ISLAMABAD: National Assembly Standing Committee on Finance, Wednesday, raised serious concern over the fraudulent schemes in the name of Modarabas, which prompted the Securities and Exchange Commission of Pakistan (SECP) to further amend the law for the protection of the investments made by the general public.

The first meeting of the subcommittee of the Standing Committee on Finance and Revenue on the Modaraba Companies and Modarabas (Floatation and Control) (Amendments) Bill, 2020, was held Wednesday at the SECP Head Office, Islamabad, under the chairmanship of Chaudhary Muhammad Barjees Tahir.

The SECP team made a presentation on the salient features of the proposed bill, primarily aiming to align the Modaraba Law with the Companies Act, 2017, empowering certificate holders of Modarabas and enhancing the ease of doing business.

In light of the observations of committee members with respect to fraudulent schemes in the name of Modarabas, the SECP team has highlighted some areas where, subject to the concurrence of the subcommittee, further amendments to the bill can be proposed to further improve it.

In the end, it was decided to reconvene the meeting, and in the meantime, the ministries and the SECP will prepare an updated matrix of proposed amendments for consideration by the subcommittee.

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The proposed Modaraba Companies and Modaraba (Floatation and Control) Ordinance, (Amendment) Bill, 2020 seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as a pure Islamic financial institution of the country. This has been briefed by the officials of the SECP on Wednesday during the meeting of the sub-committee of the National Assembly Standing Committee on Finance held at the SECP Headquarters.

During the committee, the SECP officials further informed that the proposed Ordinance intends to amend more than 40 years old Ordinance and regulate the business of Modarabas and Modaraba Companies to provide protection to the investors, modaraba certificate holders and the public.

The bill provide incentives to entrepreneur and prospective investors to invest and carry out their businesses under the umbrella of regulated structure of Modaraba to earn halal profits on their investments.

The existing Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 was promulgated by the Federal Government in 1980 since inception, no substantial changes have so far been introduced except the inclusion of some administrative powers for the Commission and the Registrar Modaraba.

The Bill focuses on the growth of the modaraba sector through introduction of various reforms such as the concept of establishment of unlisted modaraba, empowerment of the certificate holders through introduction of the concept of annual general meetings to ensure maximum participation of certificate holders in decision-making process of a modarba and providing enabling environment for ease ofdoing business.

It will facilitate the growth of economy in general and the Islamic financial sector in particular by providing simplified procedures for ease of starting and doing business, greater protection of investors and augment corporatization in the country.

The proposed bill seeks to mitigate the reputational and operational risks and enhance the image and operational framework of modarabas as a pure Islamic financial institution ofthe country.

In order to give immediate impetus to the Islamic financial industry and to stimulate economic growth, there is an emergent need to promulgate the proposed Modaraba Bill, 2020 to provide incentives to entrepreneur- and prospective investors to invest and carry out their businesses under the umbrella of regulated structure of modarba to earn halal profits on their investments, the SECP officials added.

Copyright Business Recorder, 2022