SECP ini­ti­ates ac­tion against non-per­form­ing modarabas

The Pak Banker - - NATIONAL -

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 here today. 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.

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