Modaraba Ordinance 1980: SECP issues draft bill of amendments

Changes aimed at promoting Islamic financial services, strengthening Shariah compliance

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued the draft bill of amendments in modaraba companies and Modaraba (Floatation and Control) Ordinance 1980 to obtain feedback of the stakeholders and public.

The proposed amendments are intended to reflect the rapid and extensive changes in the business of modarabas, said the statement issued by the commission.

“The SECP feels the need to amend the ordinance in order to promote the Islamic financial services. The proposed amendments would strengthen Shariah compliance by modarabas and ensure that the systems, procedures and policies adopted by the modarabas are in line with the Shariah principles,” the statement added.

“It would also mitigate the reputational and operational risks and enhance the image and operational framework for modarabas as pure Islamic financial institutions.”

The major amendments to the ordinance include the prohibition on the use of the world ‘modarabas’ or any of its derivatives by any person other than a modaraba company to ensure that no one can use the world modaraba for any illegal business activity.

Provisions for empowerment of the modaraba certificate holders have been introduced who will convene the annual and extraordinary general meetings.

Also, prohibition has been imposed on deposit raising by modarabas while the appointment of Shariah advisers by modarabas has been made mandatory.

Provisions have also been introduced to make the Shariah adviser’s report as part of the annual audited accounts of the modaraba.

Published in The Express Tribune, June 24^th, 2016.

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