ISLAMABAD: The Policy Board of the Securities and Exchange Commission of Pakistan (SECP) has approved the introduction of unlisted Modarabas, aiming to facilitate financial resource mobilization and performance-based profit sharing in the Islamic finance sector.
The decision follows a fresh review of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, which initially saw amendments introduced in the National Assembly in July 2020 through the Modaraba Ordinance (Amendments) Bill, 2020.
However, the proposal lapsed following the dissolution of the National Assembly in August 2023. SECP has now revised and finalized the amendments, which will be submitted to the Finance Division for further legislative action.
Modaraba is an Islamic financial contract where one party provides capital, and the other manages it for profit-sharing under Shariah principles.
The key reforms retained in the revised proposal include enhanced investor rights, improved governance provisions, and regulatory alignment with the Companies Act. The amendments allow for special resolutions on management changes, investor access to winding-up proceedings in courts, and streamlined oversight by shifting disciplinary actions from criminal to civil proceedings.
Additionally, the proposal dissolves the Modaraba Tribunal, transferring its responsibilities to high courts and session courts to improve legal efficiency. These changes are expected to enhance transparency, ease regulatory compliance, and modernize the Modaraba sector.
The proposed amendments align with the government’s economic transformation agenda, particularly in light of the 26th constitutional amendment and the Federal Shariat Court’s ruling to eliminate Riba (interest) from the economy. The SECP’s policy revisions aim to strengthen Islamic financial institutions and promote industry development.
