ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has constituted a Religious Board to remove all impediments in the Modaraba sector to help expand and diversify their business, achieving economies of scale.
In this connection, the SECP has issued SRO 63 (I)/2022, here on Monday.
According to the notification, Syed Ahmad Hassan Shah would be chairman of the Religious Board. Members of the Board would be Dr Zeeshan Ahmed and Mufti Irshad Ahmad Aijaz.
In exercise of the powers conferred by section 9 of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and rule 6 of the Modaraba Companies and Modaraba Rules, 1981 read with clause (a) and (c) of section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 and S.R.O 698 (I)/86 dated July 2, 1986, the SECP has constituted a Religious Board consisting of the three members.
The SECP stated that due to popularity of Islamic financial products and enhanced awareness about Modaraba institutions among the masses, investors have started showing interest in establishing Modarabas.
Several investors showed interest in establishing Modarabas and their respective applications are under review. However, owing to ongoing pandemic situation, investors are cautious and waiting for a suitable time to re-initiate their investment endeavours. The SECP, in view of the Covid-19 situation, has taken a number of measures to provide ease to customers of Modarabas in repayment of facility and relaxed provisioning requirements for Modarabas.
The commission has also modified the effective date for applicability of IFRS-9 for Modarabas till June 30, 2021.
SECP tightens regulations for Modaraba sector
On the legislative front, amendments in the Modaraba Companies and Modaraba Rules, 1981, after public consultation were approved by the Commission and Policy Board and submitted to the Ministry of Finance for approval and notification.
As of June 30, 2020, total number of Modaraba companies registered with the SECP was 33.
Similarly, 29 Modarabas were operating with total assets of Rs51.43 billion.
The funds raised through issuance of certificate of Musharakah were Rs10.35 billion.
Under the regulations, the meeting of the Religious Board shall be held to consider applications for floatation of Modaraba as and when called by the Chairman, but at least once in every two months unless there is no business to transact.
The Board may wherever so required obtain clarification or additional information from the Modaraba company or offer a personal hearing to the Modaraba company before arriving at a decision.
The proceedings of each meeting of the Religious Board shall be recorded in such manner as may be specified by it and the same shall be signed by the Chairman or, in his absence, by the member presiding over the meeting.
All orders and decisions of the Religious Board shall be authenticated by the Chairman or a member or officer especially empowered in this behalf by the Board.
The Religious Board shall give its decision within thirty days from the date of closure of its last hearing in a communication bearing official seal of the Board.
A member of the Religious Board shall hold office for a term of three years unless he resigns, ceases to hold office or is removed earlier.
Any casual vacancy shall be filled in by appointment by the Federal Government of a person qualified to be a member, for the un-expired term of the outgoing member, SECP regulations added.
According to the experts, the Modaraba sector has an established legal framework and infrastructure that can prove useful in propelling growth of the financial sector. It is essential that Modarabas consider the policy of mergers and consolidation to develop stronger and financial viable institutions. Consolidation in the sector would facilitate expansion in the capital base of individual Modarabas and help them achieve economies of scale.
The Modarabas to explore new Sharia-compliant avenues for resource mobilisation and the possibility of introducing new Sharia-compliant avenues for resource mobilisation and the possibility of introducing new financial products to meet the diverse needs of the financial sector.
Copyright Business Recorder, 2022
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