ISLAMABAD - Securities and Exchange Commission of Pakistan (SECP) chairman Zafar Hijazi has appreciated the role of modarabas in providing Islamic financial products and services to the masses and advised them to increase their outreach to the smaller cities and towns for greater financial inclusion.

He was talking to the representatives of the NBFIs and the Modarba Association of Pakistan at the SECP head office. They discussed the performance and potential of the modarabas and removal of practical difficulties faced by the modaraba sector.

Hijazi advised them to play their role in replacing the informal lending sector, which is exploiting destitute customers by charging exorbitant interest rates asked them to provide Sharia-compliant services and products to such customers. The association gave a detailed presentation on the financial performance of the modarabas covering the areas of growth of the sector, market capitalization and sector dynamics and highlighted their role in promotion of the Islamic financial system.

The potential of modarabas for providing financing facilities to small and medium enterprises and dividend distributions to the certificate holders was also reviewed.

The proposed amendments to the modaraba regulatory framework were discussed in detail. The association greatly appreciated the improvements in the compliance and risk management framework being introduced by the SECP through the proposed amendments, which would enhance the effectiveness and creditability of the sector. The representatives of the association discussed the diversity and potential of the modaraba concept in exploring the current and forthcoming business opportunities in the context of overall economic development of the country and the role this sector can play with particular reference to the China Pakistan economic corridor. The chairman, while assuring the SECP support, for the growth of the modaraba sector invited specific proposals for resource mobilization and product innovation. The representatives assured the SECP chairman that they would work actively on the aforesaid guidelines and participate in increasing their outreach, initially in the Abbottabad capital market hub and afterwards in Rawalpindi and other locations in the country.