Performance of the majority of the Modarabas, though quite impressive, is not reflected in the share market value in spite of high dividend being paid. This was pointed out by Salman Ali Shaikh, Commissioner, Securities and Exchange Commission of Pakistan (SECP) on the occasion of Modaraba Year Book 2006 launching at a ceremony held here on Monday.
Salman Shaikh was of the view that the basic Modaraba model needs to be re-evaluated and a newer model with enhanced shareholders' rights, and better corporate governance should be implemented. He said that the SECP was determined to create a regulatory environment that recognises the potential of the evolving Shariah based financial systems and that SECP wants to encourage Modarabas to take part effectively in promotion of the Islamic financial regime.
He appreciated the facts recorded in the Year Book that out of 25 Modarabas, 18 Modarabas had paid dividends ranging between 5 percent to 52 percent last year making a total pay out of Rs 745 million as against Rs 584 million of the previous year showing a growth of 28 percent.
He distributed trophies to three top dividend paying Modarabas namely First Imrooz Modaraba (52 percent), Faizan Manufacturing Modaraba (29.4 percent) and First Habib Modaraba (20 percent).
While commending on the role of Modaraba Association as an effective front line regulatory, Salman Shaikh recognised its contribution in numerous issues such as proposed amendments in laws, changes in Prudential Regulations and ongoing work for development of model financing agreements. He strongly advised the Modarabas to evaluate their risks more carefully and achieve better governance standards while avoiding the high-risk areas.
Earlier, Basheer A Chowdry, Chairman, Modaraba Association of Pakistan (MAP) presented the Modaraba Year Book 2006 and summarised the performance of the sector during the year ended June 30, 2006. He said the total assets of the sector had increased to Rs 23.7 billion from Rs 21.1 billion last year showing a growth of 12.32 percent.
Income of the Modaraba had increased considerably from Rs 39 billion to Rs 5.1 billion showing a growth of 30.7 percent. He said Religious Board had approved setting up of six Modarabas during the last year, of which two Modarabas namely First Treet Manufacturing Modaraba and Allied Modaraba have since been floated with a paid up capital of Rs 143 million and Rs 300 million respectively.
He highlighted the fact that different modes of the new entrants reflected a well-diversified and strong business potential of Islamic concept of Modarabas. He was also appreciative of the development of the Islamic banking sector through which the Modarabas will be benefiting directly from the product development, public awareness of the Islamic finances and emergence of the Islamic money markets to be accelerated by the Islamic banks in the country.
He said the Association (MAP) is playing an active role in promoting a functional collaboration between Modarabas and Islamic banks. Nevertheless, Chowdry was of the view that the issues like capital enhancement, diversification of business modes, outreach in the market place, innovation in product acid services and enhancement of professional skills will be addressed by the Modaraba Sector with courage and speed. He said the Association was working very closely with the Registrar Modaraba to develop a comprehensive and progressive plan for growth of the sector in the immediate to medium timeframe.
The MAP Year Book 2006 contains an overview of the Modaraba Sector, individual performance of the members and useful article regarding Islamic finances. The ceremony was attended by Bilal Rasul, Registrar Modaraba and Shahid Mahmood, Deputy Registrar Modaraba, Shahid Nasim, Director, NBFC and representatives of Modaraba, leasing and Islamic banking sectors.