Bank Alfalah is one of the fastest-growing banks in Pakistan with over 700 branches nationwide. It offers a broad range of conventional and Islamic banking products catering to all customer segments.
Unlike most peer banks, Bank Alfalah employs an innovative system of deposit interest tiers tied to average balance maintenance. This structure aims to encourage financial savings among account holders while allowing the bank to earn higher gains on invested funds.
Article Highlights
Let us examine the major savings accounts of Bank Alfalah and their system of interest tiers:
Alfalah Basic Banking Account
The Basic Banking Account is an conventional, interest-bearing savings account. Interest is calculated on a daily product basis, but credited twice yearly upon maintaining a pre-defined threshold balance for 180 days in the period.
Specifically, Bank Alfalah offers two interest tiers under this savings account:
Tier 1: Average balance below PKR 50,000
- No interest paid
Tier 2: Average balance above PKR 50,000
- Interest paid semi-annually
By stipulating a minimum average balance requirement to enter Tier 2, the product aims to inculcate financial discipline among account holders. Interest earnings also boost returns over keeping funds idle.
However, conventional interest-based returns may not comply for customers wanting Shariah-compliant products only. Bank Alfalah offers alternatives under its Islamic banking division as seen next.
Alfa Islamic Savings Account
The Alfa Islamic Saving Account is based on an alternate profit-and-loss sharing structure complying with Islamic banking principles.
Account holders share in profits earned by Bank Alfalah through deploying their account balances in various Halal investment and lending activities. The share of profits paid out is based on the following two tiers:
Tier 1: Average balance below PKR 50,000
- No profit payout
- Unlimited free cash withdrawals
Tier 2: Average balance above PKR 50,000
- Share in profit paid annually
- Unlimited free cash withdrawals
- Free accident insurance cover
Maintaining an average balance above the prescribed minimum tier threshold of PKR 50,000 makes account holders eligible for sharing yearly profits. They also get complimentary insurance over and above profit payouts.
This encourages financial savings discipline as per Islamic principles while allowing Bank Alfalah optimal utilization of pooled funds at a relatively lower implicit cost versus commercial deposits.
Alfa Farmers Savings Account
The bank has also tailored savings propositions for priority sectors like agriculture.
The Alfa Farmers Savings Account is targeted at low-income farmers, fishermen, livestock owners with seasonal income patterns. It employs balance-led tiers to promote financial inclusion:
Tier 1: Average balance up to PKR 15,000
- Biannual electronic profit extraction statement
- Unlimited cash withdrawal
Tier 2: Average balance above PKR 15,000
- Profit extraction and statements monthly
- Free Micro-health insurance
- Free accidental cover
Farmers maintaining over PKR 15,000 get faster monthly profit payouts compared to biannual cycle for lower tier. They also enjoy free insurance covers revealing effective product bundling to promote concentrated savings.
Higher average balances also steady bank funding profiles compared to volatile low-balance accounts. This enables robust agriculture sector lending which in turn funds the very same target group – thereby closing the loop.
Conclusion
Across key customer segments, Bank Alfalah demonstrates innovative usage of average balance-based tiers for shaping savings account returns. Maintaining threshold minimum balances ensures customers have skin in the game before enjoying tier benefits like better profit payouts, free insurance and preferential pricing.
For the bank, building such focused yet balanced concentration in savings creates a leveragable float pool at optimal funding costs – assisting wider agenda including financial inclusion and priority sector development. Thus, interest tiers allow Bank Alfalah to align wider goals with returns for account holders through a sustainable framework.