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]

Modaraba

Defination:
Modarabah is a kind of partnership , wherein one party
provides finance to other party for the purpose of
carrying on business . The party who provides the
finance is called the Rabb-ul-Mal, whereas the other
party who who puts its management skills for the
Modaraba is called the Modarib (working
partner)Modaraba is one of the prime modes of Islamic
Financial System.
Mudaraba Concept

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

 History

In Pakistan the process of Islamization of the economy was initiated

in 1980 when the Government introduced the concept of
Modarabah for Islamization of the economy in the banking and
corporate sector.

The Modaraba Companies & Modaraba (Floatation &Control )

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

The Ordinance and Rules provides matters relating to the

registration of Modaraba companies and the floatation,
management and regulation of Modarabas.
Types of Modaraba

Modaraba Al Muqayyadah: Mudarabah Al Muqayyadah means a

restricted modaraba where the Rabb-ul-maal may specify a particular
business or a particular place for the mudarib, in which case he shall
invest the money in that particular business or place.

Modaraba Al Mutlaqah: Modaraba Al Mutalqah means

unrestricted modaraba where the Rabb-ul-maal gives full freedom to
the mudarib to undertake whatever business he deems fit.
Modaraba as an islamic fund
Mudaraba can:
Invest in the stock market

Indulge in Ijara, Morabah and Musharakah financing

acyivitied

indulge in trading of halal commodities

undertake project financing activities

Act as a venture capital company amongst other activities

Structure
Parties involve in Mudarabah
There are two parties invovle:

Rab-Ul-Mal (Invester)

Mudarib (Agent,working capital)

 ROLES OF MUDARIB
Ameen(Trustee):To look after the investment responsibly, except in case
of natural climities.

Wakeel(Trustee): To purchase from the funds provided by rab-ul-Maal.

Shareek(Partner): Sharing in any profit.

Zamin(Liable): To provide for the loss suffered by the Mudabara due to

any act on his part.

Ajeer(Employee):When the mudaraba gets fasid due to any reason ,the

mudarib is entitled to only the salary,Ujrat-e-Misl.
Rules and regulation of Rab-ul-Maal

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
Process
 Benefits of Investing in Modaraba

Halal Business.

Diversified Business.

Tax benefit.

Maximum distribution of profit.

Funding and financial Facilities under shariah compliant.

MODARABAH COMPANIES AS A
CONJUNCTION POINT
For the occurrence of investment usually there are two options:
Active investment occurs in a state where one or more
persons or entities engaged their capital into a project. The
project is wholly managed by them, they put their labor and
capital to run the project and thus bears all the risks,
consequently they enjoy the fruit of their managerial skills and
the capital they have invested in it.
Passive investment occurs in a state where one party provides
capital only and takes no part in the management of the
capital invested and wants to receive return/fruit on the basis
of the investment they have provided to run a project or
venture. Usually it happens when a party or person have no
skills to manage or invest his capital. Three options are
available to such a passive investor
Investment options for capital-holders (Principal
investors)
Basic Structure of Modaraba in Pakistan

Modaraba is one of the prim e modes of Islamic Financial

System. In Pakistan the process of Islamization of the economy
was initiated in 1977 and in light of the recommendations
made by the Islamic Ideology Council, Government of Pakistan
introduced certain changes in the Banking Companies
Ordinance and promulgated the Modaraba Companies &
Modaraba (Floatation & Control) Ordinance, 1980 to provide a
legal framework for Islamic financial system.
The Companies incorporated under the Companies Ordinance,
1984 and registered with the Registrar (Modarabas), SECP are
eligible to undertake floatation and management of
Modarabas.
Mudaraba Companies

Meaning:
A Modaraba Company means a company engaged in
the business of floating and managing Modaraba.
Legal Status:
Any company Incorporated under the Companies
Ordinance 1984 can be registered as a Modaraba
management company.

The pre-requisite of the registration of a Modaraba

company is the financial standing and previous
background of its directors.
Registration of Mudaraba Companies
No Modarba company can operate without registration with
the registrar.
A company shall be eligible for registration as a Modaraba
Company if it fulfills the following conditions:

It is registered under the Companies Act 1913 (VII of

1913) or is a body corporate formed under any law in
force and owned or controlled by the Federal and
Provincial Government.
That, being a company solely engaged in the floatation
and management of Modaraba has a paid-up capital not
less than two and a half million rupees.
Contd
That, being a company also engaged in business other
than floatation and management of Modaraba.
It has a paid-up capital of such amount and of such nature
as may be prescribed.
Mudarbaha Companies work in Pakistan

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) First paramount Mudaraba

Company Profile
First Paramount Modaraba (FPM),is a Non-Banking Islamic
Financial Institute managed by Paramount Investments
Limited (PIL).PIL It was incorporated in the Province of Sindh
under the Companies Ordinance, 1984 on 15th February 1992.
It was registered as a Modaraba Management Company with
the Registrar of Modaraba companies and Modarabas
Islamabad on 15th October, 1992. It is listed on the Karachi
Stock Exchange. FPM is a member of NBFI & Modaraba
Association of Pakistan.
The Authorized capital of Paramount Investments Limited is
Rs.50,000,000/- divided into 5,000,000/- certificates of Rs.10/-
each with a paid up capital of Rs.22,319,000/-.
Management Profile

Syed Wajih Hassan

Chief Executive Officer
Chief Financial Officer / Company
Mr. Abdullah Khan
Secretary

Shariah Advisor of Modaraba

Mufti Mohammad Najeeb Khan

Auditors of Modaraba Management

M/s Rahim Jan & Co.Chartered
Company
Accountants.

Mr. Raja Qasit Nawaz, Advocate Legal Advisors

Mr. Saif Uddin, Advocate
Vision

It is our firm commitment to operate the Modaraba activities

in accordance with Islamic Sharia with its true spirit.
Mission

It is our mission to constantly endeavor for excellence in all

spheres of business activity, maintain an eminent market
position, promote enduring relationship with our customers
and other stakeholders, and construct a durable and vibrant
Pakistan
Award and achievement
Objectives
To engage in MODARABA and all other forms of Islamic ways of
financing.
To initiate sponsor, promote, float, organize, manage, administer
and operate Modaraba Companies, Modaraba Fund and Modarabas
of all types and description, Mutual Funds, unit trusts and other
similar concerns either in syndicates or otherwise.
To invest or participate in and to collaborate or co-operate with any
Modaraba company Modaraba funds, Modarabas, Mutual Funds,
Unit trusts and other similar concerns either in syndicates or
otherwise.
To arrange, procure and raise finance through Modaraba
Companies, Modaraba funds, Modarabas of all types, descriptions
and durations, mutual funds units' trusts and other similar modes.
To establish, manage, take-over and operate all sorts of commercial
industrial, trading and business activities.
Distribution of Profit & Loss

It is necessary for the validity of Mudarabah that the parties

agree, right at the beginning, on a definite proportion of the
actual profit to which each one of them is entitled. The
Shariah has prescribed no particular proportion; rather it has
been left to their mutual consent. They can share the profit in
equal proportions and they can also allocate different
proportions for Rab-ul-Maal and Mudarib. However in
extreme case where the parties have not predetermined the
ratio of profit, the profit will be calculated at 50:50.
Termination of Mudaraba
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.