Pakistan News

Modarabas not meeting Shariah requirements

Modarabas not meeting Shariah requirements

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) in a report said almost half of the 28 modarabas were not performing well to meet the requirements of Shariah compliance.

In a study carried out by the commission, it was identified that various modarabas failed to perform despite availability of vast Shariah compliant business avenues, and out of 28, the performances of 13 modarabas were found unsatisfactory.

“The SECP had recently carried out a comprehensive financial review of modarabas on the basis of their historical performance,” said an official of the corporate sector regulator.

The study identified issues being faced by the non-performing modarabas. These included presence of significant non-earning and classified assets, lack of diversification, liquidity issues, small capital base to compete and non-injection of fresh investment.

These issues affected the financial performance of modarabas and were major hurdles in distributing dividends among certificate holders.

In an effort to streamline the affairs of the non-performing modarabas, the SECP has initiated necessary enforcement actions against those having unsatisfactory track record of dividend payouts, high classified and non-earning assets and those which have not implemented proper risk management framework.

Published in Dawn, March 26th, 2016

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