah campuses. Green Finance: From the beginning of its green banking, AlArafah Islami Bank Ltd. has expanded it activities in different green sectors like LED Bulv/Tube Assembly Plant, production of burnable from waste tire by the process of pyrolysis, ETP construction, recycling waste and green brick manufacturing etc. A brief summary of green finance presented in the table below: Product wise Green Finance For the Quarter: Oct-Dec, 2018. In Million BDT Sl No. Product Disbursement Amount 1 Having and installation ETP 946.57 2 Green Brick manufacturing 945.72 3 LED Bulv/Tube Assembly Plant 179.14 4 Recycling and reusing waste 5 Production of burnable oil from waste tire by the process of pyrolysis Total 80.43 3.79 2155.65 Corporate Social Responsibility (CSR) Under CSR activities the bank always focuses social development and fulfilling its needs on priority basis. The bank is increasing its contribution day by day. The bank maintains ethics in all its activities and always responsible for social development in addition to economic development. To enhance social service the bank has facilitated farmers & freedom fighters to open savings accounts with special facilities of giving profit on daily balance without realizing any account maintenance fee. During the year 2018 we accomplished different humanitarian and social activities which include allocation of fund Tk. 121.60 million . Besides we have taken a program to develop manpower and make them employed as well as assisting them for employment in abroad. CSR activities in the year 2018: (Amount in Million BDT) Sl No. Particulars 1 Health Sector 2 2017 2018 10.80 15.03 Education Sector 8.10 15.83 3 Disaster Management 2.60 01.83 4 Cultural Activities 0.90 6.36 5 Environment 1.70 7.13 6 Others 133.30 75.39 157.40 121.57 Total Education Scholarship: Al-Arafah Islami Bank Ltd is contributing to the overall development of the society significantly through its initiatives to achieve Sustainable Development Goal (SDG). In this context, the bank has taken step to spread quality education which is the 4th most prioritized goal of SDG. So from 2018 the bank has successfully begun one most deserving event titled “AlArafah Islami Bank Education Scholarship Program-2018” for underprivileged meritorious students who have recently passed HSC examination. It will be continued each year from now onward. Under this program, students who have been selected will be awarded financial assistance for four years period of studying at bachelor level and payment for books and dresses once in a year. For the beginning period total estimated expenditure would be approximately Tk. 9 million in this purpose. Initially about 800 students will be covered under this program within next 4 years. Cottage, Micro, Small and Medium Enterprises Investment (CMSME) Cottage, Micro, Small and Medium Enterprises (CMSME), works as the platform for job creation, income generation, and development of forward and backward industrial linkages and fulfillment of local social needs. MSMEs occupied a unique position in the economy of Bangladesh. Here, the MSMEs account for about 40% of manufacturing value addition. They account for about 80% of industrial employment, about 90% of total industrial units and about 25% of total labour force. In the light of the definition by Bangladesh Bank, Al-Arafah Islami bank Ltd. is giving a priority over CMSME financing to three categories of enterprises viz. Industry, Trade & Services. Total Investment To CMSME Investment Figure in Million Description Total CMSME Portfolio 45 2017 2018 104,743.90 105,909.20 % of CMSME Portfolio to Total Portfolio 43.29% 39.94% Target of CMSME Investment 55,000.00 58,000.00 Total CMSME Disbursement 95,684.43 78,981.30 % of Achievement 173.97% 136.174% Al-Arafah Islami Bank Limited Annual Report 2018
46. In CMSME sector , we have a number of collateral free schemes. Those schemes are running in all Branches. Skilled and experienced staffs are recruited in the concerned branches to ensure proper expansion of collateral security free investment. paying massive attention to invest on agricultural sectors. The main items of agricultural sectors are- crops, fisheries, warehouse, poverty alleviation, irrigation, livestock development etc. At the end of December 2015, total agricultural investment portfolio is Tk. 2800.17 Million for the fiscal year 2017-2018. With collateral and without collateral both are practiced in agricultural investment. Investment on Women Entrepreneurs About 50% of the populations of Bangladesh are women. Women participation in the mainstream of economic activities especially in the productive sectors is crucial for attaining sustainable economic growth, poverty reduction and women’s empowerment. But women participation in economic sector is inadequate and the number of women entrepreneurs is very low compared to that of their male counterparts. The Achievement of 2017-2018 is as follows: (Figure In Million) Sector wise Agricultural Disbursement a) Crops Al-Arafah Islami Bank Ltd. is working with women entrepreneurs to make them capable of earning by connecting with country’s economic activities. We give priority to women entrepreneurs to invest on various productive sectors. By the side of collateral secured investment, collateral security free investment is also considered in the question of women development. Description Figure in Million Total SME Portfolio in Women Entrepreneurs 5,318.58 Amount of Disbursement to Women Entrepreneurs 6,266.30 Current Fiscal Year Disbursement (2017-18) 725.10 Accumulated Outstanding (31.12.2018) 676.90 b) Fisheries 729.90 565.10 c) Crop Storage b) Livestock Development d) Poverty Alleviation 264.90 379.30 1779.90 973.20 125.10 43.60 a) Irrigation Tools 56.70 203.60 e) Agricultural Tools 28.90 138.60 g) Others Grand Total 240.30 229.80 3950.80 3210.10 To promote agricultural sectors properly, our collateral free agricultural schemes are: Rural Agricultural Investment Scheme (RAIS) & Khamarbari Investment Scheme. Those schemes are running in all rural Branches. Skilled and experienced staffs are recruited in the concerned branches to ensure proper development of marginal farmers. Agricultural Investment Agricultural Investment is dealt by Agricultural Department functioning under the control of SME Investment Division. To face the increasing food shortage of the country, bank is The Bank provided 100 computer sets to Jamiya Islamiya Ubaida Nanpur Madrasa under CSR activities Al-Arafah Islami Bank Limited Annual Report 2018 46
47. Special Schemes for Agricultural development Rural Agricultural Investment Scheme (RAIS) On the basis of socio-economic development of marginal and lessee farmers, this agricultural based programme named ‘Rural Agricultural Investment Scheme (RAIS)’ is running in this Bank. Development of country’s internal food production as well as socio-economic sectors of farmers is the main focus here. We have already listed 2325 farmers under this scheme and total investment is Tk. 29.10 million of which outstanding is Tk. 28.00 million. Al-Arafah Khamerbari Investment Scheme To make a priority to invest in the crop sector of Bangladesh, we have launched the product named: “Al-Arafah Khamerbari Investment Scheme (Khamerbari)”. With this product, we work for farmer’s community surrounding the Branch. Our field officials motivate farmers to grow the potential corps based on their previous farming experience. This scheme is an innovative action to develop the crop sector of Bangladesh. We have disbursed 73.00 million investments among 1085 farmers under this scheme so far. another and at the end of business cycle, the profit will be distributed between both the parties as per previously signed agreement. The investment comes from the first partner who is called “Saheb-ul-maal”, while the management and work is an exclusive responsibility of the other, who is called “Mudarib”. All the losses will be contributed by the fund provider. In this scheme, Bank shall purchase cows, goats etc. on behalf of client under the limit of sanction amount. Clients shall responsible for daily maintenance of that animal as per terms and conditions. After a certain time, that animal will be sold in current market rate and then the profit shall be distributed as on previous agreement. In this scheme, we have already disbursed Tk. 19.31 million for fattening of 401 Cows and 13 Buffalos among 152 farmers so far. This was a great achievement we think. This is a special scheme in the banking sector of Bangladesh. Agent Banking As per instruction of Bangladesh Bank, and to increase the production of different types of spices like Pulse, Oil-seed, Spice and Maize, we started investment at a lowest rate of profit (only 4%) to the marginal farmers. We have disbursed 23.22 million investments among 487 farmers under this sector so far. Agent Banking services is one of the new dimensions of banking services in Bangladesh which is provided through engaged agents under valid agency agreement. Agent is the owner of one or more than one outlet(s) who conducts banking transactions on behalf of the bank. This type of banking is comparatively a new idea that can help the formal banking sector reach out to the marginalized people of the society through agents. It is playing a pragmatic role in paving the way for financial inclusion. Financial inclusion is a tool for inclusive economic growth and financial development of a country. Mudaraba Animal Husbandry Scheme Agent Banking Mission In the concept of Islamic Finance, Mudaraba is a special kind of partnership business, where one partner gives money to To bring low cost and secured banking services to the unbanked people of Bangladesh as a part of financial inclusion. Growing spices at a lowest profit rate (4%) The Bank provided Tk. 20 lakh to Islamic University of Technology (IUT) under Corporate Social Responsibility (CSR) 47 Al-Arafah Islami Bank Limited Annual Report 2018
48. Agent Banking Vision Number of Accounts To create more satisfied   financial inclusion by offering technology driven banking solutions to the unbanked people living in rural area of Bangladesh. Total Deposit (Tk.) of Agent Bank 70,774 1,36,434 6,839.82 million 9,440.64 million 86,102 2,23,154 3,132.82 million 8,684.71 million Number of Polly Bidyut Bills Collection 43,741 7,18,122 Amount of Polly Bidyut Bills Collection (Tk.) 21.44 million 377.32 million Number of Covered District 30 44 Number of Covered Upa-zilla 88 112 Number of Foreign Remittance Disburse Through Agent Bank Agent Banking Product & Services All kinds of account opening Cash deposit & withdrawal Fund transfer to any account of AIBL Foreign remittance disbursement Utility bill payment (Polly Bidyut) Balance inquiry & mini-statement Electronic Fund Transfer (BEFTN/RTGS) MTDR & ITD, MDS etc. accounts for customers SME, Agricultural & Micro investment processing Investment repayment ATM debit card for agent banking customer MICR cheque books School banking Internet banking facility etc. Amount of Foreign Remittance (Tk.) Disburse Through Agent Bank Agent Banking Growth Report Agent Banking Specialty Real-time transactions all over the country All kinds of banking services (except DD, Pay order and foreign transaction) Transactions are authenticated by biometric Automatic transaction slip SMS notifications for all transactions  Mini branch concept Outlet branding by bank’s participation Providing bank’s officials for smooth customer support 51 141.67% Total Number of Outlets 47 88 187.23% 40,210 65,660 163.29% 6,037.43 million 2,600.81 million 43.08% Number of Remittance 47,665 1,37,052 287.53% Amount of Remittance (Tk.) 2543.72 million 5551.90 million 218.26% Number of Electricity Bills 43,741 6,74,381 1541.76% Amount of Electricity Bills (Tk.) 21.44 million 355.91 million 1663.08% Agent Banking Deposit and Remittance comparing to 2017 to 2018 (Figure in Million) 9440.64 3132.82 6839.82 Agent Banking Performance At a Glance (As on 31-12-2018) Year 2018 Total Number of Agents 82 133 Total Number of Outlets 112 200 Al-Arafah Islami Bank Limited 8684.71 Deposit Foreign Remittance Most of the beneficiaries are living in rural areas and were totally un-banked in their life-time. Total deposit of Agent Banking is Tk. 9,440.60 million and the figures are increasing rapidly. Clients are opening accounts, depositing and withdrawing expected money, taking foreign remittance sent by their relatives, paying their utility bills and getting other banking services spontaneously. This is one of the greatest examples of financial inclusion in Bangladesh. Year 2017 Growth (%) 36 Deposit (Tk.) We have launched 200 Agent Banking outlets through 133 Agents as on December 2018 with a view to bringing the unbanked population under banking services. As on December 2018, active accounts of Agent Banking are 1,36,434 which is 7.67% of total Bank’s account. We have already covered 112 Upa-zillas under 44 Districts. With some restrictions and limitations, a number of services are available in agent banking operation. Year 2018 Total Number of Agents Number of Active Accounts Performance of Agent Banking Particular Year 2017 Particular Annual Report 2018 2017 48 2018
49. Agent Banking Professional Coverage Farmers Day Labour Housewife Business 12 % 28% 1% 14% Students Service Holders 11% Others 6% 28% In Bangladesh, the vision 2021 is premised on a safe, efficient and inclusive financial system where savings and investment are required to be increased manifold. The financial sector is expected to play a vital role in mobilizing the substantial resources. The central bank has therefore been trying to explore and implement innovative models that will boost Bangladesh’s financial sector to support savings and investment growth. Al-Arafah Islami Bank Ltd. is also working with those mission and vision. Branding & Public Relations Improvements in branding and media relations were priorities during the year 2018. In response to the overwhelming expansion in Bank’s business, we extended our publicity to fulfill the market demand. We brought new dimension in our branding and publicity for establishing a positive image of the Bank. We acquired encouraging national attention towards AIBL throughoutthe year with our all-around activities. More than 180 news items of the Bank were broadcasted in 800 news coverage through 18 different TV Channels during the year 2018. We continued news branding on 8 major satellites TV channels such as, Bangla TV, ETV, Channel-i, Bangla Vision, ATN Bangla and ATN News, Desh TV, DBC TV. Promotion in the television media got a major hike during the Ramadan this year. In 13 major TV channels which included NTV, ETV, Bangla TV, Jamuna TV, Channel-9, Boishakhi TV, SA TV and many more, the Bank sponsored 20 different programs to encourage true Islamic values. The initiative was praised by the stakeholders and positively put an effect on business. Positive branding was one of the vitals supports that led the Bank to hold a firm position in the market. More than 15 interviews and talkshows of the Managing Director and other top executives were published or broadcasted in several media. The Bank proved its engagements with people by sponsoring several occasions. Banking Fair, SME Fair, School Banking Conference, Anti-Money Laundering Conference, Fair of Chittagong Metropolitan Chamber of Commerce & Industry and many more people-related gatherings were sponsored by the Bank. These activities tightened the relationship with clients and uplifted Bank’s faithful image. Our presence in the print media also was bold as we had 3450 Press Release items published in more than 60 different leading Newspapers and Media throughout the year. Besides, more than 800 advertisements took place in 120 different publications during that year. For 2019 our advertisement plan will focus to achieve the best outcome using available media and resources. We shall go into Electronic Media vastly this year, including Radio Branding. Besides, we have taken action to boost-up our promotion in social media. The Promotional Plan also indicates that, we have to make our promotion through client service more effective and efficient in 2019. Leaflets and Brochures of our products will be made available in every branch. There will be a number of Banners, X-Stands and Danglers visible in our branches. We must remember that, a satisfied client is the best advertiser of the Bank. So, all our promotional steps will be focused to make our customers feel that they are banking with their own bank when they are with Al-ArafahIslami Bank Limited. A Remittance Agreement was signed between the Bank and National Exchange Company S.R.L 49 Al-Arafah Islami Bank Limited Annual Report 2018
50. Branding Summery of AIBL in 2018 SL Branding Details Frequency During 2017 TV News Items 180 events 800 coverage TV Channel Coverage 18 channels TV Branding (throughout the year) 8 channels TV Branding during Ramadan 20 programs 13 channels Talkshow/Interview 15 programs PR Published 3450 times Print media covered RTGS, BEFTN, BACH, ISS Report, BPA, CIB, goAML- CTR, RIT Reporting, i-Banking, Sylvia (HRMS), Agent Banking, Utility Bill Collection, xiii. xiv. xv. xvi. xvii. xviii. xix. xx. xxi. xxii. xxiii. xxiv. xxv. Sanction Screening, FATCA Compliance, SWIFT, Asset Management, Centralized Anti Virus Management, Mail Server, OBU, Treasury, ATM Service, Mobile ATM Service, Debit Card, Credit Card, SMS Alertetc. There are some Technology based initiatives taken by the bank management to improve the customers’ services with a view to become the best bank in Bangladesh: 60 media Promotional Advertising Publications used i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. 800 advertisements 1. To become one of the best three Technologically advanced banks in the country within next 3 years 2. Ensure100% Regulatory Compliance by taking highest possible ICT security measures within a year. 3. To take necessary steps to earn highest possible satisfaction of end-users inICT Supports Service by 2019. 4. Considering a huge unbanked population across the country, AIBL has been working to commercialize Mobile Financial Services (MFS). 5. Full-phased Internet Banking along with E-Commerce and Payment Gate way will be started very soon. 6. Working for E–wallet name “Islami Wallet” is going on and will be started very soon. 7. Introduce Booth Services as per Bangladesh Bank guideline. 120 publications Information Technology Information and communication technology (ICT) has become the heart of the banking sector and it is the heart of every robust economy. ICT is helping the banking sector improve its efficiency and effectiveness of services offered to the customers, and enhances business processes, managerial decision making, and workgroup collaborations which strengthen their competitive positions in rapidly changing and emerging economies. Every bank is rendering their financial services, DATA analysis & classifications, making the ultimate decision with a truly automation system accomplished by the ICT division. AIBL started its Automation journey from 2006 and lived their Online Operation in the 2008 that has been going on successfully since inception. Card Division Modern day Banking is unimaginable without digital and alternative payment platform. The synonym of Card is now “Plastic Money”. In busy day to day life, businesses and consumers are interested in faster, safer, and more convenient payment methods. Beside Core Banking System (CBS) we are also using the below tech based services to automate, secure and faster our internal activity as well as to offer the better services to our valued customers: An MoU was signed between the Bank and Fintech Innovations International Al-Arafah Islami Bank Limited Annual Report 2018 50
51. At present we are providing wide range of Card product like Debit Card , Credit Card, Instant Card, Pre-Paid Card and Hajj Card. More than 1.50 lac AIBL card holders can use AIBL own ATMs as well as any Banks ATM through NPSB network & MasterCard enable ATMs. More than BDT 12.48 billion has been transacted from AIBL ATMs last year. We are the principal member of MasterCard, world’s largest retail electronic payment network. We already introduced most secure EMV certified chip based card. We are one of the largest Islamic Bank of Bangladesh. We are strictly maintaining the Shariah principals while issuing La-Riba Credit Card, so we operate on ‘Quard’ concept. We are offering Credit card to our customer with wide range of modern & digitalized service. By that, La-Riba Credit Card makes a positive foot step in our customers mind. We are offering discount facility for both Debit & Credit card holders & Equal Monthly Installment (EMI) facility for credit card holders. We have already signed EMI and discount agreement with almost all renowned Furniture manufacturers, Branded Electronics chain shop, & Lifestyle retailers and leading Hospitals, Restaurants, Hotels, On-line shops. We have accomplished different joint Campaign with MasterCard time to time. With the approval of the Honorable Board of the Directors of the Bank, we are planning to provide Lounge facilities to our honorable customers in both Domestic & International Airport Lounge. We are going to provide Hajj card to honorable Hajji Saheba & Saheban. Addition to that, we will issue pre-embossed La-Riba Pre-Paid Card from our Hajj booth at Hajj Camp to facilities honorable Hajji Saheba & Saheban for hassle free International transaction during Hajj. AIBL launched “Instant Card” to facilities our honorable customers, they can collect the pre-embossed debit card from Branch at the time of opening account. For the first time in Bangladesh we provide cards to Agent Banking customers. Card Division of AIBL working round the clock to provide efficient & satisfactory service to our valued customers. Adapting technological advancement, AIBL Card Division will provide modern day Banking service to our customers Insha Allah. Asset Quality Overdue investment stood at Tk.9,097.52 million as on 31st December 2018 as against Tk. 6,095.69 million as of December, 31 last year. Total overdue increased by Tk. 3,001.83 million during the year 2018 bringing the same to 3.43% of our total investment as against 2.52% in the previous year. Corporate Branch Manager, Zonal Head and Branch manager are advised for adopting strategies to arrest the situations. Rescheduled investment increased by Tk. 3,304.27 million from Tk. 9,653.30 million to Tk. 12,957.57 million (Term Tk. 6,398.96million + Continuous & Demand Tk. 6,558.61million) which was 4.89% of total Investment. Recovery against rescheduled investment during the year 2018 was Tk. 1,138.62 million. Classified investment increased by Tk. 2,769.21 million from Tk. 9,921.51 million to Tk. 12,690.72million representing 4.79% of total investment as against 4.10% in the previous year. During the year 2018, recovery against classified investment stood at Tk. 3,149.17million while recovery against SMA was Tk. 2,075.27 million and against Written off Tk. 173.40 million building a total recovery of Tk. 6,536.46 million including recovery Tk. 1,138.62 million from rescheduled investment. Plan and Strategies to Improve the Asset Quality• to ensure constant supervision and follow-up for timely recovery of investment and prevent it from becoming overdue afresh. • to fix individual target from very beginning of the year for recovery of non-performing investment. • to give special attention on top classified investment clients for early settlement/ adjustment/regularization. • to keep constant follow up & monitoring to ensure timely recovery of installment against rescheduled investment. • to address chronic NPI clients by taking effective steps and applying prudence. • to initiate necessary steps to settle the court cases quickly and even the cases can be settled outside the court through persuasion and mutual understanding. • to be more vigilant to keep NPI at the lowest possible level. • to deploy level best efforts for recovery of Written off investment. Risk Management Risk is generally defined by the adverse impact on the profitability of several distinct sources of uncertainty. It looks at financial exposures and its inherent risks to the business, and deeply believes profits are in part for successful risk taking in business. A bank must run its operations with two goals- to generate profits and to stay in business. Greater risk and poorly managed risk increase the danger that the bank may incur huge losses and be forced out of business. Risk Management is a tool used by banking institution in the name of good governance, risk mitigation and prudent practice. It focuses a lot on control processes, performance monitoring, collateral value, and decision making policies for credit, market and systemic risks. Risk Management’s main objectives are to identify and measuring the risks and advise mitigation there against. Banking operations are mainly exposed to: • Investment or default Risk (including concentration risk, country risk, and settlement risk) • Market risk (Including interest rate risk in the banking book, Forex risk, and equity price risk) • Liquidity risk • Operational risk • Other risks (residual risk, compliance risk, strategic risk, reputation risk etc.) AIBL has three lines of defense for identification, assessment, control and mitigation of risks. 1st line of defense: Day to Day Business and Operational Management units • Branches • Support Functions 51 Al-Arafah Islami Bank Limited Annual Report 2018
52. 2nd line of defense : Internal Control Framework (Policy & Methodology) • • • • use of its resources. Through internal control system, bank identifies its weaknesses and takes appropriate measures to overcome the same. ICC Risk Management Committee assesses and mitigates the risks related to compliance with regulatory requirements, set rules of the Bank, internal checking system, lapses, fraud, forgeries, misappropriation, defalcation, violations of the set rules etc. Zonal Office Different Risk Management Committees Risk Management Division and CRO Board Risk Management Committee 3rd line of defense: Independent Assurance • Internal Audit • Board Audit Committee • Supervision of Regulators In accordance with the direction of Bangladesh Bank, AIBL has established ‘Risk Management Division’ and possesses board’s approved risk management guidelines designed to ensure that risks are identified, monitored and reported. Risk Management Division exclusively manages 6 (six) core risks in line with core risk Management guidelines of Bangladesh Bank. AIBL formed All Risk Committee at Management level in addition to six separate Core Risk Management Committees to address basic risk management activities like identification, assessment, and mitigation of risks. Besides, Board Risk Management Committee oversights the overall risk management activities of the bank, risk appetite and performs their duties with utmost care to minimize the risk level. Regular meeting of all the committees are held on monthly/ quarterly basis. The major concerns of the 6 (six) Core Risks Management Committees are as under: 5. Central ComplianceCommittee: Money laundering risk is the risk of loss of reputation of the Bank. CCU looks after the money laundering and terrorist financing activities, STR (Suspicious Transaction Report), CTR (Cash Transaction Report), KYC (Know Your Customer) and TP (Transaction Profile) related compliances. The committee also supervises and monitors the entire transactional activities of the Bank including money laundering aspects involved with foreign exchange transactions. 6. Information & Communication Technology Risk Management Committee: ICT risks include hardware and software failure, human error, spam, viruses and malicious attacks, as well as natural disasters such as fires, cyclones or floods. This committee monitors and supervises the risks related to Data security, Physical security, Network security, Disaster recovery, Fraud, Forgery, System failure and Business continuity etc. 1. Investment Risk Management Committee : Operational risk: Investment risk arises from the potential that a bank’s borrower may fail to meet its obligations in accordance with agreed terms. IRMC deals with the activities of supervises and monitors Investment concentration, Internal investment risk grading, Corporate clients rating, Non performing investment, Residual risk against investment, Provision against classified investment, Investment mix, Asset quality etc. 2. Asset Liability Risk Management Committee (ALCO): Asset Liability Management ensures balanced fund mobilization and their deployment with respect to their maturity profile, cost, and yield as well as risk exposure. ALCO looks after the Asset-liability risk, Liquidity risk, Investment Deposit Ratio (IDR), Deposit mix, Investment mix, Gap analysis etc. under direct guidance of the Managing Director & CEO. Operational risk is the risk of loss or harm resulting from inadequate or failure of internal processes, people and systems or from external events. The policy for measuring and managing operational risks including internal control and compliance risk is approved by the Board taking into account relevant guidelines of Bangladesh Bank. As a part of continued surveillance, the Management Committee (MANCOM), All Risk Committee (ARC), Board Risk Management Committee regularly review different aspects of operational risks and suggest to formulate policies, tools and techniques for mitigation of operational risks. 3. Foreign Exchange Risk Management Committee: Foreign Exchange Risk Management in Banks has become inevitable. It oversees Foreign exchange risk, Treasury, Net open position, Import & Export business, Dealing room operations, Anti-money laundering aspects in foreign exchange transactions and remittance etc. 4. Internal Control & Compliance Risk Management Committee: The primary objective of internal control system in a bank is to help the bank perform better through the Al-Arafah Islami Bank Limited Annual Report 2018 Managing other specific risks: Bangladesh Bank has issued six core risk guidelines and Risk Based Capital Adequacy (RBCA) Guidelines that provides concepts, methods and processes with regards to the respective risk areas. AIBL follows those guidelines and also reviews/updates them on regular basis and gets approval from the Board. Apart from these, there are some other specific risks that are covered by SRP Guidelines and RBCA Guidelines of Bangladesh Bank. Residual RiskResidual risk arises mainly from error in documentation and error in valuation. As institutions mitigate risks by way of collateral, the collaterals can pose additional risks (legal and documentation risks), which may deteriorate the impact of risk mitigation. AIBL have appropriate governing and control system, valuations procedures, internal regulations and responsible individuals assigned for the prudent handling of risks. 52
53. Credit Concentration Risk- community rightly feels in the following manner : Credit concentration risk may arise from exposure to a single entity/group and/or exposures in the same economic or geographic sector and/or credit concentration in dependent industries. AIBL is now exposed to some of specific sectors and regions that are highly inviting concentration risks. Although these regions are economically important, AIBL has the scope to come out from such concentration gradually having a structural strategic perspective investment plan and diversify its investment portfolio in more potential sectors and areas and thus distribution of the risk factors. • Strategic RiskStrategic risk means the current and prospective risk to earnings and capital arising from imperfection in business strategy formulation, inefficiencies in implementing plan targets, or from the overlooking of changes in business environment. Strategic risk induces operational loss that consequently hampers the capital base. The key aim of strategic Risk Management is to strengthen the bank’s earnings resilience and protect it against undue earnings volatility to support overall risk appetite targets (especially CET-1 ratio and Leverage Ratio). AIBL involves all levels of management in formulating and establishing robust strategy planning process, and regularly reviews on incorporating changes to strategic environment. It is no longer an isolated problem confined to a place or region; • Nations have to join hands and deal with this scourge together; • Government and regulatory agencies have to join force and formulate strategies, operating procedures and legislative measures to combat this scourge. Bangladesh has major problems in this area. Over the years a huge volume of foreign currency (in terms of billions of US$) has been funneled out abroad through the illegal channels (hundi, etc.) and through Trade Finance activities. Not surprisingly GOB has entrusted an autonomous agency - Bangladesh Financial Intelligence Unit (BFIU) to handle and govern this serious and very important function. Banks in Bangladesh work closely under the auspices of BFIU. AIBL (in business for 22+ years) has an established framework for AML/CFT compliance. It has formulated its own Risk Management Policy Guidelines, approved by BOD. The policy guidelines establish standards of AML/CFT compliance that is applicable in all sphere of its business (branches/zones/ departments/divisions/wings) and also ensures compliance with existing laws & regulatory requirements. We are pleased to confirm that all reasonable steps are taken to effectively : Basel Accord Implementation: • To implement Basel III guidelines, AIBL formed units as under: a) Basel Unit, and b) Supervisory Review Process Team. • • All Risk Committee at Management level: The All Risk Committee at the Management level sits at least once in a month or more when necessary. In the meeting all the existing/identified and foreseeable/potential risks issues are discussed. Afterwards, recommendations are made and forwarded to the concerned risk taking departments to address, measure and take steps to mitigate the risk factors. All the meeting minutes along with Risk Management Papers are reported to the Department of Off-site Supervision of Bangladesh Bank duly. Risk Management Report: Monthly/Quarterly Risk Management Report and a HalfYearly Comprehensive Risk Management Report (CRMR) incorporating all risk areas are prepared as per directions of the prescribed format of Bangladesh Bank. These Reports are discussed in depth in the All Risk Committee in the Management level as well as Board Risk Management Committee and necessary instructions and guidance are given and implemented there against. Besides, AIBL sends Risk Appetite statement to Bangladesh Bank annually duly approved by the meeting of Board of Directors of the Bank. Money Laundering and Terrorist Financing Prevention The score card on matters such as peace and harmony among neighboring states and conflicts often culminating in wars between them does not make good reading. The only positive news has been the consensus among nations on this issue of Money Laundering and Terrorism Financing and its growing menace. It is therefore not surprising that the global • maintain and verify the identity of customers via KYC (Know Your Client); periodically update information via CDD/EDD; classify accounts as High and Low risk. Higher level of due diligence and monitoring is required for High risk (per Master Circular 19 by BFIU); monitoring and Reporting of Suspicious Transactions (includes large and structured transactions on/above a specified threshold level). The pursuit to motivate and create staff awareness is ongoing. Training via workshops and seminars are arranged for new entrants and refreshers course for existing staff. AIBL remains as a preferred institution by BFIU to hold seminar/workshop as Lead Bank. We are proud of our association in the first Town Hall meeting held in Teknaf in 11/2018 arranged by BFIU. BFIU is lending immense support in educating and creating more awareness among banks. The following two notable cases need to be cited in this regard : The first ever held Town Hall meeting was arranged at Teknaf in November 2018 to create awareness on Human Trafficking and the illegal narcotics trade in the region. Under the auspices of BFIU, three banks were nominated to hold this event which includes AIBL. The fact that Mr. Abu Hena Mohd. Razee Hassan, Deputy Governor of Bangladesh Bank presided as Chief Guest underscores the importance attached to this conference. A conference was held in Bangkok, Thailand for head of banks and their CAMLCO. This was a joint venture between United States (through US Embassy and Department of Justice) and Bangladesh (through BFIU). All the speakers were professionals selected by US Embassy. 53 Al-Arafah Islami Bank Limited Annual Report 2018
54. Agent Banking has taken off well and is an area of growth for AIBL . Because of the associated risks, we intend to focus more on this business aspect. A new section will be set up to monitor this area in 1st quarter of this year. We hope to work very closely with this business segment in the coming period. Long Term Short Term Based on Date of Rating Validity Outlook The support from Management and Board of Directors is overwhelming. Zero tolerance on MLTF activities is the message which goes out at beginning of year from the Managing Director to all employees. Board is apprised of the department activities every six months. Commencing this year we envisage holding an awareness program for our Board Members where we intend to invite senior staff from BFIU to make keynote presentations on important and contemporary topics. Date of Rating 30 June 2018 30 June 2017 30 June 2016 30 June 2015 30 June 2014 The bank has been paying dividend every year since 1998 just after conversion of a public limited company. The Board of Directors of the Bank is pleased to recommend dividend 15% Cash and 2% bonus in the year 2018. 2009 30% Bonus 2010 26% Bonus 2011 21% Bonus 2012 17% Bonus 2013 13.50% Bonus Long Term AA AA AA AA 2 AA 3 Short Term ST-2 ST-2 ST-2 ST-2 ST-2 Outlook Stable Stable Stable Stable Positive Interpretation: AA+, AA, AA-(Double A) ( High Safety) : Securities rated in this category are adjudged to be high credit quality and offer higher safety. The level of rating indicates a security with sound credit profile and without significant problems. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Table of Historical Dividend Payment Percentage are as follows: Dividend AA (pronounced Double A Two) ST-2 Audited Financial Statement 2016 28 June 2018 27 June 2019 Stable Year-wise Comparative Rating Position: Dividend Year : : : : : : ST-2 (High Grade): High certainty of timely payment. Liquidity factors are strong and supported good fundamental protection factors. Risk factors are very small. MOODY’S B1 Rating to Al-Arafah Islami Bank Limited 2016 20% Cash 2017 15% Cash & 5% Bonus Al-Arafah Islami Bank Limited (AIBL) has been rated by Moody’s, one of the oldest and leading rating agencies in the world. Moody’s has assigned B1 rating to AIBL with Stable Outlook. This rating is the recognition of AIBL’s well matched maturity profile, modest asset quality, good profitability and solvency profile. 2018 15% Cash & 2% Bonus Human Resources 2014 14% Cash 2015 10% Cash & 5% Bonus Well educated and skilled manpower is the best capital of an organization particularly in banking institution. We put utmost importance on recruitment and development of human resources. In recruiting process, we put emphasis on attracting talented young stars. Total 291 employees in different categories/ranks joined and fleet 76 during the year 2018 raising our total employees to 3,682 as on 31.12.2018. We have 3,682 staff in the Bank of whom 262 are executives 2,622 are officers and 798 other staff a as on December 31st 2018. 17.00 20.00 20.00 15.00 14.00 13.50 17.00 21.00 26.00 30.00 Dividend (%) Sl No 1 2 3 Designation Executives Officers Others Total Category Number 262 2,622 798 3,682 Credit Rating We nominated 489 employees in outside training course viz. BIBM, BBTA,BAB etc. in 2018 and they have completed the course successfully. Credit Rating Information and Services Limited (CRISL) has adjudged rating for Al-Arafah Islami Bank Limited as follows: We motivate and facilitate our deserving employees to complete international standard professional degrees like 2009 2010 2011 2012 2013 Al-Arafah Islami Bank Limited 2014 2015 2016 2017 2018 Annual Report 2018 54
55. Activities of AIBTRI by Bangladesh Bank in Cumilla . AIBTRI, as per instruction of the BFIU successfully arranged, monitored and supervised the workshop with 67 (sixty seven) officials most of whom are BAMLCOs and Branch Managers of different Banks of Cumilla. AIBTRI: Home of Knowledge & Human Resources Development Reading Material Manual: Human resources are the main component of any development, improvement, changes or achievements. All material assets/ resources are to be utilized by human resources to execute any plan or program. If the human resources are not found to be capable in utilizing other assets or resources prudently, efficiently and effectively, success of any plan/program will be far away. So, it is very important to have a pool of excellent human resources for any organization/institution. Training involves the development of skills that are usually necessary to perform a specific job. It brings positive changes in knowledge, skills, attitude (KSA) and building confidence of the human capital so that they can be efficient in performing their duties and responsibilities. So, training is regarded to be one of the best means of improving performance of the Staff-member. AIBTRI accumulated 04 (four) Training Reading Material Manuals on Foundation Courses for Newly Recruited MTOs/ Officers this year to facilitate the participants to acquire knowledge on banking & use those as reference in their day to day banking operation. CDCS, CSDG and ACAMS. Presently, we have 56 CDCS, 2 CSDG and 2 ACAMS officials of which 8 officials completed CDCS and 2 officials ACAMS during the year 2018. The need for Training Institute was keenly felt in the early seventies to cater to the management training needs of the banking sector. The formation of Al-Arafah Islami Bank Training & Research Institute (AIBTRI) sine-qua-non for the development of human resources at the very beginning of AIBL.AIBTRI had to concentrate on training of the entry level officers due to absence of appropriate training infrastructure in AIBL arena from the very beginning. However, with the passage of time it assumed the responsibility of imparting training to the mid and senior level officials of AIBL. The financial sector of Bangladesh underwent a number of reforms measures as per structural adjustment in the country. In line with these reforms, the AIBTRI has been adopting new strategies and methods for improving their services. AIBTRI is also keeping pace by putting its best efforts to respond to the need for capacity building of AIBL officials for implementation of the reform measures. Meanwhile, banking sector of Bangladesh demanded upgradation of capabilities of managerial level officials as the bank expanded horizon of operations. In line with that AIBTRI regularly updates its training areas, contents and methods. Training Scenario in 2018: AIBTRI conducted a total number of 106 (one hundred & six) Training Courses, Workshops, Executive Development Programs and Outreach Programs where 5,471 participants attended during the period from January – December, 2018. AIBTRI conducted a total of 22 (twenty two) courses and 57 (fifty seven) workshops during the year as well as 4 (four) EDPs. AIBTRI also conducted 23 (twenty three) outreach training programs (OTP) during the period with 1564 officers of different zone. Lead Bank Program (LBP): This year Al-Arafah Islami Bank Ltd. had the privilege of organizing the daylong workshop on “Money Laundering Prevention & Combating Financing of Terrorism” as the lead bank nominated However we are not complacent with only quantitative achievement. Our main focus is on quality & effective training. We are always striving for qualitative improvement. Keeping this end in view, we have prepared the academic calendar 2019 containing 21 training courses, 6 EDPs, 30 outreach programs & 58 workshops on operational activities & various risk management issues. Introduction of Training Policy Guidelines AIBL started its journey since 27th September, 1995 and committed to serve the people & the nation by providing Islamic banking services with a rare combination of contemporary banking services. In this perspective & to create awareness, capacity development in Banking of all of its employees, AIBL has been established its Training Institute in 1996. At present banking activities have to be operated by complying 6 core risk management guidelines Beyond the core risks guidelines, the bank has to comply Green/Sustainable financing guidelines, Environment Risk Management Guidelines, Basel-III etc. Above all, as an Islamic Bank, AIBL has to ensure the compliance of all concerned Islamic Shariah Principles. So, building of capacity, visà-vis efficiency & acquiring absolute knowledge of all the respective officials of the bank on the aforesaid Core Risks & Islami Banking guidelines is very important now-a-days. Training is an accepted and effective mechanism for human resources development. It plays a vital role in developing knowledge and to acquire skills to keep pace with the changes taking place both home and abroad. For this purpose all the staff/ officials of the bank should be provided with appropriate and real-time training. But there was no Training Policy Guidelines for the training institute of the bank, so it has become essential to initiate an effective Training Policy Guidelines. The purpose of the Training Policy Guidelines is to create awareness and to equip the employees with proper knowledge on all the existing & new issues/products/banking laws/rules/regulation/Islamic banking and core risk management guidelines of Bangladesh Bank and Al-Arafah Islami Bank Limited. So, a training policy guideline has been prepared & presented before the Management & Board and it was approved by the Board of Directors in its 332nd Meeting held on 22/01/2019. Branches Control Division:Branches Control Division (BCD) has been conducting with a huge volume of works with its all branches relates General Banking activities including Regulatory Authorities of the country such as: 1. Compliance of different circulars on Customer Service & General Banking issued by Bangladesh Bank, NBR & 55 Al-Arafah Islami Bank Limited Annual Report 2018
56. other Regulatory Authorities time to time . 2. Agency Arrangement i.e Agreement for bill collection of DESCO, DPDC, WASA, BTCL, REB etc. 3. Compliance of NBR, DUDAK, Anti-corruption Commission etc. Authorities Income Tax related bank account information. 4. Compliance against General banking related irregularities of the branch raised by Audit & Inspection Division. Accounts” and balance 7. To collect potential client list quarterly in each year from the Branches for maintaining sustainable business growth 8. To evaluate the Branch performance on monthly basis whether the branches are maintaining the point-topoint deposit, investment and operating profit growth 9. To arrange regular monthly business review meeting attended by all Zonal Heads, Corporate Branch Managers and concerned Head Office Officials 10. Provide assistance/advice/guideline to the Branch regarding deposit mobilization for business development of the Bank. List of corporate depositors to be kept at Branch level as well as Head Office 11. Generating several promotional items for specific events and business development/brand development as well such as Ramadan Gift Box, Pohela Boishakh Gift items, Happy New Year Gift items etc. 12. To arrange special service month, awareness program, customer gathering and other program on different development and promotional issues 13. To arrange School Banking Campaign and Conference 14. To set up Banking Booth, Collection Booth 15. To get Evening Banking License 16. To arrange or formulate program for customer awareness and monitor properly 17. Other functions related with Business Promotion. Business Promotion & Marketing Division (BPMD) Business Promotion and Marketing Division (BPMD) started its journey in the year 2010 under the name and style ‘Marketing & Business Development Division (MBDD)’. A full fledged Policy Guideline was introduced on 23.06.2016 with a vision to survive in the market of stiff competition as well as to improve business relentlessly of our Bank using different marketing tools. BPMD has the motto to offer new customized Financial Products and Services to cater the growing needs of common people keeping in mind the strict compliance of Shariah and complex regulatory norms. BPMD consists of six (6) Departments as: i) ii) iii) iv) v) vi) Business Development & Marketing Department Branch Expansion Department Product Development & Evaluation Department Protocol Department Financial Literacy & Financial Inclusion Department Central Customer Service & Complaints Management Department. Each department has its own targeted goal to achieve. Some other responsibility of BPMD is worth mentioning here such as it will maintain probable schedule of different National & International Trade Fair, National Book Fair, National Banking Fair, Hajj Fair, other important fair, Bishwa Ijtema. Function of BPMD: The main marketing strategy of BPMD is to build and maintain a long-term relationship with its investment clients, assists Branches regarding prospective investment clients, assist Branches for deposit mobilization growth of the Bank. The above expresses a whole gamut of functions of BPMD part of which is in practice. If total support and logistics are in place, BPMD will definitely play a pivotal role in the development of ever changing Islamic Banking arena. However, Business Promotion & Marketing Division focuses the following marketing strategies: Branch Network At present we have 168 branches all over the country. In a bid to expand our network of Branches we got approval to open 9 (Nine) new branches in 2019. 1. Close follow-up, Monitoring, Supervision with the marketing desk of branches and zones regarding business development issues 2. To fix-up a reasonable annual business target considering market situation or all the branches and follow-up, monitor; supervise to achieve the target by the branches 3. To design and develop all marketing communication materials/gift items and to provide promotional gift items, leaflet, brochure to the branches for maintaining marketing relationship with the existing and prospective investment clients 4. To identify customer need, designing and developing of new products and improvement of existing products 5. To provide assistance/advice/guideline to the branches regarding new investment client for business development of the Bank according to the collected potential client list by the Branch 6. To conduct Financial Literacy program among unbanked people through Branches for increasing “No Frills Al-Arafah Islami Bank Limited Annual Report 2018 Appointment of Statutory Auditor In the 23rd Annual General Meeting of the Bank M/S Hoda Vasi Chowdhury & Co. Chartered Accountants & M/S Rahman Mostafa Alam & Co. Chartered Accountants was appointed External Auditors of the Bank for a term till conclusion of the 24th Annual General Meeting. The Board has approved M/S Hossain Farhad & Co. Chartered Accountants and M/S Rahman Mostafa Alam& Co. Chartered Accountants for appointment as External Auditors by the shareholders till the 25th Annual General Meeting. Board Meeting During the year 2018, 14 regular Board Meeting had been held. Besides, 15 meetings of Executive Committee,10 meetings of Audit Committee and 4 Risk management Committee of the Board had also been held during the year. 56
57. The Board of Directors recommended 15 % Cash and 2% Stock Dividend subject to the approval of AGM Board Executive Committee meeting Board Audit Committee meeting Board Risk Management Committee meeting Honorable Chairman and other guests at Annual Business Development Conference 2019 The opening ceremony of 168th branch at Patiya, Chattogram Honorable Director, Managing Director and other Bank’s Officials with newly recruited Officers Honorable Director and Managing Director along with other Executives at Branch Management and Leadership training 57 Al-Arafah Islami Bank Limited Annual Report 2018
58. Handover of SME Investment cheque by Bangladesh Bank Governor to women entrepreneurs Chairman Alhajj Abdus Samad Labu handed over a cheque of Tk10 lac for cancer hospital under CSR activity . The Bank donated Tk. 10 lakh to Bangladesh Junior Science Olympiad (BSJO) due to Corporate Social Responsibility The Bank provided a scholarship of Tk. 5 lakh to meritorious and financially insolvent children of Dhaka Metropolitan Police members The Bank signed agreement with Hajj Agencies Association Of Bangladesh (HAAB) Board Meeting of AIBL Capital Market Services Limited Board Meeting of AIBL Capital Management Limited Board Meeting of Millennium Information Solution Limited Al-Arafah Islami Bank Limited Annual Report 2018 58
59. Directors ’ Report to the Shareholders as per condition No. 1.5 of BSEC Notification No.BSEC/ CMRRCD/2006-158/207/Admin/80 Dated 3rd June 2018 The Directors also report that: i. Industry outlook and possible future developments in the industry; Page No. 31-32 ii. The segment-wise or product-wise performance; Page No. 36-40 & 44-50. iii. Risks and concerns including internal and external risk factors, threat to sustainability and negative impact on environment, if any; Page No. 107-108 iv. A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin, where applicable; Page No. 58 v. A discussion on continuity of any extraordinary activities and their implications (gain or loss); Not applicable. Particulars Investment income Profit paid to depositors Net Investment Income Commission, Exchange and other Income Total Operating Income Total Operating Expense Profit before tax and provision Provision on Investment and others Profit Before tax Provision for taxation Net Profit after tax EPS (Restated 2017) vi. A detailed discussion on related party transactions along with a statement showing amount, nature of related party, nature of transactions and basis of transactions of all related party transactions; Page No. 146-148 vii. A statement of utilization of proceeds raised through public issues, rights issues and/or any other instruments(AIBL Mudaraba Subordinate Bond) Page: 37; viii. An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Share Offer, Direct Listing, etc. Not Applicable; ix. An explanation on any significant variance that occurs between Quarterly Financial performances and Annual Financial Statements ; Highlights along with reasons thereof are given below: 2018 Amount in million 24,678.71 16,062.93 8,615.78 3,579.58 12,195.36 5,983.82 6,211.54 2,154.22 4,057.32 1,650.79 2,406.53 2.31 2017 Amount in million 20,305.59 11,586.15 8,719.44 3,084.76 11,804.20 5,101.14 6,703.06 1,270.59 5,432.47 2,355.78 3,076.69 2.95 Growth (%) 21.54% 38.64% (1.19%) 16.04% 3.31% 17.30% (7.33%) 69.54% (25.31%) (29.93%) (21.78%) (0.64) During the year 2018 Profit paid to depositors increased by 38.64% due to Deposit & Borrowing increase by Tk. 10,193.66 million and Investment income increased by 21.54% due to Investment increase by Tk. 24,477.87 million compared to previous year 2017. i. A statement of remuneration paid to the directors including independent directors; Page no. 126 ii. The financial statements prepared by the management of the Bank present fairly its state of affairs, the result of its operations, cash flows and changes in equity; iii. Proper books of account of the Bank have been maintained; iv. Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment; v. International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there from has been adequately disclosed; vi. The system of internal control is sound in design and has been effectively implemented and monitored; vii. The Minority shareholders have been protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly and have effective means of redress; viii. There is no significant doubt upon the Bank’s ability to continue as a going concern; ix. The significant deviations from the last year’s operating results of the Bank has been highlighted and the reasons thereof is explained serial no. ix of page no 58; x. A statement where key operating and financial data of at least preceding 5 (five) years shall be summarized; Page No. 15 xi. The Bank has declared dividend (cash or stock) for the year 2018; xii. Board’s statement to the effect that no bonus share or stock dividend has been or shall be declared as interim dividend; Page No 53 xiii. The total number of Board meetings held during the year and attendance by each director; Page No 73 xxiii.A report on the pattern of shareholding disclosing the aggregate number of shares (along with name-wise details where stated below) held by: 59 Al-Arafah Islami Bank Limited Annual Report 2018
60. a . Parent or Subsidiary or Associated Companies and other related parties (name-wise details); Page No. 146-148 b. Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and Compliance and their spouses and minor children (name-wise details); page no 74 c. Executives; page no 9-10 d. Shareholders holding ten percent (10%) or more voting interest in the company (name-wise details); Not applicable Explanation: For the purpose of this clause, the expression “executive” means top 5 (five) salaried employees of the company, other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit and Compliance. xxiv.Appointment or reappointment of a director, a disclosure on the following information to the shareholders: a. brief resume of the director; Page No. 146-148 b. nature of his or her expertise in specific functional areas; and Page No.146-148 c. names of companies in which the person also holds the directorship and the membership of committees of the Board; Page No.146-148 xxv. A Management’s Discussion and Analysis signed by CEO or MD presenting detailed analysis of the company’s position and operations along with a brief discussion of changes in the financial statements, among others, focusing on: a. Bank has an accounting policies and there in after have been consistently applied in estimation for preparation of financial statements; b. Changes in accounting policies and estimation, if any, clearly describing the effect on financial performance or results and financial position as well as cash flows in absolute figure for such changes; Not applicable c. Comparative analysis (including effects of inflation) of financial performance or results and financial position as well as cash flows for current financial year with immediate preceding five years explaining reasons thereof; Not applicable. d. Compare such financial performance or results and financial position as well as cash flows with the peer industry scenario; Not applicable e. Briefly explain the financial and economic scenario of the country and the globe; Page no 31-32 f. Risks and concerns issues related to the financial statements, explaining such risk and concerns mitigation plan of the company; and page no 50-52 g. Future plan or projection or forecast for Bank’s operation, performance and financial position, with justification thereof, Budgeted Deposit, Investment, Classified Investment, Foreign Exchange and Operating Profit for the year 2019 (Amount in million Taka) SLNo Particulars Achievement 2017 1 2 3 Budget 2018 Achievement December 2018 4 5 Achievement of Budget 2018 % Growth on 2017 Budget 2019 6=(5/4)% 7=(5-3)/3 8 Budgeted (%) Growth Growth on 2018 on 2018 (In Taka) 9=(8-5) 10=(8-5)/5 1 Deposit & Borrowings 276,546 310,000 286,739 92.50% 3.69% 345,000 58,261 20.32% 2 Investment 241,962 279,000 265,132 95.03% 9.58% 310,000 44,868 16.92% 101.69% 15.56% 2,400,000 620,400 34.86% 3 No. of Accounts 4 Classified Investment Percentage(%) of Classified Investments Foreign Exchange Business 5 6   9,922 13,000 12,690 4.10% 4.66% 4.79% 281,940 358,150 a) Import 156,700 b) Export c) Remittance 7 1,539,962 1,750,000 1,779,600 Operating Profit Al-Arafah Islami Bank Limited 97.62% 27.90% 15,000 319,971 4.84% 89.34% 13.49% 405,000 85,029 26.57% 203,700 168,573 82.76% 7.58% 210,000 41,427 24.58% 104,540 125,450 114,481 91.26% 9.51% 145,000 30,519 26.66% 20,700 29,000 36,917 127.30% 78.34% 50,000 13,083 35.44% 6,703 8,100 6,211 76.68% (7.34%) 7,500 1,289 20.75% Annual Report 2018 60 - 2,310 18.20% -
61. Annexure-B [Certificate as per condition No. 1(5) (xxvii)] Report to The Shareholders of Al-ArafahIslami Bank Limited on compliance on the Corporate Governance Code We have examined the compliance status to the Corporate Governance Code by Al-ArafahIslami Bank Limited for the year ended on December 31, 2018 This Code relates to the Notification No. BSEC/CMRRCD/2006.-158/207/ Admin/80 dated June 3, 2018 of the Bangladesh Securities and Exchange Commission. Such compliance with the Corporate Governance Code is the responsibility of the Company. Our examination was limited to the procedures and implementation thereof as adopted by the Management in ensuring compliance to the conditions of the Corporate Governance Code. This is a scrutiny and verification and an independent audit on compliance of the conditions of the Corporate Governance Code as well as the provisions of relevant Bangladesh Secretarial Standards (BSS) as adopted by Institute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not inconsistent with any condition of this Corporate Governance Code. We state that we have obtained all the information and explanations, which we have required, and after due scrutiny and verification thereof, we report that, in our opinion: (a) The company has complied with the conditions of the Corporate Governance Code as stipulated in the above mentioned Corporate Governance Code issued by the Commission; (b) The company has complied with the provisions of the relevant Bangladesh Secretarial Standards (BSS) as adopted by the Institution of Chartered Secretaries of Bangladesh (ICSB) as required by this code; (c) Proper books and records have been kept by the company as required under the Companies Act, 1994, the securities laws and other relevant laws; and (d) The governance of the company is satisfactory. Place: Dhaka Dated: 24 April 2019 61 Ahsan Manzur & Co. Chartered Accountat Al-Arafah Islami Bank Limited Annual Report 2018
62. Compliance Status of BSEC Guidelines for Corporate Governance Annexure –C [(As per condition No. 1(5) (xxvii)] Status of compliance with the conditions imposed by the Commission’s Notification No. SEC/CMRRCD/2006-158/207/ Admin/80 dated 03 June 2018 issued under section 2CC of the Securities and Exchange Ordinance, 1969: Condition No. Compliance Status (Put √ in the appropriate column) Title Complied 1 Not complied Remarks (if any) Board of Directors 1(1) Board’s size shall not be less than 5 and more than 20 (twenty) (twenty): 1(2) Independent Directors √ 1(2) (a) Independent director: At least 1/5th of the total number of directors 1(2)(b) Independent Director means 1(2)(b)(i) Who either does not hold any share in the company or holds less than one percent (1%) shares of the total paid-up shares of the company √ 1(2)(b)(ii) Who is not a sponsor of the company or is not connected with the company’s any sponsor or director or nominated director or shareholder of the company or any of its associates, sister concerns, subsidiaries and parents or holding entities who holds one percent (1%) or more shares of the total paid-up shares of the company on the basis of family relationship and his or her family members also shall not hold above mentioned shares in the company √ 1(2)(b)(iii) Who has not been an executive of the company in immediately preceding 2 (two) financial years √ 1(2)(b)(iv) Who does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companies √ 1(2)(b)(v) Who is not a member or TREC (Trading Right Entitlement Certificate) holder, director or officer of any stock exchange; √ 1(2)(b)(vi) Who is not a shareholder, director excepting independent director or officer of any member or TREC holder of stock exchange or an intermediary of the capital market √ 1(2)(b)(vii) Who is not a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of the concerned company’s statutory audit firm or audit firm engaged in internal audit services or audit firm conducting special audit or professional certifying compliance of this Code √ 1(2)(b)(viii) Who is not independent director in more than 5 (five) listed companies √ Al-Arafah Islami Bank Limited Annual Report 2018 62 √ The Board of Directors consists of 20 (twenty) members including 3 (three) Independent Directors which is in compliance with Section15(9) of the Banking Companies Act, 1991 (Amended up to 2013)
63. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied Not complied 1(2)(b)(ix) Who has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan or any advance to a bank or a Non-Bank Financial Institution (NBFI) √ 1(2)(b)(x) Who has not been convicted for a criminal offence involving moral turpitude? √ 1(2)(c) The independent director(s) shall be appointed by the Board and approved by the shareholders in the Annual General Meeting (AGM) √ 1(2)(d) The post of independent director(s) cannot remain vacant for more than 90 (ninety) days √ 1(2)(e) The tenure of office of an independent director shall be for a period of 3 (three) years, which may be extended for 1 (one) tenure only √ 1(3) Qualification of Independent Director 1(3)(a) Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial, regulatory and corporate laws and can make meaningful contribution to business √ 1(3)(b)(i) Business Leader who is or was a promoter or director of an unlisted company having minimum paid-up capital of Tk. 100.00 million or any listed company or a member of any national or international chamber of commerce or business association √ 1(3)(b)(ii) Corporate Leader who is or was a top level executive not lower than Chief Executive Officer or Managing Director or Deputy Managing Director or Chief Financial Officer or Head of Finance or Accounts or Company Secretary or Head of Internal Audit and Compliance or Head of Legal Service or a candidate with equivalent position of an unlisted company having minimum paid up capital of Tk. 100.00 million or of a listed company √ 1(3)(b)(iii) Former official of government or statutory or autonomous or regulatory body in the position not below 5th Grade of the national pay scale, who has at least educational background of bachelor degree in economics or commerce or business or law √ 1(3)(b)(iv) University Teacher who has educational background in Economics or Commerce or Business Studies or Law √ 1(3)(b)(v) Professional who is or was an advocate practicing at least in the High Court Division of Bangladesh Supreme Court or a Chartered Accountant or Cost and Management Accountant or Chartered Financial Analyst or Chartered Certified Accountant or Certified Public Accountant or Chartered Management Accountant or Chartered Secretary or equivalent qualification √ 1(3)(c) The independent director shall have at least 10 (ten) years of experiences in any field mentioned in clause (b) √ 1(3)(d) In special cases, the above qualifications or experiences may be relaxed subject to prior approval of the Commission 1(4) Duality of Chairperson of the Board of Directors and Managing Director or Chief Executive Officer 1(4)(a) The positions of the Chairperson of the Board and the Managing Director (MD) and/or Chief Executive Officer (CEO) of the company shall be filled by different individuals √ 1(4)(b) The Managing Director (MD) and/or Chief Executive Officer (CEO) of a listed company shall not hold the same position in another listed company √ 1(4)(c) The Chairperson of the Board shall be elected from among the nonexecutive directors of the company √ 63 Remarks (if any) N/A Al-Arafah Islami Bank Limited Annual Report 2018
64. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied 1(4)(d) The Board shall clearly define respective roles and responsibilities of the Chairperson and the Managing Director and/or Chief Executive Officer √ 1(4)(e) In the absence of the Chairperson of the Board, the remaining members may elect one of themselves from non-executive directors as Chairperson for that particular Board’s meeting; the reason of absence of the regular Chairperson shall be duly recorded in the minutes √ 1(5) The Directors’ Report to Shareholders shall include 1(5)(i) An industry outlook and possible future developments in the industry √ 1(5)(ii) The segment-wise or product-wise performance √ 1(5)(iii) Risks and concerns including internal and external risk factors, threat to sustainability and negative impact on environment, if any √ 1(5)(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin √ 1(5)(v) Discussion on continuity of any extraordinary activities and their implications (gain or loss) √ 1(5)(vi) Discussion on related party transactions along with a statement showing amount, nature of related party, nature of transactions and basis of transactions of all related party transactions √ 1(5)(vii) Utilization of proceeds raised through public issues, rights issues and/or any other instruments √ 1(5)(viii) An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights share Offer, Direct Listing, etc. √ 1(5)(ix) If significant variance that occurs between Quarterly Financial performances and Annual Financial Statements √ 1(5)(x) Remuneration paid to the directors including independent directors √ 1(5)(xi) The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity √ 1(5)(xii) Proper books of account of the issuer company have been maintained √ 1(5)(xiii) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment √ 1(5)(xiv) International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there from has been adequately disclosed √ 1(5)(xv) The system of internal control is sound in design and has been effectively implemented and monitored √ 1(5)(xvi) Minority shareholders have been protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly and have effective means of redress √ 1(5)(xvii) There is no significant doubt upon the issuer company’s ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons there of shall be disclosed √ Al-Arafah Islami Bank Limited Annual Report 2018 64 Not complied Remarks (if any) Roles and responsibilities are as per Bangladesh Bank guidelines and service rules of the Bank.
65. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied Not complied Remarks (if any) 1(5)(xviii) An explanation that significant deviations from the last year’s operating results of the issuer company shall be highlighted and the reasons thereof shall be explained √ 1(5)(xix) Key operating and financial data of at least preceding 5 (five) years shall be summarized √ 1(5)(xx) An explanation on the reasons if the issuer company has not declared dividend (cash or stock) for the year √ 1(5)(xxi) Board’s statement to the effect that no bonus shares or stock dividend has been or shall be declared as interim dividend √ 1(5)(xxii) The total number of Board meetings held during the year and attendance by each director √ 1(5)(xxiii) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name-wise details) held by √ 1(5)(xxiii)(a) Parent or Subsidiary or Associated Companies and other related parties (name-wise details) √ 1(5)(xxiii)(b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and Compliance and their spouses and minor children (name-wise details) √ 1(5)(xxiii)(c) Executives (top 5 (five)) salaried employees of the company, other than the Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit and Compliance √ 1(5)(xxiii)(d) Shareholders holding ten percent (10%) or more voting interest in the company (name-wise details) √ 1(5)(xxiiii) Appointment or reappointment of a director, a disclosure on the following information to the shareholders: 1(5)(xxiv)(a) Brief resume of the director √ 1(5)(xxiv)(b) Nature of his or her expertise in specific functional areas √ 1(5)(xxiv)(c) Names of companies in which the person also holds the directorship and the membership of committees of the Board √ 1(5)(xxv) A Management’s Discussion and Analysis signed by CEO or MD presenting detailed analysis of the company’s position and operations along with a brief discussion of changes in the financial statements, among others, focusing on: 1(5)(xxv)(a) Accounting policies and estimation for preparation of financial statements 1(5)(xxv)(b) Changes in accounting policies and estimation, if any, clearly describing the effect on financial performance or results and financial position as well as cash flows in absolute figure for such changes. 1(5)(xxv)(c) Comparative analysis (including effects of inflation) of financial performance or results and financial position as well as cash flows for current financial year with immediate preceding five years explaining reasons thereof 1(5)(xxv)(d) Compare such financial performance or results and financial position as well as cash flows with the peer industry scenario √ 1(5)(xxv)(e) Briefly explain the financial and economic scenario of the country and the globe √ 1(5)(xxv)(f) Risks and concerns issues related to the financial statements, explaining such risk and concerns mitigation plan of the company; √ 1(5)(xxv)(g) Future plan or projection or forecast for company’s operation, performance and financial position, with justification thereof, i.e., actual position shall be explained to the shareholders in the next AGM 65 √ √ √ √ Al-Arafah Islami Bank Limited Annual Report 2018
66. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied Not complied Remarks (if any) 1(5)(xxvi) Declaration or certification by the CEO and the CFO to the Board as required under condition No. 3(3) shall be disclosed as per Annexure-A; and 1(5)(xxvii) The report as well as certificate regarding compliance of conditions of this Code as required under condition No. 9 shall be disclosed as per Annexure-B and Annexure-C 1(6) Meetings of the Board of Directors 1(6) The company shall conduct its Board meetings and record the minutes of the meetings as well as keep required books and records in line with the provisions of the relevant Bangladesh Secretarial Standards (BSS) as adopted by the Institute of Chartered Secretaries of Bangladesh (ICSB) in so far as those standards are not inconsistent with any condition of this Code 1(7) Code of Conduct for the Chairperson, other Board members and Chief Executive Officer 1(7)(a) The Board shall lay down a code of conduct, based on the recommendation of the Nomination and Remuneration Committee (NRC) at condition No. 6, for the Chairperson of the Board, other board members and Chief Executive Officer of the company 1(7)(b) The code of conduct as determined by the NRC shall be posted on the website of the company including, among others, prudent conduct and behavior; confidentiality; conflict of interest; compliance with laws, rules and regulations; prohibition of insider trading; relationship with environment, employees, customers and suppliers; and independency 2 Governance of Board of Directors of Subsidiary Company 2 (a) Provisions relating to the composition of the Board of the holding company shall be made applicable to the composition of the Board of the subsidiary company √ 2 (b) At least 1 (one) independent director on the Board of the holding company shall be a director on the Board of the subsidiary company √ 2 (c) The minutes of the Board meeting of the subsidiary company shall be placed for review at the following Board meeting of the holding company √ 2 (d) The minutes of the respective Board meeting of the holding company shall state that they have reviewed the affairs of the subsidiary company √ 2 (e) The Audit Committee of the holding company shall also review the financial statements, in particular the investments made by the subsidiary company √ 3 Managing Director (MD) or Chief Executive Officer (CEO), Chief Financial Officer (CFO), Head of Internal Audit and Compliance (HIAC) and Company Secretary (CS) 3(1) Appointment 3(1)(a) The Board shall appoint a Managing Director (MD) or Chief Executive Officer (CEO), a Company Secretary (CS), a Chief Financial Officer (CFO) and a Head of Internal Audit and Compliance (HIAC) √ 3(1)(b) The positions of the Managing Director (MD) or Chief Executive Officer (CEO), Company Secretary (CS), Chief Financial Officer (CFO) and Head of Internal Audit and Compliance (HIAC) shall be filled by different individuals √ 3(1)(c) The MD or CEO, CS, CFO and HIAC of a listed company shall not hold any executive position in any other company at the same time √ 3(1)(d) The Board shall clearly define respective roles, responsibilities and duties of the CFO, the HIAC and the CS √ Al-Arafah Islami Bank Limited Annual Report 2018 66 √ √ √ As Bangladesh Bank’s circular states that “Each Bank Company can form 1 (one) executive committee, 1 (one) audit committee, and 1 (one) risk management committee with the directors. Board can’t form any permanent, temporary or sub-committee except the above mentioned three committees”.
67. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied Not complied Remarks (if any) Note: As explained in note under condition number 6, since no NRC was formed code of conduct for the Chairperson of the Board, other board members and Chief Executive Officer of the company remained pending. 3(1)(e) The MD or CEO, CS, CFO and HIAC shall not be removed from their position without approval of the Board as well as immediate dissemination to the Commission and stock exchange(s) 3(2) Requirement to attend Board of Directors’ Meetings The MD or CEO, CS, CFO and HIAC of the company shall attend the meetings of the Board √ √ 3(3) Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief Financial Officer (CFO) 3(3)(a) The MD or CEO and CFO shall certify to the Board that they have reviewed financial statements for the year and that to the best of their knowledge and belief: 3(3)(a)(i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading √ 3(3)(a)(ii) These statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws √ 3(3)(b) The MD or CEO and CFO shall also certify that there are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or in violation of the code of conduct for the company’s Board or its members √ 3(3)(c) The certification of the MD or CEO and CFO shall be disclosed in the Annual Report √ 4 Board of Directors’ Committee For ensuring good governance in the company, the Board shall have at least following sub- committees: 4(i) Audit Committee 4(ii) Nomination and Remuneration Committee 5 Audit Committee: 5(1) Responsibility to the Board of Directors 5(1)(a) The company shall have an Audit Committee as a sub-committee of the Board √ 5(1)(b) The Audit Committee shall assist the Board in ensuring that the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business √ 5(1)(c) The Audit Committee shall be responsible to the Board; the duties of the Audit Committee shall be clearly set forth in writing √ 5(2) Constitution of the Audit Committee 5(2)(a) The Audit Committee shall be composed of at least 3 (three) members √ 5(2)(b) The Board shall appoint members of the Audit Committee who shall be non-executive directors of the company excepting Chairperson of the Board and shall include at least 1 (one) independent director √ 5(2)(c) All members of the audit committee should be “financially literate” and at least 1 (one) member shall have accounting or related financial management background and 10 (ten) years of such experience √ √ Please refer to the note given under condition number 6 67 Al-Arafah Islami Bank Limited Annual Report 2018
68. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied When the term of service of any Committee member expires or there is any circumstance causing any Committee member to be unable to hold office before expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number of 3 (three) persons, the Board shall appoint the new Committee member to fill up the vacancy immediately or not later than 1 (one) month from the date of vacancy in the Committee to ensure continuity of the performance of work of the Audit Committee √ 5(2)(e) The company secretary shall act as the secretary of the Committee √ 5(2)(f) The quorum of the Audit Committee meeting shall not constitute without at least 1 (one) independent director √ 5(3) Chairperson of the Audit Committee 5(3)(a) The Board shall select 1 (one) member of the Audit Committee to be Chairperson of the Audit Committee, who shall be an independent director √ 5(3)(b) In the absence of the Chairperson of the Audit Committee, the remaining members may elect one of themselves as Chairperson for that particular meeting, in that case there shall be no problem of constituting a quorum as required under condition No. 5(4)(b) and the reason of absence of the regular Chairperson shall be duly recorded in the minutes √ 5(3)(c) Chairperson of the Audit Committee shall remain present in the Annual General Meeting (AGM) Meeting (AGM) √ 5(4) Meeting of the Audit Committee 5(4)(a) The Audit Committee shall conduct at least its four meetings in a financial year √ 5(4)(b) The quorum of the meeting of the Audit Committee shall be constituted in presence of either two members or two third of the members of the Audit Committee, whichever is higher, where presence of an independent director is a must √ 5(5) Role of Audit Committee 5(5)(a) Oversee the financial reporting process √ 5(5)(b) Monitor choice of accounting policies and principles √ Monitor Internal Audit and Compliance process to ensure that it is adequately resourced, including approval of the Internal Audit and Compliance Plan and review of the Internal Audit and Compliance Report √ 5(5)(d) Oversee hiring and performance of external auditors √ 5(5)(e) hold meeting with the external or statutory auditors for review of the annual financial statements before submission to the Board for approval or adoption √ 5(5)(f) Review along with the management, the annual financial statements before submission to the Board for approval √ 5(5)(g) Review along with the management, the quarterly and half yearly financial statements before submission to the Board for approval √ 5(5)(h) Review the adequacy of internal audit function √ 5(5)(i) Review the Management’s Discussion and Analysis before disclosing in the Annual Report √ 5(5)(j) Review statement of all related party transactions submitted by the management √ 5(2)(d) 5(5)(c) Al-Arafah Islami Bank Limited Annual Report 2018 68 Not complied Remarks (if any)
69. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied 5(5)(k) 5(5)(l) 5(5)(m) Review Management Letters or Letter of Internal Control weakness issued by statutory auditors √ Oversee the determination of audit fees based on scope and magnitude, level of expertise deployed and time required for effective audit and evaluate the performance of external auditors; √ Oversee whether the proceeds raised through Initial Public Offering (IPO) or Repeat Public Offering (RPO) or Rights Share Offer have been utilized as per the purposes stated in relevant offer document or prospectus approved by the Commission. Provided that the management shall disclose to the Audit Committee about the uses or applications of the proceeds by major category (capital expenditure, sales and marketing expenses, working capital, etc.), on a quarterly basis, as a part of their quarterly declaration of financial results: Provided further that on an annual basis, the company shall prepare a statement of the proceeds utilized for the purposes other than those stated in the offer document or prospectus for publication in the Annual Report along with the comments of the Audit Committee. √ Not complied 5(6) Reporting of the Audit Committee 5(6)(a) Reporting to the Board of Directors 5(6)(a) (i) The Audit Committee shall report on its activities to the Board 5(6)(a) (ii) The Audit Committee shall immediately report to the Board on the following findings, if any: - 5(6)(a) (ii) (a) Conflicts of interests √ 5(6)(a) (ii) (b) Suspected or presumed fraud or irregularity or material defect identified in the internal audit and compliance process or in the financial statements √ 5(6)(a) (ii) (c) Suspected infringement of laws, regulatory compliances including securities related laws, rules and regulations √ 5(6)(a) (ii) (d) Any other matter which the Audit Committee deems necessary shall be disclosed to the Board immediately √ 5(6)(b) Reporting to the Authorities If the Audit Committee has reported to the Board about anything which has material impact on the financial condition and results of operation and has discussed with the Board and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Audit Committee shall report such finding to the Commission, upon reporting of such matters to the Board for three times or completion of a period of 6 (six) months from the date of first reporting to the Board, whichever is earlier √ 5(7) Reporting to the Shareholders and General Investors Report on activities carried out by the Audit Committee, including any report made to the Board under condition No. 5(6)(a)(ii) above during the year, shall be signed by the Chairperson of the Audit Committee and disclosed in the annual report of the issuer company. √ 6 Nomination and Remuneration Committee (NRC) 69 Remarks (if any) √ As Bangladesh Bank’s circular states that “Each Bank Company can form 1 (one) executive committee, 1 (one) audit committee, and 1 (one) risk management committee with the directors. Board can’t form any permanent, temporary or sub-committee except the above mentioned three committees”. Al-Arafah Islami Bank Limited Annual Report 2018
70. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied 6(1) Responsibility to the Board of Directors 6(1) (a) The company shall have a Nomination and Remuneration Committee (NRC) as a sub-committee of the Board; 6(1) (b) The NRC shall assist the Board in formulation of the nomination criteria or policy for determining qualifications, positive attributes, experiences and independence of directors and top level executive as well as a policy for formal process of considering remuneration of directors, top level executive; 6(1) (c) The Terms of Reference (TOR) of the NRC shall be clearly set forth in writing covering the areas stated at the condition No. 6(5)(b) 6(2) Constitution of the NRC 6(2) (a) The Committee shall comprise of at least three members including an independent director 6(2) (b) All members of the Committee shall be non-executive directors 6(2) (c) Members of the Committee shall be nominated and appointed by the Board 6(2) (d) The Board shall have authority to remove and appoint any member of the Committee 6(2) (e) In case of death, resignation, disqualification, or removal of any member of the Committee or in any other cases of vacancies, the board shall fill the vacancy within 180 (one hundred eighty) days of occurring such vacancy in the Committee 6(2) (f) The Chairperson of the Committee may appoint or co-opt any external expert and/or member(s) of staff to the Committee as advisor who shall be non-voting member, if the Chairperson feels that advice or suggestion from such external expert and/or member(s) of staff shall be required or valuable for the Committee 6(2) (g) The company secretary shall act as the secretary of the Committee 6(2) (h) The quorum of the NRC meeting shall not constitute without attendance of at least an independent director 6(2) (i) No member of the NRC shall receive, either directly or indirectly, any remuneration for any advisory or consultancy role or otherwise, other than Director’s fees or honorarium from the company 6(3) Chairperson of the NRC 6(3) (a) The Board shall select 1 (one) member of the NRC to be Chairperson of the Committee, who shall be an independent director 6(3) (b) In the absence of the Chairperson of the NRC, the remaining members may elect one of themselves as Chairperson for that particular meeting, the reason of absence of the regular Chairperson shall be duly recorded in the minutes 6(3) (c) The Chairperson of the NRC shall attend the annual general meeting (AGM) to answer the queries of the shareholders Provided that in absence of Chairperson of the NRC, any other member from the NRC shall be selected to be present in the annual general meeting (AGM) for answering the shareholder’s queries and reason for absence of the Chairperson of the NRC shall be recorded in the minutes of the AGM 6(4) Meeting of the NRC 6(4) (a) The NRC shall conduct at least one meeting in a financial year Al-Arafah Islami Bank Limited Annual Report 2018 70 Not complied Remarks (if any)
71. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied Not complied Remarks (if any) 6(4) (b) The Chairperson of the NRC may convene any emergency meeting upon request by any member of the NRC 6(4) (c) The quorum of the meeting of the NRC shall be constituted in presence of either two members or two third of the members of the Committee, whichever is higher, where presence of an independent director is must as required under condition No. 6(2)(h) 6(4) (d) The proceedings of each meeting of the NRC shall duly be recorded in the minutes and such minutes shall be confirmed in the next meeting of the NRC. 6(5) Role of the NRC 6(5) (a) NRC shall be independent and responsible or accountable to the Board and to the shareholders 6(5) (b) NRC shall oversee, among others, the following matters and make report with recommendation to the Board 6(5) (b) (i) Formulating the criteria for determining qualifications, positive attributes and independence of a director and recommend a policy to the Board, relating to the remuneration of the directors, top level executive, considering the following 6(5) (b) (i) (a) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate suitable directors to run the company successfully 6(5) (b) (i) (b) The relationship of remuneration to performance is clear and meets appropriate performance benchmarks 6(5) (b) (i) (c) Remuneration to directors, top level executive involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals 6(5) (b) (ii) Devising a policy on Board’s diversity taking into consideration age, gender, experience, ethnicity, educational background and nationality 6(5) (b) (iii) Identifying persons who are qualified to become directors and who may be appointed in top level executive position in accordance with the criteria laid down, and recommend their appointment and removal to the Board 6(5) (b) (iv) Formulating the criteria for evaluation of performance of independent directors and the Board 6(5) (b) (v) Identifying the company’s needs for employees at different levels and determine their selection, transfer or replacement and promotion criteria 6(5) (b) (vi) Developing, recommending and reviewing annually the company’s human resources and training policies 6(5) (c) The company shall disclose the nomination and remuneration policy and the evaluation criteria and activities of NRC during the year at a glance in its annual report 7 External or Statutory Auditors : 7 (1) The issuer company shall not engage its external or statutory auditors to perform the following services of the company, namely: 7 (1) (i) Appraisal or valuation services or fairness opinions; √ 7 (1) (ii) Financial information systems design and implementation; √ 71 Al-Arafah Islami Bank Limited Annual Report 2018
72. Compliance Status of BSEC Guidelines for Corporate Governance Condition No . Compliance Status (Put √ in the appropriate column) Title Complied 7 (1) (iii) Book-keeping or other services related to the accounting records or financial statements; √ 7 (1) (iv) Broker-dealer services √ 7 (1) (v) Actuarial services; √ 7 (1) (vi) Internal audit services or special audit services √ 7 (1) (vii) Any service that the Audit Committee determines √ 7 (1) (viii) Audit or certification services on compliance of corporate governance as required under condition No. 9(1); and √ 7 (1) (ix) any other service that creates conflict of interest. √ 7 (2) No partner or employees of the external audit firms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company; his or her family members also shall not hold any shares in the said company √ 7 (3) Representative of external or statutory auditors shall remain present in the Shareholders’ Meeting (Annual General Meeting or Extraordinary General Meeting) to answer the queries of the shareholders √ 8 Maintaining a website by the Company – 8 (1) The company shall have an official website linked with the website of the stock exchange. √ 8 (2) The company shall keep the website functional from the date of listing √ 8 (3) The company shall make available the detailed disclosures on its website as required under the listing regulations of the concerned stock exchange(s) √ 9 Reporting and Compliance of Corporate Governance: 9 (1) The company shall obtain a certificate from a practicing Professional Accountant or Secretary (Chartered Accountant or Cost and Management Accountant or Chartered Secretary) other than its statutory auditors or audit firm on yearly basis regarding compliance of conditions of Corporate Governance Code of the Commission and shall such certificate shall be disclosed in the Annual Report 9 (2) The professional who will provide the certificate on compliance of this Corporate Governance Code shall be appointed by the shareholders in the annual general meeting. 9 (3) The directors of the company shall state, in accordance with the Annexure-C attached, in the directors’ report whether the company has complied with these conditions or not. Al-Arafah Islami Bank Limited Annual Report 2018 72 Not complied Remarks (if any) √ To be complied in next Annual General Meeting (AGM) √
73. Compliance Report on BSEC ’s Notification 1. Compliance of section 1.5 (xxii) Board of Directors meeting held during the year 2018 and attendance by each Director: Composition of the Board No. of meeting Sl. No. held Name Position 1 Alhajj Abdus Samad Chairman 14 2 Alhajj Abdus Salam Vice Chairman 14 3 Hafez Alhajj Md. Enayet Ullah Director 14 4 Alhajj Salim Rahman Director 14 5 Alhajj Md. Liakat Ali Chowdhury Director 14 6 Jb. Md. Amir Uddin PPM Independent Director 14 7 Alhajj Nazmul Ahsan Khaled Director 14 8 Alhajj Abdul Malek Mollah Director 14 9 Alhajj Md. Harun-ar-Rashid Khan Director 14 10 Alhajj Md. Anowar Hossain Director 14 11 Alhajj Badiur Rahman Director 14 12 Alhajj Engr. KH. Mesbauddin Ahmed Director 14 13 Alhajj Ahamedul Haque Director 14 14 Alhajj Abu Naser Mohammad Yeahea Director 14 15 Alhajj Niaz Ahmed Director 14 16 Alhajj Mohammed Emadur Rahman Director 14 17 Dr. Md. Shafiul Haider Chowdhury Alternative Director 14 18 Jb Anwar Hossain Alternative Director 14 19 Jb. Khalid Rahim Independent Director 14 Jb.M.. Kamaluddin Chowdhury 20 Independent Director 14 (Joined on 30-8-2018) Annexure-III Entitlement to attend 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 5 Attended 14 12 14 12 13 14 10 14 14 14 8 13 12 8 11 4 10 9 12 5 Board of Executive Committee meeting held during the year 2018 and attendance by each Director: Sl. No. Composition of the Committee Name Position 1 Alhajj Hafez Md. Enayet Ullah 2 Alhajj Salim Rahman 3 4 5 6 7 8 Alhajj Nazmul Ahsan Khaled Alhajj Md. Harun-ar Rashid Khan Alhajj Badiur Rahman Alhajj Ahamedul Haque (Member wef 612th Meeting) Alhajj Engr. KH. Mesbahuddin Ahmed Alhajj Abu Naser Mohammad Yeahea Chairman Vice Chairman Member Member Member Member Member Member No. ofmeeting held Entitlement to attend Attended 15 15 14 15 15 7 15 15 15 15 7 8 15 15 8 15 3 8 14 14 15 15 15 Board of Audit Committee meeting held during the year 2018 and attendance by each Director: Sl. No. 1 2 3 4 5 Composition of the Committee Name Alhajj Md. Amir Uddin PPM Alhajj Abdus Salam Alhajj Abdul Malek Mollah Alhajj Niaz Ahmed Alhajj Khalid Rahim Position No. of meeting held Entitlement to attend Attended Chairman Member Member Member Member 10 10 10 10 10 10 10 10 10 10 10 9 10 9 10 73 Al-Arafah Islami Bank Limited Annual Report 2018
74. Board of Risk Management Committee Meeting held during the year 2018 and attendance by each Director : Sl. 1 2 3 4 5 Composition of the Committee Name Alhajj Md. Liakat Ali Chowdhury Alhajj Abdus Samad Alhajj Abdus Salam Alhajj Mohd. Emadur Rahman Alhajj Md. Amir Uddin PPM Position Chairman Member Member Member Member No. of meeting held Entitlement to attend Attended 4 4 4 4 4 4 4 2 4 3 3 3 1 1 2 2. Compliance of section 1.5 (xxiii) The pattern of Shareholding: a. Parent / Subsidiary / Associated Companies and other related party Sl. No. 1 2 3 Name AIBL Capital Market Services Limited AIBL Capital Management Limited Millennium Information Solution Limited Relation Related Party Related Party Related Party Shares held 242000000 4900000 9369343 b. Directors and their spouse and minor children as on 31st December, 2018 Sl. No. 1 Name Relation Chairman Jb. Abdus Samd Mrs. Shahana Ferdous 2 3 4 16 Spouse Jb. Abdus Salam Hafez Md. Enayetullah Jb. Salim Rahman Jb. Md. Liakat Ali Chowdhury Vice Chairman Sponsor Director Director Director 6 Jb. Md. Amir Uddin PPM Independent Director 7 8 Jb. Nazmul Ahsan Khaled Jb. Abdul Malek Mollah Sponsor Director Sponsor Director Mrs. Laila Begum 9 10 11 Spouse 754,451 21,174,895 20,886,151 20,881,355 20,887,108 22,365,683 20938,682 327 Sponsor Director Sponsor Director Sponsor Director 20,880,939 23,116,404 29,121,809 Mrs. Syeda Rashida Yasmin Spouse 5,288,969 Engr. KH. Mesbauddin Ahmed Director 20,881,634 Mrs. Ajmeri Ahmed Spouse 9,239,039 13 14 15 Jb. Ahamedul Haque Jb. Abu Naser Mohammad Yeahea Jb. Niaz Ahmed Director Director Director 20,880,832 25,785,097 20,988,159 5 17 Jb. Mohammed Emadur Rahman Jb. Badsha Meah 12 Jb. Md. Harun – Ar- Rashid Khan Jb. Md. Anowar Hossain Jb. Badiur Rahman Shares held 23,495,221 Mrs. Shabana Niaz Mrs. Feroza Begum 18 Jb. Mohammed Haroon Sponsor Director Spouse Jb. Khalid Rahim Jb. M. Kamaluddin Chowdhury Al-Arafah Islami Bank Limited Annual Report 2018 8,608,893 20,906,191 20,880,983 Spouse Mrs. Shamsun Nahar Begum 19 20 Spouse Director Sponsor Director Independent Director Independent Director 74 324,014 21,002,181 70,000 -
75. c . Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and Compliance division and their spouses and Minor children (as on 31st December, 2018) Sl. No. Name Relation Shares held 1 Janab Farman R. Chowdhury Chief Executive Officer Nil 2 Janab Md. Mahmudur Rahman Company Secretary Nil 3 Janab Mohammmed Nadim FCA Chief Financial Officer Nil 4 Janab Mohammed Zubair Wafa Head of Internal Control & Compliance Wing Nil d. Executives (top five salaried employees of the company, other than Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer and Head of Internal Audit as on 31 December 2018 ) Sl. No. Name Relation Shares held 1 Janab Md. Fazlul Karim Deputy Managing Director Nil 2 Janab Muhammad Mahmoodul Haque Deputy Managing Director Nil 3 Janab S.M Jaffar Deputy Managing Director Nil 4 Janab Syed Masodul Bari Executive Vice President & CTO Nil 5 Janab Md. Atiqur Rahman Executive Vice President Nil e. Shareholders holding ten percent (10%) or more voting interest in the company: None Appreciation The Board of Directors expresses its gratitude to the Almighty Allah for enabling us to achieve remarkable progress in all respect during the year-2018. Board of Directors takes this opportunity to thank the Shariah and Board Members of the Bank for their relentless whole hearted support. Their collective wisdom contributed extensively to acquiring of strength. The Board of Directors also thanks the management and the staff for their loyalty, support and untiring efforts which has resulted in improved performance. The Board of Directors expresses its thanks to respected shareholders, valued customers, patrons well-wishers, Government, of Bangladesh, Bangladesh Bank, Registrar of Joint Stock Companies & Firms, Securities and Exchange Commission, Auditors, Legal advisers and all others concerned for giving us the benefit of their support and co-operation. We quietly weigh their continued support and co-operation which are constant source of inspiration. We re-assurance our vow to remain most disciplined, Shariah compliant and result oriented. While we look forward to their continuous support and co-operation with trust and confidence, we reassure that our respected shareholders can expect further satisfactory results in 2019. May the Almighty, Allah give us dedication, patience and fortitude to serve the cause of Islam and to go ahead with our mission to run the Bank as per the principles of Islamic Shariah. May Allah the Almighty bestow his bountiful blessing upon us all. Allah Hafiz Ma- Assalam Sincerely, Alhajj Abdus Samad Labu Chairman Date: 22nd June 2019 75 Al-Arafah Islami Bank Limited Annual Report 2018
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77. Report of the Shariah Supervisory Committee for the year ended on 31 December 2018 Bismillahir Rahmanir Rahim Honourable Shareholders of Al-Arafah Islami Bank Limited (AIBL) Assalamu Alaikum Wa Rahmatullahi Wa Barakatuhu. As a Shariah Supervisory Committee we examine all the banking activities to see whether all Shariah laws, guidelines, directions and Fatwas given by the Shariah Supervisory Committee from time to time have been complied with by the Bank or not. On the other hand it is the responsibility of the Management of the Bank to ensure compliance thereof. On completion of the examination Shariah Supervisory Committee places an Independent Report based on Islamic Shariah before the Shareholders. In line with the above we have meticulously scrutinized and examined all the activities including relevant documents, transactions and deals performed by 168 branches of AIBL during the year ended on 31.12.2018 (Esayee) (Hijri 1439-1440). Our Opinions and Suggestions are enumerated below: Opinions: a. On completion of the audit we have found that more or less all the activities, transactions and deals have been in accordance with the Shariah Principles and Regulations. b. Distribution of profits among various Mudaraba Depositors has been done in line with the Mudaraba Principles as per Sahibul Mal, i.e. as per the contractual agreement between the Bank and the Depositors. c. Since the Bank does not pay any Zakat on the money of the Depositors and Shareholders the responsibility of paying Zakat thus lies with the respective Depositors and Shareholders. d. Although all the activities have been in terms with Shariah Principles nevertheless due to ignorance of the obligation of abiding by some internal and international regulatory bindings and lack of proper due diligence there has been few cases where the means of the income earned have not been approved by the Shariah. This has been termed as Doubtful Income and the Bank has been advised to separate the same from its basic income and spend it on the basis of Shariah prescribed ways. This money is not to be distributed among the Depositors or Shareholder as Profit or Dividend. Suggestions: 1. To ensure buy and sell through Bai-muajjal and Bai-murabaha investment modes and to comply with the Shariah rules clients can even be appointed as “Buying-Agents” if needed. 2. Bank should introduce the Mudaraba and Musharaka investment schemes even in a small scale. 3. To assist in improving the socio-economic condition of the less privileged group of the population Bank should emphasize on the existing small investment schemes and introduce new development schemes based on Islamic Shariah. 4. In order to equip the employees with Islamic Banking knowledge Bank should arrange adequate training programs on Islamic Economics and Banking. 5. In order to generally involve more and more people into Islamic Banking and to make them understand the benefit of it in this life and hereafter Bank should arrange various seminars, workshops and client-gathering at the Head Office, Zones and Branch level on a regular basis. 6. To strengthen the welfare and CSR activities of Al-Arafah Islami Bank Foundation by ensuring the implementation of the Shariah rules and regulations. May Allah (SWT) forgive all our sins and accept all our good deeds for His sake and give us Tawfiq to do more and more activities beneficial to mankind. Ameen. (Md. Abdur Rahim Khan) Secretary Shariah Supervisory Committee 77 (Mufti Sayeed Ahmad Muzaddedi) Chairman Shariah Supervisory Committee Al-Arafah Islami Bank Limited Annual Report 2018
78. For implementation of National Integrity Strategy , Al-Arafah Islami Bank Limited has taken the following steps according to the instructions given by Bangladesh Bank to improve ethics and murality in all levels and to establish good governance in the bank:1) A 7 (seven) member Central Integrity Committee (having a Deputy Managing Director as a Convener) has been formed. Progress on Integrity Strategy implementation is discussed in regular meetings of the Central Integrity Committee. 2) Action Plan regarding integrity has been devised as per format provided by Bangladesh Bank and quarterly implementation progress reports are being sent to Bangladesh Bank. 3) An Instruction Circular has been issued to all the branches/zones/offices to meticulously comply with instructions so that the identified existing and potential challenges and problems of the bank can be faced and mitigated. 4) Previous Code of Conducts for the officials and stakeholders of the bank has been updated as per Central Bank instructions and all the employees have been informed through instruction circular for meticulous compliance thereof. 5) According to the instructions of the Integrity Committee of Head Office, discussion meetings are being organized in every zone / branches at least on a quarterly basis to improve the ethics/morality of the officials and minutes of the meetings are being sent to the Member-Secretary, Integrity Committee of Head Office of the bank regularly for monitoring and follow up. 6) As per directions of the bank’s Central Integrity Committee, classroom sessions are being conducted in each training program of the training institute for development Al-Arafah Islami Bank Limited Annual Report 2018 78 status of Integrity under National Integrity Strategy Purpose of National Integrity Strategy: The Government of Bangladesh has introduced National Integrity Strategy in the year 2012 to establish rule of law, fundamental human rights, equality, justice and organizational good governance through ensuring political, economical and social rights as well as to develop a prosperous Bangladesh. Bangladesh Bank itself and all the scheduled banks are implementing the Strategy through Action Plans since 2013. National Integrity Strategy Action Plan and Implementation Progress Monitoring Structures, 2018-19 at field level, has also been in place since July 2018. Implementation Integrity & National Integrity Strategy: Integrity generally means behavioral excellence influenced by ethics, morality and honesty. It also implies adherence to time-tested norms, values, customs and principles of a society. At the individual level, it means being duty-bound and honest. Organizations are created by people for achievement of its common goal. For promotion of integrity, strict adherence to remaining morally and ethically correct at individual level is of critical importance. “Homes” can play a vital role in promoting integrity since moral education originates from homes. It is equally true about institutions, as they are the manifestation of the overall goal of the individuals. Laws, regulations, processes, policies, systems and the philosophy may be followed in such a manner that they can promote righteousness in life. So, beyond the laws/policies, a movement has to be initiated so that the citizens become ethical in public and private lives and integrity prevails in all organizations, business and civil society. Therefore keeping all these factors in mind, in order to establishing a good governance in all institutions and the in the society at large The Government of the People’s Republic of Bangladesh formulated a NATIONAL INTEGRITY STRATEGY to prevent corruption and promote an happy and prosperous Bangladesh.
79. Implementation status of Integrity under National Integrity Strategy of the morality of all the executive / officials of the bank. The Training Institute of the bank is being organized by the Executive Development Program (EDP) from time to time with executives of different levels for development of their moral and ethical values. 7) According to the instructions of Bangladesh Bank, a 5-Member Innovation Team has been formed to take new strategies/ Innovative Ideas on the deposit/investment and services products from time to time. 9) According to the instructions of Bangladesh Bank, recently, the Obijog Nishpotti Kormokarta (ONIK), Complain Management & Resolving Officer (CMRO) and an Appellate Authority have been appointed for the management of dispute/complaints of the customers and stakeholders under the Right to Information Act, 2009. 10) The particulars (name and designation etc) of the officials who are dismissed / removed / terminated from time to time by the bank are being uploaded to the web portal of Bangladesh Bank and compliance reports is being sent to Bangladesh Bank on quarterly basis as per their instruction. 11) Advertisements are being published in each quarter in the national daily newspaper by AIBL on the Integrity Rhymes introduced by Bangladesh Bank on ethics/morality. 12) In 2016, for the practice of integrity, AIBL awarded crests and certificates to the 38 employees as incentive after fulfilling 13 different determining criteria. In 2017, 63 officials / executives have been awarded with crests and certificates in order to encourage good practice / excellence in the bank. This time the number of determining criteria was 25. In the meantime, to encourage even further BRPD Circular No. 08 of 08/08/2018 was issued by Bangladesh Bank with a direction to give one month’s basic salary to at least one executive/official from each rank in each year as Integrity Award. In order to encourage the integrity practice / excellence in this bank in the light of the instructions of the Bangladesh Bank, the policy of awarding of one month’s basic salary to at least one executive/officials from each rank in each year as Integrity Award was approved by the Board of Directors on 24/11/2008 in its 330th Meeting and the award for the year 2018 will be given within June, 2019.. There is no denying the fact that introduction of financial award for integrity will not only motivate the officials to be behaviorally correct but also will increase the competitiveness and efficiency of the employees and the officials. This will inevitably decrease the irregularities of banking activities and will improve the quality of asset as well. Thus the aims and objectives/goals of the bank as well as overall integrity of the officials will be achieved. 79 Al-Arafah Islami Bank Limited Annual Report 2018
80. 1 . Review the financial reporting process, the system of internal control and compliance approach to manage risks, the audit process, findings of the Central Bank’s comprehensive audit and the Bank’s processes for monitoring compliance of laws and regulations and its own code of business conduct. 2. Assist the Board in fulfilling its oversight responsibilities including implementation of the objectives, strategies, policies and overall business plans set by the Board for effective functioning of the bank. Role and Responsibilities of the Committee The roles and responsibilities of Board Audit Committee of AIBL have been chalked out on the basis of BRPD Circular No. 11 dated 27 October 2013, corporate governance notification issued by BSEC, dated 03 June, 2018 and other best practice of corporate governance guidelines and standards. The important roles and responsibilities of the Board Audit Committee are described below: 1. Review the Internal Control system of the bank to ensure that sufficient Risk Management System is in place to manage core risk of the bank. 2. Review the Internal Audit Procedure. 3. Review the efficiency and effectiveness of Internal Control System. 4. Consider the recommendations made by the internal and external auditors. 5. Ensure fair presentation of financial statements in compliance with Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards. 6. Review compliance with the applicable rules and regulations of Bangladesh Bank, BSEC, Bank Company Act- 1991 (amended in July, 2013) and Companies Act, 1994. 7. Review statement of all related party transactions submitted by the management. 8. Oversee the determination of audit fees based on scope and magnitude, level of expertise deployed and time required for effective audit and evaluate the performance of external auditors. 9. Hold meeting with the external or statutory auditors for review of the annual financial statements before submission to the Board for approval or adoption. Report to the Board of Director 1. Report immediately to the Board of Directors on conflict of interest. 2. Report to the Board of Directors on frauds or irregularities or material defects in the Internal Control System. 3. Suspected infringement of laws, regulatory compliances including securities related laws, rules and regulations. Composition of the Board Audit Committee (BAC) The Board Audit Committee was reconstituted by the Board of Directors of the bank in its 322nd Meeting held on 24 May, 2018. The Board Audit Committee (BAC) consists of the following 05 (five) members: Al-Arafah Islami Bank Limited Annual Report 2018 80 the Board Audit Committee (BAC) Objectives of the Board Audit Committee Report of In compliance with the guidelines of Banking Companies Act (amended in July 2013), Bangladesh Bank guidelines, notifications of Bangladesh Securities & Exchange Commission (BSEC) and international best practices of Corporate Governance, the Audit Committee of the Board of Al-Arafah Islami Bank Limited was formed by the Board of Directors of the bank with a view to ensuring the achievement of objectives of the bank, efficiency of operations and compliance with applicable laws, rules, regulations and internal policies to make the bank a strong and dependable organization for all stakeholders, specially shareholders, depositors and the society as a whole.
81. SL . No Name Educational Qualification Status with the Bank Status with the Committee 1 Jb. Md. Amir Uddin PPM BSS (Hon.) Economics, MSS(Economics) Independent Director Chairman 2 Jb. Abdus Salam 3 Jb. Abdul MalekMollah 4 5 M.Com Director Member Intermediate Director Member Jb. Niaz Ahmed M.Com (Accounting), L.L.B. Director Member Jb. Khalid Rahim FCA Independent Director Member Meetings of Board Audit Committee During the Year 2018, 10 (ten) meetings of the Committee were held. Activities during the year The Board Audit Committee carried out the following activities during the year 2018:1. Reviewed the comprehensive inspection report of Bangladesh Bank, evaluated compliance status thereof and advised the bank management to take necessary action as required. 2. Reviewed performance of internal audit, 2018. 3. Reviewed audited accounts and report of 2018 and recommended those audited report to place to the Board. 4. Reviewed inspection report of different branches of the bank conducted by Internal Control and Compliance Wing of the bank and advised the bank management to enhance deposit, Investment including reduction of classified Investment. 5. Reviewed the compliance status of audit objections and advised the management to ensure full compliance of regulatory, legal and significant issues meticulously. 6. Reviewed annual financial statements of the bank with appointment of external auditors prior to submission to the Board for their approval. 7. Reviewed and approved Annual Plan of Risk Based Internal Audit, 2018. 8. Reviewed and approved action plan for turning loss-incurring branches into profitable branches. 9. Reviewed comparative position of half yearly income - expenditure statement as on 30 June, 2018 and 30 June, 2017. 10. Recommend measures for improvement of the performance of the bank. 11. Reviewed cost of fund as on June 30, 2018 of the bank. Acknowledgement In conclusion, we would like to extend our sincere thanks and profound gratitude to the members of Board of Directors for allowing the committee to discharge its due role independently. We also express our gratitude and thanks to the management, auditors, regulatory authorities particularly, Bangladesh Bank and Bangladesh Securities & Exchange Commission for their cordial co-operation in performing the duties with due diligence. For and on behalf of Board Audit Committee. Md. Amir Uddin PPM Chairman Board Audit Committee (BAC) 81 Al-Arafah Islami Bank Limited Annual Report 2018
82. The Minutes of the RMC meetings with suggestions were placed for implementation and to the Board of Directors for subsequent approval . Reporting to the Board The decisions and recommendations of the Board Risk Management Committee were submitted before the Board of Directors for reviewing and the Board closely reviewed and approved the same as placed. Acknowledgement The members of the Board Risk Management Committee (BRMC) express their gratitude and thanks to the Board of Directors, Management and Risk Management Team of the Bank for their cooperation while performing its duties and responsibilities. Md. Liakat Ali Chowdhury Chairman Board Risk Management Committee Al-Arafah Islami Bank Limited Annual Report 2018 82 Activities of a) Reviewed the Bank’s Risk Management Guidelines and recommended thereon. b) Reviewed all Core Risk Management Guidelines of the Bank. c) Reviewed the Internal Capital Adequacy Assessment Process (ICAAP) Manual/ Guidelines of the Bank. d) Reviewed the Internal Capital Adequacy Assessment Process (ICAAP) report of the Bank. e) Reviewed the Environment & Social Risk Management (ESRM) activities of the Bank. f) Reviewed the Capital to Risk Weighted Assets Ratio (CRAR) of the Bank from time to time against Minimum Capital Requirement (MCR). g) Reviewed the Risk Appetite Statement of the Bank. h) Reviewed the Delegation of Power (Business Discretionary Power) for the Bank. i) Evaluated the Stress Testing Result as per requirement of Pillar-2 of Basel-III periodically. j) Evaluated the Risk Based Capital Adequacy (Basel-III) Report as per Pillar-1 of BaselIII periodically. k) Evaluated the Monthly Risk Management Report (MRMR) and Comprehensive Risk Management Report (CRMR) of the Bank periodically. l) Evaluated the implementation status of the decisions taken in the management level Risk Management Committee (RMC) meetings time to time. m) Reviewed the Management Action Triggers (MAT) with Supplementary Documents of ICAAP under Pillar-2 of Basel-III. n) Reviewed the status of Bank’s Recovery, Classification, Legal position and Written off accounts periodically. o) Reviewed the Bank’s overall collateral securities and advised the management to obtain additional securities from the large borrowers on best effort basis to reduce additional capital charge of the Bank. p) Evaluated the concentration of Investment portfolio of Bank and advised the management to diversify investment portfolio as far as possible and practicable. q) Reviewed the Bank’s overall rated investment clients and advised the management to improve the number of rated investment clients by pursuing the existing Corporate and SME investment clients to reduce the Risk Weighted Assets (RWA) as well as to reduce additional capital charge on the Bank. r) Reviewed the Bank’s Top-100 Defaulter Clients and the status thereof. s) Reviewed the status of the large investments of the Bank and advised the management to closely monitor such investments for further improvement. t) Reviewed the CAMELS rating and Comprehensive Risk Management Ratings of the Bank and advised the management for further improvement. the Board Risk Management Committee in the year 2018 The major activities of the Board Risk Management Committee (BRMC) in the year 2018 were as follows:
83. CEO and CFO ’s Declaration to the Board April 24, 2019 The Board of Directors Al-ArafahIslamiBank Limited Al-Arafah Tower, 63,PuranaPaltan, Dhaka 1000. Subject: Declaration on Financial Statements for the year ended on December 31, 2018 Muhtaram Assalamu Alaikum Pursuant to the condition No. 1(5)(xxvi) imposed vide the Commission’s Notification No. BSEC/CMRRCD/2006-158/207/Admin/80 Dated June 3, 2018 under section 2CC of the Securities and Exchange Ordinance, 1969, we do hereby declare that: 1. The Financial Statements of Al-Arafah Bank Limited for the year ended on December 31, 2018 have been prepared in compliance with International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS), as applicable in the Bangladesh and any departure there from has been adequately disclosed; 2. The estimates and judgments related to the financial statements were made on a prudent and reasonable basis, in order for the financial statements to reveal a true and fair view; 3. The form and substance of transactions and the Company’s state of affairs have been reasonably and fairly presented in its financial statements; 4. To ensure above, the Company has taken proper and adequate care in installing a system of internal control and maintenance of accounting records; 5. Our internal auditors have conducted periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed; and 6. The management’s use of the going concerns basis of accounting in preparing the financial statements is appropriate and there exists no material uncertainty related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. In this regard, we also certify that: i. We have reviewed the financial statements for the year ended onDecember 31, 2018 and that to the best of our knowledge and belief: a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; b) these statements collectively present true and fair view of the Company’s affairs and are in compliance with existing accounting standards and applicable laws. ii. There are, to the best of knowledge and belief, no transactions entered into by the Company during the year which are fraudulent, illegal or in violation of the code of conduct for the company’s Board of Directors or its members. Ma-assalam Sincerely yours, Farman R. Chowdhury Managing Director and CEO 83 Muhammed Nadim FCA Chief Financial Officer Al-Arafah Islami Bank Limited Annual Report 2018
84. Auditor ’s Report and Financial Statements for the year ended 31 December 2018
85. We have audited the consolidated financial statements of Al-Arafah Islami Bank Limited and its subsidiary (the “Group”) as well as the separate financial statements of Al-Arafah Islami Bank Limited (the “Bank”), which comprise the consolidated and separate balance sheets as at 31 December 2018 and the consolidated and separate profit and loss accounts, consolidated and separate statements of changes in equity and consolidated and separate cash flow statements for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2018, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note 2. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Description of key audit matters Independent Auditor’s Report Opinion to the Shareholders of Al-Arafah Islami Bank Limited Report on the Audit of the Consolidated and Separate Financial Statements Our response to key audit matters Measurement of provision for investments The process for estimating the provision for customer investments associated with credit risk is significant and complex. For the individual analysis for large exposure, provisions calculation consider the estimates of future business performance and the market value of collateral provided for availing investment facilities. For the collective analysis of exposure on portfolio basis, provision calculation and reporting are manually processed that deals with voluminous databases, assumptions and estimates. We tested the design and operating effectiveness of key controls focusing on the following: • Investment appraisal, disbursement and monitoring procedures, and provisioning process; • Identification of loss events, including early warning and default warning indicators; • Reviewed quarterly Classification of Investments (LoansCL) submitted to Bangladesh Bank; Our substantive procedur es in relation to the provision for investment portfolio comprised the following: • Reviewed the adequacy of the general and specific provisions in line with related Bangladesh Bank guidelines and; • Assessed the methodologies on which the provision amounts are based, recalculated the provisions and tested the completeness and accuracy of the underlying information; • Evaluated the appropriateness and presentation of disclosures against relevant accounting standards and Bangladesh Bank guidelines. 85 Al-Arafah Islami Bank Limited Annual Report 2018
86. • Finally, compared the amount of provision requirement as determined by Bangladesh Bank Department of Banking Inspection (DBI) team to the actual amount of provision maintained. See note no 9 and 15.2 to the financial statements • Finally, compared the amount of provision requirement as determined by Bangladesh Bank Department of Banking Inspection (DBI) team to the actual amount of provision maintained. Valuation of treasury bill and treasury bond (including Islami Bond) The classification and measurement of T-Bill and T-Bond require judgment and complex estimates. In the absence of a quoted price in an active market, the fair value of T-Bills and T-Bonds including Islami Bond issued by Bangladesh Bank is determined using complex valuation techniques which may take into consideration direct or indirect unobservable market data and complex pricing models which require an elevated level of judgment. See note no 8 to the financial statements We assessed the processes and controls put in place by the Bank to identify and confirm the existence of treasury bills and bonds. We obtained an understanding, evaluated the design and tested the operating effectiveness of the key controls over the treasury bills and bonds valuation processes, including controls over market data inputs into valuation models, model governance, and valuation adjustments. We tested a sample of the valuation models and the inputs used in those models, using a variety of techniques, including comparing inputs to available market data. Finally assessed the appropriateness and presentation of disclosures against relevant accounting standards and Bangladesh Bank guidelines. Impairment assessment of unquoted investments In the absence of a quoted price in an active market, We have assessed the processes and controls put in place by the Bank to ensure all the fair value of unquoted shares and bonds, major investment decisions are undertaken through a proper due diligence process. especially any impairment is calculated using valuation We tested a sample of investments valuation as at 31 December 2018 and techniques which may take into consideration direct compared our results to the recorded value. or indirect unobservable market data and hence Finally we assessed the appropriateness and presentation of disclosures require an elevated level of judgment. against relevant accounting standards and Bangladesh Bank guidelines. See note no 8 to the financial statements IT systems and controls Our audit procedures have a focus on IT systems and We tested the design and operating effectiveness of the Bank’s IT access controls due to the pervasive nature and complexity of controls over the information systems that are critical to financial reporting. the IT environment, the large volume of transactions We tested IT general controls (logical access, changes management and processed in numerous locations daily and the reliance aspects of IT operational controls). This included testing that requests for on automated and IT dependent manual controls. access to systems were appropriately reviewed and authorized. Our areas of audit focus included user access We tested the Bank’s periodic review of access rights and reviewed requests management, developer access to the production of changes to systems for appropriate approval and authorization. environment and changes to the IT environment. We considered the control environment relating to various interfaces, These are key to ensuring IT dependent and configuration and other application layer controls identified as key to our application based controls are operating effectively audit. Legal and regulatory matters We focused on this area because the Bank and its subsidiaries (the “Group”) operates in a legal and regulatory environment that is exposed to significant litigation and similar risks arising from disputes and regulatory proceedings. Such matters are subject to many uncertainties and the outcome may be difficult to predict. These uncertainties inherently affect the amount and timing of potential outflows with respect to the provisions which have been established and other contingent liabilities. Furthermore, the Bank operate under Islamic Shariah principles and its activities are supervised by a Shariah Council. Overall, the legal provision represents the Group’s and the Bank’s best estimate for existing legal matters that have a probable and estimable impact on the Group’s financial position. Carrying value of investments in subsidiary by the Bank The Bank has invested in equity shares of three subsidiaries, namely AIBL Capital Market Services Limited, AIBL Capital Management Ltd and Millennium Information Systems Limited as at 31 December 2018 the carrying value of this investment is BDT 3,060 million. At the time of conducting our audit of the separate financial statements of the Bank we have considered the recoverable value of the Bank’s investments in all the above subsidiaries stated at cost. Management has conducted impairment assessment and calculated recoverable value of its individual subsidiaries in accordance with IAS 36. Al-Arafah Islami Bank Limited Annual Report 2018 We obtained an understanding, evaluated the design and tested the operational effectiveness of the Bank’s key controls over the legal provision and contingencies process. We enquired to those charged with governance to obtain their view on the status of all significant litigation and regulatory matters. We enquired of the Bank’s internal legal counsel for all significant litigation and regulatory matters and inspected internal notes and reports. We assessed the methodologies on which the provision amounts are based, recalculated the provisions, and tested the completeness and accuracy of the underlying information. We read minutes of various Shariah committee meetings and checked compliance of various directives. We also assessed the Bank’s provisions and contingent liabilities disclosure. We have reviewed Management’s analysis of impairment assessment and recoverable value calculation of subsidiaries in accordance with IAS 36. In particular, our discussions with the Management were focused on the continued appropriateness of the value in use model, the key assumptions used in the model, the reasonably possible alternative assumptions, particularly where they had the most impact on the value in use calculation. We also checked mathematical accuracy of the model, recalculated discount rate used within the model, inputs used in the determination of assumptions within the model were challenged and corroborating information was obtained with reference to external market information, third-party sources. 86
87. Revaluation of property , plant and equipment The Bank in prior year has undertaken revaluation of its land . As a result of this revaluation exercise, an amount of BDT 977 million is recognised as the fair value gain in revaluation reserve. Determination of fair value in absence of any quoted price and active market require significant judgment We assessed the process of revaluation previously taken by the Bank. We reviewed revaluation report of the independent valuer along with relevant documents and applied our judgment to see whether the fair value is still relevant. Reporting on other information Management is responsible for the other information. The other information comprises all of the information in the annual report other than the consolidated and separate financial statements and our auditors’ report thereon. The annual report is expected to be made available to us after the date of this auditor’s report. Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Consolidated and Separate Financial Statements and Internal Controls Management is responsible for the preparation and fair presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank in accordance with IFRSs as explained in note 2, and for such internal control as management determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error. The Bank Company Act, 1991 and the Bangladesh Bank Regulations require the Management to ensure effective internal audit, internal control and risk management functions of the Bank. The Management is also required to make a self-assessment on the effectiveness of anti-fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. In preparing the consolidated and separate financial statements, management is responsible for assessing the Group’s and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s and the Bank’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Bank to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying 87 Al-Arafah Islami Bank Limited Annual Report 2018
88. transactions and events in a manner that achieves fair presentation . • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other Legal and Regulatory Requirements In accordance with the Companies Act, 1994, the Securities and Exchange Rules 1987, the Bank Company Act, 1991 and the rules and regulations issued by Bangladesh Bank, we also report that: (i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; (ii) to the extent noted during the course of our audit work performed on the basis stated under the Auditor’s Responsibility section in forming the above opinion on the consolidated financial statements and considering the reports of the Management to Bangladesh Bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management’s Responsibility for the financial statements and internal control: (a) internal audit, internal control and risk management arrangements of the Group as disclosed in the financial statements appeared to be materially adequate; (b) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Group and its related entities {other than matters disclosed in these financial statements}; (iii) Consolidated financial statements of the Bank include three subsidiaries, namely AIBL Capital Market Services Limited, AIBL Capital Management Ltd and Millennium Information Systems Limited, reflecting total assets of BDT. 1184,47,24,548 as at 31 December 2018 and total revenue of Tk. 27,42,37,512 for the year ended 31 December 2018, which has been audited by another auditor who has expressed an unqualified audit opinion. The results of these subsidiaries have been properly reflected in the Group’s consolidated financial statements; (iv) in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; (v) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; (vi) the consolidated balance sheet and consolidated profit and loss account together with the annexed notes dealt with by the report are in agreement with the books of account and returns; (vii) the expenditures incurred were for the purpose of the Bank’s business for the year; (viii) the consolidated financial statements have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as related guidance issued by Bangladesh Bank; (ix) adequate provisions have been made for investments and other assets which are in our opinion, doubtful of recovery; (x) the information and explanations required by us have been received and found satisfactory; (xi) we have reviewed over 80% of the risk weighted assets of the Bank and spent over 3,500 person hours; and (xii) Capital to Risk-weighted Asset Ratio (CRAR) as required by Bangladesh Bank has been maintained adequately during the year. Hoda Vasi Chowdhury & Co. Chartered Accountants Rahman Mostafa Alam & Co. Chartered Accountants Dhaka, 24 April 2019 Al-Arafah Islami Bank Limited Annual Report 2018 88
89. Consolidated Balance Sheet As at December 31 , 2018 Notes PROPERTY AND ASSETS Cash in hand Cash in hand (including foreign currencies) Balance with Bangladesh Bank and its Agents Banks (including foreign currencies) Balance with other Banks and Financial Institutions In Bangladesh Outside Bangladesh 5.A 2018 Taka 2017 Taka 2,616,496,304 23,104,623,105 25,721,119,409 2,096,407,675 37,669,574,111 39,765,981,786 2,005,164,277 8,303,795,224 10,308,959,502 8,200,000,000 12,214,670,316 11,000,000,000 1,214,670,316 1,070,656,791 10,327,998,227 11,398,655,018 4,400,000,000 10,145,490,279 8,000,000,000 2,145,490,279 244,932,304,989 16,941,828,811 261,874,133,800 4,494,609,175 15,600,927,973 50,875,037 338,465,295,212 216,659,827,253 19,245,407,271 235,905,234,524 3,209,501,858 14,379,554,005 50,875,037 319,255,292,507 21,759,835,650 32,218,677,048 37,678,761,490 152,181,785,427 49,467,884,447 24,454,571,622 2,422,489,486 266,205,492,472 19,450,871,395 165,866,439 7,400,000,000 314,982,065,956 32,130,000,015 135,929,026,231 47,832,419,620 26,435,038,160 2,479,779,449 244,806,263,475 16,608,728,003 100,949,200 3,000,000,000 296,734,617,726 10,440,217,500 8,388,044,096 977,583,714 1,908,962,937 21,714,808,247 1,768,421,008 23,483,229,256 338,465,295,212 9,943,064,280 7,576,581,114 980,376,225 2,259,155,807 20,759,177,426 1,761,497,355 22,520,674,781 319,255,292,507 6.A Placement with Banks & Other Financial Institutions Investment in Share & Securities Government Others Investments General Investments etc. Bills purchased and discounted 7.A 8A 8.A.i 9.A Fixed assets less Accumulated Depreciation Other Assets Non-Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Placement from Banks & Other Financial Institutions Deposits and other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-wadeeah Current Accounts and Other Accounts etc. Bills Payable 10.A 11.A 12 13.A 14.A 14.A.ii. 14.i. 14.ii Other Liabilities Deferred tax Liabilities/ (Assets) AIBL Mudaraba Subordinated Bond Total Liabilities Capital/Share holders Equity Paid -up Capital Statutory Reserve Revaluation Reserve Retained Earnings Total Equity attributable to equity holders of the bank Non-Controlling Interest Total Equity Total Liability and Share holders equity 15.A 16.A 17 18 19 20.A 17.A 89 Al-Arafah Islami Bank Limited Annual Report 2018
90. Consolidated Balance Sheet As at December 31 , 2018 Notes 2018 Taka 2017 Taka OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement 34,615,080,021 12,460,678,951 7,096,016,003 6,443,409,058 27,266,995,989 33,529,501,439 4,069,866,667 4,608,308,496 - - 73,047,958,680 57,041,897,944 Documentary Credits and other short term trade related transactions - - Forward Assets Purchased and forward Deposit placed - - Undraw note issuance and Revolving underwriting Facilities - - Undraw Formal standing Facilities, Credit lines and others commitments - - 73,047,958,680 57,041,897,944 Letters of Guarantee 21 Letters of Credit Bills for Collection Other Contingent Liabilities Total Other Commitments : Total Off Balance sheet items including Contingent liabilities Accompanying notes form an integral part of these financial statements. Signed in terms of our report of even date. Hoda Vasi Chowdhury & Co. Chartered Accountants Rahman Mostafa Alam & Co. Chartered Accountants Dhaka, 24 April 2019 Al-Arafah Islami Bank Limited Annual Report 2018 90
91. Consolidated Profit & Loss Accounts For the year ended December 31, 2018 Notes Investment Income Profit paid on deposits & Borrowing Net Investment Income Income from Investment in Shares /Securities Commission, Exchange and Brokerage Other Operating Income 22.A 23.A 24.A 25.A 26.A Total operating income Salaries and allowances & contribution to P.F Directors fees & expenses Shariah Supervisory Committee’s fees & expenses Rent, taxes, insurance and lighting etc. Postage, telegram, telephone and stamp etc. Legal charges Auditors’ fee Salary & Allowances to the Managing Director Depreciation and repairs to the bank’s properties Stationery, printing & advertisement etc. Other expenses Total operating expenses Profit/(Loss) before Tax & provision Provision against Investments & Contingent Liabilities Provision for diminution in value of investment Other Provision Total provision Profit/(Loss) before Tax Current tax Deferred tax Provision for Taxation Net Profit/(Loss) after tax Net Profit attributable to: Equity holders of the bank Non-controlling Interest Profit for the year Appropriation Statutory Reserve Non-Controlling Interest 27.A 28.A 29 30.A 31.A 32.A 33.A 34.A 35.A 15.1.A Transfer to Retained Earnings Earning per Ordinary Share (EPS) 40.A 2018 Taka 2017 Taka 24,956,812,132 (16,256,611,114) 8,700,201,019 701,097,070 2,729,472,295 338,824,677 3,769,394,041 12,469,595,060 4,118,564,966 15,324,200 620,660 681,568,195 65,864,096 15,527,201 1,587,250 16,954,000 482,113,617 171,272,314 591,302,955 6,160,699,453 6,308,895,606 2,174,105,337 635,613 3,237,000 2,177,977,950 4,130,917,657 1,607,481,302 66,629,727 1,674,111,029 2,456,806,628 20,491,028,035 (11,784,195,568) 8,706,832,467 437,319,085 2,790,684,690 329,353,333 3,557,357,108 12,264,189,575 3,571,959,651 18,937,652 560,969 584,955,214 78,429,866 10,698,639 1,602,500 15,825,000 317,899,334 125,305,263 582,245,933 5,308,420,021 6,955,769,554 1,354,891,535 1,354,891,535 5,600,878,019 2,405,891,962 25,492,603 2,431,384,565 3,169,493,454 2,449,882,975 6,923,653 2,456,806,628 3,134,682,251 34,811,203 3,169,493,454 811,462,982 6,923,653 818,386,635 1,638,419,993 2.35 1,086,492,574 34,811,203 1,121,303,777 2,048,189,677 3.00 Accompanying notes form an integral part of these financial statements. Signed in terms of our report of even date. Hoda Vasi Chowdhury & Co. Chartered Accountants Dhaka, 24 April 2019 Rahman Mostafa Alam & Co. Chartered Accountants 91 Al-Arafah Islami Bank Limited Annual Report 2018
92. Consolidated Cash Flow Statement For the year ended December 31 , 2018 Notes Cash flows from operating activities Investment income receipt in Cash Profit paid on deposits and borrowing Dividend received Fees & Commission received in cash Recoveries from written off investments Cash payments to employees Cash payments to suppliers Received from other operating activities (item-wise) Paid for other operating activities (item-wise) Advance income tax paid Operating profit before changes in operating assets and liabilities Changing in Operating assets & liabilities Increase/(Decrease) of trading securities Increase/(Decrease) of placement to other banks Increase/(Decrease) of Investment and advances to customers (other than Banks) Increase/(Decrease) of other assets (item-wise) Increase/(Decrease) of placement from other banks and financial institution Increase/(Decrease) of Deposits from customers (other than Banks) Increase/(Decrease) of Other liabilities account of customers Increase/(Decrease) of Trading liabilities (item-wise) Cash receipt from operating activities A. Net Cash from operating activities Cash flows from investing activities: Proceeds from sale of securities Payments for purchases of securities Purchase of property, plant and equipment Sales proceeds of Fixed assets Purchase-sale of subsidiary B. Net cash flows from investing activities Cash flows from financing activities Increase in Exchange Equalization Account Issue of AIBL Subordinate Bond Dividend paid C. Net cash flows from financing activities D. Net increase in cash and cash equivalent (A+B+C) E. Effects of exchange rate changes on cash and cash-equivalents F. Net increase in cash and cash equivalent D+E G. Cash & Cash Equivalents at the beginning of the year H. Cash & Cash Equivalents period ended 36.A 37.A 38.A 39.A 2018 Taka 25,252,073,217 (15,761,228,519) 27,973,671 2,729,472,295 164,881,715 (4,135,518,966) (171,272,314) 338,824,677 (1,453,752,046) (2,021,821,162) 4,969,632,568 21,383,831,283 (11,360,819,054) 88,486,282 2,790,684,690 309,972,277 (3,587,784,651) (125,305,263) 329,353,333 (1,457,029,985) (4,846,389,088) 3,524,999,824 930,819,963 (3,800,000,000) (26,559,395,923) 1,033,427,795 (10,458,841,398) 20,903,846,402 (774,687,828) (18,724,830,990) (13,755,198,422) (1,285,107,317) (1,285,107,317) 23,186,015 (1,066,549,840) (38,193,892,248) 8,263,939,784 7,134,023,242 44,678,966,954 (12,039,886,171) 8,799,787,736 12,324,787,560 (180,314,202) (180,314,202) (2,792,511) 4,400,000,000 (1,491,459,642) 2,905,747,847 (12,134,557,892) (12,134,557,892) 59,164,636,804 47,030,078,911 1,937,451 (1,988,612,856) (1,986,675,405) 10,157,797,953 10,157,797,953 49,006,838,852 59,164,636,804 Accompanying notes form an integral part of these financial statements. Al-Arafah Islami Bank Limited Annual Report 2018 92 2017 Taka
93. 93 Al-Arafah Islami Bank Limited Annual Report 2018 - offload share - Currency translation differences recognized in the income Share premium Net profit for the year Cash Dividend - Revaluation of subsidiary Transferred to retained earning 10 ,440,217,500 9,943,064,280 Balance as at December 31,2018 Balance as at December 31,2017 - - Gain on pre acquisition of subsidiary Appropriations during the year - Issue of share capital of subsidiary 497,153,220 - Surplus/deficit on account of revaluation of investments Bonus Share - Surplus/deficit on account of revaluation of properties Restated balance 9,943,064,280 - Changes in accounting policy Restated Adjustment 9,943,064,280 Paid up Capital Balance at 1st January, 2018 Particular 7,576,581,114 8,388,044,096 811,462,982 - - - - - - - - - - - 7,576,581,114 - - - 7,576,581,114 Statutory Reserve 2,259,155,806 1,908,962,939 (811,462,982) - - - - (497,153,220) (1,491,459,642) 2,449,882,975 - - - - 2,259,155,806 - - - 2,259,155,806 Retained Earnings 980,376,225 977,583,714 - - - - - - - - - (2,792,511) - - 980,376,225 - - - 980,376,225 Asset Revaluation Reserve 20,759,177,425 21,714,808,249 - - - - - - (1,491,459,642) 2,449,882,975 - (2,792,511) - - 20,759,177,425 - - - 20,759,177,425 Total 1,761,497,355 1,768,421,008 - - - - - - - 6,923,653 - - - - 1,761,497,355 - - 1,761,497,355 Non-Controlling Interest Total Equity 22,520,674,781 23,483,229,256 - - - - - - (1,491,459,642) 2,456,806,628 - (2,792,511) - - 22,520,674,780 - - - 22,520,674,780 Consolidated Statement of Changes in Equity For the year ended December 31, 2018
94. Al-Arafah Islami Bank Limited Annual Report 2018 94 4 ,438,000,000 92,852,832,194 - 32,500,000 - 21,181,892,244 (17,635,200,529) Net Liquidity Gap - 51,318,249,588 110,488,032,723 - AIBL Mudaraba Subordinated Bond - - - Total Liabilities - 2,000,000 - 45,804,413,938 106,050,032,723 5,511,835,650 Deferred tax Liabilities/ (Assets) Provision and Other Liabilities Other Accounts Deposits Placement from Banks & Other Financial institutions Liabilities : 72,500,141,832 - 1,233,262,989 - 81,906,800,000 - 8,200,000,000 2,713,532,194 - 4 1 to 3 Months - - - 6 1 to 5 Years - - - 1,366,500,000 - - - - 6,219,700,000 27,986,604,184 85,917,400,000 32,950,500,000 - - 2,000,000 - 75,471,900,000 31,584,000,000 10,443,500,000 92,137,100,000 60,937,104,184 - 3,200,000 - 91,666,300,000 48,790,033,868 67,600,000 12,147,070,316 - 400,000,000 - 5 3 to 12 Months 50,875,037 15,600,927,973 4,494,609,175 261,874,133,800 12,214,670,316 8,200,000,000 10,308,959,502 25,721,119,409 8 Total 21,759,835,650 7,400,000,000 165,866,439 19,450,871,395 - (14,269,766,642) 23,483,229,257 34,307,883,645 314,982,065,956 7,400,000,000 165,866,439 19,446,871,395 - 7,295,145,811 266,205,492,472 - 20,038,117,003 338,465,295,212 50,875,037 14,331,964,985 4,494,609,175 - - - 1,160,667,806 - 7 More than 5 Years The Liquidity statement is prepared on contractual basis and which usually renewable. As a result it may not be actually alarming situation due to mismatch of assets & liability. 2 Total Assets Non Banking Assets Other Assets Fixed Assets including premises (Land & Bulding) 39,510,999,932 - Investments (in Shares & Securities) Investments - 6,034,759,502 25,721,119,409 3 Less than 1 Month Placement with Banks & Other Financial Institutions Balance with other Bank and Financial Institution Cash in hand Assets : 2 1 1 Particulars SL Consolidated Statement of Liquidity (Maturity Analysis of Assets and Liabilities) For the year ended December 31, 2018
95. Balance Sheet as at December 31 , 2018 Notes PROPERTY AND ASSETS Cash in hand 2018 Taka 2017 Taka 5 Cash in hand (including foreign currencies) Balance with Bangladesh Bank and its Agents Banks (including foreign currencies) Balance with other Banks and Financial Institutions In Bangladesh Outside Bangladesh 6 Placement with Banks & Other Financial Institutions Investment in Share & Securities Government Others 7 8 Investments General Investments etc. Bills purchased and discounted 9 Fixed assets less Accumulated Depreciation Other Assets Non-Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Placement from Banks & Other Financial institutions Deposits and other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-wadeeah Current Accounts and Other Accounts etc. Bills Payable 10 11 12 13 14 14.i 14.ii Other Liabilities Deferred tax Liabilities/ (Assets) AIBL Mudaraba Subordinated Bond Total Liabilities Capital/Share Holders Equity Paid up Capital Statutory Reserve Revaluation Reserve Retained Earnings Total Share holders equity Total Liability and Share holders equity 15 16 17 18 19 20 95 2,605,382,213 23,104,623,105 2,096,167,797 37,669,574,111 25,710,005,318 39,765,741,908 2,005,164,277 8,303,795,224 1,007,124,597 10,327,998,227 10,308,959,502 8,200,000,000 11,335,122,824 4,400,000,000 11,000,000,000 367,606,111 8,000,000,000 420,592,123 11,367,606,111 8,420,592,123 240,150,271,121 16,941,828,811 213,368,821,452 19,245,407,271 257,092,099,932 4,305,855,784 16,226,562,989 50,875,037 333,261,964,673 232,614,228,723 3,038,952,614 14,971,459,393 50,875,037 314,596,972,623 20,393,335,650 30,904,054,548 37,678,761,490 152,322,906,893 49,467,884,447 24,454,571,622 2,422,489,486 32,130,000,015 136,764,993,508 47,832,419,620 26,435,038,160 2,479,779,449 266,346,613,938 17,364,627,192 168,486,792 7,400,000,000 311,673,063,572 245,642,230,752 14,273,105,891 100,949,200 3,000,000,000 293,920,340,391 10,440,217,500 8,388,044,096 977,583,714 1,783,055,791 9,943,064,280 7,576,581,114 980,376,225 2,176,610,612 21,588,901,101 333,261,964,673 20,676,632,231 314,596,972,623 Al-Arafah Islami Bank Limited Annual Report 2018
96. Balance Sheet as at December 31 , 2018 Notes OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement Letters of Guarantee Letters of Credit Bills for Collection Other Contingent Liabilities Total 21 2018 Taka 2017 Taka 34,615,080,021 7,096,016,003 27,266,995,989 4,069,866,667 - 12,460,678,951 6,443,409,058 33,529,501,439 4,608,308,496 - 73,047,958,680 57,041,897,944 73,047,958,680 57,041,897,944 Other Commitments : Documentary Credits and other short term trade related transactions Forward Assets Purchased and forward Deposit placed Undraw note issuance and Revolving underwriting Facilities Undraw Formal standing Facilities, Credit lines and others commitments Total Off Balance sheet items including Contingent liabilities Accompanying notes form an integral part of these financial statements. Signed in terms of our report of even date. Hoda Vasi Chowdhury & Co. Chartered Accountants Dhaka, 24 April 2019 Al-Arafah Islami Bank Limited Annual Report 2018 Rahman Mostafa Alam & Co. Chartered Accountants 96
97. Profit & Loss Accounts For the year ended December 31, 2018 Notes Investment Income Profit paid on deposits & Borrowing Net Investment Income Income from Investment in Shares /Securities Commission, Exchange and Brokerage Other Operating Income 22 23 24 25 26 Total operating income Salaries and allowances & contribution to P.F Directors fees & expenses Shariah Supervisory Committee’s fees & expenses Rent, taxes, insurance and lighting etc. Postage, telegram, telephone and stamp etc. Legal charges Auditors’ fee Salary & Allowances to the Managing Director Depreciation and repairs to the bank’s properties Stationery, printing and advertisement etc. Other expenses Total operating expenses Profit/(Loss) before Tax & provision Provision against Investments & Contingent Liabilities Provision for diminution in value of investment Other Provision Total provision Profit/(Loss) before Tax Current tax Deferred tax Provision for Taxation Net Profit/(Loss) after tax Appropriation Statutory Reserve General Reserve 27 28 29 30 31 32 33 34 35 15.1 16 Retained Earnings Earning per Ordinary share (EPS) 40 2018 Taka 2017 Taka 24,678,709,611 (16,062,930,822) 8,615,778,790 676,303,995 2,581,003,540 322,271,224 3,579,578,758 12,195,357,548 4,030,393,447 10,335,030 620,660 654,350,186 65,234,290 15,472,553 1,512,250 16,954,000 474,480,369 170,091,108 544,375,467 5,983,819,359 6,211,538,188 2,150,350,667 635,613 3,237,000 2,154,223,280 4,057,314,909 1,583,256,294 67,537,592 1,650,793,886 2,406,521,023 20,305,586,115 (11,586,148,356) 8,719,437,759 391,135,221 2,407,886,232 285,736,748 3,084,758,201 11,804,195,960 3,491,198,259 10,096,318 560,969 570,174,901 77,669,122 10,481,205 1,337,500 15,825,000 309,625,798 123,433,001 490,739,481 5,101,141,554 6,703,054,406 1,270,591,535 1,270,591,535 5,432,462,871 2,330,292,331 25,492,603 2,355,784,934 3,076,677,937 811,462,982 811,462,982 1,595,058,041 2.31 1,086,492,574 1,086,492,574 1,990,185,363 2.95 Accompanying notes form an integral part of these financial statements. Signed in terms of our report of even date. Hoda Vasi Chowdhury & Co. Chartered Accountants Dhaka, 24 April 2019 Rahman Mostafa Alam & Co. Chartered Accountants 97 Al-Arafah Islami Bank Limited Annual Report 2018
98. Cash Flow Statement For the year ended December 31 , 2018 Notes Cash flows from operating activities Investment income receipt in Cash Profit paid on deposits and borrowings Dividend recieved Fees & Commission received in cash Recoveries from write off investments Cash payments to employees Cash payments to suppliers Received from other operating activities (item-wise) Paid for other operating activities (item-wise) Advance income tax paid Operating profit before changes in operating assets and liabilities Changing in Operating assets & liabilities Increase/(Decrease) of trading securities Increase/(Decrease) of placement to other banks Increase/(Decrease) of Investment and advances to customers (other than Banks) Increase/(Decrease) of other assets (item-wise) Increase/(Decrease) of placement from other banks and financial institution Increase/(Decrease) of Deposits from customers (other than Banks) Increase/(Decrease) of Other liabilities account of customers Increase/(Decrease) of Trading liabilities (item-wise) Cash receipt from operating activities A. Net Cash from operating activities Cash flows from investing activities: Proceeds from sale of securites Payments for purchases of securities Purchase of property, plant and equipment Sales proceeds of Fixed assets Purchase-sale of subsidiary B. Net cash flows from investing activities Cash flows from financing activities Increase in Exchange Equalization Account Subordinate Debt Increase in Share Capital Dividend paid C. Net cash flows from financing activities D. Net increase in cash and cash equivalent (A+B+C) E. Effects of exchange rate changes on cash and cash-equivalents F. Net increase in cash and cash equivalent (D+E) G. Cash & Cash Equivalents at the beginning of the year H. Cash & Cash Equivalents at the end of the year 36 37 38 39 2018 Taka 24,931,762,791 (15,567,548,227) 15,651,835 2,581,003,540 164,881,715 (4,047,347,447) (170,091,108) 322,271,224 (1,376,282,394) (1,975,685,032) 4,878,616,897 21,181,862,736 (11,162,771,842) 58,829,043 2,407,886,232 309,972,277 (3,507,023,259) (123,433,001) 285,736,748 (1,194,013,406) (3,427,931,996) 4,829,113,531 52,986,012 (3,800,000,000) 1,427,568,865 (1,600,000,000) (25,475,508,329) (45,910,811,251) 963,298,701 9,042,698,009 (10,510,718,898) 5,819,400,742 20,209,000,591 45,164,656,553 351,678,848 (18,209,263,075) (13,330,646,178) (6,395,885,881) 7,547,627,037 12,376,740,568 (1,657,001,581) (1,657,001,581) (292,475,281) (292,475,281) (2,792,511) 4,400,000,000 (1,491,459,642) 2,905,747,847 (12,081,899,912) (12,081,899,912) 59,100,864,732 47,018,964,820 2,306,247 (1,988,612,856) (1,986,306,609) 10,097,958,678 10,097,958,678 49,002,906,053 59,100,864,732 Accompanying notes form an integral part of these financial statements. Al-Arafah Islami Bank Limited Annual Report 2018 98 2017 Taka
99. 99 Al-Arafah Islami Bank Limited Annual Report 2018 - Currency translation differences recognized in the income Net gain and losses not recognised in Income Statement Net profit for the year Cash 10 ,440,217,500 9,943,064,280 Total shareholders’ equity as on December 31,2017 - Appropriations during the year Total shareholders’ equity as on December 31,2018 - - Transferred to retained earning 7,576,581,114 8,388,044,096 811,462,982 - - - - - - - - 7,576,581,114 - - 7,576,581,114 Statutory Reserve Issue of share capital 497,153,220 - Surplus/deficit on account of revaluaton of investments Bonus Share - Surplus/deficit on account of revaluaton of properties 9,943,064,280 - Issue of the share capital Restated balance - 9,943,064,280 Paid up Capital Changes in accounting policy Balance at 1st January, 2018 Particular 2,176,610,611 1,783,055,791 (811,462,982) - - (497,153,220) (1,491,459,642) 2,406,521,023 - - - - 2,176,610,612 - - 2,176,610,612 Retained Earnings 980,376,225 977,583,714 - - - - - - - (2,792,511) - - 980,376,225 - - 980,376,225 Asset Revaluation Reserve Statement of Changes in Equity For the year ended December 31, 2018 20,676,632,231 21,588,901,101 - - - - (1,491,459,642) 2,406,521,023 - (2,792,511) - - 20,676,632,231 - - 20,676,632,231 Total Taka
100. Al-Arafah Islami Bank Limited Annual Report 2018 100 - 51 ,318,249,588 21,170,778,153 Total Liabilities Net Liquidity Gap - - Deferred tax Liabilities/ (Assets) AIBL Mudaraba Subordinated Bond (18,534,700,000) 111,324,000,000 - - 2,000,000 Provision and Other Liabilities - 106,886,000,000 45,804,413,938 - 4,438,000,000 5,511,835,650 92,789,300,000 Other Accounts Liabilities : Placement from Banks & Other Financial Institutions Deposits 72,489,027,741 32,500,000 - 1,233,262,989 81,906,800,000 - 8,200,000,000 2,650,000,000 - 4 1 to 3 Months 39,510,999,932 - - 6,034,759,502 25,710,005,318 3 Less then 1 Month 6,219,700,000 85,917,400,000 - - 2,000,000 - 75,471,900,000 10,443,500,000 92,137,100,000 - 3,200,000 - 91,666,300,000 67,600,000 - 400,000,000 - 5 3 to 12 Months 9,595,806,111 31,584,000,000 - - - - 31,584,000,000 - 41,179,806,111 - - - 29,879,800,000 11,300,006,111 - - - 6 1 to 5 Years 3,137,316,837 31,529,413,984 7,400,000,000 168,486,792 17,360,627,192 - 6,600,300,000 - 34,666,730,821 50,875,037 14,957,600,000 4,305,855,784 14,128,200,000 - - 1,224,200,000 - 7 More then 5 Years 21,588,901,101 311,673,063,572 7,400,000,000 168,486,792 17,364,627,192 - 266,346,613,938 20,393,335,650 333,261,964,673 50,875,037 16,226,562,989 4,305,855,784 257,092,099,932 11,367,606,111 8,200,000,000 10,308,959,502 25,710,005,318 8 Total The Liquidity statement is prepared on contractual basis and which usually renewable. As a result it may not be actually alarming situation due to mismatch of assets & liability. 2 Total Assets Non Banking Assets Investments Fixed Assets including premises (Land & Bulding) Other Assets Cash in hand Balance with other Bank and Financial Institution Placement with Banks & Other Financial Institutions Investments (in Shares & Securities) Assets : 2 1 1 Particulars SL No Statement of Liquidity (Maturity Analysis of Assets and Liabilities) For the year ended December 31, 2018
101. Notes to the Financial Statements As at and for the year ended December 31 , 2018 1. 1.1 The Bank and its activities Al-Arafah Islami Bank Limited was established in 1995 under the Companies Act, 1994 as a Banking Company with Limited Liability by shares. It is an interest free Shariah Bank of Bangladesh rendering all types of commercial banking services under the regulation of Bank Companies Act, 1991 (as amended 2013) . The Bank conducts its business on the principles of Musharaka, Bai-Murabaha, Bai-Muazzal and Hire Purchase transactions approved by Bangladesh Bank. Naturally, its modes and operations are substantially different from those of other conventional commercial banks. There is a Shariah Supervisory Committee in the bank who maintains constant vigilance to ensure that the activities of the bank are being conducted on the percepts of Islam. The Shariah Supervisory Committee consists of prominent Ulema, reputed Bankers. The Bank went for public issue of share in the year 1998 and its share are listed with Dhaka Stock Exchance (DSE) and Chaittagong Stock Exchange (CSE). Presently the bank has 168 Branches and 3 (three) Subsidiary Companies. The principal activities of the Bank are to provide a comprehensive range of financial services including commercial banking, consumer banking, trade finance and other related custody and clearing services to the customers following the provisions of Bank Companies Act, 1991 (as amended), Bangladesh Bank’s directives and the principles of Islamic Shariah. 1.2 Subsidiaries of the Bank Al-Arafah Islami Bank Ltd has three subsidiary companies. The financial statements of these subsidiary companies are included in the cosolidated financial statements according to IFRS-10. 1.2.1 AIBL Capital Market Services Limited Al-Arafah Islami Bank Ltd. owned 60.50% shares of AIBL Capital Market Services Ltd. a subsidiary company of AlArafah Islami Bank Limited. AIBL Capital Market Services Ltd. incorporated in Bangladesh on 20 September, 2010 as a Public Limited Company. The principal activities of subsidiary company is to provide quality services to the prospective institutional and individual investors in the capital market. The main activities and functions of the company include; i.  Share trading in Dhaka Stock Market and Chittagong Stock Market. ii.   Provide Margin facilities to the client. iii. Full service depository participant of Central Depository of Bangladesh Ltd. Copy of the audited financial statement is attached Appendix A 1.2.2 AIBL Capital Management Limited Al-Arafah Islami Bank Ltd. owned 98% shares of AIBL Capital Management Limited a subsidiary company of Al-Arafah Islami Bank Limited. AIBL Capital Management Limited has been incorporated under the Companies Act (Act XVIII) of 1994 as a Private Limited Company by share on 25th October, 2011. The company was entitled to commence the business also from 25th October, 2011 with a view to run and manage the operations of Merchant Banking Services with an authorized Capital of BDT 2 billion and paid up capital of BDT 500 million . It aims to be one of the leading Merchant Banks of the country by rendering quality Merchant Banking Services with a high level of professional expertise and integrity. Copy of the audited financial statement is attached in Appendix B 1.2.3 Millennium Information Solution Limited (MISL) Al-Arafah Islami Bank Ltd. owned 51% shares of Millennium Information Solution Limited, a subsidiary company of AlArafah Islami Bank Limited. Millennium Information Solution Limited, a private limited Company was incorporated in Bangladesh under the Companies Act 1994 on February 11, 2001. This company was acquired by the Bank-AIBL during the year as per 250th meeting of the Board dated November 30, 2013. Subsequently, Bangladesh Bank approved the acquisitions of MISL vide letter no. BRPO (R-I) 717/2015-2017, Dated March 28, 2015. The main objective of the company is to carry on activities relating to developing software products and providing maintenance and support services to both the domestic and international clients. Over the years, MILS has established itself as the leading software developer, implementation and service provisioning company in Bangladesh which adheres to the rules of Islamic Shariah. 2. Basis of preparation and significant accounting policies 2.1 Preparation of financial statements The consolidated financial statements of the group and the financial statements of the bank have been prepared on a going concern basis under the historical cost convention and on Generally Accepted Accounting Principles consistently with those of previous years. Although the operations of the Bank are in strict compliance with the rules of Islamic Shariah, the financial statements have been prepared in accordance with the Bank Companies Act 1991 (as amended 2013), in particular Banking Regulation and Policy Department (BRPD) Circular No.15 (09 November, 2009) other Bangladesh Bank circulars, the Companies Act 1994, the Securities and Exchange Rules 1987, Dhaka and Chittagong Stock Exchange Listing Regulations, other laws and rules applicable in International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). where relevant to the Bank to the extent that these do not contradict with the applicable statutory provisions and standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions. 2.2 Basis of Consolidation A separate set of records for consolidating the Statements of Affairs and Income & Expenditure Statements of the branches are maintained at the Head Office of the Bank in Dhaka from which the financial statements are drawn up. 101 Al-Arafah Islami Bank Limited Annual Report 2018
102. Notes to the Financial Statements As at and for the year ended December 31 , 2018 Subsidiries are entities controlled by the group. Control exists when the group has the power to govern the financial and operating policies of an entity, so as to obtain economic benefits from its activities. The consolidated financial statements incorporate the financial statements of Al-Arafah Islami Bank Limited and the fianancial statements of subsidiary companies from the date that control commences until the date that control ceases. The financial statements of such subsidiary companies are incorporated on a line by line basis and the investments held by the bank is eliminated against the corresponding share capital of subsidiaries in the consolidated financial statements. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there are no evidence of impairment. 2.3 Cash flow statement IFRS: The Cash flow statement can be prepared using either the direct method or the indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently. 2.4 Liquidity Statement The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per the following basis: i) Balance with other banks and financial institutions, money at call and short notice, etc. are on the basis of their maturity term; ii) Investments are on the basis of their respective maturity; iii) Fixed assets are on the basis of their useful lives; iv) Other assets are on the basis of their realization / amortization; v) Borrowing from other Banks, financial institutions and agents, etc are as per their maturity / repayment terms; vi) Provisions and other liabilities are on the basis of their repayment / adjustments schedule. 2.5 Use of estimation and judgment The preparation of financial statements requires the bank to make certain estimates and to form judgments about the application of accounting policies which may affect the reported amount of assets, liabilities, income and expenses. The most significant areas of estimates and judgments have been made on provision for Investments. 2.6 Reporting period The financial statements cover particular calendar period from January 01, 2018 to December 31, 2018. 2.7 Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. 2.8 Assets and basis of their valuation 2.8.1 Cash and cash equivalent IFRS: Cash and cash equivalent items should be reported as cash item as per IAS 7. Bangladesh Bank: Some cash and cash equivalent items such as ‘money at call and on short notice’, treasury bills, Bangladesh Bank bills and prize bond are not shown as cash and cash equivalents. Money at call and on short notice presented on the face of the balance sheet, and treasury bills, prize bonds are shown in investments. 2.8.2 Investments Investments are stated in the Balance Sheet net of profit receivable/mark-up profit. Investment write-off Investment are normally written off, when there is no realistic prospect of recovery of these amounts in accordance with BRPD Circular No.2 (13 January, 2003). A separate Investment Administration and Recovery Department (IARD) has been set up at the Head Office, which monitors investment written off and legal action through the Money Court. These write-offs do not undermine or affect the amount claimed against the borrower by the bank. The Investment Administration and Recovery Department (IARD) maintains a separate ledger for all individual cases written off by each branch. The IARD follows up on the recovery efforts of these written off investment and reports to management on a periodic basis. Written off investment are reported to the Credit Information Bureau (CIB) of Bangladesh Bank. 2.8.2.1 Investment in shares and securities IFRS: As per requirements of IAS 39 investment in shares and securities generally falls either under “at fair value through profit and loss account” or under “available for sale” where any change in the fair value (as measured in accordance with IFRS 13) at the year-end is taken to profit and loss account or revaluation reserve respectively. Bangladesh Bank: As per BRPD Circular No. 14 dated 25 June, 2003 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should Al-Arafah Islami Bank Limited Annual Report 2018 102
103. Notes to the Financial Statements As at and for the year ended December 31 , 2018 be made for any loss arising from diminution in value of investment; otherwise investments are recognised at cost. 2.8.2.2 Revaluation gains/losses on Government securities IFRS: As per requirement of IFRS 9 “Financial Instruments: where securities will fall under the category of fair value through profit or loss account and any change in fair value of the asset is reconnised through profit or loss account. Held for Trading (HFT), any change in the fair value of held for trading assets is recognised through profit and loss account. Securities designated as amortized cost are measured at effective interest rate method and interest income is recognized through the profit and loss account. Bangladesh Bank: HFT securities are revalued on the basis of mark to market and at year end any gains on revaluation of securities which have not matured as at the balance sheet date are recognised in other reserves as a part of equity and any losses on revaluation of securities which have not matured as at the balance sheet date are charged in the profit and loss account. Interest on HFT securities including amortisation of discount are recognised in the profit and loss account. HTM securities which have not matured as at the balance sheet date are amortised at the year end and gains or losses on amortisation are recognised in other reserve as a part of equity. 2.8.2.3 Provision on loans and advances/investments IFRS: As per IAS 39 an entity should start the impairment assessment by considering whether objective evidence of impairment exists for financial assets that are individually significant. For financial assets that are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis. Bangladesh Bank: As per BRPD Circular No.14 (23 September, 2012), BRPD Circular No. 19 (27 December, 2012) and BRPD Circular No. 05 (29 May, 2013) a general provision at 0.25% to 5% under different categories of unclassified loans (good/standard loans) has to be maintained regardless of objective evidence of impairment. Also provision for sub-standard loans, doubtful loans and bad losses has to be provided at 20%, 50% and 100% respectively for loans and advances depending on the duration of overdue. Again as per BRPD Circular No. 10 dated 18 September, 2007 and BRPD Circular No. 14 dated 23 September, 2012, a general provision at 1% is required to be provided for all offbalance sheet exposures. Such provision policies are not specifically in line with those prescribed by IAS 39. 2.8.2.4 Investment in subsidiaries The bank has made investment in subsidiary company named AIBL Capital Market Service Ltd Tk. 242.00 crore holding 60.50% shares. The rest of 39.50% shares are hold by others and another subsidiary Company named AIBL Capital Management Limited Tk 49.00 crore holding 98% shares. Another subsidiary company named Millenium Information Solution Limited (MISL) Tk. 15.00 Crore holding 51% shares. 2.8.3 Fixed assets Accounting & Depreciation and Intangible Assets Accounting & Amortization Policy. Board of Directors of Al- Arafah Islami Bank Limited in its 226th meeting held on 11 July, 2012 has approved “Fixed Assets accounting & depreciation and Intangible Assets accounting & amortization Policy” which has been effected from January 2012. i) All fixed assets except land are stated at cost less accumulated depreciation and accumulated impairment loss as per IAS-16 “ Property, Plant and Equipment”. Acquisition cost of an asset comprises the purchase price and any directly attributable cost of bringing the asset to working condition for its intended use. ii) Land is recognised at cost at the time of acquisition and subsequently measured at revalued amounts which is the market value at the time of revaluation done by a independent professional valuer on 31st December 2012, any surplus on revaluation is shown as equity component until the disposal/de-recognition of asset. The property is located within: a) Dist : Dhaka, P. S Motijheel, Sub - registry office : Sutrapur, Dhaka collectorate Touzi # 141-B-1, Mouza : Sabek Shahar Dhaka, Sheet # 22, Ward # 03,Holding No 63,Purana Palton Sabek Khatian # 6947, 6947 [KA], 6947[Jha], Sabek Dag # 97, 100,101,102 and 110, SA Mouza : Ramna, Sheet # 10, SA Khatian # 362, SA Dag # 1979,1980,1981,2025,1997,1998 and 1979/2039, RS Mouza : Motijheel, RS Khatian # 420, RS Dag # 1314 and 1322, D.P Khatian # 619, D.P Dag # 812 and 804.Mutation Khatian 362/3 and Dag # 1979 and 1980. The area of land measuring about 16.42 katha, b) Holding No 63/1/A, Purana Palton, Dist: Dhaka, P.S Motijheel,Subregistry office: Sutrapur ,Dhaka Collectorate Touzi # 141B-1, under Mouza: Sabek-Sahar Dhaka then Ramna, Hal-Motijheel, J-L#S.A-04, R.S & City Jarip - 06, Sheet # 22,Ward # 03, Khatian-C.S-6947 (Jha), S.A-428, Dhaka City Jarip-103,449, Namjari-542, 362/3/1, Jote-543,687&437,Dag # C.S-100,101, S.A 1979, 1980, 1981,1997,2025,1979/2039,R.S-1315,1322,1316/1360,1323/1359, Dhaka City Jarip-08,809,811. Deed # 3825 300, dated: 22.08.2010 & 01.02.2012. The area of land measuring about (6.91+7.03) 13.94 katha, c)  Total land measuring 30.36 katha, cost price was Tk. 453,255,000. The land was revalued at tk. 4.50 crore per katha and total land valuation amount Tk. 1,366,200,000. Total asset revaluation gains amounting Tk. 912,945,000. Depreciation of an item of fixed assets and amortization on intangible assets is charged on the basis of estimated useful lives as mentioned in revised fixed asset policy of the bank on monthly basis following straight-line method. The depreciation/amortization method used should reflect the pattern in which the asset’s economic benefits are consumed by the enterprise. The depreciation charge for each period should be recognized as an expense unless it is included in the carrying amount of another asset. 103 Al-Arafah Islami Bank Limited Annual Report 2018
104. Notes to the Financial Statements As at and for the year ended December 31 , 2018 iv) Depreciation/amortization rates used for each type of fixed assets are as follows (per annum): Name of Assets Furniture and Fixture (Wood) Furniture and Fixture (Steel ) Computer Computer Accessories Motor Car Mechanical Appliances Books Online Hardware Land Building Interior Decoration Online Software v) vi) vii) 2.8.4 2.8.5 2.8.6 2.9 2.10 2.11 2.12 2.13 2.13.1 Rate of Depreciation/amortization 10% 10% 20% 20% 20% 20% 10% 20% Nil 3% 10% 20% Estimated usefull Lives 10 years 10 years 5 years 5 years 5 years 5 years 10 years 5 years Nil 40 years 10 years 5 years Depreciation is charged on the addition of fixed assets and intangible assets are amortized from the month of acquisition. Whole month depreciation/amortization is to be charged if such assets are acquired in the first half of the month and no depreciation/amortization is to be charged if such assets are acquired in the second half of the month; no depreciation is charged from the month when the assets are disposed. Maintenance and repair costs are charged to profit and loss account as and when incurred. Presentation of intangible asset IFRS: An intangible asset must be identified and recognised, and the disclosure must be given as per IAS 38. Bangladesh Bank: There is no regulation for intangible assets in BRPD Circular No. 15. Other assets Other assets include all balance sheet accounts not covered specifically in other areas of the supervisory activity and such accounts may be quite insignificant in the overall financial condition of the Bank. Non-banking asset IFRS: No indication of Non-banking asset is found in any IFRS. Bangladesh Bank: As per BRPD Circular No. 15, there must exist a face item named Non-banking asset. Reconciliation of inter bank/branch books of accounts Books of accounts in regard to Inter-branches are reconciled and there are no material differences, which may affect the financial statements significantly. Unrecognized entries in case of inter-branch transactions as on the reporting date are not mentionable due to the time gap before finalizing the same. (Note -14.4) Share Capital Ordinary shares are classified as equity, when there is no contractual obligation to transfer cash or other financial assets. Statutory reserve Bank Companies Act, 1991 requires the Bank to transfer 20% of its current year’s profit before tax to reserve until such reserve along with share premium equals to its paid up capital. Revaluation reserve When an asset’s carrying amount is increased as a result of revaluation, the surplus amount should be credited directly to equity under the heading of revaluation surplus/reserve as per IAS-16: “Property, Plant and Equipment”. The bank first revalued its land in December 2004 and again in December 2012 which is absolutely owned by the bank and the surplus amount transferred to revaluation reserve. (Annexure-A) Non-controlling interest Non-controlling interest is that portion of the profit or loss and net assets of the subsidiaries (AIBL Capital Market Services Limited,AIBL Capital Management Limited and Millenium Information Solution Limited (MISL)) attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent (Al-Arafah Islami Bank Limited). Basis for valuation of liabilities and provisions Provisions on Investment a) Provision for Investment are made on the basis of year end review by the management and instructions contained in Bangladesh Bank BRPD Circular No. 05 dated 05 June, 2006 & BRPD Circular No. 10, dated 18 September, 2007 & Subsequent changes as per BRPD Circular No.14 dated 23 Spetemebr, 2012 and BRPD Circular No.05 dated 29 May, 2013 . The provision rates are given below: Al-Arafah Islami Bank Limited Annual Report 2018 104
105. Notes to the Financial Statements As at and for the year ended December 31 , 2018 Particulars General provision on unclassified general loans and advances / investments General provision on unclassified small enterprise financing Rate 1% 0% General provision on unclassified loans / investments for housing finance and on loans for professionals General provision on unclassified BHS/MHS/SDS 2% 2% General provision on unclassified consumer financing other than housing finance and loans for professionals 0.25% to 5% General provision on special mention account Specific provision on substandard loans and advances / investments Specific provision on doubtful loans and advances / investments Specific provision on bad / loss loans and advances / investments 0.25% to 5% 20% 50% 100% 2.13.2 Loans and advances/Investments net of provision IFRS: Loans and advances/Investments are presented should be net of provision. Bangladesh Bank: As per BRPD Circular No. 14 dated September 23, 2012, provision on loans and advances/ investments are presented separately as liability and can not be netted off against loans and advances. 2.13.3 Provision for off balance sheet exposures BRPD circular no.10 (18 September, 2007) requires a general provision for off balance sheet exposure is to be calculated at 1% (2007:0.50%) on all off balance sheet exposures as defined in BRPD Circular No.10 (24 Novemberm, 2002). Accordingly we have recognized a provision of 1% on the following off balance sheet items: 1. Letter of Guarantee 2. Letter of Credit 3. Bills for Collection 4. Acceptance and endorsements 5. Other Contingent Liabilities iv) Off-balance sheet items IFRS: There is no concept of off-balance sheet items in any IFRS; hence there is no requirement for disclosure of offbalance sheet items on the face of the balance sheet. Bangladesh Bank: As per BRPD Circular No. 14 dated September 23, 2012, off balance sheet items (e.g. Letter of credit, Letter of guarantee etc.) must be disclosed separately on the face of the balance sheet. v) Provision for other assets BRPD Circular No. 14 (25 June, 2001) requires a provision of 100% on other assets which are outstanding for one year and above. vi) Provision on balance with other banks and financial institutions (Nostro Accounts) Provision for unsettled transaction on nostro accounts made are reviewed at each balance sheet date by management and certified by our external auditor in accordance with Bangladesh Bank Foreign Exchange Policy Department (FEPD) Circular Letter No. 677 (13 September, 2005) vii) Provision for taxation Current tax Provision for current income tax has been made @ 37.50% as prescribed in the Finance Act 2018 of the profit made by the bank considering taxable add-back of income and disallowance of expenditure in compliance with IAS-12 “Income Taxes”. Tax return for the income year 2017 (Assessment year 2018-2019) has been filed but assessment is to be done by the tax authority. Deferred tax The bank recognized deferred tax in accordance with the provision of IAS-12. Deferred tax arises due to temporary difference deductible or taxable for the events or transaction recognized in the income statement. A temporary difference is the difference between the tax base of an assets or liability and its carrying amount/reported amount in the financial statement. Deferred tax assets or liability is the amount of income tax payable or recoverable in future period(s) recognized in the current period. The deferred tax assets/expenses does not create a legal liability/ recoverability to and from the income tax authority. The bank recognizes deferred tax on 100% specific provision investment which will be write off as per Bangladesh Bank Circulars. The detail calcuation of deffered tax for the period ended 31st December 2018, has given below: 105 Al-Arafah Islami Bank Limited Annual Report 2018
106. Notes to the Financial Statements As at and for the year ended December 31 , 2018 Particulars As Per Books of Account Iteams giving rise temporary Diference 1. Fixed Assets Carring Amount 4,305,855,783 As Per Tax Assets not Depreciable Net Carring Amount 1,367,350,690 2,938,505,093 2. Provision for Gratuity allowable at the time of payament Net deferred tax liability (asset) Tax Base Temporary Difference Taxable / (Deductible) Deferred Tax Tax Rate Liability/ (Assets ) 2,464,719,651 473,785,442 37.5% 177,669,541 - 24,487,335 37.5% (9,182,751) 168,486,791 Deferred tax Assets (Income )/Liability Expenses Balance as on 1st January 2018 Provision required as on 31st December 2018 Balance as on 31st December 2018 100,949,199 67,537,592 168,486,791 viii) Provision for gratuity Gratuity Fund benefits are given to the staff of the bank in accordance with the approved Gratuity Fund rules. National Board of Revenue has approved the gratuity fund as a recognized gratuity fund on October 10, 2010. The fund is operated by a Board of Trustees consisting of 06 (six) members of the bank. The employees who serve at least 07 (seven) years in AIBL are normally entitled to get gratuity equivalent to one month’s basic salary of the employees for their completed year of services in the Bank. So that actuarial valuation is not considered essential. ix) Retirement benefit and staff welfare schemes The Bank operates a Contributory Provident Fund, Social Security Fund and Benevolent Fund. These funds are managed by separate Board of Trustees. x) Other provision and accrued expenses In compliance with IAS-37, provision and accrued expenses are recognised in the fianancial statements when the bank has legal or constructive obligation as a result of past event, it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. 2.14 Revenue recognition 2.14.1 Profit on Investment a) Income from investments has been accounted for on accrual basis except investment under Musharaka. Income in case of Musharaka is accounted for on realization basis. b) Profit/rent/compensation accrued on classified investment are suspended and accounted for as per Circulars issued by the Bangladesh Bank. Moreover, incomes which are irregular (doubtful) as per Shariah are also not included in the distributable income of the Bank. Bank charges compensation on unclassified overdue Bai-Murabaha and Bai-Muazzal investment. Such compensation is not permissible by Shariah to take into regular income of the bank. Therefore, the amount of compensation treated as a component of provision against bad & doubtful investment. Interest received due to legal obligation is also not taken into regular income of the bank. c) Profit on investment is calculated on daily product basis and charged on yearly basis. d) Recognition of interest in suspense IFRS: Loans and advances to customers are generally classified as ‘loans and receivables’ as per IAS 39 and interest income is recognised through effective interest rate method over the term of the loan. Once a loan is impaired, interest income is recognised in profit and loss account on the same basis based on revised carrying amount. Bangladesh Bank: As per BRPD Circular No. 14 dated 23 September, 2012, once a loan is classified, interest on such loans are not allowed to be recognised as income, rather the corresponding amount needs to be credited to an interest in suspense account, which is presented as liability in the balance sheet. 2.14.2 Fees and commission income Fees and commission income are recognized when earned. Commission charged on customer on letters of credit and letters of guarantee are credited to income at the time of effecting the transactions. Al-Arafah Islami Bank Limited Annual Report 2018 106
107. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2.14.3 Other comprehensive income IFRS: As per IAS 1 Other Comprehensive Income (OCI) is a component of financial statements or the elements of OCI are to be included in a single Other Comprehensive Income statement. Bangladesh Bank: Bangladesh Bank has issued templates for financial statements which will strictly be followed by all banks. The templates of financial statements issued by Bangladesh Bank neither Other Comprehensive Income nor the elements of Other Comprehensive Income are allowed to be included in a single Other Comprehensive Income (OCI) Statement. As such the Bank does not prepare the other comprehensive income statement. However, elements of OCI, if any, are shown in the statements of changes in equity. 2.14.4 Dividend Income Dividend Income from investment is recognised at the time when it is declared, ascertained, and right to receive the payment is established. 2.15 Management and other expenses Expenses incurred by the bank are recognised on actual and accrual basis. 2.16 Sharing of investment income The investment income (except exchange and commission income) is shared between depositors and the bank at the ratio of 70 : 30. 2.17 Foreign currency transactions i) The transactions in foreign currencies are converted into equivalent Taka currency using the ruling exchange rates prevailed on the dates of such transactions. ii) The assets and liabilities denominated in foreign currencies as at 31 December, 2018 are translated into Taka currencies at the prevailing selling and buying rates of the concerned foreign currencies. iii) Gains and losses of translation are dealt with through exchange account. 2.18 Basic Earning per share This has been calculated by dividing the basic earning attributable to ordinary shareholders of the bank by the weighted average number of ordinary shares outstanding during the year as per IAS-33. Diluted earning per share is required to be calculated for the period, when there is scope for dilution during the period under review. 2.19 Related Party transactions Related party transaction is a transfer of resources, services, or obligation between related parties, regardless of whether price is charged as per IAS 24. 2.20 Events after reporting period All the material events after the reporting period have been considered; appropriate adjustments and disclosures have been made in the financial statements. 2.20.1 Financial instruments – presentation and disclosure In several cases Bangladesh Bank guidelines categorise, recognise, measure and present financial instruments differently from those prescribed in IAS 39. As such full disclosure and presentation requirements of IFRS 7 and IAS 32 cannot be made in the financial statements. 2.20.2 Financial guarantees IFRS: As per IAS 39, financial guarantees are contracts that require an entity to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included within other liabilities. Bangladesh Bank: As per BRPD Circular No. 14 dated September 23, 2012, financial guarantees such as letter of credit, letter of guarantee will be treated as off-balance sheet items. No liability is recognised for the guarantee except the cash margin. 2.20.6 Balance with Bangladesh Bank: (Cash Reserve Requirement) IFRS: Balance with Bangladesh Bank should be treated as other asset as it is not available for use in day to day operations as per IAS 7. Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash equivalents. 2.21 Approval of the financial statements Financial Statements were approved by the Board of Directors on 334th meeting held on 24 April 2019 has approved the audited financial statements for the year ended 31 December 2018. The Board has also recommended 15% cash and 2% Stock dividend for the year ended 31 December 2018 subject to approval of the shareholders at the 24th Annual General Meeting (AGM). 107 Al-Arafah Islami Bank Limited Annual Report 2018
108. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2.22 i) ii) iii) 3.A i) ii) iii) iv) General The financial statements have been prepared in accordance with the formats prescribed under the Banking Companies Act, 1991 (as amended 2013) and in compliance with the rules of Islamic Law (Shariah) related to the banking business activities. The figures appearing in these accounts have been rounded off to the nearest taka. Wherever necessary previous years’ figures have been rearranged to conform to the current years’ presentation. Risk Management The risk of Al-Arafah Islami Bank Limited is defined as the possibility of losses, financial or otherwise. The risk management of the Bank covers 6 (six) Core Risk Areas of banking i.e Credit risk management, foreign exchange risk management, Assets Liability Management, prevention of money laundering and establishment of internal control and compliance and information & communication technology. The prime objective of the risk management is that the bank takes well calculative business risks while safeguarding the bank’s capital, its financial resources and profitability from various risks. In this context, the bank took steps to implement the guidelines of Bangladesh Bank as under : Credit Risk Management Credit risk is one of the major risks faced by the bank. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the bank. The failure may result from unwillingness of the counter party or decline in his/her financial condition. Therefore, bank’s credit risk management activities have been designed to address all these issues. The bank has an investment (Credit) risk management committee at head office. The committee reviews the investment risk issues on monthly basis. The bank has segregated the investment approval, investment administration, investment recovery and legal authority. The bank has segregated duties of the officers/executives involved in credit related activities. A separate business development (marketing) department has been established at head office, which is entrusted with the duties of maintaining effective relationship with the customer, marketing of credit products, exploring new business opportunities etc. In the branches of the bank separate officials are engaged as relationship manager, documentation officer, verification officer, disbursement officer and recovery officer. Their jobs have been allocated and responsibilities have been defined. Investment (Credit) Risk Grading Manual The bank has implemented the Investment (Credit) Risk Grading Manual (IRGM) since April 1, 2006 which is made mandatory by Bangladesh Bank vide BRPD Circular No. 18 of December 11, 2005. Investment Officials of the bank have been trained on IRGM. Investment Risk Grading is incorporated in the investment presentation form for all the cases. Foreign Exchange Risk Management Foreign exchange risk is defined as the potential change in earnings arising due to change in market prices. As per foreign exchange risk management guideline, bank has established a separate treasury department at head office. Under the treasury department, foreign exchange front office, foreign exchange back office and local money market have been physically demarketed. Duties and responsibilities of them have also been defined. All foreign exchange transactions are revalued at mark to market rate as determined by Bangladesh Bank at the month end. All Nostro accounts are reconciled on monthly basis and outstanding entry beyond 30 (thirty) days is reviewed by the management for its settlement. Regulatory reports are submitted on time to Bangladesh Bank. Assets Liability Management The Asset Liability Committee (ALCO) monitors balance sheet risk and liquidity risks of the bank. The balance sheet risk is defined as potential change in earnings due to change in rate of profit, foreign exchange rates which are not of trading nature. ALCO reviews liquidity requirement of the bank, the maturity of assets and liabilities, deposit and lending pricing strategy and the liquidity contingency plan. The primary objective of ALCO is to monitor and avert significant volatility in net profit income, investment value and exchange earnings. Internal control and compliance Effective internal controls are the foundation of safe and sound banking. A properly designed and consistently enforced system of operational and financial internal control helps the bank management to safeguard the bank’s resources, produce reliable financial and managerial report, and comply with laws and regulations. AIBL has taken all-out efforts to mitigate all sorts of risk in line with the guidelines issued by Bangladesh Bank. To this effect, the bank has formed an Internal Control & Compliance (ICC) wing headed by Deputy Managing Director. The ICC wing has been segregated to three departments which are audit & inspection division, compliance division and monitoring division. AIBL internal control contains self-monitoring mechanisms and to ensure effective control DCFCL, Investment documentation checklist and quarterly operation report have been developed and implemented. Internal audit and internal control teams carries out regular audit and surprise/special inspection of the branches to mitigate operational risk and restrain the possibility of circumvention or overriding the control procedure. ICC wing submits parallel comprehensive internal audit report to the managing director and to the audit committee. Within Al-Arafah Islami Bank Limited Annual Report 2018 108
109. Notes to the Financial Statements As at and for the year ended December 31 , 2018 v) vi) vii) viii) 3.B 3.C 02 (two) months after receiving the audit report, audit monitoring department completes the compliance report and submits the report to the audit committee for their review. The committee reviews the system of internal control and the audit process for compliance with rules, regulation and code of conduct, financial reporting process, and also suggests actions to remedy the lapses/irregularities. By this time the ICC wing has introduced concurrent audit, surprise inspection, auto information system, Quarterly Audited System, and mandatory leave policy to boost-up the functions of internal control and compliance. Prevention of money laundering Money laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering. For mitigating the risk the bank has a Central Compliance Unit (CCU) at head office. The unit reviews the anti money laundering activities of the bank on regular basis. The bank has a designated Chief Anti Money Laundering Compliance Officers (CAMLCO) at head office and Branch Anti Money Laundering Compliance Officers (BAMLCO) at branches. The compliance officers review the Suspicious Transaction (STR) and records them properly. Manuals have been established for the prevention of money laundering and transaction profile has been introduced. Training has been continuously given to all category of officers and executives for developing awareness and skill for identifying suspicious activities. The bank submits the STR, CTR and other periodical reports to Bangladesh Bank on time. Guideline on information & Communication Technology: Technology is the process by which humans modify nature to meet their needs and wants. The term Information Technology (IT) means computers, auxiliary equipment, software, hardware and similar procedures, services and related resources. Information Technology (IT) developed in a rapidly changing global environment, and challenges us to courageous initiatives to address a host of vital skilled human resources. To overcome the challenges the bank has a IT policy. The IT policy of the bank includes the purchase policy, hardware policy, software development policy, banking application usage policy, security policy, disaster recovery policy etc. The bank is now implementing its on line banking project complying the IT policy. Internal Audit As per Internal Control & Compliance (ICC) Risk Management Guideline of Bangladesh Bank, a ’Risk Based Audit Plan‘’ is to prepared for each calendar year for smooth conducting of Audit & Inspection of all the branches and departments & divisions of Head Office of the bank. Besides the Yearly Auditing, Internal Audit Department Conducts Special Audit, Quarterly Foreign Exchange & Investment Audit, Surprise Audit etc. To prevent incidence of errors and their recurrences, more emphasis are given on spot rectification of irregularities/ lapses while auditing/inspecting of the branches. For Audit purpose, branches have been segregated into 05 risk categories (Extremely High, Very High, High, Medium & low risk). The regular Audit & Inspection Teams also conduct Core Risks System Audit during their regular Audit & Inspections. Fraud and Forgeries: During the year 1st January to 31st December, 2018 Audit and Inspection division of ICCW, have detected some incidents/irregularities as fraud-forgeries relating to cash misappropriation and investment disbursement in 05 branches of the Bank, which are not material in terms of Bank’s overall financial transactions. In order to not jeopardize the bank’s interest, all such irregularities were regularized/mitigated by recovery of the defalcated money through strong monitoring and close supervision by the ICC Wing. Furthermore, administrative actions were also taken against the delinquent officers/persons involved. Compliances of these issues were duly reported to the Board Audit Committee and Bangladesh Bank in time as per regulatory guidelines. Risk Based Capital (Basel III) To comply with the international best practices and to make the bank’s capital more risk sensitive as well as to build the banking industry more shock absorbent and stable, Bangladesh Bank is aimed to implement Basel-II reporting from 2010 and Basel-III reporting from 2015. As per the directive of Bangladesh Bank, all scheduled banks in Bangladesh are now required to report risk based capital adequacy for banks under Basel-III along with the existing capital adequacy rules and reporting under Basel-I and Basel-II during the parallel run i.e. 2009 and 2010 respectively. All scheduled banks are also required to disclose capital adequacy in both quantitative and qualitative terms. The first disclosure as per guidelines shall be made as on the effective date viz. January 01, 2015. Compliance status on Bangladesh Accounting Standards (IAS) and Bangladesh Financial Reporting Standards (IFRS) The Institute of Chartered Accountants of Bangladesh (ICAB) is the sole authority for adoption of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). While preparing the financial statements, the bank applied most of IAS and IFRS as adopted by ICAB. Details are given below: 109 Al-Arafah Islami Bank Limited Annual Report 2018
110. Notes to the Financial Statements As at and for the year ended December 31 , 2018 4 Name of the IAS Presentation of Financial Statements Inventories Statement of Cash Flow Accounting Policies, Changes in Accounting Estimates and Errors Events after the Reporting Period Income Taxes Property, Plant and Equipment Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Effects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Separate Financial Statements Investments in Associates & Joint Ventures Financial Instruments: Presentation Earnings per share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Investment Property Agriculture IAS No. 1 2 7 8 10 12 16 19 20 21 23 24 26 27 28 32 33 34 36 37 38 40 41 Status Applied Applied Applied Applied Applied Applied Applied Applied N/A Applied Applied Applied N/A Applied N/A Applied Applied Applied Applied Applied Applied N/A N/A Name of the IFRS Financial Instruments: Disclosures Financial Instruments: Recognition and Measurement Consolidated Financial Statements Disclosure of interest in other entities Fair value Measurement Revenue from contracts with customers IFRS No. 7 9 10 12 13 15 Status Applied Applied Applied Applied Applied Audit Committee: An Audit Committee was constituted by the Board of Directors of the bank in its 95th meeting held on 24th March, 2003 as per BRPD Circular No. 12 dated 23th December, 2002 and subsequently reconstituted by the Board of Directors in its 322ndmeeting held on 24th May, 2018 as per BRPD Circular No. 11 Dated 27.10.2013 as under: SL 1 2 3 4 5 i) ii) iii) Name Md. Amir Uddin PPM Abdus Salam Abdul Malek Mollah Al-hajj Naiz Ahmed Khalid Rahim Status with Committee Chairman Member Member Member Member Eduacational Qualification BSS(Hons) Economics,MSS (Economics) M.com Intermediate M.com.(Accounting),LLB FCA (ICAEW) ; MA(UK) During the period 2018 the audit committee of the bank conducted 10 (ten) meetings in which among others, the following issues were discussed:Reviewing the inspection report of different branches of AIBL conducted by the bank internal inspection team from time to time and status of compliance thereof. Reviewing the comprehensive inspection report of different branches of AIBL conducted by Bangladesh Bank and status of compliance thereof. Reviewing the financial statements of the bank for the period 31 December, 2018. Al-Arafah Islami Bank Limited Annual Report 2018 110
111. Notes to the Financial Statements As at and for the year ended December 31 , 2018 5. a) b) 2018 Taka Cash in hand In local currency In Foreign currency ( Note 5.a.ii ) Balance with Bangladesh Bank In local currency In Foreign currency c) Balance with Sonali Bank Ltd. In local currency In Foreign currency 5.a.i 5.a.ii Balance With Bangladesh Bank and its Agents Banks (including foreign currencies) In Foreign currency Currency Name Amount in FC Ex. Rate US Dollar 9800 82.97 Great Britain Pound EURO Others - 2017 Taka 2,604,569,115 813,098 2,605,382,213 2,092,699,819 3,467,978 2,096,167,797 21,818,150,233 224,420,957 22,042,571,190 36,353,337,500 111,796,457 36,465,133,957 1,062,051,915 1,062,051,915 23,104,623,105 1,204,440,154 1,204,440,154 37,669,574,111 Amount in BDT 813,098 - Amount in BDT 3,467,978 - 813,098 3,467,978 Cash Reserve Requirments (CRR) and Statutory Liquidity Requirments (SLR) Cash Reserve Requirments (CRR) and Statutory Liquidity Requirments (SLR) have been calculated and maintained in accordance with Section 33 of Bank Companies Act 1991 (as amended 2013) & as per Bangladesh Bank Curcular No: MPD/01 dated April 3, 2018. 5.e Cash Reserve Requirments (CRR) Required Reserve( 5.50 % of Average Demand and Time Liabilities) 14,837,659,000 15,640,910,000 Actual reserve held with Bangladesh Bank 21,790,966,000 34,432,027,000 Surplus/(Deficit) 6,953,307,000 18,791,117,000 Statutory Liqudity Requirments (SLR) Required Reserve( 5.50 % of Average Demand and Time Liabilities) 14,837,659,000 13,234,616,000 Actual reseve held 14,837,659,000 13,234,616,000 Surplus/(Deficit) 5.A Cash in hand Al-Arafah Islami Bank Ltd. 2,605,382,213 2,096,167,797 AIBL Capital Market Services Ltd. 9,052 AIBL Capital Management Ltd. 10,757,261 Millennium information solution Ltd. 347,778 239,878 2,616,496,304 2,096,407,675 6. Balance with other Banks and Financial Institutions a) In Bangladesh: Al-Wadia Current Accounts Dutch Bangla Bank Ltd. 1,180,288 3,185,318 National Bank Ltd. 2,613,800 1,329,950 Agrani Bank 1,650 1,650 3,795,737 4,516,917 Short Term Deposits Dhaka Bank Ltd. 7,659,330 6,185,080 Prime Bank Ltd. 3,618,758 11,837,616 Islami Bank Bangladesh Ltd. 21,684,500 132,626,402 Social Islami Bank Ltd. 44,832,925 26,896,790 Shahjalal Islami Bank Ltd. 1,211,922,939 393,819,641 EXIM Bank Ltd. 357,926,383 210,247,804 ICB Islamic Bank Ltd. 162,169,534 162,184,994 Jamuna Bank Ltd. 2,515,231 15,252,289 The City Bank Ltd. 2,943,933 3,337,414 Southeast Bank Ltd. 7,969,060 3,453,192 AB Bank Ltd. 174,693,466 33,321,441 Social Islami Bank Ltd. Bank Alfalh Ltd. 3,432,482 3,445,016 Rupali Bank Ltd. 2,001,368,540 1,002,607,680 2,005,164,277 1,007,124,597 5.d 111 Al-Arafah Islami Bank Limited Annual Report 2018
112. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 2017 Taka Amount In BDT. Amount In BDT. b. Outside Bangladesh (NOSTRO A/C) Amuont Convertion rate in Foreign per unit F.C Currency HABIB BANK AG ZURICH CSF 5,016 84.54 COMMERZBANK AG FRANKFURT AM EURO (65,428) 95.48 SONALI BANK LTD.LONDON EURO EURO STANDARD CHARTERD BANK LTD,FRANKFURT EURO 1,158,194 95.48 UNITED BANK OF INDIA,EURO EURO 767 95.48 UNITED BANK OF INDIA,KOLKATA, ACUD USD 158,500 83.90 STANDARD CHARTERD BANK LTD,JAPAN JPY 2,042,088 0.76 SONALI BANK LTD.,LONDON GBP POUND 1,756,809 106.18 STANDARD CHARTERD BANK LTD,LONDON POUND AL RAJI BANKING & INV CORP,SAUDI ARABIA REYAL 358,819 22.36 AB BANK LID., MUMBAI ACUD 127,806 83.90 AXIS BANK LTD. ACUD 406,401 83.90 BANK OF BHUTAN, ACU ACUD 145,796 83.90 COMMERZBANK AG FRANKFURT AM MAIN DE USD 258,101 83.90 HABIB BANK AMERICAN BANK ,NEW YORK,USA ACUD 296,946 83.90 ICICI BANK LIMITED, MUMBAI ACUD 945,846 83.90 ICICI BANK LIMITED,HONGKONG USD 599,842 83.90 MASHREQUE BANK PSC,MUMBAI ACUD 270,059 83.90 SONALI BANK LTD. LONDON USD SONALI BANK LTD. KOLKATA ACUD 188,668 83.90 STANDARD CHARTERD BANK LTD,KARACHI ACUD 342,858 83.90 STANDARD CHARTERD BANK LTD,MUMBAI ACUD 443,324 83.90 HABIB METROPOLITAN BANK LTD, KARACHI USD 151,544 0.00 MASHREQUE BANK PSC,NEW YORK USD 819,107 83.90 CITIBANK N.A.,NEW YORK, USA USD (1,571,311) 83.90 STANDARD CHARTERD BANK LTD,NEW YORK USD 36,072 43.98 STANDARD CHARTERD BANK, KOLKATA (AMEX) USD 155,899 83.90 HABIB AMERICAN BANK,NEW YORK,USA USD EMIRATES NBD, RIYADH, KSA SAR 284,147 22.36 UNITED BANK OF INDIA, DOLLAR ACUD Currency Name Name of bank Placement to OBU-USD 6.A. a) In Bangladesh: Al-Arafah Islami Bank Ltd. [ Note-6.a ] AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Less: Inter-Company Adjustment b. Outside Bangladesh 6.A.i Maturity - wise Groupings ( Inside & Outside Bangladesh) Payable on Demand Up to 1 ( one ) month Over 1 ( one ) Month but not more than 3 ( three ) Months Over 3 ( three ) Months but not more than 1 ( one ) year Over 1 year but not more than 5 years Over 5 years Al-Arafah Islami Bank Limited Annual Report 2018 112 424,036 (6,246,945) 110,582,291 73,254 13,298,167 1,544,431 186,544,664 8,023,914 10,722,909 34,097,043 12,232,305 21,654,645 24,913,792 79,356,490 50,326,750 22,657,972 15,829,273 28,765,756 37,194,894 12,714,531 68,723,069 (131,832,988) 1,586,459 13,079,910 6,354,097 622,620,719 7,681,174,506 8,303,795,224 10,308,959,502 674,750 25,977,914 (13,172) 15,861,375 76,115 9,673,439 222,800 2,042,248 1,261,337 6,818,688 24,766,948 6,223,166 12,024,915 22,614,782 (143,359) (49,195,537) 5,957,046 25,972,541 (75,680) 8,747,206 18,419,741 7,551,595 (932,164) 97,454,506 34,700,831 43,473,235 12,892,832 10,254,670 534,313 2,508,291 346,345,371 9,981,652,856 10,327,998,227 11,335,122,824 2,005,164,277 71,397,766 51,000,000 18,723,700 2,146,285,743 (141,121,466) 2,005,164,277 8,303,795,224 10,308,959,502 1,007,124,597 207,494,736 627,743,822 64,260,913 1,906,624,068 (835,967,277) 1,070,656,791 10,327,998,227 11,398,655,018 6,034,759,502 2,713,532,194 400,000,000 1,160,667,806 10,308,959,502 5,982,362,824 2,113,532,194 3,302,760,000 11,398,655,018
113. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 7. Placement with Banks & Other Financial institutions Shahjalal islami bank ltd. Exim bank ltd. Southeast bank ltd. First security islami bank Ifil mtdr Union bank ltd mtdr a/c AB Bank Ltd. Social Islami Bank Ltd. 7.A Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. 8. Investment in Shares & Securities Bangladesh Govt. Islami Bond Fund ( 8.a ) Investment In Islamic Refinance Fund (8.a) Investment in Share ( 8.b ) Central Depository Bangladesh Limited ( 8.b ) 8.a 8.b.i 8.b.ii 8. Investments in Share & Securities Government Securities Bangladesh Govt. Islami Bond Fund Investment In Islamic Refinance Fund In shares (quoted and unquoted) Quoted Private (8.b) Unquoted Private (8.b) Book value of share as on 31 December 2018 as follows Quoted shares in (Schedule of Shares and Securities are given Annexure B) Dafodilco Kpcl Intech Primetex Primelife AIBl 1st Islamic Mutual Fund Unquoted shares in Swift Share Investment in sibl mudaraba sub-ordinated bond Central Depository Bangladesh Limited Investment in Shares & Securities Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. 8.A.ii AIBL Capital Management Ltd. 8.A.ii Millennium information solution Ltd. 8.A.ii 113 2017 Taka 3,000,000,000 500,000,000 1,000,000,000 1,500,000,000 1,000,000,000 200,000,000 1,000,000,000 8,200,000,000 8,200,000,000 8,200,000,000 500,000,000 1,000,000,000 500,000,000 1,400,000,000 1,000,000,000 4,400,000,000 4,400,000,000 4,400,000,000 10,500,000,000 500,000,000 364,467,221 3,138,890 11,367,606,111 7,500,000,000 500,000,000 417,453,233 3,138,890 8,420,592,123 11,000,000,000 10,500,000,000 500,000,000 8,000,000,000 7,500,000,000 500,000,000 57,013,988 10,000,000 310,592,123 367,606,111 10,592,123 20,592,123 25,859,272 4,270,275 2,960,156 9,272,592 4,651,693 10,000,000 57,013,988 10,000,000 10,000,000 7,453,233 300,000,000 3,138,890 310,592,123 367,606,111 7,453,233 400,000,000 3,138,890 410,592,123 420,592,123 11,367,606,111 662,120,683 114,355,120 70,588,402 12,214,670,316 8,420,592,123 700,000,000 1,376,753,723 48,144,433 10,545,490,279 Al-Arafah Islami Bank Limited Annual Report 2018
114. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 8.A.i 8.A 9. a) i. ii. Investment in Shares & Securities Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. Maturity grouping of investments Payable on Demand Not more than 3 months Over 3 ( three ) months but not more than 1 ( one ) year Over 1 year but not more than 5 years More than 5 years Investments General Investment in Bangladesh Murabaha Investment Bai-Muazzal Investment Hire Purchase Investment Quard Other Investment Out side Bangladesh Less: Unearned profit on Investment b) c) Bill Purchased & Discounted Payable in Bangladesh Payable out side Bangladesh Maturity grouping of Investment Including bills purchased and discounted Payable on Demand Up to 1 ( one ) month Over 1 ( one ) month but not more than 3 ( three ) months Over 3 ( three ) months but not more than 1 ( one ) year Over 1 year but not more than 5 years Over 5 years d) i. ii. An analysis to disclose following Significant concentration : Investment to Directors and others Investment to Managing Director and Cheif Executive iii. Investment to customer (No. of clients with amount of outstanding and classified loan to whom loans and Investment sanctioned more than 10% of total capital of the Bank) iv. Investments to customers for more than 10% of Bank’s Total Capital Number of clients Amount of outstanding Investment Amount of Classified Investment Al-Arafah Islami Bank Limited Annual Report 2018 114 2017 Taka 367,606,111 662,120,683 114,355,120 70,588,402 1,214,670,316 20,592,123 700,000,000 1,376,753,723 48,144,433 2,145,490,279 67,600,000 12,147,070,316 12,214,670,316 20,592,123 10,524,898,156 10,545,490,279 74,671,522,300 89,934,855,909 79,644,814,095 130,409,695 3,809,028,155 248,190,630,154 248,190,630,154 8,040,359,033 240,150,271,121 48,754,958,120 88,080,022,737 63,373,693,778 841,723,870 21,665,976,904 222,716,375,409 222,716,375,409 9,347,553,957 213,368,821,452 12,809,623,481 4,132,205,330 16,941,828,811 257,092,099,932 17,716,863,296 1,528,543,975 19,245,407,271 232,614,228,723 74,829,975,723 70,948,500,000 88,135,500,000 3,517,553,000 19,660,571,209 257,092,099,932 64,829,975,723 67,948,500,000 82,135,500,000 2,917,553,000 14,782,700,000 232,614,228,723 33,748,000 - 33,748,000 - 72,311,000,000 67,718,100,000 24 72,311,000,000 - 26 67,718,100,000 -
115. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v) Name of Clients Meghna Group City Group Thermax Group Majumder Traders T K Group Abul Khair Steel Industries Ltd. Nasir Glass Ltd AIBL Capital Market Services Ltd. Noapara Traders Techno Electricals ltd Aman Tex Limited Masihata Sweaters Ltd. Gastro Liver Hospital & Reaserch Institute ltd NICE Denim Mills Ltd. Kader Compact Spinning Mills Kabir Steel Re-rolling Mills Mahmud Indigo Ltd. Ayman Textile & Hosiery Ltd. Nitol Motors Ltd. Robiul Islam, M/S. Rahman Traders & M/S. Zobari Traders Kamal Yearn Ltd Creative paper Mills Biswas Poultry & Fish Feeds Ltd. Anwar Khan Modern Hospital Ltd. Bangladesh Hardland Ceramics Co. Ltd. Mahmud Fabrics And Finishing Ltd. S Suhi industrial Park Ltd Smile Food Products Ltd Funded Non-Funded 317.43 90.16 164.10 3.21 23.80 106.82 9.10 80.00 239.07 321.53 98.58 138.97 194.62 32.01 5.51 0.77 13.70 Figure in crore 317.43 346.97 482.27 261.28 73.44 461.05 67.29 448.12 264.20 413.14 264.23 417.97 530.00 316.61 82.67 366.04 271.77 Figure in crore 89.04 163.35 527.56 463.27 84.85 553.89 148.23 277.86 104.32 403.05 273.17 483.34 90.99 294.51 317.94 84.47 132.70 336.09 232.54 127.13 - 127.13 217.81 314.10 116.90 163.30 334.83 109.50 151.66 4,862.52 27.27 147.51 261.42 40.97 1.75 50.28 2,368.58 341.37 264.41 424.72 375.80 111.25 201.94 7,231.10 480.30 237.25 151.45 189.11 132.16 302.56 6,771.81 3,210,500,000 138,791,500,000 33,689,800,000 1,758,500,000 9,369,400,000 74,759,872,098 1,405,500,000 2,147,386,867 265,132,458,965 8,040,359,033 257,092,099,932 2,800,100,000 112,386,800,000 11,823,600,000 391,700,000 9,048,100,000 64,701,800,000 21,865,600,000 18,944,082,680 241,961,782,680 9,347,553,957 232,614,228,723 239,373,961,000 194,132,866,000 27,317,689,000 672,326,000 6,065,113,000 1,509,578,000 6,197,800,000 1,350,896,000 2,127,693,000 214,915,306,680 176,096,065,680 25,168,314,000 863,571,000 5,722,280,000 5,775,383,000 1,289,693,000 256.81 318.17 258.07 49.64 354.23 58.19 368.12 25.13 91.61 165.65 279.00 335.38 284.60 77.16 365.27 258.07 Industry/Sector wise Investments Agriculture Industry Constraction Power,Gas,Water & Sanatary Services Transport & communication Trade Service Storage Professional & Miscellaneous Service Less: Unearned profit on Investment vi) 2017 Taka Geographical Location -wise Investment Urban: Dhaka Region Chittagong Region Sylhet Region Rajshahi Region Mymensing Khulna Region Rangpur Region Barisal Region 115 Al-Arafah Islami Bank Limited Annual Report 2018
116. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka Rural: Dhaka Region Chittagong Region Sylhet Region Mymensing Rajshahi Region Khulna Region Rangpur Region Barisal Region e) Less: Unearned profit on Investment Classification of Investment including bills purchased and discounted Unclassified Standard including (Staff investment ) Special Mention Accounts (SMA) Classified Sub Standard Doubtful Bad / Loss Less: Unearned profit on Investment f) g) Required Provision on Investment & Off -balance sheet exposures Unclassified General provision on unclassified Investment General provision on small enterprise Investment General provision on Housing financing Investment General provision on consumer financing Investment General provision on Micro Investment General provision on special mention Investment General provision on BHS/MHS/SDS Classified Specific provision on substandard Investment Specific provision on doubtful Investment Specific provision on bad/loss Investment Unclassified General provision on Off-balance sheet Provision made on Investment & Off-balance sheet exposures Unclassified General provision on unclassified Investment General provision on small enterprise Investment General provision on Housing financing Investment General provision on consumer financing Investment General provision on Micro Investment General provision on special mention Investment General provision on BHS/MHS/SDS Classified Specific provision on substandard Investment Specific provision on doubtful Investment Specific provision on bad/loss Investment Unclassified General provision on Off-balance sheet Provision Excess/(Shortfall) Al-Arafah Islami Bank Limited Annual Report 2018 116 2017 Taka 25,758,497,965 11,633,705,965 4,934,974,000 592,107,000 2,184,732,000 271,875,000 1,713,777,000 3,531,873,000 895,454,000 265,132,458,965 8,040,359,033 257,092,099,932 24,907,535,000 11,646,434,000 4,455,490,000 706,102,000 2,646,022,000 1,439,971,000 3,107,643,000 905,873,000 239,822,841,680 9,347,553,957 230,475,287,723 252,441,737,965 244,039,574,965 8,402,163,000 12,690,721,000 2,011,038,000 1,276,911,000 9,402,772,000 265,132,458,965 8,040,359,033 257,092,099,932 232,040,269,680 226,458,279,680 5,581,990,000 9,921,513,000 1,154,051,000 497,117,000 8,270,345,000 241,961,782,680 9,347,553,957 232,614,228,723 1,452,819,000 233,231,000 23,416,000 6,080,000 19,414,000 70,020,000 86,020,000 1,891,000,000 184,090,000 235,662,000 3,526,336,613 3,946,088,613 689,800,000 6,526,888,613 1,277,199,000 240,541,000 43,652,000 7,526,000 15,765,000 44,314,000 94,043,000 1,723,040,000 87,602,000 86,649,000 2,921,904,000 3,096,155,000 570,419,000 5,389,614,000 1,452,819,000 233,231,000 23,416,000 6,080,000 19,414,000 70,020,000 86,020,000 1,891,000,000 184,090,000 235,662,000 3,526,336,613 3,946,088,613 689,800,000 6,526,888,613 - 1,277,199,000 240,541,000 43,652,000 7,526,000 15,765,000 44,314,000 94,043,000 1,723,040,000 87,602,000 86,649,000 2,921,904,000 3,096,155,000 570,419,000 5,389,614,000 -
117. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka h) i) Particulars of Investments Investment considered good in respect of which of the bank company is fully secured; ii) Investment considered good against which the banking company holds no security other then the debtors personal guarantee. iii) 2017 Taka 187,157,254,773 176,481,559,502 77,615,204,177 65,480,223,171 Investment considered good secured by the personal undertaking of one or more perties in addition to the personal guarantee of the debtors; - - iv) Investment adversely classified; provision not maintained thereagainst; - - v) Investment due by directors or officers of the Banking company or any of these either separately or Jointly with any other persons; vi) Investment due from companies or firms in which the directors of the banking company have interests as directors, partners or managing or in the case of private companies as members; 27,826,686 16,082,500 Maximum total amount of Investments including temporary Investments made at any time during the year to directors or managers or officers of the banking companies or any of them either agents severally or jointly with any other persons; - - Maximum total amount of Investment including temporary Investment granted during the year to the companies or firms in which the directors of the banking company have interests as directors, partners or managing agents or in the case of private companies as members; - - 9,402,772,000 849,933,613 6,778,137,000 164,881,715 3,526,336,613 7,770,359,000 1,177,957,769 6,778,137,000 8,270,345,000 517,286,000 4,804,835,000 309,972,277 2,921,904,000 5,623,657,000 754,132,267 4,804,835,000 257,092,099,932 8,178,160,493 2,973,375 265,273,233,800 (3,399,100,000) 261,874,133,800 232,614,228,723 8,186,981,984 12,947,718 240,814,158,425 (4,908,923,901) 235,905,234,524 76,829,975,723 72,948,500,000 90,135,500,000 3,517,553,000 18,442,605,077 261,874,133,800 64,829,975,723 67,948,500,000 82,135,500,000 2,917,553,000 18,073,705,801 235,905,234,524 vii) viii) ix) x) xi) 9.A. Due from banking companies; Amount of Clssified Investment on which profit has not been charge, are mentioned as follows; a) An amount of Bad Investment on which profit has not been charged i) Decrease/Increase in provision ( Specific ) ii) Amount of Investment written off; iii) Amount realised against Investment previously written off; b) Amount of provision kept against Investment classified as “bad/loss” on the date of preparing the balance sheet ; c) Profit creditable to the profit suspense/Compensation A/c; i) Cumulative amount of the written of Investment; ii) Amount written off during the current year; iii) The amount of written off Investment for which lawsuit has been field; Investments Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Less : Inter company Adjustment 9.A.i Maturity grouping of Investment Including bills purchased and discounted Payable on Demand Up to 1 ( one ) month Over 1 ( one ) month but not more than 3 ( three ) months Over 3 ( three ) months but not more than 1 ( one ) year Over 1 year but not more than 5 years Over 5 years 117 Al-Arafah Islami Bank Limited Annual Report 2018
118. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 10. Fixed Assets Tangiable Assets Land Building Furniture (Wood) Furniture (Steel) Computer Computer (Accessories) Motor Car Machine equipment & appliance Online Hardware Interior Decoration Books & Library Intangiable Assets Online Software Total Less Accumulated Depreciation & Amortization 10.A. 11. Schedule of Fixed Assets are given in Annexure - A. Fixed Assets Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium Information Other Assets Master card Settlement Account Suspense Account Stock of Stationery Stamp in hand Advance Deposit Advance Rent Capital Work In Progress Investment for Subsidiary Companies Advance Income Tax & TDS [ Note 11.2 ] Protested Bills Prepaid Expenditure Balance with cmsl for portfolio account Accrued Income Stock of ATM Card Clearing adjustment Dividend Receivable Due from off-shore Banking unit Less: Balance with OBU for elimination investment with OBU Al-Arafah Islami Bank Limited Annual Report 2018 118 2017 Taka 1,367,350,690 1,212,396,406 807,729,544 113,853,147 250,767,362 91,835,680 174,513,591 1,098,948,265 628,034,616 174,382,875 9,158,557 5,928,970,733 1,368,054,382 744,610,287 470,589,762 106,024,971 219,085,932 80,143,215 167,901,575 688,509,557 337,733,628 171,280,161 9,346,784 4,363,280,254 296,297,744 6,225,268,477 1,919,412,693 4,305,855,784 221,104,558 4,584,384,812 1,545,432,198 3,038,952,614 4,305,855,784 13,486,543 518,708 174,748,140 4,494,609,175 3,038,952,614 18,713,240 763,998 151,072,006 3,209,501,858 156,975,152 32,542,818 44,803,219 5,264,524 4,348,842 382,055,381 3,060,000,000 10,168,005,399 5,706,700 2,314,334 1,428,291,317 836,994,140 1,050,000 98,211,163 7,743,066,982 23,969,629,971 7,743,066,982 16,226,562,989 47,886,131 41,042,980 43,866,347 6,144,565 4,201,242 363,104,456 931,108,305 3,060,000,000 8,192,320,367 6,506,700 3,228,480 1,475,000,000 594,276,875 1,050,000 178,719,301 23,003,644 10,028,030,543 24,999,489,936 10,028,030,543 14,971,459,393
119. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 11.1 Classification of other Assets under the following catagories i) Investment in shares of subsidiary companies; 2017 Taka 3,060,000,000 In Bangladesh 3,060,000,000 - - 51,117,743 51,060,912 Advance rent and advertisement; 382,055,381 363,104,456 iv) Profit accrued on Investment but not collected, commision & brokerage receivable on shares and debenture and other income receivable 836,994,140 594,276,875 v) Security deposit 4,348,842 4,201,242 vi) Preliminary, formation and organization expenses, renovaiton 2,314,334 3,228,480 ii) Stationery, Stamps, Printing materials etc. iii) vii) Master card Settlement Account viii) Suspenses account ix) DD Paid without advice x) Protested Bills xi) Dividend Receivable - 23,003,644 xii) Capital Work In Progress - 931,108,305 xiii) Others xiv) xiii) 156,975,152 47,886,131 32,542,818 41,042,980 - 61,455,300 5,706,700 6,506,700 11,694,507,879 10,184,584,368 16,226,562,989 15,371,459,393 98,211,163 4,931,507 Others Adjustment a/c cost of borrowing Remittance adjustment a/c - - Investment in sibl mudaraba sub-ordinated bond - 400,000,000 10,168,005,399 8,192,320,367 Advance Income Tax & TDS Mfci usd (edf) a/c Balance with cmsl for portfolio account Revaluation adjustment a/c - 3,199,437 1,428,291,317 1,475,000,000 - 109,133,057 11,694,507,879 10,184,584,368 11.2 Advance Income Tax & TDS i) Begining of the year 8,192,320,367 13,039,216,681 Advance tax paid during the year 1,882,445 ,715 3,353,712,977 Tax deducted at Source during the year Settlement for previous year Advance income tax at the end of the year 11.A. 93,239,317 78,054,279 - (8,278,663,570) 10,168,005,399 8,192,320,367 16,226,562,989 15,371,459,393 2,043,499,169 2,526,599,457 365,701,008 102,490,015 Consolidated Other Assets Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. Less: Inter-Company Adjustment 12. Non-Banking Assets 13. Placement from Banks & Other financial Institutions 63,717,001 63,249,595 18,699,480,167 18,063,798,460 (3,098,552,194) (3,684,244,456) 15,600,927,973 14,379,554,005 50,875,037 50,875,037 - 30,904,054,548 The Bank has taken finance from Islami Investment Bond (Islami Bond ) at banks’ own mudaraba savings rate (i,e.as on 31ST December 2018 MTDR provisional rate ) for 60/90/120/150/180 days tenor which introduced by the Government for islami banks and financial institutes in september 2004 through Bangladesh Bank. The borrowing has been secured by MTDR, Accepted bills and Demand Promissory Note. 119 Al-Arafah Islami Bank Limited Annual Report 2018
120. Notes to the Financial Statements As at and for the year ended December 31 , 2018 a. Name of the Bank In Bangladesh Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Brorowing from Bangladesh Bank Mature Date 16-Jan-2019 21-Jan-2019 21-Jan-2019 19-Apr-2019 5-Apr-2019 17-May-2019 19-May-2019 15-Jun-2019 27-Jan-2019 Nature D.P Note D.P Note D.P Note D.P Note D.P Note D.P Note D.P Note D.P Note D.P Note Outside Bangladesh 13.A 14. 14.i. 14.ii Placement from Banks & Other financial Institutions Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. Deposit and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits [ Note :14.i ] Al-Wadia Current Accounts and Others Accounts etc.[ Note: 14.ii] Bills Payable Other Mudaraba Deposits Mudaraba Short Term Deposit Installment Term Deposit (Itd) Savings Inv. Deposit (Sid) P/P Term Deposit (Ptd) Monthly Hajj Deposit (Mhd) Term Hajj Deposit (Thd) Marriage Savings & Invt. Scheme Special Pension Dep. Scheme Mudaraba Term Cash Waqf Deposi Lakhapati Deposit Scheme (Lds) Millionaire Dep. Scheme (Mmds) Kotipoti Deposit Scheme (Mkds) Double Benefit Dep. Scheme (Dbds) Pension Dep. Scheme (Pds) Triple Benefit Dep. Scheme (Tbds) Al-wadeeah Current Accounts and Other Accounts Al-wadeeah Current Deposits Sundry Deposit Profit Payable For All Deposit Ac F.C Held against EDF F.C Deposit Account Al-Arafah Islami Bank Limited Annual Report 2018 120 2018 Taka 2017 Taka Amount Amount 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 2,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 1,000,000,000 10,000,000,000 10,393,335,650 20,393,335,650 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000 18,000,000,000 12,904,054,548 30,904,054,548 20,393,335,650 1,366,500,000 21,759,835,650 30,904,054,548 1,314,622,500 32,218,677,048 37,678,761,490 152,322,906,893 49,467,884,447 24,454,571,622 2,422,489,486 266,346,613,938 32,130,000,015 136,764,993,508 47,832,419,620 26,435,038,160 2,479,779,449 245,642,230,752 14,260,971,078 17,184,571,101 12,040,131 5,882,470,210 191,428,311 3,399,957 649,465 43,056,207 28,228,362 492,299,511 3,817,788,863 2,327,809,271 2,781,725,526 2,209,631,286 231,815,168 49,467,884,447 14,007,643,183 14,568,400,206 44,971,694 5,953,296,550 153,649,312 2,924,139 545,696 51,242,035 25,557,432 616,994,921 4,082,046,932 2,286,871,847 3,813,903,414 2,001,290,387 223,081,872 47,832,419,620 11,100,275,628 7,853,678,220 3,676,336,626 192,318,716 1,631,962,432 24,454,571,622 12,469,736,608 8,079,726,960 3,180,954,031 121,200,668 2,583,419,893 26,435,038,160
121. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 14.A. 14.A.i i. ii. iii. iv. v. vi. vii. Consolidated Deposit and other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits [ Note :14.A.ii ] Other Mudaraba Deposits Al-Wadia Current Accounts and Others Accounts etc. Bills Payable Maturity-wise Classification of Deposits Repayable on Demand With a residual maturity of Repayable within 1 ( one ) month Over 1 ( one ) month but within 6 ( six ) months Over 6 ( six ) months within 1 ( one ) year Over 1 ( one ) year within 5 ( five ) years Over 5 ( five ) years within 10 ( ten ) years Unclaimed Deposits 10 (ten) years and above 14.A.ii Mudaraba Term Deposits Less: Inter-Company Adjustment 15. Other Liabilities Provission for unclassified investment Provission for classified investment Provision for off balance sheet item Provision for diminution in value of investment Provision for Gratuity Provision for Outstanding expense Provision for taxation provision for Others Hajj foundation Clearing adjustment Interest income Cib collection charge Cash waqf (staff) F.c. held against bb l/c Supervision fees (sme) Electronic govt procurement Profit rent suspense Compensation receivable Mastercard Settlement Account 15.1 Provision for income Tax Current tax Provision held at the begining of the year Provision made during the year Settlement for previous year Provision held at the end of the year 121 2017 Taka 37,678,761,490 152,181,785,427 49,467,884,447 24,454,571,622 2,422,489,486 266,205,492,472 32,130,000,015 135,929,026,231 47,832,419,620 26,435,038,160 2,479,779,449 244,806,263,475 3,871,910,000 5,540,235,000 41,932,503,938 80,164,500,000 102,052,278,534 31,584,000,000 6,599,405,111 894,889 266,205,492,472 152,322,906,893 (141,121,466) 152,181,785,427 29,887,495,752 81,203,632,723 102,832,800,000 18,978,800,000 6,363,300,000 244,806,263,475 136,764,993,508 (835,967,277) 135,929,026,231 1,891,000,000 3,946,088,613 689,800,000 635,613 24,487,335 13,064,957 9,724,592,077 18,747,964 9,522,052 7,274,586 12,821,467 94,973 356,001 10,262,946 245,683,393 561,173,393 209,021,820 17,364,627,192 1,723,040,000 3,096,155,000 570,419,000 19,657,581 2,455,780 8,141,335,783 15,510,964 69,000 3,905,072 7,672,827 9,269,407 80,000 94,973 333,415 4,518,123 85,593,619 589,191,824 3,803,523 14,273,105,891 8,141,335,783 1,583,256,294 9,724,592,077 14,085,871,761 2,330,292,332 (8,274,828,310) 8,141,335,783 Al-Arafah Islami Bank Limited Annual Report 2018
122. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 15.1.a 15.2 a) i) ii) iii) b) 15.3 Provision for Current Tax made during the year Income Tax on Business income Capital gain Cash Dividend Excess Profit Tax (+) Estimated Provision Required as at December 31,2018(i) Estimated Provision Required as at December 31,2018 (i) Balance as at January 1,2018 Tax for previous year ( - ) Actual provision for tax held (II) Estimated provision needs to be made (I-II) Provision actually made during the year A. Computation of Taxable Profit Profit before tax Add:Inadmissible expenditure Less: Item of income for sparate Considaration Less: Further allowable Expenditure Estimated Business income other than 82(C) Add: Capital Gain Add:Cash dividend Total Taxable Income Provision on Investment & Others Provision against Classified Investments (Specific) [ 15.2.a.i ] Provision against Unclassified Investments (general) [15.2.a.ii ] Provision against Off-balance Sheet exposures [15.2.a.iii ] Provision for diminution in value of investments [15.3] Total Provision Held (a) The movement in Specific provision on classified Investment : Provision held at the begining of the year Fully provision debt written off Recoveries of amount previously written off Specific provision for the year Provision transfered from diminution in value of investment Provision held at the end of the year The movement in general provision on unclassified Investment : Provision held at the beginning of the year Provision during the year Provision transfered from classified investment Provision held at the end of the year The movement in provision against Off-balance sheet exposures Provision held at the beginning of the year Provision during the year Provision held at the end of the year Total general provision on Investment Provision for Others Provision held at the beginning of the year Provision during the year Less, Adjustment durring the year Provision held at the end of the year Provision for diminution in value of invevtment in Share Provision held at the beginning of the year Provision transfered to classified Investment Provision held at the end of the year Al-Arafah Islami Bank Limited Annual Report 2018 122 2017 Taka 1,580,095,397 30,530 3,130,367 1,583,256,294 2,317,380,306 1,146,217 11,765,809 2,330,292,332 8,141,335,783 8,141,335,783 9,724,592,077 1,583,256,294 1,583,256,294 4,057,314,909 2,599,428,026 15,957,139 1,868,180,460 4,772,605,335 30,530 3,130,367 4,775,766,232 14,085,871,761 5,811,043,451 8,141,335,783 2,330,292,332 2,330,292,331 5,432,462,871 1,521,388,003 70,291,215 1,090,108,894 5,793,450,764 1,146,217 11,765,809 5,806,362,790 3,946,088,613 1,891,000,000 689,800,000 635,613 6,527,524,226 3,096,155,000 1,723,040,000 570,419,000 5,389,614,000 3,096,155,000 (1,177,957,769) 164,881,715 1,863,009,667 3,946,088,613 2,586,669,000 (754,132,267) 309,972,277 779,846,535 173,799,456 3,096,155,000 1,723,040,000 167,960,000 1,891,000,000 1,352,828,000 370,212,000 1,723,040,000 570,419,000 119,381,000 689,800,000 6,526,888,613 449,886,000 120,533,000 570,419,000 5,389,614,000 15,510,964 3,237,000 18,747,964 18,747,964 15,510,964 15,510,964 15,510,964 635,613 635,613 173,799,456 (173,799,456) -
123. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 15.A. Consolidated Other Liabilities Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. Less: Inter-Company Adjustment 15.I.A 17,364,627,192 14,273,105,891 2,065,923,203 2,819,157,181 38,406,727 115,478,368 32,914,268 28,730,385 19,501,871,389 17,236,471,825 (51,000,000) (627,743,822) 19,450,871,389 16,608,728,003 1,583,256,294 2,330,292,332 21,364,833 70,584,620 Consolidated Current tax Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. 15.3.A 2,860,175 5,015,011 1,607,481,302 2,405,891,963 635,613 - - - Provision for diminution in value of investment Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. 16. 2017 Taka - - 635,613 - 100,949,200 75,456,597 67,537,592 25,492,603 - - Provision held at the end of the year 168,486,791 100,949,200 Presented after appropriate offsetting as follows: 100,949,200 75,456,597 Deferred tax Liabilities/ (Assets) Opening balance Add: Addition for the year Closing balance Deferred tax Liabilities(+) 67,537,592 25,492,603 168,486,791 100,949,200 168,486,791 100,949,200 (2,620,352) - 165,866,439 100,949,200 15,000,000,000 15,000,000,000 Issued for Cash 2,819,339,680 2,819,339,680 Issued for other than Cash ( Bonus Share ) 7,620,877,820 7,123,724,600 10,440,217,500 9,943,064,280 Deferred tax Liabilities Deferred Tax Liabilities(net) 16.A Deferred tax Liabilities/ (Assets) Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. Provision held at the end of the year 17. a) Authorised Capital The Authorized Capital of the Bank is 1,500,000,000 Ordinary Share of Tk. 10 each. b) c) Issued, Subscribed and Fully Paid - up Capital Issued and paid up Capital of the Bank is 1,044,021,750 nos. of shares of Tk. 10 each as follows Description 2018 2017 2018 2017 Total Taka Total Taka No. of Shares No. of Shares Sponsors / Promoters 435,247,563 413,940,550 4,352,475,630 4,139,405,500 Institution 236,854,311 169,998,643 2,368,543,110 1,699,986,430 General Public Total 371,919,876 410,367,235 3,719,198,760 4,103,672,350 1,044,021,750 994,306,428 10,440,217,500 9,943,064,280 123 Al-Arafah Islami Bank Limited Annual Report 2018
124. Notes to the Financial Statements As at and for the year ended December 31 , 2018 d) 2017 Taka No. of Shares No. of Shares Break-up of Shares Classification of shareholders by holding as on 31-12-2018 Range of Holding Less than 50,000 73,305,393 7.02% 50,001 to 100,000 16,134,775 1.55% 100,001 to 200,000 22,721,012 2.18% 200,001 to 300,000 11,549,252 1.11% 300,001 to 400,000 13,064,783 1.25% 400,001 to 500,000 500,001 to 1,000,000 1,000,001 to 10,000,000 10,000,001 to 20,000,000 9,193,333 0.88% 29,514,040 2.83% 239,737,885 22.96% 628,801,277 Total e) 2018 Taka 1,044,021,750 60.23% 100.00% Minimum Capital Requirement Capital Adequacy Ratio 1.Tier-I ( Core Capital ) Paid-up Capital Statutory Reserve General Reserve Retained Earnings Less : Regulatory Adjustment ( Goodwill and al other Intangible Assets ) 10,440,217,500 9,943,064,280 8,388,044,096 7,576,581,114 - - 1,783,055,791 2,176,610,612 (125,715,000) (80,450,000) 20,485,602,387 19,615,806,006 2,580,800,000 2,293,459,000 2. Tier- II ( Supplimentary Capital ) General Provision Assets Revaluation Reserves 97,754,825 195,509,650 7,400,000,000 3,000,000,000 10,078,554,825 5,488,968,650 30,564,157,212 25,104,774,656 B. Total Risk weighted Assets ( a+b+c) 212,580,056,300 204,447,535,050 a. Credit Risk 194,063,493,300 187,519,601,050 i. Balance sheet Exposure 183,555,692,500 181,503,704,000 ii. Off-balance sheet Exposure 10,507,800,800 6,015,897,050 b. Market Risk ( From WS-3 ) 1,058,626,000 1,048,588,000 c. Operrational Risk ( From WS-4) 17,457,937,000 15,879,346,000 C. Capital Adequqcy Ratio (CAR) ( A / B) 14.38% 12.28% D. Core Capital to RWA 9.64% 9.59% E. Supplementary Capital to RWA 4.74% 2.68% F. Minimum Capital Requirement (MCR) 10.00% of RWA 21,258,005,630 20,444,753,505 G. Capital surplus on risk weighted assets based ( A-F) H. Required Capital with Conservation Buffer @ 11.875% on RWA I. Excess Over Capital with Conservation Buffer ( A-H) 17.A. Non-Controlling Interest Opening balance Add: Non-Controling Interest in Profit for the year AIBL Mudaraba Subordinated Bond 3. Tier- III A. Total Eligible Capital ( 1+2) Al-Arafah Islami Bank Limited Annual Report 2018 124 9,306,151,582 4,660,021,151 25,243,881,686 23,000,347,693 5,320,275,526 2,104,426,963 1,761,497,355 6,923,653 1,768,421,008 1,726,686,152 34,811,203 1,761,497,355
125. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 18. 19. 20. Statutory Reserve Opening balance beginning of the year Add. Reserve @ 20% (on pre-tax profit) Balance at the end of the year. Other Reserve FC Revaluation Reserve Asset revaluation Reserve Retained Earnings Opening balance beginning of the year Less : Cash Dividend Less : Bonus Share Add: Net Profit / (loss) after tax during the year Less : transfer to Statutory Reserve 20.A. Consolidated Retained Earnings Al-Arafah Islami Bank Ltd. Add: Net profit after tax during the year Add: Dividend adjusment Less: Stock dividend to equity holders of the bank Less: Cash dividend to equity holders of the bank Less: Transfer to statutory reserve 21. a) b) i. ii. iii. iv. Letter of Guarantee Claim against the bank which is not acknowledged as debt Money for which is the bank is contingently liable in respect of guarantees given favoring Directors Government Bank and other financial institution Others 22. i. Investment Income Income from General Investments Murabaha Bai-Muazzal Hire-Purchase Others mode income ii. Profit received from other Islamic Bank Total ( i + ii ) 22.A. Cosolidated Investment Income Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. Less : Inter company Adjustment 125 2017 Taka 7,576,581,114 811,462,982 8,388,044,096 6,490,088,540 1,086,492,574 7,576,581,114 35,466 977,548,248 977,583,714 2,827,977 977,548,248 980,376,225 2,176,610,612 (1,491,459,642) (497,153,220) 2,406,521,023 2,594,518,772 811,462,982 1,783,055,791 2,175,038,105 (1,988,612,856) 3,076,677,937 3,263,103,185 1,086,492,574 2,176,610,612 2,259,155,807 2,449,882,975 (497,153,220) (1,491,459,642) (811,462,982) 1,908,962,937 2,199,578,988 3,134,682,251 (1,988,612,856) (1,086,492,574) 2,259,155,807 7,096,016,003 7,096,016,003 6,443,409,058 6,443,409,058 1,010,052,484 7,666,034,279 7,496,776,142 7,660,806,811 23,833,669,716 845,039,895 24,678,709,611 1,116,351,878 7,209,846,558 5,668,458,415 5,953,933,810 19,948,590,661 356,995,454 20,305,586,115 24,678,709,611 267,555,170 31,088,247 79,034,749 25,056,387,777 (99,575,645) 24,956,812,132 20,305,586,115 480,236,262 320,713,282 73,395,745 21,179,931,404 (688,903,369) 20,491,028,035 Al-Arafah Islami Bank Limited Annual Report 2018
126. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 23. Profit paid on Deposits & Borrowing Mudaraba Savings Deposit Mudaraba Short Term Deposit Mudaraba Term Deposit Mudaraba Special Deposit AIBL Mudaraba subordinate debt. Mudaraba BD. Govt. Islamic Bond fund 23.A. Profit paid on Deposits & Borrowing Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium Information Less : Inter company Adjustment 24. 24.A. Income from Investment in Share /Securities Dividend income ( cash) Gain on sale of Shares/Securities Profit received from other Islamic Bond Income from Investment in Share /Securities Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Less : Inter company Adjustment 25. Commission, Exchange & Brokerage Income Commission Exchange Brokerage commision 25.A. Commission, Exchange & Brokerage Income Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Less : Inter company Adjustment 26. Other Operating Income Procesing fee on investment Supevision fee Service charge Capital gain or loss from fixed asset Passbook sales(gsis) Application form sales(seis) Direct expenses on investmnent Tranfer / redumsion fee Telephone/ fax charge legal expenses recovered Printing & stationary P & t charge recovered Account maintenance fee Card income Misc.earning Al-Arafah Islami Bank Limited Annual Report 2018 126 2017 Taka 1,223,777,729 526,509,725 10,716,939,882 2,404,006,634 355,131,954 836,564,897 16,062,930,822 762,737,103 473,939,097 7,323,670,466 2,096,338,009 315,287,672 614,176,009 11,586,148,356 16,062,930,822 226,955,116 32,882,161 33,418,660 16,356,186,759 (99,575,645) 16,256,611,114 11,586,148,356 514,566,486 329,918,790 42,465,305 12,473,098,937 (688,903,369) 11,784,195,568 15,651,835 305,305 660,346,855 676,303,995 58,829,043 11,462,172 320,844,006 391,135,221 676,303,995 24,793,075 701,097,070 701,097,070 391,135,221 12,834,697 33,349,167 437,319,085 437,319,085 1,275,061,899 1,305,941,641 2,581,003,540 1,160,615,008 1,247,271,224 2,407,886,232 2,581,003,540 147,747,021 721,734 2,729,472,295 2,729,472,295 2,407,886,232 382,481,895 316,563 2,790,684,690 2,790,684,690 6,500 521,710 699,987 5,242,673 26,950 66,590 136,715 3,030 1,700 15,184,629 177,780 42,345,619 172,405,692 60,119,984 25,331,664 322,271,224 76,700 98,175 1,066,744 669,676 109,957 102,810 53,540 609,152 42,805,118 26,616,747 155,660,609 34,683,923 23,183,597 285,736,748
127. Notes to the Financial Statements As at and for the year ended December 31 , 2018 26.A. Other Operating Income Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. Less : Inter company Adjustment 27. Salaries, Allowances & Contribution to P.F Basic Pay House Rent Expenses House Maintanence Medical Expenses Bonus Bank’s contribution to P.F Utility Conveyance Expenses LFA Allowance Leave Encashment Expenses Car Allowance Lunch and entertainment allowance Gratuity Expenses 27.A. Salaries, Allowances & Contribution to P.F Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 28. i. ii. iii. Director & Sharia Council Fees & Expenses Directors fees for attending Board/executive Committee/other committee meeting TA/DA/ Hotel fare & Foreign Directors Others 28.A. Director & Sharia Council Fees & Expenses Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 29. i. ii. iii. Sharia Supervisory Committee’s Fees & Expenses Sharia fees for attending meeting TA/DA/ Hotel fare & Foreign Directors Others 30. Rent,Taxes,Insurance & Electricity Bill Rent Office Electricity Bill Insurance 127 2018 Taka 2017 Taka 322,271,224 29,202,829 (12,649,376) 338,824,677 338,824,677 285,736,748 37,553,134 6,063,451 329,353,333 329,353,333 1,369,433,925 632,319,305 249,859,183 240,967,767 687,573,249 125,597,916 658,757 85,659,617 251,162,434 87,088,026 162,859,075 22,726,858 114,487,335 4,030,393,447 1,193,447,308 558,042,969 222,041,996 210,621,730 511,130,276 109,156,703 845,454 80,104,968 220,186,583 72,114,322 130,576,713 77,271,656 105,657,581 3,491,198,259 4,030,393,447 63,900,298 8,894,238 15,376,983 4,118,564,966 3,491,198,259 59,949,037 10,168,047 10,644,308 3,571,959,651 2,982,800 7,352,230 10,335,030 4,041,300 6,055,018 10,096,318 10,335,030 4,798,970 190,200 15,324,200 10,096,318 7,143,200 244,800 1,453,334 18,937,652 349,600 271,060 620,660 530,513 30,456 560,969 365,484,980 96,557,746 192,307,460 654,350,186 320,576,679 88,343,546 161,254,676 570,174,901 Al-Arafah Islami Bank Limited Annual Report 2018
128. Notes to the Financial Statements As at and for the year ended December 31 , 2018 30.A. Rent,Taxes,Insurance & Electricity Bill Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 31. Postage,Telegram,Telephone & Stamp Stamp and Catridge paper Postage Fax Charges Telephone (Office) Telephone (Residence) Telephone (Mobile) SWIFT Charge Internet Charges Online Charge 31.A. Postage,Telegram,Telephone & Stamp Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. 32. Depreciation Repairs to the Bank’s property Repairs to the Bank’s property R.R. Furniture & Fixture (Wooden) R.R. Furniture & Fixture (Steel) R.R. Computer Maint. of Motor Car and other Vahicle R.R. Machine equipment & appliances Maintenance of Land & Building Maintenance of Rented Premises R.R. Computer Accessories R.R. Others Software Maintenance Fee Hardware Maintenance Fee Depreciation to the Bank’s property Depr. Furniture (Wood) Depr. Furniture (Steel) Depr. Computer Depr. Motor Car Depr. Machine equip & Appliance Depr. Books & Library Depr. Land & Building Depr. Online Hardware Depr. Online Software Depr. Computer Accessories Depr. Interior Decoration Al-Arafah Islami Bank Limited Annual Report 2018 128 2018 Taka 2017 Taka 654,350,186 25,410,884 1,807,125 681,568,195 570,174,901 11,530,435 1,089,878 2,160,000 584,955,214 8,704,986 1,848 5,313,033 266,026 10,799,022 6,327,643 288,083 33,533,649 65,234,290 21,495,680 3,591 5,479,049 1,344,012 8,919,089 5,039,100 280,893 35,107,708 77,669,122 65,234,290 562,859 66,947 65,864,096 77,669,122 698,344 62,400 78,429,866 2,616,347 2,715,270 2,780,243 1,163,883 30,500,146 148,309 3,500 932,366 1,387,780 40,002,364 2,131,750 84,381,958 1,221,592 1,929,962 2,210,658 853,707 16,348,344 132,841 6,226 684,055 1,107,065 6,922,710 1,536,750 32,953,910 59,929,096 8,856,713 20,078,619 19,262,845 120,117,421 109,318 24,692,568 77,587,527 30,166,761 12,565,677 16,731,866 390,098,411 474,480,369 37,049,220 7,864,476 18,588,335 18,590,629 81,579,395 126,540 18,748,102 42,269,028 25,316,099 10,507,733 16,032,330 276,671,887 309,625,798
129. Notes to the Financial Statements As at and for the year ended December 31 , 2018 32.A Depreciation Repairs to the Bank’s property Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 33. Stationary,Printing & Advertisement Printing & Stationerty Paper & Table Stationery Advertisement & Publicity Expenses 33.A. Stationary,Printing & Advertisement Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. 34. Other expenses Local conveyance expenses Petrolium oil lubricant motors Cng motor car Entertainment expenses Travelling expenses Bank charge Wages (salary-casual staff) Security guard service Subscription Leveries & uniforms Petrolium oil & lubricants Donations Registration charge Wasa charge Gas charge Staff welfare News paper journal & periodical Evening banking expenses Upkeep branches premises Capital loss from sale of fixed assets Washing charge Computer Accessories Photo Copy Machine Accessories Business development Manager conference SWIFT Closing expenses Office expenses (Various Purchase) Registration expenses Account opening commision throu Agm/egm Crocarige Creditrating charge Tax token expenditure Direct expenses on investment Data info service charge Training expenses Card expense It allowance (Overtime ) Saturday working allowance (Overtime) Charge expenses Risk expenses Lunch and entertainment Account opening commision through agent bankinng Data info service charge Electronics & fittings item Honorarium 2018 Taka 2017 Taka 474,480,369 7,368,638 264,610 482,113,617 309,625,798 7,193,974 182,464 897,098 317,899,334 42,101,002 47,721,817 80,268,289 170,091,108 29,838,353 34,020,621 59,574,027 123,433,001 170,091,108 1,033,914 147,292 171,272,314 123,433,001 1,671,705 200,557 125,305,263 11,901,887 12,600,923 2,568,027 27,150,374 37,686,604 18,638,171 32,179,734 137,424,145 12,884,944 475,270 11,161,017 848,116 7,094,182 1,636,266 100,000 3,556,874 809,880 4,781,301 2,745,489 14,621,061 1,254,102 26,797,345 934,625 9,079,310 7,271,485 13,589,052 1,729,361 4,723,074 711,500 953,139 1,454,474 22,147,887 86,435,853 5,096,738 8,587,245 2,808,870 1,926,700 10,541,600 15,925,276 2,887,799 21,344,140 32,119,180 13,807,951 55,878,025 91,705,546 5,237,982 511,155 10,766,430 669,629 5,668,850 1,273,218 150,000 2,490,005 816,037 2,909,248 2,322,623 15,550,598 808,202 18,619,418 1,108,951 7,791,400 14,821,220 14,271,639 1,488,101 715,256 517,500 514,582 1,606,311 16,662,618 74,957,275 4,665,500 26,975,355 2,733,485 1,950,900 3,845,451 1,049,662 2,208,928 852,435 490,739,481 1,729,361 1,188,822 4,817,260 275,000 544,375,467 129 Al-Arafah Islami Bank Limited Annual Report 2018
130. Notes to the Financial Statements As at and for the year ended December 31 , 2018 34.A. Consolidated Other expenses Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 35. Provision against Investments & Off-Balance sheet exposures On Classified Investment as per Bangladesh Bank Circular On Un-classified Investment as per Bangladesh Bank Circular On Off-balance sheet as per Bangladesh Bank Circular 35.A. Provision against Investments & Off-Balance sheet exposures Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. 36. 36.A. 37. Paid for other operating activities Directors fees & expenses Shariah Supervisory Committee’s fees & expenses Rent, taxes, insurance and lighting etc. Postage, telegram, telephone and stamp etc. Legal charges Auditors’ fee Repairs to the bank’s properties Other expenses Paid for other operating Activities Al-Arafah Islami Bank Ltd. Inter company Adjustment Increase/Decrease of other assets (item-wise) Master card Settlement Account Suspense Account Adjustment a/c debit balance Stock of Stationery Stamp in hand Advance Deposit Advance Rent Capital Work In Progress Investment in sibl mudaraba sub-ordinated bond Investment for Subsidiary Companies Advance Income Tax & TDS [ Note 11.2 ] Protested Bills Prepaid Expenditure Adjustment a/c cost of borrowing Balance with cmsl for portfolio account Accrued Income Mfci usd (edf) a/c Scb mc settlement a/c (local) Stock of ATM Card Remittance adjustment a/c Acquiring settlement Clearing adjustment Dividend Receivable Al-Arafah Islami Bank Limited Annual Report 2018 130 2018 Taka 2017 Taka 544,375,467 35,856,932 1,116,060 9,954,496 591,302,955 490,739,481 80,946,373 1,415,466 9,144,613 582,245,933 1,863,009,667 167,960,000 119,381,000 2,150,350,667 779,846,535 370,212,000 120,533,000 1,270,591,535 2,150,350,667 50,205,759 (26,451,089) 2,174,105,337 1,270,591,535 84,300,000 1,354,891,535 10,335,030 620,660 654,350,186 65,234,290 15,472,553 1,512,250 84,381,958 544,375,467 (1,376,282,394) 10,096,318 560,969 570,174,901 77,669,122 10,481,205 1,337,500 32,953,910 490,739,480 (1,194,013,406) (1,376,282,394) (77,469,652) (1,453,752,046) (1,194,013,406) (263,016,579) (1,457,029,985) 109,089,021 (8,500,162) 936,872 (880,041) 147,600 18,950,925 (931,108,305) (800,000) (914,146) (46,708,683) (80,508,138) (23,003,644) 963,298,701 (17,452,751) (644,794,151) 19,840,506 1,269,014 359,490 17,400,180 278,876,583 (6,799,828,310) (1,290,000) (22,004,432) 4,931,507 (1,535,406,077) (37,375,751) (7,306,514) (86,000) (299,831,304) 9,042,698,009
131. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 37.A Increase/Decrease of other assets (item-wise) Al-Arafah Islami Bank Ltd. 963,298,701 Inter company Adjustment 38. 2017 Taka 70,129,093 (778,758,225) 1,033,427,795 8,263,939,784 Increase/Decrease of Trading liabilities (item-wise) Provission for unclassified investment - Provission for classified investment (1,282,807) Provision for off balance sheet item - Provision for diminution in value of investment (531,256) Provision for Gratuity (40,200) Provision for Outstanding expense (63,812,398) Provision for taxation (1,513,779) provision for Others 3,969,366 Branches Adjustment A/C - 3,381,580 Hajj foundation (69,000) - Provident fund - - Social security b. Fund - (270,360,535) Adjustment a/c credit balance - (5,944,536,055) 5,616,980 - Interest income (398,241) 120,533,000 Cib collection charge 3,552,060 1,320,021 (80,000) (27,157,131) Clearing adjustment Cash waqf (staff) Parking account - 40,020 F.c. held against bb l/c - (173,799,456) Cmsd clearing adjustment a/c. - - Atm & pos settlement (mc-debit iss Supervision fees (sme) POS SETTLEMENT NPSB (ISSUING) Electronic govt procurement (100,786) (37,247,020) - 1,907,916 72,409,514 - (48,800,472) Profit rent suspense 160,089,774 (30,265,401) Compensation receivable (28,018,431) - Mastercard Settlement Account 205,218,297 - 351,678,848 (6,395,885,881) Increase/Decrease of Trading liabilities (item-wise) Al-Arafah Islami Bank Ltd. 351,678,848 (6,395,885,881) (1,126,366,676) (5,644,000,290) (774,687,828) (12,039,886,170) 2,605,382,213 2,096,167,797 Balance with Bangladesh Bank & Sonali Bank Ltd. 23,104,623,105 37,669,574,111 Balance with Other Banks 10,308,959,502 11,335,122,824 Bangladesh Government Islamic Investment Bond 11,000,000,000 8,000,000,000 47,018,964,820 59,100,864,732 Inter company Adjustment 39. 22,586 5,744,823 Bangladesh bank usd (edf) 38.A 9,042,698,009 Cash and Cash Equivalent at the end of the year Cash in hand 131 Al-Arafah Islami Bank Limited Annual Report 2018
132. Notes to the Financial Statements As at and for the year ended December 31 , 2018 2018 Taka 39.A Cash and Cash Equivalent at the end of the year Al-Arafah Islami Bank Ltd. AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. Millennium information solution Ltd. 40. 2017 Taka 47,018,964,820 59,100,864,732 9,052 10,202 10,757,261 - 347,778 63,761,870 47,030,078,911 59,164,636,804 Calculation of Earning Per Share (EPS) The earning per share of the bank has been calculated in accordance with BAS-33 under basic Earning per share method as follows: Earnings Per Share (EPS) Basic earning ( net profit after tax ) for the year 2,406,521,023 3,076,677,937 Number of ordiner shares outstanding as of the reportng date 1,044,021,750 1,044,021,750 2.31 2.95 Net profit after tax 2,449,882,975 3,134,682,251 Number of ordiner shares outstanding as of the reportng date 1,044,021,750 1,044,021,750 2.35 3.00 Earning per Share 40.A Consolidated Earnings Per Share (CEPS) Consolidated earnings per share as per share 41. Events after the balance sheet date The Board of Directors in its 334th meeting held on 24 April, 2019 has approved the audited financial statements for the year ended 31 December 2018. The Board has also recommended 15% cash and 2% Stock dividend for the year ended 31 December 2018 subject to approval of the shareholders at the 24th Annual General Meeting (AGM). Al-Arafah Islami Bank Limited Annual Report 2018 132
133. 133 Al-Arafah Islami Bank Limited Annual Report 2018 Particulars Books & Library 9 353,042,437 353,042,437 4,802,106,457 4,521,042,966 12 Online Software Sub-Total December 31, 2018 December 31, 2017 B. Intangible Assets 4,449,064,020 191,104,493 11 Interior Decoration Sub-Total 340,680,512 10 Online Hardware 9,415,543 702,237,440 Machine Equipment & Appliance 8 86,234,252 225,773,629 198,904,221 Computer 5 106,364,545 Motor Car Furniture & Fixture (Steel) 4 475,684,716 7 Furniture & Fixture (Wood) 3 744,610,287 Computer Acessories Building 2 1,368,054,382 Balance at 1st January 2018 6 Land 1 A. Fixed Assests SL No - - - - - - - - - - - - - - - - Revalution - 347,507,868 1,688,459,654 99,014,772 99,014,772 1,589,444,882 3,433,109 290,301,185 19,488 413,902,793 19,223,173 12,237,208 32,065,589 8,111,574 342,364,645 467,786,119 Addtion during the year 66,444,375 20,612,876 - - 20,612,876 10,525 197 207,715 3,072,165 10,600,321 516,273 384,159 148,830 4,968,999 - 703,692 Transfer/ Disposal during the year Cost / Revaluation 4,802,106,459 6,469,953,235 452,057,209 452,057,209 6,017,896,026 194,527,077 630,981,500 9,227,316 1,113,068,068 207,527,073 97,955,187 257,455,059 114,327,289 813,080,362 1,212,396,406 1,367,350,690 Balance at 31st Dec. 2018 - - 24,029,833 13,048,067 20,466,264 8,898,489 60,411,070 24,692,568 Charge for the year 18,625,638 77,633,176 110,245 30,554,264 30,554,264 1,331,732,285 284,973,958 1,592,604,601 399,079,105 142,255,187 142,255,187 1,450,349,414 368,524,841 109,469,091 229,059,395 8,744,233 475,535,879 120,609,491 117,929,632 48,468,322 185,670,094 56,504,638 148,980,792 69,987,338 Balance at 1st January 2018 24,101,642 16,339,643 - - 16,339,643 6,925 - 4,466 3,006,904 10,328,003 457,631 384,159 141,982 2,009,573 - - Tranfer/ Disposal during the year Depreciation/Amortization Consolidated Schedule of Fixed Assets as at December 31, 2018 - 1,367,350,690 Written down value as on 3112-18 66,439,274 324,288,929 377,304 519,929,601 75,895,610 36,896,429 51,702,860 49,066,144 605,698,073 279,247,759 279,247,759 1,592,604,601 3,209,501,858 1,975,344,063 4,494,609,175 172,809,450 172,809,450 1,802,534,612 4,215,361,414 128,087,803 306,692,571 8,850,012 593,138,467 131,631,463 61,058,758 205,752,199 65,261,144 207,382,289 94,679,906 1,117,716,499 Balace at 31st Dec. 2018 Annexure - A.I
134. Al-Arafah Islami Bank Limited Annual Report 2018 134 Particulars 470 ,589,762 Building Furniture & Fixture (Wood) Furniture & Fixture (Steel) Computer Computer Acessories Motor Car Machine Equipment & Appliance Books & Library 2 3 4 5 6 7 8 9 221,104,558 221,104,558 4,584,384,812 4,315,993,882 12 Online Software Sub-Total December 31, 2018 December 31, 2017 B. Intangible Assets 4,363,280,254 171,280,161 11 Interior Decoration Sub-Total 337,733,628 10 Online Hardware 9,346,784 688,509,557 167,901,575 80,143,215 219,085,932 106,024,971 744,610,287 Land 1,368,054,382 Balance at 1st January 2018 1 A. Fixed Assests SL No - - - - - - - - - - - - - - - - Revalution 243,543 384,159 148,830 4,968,999 703,692 Transfer/ Disposal during the year 10,525 197 207,715 3,061,665 - - 334,809,575 66,418,645 1,661,213,310 20,329,646 75,193,186 75,193,186 1,586,020,124 20,329,646 3,113,239 290,301,185 19,488 413,500,372 17,212,337 10,600,321 11,936,008 32,065,589 7,977,006 342,108,781 467,786,119 - Addtion during the year Cost / Revaluation 102,206,448 225,913,383 8,668,128 464,071,255 105,773,416 44,753,147 180,196,712 56,629,355 146,816,893 69,987,338 - Balance at 1st January 2018 16,731,866 77,587,527 109,318 120,117,421 19,262,845 12,565,677 20,078,619 8,856,713 59,929,096 24,692,568 - 140,416,124 140,416,124 30,166,761 30,166,761 4,584,384,812 1,292,844,661 276,671,887 6,225,268,476 1,545,432,198 390,098,411 296,297,744 296,297,744 6,925 170,582,885 170,582,885 ,748,829,808 118,931,389 303,500,910 8,772,980 581,189,411 114,708,258 57,075,281 199,891,172 65,344,086 204,736,416 94,679,906 - Balace at 31st Dec. 2018 24,084,351 1,545,432,197 16,117,916 1,919,412,693 - - 16,117,916 - 4,466 2,999,265 10,328,003 243,543 384,159 141,982 2,009,573 - Tranfer/ Charge Disposal for the year during the year 5,928,970,732 1,405,016,074 359,931,650 174,382,875 628,034,616 9,158,557 1,098,948,264 174,513,591 91,835,680 250,767,362 113,853,147 807,729,544 1,212,396,406 1,367,350,690 Balance at 31st Dec. 2018 Depreciation/Amortization Schedule of Fixed Assets as at December 31, 2018 3,038,952,615 4,305,855,783 125,714,860 125,714,860 4,180,140,924 55,451,486 324,533,706 385,577 517,758,854 59,805,333 34,760,399 50,876,190 48,509,061 602,993,128 1,117,716,500 1,367,350,690 Written down value as on 31-122018 Annexure - A
135. Highlight of the on the Overall Activities of the Bank for the year 31 December , 2018 SL NO Particulars Year 2018 Year 2017 1 Paid -up Capital 10,440,217,500 9,943,064,280 2 Total Capital 30,564,157,212 25,104,774,656 3 Capital Surplus(Deficit) 9,306,151,582 4,660,021,151 4 Total Assets 333,261,964,673 314,596,972,625 5 Total Deposits 266,346,613,938 245,642,230,752 6 Total Investment 257,092,099,932 232,614,228,723 7 Total Contingent Liabilities 73,047,958,680 57,041,897,944 8 Investment Deposit Ratio (%) 89.87% 88.95% 9 Ratio of Classified Investment to Total investment (%) 4.79% 4.10% 10 Profit after Tax & Provision 2,406,521,023 3,076,677,937 11 Amount of Classified Investment during the year 12,690,721,000 9,921,513,000 12 Provision kept againest Classified Investment 3,946,088,613 3,096,155,000 13 Provision Surplus / (Deficit) - - 14 Cost of fund (%) 8.70% 7.50% 15 Profit earning Assets 286,968,665,544 256,369,943,671 16 Profit Non-earning Assets 46,293,299,128 58,227,028,954 17 Return on Investment (ROI) 9.83% 9.47% 18 Return on Assets After Tax (ROA) 0.72% 0.98% 19 Income from Investment in Shares 676,303,995 391,135,221 20 Earning per Share (Taka) 2.31 3.09 21 Net Income per share (Taka) 2.31 3 .09 22 Price Earning Ratio (Times) 8.63 8.01 135 Al-Arafah Islami Bank Limited Annual Report 2018
136. Off-shore Banking Unit (OBU) Balance Sheet As at December 31, 2018 Notes 2018 USD PROPERTY AND ASSETS Cash in hand Cash in hand (including foreign currencies) Balance With Bangladesh Bank and its Agents Banks (including foreign currencies) Balance with other Banks and Financial Institutions In Bangladesh Outside Bangladesh Placement with Banks & Other Financial institutions Investment in Share & Securities Government Others 4 Fixed assets including Premises Other Assets Non-Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Placement from Banks & Other Financial institutions Deposits and other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadia Current Accounts and Others Accounts etc. Bills Payable 5 Other Liabilities Deferred tax Liabilities/ (Assets) Total Liabilities Capital/Share Holders Equity Paid up Capital Statutory Reserve Foreign Currency Transaction gain/(Loss) Other Reserve Retained Earnings Total Share holders equity Total Liability and Share holders equity Al-Arafah Islami Bank Limited Taka Annual Report 2018 USD Taka - - - - - - - - - - - - 737,735 737,735 61,895,925 61,895,925 560,836 560,836 46,381,153 46,381,153 12,635,952 1,060,156,336 - Investments General Investments etc. Bills purchased and discounted 2017 - 13,503,064 1,116,703,403 - - 78,915,551 6,621,014,721 78,915,551 6,621,014,721 92,289,237 7,743,066,982 107,194,026 8,864,945,987 107,194,026 8,864,945,987 121,257,927 10,028,030,543 91,551,587 7,681,178,123 120,697,346 9,981,670,480 - - - - - - - - 91,551,587 7,681,178,123 - - 737,650 61,888,858 737,650 61,888,858 92,289,237 7,743,066,982 136 120,697,346 9,981,670,480 - - 560,581 46,360,054 560,581 46,360,054 121,257,927 10,028,030,543
137. Off-shore Banking Unit (OBU) Balance Sheet As at December 31, 2018 Notes 2018 USD OFF BALANCE SHEET ITEMS Contingent Liabilities Acceptance and endorsement Letters of Guarantee Letters of Credit Bills for Collection Other Contingent Liabilities Total 2017 Taka USD Taka - - - - - - - - - - - - - - - - - - - - - - - - Other Commitments : Documentary Credits and other short term trade related transactions Forward Assets Purchased and forward Deposit placed Undraw note issuance and Revolving underwriting Facilities Undraw Formal standing Facilities, Credit lines and others commitments Total off Balance sheet items including Contingent liabilities 137 Al-Arafah Islami Bank Limited Annual Report 2018
138. Off-shore Banking Unit (OBU) Profit & Loss Accounts As at December 31, 2018 Notes 2018 USD Investment Income Profit paid on deposits & Borrowing 7 2017 Taka USD Taka 7,413,908 622,026,876 5,081,681 420,255,043 (6,672,258) (559,802,417) (4,517,100) (373,564,188) Net Investment Income 741,650 62,224,458 564,581 46,690,854 Income from Investment in Shares /Securities - - - - Commission, Exchange and Brokerage - - - - Other Operating Income - - - - - - - - 741,650 62,224,458 564,581 46,690,854 Salaries and allowances & contribution to P.F - - - - Directors fees & expenses - - - - Shariah Supervisory Committee’s fees & expenses - - - - Rent, taxes, insurance, lighting etc. - - - - 4,000 335,600 4,000 330,800 Legal charges - - - - Auditors’ fee - - - - Salary & Allowances to the Managing Director - - - - Depreciation and repairs to the bank’s properties - - - - Stationery, printing, advertisement etc. - - - - Other expenses - - - - 4,000 335,600 4,000 330,800 737,650 61,888,858 560,581 46,360,054 Provision against Investments & Contingent Liabilities - - - - Provision for diminution in value of invevtment - - - - Other Provision - - - - Total provision - - - - 737,650 61,888,858 560,581 46,360,054 Current tax - - - - Deferred tax - - - - Provision for Taxation - - - - 737,650 61,888,858 560,581 46,360,054 Statutory Reserve - - - - General Reserve - - - - - - - - 737,650 61,888,858 560,581 46,360,054 Total operating income Postage, telegram, telephone and stamp etc. Total operating expenses Profit/(Loss) before Tax & provision Profit/(Loss) before Tax Net Profit/(Loss) after tax Appropriation Retained Earnings Earning per Ordinary share (EPS) Al-Arafah Islami Bank Limited Annual Report 2018 138
139. Off-shore Banking Unit (OBU) Cash Flow Statement For the Year ended December 31, 2018 Notes 2018 USD Cash flows from operating activities Investment income receipt in Cash Profit paid on deposits Dividend recieved Fees & Commission received in cash Recoveries from write off investments Cash payments to employees Cash payments to suppliers Received from other operating activities (item-wise) Paid for other operating activities (item-wise) Advance income tax paid Operating profit before changes in operating assets and liabilities Changing in Operating assets & liabilities Increase/Decrease of trading securities Increase/Decrease of investment and advances to other banks Increase/Decrease of Investment and advances to customers (other than Banks) Increase/Decrease of other assets (item-wise) Increase/Decrease of Deposits from other banks Increase/Decrease of Deposits from customers (other than Banks) Increase/Decrease of Other liabilities account of customers Increase/Decrease of Trading liabilities (item-wise) Cash receipt from operating activities A. Net Cash from operating activities Cash flows from investing activities: Proceeds from sale of securites Payments for purchases of securities Purchase of property, plant and equipment Sales proceeds of Fixed assets Purchase-sale of subsidiary B. Net cash flows from investing activities Cash flows from financing activities Increase in Exchange Equalization Account Increase in Share Capital Dividend paid C. Net cash flows from financing activities 2017 Taka USD Taka 7,413,908 (6,672,258) (4,000) - 622,026,876 (559,802,417) (335,600) - 5,081,681 (4,517,100) (4,000) - 420,255,043 (373,564,188) (330,800) - 737,650 61,888,858 560,581 46,360,054 (12,635,952) 91,551,587 (78,915,551) 84 737,735 (1,060,156,336) 7,681,178,123 (6,621,014,721) 7,067 61,895,933 (13,503,064) 120,697,346 (107,194,026) 255 560,836 (1,116,703,403) 9,981,670,480 (8,864,945,987) 21,090 46,381,153 - - - - - - - - D. Net increase in cash and cash equivalent (A+B+C) E.Effects of exchange rate changes on cash and cash-equivalents F.Net increase in cash and cash equivalent (D+E) G.Cash & Cash Equivalents at the beginning of the year 737,735 737,735 0 61,895,933 61,895,933 0 560,836 560,836 0 46,381,153 46,381,153 0 H.Cash & Cash Equivalents at the end of the year 737,735 61,895,933 560,836 46,381,153 139 Al-Arafah Islami Bank Limited Annual Report 2018
140. Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December, 2018 1 Status of the unit The Bank obtained the Off-shore Banking Unit (“the Unit”) License on 17 February’14 vide letter # BRPD (P3)744(121)/2014-934 from Bangladesh Bank. The Bank commenced operation of this unit from 22 may 2014. The Offshore Banking Unit is governed under the rules and guidelines of the Bangladesh Bank. Its office is located at AIBL Motijheel Branch, 161, Motijheel Commercial Area Dhaka 1000. 1.1 Principal activities The principal activities of OBU are to provide Mudaraba Investment against payment of import bills under UPAS (Usance Payment at Sight) and Musharaka Documentary Bills in foreign currency (MDB F.C) to its customers. 2 Significant accounting policies and basis of preparation of financial statements 2.1 Basis of accounting The Off-shore Banking Unit maintains its accounting records in USD from which accounts are prepared according to the Bank Companies Act, 1991, Bangladesh Accounting Standards, Bangladesh Financial Reporting Standard (BFRS) and other applicable directives issued by the Bangladesh Bank, in particular, Banking Regulations and Policy Department (BRPD) Circular No. 15 (09 November 2009). 2.2 Use of estimates and judgments The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. 2.3 Foreign currency transaction a) Foreign currency transactions are converted into equivalent taka using the ruling exchange rates on the dates of respective transactions as per BAS-21” The Effects of Changes in Foreign Exchange Rates”. Foreign currency balances held in US Dollar are converted into Taka at weighted average rate of inter-bank market as determined by Bangladesh Bank on the closing date of every month. Balances held in foreign currencies other than US Dollar are converted into equivalent US Dollar at buying rates of New York closing of the previous day and converted into Taka equivalent. b) Assets and liabilities & income and expenses have been converted into Taka currency @ US$1 = Taka 83.90 closing rate as at 31 December 2018. a) Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these financial statements are translated at contracted rates. Contingent liabilities/commitments for letter of credit and letter of guarantee denominated in foreign currencies are expressed in Taka terms at the rates of exchange ruling on the balance date. b) Translation gains and losses The resulting exchange transaction gains and losses are included in the profit and loss account, except those arising on the translation of net investment in foreign subsidiary. 2.4 Cash and cash equivalents Cash and cash equivalents are accounted for notes and coins in hand, highly liquid financial assets, unrestricted balances held with other banks/financial institutions and Bangladesh Bank. 3 Investments a) General investments of Off-shore Banking Units are stated in the Balance Sheet net off unearned income. Provisions for investments are made as per instructions contained in Bangladesh Bank BRPD Circular No. 14 dated 23 September 2012 and BRPD Circular No. 19 dated 27 December 2012. b) Profit is calculated on a daily product basis but charged and accounted for on accrual basis. Profit is not charged on bad and loss investments as per guidelines of the Bangladesh Bank. Records of such interest amounts are kept in separate memorandum accounts. c) A provision is recognized in the balance sheet when the unit has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligations, in accordance with the BAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. 4. Placement with Banks & Other Financial institutions The OBU has financed fund to different Authorized dealer as placement mode to Al-Arafah Islami Bank Ltd reside in Bangladesh as per FE Circular No.03 dated 04.02.2013 Al-Arafah Islami Bank Limited Annual Report 2018 140
141. Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December, 2018 2018 USD Taka 962,452 80749726 Name of the Bank Al-Arafah Islami Bank Ltd. Name of the AD Branch Motijheel Branch Al-Arafah Islami Bank Ltd. Dilkusha Branch 6,759,656 567135138 Al-Arafah Islami Bank Ltd. Motijheel Cor. Branch 1,286,285 107919293 Al-Arafah Islami Bank Ltd. Gulshan Branch. 2,684,805 225255140 Al-Arafah Islami Bank Ltd. Head Office Cor. Branch 942,754 12,635,952 79097039 1060156336 2017 USD Taka 3,851,715 318536727 6,614,833 547046706 .20 701,356 .60 58002109 2,335,162 193117861 .56 0 0 13,503,064 1116703403 5. Placement from Banks & Other Financial institutions The OBU has borrowed fund from different Banks & Other Financial institutions reside in Bangladesh and outside Bangladesh in the mode of Placement. Name of the Bank In Bangladesh Al-Arafah Islami Bank Ltd. 2018 USD TK 46,472,976 3,899,082,669 2017 USD TK 34,901,408 2,747,128,176 Outside Bangladesh 45,078,611 28,081,122 3,782,095,455 2,210,295,963 6. Profit income In terms of the provisions of the BAS-18 “Revenue”, the profit income is recognized on accrual basis. 6.1 Fees and commission income Fees and commission income arises on services provided by the units are recognized on a cash receipt basis. Commission charged to customers on letters of credit and letters of guarantee are credited to income at the time of effecting the transactions. 6. 2 Profit paid and other expenses In terms of the provisions of the BAS - 1 “Presentation of Financial Statements” interest and other expenses are recognized on accrual basis. 6.3 Allocation of common expenses Establishment expenses in the nature of rent, rates, taxes, management expenses, printing and stationery, electricity, postage, stamps, telecommunication and audit fees etc. have not been separately accounted for in the financial statements, but staff costs (salaries and allowances) are separately accounted for OBU 7. Profit paid on deposits & Borrowings 2018 USD AIBL Treasury Division AIBL AD Branches 2017 TK USD TK 6301562.26 528701073 3952519 326873334 370695.40 31101344 564581 46690854 6672257.66 559802417 4517100 373654188 8. Principles of Shariah Any gains, expenses & losses not permitted in the Shariah and not duly approved by the Shariah Supervisory Committee is not accounted for and income thus derived transferred/expensed as per approval of the Shariah Supervisory Committee. 9. Cash flow statement Cash flow statement has been prepared in accordance with the BAS-7 “Cash flow statement” under direct method as recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation and Policy Department of Bangladesh Bank. 10. General These financial statements are presented in BDT, which is the Bank’s functional currency. Figures appearing in these financial statements have been rounded off to the nearest BDT. 11. Reporting period The financial statements cover from 1st January 2018 to December 31, 2018. 141 Al-Arafah Islami Bank Limited Annual Report 2018
142. Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December, 2018 2018 a) b) c) Cash Cash in hand In local currency In Foreign currency Balance with Bangladesh Bank In local currency In Foreign currency Balance with Sonali Bank Ltd. In local currency In Foreign currency Balance with other Banks and Financial Institutions In Bangladesh: Outside Bangladesh Placement with Banks & Other Financial institutions Investments in Share & Securities Government Securities Bangladesh Govt. Islami Bond Fund Investment In Islamic Refinance Fund In shares (quoted and unquoted) Quoted Private (8.b) Unquoted Investments a) General Investment i. in Bangladesh Murabaha Investment Bai-Muazzal Investment Hire Purchase Investment Quard Other Investment ii. b) Out side Bangladesh Bill Purchased & Discounted Payable in Bangladesh Payable out side Bangladesh Taka USD Taka - - - - - - - - - - - - 737,735 61,895,925 560,836 46,381,153 737,735 61,895,925 560,836 46,381,153 12,635,952 1,060,156,336 13,503,064 1,116,703,403 - - - - - - - - 78,915,551 78,915,551 6,621,014,721 6,621,014,721 107,194,026 107,194,026 8,864,945,987 8,864,945,987 - - - - Fixed Assets Tangiable Assets Land Building Furniture (Wood) Furniture (Steel) Computer Computer (Accossories) Motor Car Machine equipment & appliance Online Hardware Interior Decoration Books & Library Al-Arafah Islami Bank Limited Annual Report 2018 2017 USD 142
143. Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December, 2018 2018 USD Intangiable Assets Online Software Total Less Accumulated Depreciation Other Assets Placement from Banks & Other financial Institutions Parent Bank Out Side Bangladesh 2017 Taka USD Taka - - - - - - - - 46,472,976 45,078,611 91,551,587 3,899,082,669 3,782,095,455 7,681,178,123 43,701,873 76,995,473 120,697,346 3,614,144,863 6,367,525,617 9,981,670,480 - - - - - - - - - - - - 560,581 (560,581) 737,650 46,360,054 (46,360,054) 61,888,858 315,577 (315,577) 560,581 24,839,447 (24,839,447) 46,360,054 737,650 7,413,908 (6,672,258) 61,888,858 622,026,876 (559,802,417) 560,581 5,081,681 (4,517,100) 46,360,054 420,255,043 (373,564,188) Deposit and Other Accounts Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadia Current Accounts and Others Accounts etc Bills Payable Other Liabilities a) Authorised Capital The Authorized Capital of the Bank is Ordinary Share of Tk. 10 each. b) Issued, Subscribed and Fully Paid - up Capital Issued for Cash Issued for other than Cash ( Bonus Share ) Statutory Reserve Opening balance beginning of the year Add. Reserve @ 20% (on pre-tax profit) Balance at the end of the year. Other Reserve Asset revaluation Reserve Retained Earnings Opening balance beginning of the year Less : transfer to Parent bank Add: Profit during the year Less : transfer to Parent bank Investment Income Profit paid on Deposits & Borrowing Income from Investment in Share /Securities Commission, Exchange & Brokerage Income Commission Exchange Brokerage commision Other Operating Income Salaries, Allowances & Contribution to P.F Director & Sharia Council Fees & Expenses i. Directors fees for attending Board/executive Committee/other committee meeting ii. TA/DA/ Hotel fare & Foreign Directors iii. Others 143 Al-Arafah Islami Bank Limited Annual Report 2018
144. Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December, 2018 2018 USD Sharia Supervisory Committee’s Fees & Expenses i. Sharia fees for attending meeting ii. TA/DA/ Hotel fare & Foreign Directors iii. Others Rent,Taxes,Insurance & Lighting Rent Office Lighting & Electricity Insurance Postage,Telegram,Telephone & Stamp Stamp and Catridge paper Postage Fax Charges Telephone (Office) Telephone (Residence) Telephone (Mobile) SWIFT Charge Internet Charges Online Charge Depreciation Repairs to the Bank’s property Repairs to the Bank’s property R.R. Furniture & Fixture (Wooden) R.R. Furniture & Fixture (Steel) R.R. Computer Maint. of Motor Car and other Vahicle R.R. Machine equipment & appliances Maintenance of Land & Building Maintenance of Rented Premises R.R. Computer Accessories R.R. Others Software Maintenance Fee Hardware Maintenance Fee Depreciationto the Bank’s property Depr. Furniture (Wood) Depr. Furniture (Steel) Depr. Computer Depr. Motor Car Depr. Machine equip & Appliance Depr. Books & Library Depr. Land & Building Depr. Online Hardware Depr. Online Software Depr. Computer Accessories Depr. Interior Decoration Stationary,Printing & Advertisement Printing & Stationerty Paper & Table Stationery Advertisement & Publicity Expenses Other expenses Cash and Cash Equivalent at the end of the year Cash in hand Balance with Bangladesh Bank & Sonali Bank Ltd. Balance with Parent Banks Bangladesh Government Islamic Investment Bond Al-Arafah Islami Bank Limited Annual Report 2018 2017 Taka USD Taka 4,000 335,600 4,000 330,800 4,000 335,600 4,000 330,800 737,735 61,895,925 560,836 46,381,153 737,735 61,895,925 560,836 46,381,153 144
145. 145 Al-Arafah Islami Bank Limited Annual Report 2018
146. Al-Arafah Islami Bank Limited Annual Report 2018 146
147. Related Party Disclosure Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial and operating decision . Related party information are given below: a. Sl 1 1 2 3 4 5 6 Name of the firms/companies in which interested as Proprietor, Partner, Director, Managing Director, Guarantor, Employees etc. 2 3 4 Director: Alhajj Abdus Samad a. AIBL Capital Market Services Ltd. S. Alam Bhaban, 2119, Asadgonj, Chairman Proprietor: Chittagong. b. Samad Trading Agency Managing Director a. Mir CNG & Filling Station b. Mir Pulp & Paper Industries Ltd. c. Mir Filling Station Ltd. Director: d. Karnafully Filling Station Ltd. Alhajj Abdus Salam Vice Mir Ahmed Building e. AIBL Capital Market Services Ltd. Chairman 234, Khatungong, Chittagong. CEO: f. M/S. Hajee Mir Ahmed Sowdagar Proprietor: g. M/S M.A. Salam & Co. h. Mir Bonaspati Products i. Mir Food & Beverage Industries Active Owner: Hafez Alhajj Md. Enayet Ullah Director 2, MukimKatra, Moulvi Bazar, Dhaka. a. M/S Hadyet & Brothers Chairman a. KYCR Coil Ind. Ltd. b. KDS Textile Mills Ltd. c. SKYS Securities Ltd. Managing Director d. KDS Accessories Ltd. e. KDS Garments Ind. Ltd. f. KDS Apparels Ltd. g. KDS Fashions Ltd. Alhajj Salim Rahman Director 255, Nasirabad I/A, Chittagong. h. KDS IDR Ltd. i. KDS Cotton Poly Thread Ind. Ltd. j. KDS Poly Ind. Ltd. k. KDS Steel Accessories Ltd. l. KDS Logistics Ltd. Shareholders m. Eastern Bank Ltd. n. Pragati Insurance Ltd. o. Pragati Life Insurance Ltd. Managing Partner: a. Asadi steel Enterprise b. Jamuna Ship Breakers Managing Director: Alhajj Md. Liakat Ali Chowdhury c. Bangladesh Ship Breaking Ltd. As-Salam Tower (9th Floor), 57, Director d. L & M Builders (Pvt) Ltd. Agrabad C/A, Chittagong Proprietor e. Regal Oxygen Director: f. AIBL Capital Market Services Ltd. Independent Director: Independent Jb. Md. Amir Uddin PPM A 11 Nasreen Villa, 08 Baily Road, Dhaka Director  a. AIBL Capital Market Services Ltd. Name and Address Status with the bank 147 Percentage (%) of holding/interest in the concerned 5 Al-Arafah Islami Bank Limited Remarks 6 0.50% 100% 40% 25% 100% 15% 1.50% 30% 100% 100% 100% 100% 13.82% 0.67% 3.61% 16.16% 49.85% 50.12% 1.71% 45% 7.92% 21% 50% 0.07% 0.33% 1.12% 2.13% 90% 83.34% 90% 25% 100% 0.25% -- Annual Report 2018
148. Sl 1 7 8 9 10 11 Status with the bank Name and Address 2 3 Alhajj Nazmul Ahsan Khaled 760 , Satmasjid Road, Dhanmondi R/A, Dhaka Director Alhajj Abdul Malek Mollah House-12-14, Road-6, Block-E, Niketon, Gulshan-1, Dhaka Director Alhajj Md. Harun-ar-Rashid Khan House-19/A, Road-18, Banani, Dhaka Director Alhajj Md. Anowar Hossain House # 6,Road # 1, Dhanmondi, Dhaka-1205. Alhajj Badiur Rahman Priya Prangon, Building No. -A, Flat No: 0506, 2 Paribagh, DHaka Director Director 12 Alhajj Engr. Kh. Mesbahuddin Ahmed House # 2-E, Road # 8, Sector # 7, Uttara Model Town, Dhaka. Director 13 Alhajj Ahamedul Hoque M/s. A.H. Syndicate 16/1, Amir Market, Khatungonj, Chittagong. Director Al-Arafah Islami Bank Limited Name of the firms/companies in which interested as Proprietor, Partner, Director, Managing Director, Guarantor, Employees etc. 4 Managing Director : a. Moonlight Garments Ltd. b. Ehsan Garments Ltd. c. Khaled Shipping Lines Ltd. d. Engineers Enterprise Ltd. e. Nourish Poultry & Hatchery Ltd. f. Nourish Agro Ltd. g. Telnet Communication Ltd. h. Nourish Grand Parents Ltd. i. Nourish Feeds Ltd. j. Nourish Fisheries Ltd. k. Nourish Foods Ltd. l. Agrow Breeders Ltd. m. AgrowLayers Ltd. n. Artisun Enterprise Ltd. o. Ehsan Packaging & Printing Ind. Ltd. P Aquafarm Shrimp Ltd. q Executive Travel Solutions Ltd Director : r. Mohammadi Navigation Ltd. s. AIBL Capital Market Services Ltd. Managing Director : a. The Mollah Trading Ltd. Shareholder: b. AIBL Capital Market Services Ltd. Chairman Al-Arafah Islamic International School & College a. Director: b. AIBL Capital Market services ltd. c. Canadian Trillinium School (Ltd) Managing Director a. Tania Textiles Ltd. b. A.G. Textile Mills Ltd. c. Dubai Bangla L P Gas Ltd d. Ashik Shipping Lines Ltd. e. Dubai Bangladesh Cement Mills Ltd. f. Dubai Bangladesh Bag Factory Ltd. Director g. Islami Commercial Insurance Co. Ltd. h. Southeast University i. Anowar Hossain Secondary School j. Sultan Hossain Memorial Hospital Proprietor: a. M/S Oceanlink Services Director : b. Central Hospital Ltd. c. Human Resources Dev Co. Ltd. d. AIBL Capital Market services ltd. Chairman/Director : e. Bridene Pvt. Ltd. f. Ocean Trade Ltd. CEO/Director g. Ariel Maritime PTE Ltd. Managing Director a. M/S Aqua Consultant and Association Ltd. Director : b. Takaful Islami Insurance Ltd. Human Resources Development Co. Ltd ( HURDCO) c. d. Central Hospital Ltd. e. AIBL Capital Market services ltd. Proprietor: a. M/S. A.H. Syndicate Shareholder: b. AIBL Capital Market Services Ltd. Annual Report 2018 148 Percentage (%) of holding/interest in the concerned 5 Remarks 6 20% 10% 30% 20% 25% 20% 20% 20% 25% 30% 20% 20% 20% 25% 16.67% 20% 20% 46.15% 0.50% 15% 0.50% -0.62% - -62.5% 54% 40% 60% 18% 80% 10% ---100% 2.45% 2% 0.62% 16.16% 15% 100% 47% 3.20% 5% 4.88% 1.75% 100% 0.25%  NRB
149. Sl 1 14 15 16 17 18 19 20 21 Name and Address 2 Alhajj Abu Naser Mohammad Yeahea 232-234 , Tejgoan Industrial Area, Dhaka-1208. Alhajj Niaz Ahmed House # 24, Road # 1, Block # I, Chairman Bari, Banani, Dhaka. Alhajj Mohammed Emadur Rahman Kazi Castle, Islampur, Shaporan Sylhet. Alhajj Badsha Meah 1025/C, Housing Society, Nasirabad, Chittagong. Alternative Director : Dr. Md. Shafiul Haider Chowdhury Alhajj Mohammed Haroon 1025/B, Housing Society, Nasirabad, Chittagong. Alternative Director : Jb. Anwar Hossain Status with the bank 3 Director Director Director Name of the firms/companies in which interested as Proprietor, Partner, Director, Managing Director, Guarantor, Employees etc. 4 Managing Director: a. Purbachal Steel Mills Ltd. b. Purbachal Exclusive Ltd. c. Purbachal Drillers Ltd. d. Beco Feed Ltd. Director: e. AIBL Capital Market Services Ltd. Proprietor: f. Purbachal Gas Filling g. Beco Electronics Managing Director: a. Golden Oil Mills Ltd. b. Savoy Ice Cream Factory Ltd. Director: c. AIBL Capital Market Services Ltd. d. South East University e. Bangla Tel Limited f. BD Link Communication Limited g. Jibondhara Solution Limited Proprietor: h. Broadway Marketing Co. i. Golden Trading Co. j. Khaja Corporation Director a. Al Haramain Perfumes (Pvt) Co. Ltd. b. Al Haramain Hospital Managing Director: c. Rich & Ruitz Perfumes Trading L.L.C. d. Al Halal Perfumes Industry e. Hamidia Tea Company Limited CEO: f. 4 Corners Distribution UK Limited Deputy Managing Director: Al Haramain Perfumes Mgf. & Oudh Processing Ind. L.L.C. g. Partner: h. Al Haramain Trading LLC Shareholder: i. AIBL Capital Market Services Ltd. Percentage (%) of holding/interest in the concerned 5 Remarks 6 99.82% 99.50% 50% 42.50% 4.50% 100% 100% 70% 77% 0.75%  -10% 5% 10% 100% 100%  100% 40% 40% 49% 24% 34%  50% -10% 0.75% Shareholder: Director a. Director AIBL Capital Market Services Ltd. Owner: a. Rising Star Trading Est (U.A.E.) Shareholder: b. AIBL Capital Market Services Ltd. Jb. Khalid Rahim Independent House No. 53 (Old: 276), Road No. 16 Nil Director (Old: 27), Dhanmondi R/A, Dhaka. Jb. M. Kamaluddin Chowdhury Flat No. 0015/C2, 14th Floor, Baily Independent Trustee Heights, 2 Nawratan Colony, New Director  a. South-East University, Dhaka Baily Road, Dhaka-1217. Jb. Farman R. Chowdhury Ex-Officio ACME Concord, Flat # 3B, House Director (MD Nil # 10, Road # 121, Gulshan-1, & CEO) Dhaka-1214. 149 Al-Arafah Islami Bank Limited 1.75% 100% 1% N/A - N/A Appointment is w.e.f. 30.08.2018 Appointment is w.e.f. 01.10.2018 Annual Report 2018
150. Name of the Directors and their shareholdings in the year- 2018 Sl . Name of Directors Status Ending position on 31/12/2018 Opening position on 01/01/2018 1 Al-Hajj Abdus Samad Chairman 23495211 shares of Tk. 10/- each Tk 23,49,52,110/- 22376392 shares of Tk. 10/- each Tk 22,37,63,920/- 2 Mohammed Abdus Salam ViceChairman 21174895 shares of Tk. 10/- each Tk 21,17,48,950/- 20166568 shares of Tk. 10/- each Tk 20,16,65,680/- 3 Badiur Rahman Sponsor Director 29121809 shares of Tk. 10/- each Tk 29,12,18,090/- 27735057 shares of Tk. 10/- each Tk 27,73,50,570/- 4 Al-Hajj Md.Harun-Ar-Rashhid Khan Sponsor Director 20880939 shares of Tk. 10/- each Tk 20,88,09,390/- 19886609 shares of Tk. 10/- each Tk 19,88,66,090/- 5 Al-Hajj Abdul Malek Mollah Sponsor Director 20938682 shares of Tk. 10/- each Tk 20,93,86,820/- 19941603 shares of Tk. 10/- each Tk 19,94,16,030/- 6 Al-Hajj Hafez Md. Enayetullah Sponsor Director 20886151 shares of Tk. 10/- each Tk 20,88,61,510/- 19891573 shares of Tk. 10/- each Tk 19,89,15,730/- 7 Md. Liakat Ali Chowdhury Director 20887108 shares of Tk. 10/- each Tk 20,88,71,080/- 19892484 shares of Tk. 10/- each Tk 19,89,24,840/- 8 Al-Hajj Nazmul Ahsan Khaled Sponsor Director 22365683 shares of Tk. 10/- each Tk 22,36,56,830/- 20719699 shares of Tk. 10/- each Tk 20,71,96,990/- 9 Al-Hajj Ahamedul Haque Director 20880832 shares of Tk. 10/- each Tk. 20,88,08,320/- 19886507 shares of Tk. 10/- each Tk. 19,88,65,070/- 10 Al-Hajj Kh. Mesbah Uddin Ahmed Director 20881634 shares of Tk. 10/- each Tk. 20,88,16,340/- 19887271 shares of Tk. 10/- each Tk. 19,88,72,710/- 11 Abu Naser Mohammad Yeahea Director 25785097 shares of Tk. 10/- each Tk. 25,78,50,970/- 24557236 shares of Tk. 10/- each Tk. 24,55,72,360/- Al-Arafah Islami Bank Limited Annual Report 2018 150 Remarks
151. Name of the Directors and their shareholdings in the year- 2018 12 Alhajj Md . Anowar Hossain Sponsor Director 23116404 shares of Tk. 10/- each Tk. 23,11,64,040/- 22015623 shares of Tk. 10/- each Tk. 22,01,56,230/- 13 Jb.Niaz Ahmed Director 20988159 shares of Tk. 10/- each Tk. 20,98,81,590/- 19988724 shares of Tk. 10/- each Tk. 19,98,87,240/- 14 Jb.Salim Rahman Director 20881355 shares of Tk. 10/- each Tk. 20,88,13,550/- 19887005 shares of Tk. 10/- each Tk. 19,88,70,050/- 15 Alhajj Mohammed Haroon Sponsor Director 21002181 shares of Tk. 10/- each Tk. 21,00,21,810/- 20002078 shares of Tk. 10/- each Tk. 20,00,20,780/- 16 Mohammed Emadur Rahman Director 20906191 shares of Tk. 10/- each Tk. 20,90,61,910/- 19910659 shares of Tk. 10/- each Tk. 19,91,06,590/- 17 Alhajj Badsha Meah Sponsor Director 20880983 shares of Tk. 10/- each Tk. 20,88,09,830/- 19886651 shares of Tk. 10/- each Tk. 19,88,66,510/- 18 Jb.Khalid Rahim Independent Director Nil Nil 19 Jb.M. Kamaluddin Chowdhury Independent Director Nil Nil 20 Jb.Md.Amir Uddin PPM Independent Director Nil Nil 21 Jb. Farman R. Chowdhury Managing Director Ex-Officio Director Nil Nil 151 Al-Arafah Islami Bank Limited Annual Report 2018
152. An Action Plan /Roadmap was issued by Bangladesh Bank for implementation of BaselIII in Bangladesh vides BRPD Circular No: 18 Dated: 21December, 2014. For effective implementation of Basel-III, the Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework in line with Basel III) has been issued by Bangladesh Bank. Action Plan/Roadmap Action Action Deadline Issuance of Guidelines on Risk Based Capital Adequacy December 2014 Commencement of Basel III Implementation process January 2015 Capacity Building of the Banks January 2015- December 2019 Initiation of Full Implementation of Basel III January 2020 Phase-in Arrangements The phase-in arrangements for Basel III implementation will be as follows: 2015 2016 2017 2018 2019 2020 Minimum Common Equity Ti4.50% 4.50% 4.50% 4.50% 4.50% 4.50% er-1(CET-1) Capital Ratio Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50% 2.50% Minimum CET-1 plus Capital Conser4.50% 5.125% 5.75% 6.375% 7.00% 7.00% vation Ratio Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00% 6.00% Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% Minimum Total Capital plus Capital 10.00% 10.625% 11.25% 11.875% 12.50% 12.50% Conservation Buffer The Basel III framework consists of three-mutually reinforcing pillars: Pillar 1 : Minimum capital requirements for credit risk, market risk and operational risk Pillar 2 : Supervisory review process(SRP) Pillar 3 : Market discipline Market discipline (Pillar 3) comprises a set of disclosures on the Capital Adequacy and Risk Management framework of the Bank. Pillar 3 disclosures as per BB circular on Basel-III Capital Regulations are set out in the following sections for information. The disclosures (qualitative and quantitative) under the revised Risk Based Capital Adequacy (RBCA) framework as advised by Bangladesh Bank based on the audited financial position of the bank as of 31st December, 2018 are presented below: 1. Scope of Application 2. Capital Structure 3. Capital Adequacy 4. Credit Risk 5. Equities: Disclosures for Banking book positions 6. Interest Rate Risk in the Banking Book (IRRBB) 7. Market Risk 8. Operational Risk 9. Liquidity Ratio 10. Leverage Ratio 11. Remuneration Al-Arafah Islami Bank Limited Annual Report 2018 152 Risk Based Capital (Basel-III) To cope up with the international best practices and to make the bank’s capital shock absorbent ‘Guidelines on Risk Based Capital Adequacy(RBCA) for banks’(Revised Regulatory Capital Framework in line with Basel II) was introduced from January 01, 2009 as a parallel run with BRPD Circular No. 10, dated November 25,2002 (Basel I). At the end of parallel run, Basel II regime started from January 01, 2010 and the guidelines on RBCA came fully into force with its subsequent supplements/revisions. After that Bangladesh Bank issued ‘Guidelines on Risk Based Capital Adequacy (RBCA) for banks’ (Revised Regulatory Capital Framework in line with Basel III) vide its BRPD Circular 18 dated December 21, 2014 that Basel III reporting start from January 2015 and full implementation will start from January 2020. Instructions regarding Minimum Capital Requirement (MCR), Adequate Capital and Disclosure requirement as stated in the guidelines had to be followed by all scheduled banks for the purpose of statutory compliance. Disclosures on The public disclosure of prudential information is an important component of Basel Committee on Banking Supervision’s framework of capital measurement and capital adequacy, known as Basel III. Bangladesh Bank has specified the standard of disclosure through Guidelines on Risk Based Capital Adequacy (December 2010) which revised in Basel III Guideline on December 2014 with effect from January2015.The standard aims to enhance the transparency in Bangladeshi financial market by setting minimum requirement for the disclosure of information on the risk management practice and capital adequacy.
153. 1 . Scope of application: a. Qualitative Disclosures The name of the top corporate entity to which this framework Al-ArafahIslami Bank Limited applies An outline of differences in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities within the group (i) that are fully consolidated; (ii) that are given a deduction treatment; and (iii) that are neither consolidated nor deducted (e.g. where the investment is risk-weighted) Consolidated financial statements are the financial statements of a group (parent and subsidiaries) presented into one. This offers the benefit of viewing the whole group’s combined financial information together to see how all companies are doing jointly. The bank has an approved disclosure policy to observe the disclosure requirements set out by the Bangladesh Bank and International Financial Reporting Standard (IFRS) and International Accounting Standards (IAS) as adopted by the Institute of Chartered Accounts of Bangladesh (ICAB) into Bangladesh Financial Reporting Standards (BFRS) and Bangladesh Accounting Standards (BAS) where relevant to the bank A group consists of a parent entity and all its subsidiaries. The control exercised by the parent entity is the power to govern the financial and operating policies of the subsidiaries so as to obtain benefits from its activities. Consolidated financial statements represent combination of the financials of all subsidiaries of the parent entity. This consolidation is required when a parent owns 50 percent or more shares in the subsidiaries with controlling authority. Procedures In preparing consolidated financial statements, an entity combines the financial statements of the parent entity and its subsidiaries and the items covered are mainly assets, liabilities, equity, income and expenses. However intra group balances, transactions, income and expenses are eliminated in full. The financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements are of the same date. Consolidated financial statements are prepared using uniform accounting policies for both the parent entity and the subsidiaries. Minority interest is presented in the consolidated statement of financial position within equity segment but separately from the equity of the owners of the parent entity. Consolidation for regulatory purposes Banks having subsidiaries have been advised to consolidate their financial statements following accounting standards as set by the regulators to assess capital adequacy. As such the bank has prepared capital adequacy report on Solo basis as well as on consolidated basis. If subsidiaries financials are not consolidated with that of the Bank, investments in subsidiaries by the bank will be deducted at 50% from Tier 1 and 50% from Tier 2 capital of the bank. The assets representing the investments in subsidiaries whose capital had been deducted from that of the parent would not be included in total assets for the purposes of computing CAR. Off-Shore Banking Unit (OBU) The Bank obtained the Off-shore Banking Unit (“the Unit”) License on 17 February’14 vide letter # BRPD (P-3)744(121)/2014934 from Bangladesh Bank. The Bank commenced operation of this unit from 22 may 2014. The Off-shore Banking Unit is governed under the rules and guidelines of the Bangladesh Bank. Its office is located at AIBL Motijheel Branch, 161,Motijheel Commercial Area , Dhaka 1000. Al-ArafahIslami Bank Limited has 4 (Four) subsidiaries viz. a. AIBL Capital Market Services Ltd. b. AIBL Capital Management Ltd. c. AIBL Asset Management Co. Ltd. d. Millennium Information Solution Limited (MISL). Al-ArafahIslami Bank holds 60.50%, 98%,98% and 51% AIBL Capital Market Services Ltd. AIBL Capital Management Ltd. AIBL Asset Management Co. Ltd. Millennium Information Solution Limited (MISL). A brief description of the Bank and its subsidiary are given below: a. AIBL Capital Market Services Limited AIBL Capital Market Services Limited was incorporated as subsidiary company of Al-ArafahIslami Bank Limited with an authorized capital of Tk. 10 billion and paid-up capital of Tk. 4 billion of which AIBL holding is 60.50%. The main objectives of the company are to carry out the business of Stock Broker and Dealer in the Capital Market. b. AIBL Capital Management Limited AIBL Capital Management Limited, a subsidiary company of Al-ArafahIslami Bank Limited, was incorporated with an authorized capital of Tk. 2 billion and paid-up capital of Tk. 500 million. The main objectives of the company are to carry out the business of Merchant Banking in all its aspects including Issue Management (IPO, Right Share Issue, Bond Issue etc.), Portfolio Management, Underwriting, Corporate Advisory Services, Pre-IPO Placement, Investment Analysis and Research etc. c) AIBL Asset Management Co. Ltd. Another subsidiary company in the name of AIBL Asset Management Co. Ltd. has already been incorporated with Authorized Capital of Tk. 500 million and Paid up Capital of Tk. 100 million to carry out the business of Asset Management, Portfolio Management, Capital Market Operation and other financial services. The shareholding ratio of AIBL and its another subsidiary AIBL Capital Market Services Limited is 9:1. We hope that the company will start its functioning very soon. d) Millennium Information Solution Limited (MISL) Al-ArafahIslami Bank Ltd. owned 51% shares of Millennium Information Solution Limited a subsidiary company of Al-ArafahIslami Bank Limited. Millennium Information Solution Limited, a private limited Company was incorporated in Bangladesh under the Companies Act 1994 on February 11, 2001. The main objective of company is to carry on activities relating to developing software products and providing maintenance and support services both the domestic and international clients. Over the years, MILS has established itself as the leading software developer, implementation and service provisioning company in Bangladesh which adheres to the rules of Islamic Shariah. 153 Al-Arafah Islami Bank Limited Annual Report 2018
154. c ) Any restrictions, or other major impediments on transfer of funds or regulatory capital within the group. b.Quantitative Disclosures The aggregate amount of surplus capital of insurance subsidiaries (whether deducted or subjected to and alternative method) included in the capital of the consolidated group. Not Applicable Not Applicable 2) Capital structure: 1. Qualitative Disclosures: a) Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in CET 1, Additional Tier 1 or Tier 2 For the purpose of calculating capital under capital adequacy framework, the capital of banks shall be classified into two tiers. The total regulatory capital will consist of sum of the following categories: 1) Tier 1 Capital (going-concern capital): a) Common Equity Tier 1 b) Additional Tier 1 2) Tier 2 Capital (gone-concern capital) Common Equity Tier 1 Capital: It is called ‘Core Capital’ comprises of highest quality of capital elements consists of – I. Fully Paid-up Capital II. Statutory Reserve III. Non-Repayable Share Premium Account IV. General Reserve V. Retained Earnings VI. Minority Interest in Subsidiaries VII. Dividend Equalization Account VIII. Less: Regulatory adjustments applicable on CET1 Additional Tier 1: i) Non-cumulative irredeemable preference share ii) Instruments issued by the banks that meet the qualifying criteria for AT1 iii) Minority Interest i.e. AT1 issued by consolidated subsidiaries to third parties as specified in Annex-4 of Basel III Guidelines (For Consolidated Reporting) Less:Regulatory adjustments applicable on AT1 Tier-2 Capital : It is called ‘gone-concern capital’ represents other elements which fall short of some of the characteristics of the core capital consists ofi) General Provision ii) All other preference shares iii) Subordinated debt iv) Minority Interest i.e. Tier-2 issued by consolidated subsidiaries to third parties (For Consolidated reporting only) v) Revaluation Reserves as on 31st December, 2017 (50% of Fixed Assets and Securities and 10% of equities) vi) Other (if any item approved by Bangladesh Bank) Less: Regulatory adjustments applicable on Tier-2 capital Compliance status ofAIBLas per condition for maintaining regulatory capital: Al-Arafah Islami Bank Limited 1 Common Equity Tier 1 of at least 4.5% of the Total RWA Complied 2 Tier 1 will be at least 6.00 % of the Total RWA Complied 3 Minimum CRRA will be 10.00 % of the Total RWA Complied 4 Additional Tier 1 Capital can be admitted maximum up to 1.5% of the Total RWA or 33.33% of CEFI whichever higher Complied 5 Tier 2 Capital can be admitted maximum up to 4% of the Total RWA or 88.89% of CEFI whichever higher Complied 6 Addition to Minimum CRRA, Capital Conservation Buffer (CCB) of 2.50% of the Total RWA is being introduced which will be maintain in the form of CETI. Complied Annual Report 2018 154
155. 2 . Quantitative Disclosures: The amount of Regulatory Capital 2018 as follows: (Figure In million) 1.Common Equity Tier-1(Going Concern Capital): Solo Basis Fully Paid-up Capital Consolidated Basis 10,440.22 10,440.22 Statutory Reserve 8,388.04 8,388.04 Retained Earnings 1,783.06 1,908.96 Non Controlling Interest -  1,768.42 Less: Deferred Tax Assets (DTA) -  - 20,611.32 22,505.64 Good will and other Insensible assets Total Common Equity Tier-1 Capital (125.71) (125.71) 20,485.61 22,379.93 2. Tier-2 Capital : - General Provision 2,580.80 2,580.80 Subordinated debt 7,400.00 7,400.00 488.78 488.78 (391.02) (391.02) Total Admissible Tier-2 Capital 10,078.56 10,078.56 Total eligible capital 30,564.17 32,458.49 Revaluation Reserves for Securities up to 50% Less: 80%of Revaluation Reserves for Fixed Assets, Securities & Equity Securities.60% 3) Capital Adequacy: Qualitative Disclosures: a) A summary discussion of the bank’s approach to assessing the adequacy of its capital to support current and future activities The Bank is subject to the Capital adequacy norms as per Master Circular on Basel-III Capital regulations issued by the Bangladesh Bank. The Basel III capital regulation is being implemented from 2015. In line with the guidelines of the Bangladesh Bank, the Bank has adopted the following approaches for computing the capital charge. For Credit Risk – Standardized Approach For Market Risk – Standardized Approach Operational Risk – Basic Indicator Approach The Bank has a policy on Internal Capital Adequacy Assessment Process (ICAAP) as stipulated by Bangladesh Bank. The ICAAP also details the Risk Appetite of the Bank, assessment of material risks, the process for capital adequacy assessment to support business projections, adequacy of risk control framework, capital raising plans and Bank-wide stress testing. The periodic assessment of bank’s performance against the Risk Appetite defined under ICAAP and results of stress testing are reported to the Board of Directors for their review. CRAR has been computed based on the Basel III guidelines and it is well above the regulatory minimum level of 10%. (Figure In million) Quantitative Disclosures : Capital requirement under following Risk: Solo Basis a) Capital requirement for Credit Risk b) Capital requirement for Market Risk c) Capital requirement for Operational Risk Consolidated Basis 194,063.49 202,708.57 1,058.63 1,313.82 1,7457.93 17,117.71 d)Total Capital Requirement (b+c+d) 212,580.05 221,140.10 e) Capital to Risk –weighted Asset Ratio: 14.38% 14.68% 9.64% 10.12% 1.Common Equity Tier 1 (CET 1) Ratio 155 Al-Arafah Islami Bank Limited Annual Report 2018
156. Tier 1 Capital Adequacy Ratio 9 .64% 10.12% Tier-2 Capital Adequacy Ratio 4.74% 4.56% Capital to Risk-weighted Asset Ratio (CRAR) 14.38% f) Capital Conservation Buffer Available Capital under Pillar 2 Requirement Minimum Capital Requirement (MCR) 14.68% 1.875% 1.875% 9,306.20 10,344.50 21,258.00 22,114.00 4) Credit Risk 1. Qualitative Disclosures: a) Definition of past due and impaired assets (for accounting purposes) A loan payment that has not been made as of its due date is termed as past due. Payment may be made for repayment/ renewal/rescheduling or as an installment of a claim. The past due claims are discussed below: Special Mention Accounts (SMA): A claim which is overdue for 90 days or more will be classified as Special Mention Account. When a loan is classified as SMA, it needs constant monitoring and supervision as the repayment probability decreases. Sub-Standard (SS): The repayment of the loan has been put in doubt but the recovery is not unlikely. Doubtful (DF): There is less possibility of recovery of the overdue amount and probability of loss is high. Bad /Loss (B/L): These are the loans which have almost turned unrecoverable. Approaches followed for specific and general allowances: i) Specific provision: a) Substandard : 20% b) Doubtful : 50% c) Bad/Loss : 100% ii) General Provision: a) 0.25% to 5% on different categories of unclassified loans. b) 1% on Off Balance sheet exposure. c) 5% on the outstanding amount of loans kept in the ‘Special Mention Account’ after netting off the amount of Interest Suspense. For classification of loan, specific and general allowances the bank follows Master Circular-Loan Classification and Provisioning vide BRPD circular no. 06 dated June 14, 2012; and as advised by Bangladesh Bank from time to time. In addition to the above mentioned objective criteria, loans can be classified on the basis of subjective judgment taking into consideration the factors such as uncertainty or doubt of repayment, continuous loss of capital, adverse situation, decrease of value of securities, legal suit etc. However, Bangladesh Bank can classify any claim on the basis of their subjective judgment as well as can ask the Bank to buildup additional provision on non-performing loans. Credit Risk Management Policy The bank has established Credit Risk Management framework as directed by Bangladesh Bank through introduction or Risk Management (CRM) policy guide along with implementation of the Credit Risk Grading (CRG). This framework defines CRM structure, role, responsibilities and the processes to identify, quantify, and manage risk within the framework under the given policy .The CRM policy is reviewed from time to time for adoption of new techniques/policies for measurement and management of risk in line with the socio-economic scenario and investment environment of the country. Al-Arafah Islami Bank Limited Annual Report 2018 156
157. 2 ) Quantitative Disclosures: (Figure In million) a) Funded: General Investment Murabaha Investment 74,671.52 Bai-Muazzal Investment 89,934.86 Hire Purchase Investment 79,644.81 Quard 130.41 Other Investment 3,809.03 Sub Total 248,190.63 Outside Bangladesh 248,190.63 Less: Unearned profit on Investment 8,040.36 240,150.27 Bill Purchased & Discounted   Payable in Bangladesh 12,809.62 Payable outside Bangladesh 4,132.21 Sub Total 16,941.83 Total Funded: 257,092.10 b) Total Non- Funded: 73,047.95 c) Geographical distribution of exposures Region Based Dhaka Region 199,507.20 Chittagong Region 31,285.08 Sylhet Region 1,226.50 Rajshahi Region 8,002.35 Khulna Region 1,728.01 Rangpur Region 7,674.23 Barisal Region 4,736.28 Total 257,092.10 d) Country based funded Domestic 257,092.10 Overseas - e) Country based Non-funded 73,047.95 Domestic 73,047.95 Overseas - f) Major Industry wise distribution of exposures Agriculture, Fishing and Forestry 3,210.5 Industry 145,937.35 Construction 12,842.56 Water works & Sanitary Service 411.23 157 Al-Arafah Islami Bank Limited Annual Report 2018
158. Transport & communication 1,536.30 Storage 1,182.00 Trade Finance 61,253.40 Miscellaneous 38,759.12 Total 265,132.46 Less Unearned Profit on Investment 8,040.36 Total 257,092.10 g) Distribution of risk exposure by claims a) Claims on sovereigns and central banks 22,042.50 b) Claims on PSE - - c) Claims on banks and securities firms 21,866.60 d) Claims on corporate 123,318.20 e) Claims included in the retail portfolio & small enterprises 65,911.00 f) Claims secured by residential property 9,403.60 g) Claims secured by commercial real estate 9,323.60 h) Consumer Investment 573.00 i) Off-balance sheet items 25,404.30 h) Credit risk mitigation Claims secured by financial collateral 1,678.70 Net exposure after the application of haircuts 509.80 Claims secured by eligible guarantee - g) Residual contractual maturity breakdown of the whole portfolio Repayable on demand - Up to 1 month 39,511.00 More than 1 month but less than 3 months 81,906.80 More than 3 months but less than 1 year 91,666.30 More than 1 year to less than 5 year 29,879.80 More than 5 year 14,128.20 Total 257,092.10 Gross Non Performing Assets- (NPAs) Non-performing assets to outstanding Investment ( loans and advances) 12,690.72 Movement of Non Performing Assets (NPAs) Opening balance 9,921.51 Additions 14,146.11 Less Cash Recovery (3,149.20) Less RSDL from CL (6,081.00) Less Written Off (2,146.70) Closing balance 12,690.72 Al-Arafah Islami Bank Limited Annual Report 2018 158
159. (Figure In million) Movement of specific provisions for NPAs Provision held at the begining of the year 3,096.15 Fully provision debt written off (1,177.95) Recoveries of amount previously written off 164.88 Specific provision for the year 1,863.00 Closing balance 3,946.09 5) Equities: Disclosures for Banking Book Positions a) Qualitative Disclosures: The bank holds unquoted equities intent of which is not trading and the same are shown as banking book asset in balance sheet. As these securities are not quoted or traded in the bourses they are shown in the balance sheet at the cost price and no revaluation reserve has been created against these equities. b) Quantitative Disclosures: Values of investments (for unquoted securities) as disclosed in the Balance Sheet: (Figure In million) Name of the Scrip value Central Depository Bangladesh Ltd 310.59 Total 310.59 c) As investment in unquoted equities does not have any maturity, we have calculated capital charge on the basis of its risk weight which is 125% of investment value. 6) Interest Rate Risk in the Banking Book (IRRBB) a) Qualitative Disclosures: Interest rate risk is the exposure of a bank’s financial condition due to adverse movements in interest rates. Changes in interest rates affect a bank’s earnings by changing its net interest income and the level of other interest sensitive income and operating income. Changes in interest rates also affect the underlying value of the bank’s assets, liabilities and off-balancesheet instruments because the economic value of future cash flows changes when interest rates change. 1. Interest rate risk in the banking book can be measured on the basis of: 2. Economic value perspective- net interest income measured in a given point in time such as Economic Value of Capital b) Quantitative Disclosures: Maturity GAP on Banking Book Assets & Liabilities As on December 31, 2018 (Figure In million) Particulars Up to 1 month 1 to 3 month 3 to 12 month I to 5 years Above 5 years Total Asset Cash in hand 25,710.01 - - - - 25,710.01 6,034.76 2,650.00 400.00 - 1,224.20 10,308.96 Placement with other banks & Financial Institute - 8,200.00 - - - 8,200.00 Investment in Sharea & Securities (only HTM) - - 67.60 11,300.01 - 11,367.61 Investment (Loans and Advances) 39,511.00 81,906.80 91,666.30 29,879.80 - - - - Balance with other banks & Financial Institute Fixed Assets Non Banking Asset Other Assets Total 14,128.20 257,092.10 4,305.86 4,305.86 50.88 50.88 1,233.26 32.50 3.20 - 14,957.60 16,226.56 72,489.03 92,789.30 92,137.10 41,179.81 34,666.74 333,261.98 Liabilities 159 Al-Arafah Islami Bank Limited Annual Report 2018
160. Placement from other banks & Financial Institute 5,511.84 4,438.00 10,443.50 - Deposits and Other accounts 45,804.41 106,886.00 75,471.90 31,584.00 Provision and other liabilities 2.00 - 2.00 - - 20,393.34 6,600.30 266,346.61 17,360.63 17,364.63 Deferred Tax Liabilities/Assets - - - - 168.49 168.49 AIBL Subordinate Bond - - - - 7,400.00 7,400.00 51,318.25 111,324.00 85,917.40 31,584.00 31,529.42 311,673.07 GAP 21,170.78 (18,534.70) 6,219.70 9,595.81 3,137.32 21,588.91 Cumulative Gap 21,170.78 2,636.08 8,855.78 18,451.59 21,588.91 - Total Impact of Upward Interest Rate on Banking Book for One Year in Different Time Buckets: (Figure In million) Particular/ shock Increase in interest rate Period GAP Impact on NII (Net Interest Income) Applicable tax rate Tax adjusted impact on Net Interest Income Period GAP Impact on NII(Net Interest Income) Applicable tax rate Tax adjusted impact on Net Interest Income Period GAP Impact on NII(Net Interest Income) Applicable tax rate Tax adjusted impact on Net Interest Income Minor 1.00% 21,170.78 17.64 37.50% 6.62 (18,534.70) (30.89) 37.50% (11.58) 6,219.70 46.65 37.50% 17.49 Moderate 2.00% Up to 1 month 21,170.78 35.28 37.50% 13.23 1 to 3 month (18,534.70) (61.78) 37.50% (23.17) 3 to 12 month 6,219.70 93.30 37.50% 34.99 Major 3.00% 21,170.78 52.93 37.50% 19.85 (18,534.70) (92.67) 37.50% (34.75) 6,219.70 139.94 37.50% 52.48 Impact of Downward Interest Rate on Banking Book for One Year in Different Time Buckets (Figure In million) Particular/ shock Minor Decrease in interest rate Moderate (1.00%) Major (2.00%) (3.00%) 21,170.78 21,170.78 21,170.78 Impact on NII (Net Interest Income) (17.64) (35.28) (52.93) Applicable tax rate 37.50% 37.50% 37.50% (6.62) (13.23) (19.85) (18,534.70) (18,534.70) (18,534.70) 30.89 61.78 92.67 37.50% 37.50% 37.50% 11.58 23.17 34.75 6,219.70 6,219.70 6,219.70 Impact on NII(Net Interest Income) (46.65) (93.30) (139.94) Applicable tax rate 37.50% 37.50% 37.50% Tax adjusted impact on NII (17.49) (34.99) (52.48) Period Up to 1 month GAP Tax adjusted impact on Net Interest Income Period 1 to 3 month GAP Impact on NII (Net Interest Income) Applicable tax rate Tax adjusted impact on NII Period 3 to 12 month GAP Al-Arafah Islami Bank Limited Annual Report 2018 160
161. Impact of Upward Interest Rate on Banking Book for up to One Year (Cumulative) (Figure In million) Particular/shock Increase in interest rate GAP Period(Year) Impact on NII (Net Interest Income) Applicable tax rate Tax adjusted impact on NII Minor Moderate 1.00% 8,855.78 Major 2.00% 8,855.78 3.00% 8,855.78 177.12 37.50% 66.42 265.67 37.50% 99.63 1 Year 88.56 37.50% 33.21 Impact of Downward Interest Rate on Banking Book for up to One year (Cumulative) (Figure In million) Particular/shock Minor Decrease in interest rate GAP Moderate Major (1.00%) (2.00%) (3.00%) 8,855.78 8,855.78 8,855.78 Period( Year) 1 Year Impact on NII (Net Interest Income) (88.56) (177.12) (265.67) Applicable tax rate 37.50% 37.50% 37.50% Tax adjusted impact on NII (33.21) (66.42) (99.63) 7) Market Risk: a) Qualitative Disclosures: Views of BOD on trading/ investment activities Methods used to measure Market Risk. Market Risk Management System: The Board approves all policies related to market risk, sets limits and reviews compliance on a regular basis. The objective is to provide cost effective funding to finance asset growth and trade related transactions. Trading book consists of positions in financial instruments held with trading intent or in order to hedge other elements of the Trading Book. The portfolio of investment includes Government Treasury Bills and Bonds, Prize Bonds, Shares of listed Public Limited Companies etc. Bank always desires to invest in high yield areas and also has ensured maintenance or Statutory Liquidity Requirements (SLR) as fixed by Bangladesh Bank. Market risk is the possibility of losing assets in the balance sheet and off- balance sheet positions due to volatility in the market variables viz. interest rate, foreign exchange rate, reinvestment and price. The bank measures impact on profitability and impact on asset prices under market risk through Maturity GAP Analysis, Sensitivity Analysis, VAR, and Mark to Market and has adopted Standardized Measurement approach for measuring Market Risks under Basel-III. Standardized approach has been used to measure the market risk. The total capital requirement in respect of market risk is the aggregate capital requirement calculated for each of the risk sub-categories. The methodology to calculate capital requirement under Standardized Approach for each of these market risk categories is as follows: a) Capital charges for interest rate risk= Capital Charge for General Market Risk b) Capital charges for Equity Position Risk= Capital Charge for Specific Risk+ Capital Charge for General Market Risk c) Capital charges for Foreign Exchange Risk=Capital Charge for General Market Risk d) Capital charges for Commodity Position Risk=Capital Charge for General Market Risk The Bank has its own Market Risk Management System which includes Asset Liability Risk Management (ALM) and Foreign Exchange Risk Management under core risk management guidelines. The Treasury Division manage market risk covering liquidity, interest rate and foreign exchange risks with oversight from Asset-Liability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. ALCO meets at least once in a month. 161 Al-Arafah Islami Bank Limited Annual Report 2018
162. Risk Management and reporting is based on parameters such as Duration , PV, Exposure and Gap Limits, VaRetc, in line with the global best practices. Risk Profiles are analyzed and mitigating strategies/ processes are suggested by the Asset Liability Committee (ALCO). Their effectiveness is monitored on an on-going basis.Forex Open Position limits (Day limit Policies and processes for mitigating / Overnight limit), Deal-wise cut-loss limits, Stop-loss limit, Profit / Loss in respect of cross market risk: currency trading are properly monitored and exception reporting is regularly carried out. Holding of equities is monitored regularly so that the investment remains within the limit as set by Bangladesh Bank. Asset liability management committee (ALCO) analyzes market and determines strategies to attain business goals. Reconciliation of foreign currency transactions. b) Quantitative Disclosures: The capital requirements for Market Risk: (Figure In million) SOLO Basis Interest rate risk Consolidated Basis - - Equity position risk 109.00 364.20 Foreign exchange risk 949.63 949.62 - - 1,058.63 1,313.82 Commodity risk Total 8) Operational risk: a) Qualitative Disclosures: Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The way operational risk is managed has the i) Views of BOD on system to reduce potential to positively or negatively impact a bank’s customers,its financial performance operational Risk and reputation. The Bank has put in place Board approved governance and organizational structure with clearly defined roles and responsibilities to mitigate operational risk arising out of the Bank’s business and operations. The bank offers competitive pay package to its employees based on performance and merit. It always tries to develop corporate culture where employees can exert their highest involvement and commitment to work and organization with high ethical standards in order to build a congenial atmosphere. ii) Performance gap of executives and The bank believes that training and knowledge sharing is the best way to reduce knowlstaffs edge gap. Therefore, it arranges trainings on a regular basis for its employees to develop their expertise. The bank offers competitive pay package to its employees based on performance and merit. It always tries to develop a culture where all employees can apply his/her talent and knowledge to work for the organization with high ethical standards in order to add more value to the company and for the economy. No potential external events are expected to expose the Bank to significant operational iii) Potential external events risk Al-Arafah Islami Bank Limited Annual Report 2018 162
163. The Bank has adopted policies which deal with managing different Operational Risk . Bank strongly follows KYC norms for its customer dealings and other banking operations. The Internal Control and Compliance Division of the Bank, the inspection teams of Bangladesh Bank and External Auditors conduct inspection of different branches and divisions at Head Office of the Bank and submit reports presenting the findings of the inspections. Necessary control measures and corrective actions have been taken on the suggestions or observations made in these reports. In 2015 ICC Division conducted following No. of audit: Nature of Audit No of Frequencies 154 branches i.e 100% as Compressive & Risk based Internal Audit Annually per Audit Plan 31 branches i.e 119% as per iv) Policies and Processes for mitigatSurprise Inspection Audit Plan ing operational risk: For audit purpose, we have segregated the branches into 05 (Five) risk categories as per level of Composite Risk by fixing of a reasonable Inherent Business & Control Risk Score. Risk gradation/category of the branches is summarized below: Nature of Risk No of Branches Extremely High Risk 11 Very High Risk 31 Extremely High Risk 41 High Risk 57 Medium Risk 14 Total 154 The Bank follows the Basic Indicator Approach (BIA) in terms of BRPD Circular No. 18 dated 21 December 2014 Guidelines on Risk Based Capital Adequacy (Revised Regulatory Capital Framework for banks in line with Basel III). The BIA stipulates the capital charge for operational risk is a fixed percentage, denoted by α(alpha) of average positive annual v) Approach for calculating capital gross income of the Bank over the past three years. It also states that if the annual gross charge for operational risk income for any year is negative or zero, that should be excluded from both the numerator and denominator when calculating the average gross income. The capital charge for operational risk is enumerated by applying the following formula: K = [(GI 1 + GI2 + GI3) α]/n b) Quantitative Disclosures: (Figure In million) b) The capital requirements for operational risk (Basic Indicator Approach) Year Gross Income (GI) December-2018 12,195.36 December-2017 11,804.19 December-2016 10,751.43 Total GI 34,750.98 Average GI 11,583.66 15% of Average GI 1,737.55 9. Liquidity Ratio: a) Qualitative Disclosures: The Bank manages liquidity risk in accordance with its ALM Policy. This policy is framed as per regulatory guidelines and is approved by the Board of Directors. The ALM Policy is reviewed i) Views of BOD on system to re- periodically to incorporate changes as required by regulatory stipulation or to realign with duce liquidity Risk changes in the economic landscape. The ALCO of the Bank formulates and reviews strategies and provides guidance for management of liquidity risk within the framework laid out in the ALM Policy. 163 Al-Arafah Islami Bank Limited Annual Report 2018
164. 1 ) Liquidity risk is measured and monitored through two approaches-1) Time Bucket Analysis: Time Bucket Analysis involves comprehensive tracking of cash flow mismatches and is done through preparation of Structural liquidity statement on a regular basis. Appropriate tolerance levels/prudential limits have been stipulated for mismatches in different time buckets. 2) Ratio Analysis: Under Ratio Analysis various balance sheet ratios are prescribed with appropriate limits. The compliance of ratios to the prescribed limits ensures that the Bank has managed its liquidity through appropriate diversification and kept it within the sustainable limit. The Bank also assess its short-term liquidity mismatches and reports the same in the short term dynamic liquidity report which represents the cash flow plans of various asset and liability generating units and seasonal variation of cash flow patterns of assets and liabilities of the bank over a ii) Methods used to measure Liperiod of 1-90 days. quidity risk 3) Liquidity Risk Management System : A liquidity risk management involves not only analyzing banks on and off balance sheet positions to forecast future cash flows but also how the funding requirement would be met. The later involves identifying the funding market the bank has access, understanding the nature of those markets, evaluating banks current and future use of the market and monitor signs of confidence erosion. Al-ArafahIslami Bank Limited has well organized liquidity risk management system as enumerated in ALM Policy which is approved by the Board. The Asset Liability Management Committee (ALCO) of the Bank monitors & manages liquidity and interest rate risk in line with the business strategy. ALM activity including liquidity analysis & management is conducted through coordination between various ALCO support groups residing in the functional areas of Balance Sheet Management, Treasury Front Office, Budget and Planning etc. iii) Liquidity Risk Management System A liquidity risk management involves not only analyzing banks on and off balance sheet positions to forecast future cash flows but also how the funding requirement would be met. The later involves identifying the funding market the bank has access, Understanding the nature of those markets, evaluating banks current and future use of the market and monitor signs of confidence erosion. Al-ArafahIslami Bank Limited has well organized liquidity risk management system as enumerated in ALM Policy which is approved by the Board. The Asset Liability Management Committee (ALCO) of the Bank monitors & manages liquidity and interest rate risk in line with the business strategy. ALM activity including liquidity analysis & management is conducted through coordination between various ALCO support groups residing in the functional areas of Balance Sheet Management, Treasury Front Office, Budget and Planning etc. An effective liquidity risk management process should include systems to identify measure, monitor and control its liquidity exposures. To mitigate the liquidity risk, Management of our bank identifies and quantifies the primary sources of a bank’s following risk in a timely maniv) Policies and Processes for miti- ner. By proper identify of the sources, management understand both existing as well as future gating Liquidity risk risk that the bank can be exposed to. Our Management always alert for new sources of liquidity risk at both the transaction and portfolio levels. Key elements of an effective risk management process include an efficient MIS to measure, monitor and control existing as well as future liquidity risks and reporting them to senior management and the board of directors. b) Quantitative Disclosures: (Figure In million) Liquidity Coverage Ratio 101.88% Net Stable Funding Ratio (NSFR) 118.89% Stock of High quality liquid assets 35,648.00 Total net cash outflows over the next 30 calendar days 34,968.00 Available amount of stable funding 279,603.70 Required amount of stable funding 235,182.30 Al-Arafah Islami Bank Limited Annual Report 2018 164
165. 10 . Leverage Ratio: a) Qualitative Disclosures: i) Views of BOD on system to reduce excessive leverage ii) Policies and processes for managing excessive on and off balance sheet leverage iii) Approach for calculating exposure Excessive leverage by banks is widely believed to have contributed to the global financial crisis. Thus Basel III rules have introduced leverage ratio as a non-risk-based backstop measure, to supplement risk-based capital requirements. Board of Directors of our Bank continuously is monitoring the exposure limit of lending, capital strength of our Bank in order to avoid building-up excessive on- and off-balance sheet leverage. Many regulators are considering raising the leverage ratio. This means that banks will have to keep more capital reserves. To increase capital reserves in order to meet higher leverage ratios requires selling assets to get cash or reducing lending. Higher leverage ratio can decrease the profitability of banks because it means banks can do less - profitable lending. However, increasing the leverage ratio means that banks have more capital reserves and can more easily survive a financial crisis. In view of the impact of leverage into the business, our bank management takes decision about future investment. Considering the financial strength, Bank also make Capital planning and business budget to go on a right way. The leverage ratio is a volume-based measure and is calculated as Basel III Tier I capital divided by total on and off-balance sheet exposures. A minimum Tier 1 leverage ratio of 3% is being prescribed both at solo and consolidated level. Tier-1 Capital (after related deductions) Leverage Ratio = ------------------------------------------------------Total Exposure (after related deductions) b) Quantitative Disclosures: (Fig In Million) Leverage Ratio On Balance Sheet Exposure Solo Consolidated 5.77% 6.16% 329,507.46 337,777.33 329,507.46 Off- Balance Sheet Exposure Total Deduction Total Exposure 25,811.31 25,811.31 (125.71) (125.71) 355,193.06 363,462.93 11. Remuneration: The following remuneration disclosures have been prepared in accordance with ‘Guidelines on Risk Based Capital Adequacy (RBCA) for banks’ provided by Bangladesh Bank. The prudential disclosures require that all banks meet the minimum requirements for public disclosure of qualitative and quantitative information of the remuneration practices. The qualitative remuneration disclosures are broader in scope and cover all the individuals included whereas the quantitative information relates to senior managers and material risk takers of the Al-ArafahIslami Bank Limited, for the financial year ended December 31, 2018. a) Qualitative Disclosures: a) Information relating to the bodies that oversee remuneration: Managing Director, MANCOM & Head of Human Resources division governs the remuneration related policies and practices in alignment of the banks’ short & long term objectives. They plays an independent role, operating as an overseer; and if required, makes recommendation to the Board of Directors of the Bank for its consideration and final approval for any remuneration related policy. The main work includes presenting recommendations to the Board regarding remuneration, compensation packages of senior Management, incentive schemes and retirement benefits. They also assist the Board of Directors to ensure that all employees are remunerated fairly and get performance based compensation by ensuring effective remuneration policy, procedures and practices aligned with the Banks’ strategy and applied consistency for all employee levels. A description of the scope of the bank’s remuneration policy (e.g. by regions, business lines), including the extent to which it is applicable to all branches. 165 Al-Arafah Islami Bank Limited Annual Report 2018
166. A description of the types of employees considered as material risk takers and as senior managers , including the number of employees in each group. Risk Takers are senior employees who can take, or influence the taking of, material risk for Al-ArafahIslami Bank or for a material business unit: Managing Director : 01 Deputy Managing Director : 04 Executive Vice President : 19 Senior Vice President : 30 b) Information relating to the design and structure of remuneration processes: Key features of remuneration policy: We target a fair human resources management by using a performance based system. Our salary policy is the same in all branches and service points for the beginner level. In addition, to drive further development of individual skill sets and competencies, speaking foreign languages is compensated. There is no incident of discrimination has been occurred in terms of remuneration provided to male and female employees. Al-ArafahIslami Bank compensation program focuses on individual short-term goals vis-a-vis long-term success and overall profitability of the Bank. Both our short-term annual incentive and long-term compensation plans promote our pay-for-performance philosophy, as well as our goal of having a meaningful amount of pay at-risk, and we believe both plans provide us a competitive advantage in talent acquiring and retaining. Objectives of remuneration policy: The overall objective of the Bank’s remuneration policy is to establish a framework for attracting, retaining and motivating employees, and creating incentives for delivering long-term performance within established risk limits. Performance is judged, not only on what is achieved, but also on how it is achieved as well as alignment to the Bank’s values. Whether the remuneration committee reviewed the firm’s remuneration policy during the past year, and if so, an overview of any changes that were made: The remuneration committee reviewed the firm’s remuneration on 2018 and revised the remuneration by conducting a survey considering the following facts: a. Oversee Banks remuneration position and revise the structure according to the Competitive market. b. Align compensation strategy with business strategy c. Determine the percentage of increment at each job grade d. Get acquaint with the economy inflation. Based on the survey, Bank changes the remuneration on COMPA-Ratio based of its existing employees. A discussion of how the bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee : Control function of internal control and compliance directly respond of Audit Committee of the Board and dotted report to the President and Managing Director. Credit Risk Officer report to President and Managing Director directly. c) Description of the ways in which current and future risks are taken into account in the remuneration processes. The Bank’s remuneration practices are carefully managed takes into account the following key risks when implementing remuneration measures: • Financial Risks • Compliance Risks Risk and compliance requirements represent a gateway to whether an incentive bonus payment is made and the size of the payment. Despite, if the individual does not me et or only partially meets compliance requirements, no award or a reduced award may be made. d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration: Employees’ performance is appraised annually in line with the achieved objectives, which have a positive and direct impact in their pay package. So, individual’s remuneration may vary according to their performance. The payment is dependent on the Board’s discretion, taking into account the recent performance of the Bank. e) Description of the ways in which the bank seek to adjust remuneration to take account of longer-term performance: The Bank’s remuneration system is designed to reward long-term as well as short-term performance, encourage retention and recognize special performance in the organization. The Bank provides reasonable remuneration for short-term performance besides for long-term performance the bank has some deferred payment options (i.e. incentive bonus, gratuity, superannuation etc.).In case of following situation remuneration can be adjusted before vesting: • Disciplinary Action (at the discretion of Enquiry committee) • Resignation of the employee prior to the payment date. At the same time previously paid or already vested variable pay can also be recovered under the case of disciplinary action. Al-Arafah Islami Bank Limited Annual Report 2018 166
167. f ) Description of the different forms of variable remuneration that the bank utilizes and the rationale for using these different forms: A summary of Short-term and Long-term compensation plan are as follows: Total Compensation = Fixed Pay (Salary)+Variable Pay (Bonus)+Variable Pay (Long term incentive) Form of variable remuneration offered by Al-ArafahIslami Bank: Cash Form: Short-Term Incentives / Rewards 1. Yearly Increment 2. Yearly fixed and incentive bonus 3. Car, fuel and car maintenance allowance for executives 4. Accelerated promotion/Special increment for especial assignments/ accomplishment; 5. Cash Risk allowance for cashier; 6. Charge allowance for Head of Branches 7. Leave Encashment. Long-Term Incentives / Rewards 1. Provident fund; 2. Gratuity; 3. Social Security& Benevolent(SSBF) fund 4. Staff House building Investment Scheme(SHBIS) reduce profit rate 5. Provident fund Quard(Investment) with zero profit rate 6. 6. Yearly professional membership fees for professional certificates holder Non-Cash Form: Short-Term Incentives / Rewards 1. Accelerate promotion for top talents; 2. Study leave. Long-Term Incentives / Rewards 1. Foreign training award; b) Quantitative Disclosures: g) Number of meetings held by the main overseeing remuneration during the financial year and remuneration paid to its member : Meeting regarding overseeing the remuneration was held on as and when it required h) Number of employees having received a variable remuneration award during the financial year . - Nil Number and total amount of sign-on award made during the financial year. - Nil Number and total amount of severance payments made during the financial year. - Nil Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms. - Nil Total amount of deferred remuneration paid out in the financial year: - Nil j) Breakdown of amount of remuneration awards for the financial year to show. Fixed and Variable: deferred and non-deferred different forms used (cash, shares, share linked instruments, other forms)- Nil - All the remunerations are provided in the form of cash k) Quantitative Information about employees’ exposure to implicit(e.g. fluctuations in the value of shares or performance units) and explicit adjustments (e.g. clawbacks or similarreversals or downward revaluation of awards) of deferred remuneration and retained remuneration: All the remunerations are provided in the form of cash i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and/or implicit adjustments. - Nil ii) Total amount of reductions during the financial year due to ex post explicit adjustments. - Nil iii) Total amount of reduction during the financial year due to ex post implicit adjustments - Nil 167 Al-Arafah Islami Bank Limited Annual Report 2018
168. Auditor ’s Report on the Financial Statements of AIBL Capital Market Services Limited for the Period ended December 31, 2018
169. Report on the Audit of the Financial Statements Opinion We have audited the financial statements of AIBL Capital Market Services Limited (the Company), which comprise the Statement of Financial Position as at 31 December 2018 and Statements of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements of the Company give a true and fair view of the financial position of the Company as at 31 December 2018 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Bangladesh and we have fulfilled our other ethical responsibilities in accordance with The International Ethics Standards Board for Accountants (IESBA Code) & the Institute of Chartered Accountants of Bangladesh (ICAB) Bye-Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements and Internal Controls Management is responsible for maintenance of the required books of accounts & records, preparation and fair presentation of the financial statements in accordance with IFRSs and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error and also for disclosure of matters that may affect any fact of the financial statements. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those Charged with Governance are responsible for overseeing the Company’s financial reporting process. Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. 169 Al-Arafah Islami Bank Limited Annual Report 2018
170. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on other Legal and Regulatory Requirements: In accordance with the Companies Act 1994, we also report the following: i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; ii. in our opinion, proper books of accounts as required by law have been kept by the Company so far as it appeared from our examination of those books; iii. The Statement of Financial Position and the Statement of Profit or Loss and Other Comprehensive Income dealt with by the report are in agreement with the books of account. Place: Dhaka Dated: 24, April 2019 Al-Arafah Islami Bank Limited Syful Shamsul Alam & Co. Chartered Accountants Annual Report 2018 170
171. Statement of Financial Position As at 31 December 2018 Particulars Notes Amount (In Taka 2018 Amount (In Taka 2017 ASSETS: Non - Current Assets: Property, Plant & Equipment Deferred Tax Assets 16,106,896 20,425,728 4 13,486,543 18,713,240 9.1 2,620,353 1,712,488 10,955,187,163 11,621,076,177 Account Receivable Current Assets: 5 433,372,496 409,861,191 Investment 6 8,227,944,173 8,199,054,467 Investment in Share (DSE & CSE) 7 662,120,683 700,000,000 Advance, Deposits & Prepayment 8 20,960,350 7,735,476 Advance Income Tax 9 1,539,382,643 2,096,930,307 Cash and Cash equivalent 10 71,406,818 207,494,736 10,971,294,059 11,641,501,905 4,139,770,856 4,131,920,823 4,000,000,000 4,000,000,000 139,770,856 131,920,823 6,831,523,202 7,509,581,082 Total Assets: EQUITY AND LIABILITIES: Capital and Reserve: Paid -up Capital 11 Retained Earning Current Liabilities: Borrowing from Bank 12 4,765,600,000 4,690,423,901 Accounts Payable 13 141,082,353 363,320,041 Provision for Investments 14 478,215,594 428,009,835 Provision for taxation 15 1,446,625,255 2,027,827,305 10,971,294,059 11,641,501,905 - - Total Equity and Liabilities: The annexed notes 1 to 28 form an integral part of these financial statements. Director Director Managing Director Signed subject to our seperate report of even date. Dated : Dhaka April 24, 2019 171 Company Secretary Syful Shamsul Alam & Co. Chartered Accountants Al-Arafah Islami Bank Limited Annual Report 2018
172. Statement of Comprehensive Income For the ended 31 December 2018 Particulars Notes Amount (In Taka) Jan-Dec'2018 Amount (In Taka) Jan-Dec'2017 Investment Income 16 267,555,170 480,236,262 Profit paid on Borrowing 17 (226,955,116) (514,566,486) 40,600,054 (34,330,224) Net Investment Income Income from Commission, Exchange & Others: Brokerage Commission 18 143,200,350 382,481,895 Documentation & Maintenance Fess 19 4,546,671 5,108,000 Other Operating Income 20 Total operating Income (A) 29,202,829 45,279,831 176,949,850 432,869,726 217,549,904 398,539,502 Hawla,Laga & CDBL Charges 21 18,920,212 42,426,549 Salary allowances& Contribution to P.F 22 63,900,298 59,949,037 Rents, Taxes, Insurance, Lighting etc. 23 25,410,884 11,530,435 Honorarium & Meetting Expense 24 4,798,970 7,143,200 54,648 77,434 Law Charges Postage, Telegram, Telephone & Stamps etc 25 562,859 698,344 Depreciation, Amortization & Repairs to Properties 26 7,368,638 7,193,974 1,033,914 1,671,705 27 16,986,720 38,619,824 Stationary, Printing, Advertisement etc. Other Expenses Total operating expenses (B) Profit/(loss) before provision and Tax C = (A - B) Provision for Investment Provision for Taxation 28 Deferred Tax (Income)/Expense 9.1 Net Profit after Tax 139,037,143 169,310,502 78,512,761 229,229,000 50,205,759 84,300,000 21,364,833 70,584,620 (907,865) (277,959) 7,850,034 74,622,338 0.02 0.19 Earning per Share (EPS) The annexed notes 1 to 28 form an integral part of these financial statements. Director Director Managing Director Signed subject to our seperate report of even date. Dated : Dhaka April 24, 2019 Al-Arafah Islami Bank Limited Annual Report 2018 172 Company Secretary Syful Shamsul Alam & Co. Chartered Accountants
173. Statement of Changes in Equity As at 31 December 2018 Particulars Share Capital Balance as on 1st January , 2018 Total 4,000,000,000 131,920,823 4,131,920,823 - 7,850,034 7,850,034 4,000,000,000 139,770,856 4,139,770,856 Net profit for the Period Balance as at March 31, 2018 Retained Earning Statement of Changes in Equity As at December 31, 2017 Particulars Share Capital Balance as on 1st January, 2017 Total 4,000,000,000 55,863,955 4,055,863,955 - 1,434,529 1,434,529 4,000,000,000 57,298,484 4,057,298,484 - 74,622,338 74,622,338 8,000,000,000 131,920,823 4,131,920,823 Adjustment for Deffered Tax up to 2016 Net profit for the Period Balance as at December 31, 2017 Retained Earning The annexed notes 1 to 29 form an integral part of these financial statements. Director Director Managing Director Company Secretary Place: Dhaka Dated: 24 April 2019 173 Al-Arafah Islami Bank Limited Annual Report 2018
174. Statement of Cash Flows For the period ended 31 December 2018 Amount (In Taka) Jan-Dec'2018 Particulars Amount (In Taka) Jan-Dec'2017 Cash flows from operating activities Investment income receipt in Cash Profit paid on deposits and borrowing Commission received in cash Cash payments to employees Cash payments to suppliers Received from other operating activities (item-wise) Paid for other operating activities (item-wise) Advance income tax paid Operating profit before changes in operating assets and liabilities 267,555,170 (226,955,116) 143,200,350 (63,900,298) (1,033,914) 33,749,500 (67,884,482) (45,019,219) 39,711,991 480,236,262 (514,566,486) 382,481,895 (59,949,037) (1,671,705) 50,387,831 (102,261,450) (416,436,445) (181,779,135) Changing in Operating assets & liabilities Increase/Decrease Investment Increase/Decrease of Accounts receivable Increase/Decrease of Borrowing Increase/Decrease of Accounts payable Increase/Decrease of other assets (item-wise) Increase/Decrease of other liabilities (item-wise) Cash receipt from operating activities (28,889,706) (23,511,305) 75,176,099 (222,237,688) 24,654,443 (174,808,157) 1,809,746,093 (356,263,135) 1,772,330,922 (3,367,704,923) 1,493,772 (140,397,271) (135,096,166) (322,176,406) (991,752) (3,779,018) (991,752) (3,779,018) (136,087,918) (136,087,918) 207,494,736 (325,955,424) (325,955,424) 533,450,160 71,406,818 207,494,736 A. Net Cash from operating activities Cash flows from investing activities: Purchase of property, plant and equipment B. Net cash flows from investing activities Cash flows from financing activities Increase in Share Capital Interim Dividend Paid C. Net cash flows from financing activities D. Net increase in cash and cash equivalent (A+B+C) E.Effects of exchange rate changes on cash and cash-equivalents F.Net increase in cash and cash equivalent D+E G.Cash & Cash Equivalents at the beginning of the period H.Cash & Cash Equivalents at the end of the period The annexed notes 1 to 28 form an integral part of these financial statements. Director Director Managing Director Place: Dhaka Dated: 24 April 2019 Al-Arafah Islami Bank Limited Annual Report 2018 174 Company Secretary
175. Notes to the Financial Statement For the year ended 31 December 2018 1 .00 Reporting entity 1.01 Company Profile The Company is incorporated under the Companies Act 1994 as a public limited company by share namely AIBL Capital Market Services Limited on 21st September 2010. The company was entitled to commence the business also from 21st September 2010. The Company is a subsidiary company of Al-Arafah Islami Bank Limited. 1.02 Address of Registered Office and Principal Place of Business The principal place of business is the Registered Office at Peoples Insurance Bhaban (4th floor), 36 Dilkusha C/A, Dhaka-1000. 1.03 Nature of Business Activities The main objective of the company is to act as a member of Dhaka Stock Exchange and Chittagong Stock Exchange to carry on the business of broker, or dealers in stocks, shares and secure commercial papers, bonds, debentures stock, foreign currencies, treasury bills and/or any instruments. The company has eight branches in Bangladesh. 2.00 Basis for preparation of financial statements 2.01 Components of financial statements: According to International Accounting Standards (IAS)-1, as adopted by ICAB as BAS-1 “Presentation of Financial Statements the complete set of financial statements includes the following components: i. Statement of Financial Position ii. Statement of Comprehensive Income iii. Statement of Changes in Equity iv. Statement of Cash Flows v. Notes, comprising a summary of significant accounting policies and other explanatory information. vi. Comparative Figures. 2.02 Statement of Compliance The financial statements of AIBL Capital Market Services Limited have been prepared in accordance with the DFIM circular No. 11 dated 23 December 2009 and requirement of the Financial Institution Act 1993, the Companies Act 1994, the Security and Exchange Commission (Amendment) Act 2012, the listing rules of Dhaka Stock and Chittagong Stock Exchange, guideline from BB, Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), and other applicable laws and regulations. In case of any rules and regulations issued by Bangladesh Securities and Exchange Commission differs from those of other regulatory authorities, the rules and regulations issued by Bangladesh Securities and Exchange Commission shall prevail. 2.02.1 Disclosure of departure The departures from IFRS in the financial statements for 31 December 2018 are stated below: 175 Al-Arafah Islami Bank Limited Annual Report 2018
176. Notes to the Financial Statement For the year ended 31 December 2018 Sl Nature of No . Departure 1 Title of the IFRS Valuation of IFRS 9 Investments in quoted and “Financial Instruments” unquoted shares Al-Arafah Islami Bank Limited Treatment of the IFRS Treatment adopted as per regulator As per FID circular No. 08 dated 03 August 2002 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance IFRS 9 requires all equity sheet respectively investments to be measured to align with parent at fair value. At initial company’s adopted recognition an entity can policy. Provision should make an irrecoverable be made for any loss election to present in other arising from diminution comprehensive income in value of investment; subsequent changes in fair however in case of any value of an investment in unrealized gain, no such an equity instrument that is gain can be recognized held for trading. In all other and investments are cases, investments in equity recognized at cost only. instruments measured at fair value are recognized As per circular of through profit or loss. Bangladesh Securities and Exchange Commission In limited circumstances, circular # SEC/ cost can be an appropriate CMRRCD/2009-193/203) estimate of fair value for and dated 28 December investments in unquoted 2017, and subsequent shares. BSEC notification dated 19 December 2018 the required provisions for the year 2018 on principal portion of margin loan is to be kept at 20% in the five installments starting from December 2018. Annual Report 2018 176 Financial or presentation effect of departure If the IFRS 9 would be followed value of investments presented would be higher by BDT 9,542,786 and the same figure would be for ‘Unrealized Loss’. Due to unrealized loss (portfolio basis) as at 31 December 2018 and Tk. 9,542,786 has been provided as per the stated circular.
177. Notes to the Financial Statement For the year ended 31 December 2018 Sl Nature of No . Departure Title of the IFRS Treatment of the IFRS Treatment adopted as per regulator Financial or presentation effect of departure An entity shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. 2 Provision for Margin Loan (Loans and receivables) IFRS 9 “Financial Instruments” The objective of the impairment requirements is to recognise lifetime expected credit losses for all financial instruments for which there have been significant increases in credit risk since initial recognition - whether assessed on an individual or collective basis - considering all reasonable and supportable information, including that which is forward-looking. If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, an entity shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. Expected credit losses are a probability-weighted estimate of credit losses (ie present value of all cash shortfalls) over the expected life of the financial instrument. For a financial asset, a credit loss is the present value of the difference between the contractual cash flows that are due to an entity under the contract and the cash flows that the entity expects to receive. 177 As per circular of Bangladesh Securities and Exchange Commission circular # SEC/ CMRRCD/2009-193/203) and dated 28 December 2017, and subsequent BSEC notification dated 19 December 2018, the As on 31 December required 2018 provision on margin loan is amounting Tk. provisions for the year 468,672,808 2018 on principal portion of margin loan is to be kept at 20% in the five installments starting from December 2018. Al-Arafah Islami Bank Limited Annual Report 2018
178. Notes to the Financial Statement For the year ended 31 December 2018 2 .03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 3.00 3.01 Measurement bases used in preparing the Financial Statements The elements of financial statements have been measured on “Historical Cost” convention, which is one of the most commonly adopted base provided in “the framework for the preparation and presentation of financial statements” issued by the International Accounting Standards Board (IASB). Reporting Currency and Level of Precision: The figures in the financial statements represent Bangladesh Currency (Taka), which have been rounded-off to the nearest Taka. Use of estimates and judgments The preparation of the financial statements in conformity with IFRS requires management to use judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Going Concern Financial statements have been prepared on going concern basis as there was no significant doubt or uncertainty to continue the operation of the company in the foreseeable future. Materiality and aggregation Each material item as considered significant by management, has been presented separately in financial statements. No amount has been set off unless the Company has a legal right to set off the amounts and intends to settle on net basis. Income and expenses are presented on a net basis only when permitted by the relevant accounting standards. Consistency In accordance with the IFRS framework for the presentation of financial statements together with IAS 1 and IAS 8, AIBL Capital Market Services Limited applies the accounting disclosure principles consistently from one period to the next. In case of selecting and applying new accounting policies, changes in accounting policies applied and correction of errors, the amounts involved are accounted for and disclosed retrospectively in accordance with the requirement of IAS-8. Contingent asset and contingent liability The Company does not recognize any Contingent Asset and Contingent Liability, but discloses the existence of contingent liability in the financial statements. A contingent liability is a probable obligation that arises from the past events and whose existence will be confirmed by the occurrence of uncertain future events beyond the control of the Company or a present obligation that is not recognized because of outflow of resources is not likely or obligation cannot be measured reliably. Books of account The Company maintains its books of account for main business in Electronic Form through soft automation. Reporting period The financial period of the Company has been determined to be from 1 January to 31 December each period. These financial statements cover the period from 01 January 2018 to 31 December 2018. Events after balance sheet date (BAS-10) Events after the reporting period, dividend declared after the reporting period should not be classified as a liability at the reporting period as the proposed dividend does not represent an Obligation under BAS-37: Provision, Contingent Liabilities and Contingent Assets. Where necessary, all the material events after the reporting period is considered and appropriate adjustments /disclosures is made in the financial statements in accordance with IAS 10 - Events After Balance Sheet Date. Comparative figures of financial statements Comparative information has been disclosed in respect of the period ended 31 December 2018 for all numerical data in the financial statements and also the narrative and descriptive information when it is relevant for better understanding of the current year’s financial statements. Figures of the year 2017 have been rearranged whenever considered necessary to ensure comparability with the current period. Principal Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these financial statements. Recognition and measurement (PPE) Al-Arafah Islami Bank Limited Annual Report 2018 178
179. Notes to the Financial Statement For the year ended 31 December 2018 Items of property , plant and equipment are measured initially at cost and subsequently at cost less accumulated depreciation in compliance with Bangladesh Accounting Standard (BAS) 16 Property, Plant and Equipment. The cost of acquisition of an asset comprises its purchase price and any direct cost for bringing the asset to its working condition for its intended use. Expenditures incurred after the assets have been put into use, such as repairs and maintenance is normally charged off as revenue expenditure in the period in which it is incurred. Software and all upgradation/ enhancement are generally charged off as revenue expenditure unless they bring similar significant additional benefits. 3.02 Fixed assets and depreciation Fixed Assets are stated at cost less accumulated depreciation. Depreciation is charged on the cost of fixed assets in order to write off such amounts over the estimated useful lives, using the straight-line method in accordance with BAS-16. Depreciation for full month is charged on additions irrespective of date when the related assets are put into use and no depreciation is charged for the month of disposal and addition during the year. Depreciation is recognized in Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. For addition to property, plant and equipment, depreciation is charged from the month of capitalization and no depreciation is charged in the month of disposal. The rates of depreciation used to write off the amount of assets are as follows: Interior Decoration 10% Computer Accessories 20% Online Hardware 20% Motor Car 20% Furniture & Fixture - Steel 10% Office Equipment 20% Furniture Fixture - Wood 10% Computer 20% Online Software 20% 3.03 Disposal of PPE Gains and losses on disposal of an item of property, plant and equipment are to be determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment disposed off and are recognized net with “other non-operational income” in profit or loss. 3.04 Impairment of PPE The carrying amounts of PPE are reviewed at each reporting date to determine whether there is any indication of impairment. An impairment loss is recognized in Statement of Profit or Loss and Other Comprehensive Income if the carrying amount of an asset exceeds its estimated recoverable amount. However, no such condition that might be suggestive of a heightened risk of impairment of assets existed at the reporting date. 3.05 Investment in security Investment in security are classified broadly in two categories and accounted under as follows: I) Investment in listed securities: Investment in listed security is carried at the lower of cost or market value in accordance with BAS-39; accordingly for investment, adequate provision is being made at the end of each calendar year considering each individual investment (where cost is less than market price). Unrealized gain or loss is not recognized in the Statement of Comprehensive Income. II) Margin Investment: AIBL Capital Market Service Limited extended margin loan to the portfolio investors at an agreed ratio (between investor deposit and loan amount) of purchases securities against the respective investor account. The investors are to maintain the margin as per set rules and regulation. The margin is monitored on daily basis as it changes due to change in market price of share. If the margin falls below the minimum requirement, the investor are required to deposit additional fund to maintain the margin as per rules or otherwise the securities be sold to bring the margin to the required level but it was not possible to maintain under present capital market scenario. 3.06 Advances, deposits and prepayments Advances are initially measured at cost. After initial recognition, advances are carried at cost less deductions, adjustments or charges to other account heads such as property, plant and equipment or expenses. Deposits are measured at present value. Prepayments are initially measured at cost. After initial recognition, prepayments are carried at cost less charges to 179 Al-Arafah Islami Bank Limited Annual Report 2018
180. Notes to the Financial Statement For the year ended 31 December 2018 3 .07 3.08 I) II) III) 3.09 3.10 I) II) 3.11 3.12 statement of comprehensive income. Cash & Cash equivalent Cash and cash equivalent includes cash in hand, cash at bank and fixed deposits which are held and are available for use by the company without any restriction. There is insignificant risk of change in the value of the above items. Corporate Tax Current tax: Income tax expense is recognized in Statement of Profit or Loss and Other Comprehensive Income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. The applicable corporate tax rate is 35% as per the Finance Act 2018 for the Company. Deferred tax: Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they are reversed, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. A deferred tax asset/liabilities is recognized to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilized. Deferred tax assets/liabilities is reviewed at each reporting date and are reduced to the extent that it is probable that the related tax benefit will be realized. Tax exposures: In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. Provision on expenses Provision for expenses is recognized when the company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefit will be required to settle the obligations and reliable estimate of the amount can be measured. Revenue Recognition As per International Accounting Standard (IAS) 18 Revenue, revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of revenue and the cost incurred or to be incurred in respect of the transaction can be measured reliably. Income from margin loan: Income from margin loan is recognized on accrual basis. Such income is calculated considering daily margin loan balance respective parties. Income is recognized on monthly rest. Interest charged to margin loan that results to negative equity is not probable that the economic benefit associated with that portion will not flow to the company. So, as per paragraph 29 of “IAS-18 : Revenue” this is not recognized in income. Income from gain on sale of securities: Capital gain or loss on disposal of security listed in the stock exchange is recorded on realized basis i.e. only when the securities are sold in the market. Unrealized capital gain or losses are not accounted for in the Statement of Comprehensive Income. Earnings Per Share (EPS) Earnings Per Share (EPS) is calculated by dividing total earnings available for ordinary shareholders by weighted average number of shares outstanding for the year. Statement of Cash Flows Cash Flow Statement is prepared in accordance with BAS-7 “Cash Flow Statement”. The cash flow from the operating activities have been presented under Direct Method as prescribed by the Securities and Exchange Rules 1987 and considering the provisions of Paragraph 18(b) of BAS-7 which provides that “Enterprises are encouraged to report Cash Flow from Operating Activities using the Direct Method”. Al-Arafah Islami Bank Limited Annual Report 2018 180
181. Notes to the Financial Statement For the year ended 31 December 2018 Amount (In Taka) 31.12.2018 4.00 b) Fixed Assets: Property, Plant & Equipment a) Tangible Asset Interior Decoration Computer accessories Online Hardware Motor Car Furniture & fixture - steel Office equipment Computer Furniture & fixture - wood Intangible Assets Online Software Total (a+b) Details have been shown in Annexure-”A” 5.00 6.00 6.01 7.00 Accounts Receivable: Receivable from DSE profit charged but not realised Dividend Receivable Investments: Margin Investment Investment in Dealer A/C (6.01) Investment In AIBL Capital Management Ltd. Name of the Company Aman Feed Saif Power LHBL Adventph Intraco VFSTDL ML Dyeing KTL SSSteel SKTrims Silvaphl Ledger balance Quantity 367,780 2,404 262,492 345 266 4,222 12,079 12,076 13,492 6,049 9,194 Amount (In Taka) 31.12.2017 7,209,666 16,500 1 4,703,915 270,038 227,497 1 1,058,924 13,486,542 8,387,595 45,650 8,316,503 177,246 48,900 318,500 1,124,897 18,419,291 1 1 13,486,543 293,949 293,949 18,713,240 37,916,656 394,461,114 994,726 433,372,496 15,400,077 394,461,114 409,861,191 8,178,160,493 39,783,680 10,000,000 8,227,944,173 Cost Value 24,884,906 33,389 14,101,199 3,137 2,534 38,386 100,664 109,785 134,920 54,992 91,940 227,829 39,783,680 8,186,981,984 2,072,483 10,000,000 8,199,054,467 Market Value 17,285,660 50,484 11,418,402 14,111 7,129 244,032 358,746 305,523 280,069 276,739 30,240,894 Investment in Share (DSE & CSE): Investment in Share (DSE) Investment in Share (CSE) 487,120,683 525,000,000 175,000,000 175,000,000 662,120,683 700,000,000 Investment in Shares of Dhaka & Chittagong Stock Exchange Limited as shown above is based on acquisition cost from the parent company Al-Arafah Islami Bank Limited, face vale of which was Tk. 2,000 (Two thousand) and Tk. 300,000 (Three lac) per share respectively. After Demutualization, DSE alloted 5,411,329 number of ordinary shares (of which 2,525,288 shares blocked with DSE Demutualization Blocked Account) and CSE also alloted 4,287,330 number of ordinary shares (of which 2,572,398 shares are blocked with CSE) at face value of Tk. 10/- each. 181 Al-Arafah Islami Bank Limited Annual Report 2018
182. Notes to the Financial Statement For the year ended 31 December 2018 Amount (In Taka) 31.12.2018 8.00 9.00 Advance, Deposit & Prepayments: Advance against Office Space at Nikunja, Dhaka. Advance against Office Space Head Office. Advance against Office Space Gulshan(old). Advance against Office Space at Amborkhana Advance rent Gulshan Br.(New) Advance Rent Khulna Advance Rent Store Advance Rent Uttara Br. Advance Rent Barisal Br. Advance Rent Dhanmondi Br. Advance Rent B. Baria Advance Rent Khatungonj Advance Against Petty Cash Advance Income Tax: Tax deducted at source DSE Tax deducted at source CSE TDS against Dividend Tax deducted at source Bank Tax paid 2017 through Chalan & Source Tax paid 2016 through Chalan & Source Tax paid 2015 Through Challan & Source Tax paid 2014 through challan & Source Tax paid 2013 through challan & Source Tax paid 2012 through challan & Source Tax paid 2011 through challan Tax paid 2010 through chalan Less: Adjustment 2010, 2011, 2012 9.01 Deferred Tax Assets Opening Balance Addition During the year Adjustment during the year 10.00 Cash and Cash equivalent: Al-Arafah Islami Bank Limited Shajalal Islami Bank Limited Note-10.01 10.01 Balance at Bank: Al-Arafah Islami Bank Limited, Motijheel Br. Dhaka (2693) AIBL Capital Market Services Limited Cons.cust. (2927) AIBL Capital Market Services Limited. (2936) AIBL Capital Market Services Ltd. Dividend A/C () AIBL Capital Market Services Limited, Dhanmondi AIBL Capital Market Services Limited, Amborkhana AIBL Capital Market Services Limited, Khatunginj AIBL Capital Market Services Ltd. Public Issue Application A/C AIBL Capital Market Services Limited, Gulshan AIBL Capital Market Services Limited, Uttara AIBL Capital Market Services Limited SIBL AIBL Capital Market Services Limited Khulna Al-Arafah Islami Bank Limited Annual Report 2018 182 Amount (In Taka) 31.12.2017 100,000 7,698,300 414,080 334,000 3,348,576 2,167,884 1,038,677 2,940,000 531,126 806,578 1,581,129 20,960,350 100,000 574,080 54,450 550,000 40,000 2,281,572 1,342,673 698,850 1,012,522 1,081,329 7,735,476 20,296,306 133,820 1,503,688 476,748 80,447,999 414,413,240 415,952,141 306,367,030 299,791,671 299,436,990 282,983,417 20,146,476 2,141,949,526 602,566,883 1,539,382,643 49,027,519 1,109,533 2,734,939 1,314,020 26,250,000 414,413,240 415,952,141 306,367,030 299,791,671 299,436,990 260,386,748 20,146,476 2,096,930,307 2,096,930,307 1,712,488 907,865 2,620,353 2,620,353 1,434,529 277,959 1,712,488 1,712,488 71,397,766 9,052 71,406,818 207,485,684 9,052 207,494,736 16,021 57,469,430 2,004,206 458,644 500,000 8 118,400 10,484,752 50,000 305 296,000 71,397,766 16,472 203,453,501 2,829,614 443,648 510,644 200,000 305 31,500 207,485,684
183. Notes to the Financial Statement For the year ended 31 December 2018 Amount (In Taka) 31.12.2018 11.00 Share Capital: 11.01 Authorised Capital: The authorised Capital of the Company is 100,00,00,000 Ordinary Share of TK. 10 each. 11.02 Issued, Subscribed and fully Paid-up Capital: Issued, Subscribed and fully Paid-up Capital is 40,00,00,000 share of TK. 10 each. 11.03 Share Holding Position: As at 31 December 2018 Name of the Share Holder % of Share holdings Al-Arafah Islami Bank Limited 60.50% KDS Garment industries Ltd. 5.00% Alhaj Abu Naser Mohammad Yeahea 4.50% Alhaj Kazi Md. Mofizur Rahman 2.00% Badshah Meah 1.75% Alhaj Eng. Kh. Mesbahuddin Ahmed 1.75% Alhaj Abus Salam 1.50% Mohammed Mahtabur Rahman 1.50% Islamic Commercial Insurance Co. Ltd. 1.25% Mohammed Haroon 1.00% Norrish Poultry and Hatchery ltd. 1.00% P & I International Limited 1.00% Niaz Ahmed 0.75% Mohammed Emadur Rahman 0.75% Mohammed Oliur Rahman 0.75% Badiur Rahman 0.63% AI- haj Md. Harun-ar-Rashid Khan 0.63% KYCR Coils Industries Ltd. 0.50% Alhaj Abdul Malek Mollah 0.50% Bangladesh Ship Brake Limited 0.50% Alhaj Nazmul Ahsan Khaled 0.50% Alhaj Abdus Samad 0.50% Md. Ashik Hossain 0.50% Farid Ahmed 0.50% A S M Mainuddin Monem 0.50% Kazi Abu Kauser 0.50% Mollah Mahmood Malek 0.50% Galco Steel Bangladesh ltd. 0.50% Faisal Ahmed 0.50% Kh Sakib Ahmed 0.50% Md. Liakat Ali Chowdhury 0.25% Ahmedul Haque 0.25% Sarker Mohammad Shameem Iqbal 0.25% Master Abul Kashem 0.25% Naba knit Composite Limited 0.25% Jainul Abedin Jamal 0.25% Kamal Uddin 0.25% N.Nasir Uddin 0.25% Majbura Begum 0.25% Asma Begum 0.25% Afroza Sultana 0.25% Shajjad Mustafa 0.25% Azad Mustafa 0.25% 183 Amount (In Taka) 31.12.2017 10,000,000,000 10,000,000,000 4,000,000,000 4,000,000,000 No. of Shares 242,000,000 20,000,000 18,000,000 8,000,000 7,000,000 7,000,000 6,000,000 6,000,000 5,000,000 4,000,000 4,000,000 4,000,000 3,000,000 3,000,000 3,000,000 2,500,000 2,500,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Amount (In Taka) 2,420,000,000 200,000,000 180,000,000 80,000,000 70,000,000 70,000,000 60,000,000 60,000,000 50,000,000 40,000,000 40,000,000 40,000,000 30,000,000 30,000,000 30,000,000 25,000,000 25,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 Al-Arafah Islami Bank Limited Annual Report 2018
184. Notes to the Financial Statement For the year ended 31 December 2018 Farhana Irin 0 .25% Tanveer Nawaz 0.25% Sk. Md. Samiul Islam 0.25% Mohammad Jahangir 0.25% Mollah Mazharul Malek 0.25% Mohammed Oheidul Alam 0.25% Sahana Ferdous 0.25% Md.Nurul Hoque 0.25% Mrs. Shamsun Nahar Begum 0.25% Md. Rafiqul Islam 0.25% Mohammad Fazlur Rahman 0.25% Anower Hossain 0.25% Akram Hussain 0.25% Miss Ruksana Mumtaz Hussain 0.25% Akhter Hussain 0.25% Akbar Hossain 0.25% TOTAL 100.00% 12.00 Borrowing from Bank: Borrowing from Al-Arafah Islami Bank Limited Motijheel Borrowing from AIBL Capital Management Limited Borrowing from Union Bank ltd. Borrowing from SIBL Borrowing from HaJJ Finance 13.00 Accounts Payable : Profit Payable for CML Profit Payable for SIBL Profit Payable for AIBL Motijheel Br. Profit Payable for UNION Bank Profit Payable for HAJJ Finance VAT, Salary Tax & AIT Payable Payable toCSE Payable to clients Bonus & Incentive& Accrued exp Employees gratuity fund Audit Fees Dividend payable Dividend adjustment clients Security Money IPO Application Process Account 14.00 Provision for Investment: Openig Balance Add : Provision for Investment Closing Balance 15.00 Provision for taxation : Openig Balance Add: Income tax provision during the year Less: Adjustment for the year 2010,2011,2012 Closing Balance Al-Arafah Islami Bank Limited Annual Report 2018 184 Amount (In Taka) 31.12.2018 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 400,000,000 Amount (In Taka) 31.12.2017 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 4,000,000,000 3,399,100,000 800,000,000 491,500,000 75,000,000 4,765,600,000 2,000,000,000 1,358,923,901 800,000,000 431,500,000 100,000,000 4,690,423,901 49,059,735 2,155,191 24,536,111 370,782 392,229 554,444 53,436,587 141,310 57,500 621,367 117,097 9,640,000 141,082,353 82,651,065 4,857,790 37,296,123 20,400,000 1,741,667 703,369 524,397 191,120,383 141,310 15,999,025 50,000 7,520,000 26,387 278,525 10,000 363,320,041 428,009,835 50,205,759 478,215,594 343,709,835 84,300,000 428,009,835 2,027,827,305 21,364,833 602,566,883 1,446,625,255 1,957,242,685 70,584,620 2,027,827,305
185. Notes to the Financial Statement For the year ended 31 December 2018 Amount (In Taka) Jan-Dec’2018 16.00 Investment Income Margin Profit income Profit on MSND 17.00 Profit paid on Borrowing : ICB Pronodona SIBL Borrowing from AIBLCML Union Bank ltd AIBL Motijheel Branch HaJJ Finance 18.00 Brokerage commission DSE CSE 19.00 Documentation & Maintenance Fess BO Documentation & Maintenance fees Margin documentation fees 20.00 Other Operating Income CDBL Income Cheque dishonour Charge Dividend income IPO Process Income BO Close charge Realized Capital gain Others 21.00 Hawla, Laga & CDBL Charges Hawla charge Laga charge CDBL Charges 22.00 Salary allowances& Contribution to P.F Salary allowances& Contribution to P.F Wages Security Services 23.00 Rents, Taxes, Insurance, Electricity etc. Rent Insurance Electricity bill 24.00 Honorarium & Meeting Expense Meeting & Honorariam 25.00 Postage, Telegram, Telephone & Stamps etc Postage, Telegram, Telephone & Mobole Stamps Photocopy 185 Amount (In Taka) Jan-Dec’2017 262,787,395 4,767,775 267,555,170 467,095,625 13,140,637 480,236,262 61,201,944 29,596,874 92,027,778 31,338,242 12,790,278 226,955,116 143,676 51,202,229 319,477,803 20,400,000 121,601,111 1,741,667 514,566,486 142,274,556 925,794 143,200,350 374,014,895 8,467,000 382,481,895 4,473,671 73,000 4,546,671 4,982,000 126,000 5,108,000 947,950 130,000 8,513,164 208,815 500 19,350,635 51,765 29,202,829 1,085,365 153,000 12,834,697 145,370 30,881,300 180,099 45,279,831 3,292 9,945,562 8,971,358 18,920,212 40,758 24,897,280 17,488,511 42,426,549 61,402,863 1,840,117 657,318 63,900,298 57,479,002 1,968,399 501,636 59,949,037 22,858,698 126,153 2,426,033 25,410,884 8,766,121 387,333 2,376,981 11,530,435 4,798,970 4,798,970 7,143,200 7,143,200 558,526 4,333 562,859 650,410 41,671 6,263 698,344 Al-Arafah Islami Bank Limited Annual Report 2018
186. Notes to the Financial Statement For the year ended 31 December 2018 Amount (In Taka) Jan-Dec’2018 26.00 Depreciation & Repairs to Properties Depreciation Repair & Maintenance 27.00 Other Expenses Computer Charge Bank Charge Petroleum Oil, Lubricant & WASA/ Gas. Entertainment Bonus & Incentive Emplyees Gratuity fund Leave encashment Travelling, Local conveyance & Saturday Allowance Internet & Online Charge Registration Expenses Training Expenses Crokerage Audit Fees Utilities bill Vat Miscellaneous (Note-27.01) 27.01 Miscellaneous Subscription Renewal Newspaper Mandetory Leave IPO perticipation fees International communication service Agent commission Upkeep, wasing & cleaning Miscellanous Investors Protection Closing Allowances EID Garcia Bank Guarantee 6,218,449 1,150,189 7,368,638 5,428,310 1,765,664 7,193,974 215,900 7,037 947,257 1,916,044 5,005,101 1,998,250 511,134 2,166,667 770,000 10,000 57,500 387,805 8,755 2,985,270 16,986,720 276,823 286,478 803,476 2,305,262 10,926,405 15,999,025 2,079,050 584,136 2,242,931 659,500 249,075 12,350 100,000 225,700 43,889 1,825,724 38,619,824 719,458 56,714 1,079,712 474,149 37,257 29,004 30,776 44,500 53,700 460,000 2,985,270 858,807 54,570 221,825 3,000 98,500 40,877 108,151 55,000 39,994 345,000 1,825,724 28 Restatement due to changes in accounting policies & prior period error 28.01 Impact on company’s Statement of Financial Position Retained earnings Balance at 1 January 2016, as previously reported 51,864,963 Impact of changes in accounting policies 1,434,529 Restated balance at 1 January 2016 53,299,492 Balance at 31 December 2017, as previously reported 130,208,335 Impact of changes in accounting policies as at 1 January 1,434,529 Impact of changes in accounting policies during the year 2017 277,959 Restated balance at 31 December 2017 131,920,823 28.02 The change did not have any impact on Statement of Comprehensive Income 29 Related Party Transactions SL No. Name of the Party 1 AIBL Capital Management Limited 2 Al-Arafah Islami Bank Limited Al-Arafah Islami Bank Limited Annual Report 2018 Relationship Group Entity Group Entity 186 Amount (In Taka) Jan-Dec’2017 Nature of Transaction Profit Paid Cash at Bank Borrowing from Bank Profit Payable Profit Paid Deffered Tax Assets 1,434,529 1,434,529 1,434,529 277,959 1,712,488 Balance 29,596,874 71,397,766 3,399,100,000 2,155,191 31,338,242
187. 187 Al-Arafah Islami Bank Limited Annual Report 2018 255 ,864 991,752 3,005,154 54,813,476 Furniture & Fixture Wood Total 56,446,569 991,752 - 1,633,093 - - - - Online Software 1,633,093 - - - - - - - - - - Dispopsal/ Adjustment Intangible Assets - 4,420,095 Computer 261,650 134,568 9,923,176 316,832 - - 19,800 319,870 Addition during the Year Office Equipment Furniture & Fixture - Steel 18,062,939 2,946,884 Online Hardware Motor Car 1,203,374 14,935,022 Balance as on January 1, 2018 Computer Accessories Interior Decoration Tangible Asset Particular Cost 57,438,321 1,633,093 1,633,093 55,805,228 3,261,018 4,420,095 10,184,826 451,400 18,062,939 2,946,884 1,223,174 15,254,892 Balance as on December 31, 2018 20% 10% 20% 20% 10% 20% 20% 20% 10% Rate % 37,733,329 1,339,144 1,339,144 36,394,185 1,880,257 4,101,595 9,874,276 139,586 9,746,436 2,901,234 1,203,374 6,547,427 Balance as on January 1, 2018 6,218,449 293,948.0 293,948.0 5,924,501.1 321,837.4 318,499.0 83,053.2 41,775.8 3,612,587.8 45,649.0 3,300.0 1,497,799.0 Charge during the Year - - - - - - - - - - - Adjustment Depreciation Fixed Assets Schedule As at December 31, 2018 43,951,778 1,633,092 1,633,092 42,318,686 2,202,094 4,420,094 9,957,329 181,362 13,359,024 2,946,883 1,206,674 8,045,226 Balance as on December 31, 2018 13,486,543 1 1 13,486,542 1,058,924 1 227,497 270,038 4,703,915 1 16,500 7,209,666 Written Down Value as on December 31, 2018 Annexure-A
188. Auditor ’s Report on the Financial Statements of AIBL Capital Management Limited for the Period ended December 31, 2018
189. Independent Auditor ’s Report To the Shareholders of AIBL Capital Management Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of AIBL Capital Management Limited, which comprise the statement of financial position as at December 31, 2018, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements give a true and fair view of the financial position of AIBL Capital Management Limited as at December 31, 2018 and its financial performance and its cash flows for the period from January 01, 2018 to December 31, 2018 then ended in accordance with International Financial Reporting Standards (IFRs). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Going Concern The financial statements of the Company have been prepared using the going concern basis of accounting. The use of this basis of accounting is appropriate unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. As part of our audit of the financial statements, we have concluded that management’s use of the going concern basis of accounting in the preparation of the Company’s financial statements is appropriate. Management has not identified a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern, and accordingly none is disclosed in the consolidated financial statements of the Company. Based on our audit of the financial statements of the Company, we also have not identified such a material uncertainty. However, neither management nor the auditor can guarantee the Company’s ability to continue as a going concern. Other Matter The financial statements of AIBL Capital Management Limited for the year ended December 31, 2018 were audited by HUSSAIN FARHAD & CO., Chartered Accountants; who expressed an unmodified opinion on those financial statements on December, 2018. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the planning and performance of the audit. We also:  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are 189 Al-Arafah Islami Bank Limited Annual Report 2018
190. appropriate in the circumstances , but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.  Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We are also required to provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Legal and Regulatory Requirements In accordance with the Companies Act 1994, we also report the following: a) We have obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; b) In our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; c) The statement of financial position, statement of profit or loss and other comprehensive income and statement of cash flows dealt with by the report are in agreement with the books of account and returns; Place, Dhaka Date: 5th March 2019 Al-Arafah Islami Bank Limited Annual Report 2018 190 Hussain Farhad & Co. Chartered Accountants
191. Statement of Financial Position As at 31 December 2018 Particulars Notes 31 .12.2018 Taka 31.12.2017 Taka ASSETS: Non - Current Assets Property, Plant & Equipment 4.00 Intangible Assets 4.01 405,848 557,583 112,860 206,415 518,708 763,998 17,829,822 Current Assets: Investment in listed securities 5.00 104,367,120 Cash and Cash Equivalents 6.00 10,757,261 10,374,878 Trade and Other Receivables 7.00 1,492,277 90,403,208 Accrued Income 8.00 965,833 - Investment 9.00 63,961,375 1,371,871,619 Advance Income Tax 10.00 Balance with AIBL CMSL Total Assets 13,564,532 12,086,806 349,678,365 617,368,944 544,786,765 2,119,935,277 545,305,472 2,120,699,275 EQUITY AND LIABILITIES: Shareholders’ Equity Share Capital 11.02 500,000,000 500,000,000 Retained Earnings 12.00 6,898,745 (27,901,592) 506,898,745 472,098,408 - 1,533,122,500 317,808 53,798,535 Total Shareholders’ Equity Current Liabilities Borrowing from Bank (AIBL) Accounts Payable 13.00 Provision for Taxation 21.00 22,516,587 19,656,412 Provision for Investment 22.00 15,572,332 42,023,421 Total Liabilities Total Equity and Liabilities NAV 38,406,727 1,648,600,868 545,305,472 2,120,699,275 10.14 9.44 The annexed notes from an integral part of these financial statements Director Director CEO This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 05 March 2019 Hussain Farhad & Co. Chartered Accountants 191 Al-Arafah Islami Bank Limited Annual Report 2018
192. Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December , 2018 Particulars Notes 31.12.2018 Taka 31.12.2017 Taka Revenue Investment Income Taka14 31,088,247 320,713,282 Less: Borrowings Expense Taka15 32,882,161 329,918,790 (1,793,914) (9,205,508) 25,514,809 33,655,730 25,514,809 33,655,730 23,720,895 24,450,222 8,894,238 10,168,047 Net Investment Income Operating Income Taka16 TOTAL OPERATING INCOME Less: Operating Expenses Salary allowances & Contribution to P.F Taka17 Board Meetting Expense Rents, Insurance, Lighting etc. Postage, Telegram, Telephone & Stamps Taka18 Audit fees 190,200 244,800 1,807,125 1,089,878 66,947 62,400 25,000 25,000 Stationery, Printing, Advertisement Taka19 147,292 200,557 Depreciation, Amortization & Repairs to Properties Taka4 264,610 182,464 Other Expenses Taka20 1,116,059 1,415,467 12,511,471 13,388,613 11,209,423 11,061,610 26,451,089 - 37,660,512 11,061,610 2,860,175 5,015,011 TOTAL OPERATING EXPENSES Operating Profit/(loss) before provision and tax Taka22.01 Add back Provision for investments from previous years Profit/(loss) before tax Taka21.01 Less: Income tax expense Net Profit after Tax & Provision Retained earning Carried forward Earning per Share (EPS) 34,800,337 6,046,599 (27,901,592) (33,948,191) 6,898,745 (27,901,591.78) 0.14 0.12 The annexed notes from an integral part of these financial statements Director Director CEO This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 05 March 2019 Al-Arafah Islami Bank Limited Hussain Farhad & Co. Chartered Accountants Annual Report 2018 192
193. Statement of Changes in Equity For the year ended 31 December , 2018 Particulars Share Capital Balance as at 01 January, 2018 Total (27,901,592) 472,098,408 - 34,800,337 34,800,337 500,000,000 6,898,745 506,898,745 Net Profit for the period Balance as at 31 December , 2018 Retained Earnings 500,000,000 Statement of Changes in Equity For the year ended 31 December, 2017 Particulars Share Capital Balance as at 01 January, 2017 Net Profit for the period Balance as at 31 December , 2017 Director Retained Earnings Total 500,000,000 (33,948,191) 466,051,809 - 6,046,599 6,046,598 500,000,000 (27,901,592) 472,098,407 Director CEO Place: Dhaka Dated: 05 March 2019 193 Al-Arafah Islami Bank Limited Annual Report 2018
194. Statement of Cash flows For the year ended 31 December , 2018 31.12.2018 Taka Particulars 31.12.2017 Taka Cash flows from operating activities Investment income receipt in Cash 31,088,247 320,713,282 (32,882,161) (329,918,790) Cash payments to employees (8,894,238) (10,168,047) Received from other operating activities (item-wise) 25,514,809 33,655,730 Profit paid on deposits and borrowing Paid for other operating activities (item-wise) (3,352,623) (3,038,102) Advance income tax paid (1,477,726) (1,088,401) 9,996,308 10,155,673 1,221,372,945 530,071,699 87,945,098 326,894,481 (1,533,122,500) 138,190,063 Increase/Decrease of Accounts payable (53,480,727) (449,192,935) Increase/Decrease of other assets (item-wise) Operating profit before changes in operating assets and liabilities Changing in Operating assets & liabilities Increase/Decrease Investment Increase/Decrease of Accounts receivable Increase/Decrease of Borrowing 267,690,579 (574,755,142) Cash receipt from operating activities (9,594,605) (28,791,834) A. Net Cash from operating activities 401,703 (18,636,161) Cash flows from investing activities: Purchase of property, plant and equipment (19,320) (410,733) B. Net cash flows from investing activities (19,320) (410,733) Increase in Share Capital - - C. Net cash flows from financing activities - - 382,383 (19,046,894) - - 382,383 (19,046,894) Cash flows from financing activities D. Net increase in cash and cash equivalent (A+B+C) E.Effects of exchange rate changes on cash and cash-equivalents F.Net increase in cash and cash equivalent (D+E) G.Cash & Cash Equivalents at the beginning of the year 10,374,878 29,421,771 H.Cash & Cash Equivalents at the end of the year 10,757,261 10,374,878 0.008 (0.037) Net Operating Cash Flow per Share Director Director Place: Dhaka Dated: 05 March 2019 Al-Arafah Islami Bank Limited Annual Report 2018 194 CEO
195. Notes to the Accounts As at and for the period ended 31 December , 2018 1.00 Significant Accounting Policies and other materials information 1.01 Legal Form of the Enterprise: The Company has been incorporated under the Companies Act (Act XVIII) of 1994 as a private limited company namely AIBL Capital Management Limited on 25th October2011. The Company obtained the Certificate of Commencement of Business on 25th October, 2011. The Company is a subsidiary company of Al-Arafah Islami Bank Limited. 1.02 Address of Registered Office and Principal Place of Business: The principal place of business is the Registered Office at Level-15, ‘Al- Arafah Tower’ 63, Purana Paltan, Dhaka-1000. 1.03 Nature of Business Activities: AIBL Capital Management Ltd. is a full-fledged merchant bank licensed by Bangladesh Securities & Exchange Commission (BSEC). The main objective of the company is to carry out the activities of a full-fledged merchant banking such as Issue Management, Portfolio Management, Underwriting and Corporate Advisory services etc. as per Securities Exchange Commission (Merchant Banker and Portfolio Manager) Regulation, 1996. 2.0 Basis for preparation of financial statements: 2.01 Statement of Compliance: The financial statements of AIBL Capital Management Limited have been prepared in accordance with the DFIM Circular no 11 dated 23rd December 2009 and requirement of the Companies Act, 1994, the Security Exchange Rules 1987, Guidelines from Bangladesh Bank, International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS) and other applicable laws and regulations of Bangladesh Securities & Exchange Commission. 2.02 Measurement bases used in preparing the Financial Statements: The elements of financial statements have been measured on “Historical Cost” basis, which is one of the most commonly adopted base provided in “the framework for the preparation and presentation of financial statements” issued by the International Accounting Standard Board (IASB). 2.03 Going Concern: Financial statements have been prepared on going concern basis as there was no significant doubt or uncertainty to continue the operation of the company in the foreseeable future. 2.04 Fixed assets and depreciation: Fixed Assets are stated at cost less accumulated depreciation. Depreciation is charged on the cost of fixed assets in order to write off such amounts over the estimated useful lives, using the straight-line method in accordance with IAS-16. Depreciation for full month is charged on additions irrespective of date when the related assets are put into use and no depreciations is charged for the month of disposal. The rates of depreciation used to write off the amount of assets are as follows: Office Equipment Computer Online Software 2.05 i) ii) iii) iv) v) Components of financial statements: According to International Accounting Standard (IAS) - 1, “Presentation of Financial Statements” the complete set of Financial Statements includes the following components: Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes, comprising a summary of significant accounting policies and other explanatory information. 3.00 Principal Accounting Policies: 3.01 Cash flow Statement: Cash Flow Statement is prepared in accordance with IAS -7 “Cash Flow Statement”. The cash flow from the operating activities have been presented under Direct Method as prescribed by the Securities and Exchange Rules 1987 and considering the provisions of Paragraph 18(a) of IAS-7 which provides that “Enterprises are encouraged to report Cash Flow from Operating Activities using the Direct Method”. 20% 20% 20% 195 Al-Arafah Islami Bank Limited Annual Report 2018
196. Notes to the Accounts As at and for the period ended 31 December , 2018 3.02 Revenue Recognition: Income is recognized on accrual basis, such income is calculated considering daily margin loan balance of the respective parties. Income is recognized on quarterly basis. 3.03 Event after balance sheet date: IAS 10: Events after the reporting period, dividend declared after the reporting period should not be classified as a liability at the reporting period as the proposed dividend does not represent an Obligation under IAS 37: Provision, Contingent Liabilities and Contingent Assets. 3.04 Cash & Cash Equivalent : Cash and cash equivalents includes cash in hand, cash at bank and fixed deposits which are held and are available for use by the company without any restriction. There is insignificant risk of change in the value of the above items. 3.05 Provision on expenses: Provision for expenses is recognized when the company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefit will be required to settle the obligations and reliable estimate of the amount can be measured. 3.06 Provision for taxation Provision for current income tax is made on the accounting profit of the Company without considering taxable allowances and disallowances. 3.07 General: a) The financial statements are presented in Bangladeshi Taka (BDT) Currency, which is the company’s functional currency. b) Figures in these notes and annexed financial statements have been rounded off to the nearest Taka. c) Figures relating to previous year have been rearranged wherever considered necessary to conform with current year’s presentation. Notes to the Accounts As at and for the period ended 31 December, 2018 31.12.2018 Taka 4 4.01 Property, Plant & Equipment Cost : Opening balance Add: Additions during the year Closing balance (A) Depreciation : Opening balance Add: Charge for the year Closing balance (B) Written down value (A-B) Details have been shown in Schedule-A Intangible Assets Cost : Opening balance Add: Additions during the year Closing balance (A) Depreciation : Opening balance Add: Charge for the year Closing balance (B) Written down value (A-B) Details have been shown in Schedule-A Al-Arafah Islami Bank Limited Annual Report 2018 196 31.12.2017 Taka 855,277 19,320 874,597 444,543 410,734 855,277 297,694 171,055 468,749 405,848 208,785 88,909 297,694 557,583 467,775 467,775 467,775 467,775 261,360 93,555 354,915 112,860 167,805 93,555 261,360 206,415
197. Notes to the Accounts As at and for the period ended 31 December , 2018 31.12.2018 Taka 5 Investment in listed securities Investment in listed securities (Schedule-B) 104,367,120 104,367,120 31.12.2017 Taka 17,829,822 17,829,822 This amount represents investment in listed securities, market value of which is BDT 97,114,604 as on 31 December 2018 resulting an unrealised loss of BDT 7,252,516 on which at least 20% provision should be made as per BSEC circular no. SEC/CMRRCD/2009-193/203 dated 28 December 2017. Accordingly, provision for diminution in value of investments of an amount of BDT 1,450,503 has been made. Refer Note 22.01. 6 7 8 9 10 11 11.01 11.02 11.03 12 13 Cash at Bank Al Ararah Islami Bank Ltd ( Customers Portfolio A/C) Al Ararah Islami Bank Ltd ( Corporate A/C) Trade and Other Receivables Profit on Bi-Muazzel with AIBL CMSL Receivable from Panel Broker Receivable from Dividend Income 5,609,487 5,147,775 10,757,261 4,530,511 5,844,367 10,374,878 1,492,277 1,492,277 82,651,065 224,994 7,527,149 90,403,208 965,833 965,833 - 2,299,905 9,988,000 673,470 51,000,000 63,961,375 2,414,667 9,988,000 545,050 1,358,923,901 1,371,871,619 12,086,806 1,477,726 13,564,532 10,998,405 1,088,401 12,086,806 2,000,000,000 2,000,000,000 500,000,000 500,000,000 500,000,000 500,000,000 Amount in Tk. 490,000,000 10,000,000 500,000,000 Amount in Tk. 490,000,000 10,000,000 500,000,000 % of Shareholdings 98.00% 2.00% 100.00% % of Shareholdings 98.00% 2.00% 100.00% (27,901,592) 34,800,337 6,898,745 (33,948,191) 6,046,598 (27,901,592) Accrued Income Accrued profit on MTDR Investment Margin Investment Investment in Placement Share IPO FPM Bidding and Subscription Investment in AIBL CMSL (Bi-Muazzel) Investment in Al-Arafah Islami Bank Ltd. for MTDR Advance Tax Opening Balance Additions during the year Less : Settlements of previous years Closing Balance Share Capital Authorised Capital The authorised Capital of the Company is 20,00,00,000 Ordinary Share of TK. 10 each. Issued, Subscribed and fully Paid-up Capital Issued, Subscribed and fully Paid-up Capital is 5,00,00,000 share of TK. 10 each. Share Holding Position : Name of the Share Holder Al-Arafah Islami Bank Limited AIBL Capital Market sevices Limited TOTAL Percentage of Share Holding Position : Name of the Share Holder Al-Arafah Islami Bank Limited AIBL Capital Market sevices Limited TOTAL Retained Earnings: Opening balance Add: Net profit for the year Closing balance Accounts Payable Profit on Borrowings Paid to Central Depository Bangladesh Ltd. CDS bill for the month of November-2017. Paid to Mr. Md. Shakil for IPO MEBPOY Prospectus Preparation Chittagong tour. Paid to Mr. Md. Rukonul Islam for IPO MEBPOY Prospectus Preparation Chittagong tour. 197 - Al-Arafah Islami Bank Limited 53,092,052 3,228 10,376 10,376 Annual Report 2018
198. Notes to the Accounts As at and for the period ended 31 December , 2018 Debited to Peoples Insurance Co. Ltd. for Utility Bill, Month of November-2017. Debited to Peoples Insurance Co. Ltd. for Office Rent, Month of December-2017. Arthosuchak for Online newspaper Arthosuchak advertisement month of Nov 2017. Paid to RNF Enterprise for visiting card printing Paid to Shama printing & packaging for visiting card printing (560*3%) Debited for Mobile Bill Allowances for the month of Dec-2017 Debited for Yearly Closing Allowances Paid to Sterling Interiors for Civil, Interior Decoration and Electric Line Establish Vat Paid for Civil, Interior Decoration and Electric Line Establish Ait Paid for Civil, Interior Decoration and Electric Line Establish Paid to Md Abu Taher for Excess amount of 34th Board Meeting Expenditure. Paid to Md. Abu Taher for Excess amount of 35th Board Meeting Expenditure. Paid to Md Abu Taher for Excess amount of 36th Board Meeting Expenditure. Paid to Md. Abu Taher for Excess amount of 37th Board Meeting Expenditure. Vat Paid for 37th Board Meeting Expenses. Al-Arafah Islami Bank Ltd. For Bata Shoe Dividend wrongly credited amount Ranks ITT Limited for installation and data connectivity charges, Month of November, 2018 Al-Arafah Islami Bank Ltd. for Leave Encashment 2018 Md. Hussai Ahmed Faruqi's Car Tax Token and Fitness certificate renewal 14 15 16 17 18 19 Investment Income Profit from Cash at Bank Less: Tax Deducted at source Margin Profit Income Service Charge Income Profit from Bai-Muazzel with AIBL CMSL Profit on MTDR Operating Income Capital Gain Dividend Income IPO Process income Income from dishonour cheque charge Issue Manager Fee Underwriting Commission BO Documentation CDBL for yearly rebates & Charge Income BO Maintanance, Renewal Fee Salary Allowances & Contribution to P.F. Salary and Allowance Leave Encashment Bangla Noboborsho Bonus Incentive & Festival Bonus Postage, Telegram, Telephone, Mobile & Stamps etc. Mobile Bill & Telephone Stationary, Printing, Advertisement etc. Advertisement Expense Printing & Stationary Annual Report 2018 31.12.2017 Taka 44,671 171,000 8,100 692 472 5,200 5,000 367,054 56,761 11,353 700 2,700 800 800 7,200 53,798,535 312,925 212,613 3 29,596,873 965,833 31,088,247 402,318 (40,232) 618,784 254,609 319,477,803 320,713,282 32,882,161 32,882,161 329,918,790 329,918,790 20,984,403 3,808,672 400 1,000 300,000 387,500 5,506 24,928 2,400 25,514,809 16,505,032 16,822,542 235 314,063 2,500 6,115 5,243 33,655,730 8,021,670 255,740 57,338 559,490 8,894,238 8,250,638 239,015 1,678,394 10,168,047 66,947 66,947 62,400 62,400 50,000 97,292 147,292 97,320 103,237 200,557 - Borrowings Expense Profit paid on Bai-Muazzel with AIBL Al-Arafah Islami Bank Limited 31.12.2018 Taka 42,338 5,952 255,740 13,778 317,808 198
199. Notes to the Accounts As at and for the period ended 31 December , 2018 20 21 21.01 22 22.01 31.12.2018 Taka Other Expenses BMBA Membership & Annual fees Registration fees of DSE Book Bidding Process Subscription, Renewal Fees RJSC return file & other expenses BSEC BINIYOG SHIKSHA TAHOBIL Donation. Entertainment Travelling Allowance Local Conveyance Newspaper, Journal, Periodicals & Books EID Gracia Trade licence renewal fees Office shifting expenses Crockery Bank Charges & Fees Saturday Allowances Car Registration and 1st year Car Insurance. Car Battery, Tyre, Fitness and Renewal Computer Accessories Repair & Maintenance Petty Cash Expenses TDS Expenses Vat Expenses Wages Internet and CDBL wan connectivity charges CDBL Charge IPO Bidding fee Company secretariat Honorarium Closing Allowance Provision for Tax Opening Balance Add: Income tax expense for the year (Note: 21.01) Closing Balance Income tax expense Operating Profit Less: Gain on Sale of Securities Less: Divident Income Total Business Income Income Tax of @ 37.50% on estimated Business Income Add: Tax on Gain on Sale of Securities (10%) Add: Tax on Divident Income (20%) Provision for diminution in value of investments Opening balance Addition of provision for the year Less: Adjust from provision of previous year Closing balance as at 31 Dec 2018 Provision for diminution in value of investments (A) Provision due against un-realized loss as on 31-12-2017 (B) Provision made on 31-12-2017 Provision carried forward un-realized loss (A-B) Increase/Decrease of loss during the year Provision made @ 20% for the year 2018 Less: Adjust from provision of previous year Net provision for the year ended 31 Dec 2018 199 31.12.2017 Taka 100,000 57,500 80,264 72,570 24,416 27,560 3,250 2,000 23,016 11,430 5,000 15,157 11,800 52,988 35,000 12,280 2,500 9,378 54,067 143,596 40,287 45,000 280,000 7,000 1,116,059 78,477 228,260 199,125 189,200 64,322 6,000 100,000 8,000 1,415,467 19,656,412 2,860,175 22,516,587 14,641,401 5,015,011 19,656,412 11,209,423 20,984,403 3,808,672 (13,583,652) 2,098,440 761,734 2,860,175 11,061,610 16,505,032 16,822,542 (22,265,964) 1,650,503 3,364,508 5,015,011 42,023,421 1,450,503 (27,901,592) 15,572,332 42,023,421 42,023,421 7,252,516 1,450,503 (27,901,592) (26,451,089) Al-Arafah Islami Bank Limited 100,000 10,000 100,000 50,000 50,000 41,552 18,726 25,102 9,000 137,703 - - Annual Report 2018
200. Al-Arafah Islami Bank Limited Annual Report 2018 200 467 ,775 467,775 467,775 MB Operating Software Total at 31 December 2018 Total at 31 December 2017 Particular As at 1 January 2018 444,543 Total at 31 December 2017 Intangible Assets 345,728 855,277 Computer 509,549 As at 1 January 2018 Total at 31 December 2018 Office Equipment Particular Property, Plant & Equipment Schedule-A - Addition during the year - - - 410,734 19,320 19,320 Addition during the year Disposal/ Adjustment during the year Cost Disposal/ Adjustment during the year Cost - - - - - - 467,775 467,775 467,775 As at 31 December 2018 855,277 874,597 345,728 528,869 As at 31 December 2018 20% Rate - 20% 20% Rate 167,805 261,360 261,360 As at 1 January 2018 208,785 297,694 207,034 90,660 As at 1 January 2018 93,555 93,555 93,555 Charge for the year Disposal/ Adjustment during the year Depreciation 88,909 171,055 69,146 101,910 Charge for the year Disposal/ Adjustment during the year Depreciation Property, Plant & Equipment As at 31 December, 2018 - - - - - - 261,360 354,915 354,915 As at 31 December 2018 297,694 468,749 276,180 192,570 As at 31 December 2018 206,415 112,860 112,860 Written Down Value as at 31 Dec 2018 557,583 405,848 69,548 336,299 Written Down Value as at 31 Dec 2018
201. Investment in Shares & Securities Stock at hand as on 31 December, 2018 Schedule- B SL Name of Company 1 ACFL* 2 ACIFORMULA 3 ADVENT* 4 No. of Shares Amount (at cost) Market Rate Market Amount 1,883 75,320 42 79,274 103,657 18,902,723 154 15,942,447 345 3,137 41 14,111 BXPHARMA* 87,385 9,567,034 79 6,912,154 5 ENVOYTEX* 358,906 14,031,564 36 13,028,288 6 ICBAMCLC1U 1,303,050 12,992,085 10 13,030,500 7 INTRACO 266 2,534 27 7,129 8 KTL 12,076 109,785 25 305,523 9 LANKABAFIN 107,500 4,069,173 23 2,461,750 10 LINDEBD* 4,200 5,257,796 1,198 5,033,280 11 MJLBD* 17,850 1,770,776 99 1,770,720 12 MLDYEING 7,260 60,500 30 215,622 13 ORIONPHARM* 95,725 4,023,887 37 3,522,680 14 PRIMELIFE* 166,460 8,432,706 58 9,638,034 15 PRIMETEX 1,000 39,337 36 36,100 16 RSRMSTEEL* 55,523 3,695,943 47 2,581,820 17 SILVAPHL 9,194 91,940 30 276,739 18 SKTRIMS 5,545 50,410 46 256,734 19 SQURPHARMA* 58,850 16,620,494 254 14,959,670 20 SSSTEEL 13,492 134,920 - - 21 VFSTDL 4,222 38,386 58 244,032 22 YPL 515,000 4,396,673 13 6,798,000 104,367,120 201 Al-Arafah Islami Bank Limited 97,114,604 Annual Report 2018
202. Auditor ’s Report on the Financial Statements of Millennium Infrmation Solution Limited for the Period ended December 31, 2018
203. Independent Auditor ’s Report To the Shareholders of Millennium Information Solution Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of MILLENNIUM INFORMATION SOLUTION LIMITED, which comprise the statement of financial position as at 31st December, 2018, and statements of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly in all material respects of the statement of financial position of MILLENNIUM INFORMATION SOLUTION LIMITED as at 31st December, 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs), the Company Act 1994 and other applicable laws and regulations. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Bangladesh and we have fulfilled our other ethical responsibilities in accordance these ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key Audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report. Other Information Management is responsible for the other information. The other information comprises all of the information other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, the Companies Act 1994 and other applicable laws and regulations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. 203 Al-Arafah Islami Bank Limited Annual Report 2018
204. Misstatements can arise from fraud or error and are considered material if , individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management but not for the purpose expressing the opinion on the effectiveness of the company’s internal control. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Company’s financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Report on other Legal and Regulatory Requirements In accordance with the Companies Act 1994 and other applicable laws and regulations, we also report the following: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; b) in our opinion, proper books of accounts as required by law have been kept by company so far as it appeared from our examination of these books; c) the statement of financial position and statement of profit or loss and other comprehensive income dealt with by the report are in agreement with the books of accounts and returns. Date: 09 May 2019 Al-Arafah Islami Bank Limited Khan Wahab Shafique Rahman & Co. Chartered Accountants Annual Report 2018 204
205. Statement of Financial Position As at December 31 , 2018 Notes Property, Plant & Equipment (at cost less Accu. Dep.) 4.00 Intangible assets: Amount in Taka 31.12.2018 Amount in Taka 31.12.2017 21,089,543 21,234,995 21,089,543 21,234,995 153,658,597 129,837,011 Software 5.00 152,377,018 127,652,171 Deferred expenses 6.00 1,281,579 2,184,840 153,376,877 175,894,820 Current assets: Advance, Deposit & Pre-payments 7.00 1,907,559 2,608,924 Accounts receivable 8.00 61,809,438 60,640,672 Investments 9.00 70,588,402 112,405,346 Cash & Cash equivalent 10.00 19,071,478 239,878 328,125,017 326,966,825 200,000,000 200,000,000 183,712,610 183,712,610 111,469,595 114,523,830 (28,544) - Total Property & Assets SHARE HOLDERS EQUITY & LIABILITIES: Authorized capital: 20,000,000 Ordinary shares @ Tk. 10 each Issued, subscribed & paid up capital: 18,371,261 Ordinary shares @ Tk. 10 each 11.00 Reserve & surpluses : AFS Reserve Share Premium 56,306,570 56,306,570 Retained Earnings 55,191,569 58,217,260 Current liabilities: 32,942,812 28,730,385 9,880,774 15,274,056 Accounts Payable 12.00 Advance against revenue 13.00 100,000 100,000 Loan/Quard from Bank 14.00 15,300,000 9,700,000 5,509,050 - 2,152,988 3,656,329 328,125,017 326,966,825 18,371,261 18,371,261 16.07 16.23 Dividend Payable Provision for Income Tax 15.00 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES Number of Shares Net Assets Value per share Director Director Managing Director This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 09 May 2019 Khan Wahab Shafique Rahman & Co. Chartered Accountants 205 Al-Arafah Islami Bank Limited Annual Report 2018
206. Statement of Comprehensive Income For the year ended December 31 , 2018 Particulars Notes Revenue 16.00 Less : Production expenses 17.00 Gross Profit Less : Operating expenses Amount in Taka 2018 Amount in Taka 2017 79,034,749 73,395,745 33,418,660 42,465,305 45,616,089 30,930,440 25,215,123 24,541,964 Direct, administration and general expenses 18.00 17,985,021 16,890,588 Sales and market development expenses 19.00 7,230,102 7,651,376 20,400,966 6,388,476 20.00 (12,649,376) 6,063,451 7,751,590 12,451,926 87,812 37,388 7,663,778 12,414,538 1,253,840 1,549,149 6,409,938 10,865,389 Operating Profit Add: Non-Operational Income/Loss Net Income before Financial Expenses Less : Financial expenses 21.00 Net Income before Tax Less: Income Tax 15.01 Net Income after Tax Other Comprehensive Income/(Loss) Unrealized Gain/Loss on Securities Available for Sale Total Comprehensive Income/(Loss) Number of Shares Earning Per Share (EPS) (28,544) - 6,381,394 10,865,389 18,371,261 18,371,261 0.35 0.59 The annexed notes form an integral part of these financial statements. The annexed notes form an integral part of these financial statements Director Director Managing Director This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 09 May 2019 Al-Arafah Islami Bank Limited Khan Wahab Shafique Rahman & Co. Chartered Accountants Annual Report 2018 206
207. Statement of Changes in Equity For the year ended December 31 , 2018 Retained Earnings Share Premium 183,712,610 57,967,260 56,306,570 - 297,986,440 Dividends - (9,185,629) - - (9,185,629) Income for the period - 6,409,938 - - 6,409,938 Unrealized Gain/Loss on Securities Available for Sale - - - (28,544) (28,544) - - - - 55,191,569 56,306,570 (28,544) 295,182,205 Retained Earnings Share Premium 183,712,610 47,351,871 56,306,570 - 287,371,051 Income for the period - 10,865,389 - - 10,865,389 Prior year Adjustment - (250,000) - - (250,000) 183,712,610 57,967,260 56,306,570 - 297,986,440 Particulars Balance as at January 01, 2018 Balance as at December 31, 2018 Particulars Balance at January 01, 2017 Balance as at December 31, 2017 Director Share capital 183,712,610 Share capital Fair Value Reserve Total equity Fair Value Reserve Director Total equity Managing Director This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 09 May 2019 Khan Wahab Shafique Rahman & Co. Chartered Accountants 207 Al-Arafah Islami Bank Limited Annual Report 2018
208. Statement of Cash Flows For the year ended December 31 , 2018 Amount in Taka 31.12.2018 Particulars A. Amount in Taka 31.12.2017 Cash flows from operating activities Net Profit 6,409,938 10,865,389 Adjustments to reconcile net income to net cash provided by Operating Activities: Depreciation expense 2,497,635 2,691,295 Amortization expense 13,668,478 12,888,282 Loss or gain on disposal of fixed assets 48,203 4,939 701,365 615,969 Increase in Accounts Receivable (1,168,766) (19,006,748) Decrease in Accounts Payable (5,393,282) 4,916,960 (28,544) - (250,000) - Decrease in Advance, Deposit & Pre-payments Increase in Unrealized Loss Prior period adjustment B. Decrease in Income Tax Payable (1,503,341) 1,149,149 Net Cash provided by operating activities 14,981,686 14,125,235 (2,413,686) (1,530,339) Cash flow from investing activities: Purchase of fixed assets Sales of old assets Investment in MTDR Investment in Share Market Investment in Software development Deferred expenses Net Cash used by investing activities C. 3,500 (1,260,913) 35,206,239 (5,331,010) (37,490,064) (19,741,982) - (124,500) 1,926,494 (27,985,244) 5,600,000 9,700,000 Cash flow from financing activities Bank Loan/Quard against MTDR Dividend paid D. 13,300 6,610,705 (3,676,579) - Proceeds from Issue of equity shares - - Cash provided by financing activities 1,923,421 9,700,000 Net increase/(decrease) in cash and cash equivalents (A+B+C) 18,831,601 (4,160,009) E. Opening cash and cash equivalents 239,878 4,399,887 F. Closing cash and cash equivalents (D+E) 19,071,479 239,878 Director Director Managing Director This is the Statement of Financial Position referred to in our separate report of even date Place : Dhaka Date : 09 May 2019 Al-Arafah Islami Bank Limited Khan Wahab Shafique Rahman & Co. Chartered Accountants Annual Report 2018 208
209. Notes to the Financial Statements For the year ended December 31 , 2018 1.00 Background of the company and nature of business: Millennium Information Solution Ltd. was incorporated as a private limited company on February 11, 2001 under The Companies Act 1994. The main objective of the Company is to carry on activities relating to developing software products and providing maintenance, support and cyber security services both to domestic and international clients. Over the years, MISL has established itself as the leading software developer, implementation and service provisioning company in Bangladesh which adheres to the rules of Islamic Shariah. On May 28, 2015 the company has become a subsidiary company of Al-ArafahIslami Bank Ltd. 2.00 Accounting policies & estimates: a. Basis of Accounting The accounts of the Company is being maintained at accrual basis on historical cost convention following the International Financial Reporting Standards (IFRS’s) as adopted by the Institute of Chartered Accountants of Bangladesh. b. Reporting period As the Company is a subsidiary company of a financial institute named Al-ArafahIslami Bank Limited; therefore income covers a financial period from January 01, 2018 to December 31, 2018 according to the section 2 (35) of “Income Tax Ordinance 1984”. c. Going Concern: Financial Statements have been prepared on going concern basis as there was no significant doubt or uncertainty to continue the operation of the Company in the foreseeable future. 3.00 Significant Accounting Policies: The accounting policies set out below have been applied consistently to the periods presented in these financial statements. 3.01 Property, Plant and Equipment and their depreciation: Depreciation on the property, plant and equipment has been charged at full on their opening written down value. The values of the property, plant and equipment have been shown at written down value and depreciation has been charged at rates varying from 10-15%. 3.02 Valuation of software development: This represents the cost allocated for Customized Software Ababil and Sylvia developing by the Company through various Programmers engaged on regular employment basis and related expenditure as per IAS-38 Para 24.4.5 (Intangible Assets). During the reporting period the Company has incurred total Tk. 37,490,064.00 for software development. 3.03 Amortization of non-current assets During the year amortization has been made on software development @10% and deferred expense @25% & 33.33%. 3.04 Income Tax: The income of the Company is tax exempted up to June 30, 2024 as per sixth schedule Part-A, Para-33 of Income Tax Ordinance 1984. Company’s Tax Identification Number (E-TIN) is 477932327703. 3.05 Reporting currency and recognition of foreign currency income: All the transactions are shown in Bangladesh Taka currency. The foreign currency transactions have been converted into Taka at the time of recognition/transaction. Foreign currency gains/losses were recognized at the time of receipt/payment of money. 3.06 Comparatives: Where essential, prior period’s figures have been rearranged to ensure ready comparability with the current periods presentation. All fraction amounts have been rounded off to the nearest Taka. 209 Al-Arafah Islami Bank Limited Annual Report 2018
210. Notes to the Financial Statements For the year ended December 31 , 2018 3.07 Financial Assets: Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at bank which are available for use by the Company without any restriction. i.Accounts Receivable Accounts Receivable represent the amounts due from customers for delivering products or rendering services. Accounts Receivable are initially recognized at cost which is the fair value of the consideration given in return. 3.08 Financial Liabilities: i.Accounts Payables The Company recognizes a financial liability when its contractual obligations arising from past events are certain and the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 3.09 Revenue recognition Revenue is recognized when service provided or invoice is raised against the service/product to the client in accordance with the contractual agreement or work order. 3.10 Financial income and expense Financial income comprises on MTDR’s and savings accounts profit. Income is recognized as it accrues, using the effective method. Financial expenses comprise bank commission and charges. 3.11 Statement of Cash flows Statement of Cash flows have been prepared and presented under indirect method in accordance with the requirements of IAS 7: Statement of Cash flows. 3.12 Events after reporting period Material events after the reporting period have been considered; appropriate adjustments and disclosures have been made in the financial statements. i. Approval of the financial statements Financial statements were approved by the 70th meeting of the Board of Directors held on April 24, 2019 Board has also approved the audited financial statements for the year ended December 31, 2018. ii. Dividend Board has recommended 6% cash dividend for the year ended December 31, 2018 by the 70th meeting of the Board of Directors subject to approval of the shareholders at 18th Annual General Meeting. Al-Arafah Islami Bank Limited Annual Report 2018 210
211. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 4 Property, Plant & Equipment Balance as on January 01, 2018 Add: Addition during the year Less: Adjustment during the year 5 Less: Accumulated Depreciation Balance as on December 31, 2018 Fixed Assets Details Shown in Schedule - A Software Development Balance as on January 01, 2018 Add: Addition during the year Less: Adjustment during the year 6 6.01 6.02 6.03 7 Less: Accumulated Amortization Balance as on December 31, 2018 Software Details Shown in Schedule - A-1 Deferred expenses Website Development and Renovation Marketing & Promoting Exp-Ababil ISO Certificate Note: 6.01 Note: 6.02 Note: 6.03 Website Development and Renovation Balance as on January 01, 2018 Add : Addition during the year Less : Amortization during the year @25% Balance as on December 31, 2018 Marketing & Promoting Exp-Ababil Balance as on January 01, 2018 Add : Addition during the year Less : Amortization during the year: 25% Balance as on December 31, 2018 ISO Certificate Balance as on January 01, 2018 Add : Addition during the year Less : Amortization during the year 33.33% Balance as on December 31, 2018 Advance, Deposit & Pre-payments Balance as on January 01, 2018 Add : Addition during the year 211 Amount in Taka Dec 31, 2017 30,115,013 2,413,686 32,528,699 283,230 32,245,469 11,155,927 21,089,543 28,610,404 1,530,339 30,140,743 25,730 30,115,013 8,880,018 21,234,995 153,415,973 37,490,064 190,906,037 190,906,037 38,529,019 152,377,018 133,673,991 19,741,982 153,415,973 153,415,973 25,763,802 127,652,171 52,250 1,150,314 79,016 1,281,579 78,375 1,948,457 158,008 2,184,840 78,375 78,375 26,125 52,250 104,500 104,500 26,125 78,375 1,948,457 1,948,457 798,144 1,150,314 2,721,601 20,000 2,741,601 793,144 1,948,457 158,008 158,008 78,992 79,016 237,000 237,000 78,992 158,008 2,608,924 1,042,628 3,651,552 3,224,893 802,625 4,027,518 Al-Arafah Islami Bank Limited Annual Report 2018
212. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 Less: Adjustment during the year Balance as on December 31, 2018 Break-up of Advance, Deposit & Pre-payments Advance Income Tax Paid at sources Advance Income Tax Paid at Source-MTDR/FDR Advance Income Tax Paid at Source-on AIBL SND AC#5406 Advance Income Tax paid for Car Advance Income Tax paid for Share Dividend Advance to High Tech Park for Office Rent Advance for Garage Rent Security deposit to Spectrum Eng. (For CID) Security Deposit for BG/PG/APG (From AIBL) Deposit for International Roaming for CEO Mobile Short Term Loan to BVC & ATCPIL Advance against salary Mr. Shahin Advance against salary Abu Sayed Advance against salary Kaysar Ahmed Advance against salary Muhammad Gulam Rabbani Khan Advance against salary Md. Mojidul Islam Advance against Salary Mohammad Maksudur Rahman Advance against Salary Md. Rezaul Karim 8 9 9.01 Accounts receivable Balance as on January 01, 2018 Add: Addition during the year Less: Adjustment during the year Balance as on December 31, 2018 Accounts receivable Details Shown in Schedule - B Investments Investment in FDR/MTDR Tk. Note: 9.01 Investment in shares Note: 9.02 Balance as on December 31, 2017 Investment in FDR/MTDR Balance as on January 01, 2018 Add: Investment during the year Add: Net Profit (Gross Profit less Excise Duty) Less: Income Tax deduct at source Less: Encashment Balance as on December 31, 2018 MTDR Details Shown in Schedule - D Al-Arafah Islami Bank Limited Annual Report 2018 212 Amount in Taka Dec 31, 2017 1,743,993 1,907,559 1,418,594 2,608,924 31,578 674,055 6,552 220,000 226,375 540,000 6,000 5,000 150,000 20,000 - 75,107 821,782 8,774 220,000 345,673 540,000 5,000 144,750 20,000 197,838 30,000 70,000 40,000 40,000 50,000 20,000 - 8,000 1,907,559 2,608,924 60,640,672 63,421,711 124,062,383 62,252,945 61,809,438 41,633,924 61,206,331 102,840,255 42,199,582 60,640,672 57,650,208 12,938,194 70,588,402 64,260,913 48,144,433 112,405,346 64,260,913 3,228,491 67,489,403 352,349 9,486,847 57,650,208 63,000,000 3,494,063 66,494,063 351,206 1,881,944 64,260,913
213. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 9.02 Amount in Taka Dec 31, 2017 Investment in Shares This balance consists of as follows : Shares in Public Listed Company Cost Value ACTIVEFINE 1,109,922 1,128,000 BRACBANK 1,426,684 1,454,000 BXPHARMA 1,234,699 1,249,780 722,679 734,600 2,148,560 2,212,000 894,815 889,700 GP SINGERBD SQURPHARMA 10 10.01 SUMITPOWER 1,162,281 1,182,000 UPGDCL 4,267,098 4,088,114 12,966,738 12,938,194 Cash & bank balance Cash in hand Note: 10.01 154,370 65,794 Cash at bank & other accounts Note: 10.02 18,917,108 174,084 19,071,478 239,878 149,124 60,548 5,246 5,246 154,370 65,794 115,833 78,876 Dutch Bangla Bank Ltd, Motijheel Foreign Ex Br. 105-110-18205 4,702 6,887 Social Islami Bank Ltd. Motijheel Foreign Ex Br. 018-133-11673 6,948 1,733 Cash in hand Local currency with petty cash A/C in BDT Foreign Currency (Converted into BDT) 10.02 Market Value Cash at bank and other institute Bank Name & Branch A/C No. Al-Arafah Islami Bank Ltd, Motijheel Br. SND-0021220005406 AIBL Capital Market Services Ltd. BOID: 1204290059327175 77,757 86,588 18,711,867 - 18,917,108 174,084 Mr. Mahmud Hossain (1,620,341 Shares @ of Tk. 10 each) 16,203,410 16,203,410 Mr. Fokhruz Zaman (1,519,070 Shares @ of Tk. 10 each) 15,190,700 15,190,700 Mr. Md. Iftear Zahid (1,260,987 Shares @ of Tk. 10 each) United Securities Limited. BOID: 1204780059327170 11 Issued, subscribed & paid up capital 12,609,870 12,609,870 Mr. Didarul Islam Chowdhury (506,358 Shares @ of Tk. 10 each) 5,063,580 5,063,580 Mr. Saiful Alam (156,816 Shares @ of Tk. 10 each) 1,568,160 1,568,160 Mr. Syed Azmal Hossain (843,938 Shares @ of Tk. 10 each) 8,439,380 8,439,380 Mr. Anir Chowdhury (843,938 Shares @ of Tk. 10 each) Bengal Venture Capitals (2,000,470 Shares @ of Tk. 10 each) Asian Tiger Capital Partners Investments Ltd. (250,000 Shares @ of Tk. 10 each) Al-Arafah Islami Bank Limited (9,369,343 Shares @ of Tk. 10 each) 213 8,439,380 8,439,380 20,004,700 20,004,700 2,500,000 2,500,000 93,693,430 183,712,610 93,693,430 183,712,610 Al-Arafah Islami Bank Limited Annual Report 2018
214. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 12 13 Accounts Payable Balance as on January 01, 2018 Add : Addition during the year Less : Adjustment during the year Balance as on December 31, 2018 Accounts receivable Details Shown in Schedule - C Advance against Revenue Balance as on January 01, 2018 Add : Addition during the year Less : Adjustment during the year Balance as on December 31, 2018 Advance from AIBL Advance from BHEET IT 14 15 15 Loan/Quard from Bank Balance as on January 01, 2018 Add. Received during the period Add. Profit charged by bank Less: Loan refund Balance as on December 31, 2018 Provision for Income Tax Balance as on January 01, 2018 Add : Provission made during the period Add : Excess charge during the period Less: Advance Income Tax adjusted Less : Income Tax paid during the year Balance as on December 31, 2018 Income Tax Tax on SND Account’s Income 35% Tax on MTDR Profit 35% Tax on Capital Gain from Share Trading 10% Tax on Dividend Income (Considering Exempted Tk. 25,000.00) 20% Amount in Taka Dec 31, 2017 15,274,056 74,324,495 89,598,551 79,717,777 9,880,774 10,357,096 68,122,263 78,479,359 63,205,303 15,274,056 100,000 14,665,748 14,765,748 14,665,748 100,000 100,000 100,000 100,000 12,152,686 12,252,686 12,152,686 100,000 100,000 100,000 9,700,000 7,400,000 17,100,000 1,800,000 15,300,000 9,700,000 9,700,000 9,700,000 3,656,329 1,253,840 74,520 4,984,689 868,712 1,962,989 2,152,988 2,507,180 1,549,149 4,056,329 400,000 3,656,329 28,545 1,129,972 95,323 1,253,840 15,768 1,222,922 189,408 121,052 1,549,149 *** “Over the income year Loss arises from Share Trading amounting Tk. 16,461,041.00 and it can not be set off due to lack of Capital gain (U/S-37 of ITO-1984.). This loss shall be carried forward up to next six successive Assessment year (U/S-40 of ITO-1984.)” 16.00 Revenue Software Devlopment Software IT Support & Maintnance Total Income: Al-Arafah Islami Bank Limited Annual Report 2018 Note 16.01 Note 16.02 214 40,478,622 38,556,127 79,034,749 41,101,517 32,294,228 73,395,745
215. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 16.01 Income from Software Development: TK. Al-Arafah Islami Bank Ltd Social Islami Bank Ltd Union Bank Limited Agrani Bank Limited The City Bank Ltd. Islamic Finance and Investment Limited (IFIL) ICB Islamic Bank IFIC Bank Ltd Dhaka Bank United Commercial Bank Ltd.(UCBL) Uttara Bank Ltd National Bank Ltd Flora Limited NRB Bank Ltd Haj Finance & Co Uddipon 16.02 Income from IT Support & Maintnance Al-Arafah Islami Bank Ltd Social Islami Bank Ltd Union Bank Ltd The City Bank Ltd. Lafarge Surma Cement Ltd AB Bank Ltd. Agrani Bank Ltd Hajj Finance Co. Dhaka Bank EXIM Bank Ltd IFIC Bank Ltd IFIL ICB Islamic Bank Ltd 17.00 Production expenses Directors’ Remuneration and allowance Salaries and Allowances to Production Officers Wages for Part Time Work Oracle Software Expense Travelling & Daily Allowance Offday & Overtime Allowance Leave Encashment Allowances Stationery Computer Accessories Conveyance Production Entertainment-Production 215 Amount in Taka Dec 31, 2017 19,484,500 10,825,000 2,585,012 1,917,000 326,110 600,000 560,000 250,000 525,000 294,000 312,000 2,500,000 300,000 40,478,622 17,961,706 5,651,000 2,387,498 1,278,000 135,000 150,000 834,313 1,880,000 1,176,000 1,248,000 8,200,000 200,000 41,101,517 14,786,313 9,717,984 4,213,170 2,251,500 1,464,000 1,435,404 1,299,300 574,164 652,207 252,585 1,752,000 157,500 38,556,127 12,865,577 6,606,553 4,263,045 2,135,250 1,672,605 1,435,404 480,000 762,300 574,164 818,180 418,650 262,500 32,294,228 2,653,333 15,376,983 30,546 23,100 163,520 180,381 - 2,353,333 25,686,311 112 27,055 27,500 168,925 142,259 - Al-Arafah Islami Bank Limited Annual Report 2018
216. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 Lunch Expense Training for Skill Devlopment Production Staff Refreshment Mobile Allowance VAT deduction on Software Development VAT deduction on Software Support Internet Expense Overseas Travelling Expenses Amortization of Software Development Exp Depreciation Exp. 18.00 Direct, administration and general expenses Directors’ Remuneration and allowance Salaries and Allowances Admin Contribution to Provident Fund Offday, Overtime & Driver Allowance Stationeries & Photocopy Printing Conveyance Lunch Expense Entertainment Business Promotion Expense Office Staff Refreshment Telephone, Mobile, Telex & Fax Expenses Electricity Bill Internet Expenses Vehicle Maintenance (Fuel, Mobil, Parking, Renewal etc) Insurance, Tax Token & Fitness Parking and Tool Postage & Courier Expenses Audit, Consultancy & Legal Expenses Fees, Forms, Registration & Renewals Advertisement Expense Cleaning & Washing Expense Office Rent Guard, Lift Man & Cleaner Allowance Office Maintenance Expenses Repair & Maintenance Office Equipments Newspaper & Periodical Stamp & Notary expense Meeting/Conference and Seminar Expenses Miscellaneous Expenses Bed debts Expenses Al-Arafah Islami Bank Limited Annual Report 2018 216 Amount in Taka Dec 31, 2017 528,204 118,000 233,610 159,300 156,105 2,000 195,816 12,765,217 832,545 33,418,660 388,596 156,542 193,935 15,281 234,280 176,807 7,250 11,990,021 897,098 42,465,305 1,453,334 5,964,080 2,267,535 1,058,196 104,226 103,713 126,734 22,835 95,119 320,243 330,657 91,616 13,005 1,453,334 5,201,703 2,112,825 2,580 113,091 50,590 30,818 20,100 179,317 215,988 349,677 58,400 180,417 12,420 870,509 638,113 37,357 37,610 1,825 300,000 345,881 25,534 126,356 2,160,000 360,000 141,330 65,440 8,949 10,705 256,068 49,722 32,355 5,370 140,000 307,023 15,300 116,461 2,160,000 360,000 492,610 19,000 10,395 9,885 379,920 248,633 51,666 179,109 84,500
217. Notes to the Financial Statements For the year ended December 31 , 2018 Amount in Taka Dec 31, 2018 Discount allowed to customer Loss on disposal of fixed assets Amortization Expense Depreciation exp 19.00 Sales and market development expenses Directors’ Remuneration and allowance Salaries and Allowances to Marketing Executives Conveyance-Marketing Lunch Expense Travelling & Daily Allowance Courier Expenses Advertisement Expense Bid Document Purchase Expenses Business Promotion Expense Marketing commission Depreciation Exp. Amortization of Marketing and Promoting Exp 20.00 Non-Operational Income/Loss Income (Profit) From SND Account Income (Profit) From MTDR Capital Gain/Loss on Share Trading Dividend Income 21.00 Financial Expenses Bank Charges BO Account Charges 217 48,203 105,117 832,545 17,985,021 Amount in Taka Dec 31, 2017 411 4,939 105,117 897,098 16,890,588 1,453,333 3,876,508 51,454 3,353 94,767 11,616 29,250 26,000 53,132 832,545 798,144 7,230,102 1,453,333 3,329,780 76,004 4,244 729,536 3,450 49,500 9,800 305,487 897,098 793,144 7,651,376 81,557.00 3,228,490.96 (16,461,040.86) 501,616.60 (12,649,376.3) 45,050 3,494,063 1,894,080 630,258 6,063,451 74,194 13,618 87,812 36,888 500 37,388 Al-Arafah Islami Bank Limited Annual Report 2018
218. Al-Arafah Islami Bank Limited Annual Report 2018 218 28 ,610,404 Balance as at 31.12.2017 1,530,339 2,413,686 - 10,000 76,950 - - 832,545 Marketing department 30,115,013 32,245,469 68,759 32,742 2,240,706 4,889,310 2,089,800 6,818,207 14,950,543 125,950 1,029,452 Balance as on 31.12.2018 15% 10% 15% 10% 10% 15% 10% 15% 15% Rate of Dep. (%) 6,202,015 8,880,019 62,580 10,447 898,469 929,585 488,427 3,624,269 2,401,123 34,951 430,168 Balance as on 01.01.2018 89,892.6 2,691,295 2,497,635 926.9 2,229.5 201,335.6 395,972.6 160,137.3 479,090.6 1,154,400.2 13,649.9 17,291 221,727 - - - - - 214,088 - - 7,639 Adjustment Depreciation Addition Total Depreciation expenses have been allotted to Production, Administration and Sales & Marketing department equally. 2,497,635 832,545 Total 832,545 Administration department Amount of TK. Production department Allocation of depreciation 25,730 283,230 - - - - - 272,730 - - 10,500 Disposal/ Adjustment Depreciation have been charged on reducing balance over the useful life. Note: 30,115,013 Balance as at 31.12.2018 22,742 68,759 2,163,756 Office Equipments Cookers and cutlery 4,889,310 Office decoration, partitions Books & periodicals 2,089,800 Furniture & Fixture 281,400 2,010,836 12,939,707 6,809,537 - 34,500 Addition 125,950 1,005,452 Balance as on 01.01.2018 Computer & accessories Motor vehicle Access Control System Power supply & electric equipment Particulars Cost Property, Plant & Equipment As at December 31, 2018 8,880,018 11,155,927 63,507 12,677 1,099,805 1,325,557 648,564 3,889,272 3,555,523 48,601 512,422 Balance as on 31.12.2018 21,234,995 21,089,543 5,252 20,066 1,140,901 3,563,753 1,441,236 2,928,935 11,395,020 77,349 517,030 Written down Value as on 31.12.2018 Schedule -A
219. 219 Al-Arafah Islami Bank Limited Annual Report 2018 5 ,329,364 153,415,973 133,673,991 HRMS Software – “Sylvia” Balance as at 31.12.2018 Balance as at 31.12.2017 19,741,982 37,490,064 1,558,328 - 35,931,736 Addition - - - - - Disposal/ Sales 153,415,973 190,906,037 6,887,692 5,856,320 178,162,025 Balance as on 31.03.2018 Note: 01) Amortization have been charged on reducing balance over the useful life. 02) Amortization have not been charged on this year’s devloped software. 5,856,320 142,230,289 Balance as on 01.01.2018 Mobile Banking Software “ABABIL” Islamic Core Banking Solution Particulars Cost 10% 10% 10% Rate of Dep. (%) - 25,763,802 546,792 849,166 24,367,844 Balance as on 01.01.2017 - 12,765,217 478,257 500,715 11,786,245 - - - - - Adjustment Depreciation Charged during the period Software As at December 31, 2018 25,763,802 38,529,019 1,025,049 1,349,881 36,154,089 Balance as on 31.03.2018 127,652,171 152,377,018 5,862,643 4,506,439 142,007,937 Written down Value as on 31.03.2018 Schedule -A-1
220. Statement of Accounts Receivable As at December 31 , 2018 Schedule-B Sl. No. A. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 B. 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Particulars Software Development: The City Bank Ltd. Al-Arafah Islami Bank-Ababil Core Al-Arafah Islami Bank-Ababil Treasury Al-Arafah Islami Bank-Ababil Audit Automation Agrani Bank Ltd Ababil AB Bank Limited-Ababil Social Islami Bank Limited-Ababil Social Islami Bank Limited-Ababil Agent Banking Social Islami Bank Limited-Mobile App Uddipan HRMS Union Bank _ Ababil Sonali Polaris-Rupali Bank_ABABIL-Sales Islamic Finance and Investment Limited (IFIL) BURO Bangladesh_Sylvia_Sales Dhaka Bank_ABABIL_Internet Banking-Sales ICB Islami Bank_Ababil FLORA LIMITED Hajj Finance Co. Ltd United Commercial Bank Ltd. Uttara Bank Ltd-ABABIL NRB Bank Ltd National Bank Ltd-ABABIL IT Support & Software Maintenance The City Bank Ltd.Support The City Bank Ltd. RTGS Support Lafarge Holcem Ltd._Support Al-Arafah Islami Bank-Ababil -Support AIBL_Ababil_BACPS_Support AIBL_Ababil_GoAML_Support AIBL_Ababil_CBS & ATMS Support AIBL_Ababil_Agent Banking_Support AIBL_Ababil_OBUS_Support AIBL_Ababil_RTGS AB Bank Ltd._Support Agrani Bank Ltd._Support EXIM Ababil Offshore Support Hajj Finance Co. Ltd_Support SIBL_ Ababil_Support SIBL_ Offshore Ababil_Support SIBL_Tran_API for WSDL Support SIBL_Ababil_RTGS_Support SIBL_Ababil_AGENT Banking_Support SIBL_Ababil_BACH-BACPS_MRC Union Bank Ltd_ Ababil_Support Union Bank Ltd_ Ababil_RTGS_Support IFIC Bank_Ababil_RTGS_Support IFIL Bank_Support Dhaka Bank_Internet Banking_Support ICB Islamic Bank_Ababil_RTGS_AMC TOTAL: Al-Arafah Islami Bank Limited Annual Report 2018 Addition during the year Adjustment/ Received 665,519 4,546,741 2,000,000 6,210,000 569,279 507,763 4,753,000 700,000 200,000 4,680,000 13,240,642 300,000 1,400,000 560,000 8,200,000 2,255,000 1,176,000 1,248,000 326,110.00 15,097,000.00 4,140,000.00 1,917,000.00 8,800,000.00 2,025,000.00 2,585,012.00 600,000.00 250,000.00 560,000.00 300,000 525,000.00 294,000.00 2,500,000.00 312,000.00 244,582.00 15,523,063.00 800,000.00 6,210,000.00 641,204.00 40,263 10,594,000.00 2,835,012.00 600,000.00 250,000.00 560,000.00 300,000 2,255,000.00 1,176,000.00 1,000,000.00 1,248,000.00 747,047 4,120,678 1,200,000 4,140,000 1,845,075 467,500 2,959,000 700,000 2,025,000 200,000 4,430,000 13,240,642 300,000 1,400,000 560,000 8,200,000 525,000 294,000 1,500,000 312,000 49,500 135,000 257,332 137,563 187,470 163,636 66,550 1,689,055 942,277 800,000 2,226,960 49,875 418,650 239,235 65,625 60,640,672 1,449,000.00 202,500.00 1,483,998.00 1,435,404.00 652,984.00 1,299,300.00 5,619,234.00 400,000.00 840,000.00 2,318,750.00 540,000.00 3,913,920.00 299,250.00 252,585.00 1,752,000.00 574,164.00 157,500.00 63,421,711 999,000.00 299,194.00 1,253,330.00 849,283.00 490,906.00 465,850.00 5,193,824.00 700,000.00 626,955.00 3,913,920.00 299,250.00 608,437.00 1,672,000.00 525,122.00 78,750.00 62,252,945 499,500 38,306 488,000 723,684 187,470 325,714 900,000 2,114,465 942,277 500,000 213,045 2,318,750 540,000 2,226,960 49,875 62,798 80,000 288,277 144,375 61,809,438 Balance as at 31.12.2017 220 Balance as at 31.12.2018
221. Statement of Accounts Payable & Provision As at December 31, 2018 Schedule-C Sl. No. Particulars 1 Directors’ Remuneration 2 Salaries & Allowances 3 Provident Fund 4 Accrued telephone, telex & fax expenses 5 Payable to Project Development Consultants 6 Car Maintenance Expanse 7 Desire Design 8 The Daily Financial Express Opening Adjustment/ Payment Addition Cl. Balance 267,500 3,610,000 3,610,000 267,500 5,457,635 57,875,293 61,706,660 1,626,268 357,422 4,535,070 4,495,442 397,050 - 53,866 51,228 2,638 150,000 1,440,000 1,470,000 120,000 88,000 1,056,000 1,056,000 88,000 6,000 0 - 6,000 17,250 17,250 17,250 17,250 1,983 46,200 47,658 525 3,181,506 2,520,000 3,181,506 2,520,000 40,000 50,000 40,000 50,000 2,174 114,786 115,655 1,305 9 STARgate Communications Ltd[Internet] 10 Hi-Tech Park Authority for Office Rent 11 Audit Fees Payable 12 Ranks ITT(Office-Internet) 13 Lunch Bill payable - 850,220 768,740 81,480 14 Amber IT Ltd[Internet] - - - - 15 Payable to Oracle - - - - 16 Payable to Inspire Computer & Technology. - - - - 17 Electric Bill 261,120 - 261,120 - 18 Marketing and Promoting cost payable for ‘Ababil’ 1,393,750 - - 1,393,750 19 Provision for Expenses 3,088,125 - 727,196 2,360,929 20 Income Tax DAS from Office Rent 108,000 - 108,000 - 21 Income Tax DAS from Consultants Payment 5,000 - - 5,000 22 Income Tax DAS from Remuneration 185,291 520,000 520,000 185,291 23 Income Tax DAS from Salaries and allowances 654,863 1,635,810 1,541,322 749,351 24 VAT payable 8,437 - - 8,437 15,274,056 74,324,495 79,717,777 9,880,774 TOTAL: 221 Al-Arafah Islami Bank Limited Annual Report 2018
222. Branches of AIBL DHAKA DIVISION Abdullahpur SME Branch Minnat Plaza , Abdullahpur Bazar, Abdullahpur, Keranigonj, Dhaka-1311, 01811487862 Alenga Branch Alenga Bus Stand, Alenga, Kalihati, Tangail 01977520019 Amin Bazar Branch MA Hossain Tower, Amin Bazar, Savar, Dhaka - 1348, 9034411-2, 01841123004 Ati Bazar Branch Manik Plaza, Ati Bazar , Keranigonj, Dhaka-1312 01833-330274 Azampur Branch 272 Shah Kabir Majar Road, Azampur, Chalaban, Daxminkhan, Dhaka; 48954592-3, 01817143928 Banani Branch (AD) 16, Kamal Ataturk Avn, Banani, Dhaka 9822250, Fax- 9822357, 01819255587 Bandar SME Branch 555/1, Wilson Road, Bandar Bazar, Narayanganj 766-1317-8, 01826-180327 Barmi Branch Shahjahan Fakir Bhaban, Barmi Bazar, Sreepur, Gazipur; 01847054694 Dilkusha Branch (AD) 63, Dilkusha C/A, Dhaka-1000 01766677411 Faridpur Branch 15/75, Mujib Sarak, Niltuli, Faridpur 0631-65366, 01864554466 Fulbaria Branch Haji Joynal Abedin Sarker Plaza, Fulbaria,Kaliakoir, Gazipur 01847054692 Gawsia Branch Bhai Bhai Complex, Rupgonj, Narayangonj 01791418011 Gazipur Branch Holding # K-280 , BIDC Road, Gazipur 4926-1102, 4926-1140, 01811-448051 Gulshan Branch (AD) Hosna Center, 106 Gulshan Avenue, Dhaka-1212 9863236, 01814652647 Gulshan Link Road Branch H # 204/B, Tejgaon, Gulshan Link Road, Dhaka 01711351761 Hazaribagh Branch 149, Hazaribagh bazar, Dhaka-1209 9611758-9, 01819-255297 Bashundhara Branch H # 262-263, Block - B, Bashundhara R/A, Dhaka. 01841226660 Head Office Corporate Branch Al-Arafah Towar (1st & 2nd Floor), 63, Purana Paltan (Daynik Bangla Mor), Dhaka-1000. 02-44 85 00 01(D), 01811409593 Bhagyakul Branch A Rashid Tower, Balasur Chowrasta,Sreenagar, Munshigonj 01841226671 Hemayetpur Branch Asha Plaza (1st Floor), Hemayetpur Bus Stand, Hemayetpur, Savar, Dhaka, 01811-448052 Bhairab Branch Munshi Bhaban, Kolapatty Mor, Bhairab, Kishorgonj 9471178, 01817-032726 Islampur Branch 29-31, Islampur Road, Dhaka-1100 57393800, 57393754, 01841226653 Bhelanagar Branch R. I. Shopping Complex (1st floor), Bhelanagar, Narshingdi; 9452295, 01811-487868 Jatrabari Branch (AD) 6 S.F. Sharak, West Jatrabari, Dhaka-1204 7554510, 7554477, 01847054693 Daxminkhan Branch L.K. Plaza, Daxminkhan Bazar, Daxminkhan, Dhaka-1230 8999042, 01817032728 Joydebpur Chowrasta Branch Chandona Chowrasta, Joydebpur, Gazipur-1700 49263958, 01912000458 Dhanmondi Branch (AD) H#54/1, R#4/A, Dhanmondi, Dhaka 58610913, 01710853872 Kalatia SME Branch Kabir Bazar, Kalatia Bazar, Keranigonj, Dhaka 7769157, 01760-938299 Al-Arafah Islami Bank Limited Annual Report 2018 222
223. Branches of AIBL Kaliakoir Branch College Road , Kaliakoir Bazar, Kaliakoir Gazipur; 01755505468 Mirpur Branch 3/A, Darus-Salam Road, Mirpur-1, Dhaka-1216 9008123, 9010623, 01811-449493 Kaligonj Branch Twin Tower Market, Aganagar, Kaligonj, Keranigonj Dhaka; 01819677740 Mirpur-10 Golchattar Branch 9/1 Adarsha School Market, Mirpur-10, Dhaka-1216 9011766, 01811-448055 Kamrangirchar Branch Hazi Kamal Super Market, Kamrangirchar, Dhaka-1211 55160200, 01825928909 Mohakhali Branch Arzed Chember, 13 Mohakhali C/A, Dhaka-1212 9852243, 9852259, 01811417659 Kapasia Branch Kapasia Bazar, Kapasia, Gazipur 029209393, 01671973077 Kathgora Bazar Branch Sarkar Plaza, Kathgora Bazar, Ashulia, Dhaka-1341 7792573, 01972582013 Kazirhat Branch Mosjid Market, Kazirhat, Jajira Shariatpur-8010; 01911664695. Kawranbazar Branch Dhaka Trade Centre, 99, Kazi Nazrul Islam Avenue, Kawran Bazar, Tejgaon, Dhaka-1215 9135309, 01748414849 Keranigonj Branch Haridia Shopping Complex, Kadamtoli, Keranigonj, Dhaka-1310, 7763100, 01956587196 Khilkhet Branch B-34/Ka, Khilkhet Super Market, Khilkhet, Dhaka-1229 58950051, 01937777077 Konapara Branch 958, Konapara Bazar, Demra, Dhaka 01811-409592 Louhajang Branch Dowlat Khan Complex, Louhajang, Munshiganj 01711733734 Madhabdi Branch 691-694 Madhabdi Bazar, Narshingdi 9446005, 01711-613484 Manda Branch 152 South Manda, Dhaka-1214 7277772, 7277388, 01811-458743 Manikgonj Branch Shwargo Tower, H # 129, Shahid Rafiq Sarak Manikgonj Sadar, Manikgonj; 01716068686 Mohammadpur Krishi Market Branch 32/8(Ka),T.M. Road, Mohammadpur, Dhaka-1207 9142732, 01787659190 Mostafapur Branch Saim Super Market, Mostafapur Bus Stand Madaripur; 0661-61206-7, 01714067411 Motijheel Branch (AD) 161, Motijheel C/A, Dhaka-1000 9569350 (D), 01811413963 Motijheel Corporate Branch (AD) 125, Motijheel C/A, Dhaka-1000 9563884, 01811417660 Moulvibazar Branch (AD) 130, Chawk Mogoltuly, Moulvibazar, Dhaka-1211 57311989, 01819-211828 Mouchak Branch 76 D.I.T. Road, Malibagh, Dhaka-1217 9339006, 01819556379 Nandipara Branch Akkel Ali Shopping Complex, Nandipara Bazar, Dhaka. 7811053, 01819457729 Narayangonj Branch 71, B.B. Road, Narayangonj 7645821, 01811487867 Natun Bazar Baridhara Branch 1209 Madani Avenue, Natun Bazar Dhaka, 01911711950 Nawabpur Road Branch (AD) 85/87, Nawabpur Road, Dhaka-1100 01787-697347 Nayapur Branch Nayapur Shopping Center, Nayapur Bazar Narayangonj, 01811-487863 New Elephant Road Branch (AD) 91, New Elephant Road, Dhaka-1205 9665323-4, 01819238220 223 Al-Arafah Islami Bank Limited Annual Report 2018
224. Branches of AIBL North South Road Branch (AD) 96, Nazrul Islam Sharoni, Bongshal, Dhaka-1100 9580875, 01811410075 Tekerhat Branch H # 975, Tekerhat Bazar, Rajoir, Madaripur 01726408722 Pagla Branch Alhajj Afser Karim Bhaban, Pagla, Narayangonj 47696133, 01819-253591 Tongi Branch Holding # 8, Charag Ali Market, Tongi, Gazipur 01711642356 Pallabi Branch Plot # 81, Block # A, Section # 12, Pallabi, Mirpur Dhaka; 9023611, 9023511, 01715013382 Uttara Model Town Branch (AD) H#13 R # 14/A, S-4, Uttara, Dhaka-1230 58950583, 01819-261382 Panchdona SME Branch Hira Plaza, Panchdona Chowrasta, Narshingdi 029446452-3, 01619556567 Panthapath Branch F R Tower, 8/C Shukrabad, Panthapath, Dhaka-1207 9138682, 01833330271 Progati Sharani Branch (AD) Ga-133/3 Progati Sharani, Dhaka 9863317, 01713-204935 Rampal Branch Mujibur Rahman Super Market (1st floor) Shipahipara, Rampal, Munshigonj; 7611855, 01716753106 Rampura Branch 5/1, Pashchim Chowdhury Para, D.I.T. Road, Rampura Dhaka-1219; 9361356, 01819157536 Ruhitpur Branch Sun Plaza Market, Ruhitpur Bazar, Keranigonj Dhaka; 7766882-3, 01811418222 Shokhipur Branch Shokhipur Bazar, Kachua Road, Shokhipur Tangail 01918431339 Shyamoli Branch 13/1 Ring Road, Shyamoli, Dhaka-1207 9136517, 01718711511 Sonargaon Janapath Road Branch Plot#30, Sector#11, Sonargaon Janapath road, Uttara, Dhaka-1230; 01937100100 VIP Road Branch (AD) 50/1, Inner Cercular (VIP) Road, Dhaka-1000 9345871-2, 01833330272 MYMENSINGH DIVISION Mymensingh Branch 70, Choto Bazar, Mymensingh 091-66714, 01819261297 Netrokona Branch 274, Choto Bazar, Netrokona. 0951-615 48, 0951-615 49, 01777754849 CHATTOGRAM DIVISION Agrabad Branch (AD) 96, Agrabad C/A, Chattogram 031-713372-3 Akhaura SME Branch S. R. Complex (1st floor) Sarak Bazar, Akhaura , B.Baria 08522-56155, 01740-619012 Aman Bazar Branch Amanat Sha Palza (1st Floor), Hathazari Road, Chattogram. 031-2580870-1, 01811418371 Anwara Branch Chaturi Bazar, Anwara, Chattogram 01841226659 Ashugonj Branch Jalal Khar Building, Ashugonj Bazar, Brahmanbaria; 01747296951 Azadi Bazar Branch Jamey Masjid Market, Azadi Bazar, Fatikchhari, Chattogram 016 29 40 89 98 South Jatrabari Branch 314-A/4 South Jatrabari, Dhaka-1204 7545161, 01811418204 Bandartila Branch 2638, Airport Road, Ba. Naw. Ja. Isha khan, EPZ, Chattogram, 031 74 03 83 Tangail Branch 77-78, Victoria Road, Tangail, 092161435, 01819-556372 Barura Branch Madina Market, Hospital Road, Barura, Cumilla 0802752305-6, 01847-054695 Al-Arafah Islami Bank Limited Annual Report 2018 224
225. Branches of AIBL Bashurhat SME Branch 34 , Main Road, Bashurhat, Noakhali 0322-356070, 01811-448041 Halishahar Branch Holding: 1655, Port Connecting Road, Halishahar, Chattogram, 031-715662-3, 01833-149150 Bhatiary Branch Bhatiary Station, Sitakunda, Chattogram 01877185532 Hatiya Branch Moulvi Shafiullah Super Market, H # 1510, Main Road, Hatiya, Noakhali 01720630088 Brahmanbaria Branch Mosjid Road, Bhuiyan Mansion, Brahmanbaria Sadar 0851-59330, 01827-563888 Chawkbazar Branch Shajada Market (1st Floor), 178/182 College Road, Chawkbazar, Chattogram. 031-2853784-5, 01811458741 Chowmuhani Branch 857,858 Hazipur, Feni Road, Noakhali 0321-51000, 01715-033336 Companigonj Branch Companigonj Bazar, Muradnagor, Cumilla-3542 08026-59076, 01712235569 Cox’s Bazar Branch 902, Saiket Tower, East Bazarghata, Cox’s Bazar 0341-51081-2, 01819-320289 Cumilla Branch 257,240, Monoharpur, Kotwali, Cumilla-3500 081-64546, 01711-431174 Eidgoan Branch Eidgaon Bazar, Cox’s Bazar Sadar, Cox’s Bazar, 01839656396 Feni Branch 33-34 S.S.K Road, Feni 0331-63548-9, 01811-418216 Gallai Branch Abeda Noor Foundation Complex, Gallai Chandina, Cumilla; 01822131543 Gohira Branch ABM Fazle Karim Chowdhury Auditorium, Gohira Digri College, Raujan, Chattogram; 01813559067 Gouripur Branch Maa Complex (1st Floor), Gouripur Bazar, Daudkandi, Cumilla. 01811418206, 01791575766 Hathazari Branch Salamatullah Bhaban, Kachari Road, Hathazari Bazar Chattogram, 031-2601679, 01811-408492 Hajigonj Branch Hajigonj Tower, 762 Hajigonj, Chandpur 0842-475145-6 Jubilee Road Branch (AD) 221, Jubilee Road, Chattogram 031-637680, 01819-315480 Kadamtoli Branch 376, D. T. Road, Kadamtali, Chattogram. 031-2522835, 031-2522861-2, 01847114430 Karnafuly Branch Anowar City, Charpaharghata, Karnafuly, Chattogram. 01886330315 Khatungonj Branch (AD) 146, Khatungonj, Chattogram 031-617103, 01819-315481 Kutibazar Branch Eastern Firoz Plaza, Kutibazar, Kasba B.Baria, 01768722151 Lakshmipur Branch Akota Super Market, 1310-12 Bazar Main Road, Lakshmipur Sadar, Lakshmipur. 0381-62290, 01720561020 Muradpur Branch Islam Tower, 59, CDA Avenue, Muradpur, Panchlaish, Chattogram, 031-657966, 01965-881111 Nabinagar Branch Nabin Super Market, Sadar Road,Nabinagar, Brahmanbaria 0852575504, 01766-678445 Nangalkot Branch H – 50, College Road, Nangalkot, Cumilla 01712796757, 0803366471-2 O.R. Nizam Road Branch 943, O.R. Nizam Road, Nasirabad, Panchlaish Chattogram; 031-656567-8, 01819-345030 Padua Bazar Branch Seven Star Shopping Complex, Padua Bazar, Lohagara, Chattogram, 01833-175500 Pahartali Branch S. A. Tower, H # 6103/6882, Sagorika Road, Pahartali Chattogram; 01817249655 225 Al-Arafah Islami Bank Limited Annual Report 2018
226. Branches of AIBL Patiya Branch H # 2329 Awami Super Market, Patiya Upazilla Sadar, Chattogram 01880003045 Patherhat Branch Patherhat, Rauzan, Chattogram-4346 031-671150, 01811-424739 Rahimanagar Branch Rahimanagar Bazar, Kachua, Chandpur 01811-487870 Rangamati Branch Kalpotoru Holyday Int. Ltd. Banarupa, Rangamati Sadar, Rangamati. 01813601972 Shiberhat Branch Idris Complex (1st Floor) Shiberhat, Sandwip, Chattogram. 01847114428, 01796399377 Station Road Branch 108, Station Road, Chattogram 01814651011 Tantarbazar SME Branch Haji Lal Mia Market, Tantar Bazar Akhaura, Brahmanbaria; 01743-244344 Teknaf Branch Al-Jamia Market, Teknaf, Cox’s Bazar 034-2675120, 034-2675121, 01833-112924 Teribazar Branch Islam Super Market, 618/739 Teribazar, Chattogram. 031 63 02 79-80, 01819212754 SYLHET DIVISION Amborkhana Branch 4877, 4874 Amborkhana, Sylhet-3100 01777-767929 Ruposhpur Branch 1450 Central Road, Sreemangal, Moulvibazar 08626-71242, 01711431173 Zindabazar Branch Jalalabad House, Zindabazar, Sylhet 0821-722078-9, 01711-431175 KHULNA DIVISION Benapole Branch 283, 284, Benapole Bazar, Jashore 04228-75686, 01711-431176 Chuadanga Branch Molla Tower-2, Hotel Royal Blue (1st Floor), Shahid Alaul Islam Khokon Sarak (VJ School Road), Chuadanga. 0761-81146-7, 01682300150 Chuknagar Branch Chuknagar Bazar, Dumoria, Khulna, 01750-024499 Gallamari Branch 219/1, Sher-E-Bangla Road, Gallamari, Khulna 041-2832181, 01830886633 Jashore Branch 27, M.K. Road, Jashore 0421-68571, 01711-431060 Jhaudanga Branch Zaman Market, Jhaudanga Bazar, Satkhira 016 70 29 58 01 Khulna Branch (AD) 4, Sir Iqbal Road, Khulna 041-721249, 01765-063340 Kushtia Branch 147, N. S. Road, Harun Market (Infront of Sadar Thana), Kushtia. 07172262, 01799368224, 01712962933 Beanibazar Branch 825, South Beani Bazar, Sylhet 08223-56114-5, 01713-409987 Magura Branch S.M Plaza (1st Floor), 177, M.R Road, ( College Road), Magura, 0488-510 70 Laldighirpar Branch (AD) Reasot Tower, 1795 Laldighirpar, Sylhet-3100 0821-710809, 01819-550426 Mongla Branch 19/A, Mongla Port I/A, Mongla, Bagerhat 04662-75105-6, 01738-933588 Madhabpur SME Branch H-0006-000 Kalibari Road, W-07, Madhabpur Hobigonj; 0832-756352, 01926-697968 Monirampur Branch G. N. Super Market, H. # 03-005-0134, Monirampur Bazar Main Road, Monirampur, Jashore. 04227-783 60 Moulvibazar Branch 73 Farhad Plaza, Dhaka-Sylhet Highway, Moulvibazar. 0861-54106-7, 01714-000907 Nolta Branch Nolta Sharif Super Market, Nolta Kaligonj, Satkhira 01732569143 Al-Arafah Islami Bank Limited Annual Report 2018 226
227. Branches of AIBL Satkhira Branch 466 , Bara Bazar Sarak, Satkhira 0471-63606, 01712-514660 Sharankhola Branch Panch Rasta Mor, Rayenda Bazar, Sharankhola, Bagerhat 01918293210 BARISHAL DIVISION Alipur Branch Alipur Bazar, Kalapara, Patuakhali 044-2856234-5, 01755906755 Banaripara Branch Haji Sobhan Market, Falpatti Road, Banaripara, Barishal 0433-25 62 90 (D), 0433-25 62 91, 017 15 63 29 60 Barguna Branch Holding # 075, Sadar Road, Borguna. 044 85 13 39-40, 017 27 42 19 43 RAJSHAHI DIVISION Bogura Branch (AD) Talukder Mansion, H # 60/70 Barogola Bogura-5800 051-69994-5, 01713-203754 Chapainawabganj Branch Teacher’s Plaza (1st Floor), 42/14, Baten Khar More, Chapainawabganj Sadar, Chapainawabganj 0781-515 45 (D), 0781-515 46, 017 28 50 40 26 Mohadevpur Branch Plot No. 245, Mohadevpur, Noagaon 07426-75136, 01711-425675 Natore Branch Holding #0363-01, Kanaikhali, Natore Sadar, Natore. 0771-61533-4, 01811417662 Pabna Branch Plot#355, Sonapotti, Pabna 0731-62047, 01765700080 Barishal Branch 442 K. B. Hemayetuddin Road, Barishal 0431-64476, 01727379119 Rajshahi Branch (AD) 239,248 Shaheb Bazar, Boalia, Rajshahi 0721-775171, 01727-179771 Bhandaria Branch Salah Al-Zubayer Market (1st Floor), Kapuriapatty Bhandaria, Pirojpur; 0462-356469, 01726-265060 Shahjadpur Branch Chowdhury Plaza, Dariapur Bazar Shahjadpur, Sirajgonj 07527-64052, 07527-64053,01762-331990, 01557-718828 Bhola Branch Jahangir Plaza, Sadar Road, Bhola 0491-61244-5, 01796863911 Sherpur Branch Dhunat More, Sherpur, Bogura. 0502977185-6, 017283303 31 Jhalakathi Branch 68, Monoharipatti Road, Jhalakathi 0498-62808, 01754-015565, Fax : 0498-62807 RANGPUR DIVISION Mathbaria Branch 407 Kapuriapatty, Mathbaria, Pirojpur 04625-75374, Fax - 04625-75373 Patharghata Branch 2/1 Hospital Road, Patharghata, Barguna 017 16 70 65 76 Badargonj SME Branch Upazila Road, Badargonj, Rangpur 05222-56573-4, 01761-730189 Dinajpur Branch 333, Nimtola, Dinajpur 0531-61865-7, 01715-139798 Palashbari Branch Rabbi Super Market (1st Floor), Bogura-Rangpur Highway, Palashbari, Gaibandha. 0542-456136, 01740015795 Patuakhali Branch 95/1, Sadar Road, Patuakhali Sadar, Patuakhali. 0441-639 55-6, 01793205621 Rangpur Branch 15, Central Road, Payrachattar, Rangpur 0521-55830, 01773-268000 Pirojpur Branch H # 420 Lawer’s Plaza, Post Office Road, Pirojpur 01811418209 Saidpur Branch (AD) Shahed Dr. Zikrul Haque Road, Saidpur, Nilphamari 05526-72804, 01716-236334 227 Al-Arafah Islami Bank Limited Annual Report 2018
228. Head Office : 63, Purana Paltan, Dhaka-1000 PROXY FORM I/We ................................................................................ of (address) ........................................................................................ .............................................................. hereby appoint Mr./Mrs. being shareholder(s) of Al-Arafah Islami Bank Limited ................................................................................................................................... of (address) ............................................................................................................................................................ as my PROXY, to attend and vote for me on my behalf at the 24th Annual General Meeting (AGM) of the Company to be held on Saturday the 22nd June 2019, at 11.00 a.m. at “Own Premises of AIBL, 63/1, Purana Paltan (Beside of Al-Arafah Tower), Dhaka-1000” and at any adjournment thereof. Signed this in my/our presence on..................day of ...........................2019. Revenue Stamp of Tk. 20/- Signature of the Proxy Signature of the Shareholder Folio No. ................................................ BO A/C. No. No. of shares held . ................................. Notes : 1. This form of proxy, duly completed with a revenue stamp of Tk. 20/- only, must be deposited at least 48 hours before the meeting at the Company's Share Department (Level-04), 63, Purana Paltan, Dhaka-1000, proxy will be invalid if not signed and stamped as shown above. 2. Signature of the Shareholder should agree with the specimen signature registered with the Company. Head Office: 63, Purana Paltan, Dhaka-1000 ATTENDANCE SLIP I do hereby record my attendance of the 24th Annual General Meeting (AGM) of the Company to be held on Saturday the 22nd June 2019, at 11.00 a.m. at “Own Premises of AIBL, 63/1, Purana Paltan (Beside of Al-Arafah Tower), Dhaka-1000” Name of the Shareholder/Proxy ...................................................................................................................................... Folio No. ............................................ BO A/C. No. No. of shares held . ............................................ Signature of the Shareholder/ proxy Dated : .......................................... Note : Shareholders attending the meeting in person or by proxy are requested to deposit the attendance slip duly filled in at the entrance of the meeting Hall. Seats in the Auditorium are reserved only for the Shareholders/Proxies. we.`ªt weGmBwm bwUwd‡Kkb bs SEC/SRMI/2000-953/1950 dated 24th October, 2000 Ges Circular No. GmBwm/ wmGgAviwmwW/ 2009-193/154, ZvwiL 24 A‡±vei, 2013 Gi cwicvjbv‡_© evwl©K mvaviY mfvq †Kvb cÖKvi Dcnvi/Lvevi/Kzcb cÖ`v‡bi e¨e¯’v _vK‡e bv|