Chapter 1 INTRODUCTION

WHAT IS BANK?
1

The word bank is derived from Bancus or Banque. History of banking is traced to 2000 B.C in Greece. Priest and Goldsmiths acted as financial agents by keeping money and valuables of people in temples in strong safes. Thus, the first stage in the development of modern banking was accepting of deposits of cash from those who had surplus money with them. The definitions of bank from different authors are as follows. Depository financial institution: a financial institution that accepts deposits and channels the money into lending activities; "he cashed a check at the bank"; "that bank holds the mortgage on my home" According to Dr. Hart Banker or bank is a person or company carrying on business of receiving money and collecting drafts for the customers subject to the obligation of honoring cheques drawn upon them from time to time by customers to the extends of the amounts available on their currents accounts In the words of G W Gilbert A banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the borrower and lender. He borrows one party and lends to the another The Goldsmiths issued receipts for the money deposited with them, which began to pass from hand to hand in settlement of transaction as people had confidence in the integrity and solvency of goldsmiths. The receipts were drawn on a way that it entitled the holder to claim that specified amount of money from goldsmiths. These receipts were the earlier bank notes. Thus the second stage in the development of banking was the issues of bank notes. The goldsmiths discovered all the people who had deposited money did not come to withdraw their finds in cash, only a few people presented the receipts for encashment during a given period of time and they also found that most of the money deposited with them was lying idle. They also found they were being constantly requested for loan on good security. They thus thought it profitable to lend at least some of the money with them to needy persons. This proved profitable for them. Instead of charging interest from deposits, they began to give them interest on money deposited with them. This was the third stage in the development of banking. Through experience, banks came to know that they could keep a small proportion of total deposits for meeting demands of customers for cash and could easily lend the rest. They allowed deposits to draw over and above than the money standing to their credit. They thus allowed the overdraft facility to their deposits and this was the fourth stage in the development of banking. Every bank issued receipts and most allowed over draft facility and this caused too much confusion the systems. In order to earn profits, banks did not keep adequate reserves to meet demands of customers for cash. This failure on the part of bankers to return money caused widespread distress among people. In order to create confidence among the people, steps were taken to regulate the banking. A conference was held in Nuremberg in 1548 where it was decided that a bank should be set up by
2

the state, which would streamline the banking organization and technique. The first central bank was thus formed in Geneva in 1694. The responsibility of issuing notes is now entrusted to a central bank in each country. With passage of time, activities of commercial bank increased. They dealt with large number of issues such as obtaining funds, advancing loans to business, farmers, households, making investment in stocks, discounting bills of exchange etc. commercial banks are now multi-service organizations and play a very important role in financial markets.

OVERVIEW OF THE FINANCIAL SECTOR IN PAKISTAN

The history of banking system in Pakistan dates back to independence of Pakistan in August 1947 when various banks transferred their Head Quarters and funds to areas likely to fall in India. This trend emerged due to dominant role of Hindus in pre-partitioned Indian banking system. According to various books there were 3496 branches of Indian scheduled banks in the undivided sub-continent as on 1st March 1947 out of which only 487 branches were located in areas presently constituting Pakistan. However the number of scheduled banks drastically declined to 195 from 487 immediately after partition. At the time of partition there were only two banks having the honor to be first commercial bank of Pakistan namely Habib Bank Ltd., which was set up in 1941 with its Head Office in India and the Australasia Bank Ltd., which was established in 1944 with its Head Office in Pakistan. By following the partition, an expert committee was set up and this committee recommended that the Reserve Bank of India being the Central Bank of the undivided India should continue to function as Central Bank of Pakistan and the Indian currency notes would continue to be legal tender in Pakistan till 30th September 1948. Subsequently it was decided to have separate Central Banks and the State Bank of Pakistan was set up and started functioning from 1st July 1948. Thus the history of Banking system in Pakistan started with the establishment of the State Bank of Pakistan which was inaugurated by Quaid-e-Azam Mohammad Ali Jinnah on 1st July, 1948. Consequently three banks were established which include Muslim Commercial Bank Ltd. formed in September 1948. Bank of Bahawalpur in October 1948 and National Bank of Pakistan in 1949. Habib Bank also transferred its Head Office from Bombay to Karachi due to partition in August 1947 and it was assisted by the State Bank to finance domestic trade of the country.

BANK ALFALAH LIMITED

Bank Alfalah Limited was incorporated in June 21st, 1997 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from November 1st ,1997. The bank is engaged in commercial banking and related services as defined in the Banking
3

companies ordinance 1962. The Bank is currently operating through 45 branches in 21 cities, with the registered office at B.A.Building, I.I. Chandigarh, Karachi. Since, its inception as the new identity of H.C.E.B after the privatization in 1997, the management of the bank has implemented strategies and policies to carve a distinct position for the bank in the market place. Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals set out by its board of management, the Bank has invested in revolutionary technology to have an extensive range of products and services. This facilitates their commitment to a culture of innovation and seeks out synergies with clients and service providers to ensure uninterrupted services to its customers. The bank perceived the requirements of customers and matches them with quality products and service solutions. During the past five years, bank has emerged as one of the foremost financial institution in the region endeavoring to meet the needs of tomorrow as well as today. To continually upgrade the quality of service to the customers, training of team members in all the integral aspects of banking, customer service and IT was specially focused. The portfolio concentrates on all aspects of conventional banking as well as the financial needs of corporate sector. Dynamic and high value product includes Car Financing, Home Financing, Rupee Travellers Cheques, Credits Cards, Debit Cards, On line Banking, ATM and consumer Durables. In addition to this, Islamic Banking Division is a recent initiative, which operates as separate branch. It offers Shariah Compliant products through a network of five branches, which will increase to 50 by the year 2007. The bank is committed to combine all it s energies and resources to bring high value, security and satisfaction to its customers, employees and shareholder. The Bank has invested in revolutionary technology to have an extensive range of products and services. This facilitates commitment to a culture of innovation and seeks out synergies with client and service providers to ensure uninterrupted services to it customers.

Historical Background
Bank Alfalah Limited is not as old a bank that it should have such significant history. But there are certain events in the past, which make the history worth mentioning. The history of Bank Alfalah Limited dates back to September 21, 1972, when Bank of Credit and Commerce International (BCCI) were incorporated in Luxemburg. From Bank of Credit and Commerce International to bank Of Crooks and criminals International. BCCI's conception, growth, collapse, and criminality are inextricably linked with the personality of its founder, Agha Hassan Abedi, who in turn was a product of the unique conditions of Muslim India in the final period of British rule prior to partition, and the first years after partition. These were years of fundamental change in the region, involving the creation of an entire new ruling class in both Hindu and Muslim India to replace the departing British Foreign Service. While the period created special opportunities for a newly emerging professional class in countries, Abedi and many of the others who later became prominent in Pakistani Banking made up a special class. The Habibs ran the bank like a family business. All decisions were centralized with family members and working hours were long and hard. Agha Hassan Abedi rose very rapidly but soon found the atmosphere to be too restrictive for the great number of ideas welling up inside him.
4

In 1958, he left Habib Bank and was able to get together Investors to form a new bank to be known as United Bank. Within ten years, United Bank became the second largest bank in Pakistan and all that Mr. Abedi envisioned, relating to the facilities, the staff, and relating to the high quality of appearance of the offices, and to the modern outlook of the Bank, had been achieved. Internal BCCI documents make clear Abedi's ability to motivate his employees to work exceptionally hard. Additionally, the Bank had opened branches overseas in quite a few Countries including the Middle East, The Bank were already poised to become the largest bank in Pakistan but political conditions were making it apparent to Mr. Abide that Pakistan could probably not form the basis for an operation of the size which he and his team were capable of. By the early 1970's, there was an ongoing tension between Abedi's ambition to move beyond Pakistan, and that of the Pakistani government to keep Pakistani institutions generally and Abedi's bank specifically under its control. From the time he took power, Pakistani Prime Minister Zulfiqar Ali Bhutto, typifying the socialist cast of much of the Former colonial world in this period, was threatening to nationalize the banks, as he already had nationalized other sectors. Accordingly, Abide began moving forward with the initial steps to form BCCI as a Pakistani-managed bank outside of Pakistan. When Bhutto in turn learned about Abedi's attempt to circumvent his new socialist order, he not only went ahead with plans for nationalizing the United Bank, but promptly placed Abedi under house arrest. While under house arrest, Abedi further developed his scheme for his new institution. Unlike United Bank, it would operate in a manner to defy the ability of the Pakistani government, or any other, to impede any objective it might seek. It would be the first international, and indeed, transnational bank, and something more: a charity, a foundation, a shipping empire, an insurer, a brokerage firm, a commodities exchange, a publishing house, a world-class hospital for the rich, a real estate empire, an employee cooperative, an Islamic investment bank, and a Third World powerhouse. The most critical of these five elements was the relationship between BCCI and Abu Dhabi. Abu Dhabi is the largest and wealthiest member of the United Arab Emirates, an oil-rich federation of sheikhdoms with a combined population of about 1.5 million, bordering Saudi Arabia and Oman, with one of the world's highest standards of living As a result of oil wealth. As early as 1967 Abedi's high net worth customers included the ruler of Abu Dhabi, Sheikh Zayed bin Sultan Al Nahayan, and his family. By 1967, What had begun with Abedi handling the Sheikh's falconry and bustard-hunting trips in Pakistan, and the finances of Pakistani workers in Abu Dhabi, wound up with Abedi running the Sheikh's financial life. As far as Pakistani bankers observing the relationship were concerned, Abide coordinated everything for Sheikh Zayed, from the building of the Sheikh's palaces in Pakistan, the furnishing of his villas in Morocco and Spain, his medical appointments, to the digging of wells for his homes in the desert. Throughout the first critical decade of BCCI's eighteen year existence, as much as 50% of BCCI's overall assets were from Abu Dhabi and the Al Nayhan family, who were earning about $750 million a year in oil revenues in the early 1970's, an amount that rose to nearly $10 billion a year by the end of the decade. Until the formation of a separate affiliate, the Bank of Credit and
5

Commerce Emirates (BCCE), BCCI functioned as the official bank for the Gulf emirates, and handled a substantial portion of Abu Dhabi's oil revenues. Throughout the 1970's, BCCI expanded rapidly, with Abedi adding new corporate members to the BCCI family by the month. Initially, BCCI was incorporated in one location only, Luxembourg. Two years later, a holding company was created, BCCI Holdings, with the bank underneath it BCC S.A., split into two parts, BCCI S.A., with head offices in Luxembourg, and BCCI Overseas, with head offices in Grand Cayman. Luxembourg was used mostly for BCCI's European and Middle East locations, and the Grand Caymans mostly for Third World Countries. The following profile of the first five-years of BCCI's performance demonstrates this fact. Adding to the inherent problem of investigating the largest case of organized crime in history, spanning over some 72 nations, has been the destruction of documents at BCCI and its affiliates by shredding and arson; document backdating and falsification; the removal of most key documents from London to Abu Dhabi in 1990; the refusal of authorities in the United Kingdom and in the Grand Caymans to share information with investigators as a consequence of their interpretation of local bank confidentiality and privacy laws; the inability to question Abedi due to his stroke, the inability to question BCCI's other key officials due to their incarceration and segregation in Abu Dhabi by Abu Dhabi bureaucracy since July 5, 1991, and BCCI's haphazard method of record-keeping.

FROM BCCI TO BANK ALFALAH LIMITED THE LONG JOURNEY

Liquidation of BCCI
BCCI was liquidated on July 5, 1991. At that time BCCI was opening in almost 69 countries in the world. When financial authorities launched a coordinated swoop in what was alleged to be the biggest international fund in history.

Incorporation of Habib Credit and Exchange Bank (H.C.E.B)

In July 1991, the branches of BCCI in Pakistan at that time were taken over by The Ministry of Finance and SBP. All three branches were emerged in Habib Bank Limited after valuation of its
6

assets for 15 million dollars. It worked with Habib Bank Limited for around about 10 months from 14 March 1992 to 31st October 1992.

Privatization of Habib Credit and Exchange Bank

H.C.E.B was privatized on July 7, 1997. Management was taken over by Abu Dubai based AlNahyan consortium. This consortium consists of foreign investors of UAE and highly professional Pakistani bankers. Mr. Pervaiz Sheikh and Mr. Omer Khan represent this consortium in Pakistan. The bank was sold for Rs. 39 per share for buying 70% shares. The government decided to sell 10% shares to employees and rest of the shares was privatized through the stock exchange.

Emergence of Bank Alfalah Limited

Following the privatization in July 1997, Habib Credit & Exchange Bank assumed the new identity of Bank Alfalah Limited on February 25, 1998. And with this a challenge was launched, the challenge to transform this bank into a highly professional, most efficient & service oriented institution. Charged with the strength of the Abu Dhabi based consortium, and under the leadership of His Highness Sheikh Nahayan Mabarak Al-Nahayan, Minister of Education, Government of Abu Dhabi, and a prominent member of Royal Family the bank is energized with the vision, envisaging the development of consumer sector in Pakistan. Bank Alfalah has emerged as one of the leading commercial banks in the financial sector of Pakistan. This bank has made significant contributions in building and strengthening both the corporate and retail banking in Pakistan. To make banking solutions become accessible to more and more people, Bank Alfalah Limited has embarked upon a rapid expansion program, aiming to provide a networking that makes its services available to any of its customers in all the major urban centers of Pakistan.

PRESENT STATUS OF BANK ALFALAH

Bank Alfalah Limited was incorporated on June 21, 1997 as a Public Limited Company under the Companies Ordinance 1984. Its banking operations commenced from November 1, 1997. The bank is engaged in commercial banking and related services as defined in the Banking Companies Ordinance, 1962. For the last 8 years it has been successful in providing commercial banking facilities to its customers and has developed a good reputation among Pakistan banks. Quality services are provided as its backed by an Abu Dhabi based Group and driven by the strategic goals set out by its board of management, the Bank has invested in innovative technology to keep pace with growing market and needs of customers. Currently Bank Alfalah Limited has 142 branches covering 47 cities spread all over Pakistan, out of which 125 are conventional branches and 15 are Islamic Banking branches. So now Bank Alfalah has many overseas branches located in Dhaka, Bangladesh ,Afghanistan, Qatar, Bahrain and Sri Lanka as well. In the coming years, the bank plans to open a number of new branches to ensure that its customers get the benefit in the form of extended branch network and comprehensive products and services.
7

Strategies and goals of Bank Alfalah Limited have enabled it to continue its upward climb in pursuit of excellence. Strengthened by the backing of the Abu Dhabi Group and driven by strategic goals set out by its Board and management, Bank Alfalah Limited increasingly inspires trust and confidence of all its clients and number of clients is increasingly significantly. Over the years, the management has succeeded in establishing an ideological base for the employees to build the bank upon customer loyalty, service with dedication and development of a wide range of products for the customers to choose from. Foreign Trade is another success of bank and has developed excellent business and correspondent relations with well renowned banks of the world whose support in terms Of lines of credit has enabled it to handle ever-growing trade volumes and diversified needs of customers.

COMPANY NAME & LOGO

COMPANY SLOGAN
THE CARING BANK!

SOME QUICK FACTS

Type Founded Headquarters Key people Industry Products

Private June 1997, Karachi Principal Office, Karachi Pakistan H.E. Sheikh Hamdan Bin Mubarak Al Nahayan (Chairman) Banking Capital Markets Loans, Credit Cards, Savings, Consumer Banking etc.

Website

www.bankalfalah.com

GOALS & OBJECTIVES

Goals and objectives are factors through which the companys devotion and commitment to the job can be seen. If the goals are realistic and achievable, than surely that organization is doing its job. Bank Alfalah also has certain goals and objectives which it is trying to achieve, through its various strategies and operations. The goals and objectives are mentioned below: 1. To create a sound base, and through efficient systems achieve modern banking throughout Pakistan. 2. By the end of every accounting year there is an increase in deposits. 3. To create unit banking network in all the branches of Bank Alfalah, the end of the year. This means that all the operations of the bank, i.e. deposits to advances, imports, exports, L/C Opening, foreign currency and many more aspects under one roof, so that the customer can be facilitate in one visit. 4. Islamic Banking is one of the goals of Bank Alfalah though it has been initiated in the last fiscal year and it is very acceptable for general public.
9

5. Efficient fund and efficient risk management. 6. To keep on improving performance. 7. To give special care to its customer. 8. To increase its market share. 9. To become one of the leading financial institution. 10. Protection of depositors fund.

STRATEGIES
Bank Alfalah has formulated certain sets of strategies to enable it to achieve its goals and objectives. These strategies are mentioned below: 1. In order to achieve its goals of creating a sound base and presence of efficient modern banking system, Bank Alfalah has started operation of Automated Teller Machines in all the major areas like Karachi, Lahore, Islamabad and other cities of Pakistan. 2. Bank Alfalah is committed to building long-lasting relationships through an assertion to service excellence and providing innovative products to meet the changing needs of our valued customers. Although still in its infancy, compared to the exalted banking standards, Bank Alfalah, backed by a strong Abu Dhabi Group and inspired by the vision of its Board and Management, has built up a strong customer base. The Bank provides a full range of banking services to corporate clients, while applying leading technologies. Today the Bank is wellpositioned to provide appropriate banking services to customers. 3. The main focus is building relationships and being known by the way they do business. Management recognizes that a banking relationship requires compatibility, communication, and cooperation and that each customer deserves nothing less than full attention and available resources to meet their financial objectives. 4. Core value and corporate culture is based on the belief that superior personalized service is the most important product. Bank is in the process of getting to know customers by name and understand their business and personal financial needs. This one- on-one, personalized service quality has served as Bank Alfalah's unique signature since inception and continues to separate it from other financial institutions. 5. The Bank Alfalah team comprises of some of the most highly skilled and professional financial experts in banking industry. Managers, lenders and trust advisors offer the unique perspective of knowing and understanding in the local economy. The Management focuses its attention on making informed and feasible economic decisions, bringing better returns and more profitability for investors and customers. 6. Keeping in view the unrest among the Islamic Community on the Interest Bearing Banking the Alfalah is in the process of target marketing and gives its full attention to this segment of a large population over the world.
10

7. To acquire the reputation and status of bank which operates on international standard, Alfalah Bank was to get the credit rating of Pakistan Credit Rating Agency, which gave it the AA- and A1+ in the long term and short term respectively.

BUSINESS PHILOSOPHY
Bank Alfalah is committed to build long-lasting relationships through an assertion to service excellence and providing innovative products to meet the changing needs of our valued customers. Although still, infancy compared to the exalted banking standards, Bank Alfalah backed by a strong Abu Dhabi Group and inspired by the vision of its board of management, has built up a strong customer base. The bank provides full range of banking services to cooperate clients, while applying leading technologies. Today the bank is building relationships and being known by the way they do business. We recognize that banking relationships require compatibility, communication and cooperation and that each customer deserves nothing less than our full attention and available resources to meet their financial objectives. In brief business philosophy: Excellence in service Quality performance Product innovation

11

The bank is continuously formulating new products and services for the growing and diversified needs of its ever-expanding client base. The banks commitment to its customers is evident from its mission statement. A good mission statement allows for the generation and consideration of a range of feasible alternative objectives and strategies without unduly satisfying management creativity.

MARKET STANDING
Pursuit of excellence
12

Bank Alfalah has emerged as one of the leading commercial banks in the financial sector of Pakistan. It has its upward climb in pursuit of excellence. Since 1997 BAL has been steadily reaching higher standards of service excellence and performance despite many changes. The Banks towering presence in Pakistans financial and commercial life has brought change in traditional banking. It is the largest private investment in the public sector, and in short span of time, bank has covered lot of potential market. Now, Bank Alfalah Limited (BAL) is one of the fastest growing financial institutions of Pakistan. Bank continues to build track in its quest for excellence. Within short time span the bank has carved a significant niche for itself in the banking industry.

Branch network
Some of the major cities of Pakistan and the number of branches located in these cities are as follows City Number of Branches Islamabad Karachi Lahore Peshawar Quetta Rawalpindi 8 35 30 4 4 8

As Bank Alfalah is operating with such as extensive network of branches, it is not possible for it to control all activities of its different branches from one main location, that is their head office in Karachi, so due to this reason they have divided their branches in two areas: the north and south, these two areas are further divided into different areas, each controlled and monitored by their respective area office. There are 9 area offices in the northern area. Each branch of Bank Alfalah comes under an area office. The area offices are responsible for authorizing its branches on providing different services to its customers. Each branch has to first get an approval from the area office before providing any service to its customers. For example, a car financing application needs to be approved by the area office before any legal documents or order for a car is placed by the bank. Furthermore Bank Alfalah is also operating 7 foreign branches in three countries, namely Bangladesh, Afghanistan and Bahrain. Another major part of operations for Bank Alfalah includes remittances that come from abroad and are thus considered as home remittances. Some of banks with which Bank Alfalah has agency agreements are as follows: Union National Bank, Abu Dhabi, U.A.E
13

 First Gulf Bank, Abu Dhabi, U.A.E Alfalah Exchange Company, Abu Dhabi, U.A.E U.A.E Exchange Center, Abu Dhabi, U.A.E Bank Alfalah has also established relationships with other internationally renowned banks are part of Bank Alfalah list of correspondence banks. The total numbers of banks that are included in this list of correspondence are 170, in all major countries of the world and help Bank Alfalah in providing services to its customers. Furthermore Bank Alfalah is also a member of Money Gram, a service that facilitates speedy transfer of remittances on a person-to-person basis and SWIFT (Society for Worldwide Integrated Financial Transfers), a service that facilitates banks to transfer important messages or financial transfers securely and speedily to other banks. Both these services are recognized globally, with members from all over the world. Bank Alfalah being a member of both these services reiterates its commitment of providing its customers with the state of the art services.

BRANCH NETWORK OF BANK ALFALAH

The Bank is fully aware that the branch network has direct implications on the services that it provides to its customers. They offer services through a network of 282 branches and 320 state of the art ATM machines. Conventional Branches Islamic Banking Branches Overseas Branches ATM Machines 226 048 008 320

FUTURE PLANS
14

The future of the industry portends prosperity for Bank Alfalah, with major restricting taking place in the economy and the increasing concentration of few large institutions has propelled BAL to focus on strategic excellence. The environment not only instills in the entire BAL team a sense of heightened competition but also the relentless pursuit of rising above the fierce challenges the industry has to offer. In view of the above BAL has come up with Product Development and Service & Quality Assurance departments to identify fulfill them by developing premium products and offering them to our customers through organized programs as GOLD standard service. This program has met spirited response and is being implemented to increase efficiency levels internally and externally.

FINANCIAL HIGHLIGHTS
BAL continues to grow in a robust manner amidst considerable volatility in the banking industry. The bank is striving to prosper in terms of financial returns and value it continue to provide its shareholders especially when tighter spreads are exercised and margins are compressed due to high interest rates as a fool to curb inflationary pressures.

15

CHAPTER 2 MANAGEMENT SYSTEM

COUNTRY WIDE HIERARCHY

President

Chief Operating Officer

16

Branch Manager

Head of Country Operation s Information Department

Country Risk Manager

Executive Vice President

Chartered Accountant

Corporate Heads

ORGANIZATIONAL STRUCTURE OF BANK ALFALAH LIMITED:

The Management structure is headed by the Chief Executive Officer. In the absence of CEO, the Co-Chairman of Executive Committees officiates as Acting CEO and the Chairman of Central Management Committee of the Bank. The Chief Operating Officer will directly report to the Chief Executive Officer of the Bank. In the absence of CEO and Co-Chairman of Executive Committees, the Chief Operating Officer will be acting as Chairman of CMC and Central Credit Committee. Divisions at Head Office are supervised by Group Heads/ General Managers/ Divisional Heads. The branch network of Conventional & Islamic Banking is headed by Group Head Branch Banking & SME and Group Head Islamic Banking. The following Executives will directly report to the office of CEO, with the exception of Group Head - Audit & Inspection Division:

Co-Chairman Executive Committees

17

Group Head Credit & Collections Group Head Corporate & Investment Banking Group Head Islamic Banking Group Head Treasury & Financial Institutions Chief Financial Officer Chief Compliance Officer General Manager Legal Affairs and Company Secretary General Manager Risk Management Executive-in-Charge, Establishment & Administration

The following Executives are reporting to Co-Chairman Executive Committees:

Group Head Priority Banking and Wealth Management Group Head HR Development General Manager Overseas Operations General Manager Human Resources and Quality Assurance General Manager Group Marketing General Manager Strategic Planning

The following Executives are reporting to Chief Operating Officer:

Group Head Branch Banking & SME Group Head Consumer Finance Group Head Operations Group Head Commercial Banking General Manager Information Technology

The Management has also formed various committees to run banks affairs effectively such as ; Central Management Committee Central Credit Committee Strategic Planning Committee Network Expansion Asset & Liability Management Committee Central Finance, Expenditure & Budget Review Committee Information Technology Committee Human Resources Management Committee etc.
18

Committee

Groups/ Divisions The current organizational chart of the Bank stating all Groups/ Divisions with their reporting lines and scope of responsibilities is as follows:-

Executive Position 1CEO and Director

Scope of Responsibilities - Chief Executive Officer and Board Member - Priority Banking and Wealth Management - HR Development - Overseas Operations - Human Resources and Quality Assurance - Group Marketing - Strategic Planning - Branch Banking & SME - Consumer Finance - Operations - Commercial Banking - Information Technology - SBP Compliance - Internal/External Audit Compliance - Coordinator SBP Inspection - Financial Control and Budgeting - Central Payment and Expenditure Control - Taxation and Excise - Monitoring and Automation - Treasury Settlement - Nostro & HO Reconciliations - Establishment & Administration

2-

Co-Chairman Executive Committees

3-

Chief Operating Officer

4-

Chief Compliance Officer

5-

Chief Financial Officer

6-

- Establishment & Administration Executive-in-Charge Estab - Procurement of Hardware & Admin Division - Engineering, Maintenance & Security - Printing & Stationery Group Head Audit & - Audit & Inspection reporting to the Board
19

7-

Inspection Group Heads R & MM 8Central North South 9Group Head Corporate Banking

through the Boards Audit Committee - Fraud & Investigation Unit - Branch Network of Conventional Banking - Central/Regional/Area Offices - Rural Finance - SME - Branch Expansion - Corporate Banking - Management of Corporate Credits - Corporate Deposits - Cards - Mortgages - Autos - Personal Loans - Corporate Banking - Investment Banking - Credit - Equity Management Portfolio - Credit Monitoring - Monitoring of entire Credit Portfolio of the Bank - CIB - SBP Foreign Exchange Returns - SBP Financial Returns - Central/Regional/Area Offices Islamic Banking - Branch Network of Islamic Banking - Export Refinance - Central Test Keys / SWIFT. - Centralized Account Opening - Centralized Trade Finance - Call Centre - Credit Administration Department - Temenos Bank Transformation Project - Centralized Clearing Department - Priority Banking - Wealth Management
20

10-

Group Head Consumer Finance Group Head Corporate & Investment Banking Group Head Credit & Collections

11-

12-

General Manager Credit 13Monitoring Group Head Islamic Banking

14-

15- Group Head Operations

16- Group Head Priority Banking & Wealth

Management 17Group Head Training & Development Group Head Treasury & Financial Institution - Training & Development - International Banking - Treasury - Rupee Traveller Cheques - MoneyGram

18-

- UAE Representative Office General Manager Overseas - Afghanistan Operations 19Operations - Bangladesh Operations - OBU Bahrain Operations 20General Manager Legal Affairs Division - Company Secretary - Legal Department - Human Resources - Quality Assurance - Internal Communication -Procurement of Software - Entire Operations of Banking Package - Electronic Mail & Web Management -Treasury Risk - Credit Risk - Operational Risk - I.T. Security & MIS

General Manager HR & 21QAand D General Manager IT 22Division

General Manager Risk 22Management Division

ORGANIZATIONAL HIERARCHY

21

It
Chief Executive Officer Co- Chairman

Group Heads

Regional Managers

Area Managers

Branch Managers

s a general hierarchy of bank which is showing about the main authorities of Bank Alfalah Limited who are controlling its management in Pakistan. Banks management is divided into different groups, regions and areas. Co-chairman is providing supervision to group heads that are responsible for controlling the affairs of different groups. After group heads in the hierarchy regional and area managers are working who are managing and guiding the working of different branches of bank.

BOARD OF DIRECTORS
The board of directors has the authority in guiding Bank affairs and in making general policies. Some directors are the personnel of the Bank Al-Falah Limited follows.

CHAIRMAN

22

HE. Sheikh Hamdan Bin Mubarak Al Nahayan

Mr. Sirajuddin Aziz Mr. Abdullah Naseer Al Mansoori Mr. Abdullah Khalil Al Mutawa Mr. Ikram Ul-Majeed Sehgal Mr. Khalid Mana Saeed Al Otiba Mr. Adeem Iqbal Sheikh

Director & Chief Executive Officer Director Director Director Director Director

23

Mr. Atif Bajwa

Chief Executive Officer

Mr. Bahauddin Khan

Chief Operating Officer

Mr. Mohammad Yousuf

Chief Risk Officer

Mr. Shakil Sadiq

Group Head SME

Mr. Nadeem Ul Haq

Group Head Admin, Technology, System & Operations

Mr. Ijaz Farooq

Group Head Islamic Banking

Mr. Faisal Farooq Khan

Group Head HR & Learning

Mr. Khurram Hussain

Group Head Retail Central, North and Consumer Banking

Ms. Mehreen Ahmed

Group Head Retail Banking South & New Initiatives

Mr. Saad Ur Rehman Khan

Group Head Corporate & Investment Banking

Mr. Bashir Ahmed Sheikh

Group Head Special Assets Management

Mr. Yasar Rashid

Group Head Audit & Inspection

Mr. Syed Ali Sultan

Group Head Treasury & Financial Institutions

Mr. A. Wahid Dada

Group Head Operations

24

HUMAN RESOURCE MANAGEMENT

Human Resource Planning
At Bank Alfalah Limited, Human Resource Planning involves a decision making in three areas of combined activities: Step-I The bank identifies its organizational needs and then acquires a right king of human resource accordingly. Step-II Bank motivates them to achieve excellent performance by giving them different sorts of targets according to their job requirements. Step-III It also creates an interactive link between the employee goals and the organizational goals.

Job Description
It is descriptive in nature and constitutes a record of existing and additional job facts. The order of job description is as follows: Job identification Job summary Duties performed Supervision given and received

Recruitment and Selection

Bank Alfalah Limited recruits three kinds of employees: 1. Top Level Management
25

2. Trainee Officers 3. Contractual Basis Employees

Bank Alfalahs management believes in developing the potential of the Banks employees to the fullest extent. Training & Development Centre of the Bank are housed in state of the art facilities at Karachi and Lahore of provide training to its employees. It is obligatory for each staff member of the bank to attend at least two days of training in a calendar year, with training programs in the following areas: Consumer Banking and Operations Credit Marketing & Proposals Credit Administration/Documentation Marketing and Selling Skills Customer Service Skills Leadership and Management Skills Personal Effectiveness and Skills

Furthermore training programs have also been introduced for fresh entrants into the bank, to help them in learning and performing their new tasks.

Training and Development

In Bank Alfalah Ltd. the process of Training and Development consists of various other activities like: a. Training: i. The appraisal form of an employee indicates the areas in which the employee should be trained and developed. It also elaborates the abilities of an employee.

26

ii. Management and Organization Development Division of each region timely reviews the employees and recommends them for training during the operations it they note any discrepancy between the desired and actual performance. This review is performed after every quarter. iii. Upon the request of GM (Operation), indicates which sort of training is needed in a particular region regarding the Operation Support and Service b. Development: i. Management Skill Training, ii. Special Training for Foreign Transferred Employees,

Benefits Provided By Bank Alfalah

Some of the monetary and non monetary benefits that Bank Alfalah provides to itsemployees are as follows: Attractive Salary Package Employee Provident Fund Gratuity Fund Medical Insurance Bonuses Life Insurance Promotions Various types of Staff Loans Assistance in Pursuing Higher Education Cash Rewards on completing IBP Diploma

Performance Appraisal
It is a structured discussion between employee and supervisor. It provides an opportunity for the supervisor to recognize an employees achievement, offer suggestions for improvement when needed, discuss job responsibilities, define objectives, counsel for career advancement, and justify a pay adjustment. Regarding the performance appraisal, bank adopts both type of approaches. a. Traditional Approach:
27

The traditional approach is primarily concerned with the overall organization and its past performance. In Bank Alfalah, overall performance is reviews at branch level. Each branch is liable to show its performance in a positive direction according to set goals. b. Development Approach: This approach viewed the employees as individuals and has been forward looking through the use of goal setting. All the employees in the each of the branches are given a performa. Every employee working in the bank is assigned targets, usually their target are in the form of amount. The performances of all the branches are reviewed in the end of December. Till yet Bank Alfalah, has no computerized system to assess the performance of employees

Performance Appraisal Process

The performance appraisal process in the Bank Alfalah Ltd. consists of four inter-related steps: i. Establish a common understanding between the manager (evaluator) and employee (evaluate) regarding work expectations, mainly the work to be accomplished and how those work are to be evaluated. ii. Establish ongoing assessment of performance and the progress against work expectation. iii. Formal documentation of performance through the completion of a performance and development appraisal form appropriate to the job family. iv. The formal performance and development appraisal discussion, based on the completed appraisal form and ending in the construction of a development plan.

Reward Management
Reward Management elaborates how people are rewarded in accordance with their value to an organization. It is concerned with both financial and non-financial rewards. A reward system of an organization consist of integrated policies, processes and practices for rewarding its employees in accordance with contribution, skill and competence and their market worth. In Bank Alfalah the elements of reward management system are consists of Basic Pay; the fixed salary or wage which constitutes the rates for the job. This rate is varied in a skill based or competence based system according to the individuals skill or competence. The rates are fixed by managerial judgement of what is required to recruit and retain the employee. In Bank Alfalah there is no any concept of individual performance related pay except to the Business Development Officer. Business Development Officers are those who are hired at contractual basis. They are assigned different targets. If they exceed to the targets they can enjoy the individual performance related pay otherwise they are fied. There is no concept of bonuses, commission or over time related pay. The official timing of bank is 09.00 AM to 06.00 PM but almost all of the employees have to work till near 08.00 PM. However, for this additional work they are not getting any additional bonuses / over time.
28

MANAGERIAL PRACTICES
Aggressive Banking
Bank alfalah expanding their network of Islamic Banking. Bank Al Baraka has been serving the Islamic banking sector since 10 years and they have only 5 branches in Pakistan. On the other hand bank Alfalah has established 20 branches in a year.

Motivation
Bank Alfalah motivating their employees by giving them comprehensive benefits and professional environment within the organization, which enhances the performance of the employees. Bank motivates their employees by giving 3 bonuses in a year.

Monitory Benefits
Monitory benefits are given to the employees on the basis of their performance like salary rise, cash prize.

Grade Promotion
Bank also provides benefit to their employees in the form of grade promotion. Grade promotion motivates the employee to do their work efficiently and effectively.

Abroad Posting
Bank benefit their employees by sending them on overseas posting where they can enhance their professional skills and get handsome financial benefits in terms of salary or fridge benefits.

Controlling
Bank has proper setup of controlling the day to day transactions and operational affairs. Bank controls the operations through a proper check and balance system and properly monitor the daily work.

29

Internal Control Unit

Bank has an Internal Control Unit that monitors the daily transactions within the organization and keeps informing the management about the rules and policies violation. Internal control unit has a proper check and balance on operations and other bank departments.

Internal Audit
Internal audit is a tool to have a proper check on daily working in a bank. Internal auditor has to point out the discrepancies found during audit. Internal auditors hand over the audit report to the audit chief and he hand over that to the management. Management overlook all the discrepancies and try to reduce the violation and also took the necessary actions. Internal audit conducted in a bank twice a year.

External Audit
External auditors are the representatives of state bank of Pakistan. State bank assigned them to audit the banks the find out the lapses or discrepancies according to the rules and regulations of state bank of Pakistan. State bank imposed penalty on bank if they found any discrepancies related to banking practices or procedures. External auditor hand over the audit report to state bank of Pakistan and SBP handover the report to the management along with the debit advice in form of penalty and management overlook the discrepancies and take necessary actions. External audit conducted once in a year. Bank Al Falah has a Chartered Accountant Company on his panel who prepare and overview the financial reports of the bank Taseer Hadi & Co. is a chartered firm which is on the panel of Bank Alfalah.

ALFALAH BANK PROCESS ANALYSIS

30

Bank Alfalah is operating with an extensive network of 198 branches nationwide that are spread all over the four provinces, Different varieties of services that each branch is equipped to provide include:

Policy Formation Process

At Bank Alfalah, policies are been formulated at the executive level of the organization. Policies for any organization constitute a major part in the overall long term functioning of the bank. In short we can say that policies and the objectives are the lifeblood of the organization in long run.
31

Through policy formation is in the prescribed hands yet the policies formulated by the top level have been very successful as indicated by the success pattern of the bank so far. Then these policies are transformed into the hands of the top-level management. The top management is been suggested to make the policies implemented keeping in view the long-term objectives of the organization. Also the views from the middle-managers and employees are encouraged as well for the purpose of removing flaws from the system. For the very purpose meetings are held almost weekly at the branches level and also in case of any contingent dispute resolving the meeting scan be called at any time during the branch timings. Members Of The Committee: CEO Board of Directors Executive-in-charge of strategic planning and global marketing Executive-in-charge of credit and monitoring division Executive-in-charge Credit division Executive-in-charge of international and treasury division

Major Functions Major functions performed by the executive committee are as follows: Analyzing the overall growth Defining the feature of policy Do the virtual testing Remove the flaws Implementation of the policy

Members of the executive committee take into consideration various aspects before the formation of the policy: Whether the policy is profitable or not What are the demerits Whether the policy meets the desired objectives

Executive in charge of the strategic planning is responsible for the implementation of the policy but the CEO and BOD regarding the policy make the major decisions.

MANAGERIAL POILICIES
32

Since the inception of Bank Alfalah Limited in 1997, the bank has moved rapidly in expanding its branch network and deposit base, along with making profitable advances and increasing its range of products and services. It has made a breakthrough in providing premier services at an affordable cost to our customers. Managerial policies followed by the bank have a direct contribution in its success. The board and Management of the bank have implemented strategies and policies to carve a distinct position for the bank in the market place. In a bid to satisfy Bank Alfalahs shareholders and valued clients, the management initiated the process of realization of the banks vision by consolidating its financial position and creating a large and diversified business base. Bank Alfalah has made notable progress in business volume, efficiency and profitability following its increased involvement in trade finance, commercial lending and foreign exchange and money market operation.

Lending Policy
Bank Alfalah pursues a conservative yet dynamic credit policy. This strategy has enabled the bank to have high quality risk portfolio. Bank prefers to finance exporters because of less risk involved. Bank Alfalah manages the credit risk, liquidity risk, market risk and other operational risks very efficiently. For this very purpose Bank Alfalah has got an effective credit line proposals system to be sanctioned to the clients on demand.

Selection Of Clients
Management is very selective of clients. All of the references are carefully checked to learn about a potential client before establishing a relationship. References are excellent sources of new accounts as they give an opportunity to learn about a potential client. This policy helps in protecting the integrity of the bank. It ensures good relationship with the clients.

Services And Product Policies

Bank Alfalah provides a vast variety of products and services to its clients. Some of the policies are discussed below: i. Credit Facility In this service the loans are provided to the customers by the bank to meet revenue shortfalls. ii. Stop payment instructions It is one of the most important services provided by the bank to its clients. In case the account holder has lost his/her cheque, he can issue the stop payment instructions to the bank. The bank till further instructions will not honor the cheque. iii. Drafts, Telephonic Transfers, Pay Orders These are the facilities that the bank offers its customers and, at times, to the people who do not maintain an account with the bank, i.e. ordinary people. For offering these services the bank charges commission besides the government taxes and duties.

Deposits
The bank offers different types of deposits to its customers: a) Alfalah Musharakah Saving Account b) Current Account c) Musharakah Time Deposit On PLS Basis
33

Trade Department Policy

Bank Alfalahs focus is on Foreign Trade as its primary market of business. It maintains high emphasis on enlarging its Correspondent Banking network besides aiming to enhance the scope and level of cooperation with the existing correspondents. The trade finance department has efficiently done management of the changing trade policies by the central bank over there.

Marketing Policy
Bank Alfalah invests heavily for the marketing policies and orientation, for the publicity of its new products/services. It uses television advertisements, newspapers as well as various promotional schemes to attract customer. The bank sponsors a number of sporting and community development initiatives to play its part as a responsible corporate citizen.

Promotion and Incentives

Bank hires officers in range 1. Then upon their job performance they are promoted to next range. More facilities and increments are given along with promotion. The bank gives car facility to the officers of range 5. Banks policy is to give cash rewards and salary increments for increasing the employees satisfaction. Also with the expansion of the branch network growth in the current era, more and more opportunities have been provoked not only for the young generation but also for the employees of the bank.

Accounting Policies
Bank Alfalah has adopted almost the same accounting procedures that other financial institutions are adopting at this time. These accounting procedures or Accounting policies are made according to Generally Accepted Accounting Principles, the GAAP. The process flow and the usage of the policies in the day wise routine are mandatory for all the employees working in the specified departments at the branch.

Recruitment Policy
Hiring is mainly of two types i.e. direct hiring and promotion from the lower levels. Banks policy is to hire suitable candidates. By suitable candidates bank refers to candidates having proper educational qualification, experience and background. It is the policy of the bank that President of the bank will be the representative of major stakeholders/owners. Board of Directors is representative of sponsors. Bank is reluctant in making direct appointment of senior executives. Every year Bank Alfalah opens its doors for about 30 fresh post-graduates to join the prestigious ranks of the Management Trainee Officers with the bank.

Training and Development Policy

Bank Alfalahs policy is to take special interest in recruitment and training. This training is been given in two instances i.e. the Off-Job training and the On-Job training. To impart technical skills to its staff Training and Development Centre offers programs in several skill areas. Its employees attend seminars and courses offered by Institutes of Bankers. Alfalah also offers various computer-training courses to its employees. It is obligatory for each staff member of the bank to attend a minimum number of training courses during the course of a year. Wherever the
34

Training Department is unable to provide focused training for certain groups of staff, reputable external training providers are invited to fill the gap.

Quality Assurance Services

Service excellence is one of the priorities of Bank Alfalah. A separate quality assurance department is to be established as well very soon for the removal of little flaws that are still prevailing at some of the branches regarding facilities for the consumers. The focus of the bank is to develop new areas of activities along with traditional banking activities of resource mobilization and credit disbursement.

Growth Policy
Bank Alfalah emphasizes on growth along with providing best quality customer service. Banks policy is to maximize the synergies of branch network through optimal allocation of financial, human and other resources to compete in the marketplace.

35