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Mubashir Hassan

Hafiz yasir
Qasim Nawaz
Waseem Baig
M.Saqib
Sidra Mehboob
Hassan Mujtaba

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Mudarba
Mudarba concept
Parties
Types of Mudarbah
Roles of Mudarib
Constitution
Structure
Rules and regulation for Rab-ul-mal & Mudarib
General rules and regulation
Regulatory Frame work

Benefit to Rab-ul-Mal
Mudarba companies work in Pakistan
Updating the legal frame work
Transparency Regulatory control
Development of islamic capital market

Mudarba

AL-QURAN
Believers, fear Allah and give up
what is still due to you from
usury, if you are believers;
[SURAH AL-BAQARAH AYAH 278]

THE MODARABA- DEFINITION

Modaraba is a kind of partnership , wherein one


party provides finance to other party for the
purpose of carrying on business

Modaraba is one of the prime modes of Islamic Financial System. The


concept of Modaraba was given FOURTEEN HUNDRED YEARS
back by our Holy prophet Hazrat Muhammad (Peace be upon him).

100% Islamic concept

Non-Banking Company

It deals with finance act as NBFC

Mudarabah is a product of Islamic bank

There are two parties invovle:

Rab-Ul-Mal (Invester)

Mudarib (Agent,working capital)

1.Al

Mudarabah Al Muqayyadah
(Restricted Mudarabah)

2. Al Mudarabah Al Mutlaqah
(Unrestricted Mudarabah)

Ameen (Trustee)

2. Wakeel (Agent)

3.Shareek (Partner)

4. Zamin (Liable)

5. Ajeer (Employee)

He

gives only money

He

has no management skills

Rab-ul-Mal

cannot ask to Mudarib

Where

is my money?

Where

to invest?

Work as manager

He cannot invest in business

He knows about business term & condition

He works Seprately

Has business skills.

Have knowledge about business


management.

All decision are made by him.

CONSTITUTION OF MODARABA COMPANIES AND MODARABA


In 1980 Zia-ul-haq Islamization all financial institutions
operating in Pakistan

The Modaraba Companies & Modaraba (Floatation & Control)


Ordinance, 1980 and Modaraba Companies and Modarabas
Rules 1981, were promulgated in the early 80s by the Government
of Pakistan.

STRUCTURE
Regulator
The Sector is monitored and regulated by the
Registrar
(Modaraba Companies and Modarabas)
SECP

Religious Board
Authority which certifies that Prospectus of the
Modaraba is Shariah Compliant
Justice/Ex-Justice of a Court plus 2 Scholars

Modaraba Management Company (Modarib)


Private/Public Limited Company
with Board of Directors

Modaraba Fund
(Pool of Money of Rab-ul-Maal)
Separate Legal Entity

Prospectus
(business activities)

Rules and Regulation for Rab-ul-Mal


Rab-ul-Mal has no right to ask why you make this
decision
Only Rab-ul-mal can invest.
All assets are owned by Rab-ul-Mal
He has right to check and balance on mudarib but
have no right to interept in Mudarib decision making

He cannot interfere in mudarib business


He cannot ask about our money &
investment
He provide only capital
Loss only bear by rab-ul-mal
If loss done by mudarib then loss bear by
together(Negligence of mudarib)
All asset owned by rab-ul-mal

All expenses are being beard by the Rab-ul-Mal


(office , rent etc)

Loss will beard by the Rab-ul-Mal

Profit Ratio will be predefined.

Mudarib works individually

He cannot add partner

He cannot invest

Business related decisions are only made by


Mudarib

Mudarib invest according to his expertise.

All the personal expense will be beard by


the Mudarib himself

Mudarib can hire new employee and his


salary expense will be beard by the
company.

Personal expenses beared by own

If mudarib hired any employee then


company will pay their expenses

In case of loss hired employee cannot ask


about his salary from Mudarib

Rab-ul-mal trust on the abilities of mudarib


According to PAKISTAN law (90%) share of Rab-ulmal and (10%) share hold by mudarib
According to PAKISTAN law mudarib can received
profit from dividend
Mudarib can invest money in business in shape of
share and stock
Rab-ul-mal has right to sale our business of any
time

It

invest in stock exchange

It can invest in venture capital


Invest in the stock market
Indulge in Ijara, Morabaha and Musharaka Financing
activities
Indulge in trading of Halal Commodities
Undertake project financing activities
Act as a venture capital company

THE REGULATORY FRAMEWORK


The Rules & Regulations and the regulatory framework applicable to Modaraba
and the Modaraba Companies are:
The Modaraba Companies & Modaraba (Floatation & Control) Ordinance,
1980- registration of Modaraba Companies and floatation, management and
regulation of Modarabas.
- The Modaraba Companies & Modaraba Rules, 1981
- The Companies Ordinance , 1984
- The Religious Board
- Prudential Regulations for Modaraba

Mudarabah

can be terminated any time by


giving notice.

If Mudarabah was for a particular term, it will


terminate at the end of the term.

Termination of Mudarabah means that the


Mudarib cannot purchase new goods for the
Mudarabah. However, he may sell the existing
goods that were purchased before termination.

If all assets of the Mudarabah are in cash form at


the time of termination, and some profit has been
earned on the principal amount, it shall be
distributed between the parties according to the
agreed ratio.

If the assets of Mudarabah are not in cash form,


they will be sold and liquidated so that the actual
profit may be determined.

BENEFIT TO RABB-UL-MAL
One party has the funds but does not have the expertise and another party
has the expertise but does not have the funds. Modaraba gives opportunities
to both the parties i.e. Modarib and Rabb-ul-Mal to join hands for the
business under the Shariah.
Rabb-ul-Mal can liquidate his or her investment anytime by selling his/her
Modaraba Certificate through Stock markets to other Rabb-ul-Mal.

In Pakistan, the income of a Modaraba is tax free if the Modarib distributes


90% of the profit to Rabb-ul-Mal earned in any single year.

Modaraba Sector has continuously been playing an


active role in the growth of Pakistans economy.
During the last two decades, the Modaraba Sector
has enrolled its place in the financial intermediaries
of Pakistan and has been able to create a market
niche for themselves in the corporate sector.

(Rs. in million)

2008

2009

2010

2011

2012

No.ofManagementCompanies

30

27

24

24

24

No.ofModarabas

32

28

25

25

24

PaidupCapital

7,827

7,406

6,999

6,644

7,175

TotalEquity

8,401

9,233

10,062

10,062

11,456

TotalAssets

17,574

21,131

23,736

23,736

29,281

TotalIncome

4,140

3,939

5,025

5,025

6,583

LeasingIncome

3,066

2,966

3,082

3,082

4,631

Musharaka&MorabahaIncome

271

323

410

410

624

Miscellaneous&OtherIncome

803

650

1,533

1,533

1,327

NetProfitafterTax

956

794

811

811

962

1)

Financial link mudarabah

2)

First Allied bank mudarabah

3)

First equity mudarabah

4)

First general leasing mudarabah

5)

First Habib bank mudarabah

6)

First Punjab mudarabah

7)

Industrial capital mudarabah

Proposed Amendments in the Ordinance, Rules,


Regulations and Guidelines governing the
Modarabas companies and Modarabas

Relaxation of Prudential Regulations


Statutory reserve requirement increased for
capitalization
relaxation in current assets to current liabilities
ratios from 1 : 1 to 0.75:1

New trends

Concept of Islamic Funds becoming popular

Increasing number of entrants

Regulatory challenges
Minimum equity requirement to be raised
Stringent eligibility/fit and proper criteria and performance
benchmarks to be introduced, research capabilities to be
improved
Investor base broadened: (public sector) provident and pension
funds
International best practices to be implemented across the sector
Industry Associations role to be strengthened, in the areas of
training, examinations and licensing of intermediaries

Placement of quarterly accounts on website

Placement of shares either with the SECP

Joint Forum of the SECP/SBP on Islamic Financial Services

Code of Corporate governance

AAOIFI (Accounting and Auditing Organization for Islamic


Financial Institutions) Bharain, 1991

Membership of Islamic Financial Services Board


Industry Associations- product development
Shariah Boards on every institution
Holistic legislation, standardization and
harmonization to avoid conflict and overlap.

Joint Initiative of the IDB (Islamic Development


Bank) and IFSB (Islamic Financial Services
Board)
Ten year framework for the Islamic financial
industry development. General regulatory
framework for Islamic financial services
industry.