KARACHI, Jan 9: Modarabas performed well last fiscal year and they hope to do even better this year.

“This year will be a better year,” said chairman of Modarabas Association of Pakistan Waqar Ajmal Chaudhry after briefing newsmen how modarabas had improved upon their working in the last fiscal year. In the year ending on 30th June, 2002, twenty out of 45 listed modarabas declared cash dividend at the rate of 2.5- 50 per cent. The aggregate dividend paid by them comes to Rs 570 million up from Rs 529 million a year ago. This also compares well with other segments of non-banking financial sector as the leasing sector handed out cash dividends worth Rs 187 million and investment banks Rs 67 million during this period. Mutual funds did slightly better as they distributed Rs 684 million in cash dividends in the year ending on June 30.

“I expect that the modarabas to improve upon this performance through continued good governance and diversification of their activities,” Chaudhry said. He also informed newsmen that at least three to four new modarabas were likely to be launched in near future both from amongst the financial sector as well as by some corporates. Meanwhile, the process of consolidation in the modarabas sector is on track and so far nine mergers and five acquisitions have taken place, he added.

When asked whether the setting up of an Islamic bank and the likely upcoming of some Islamic bank branches by leading banks would make resource mobilization harder for modarabas he said it would not.

“We would rather have access to a more deepened market of the funds available for Islamic mode of businesses,” he said adding that with an Islamic bank and some Islamic banking branches in operation Shariah based financial products would become popular. That would make the task of raising debt from the market a bit easier for the modarabas whose operations are fully in line with the injunctions of the Shariah, said the outgoing chairman of MAP Basheer A. Chowdry. He said MAP had already got the approval of Securities & Exchange Commission of Pakistan for Islamic term finance certificates adding that two modarabas may shortly issue these TFCs.

Both the present as well as the outgoing chairman of Modarabas

Association admitted that the entry of banks in the leasing business had given tough competition to modarabas. But they said since leasing business is the speciality of the modrabas engaged in leasing they would retain their ability to progress in this area despite the entry of the banks.

“We know leasing business better than banks,” remarked Basheer A. Chowdry. “But of course our modarabas will have to come up with some innovative products and services,” added Waqar Ajmal Chaudhry.

Both said that there was scope for the modarabas to enter into housing finance business adding that the SBP had assured MAP of its support in this regard. They said modrabas could undertake this business easily particularly because housing finance is in line with the injunctions of Shariah.

Waqar Ajmal Chaudhry also spoke about the participation of MAP in the meeting of Islamic Chamber of Commerce held last month in Sharjah. He said MAP was the only vehicle after the Board of Investment from Pakistan that represented the country there. He said the MAP delegation led by him had fruitful discussions with representatives of other countries and those from Nigeria had sought MAP’s cooperation in introducing the modarabas concept in that country. He said MAP delegation also had discussions with the officials of Islamic Development Bank and Islamic Bank of Sharjah and Islamic Bank of Abu Dhabi. “But as we were not there for resource mobilization we did not discussed any specific plans and confined our discussions to how the Islamic world can enhance cooperation in the financial sector.

The MAP chairman said with the rupee having been stronger for some time and with the prospects pointing towards more stability “it is better to raise debts in rupee rather than in a foreign currency.” In early 1990s Modarabas Association had been able to get a Shariah compliant financing from the International Finance Corporation. “But time has changed.”