ISLAMABAD: In his resolve to promote the Islamic modes of doing business, inter alia, Islamic financial services, Zafar-ul-Haq Hijazi, chairman, Securities and Exchange Commission of Pakistan (SECP), envisaged to promote modarabas as pure Islamic financial institutions. In this regard, the entire regulatory framework for modarabas was reviewed and the Commission approved the concept paper for structural reforms to implement the concept of “modaraba” in its true spirit as enshrined in the Shariah.

The proposed amendments, inter alia, include introduction of the concept of unlisted modarabas to facilitate new entrants and to help the Islamic financial services industry grow. A new concept of fundraising through issuance of term equity certificates has been introduced to resolve the issue of resource mobilization being faced by modarabas. The characteristics of term equity certificates are akin to the modaraba certificates and structured in line with the overall concept of modarabas.

Furthermore, new limits regarding holding of modaraba company and its related parties in modaraba have been proposed to encourage and maximize equity participation by the public.

The SECP has already suggested other amendments such as empowering the certificate holders of modaraba to hold annual general meeting, appointment of Sharia advisors to ensure Sharia compliance in day-to-day affairs, performance-based remuneration of the “modarib” to incentivize the modaraba company to perform better.—PR