ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has carried out a comprehensive financial review of modarabas on the basis of their historical performance to identify the entities that failed to perform despite availability of vast Shari’ah compliant business avenues available to them.
In the process, out of 28 modarabas, the performance of 13 modarabas have been found unsatisfactory, a statement of the Commission. The issues being faced by the non-performing modarabas are presence of significant non-earning and classified assets, lack of diversification, liquidity issues, small capital base to compete and non-injection of fresh investment.
These issues have affected the financial performance of the modarabas and these are major hurdles in distributing dividends among the certificate holders. In an effort to streamline the affairs of the non-performing modarabas, the SECP has initiated necessary enforcement action against the modarabas having unsatisfactory track record of dividend payouts, high classified and non-earning assets and the modarabas, which have not implemented proper risk management framework.
