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Pakistan's securities regulator tackles nonperforming modarabas

The Securities and Exchange Commission of Pakistan said March25 that it initiated necessary enforcement actions against nonperforming Islamicfinancial contracts.

The SECP carried out a financial review of modarabas, a formof Islamic investment partnership where one party provides finance to another partyas capital investment. The regulator found that the performance of 13 out of 28modarabas were unsatisfactory.

The issues faced by the nonperforming modarabas are significantnonearning assets, lack of diversification, liquidity issues and a small capitalbase.

As part of the enforcement action, the SECP is persuading companiesinvolved in the contracts to implement business plans that will improve the performanceof modarabas.