The document discusses Mudaraba, which is an Islamic financing concept where one party provides capital to another party to carry out a business venture. The two main parties are the Rab-ul-Mal, who provides the capital, and the Mudarib, who manages the business. The document outlines the roles and responsibilities of each party, as well as how profits and losses are distributed. It also provides information on the regulatory framework for Mudaraba companies in Pakistan and discusses ways to further develop the Islamic capital market.

2.  Mubashir Hassan
 Hafiz yasir
 Qasim Nawaz
 Waseem Baig
 M.Saqib
 Sidra Mehboob
 Hassan Mujtaba
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3.  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

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

5. Mudarba

6. 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]

7. THE MODARABA- DEFINITION
“Modaraba is a kind of partnership , wherein one
party provides finance to other party for the
purpose of carrying on business”

8. 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

9. There are two parties invovle:
 Rab-Ul-Mal (Invester)
 Mudarib (Agent,working capital)

10.  1.Al Mudarabah Al Muqayyadah
(Restricted Mudarabah)
 2. Al Mudarabah Al Mutlaqah
(Unrestricted Mudarabah)

11.  Ameen (Trustee)
 2. Wakeel (Agent)
 3.Shareek (Partner)
 4. Zamin (Liable)
 5. Ajeer (Employee)

12.  He gives only money
 He has no management skills
 Rab-ul-Mal cannot ask to Mudarib
 Where is my money?
 Where to invest?

13.  Work as manager
 He cannot invest in business
 He knows about business term & condition
 He works Seprately

14.  Has business skills.
 Have knowledge about business management.
 All decision are made by him.

15. 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 80’s by the Government
of Pakistan.

16. Modaraba Management Company (Modarib)
Private/Public Limited Company
with Board of Directors
Modaraba Fund
(Pool of Money of Rab-ul-Maal)
Separate Legal Entity
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 Shari’ah Compliant
Justice/Ex-Justice of a Court plus 2 Scholars
Prospectus
(business activities)
STRUCTURE

17. 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
Rules and Regulation for Rab-ul-Mal

18.  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

19.  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.

20.  Mudarib works individually
 He cannot add partner
 He cannot invest
 Business related decisions are only made by
Mudarib

21.  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.

22.  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

23.  Rab-ul-mal trust on the abilities of mudarib
 According to PAKISTAN law (90%) share of Rab-ul-mal
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

24.  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

25. THE REGULATORY FRAMEWORKTHE 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

26.  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.

27.  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.

28. 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.

29.  Modaraba Sector has continuously been playing an
active role in the growth of Pakistan’s 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.

30.
2008 2009 2010 2011 2012
No. of Management Companies 30 27 24 24 24
No. of Modarabas 32 28 25 25 24
Paid up Capital 7,827 7,406 6,999 6,644 7,175
Total Equity 8,401 9,233 10,062 10,062 11,456
Total Assets 17,574 21,131 23,736 23,736 29,281
Total Income 4,140 3,939 5,025 5,025 6,583
Leasing Income 3,066 2,966 3,082 3,082 4,631
Musharaka & Morabaha Income 271 323 410 410 624
Miscellaneous & Other Income 803 650 1,533 1,533 1,327
Net Profit after Tax 956 794 811 811 962
(Rs. in million)

31. 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

32.  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

33.  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 Association’s role to be strengthened, in the areas of
training, examinations and licensing of intermediaries

34.  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

35. 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.

36.  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.