Waqar Ajmal Chaudhry is the Managing Director of First Grindlays Modaraba and Chairman of Modaraba Association of Pakistan. He has 13 years of diversified experience in corporate and retail banking sector within the country and aboard. In his career he has held key positions in Standard Chartered Group. Following are the excerpts from his interview.

Q. Can you please give us a brief background of FGM and comment on its performance for the year ended June 30, 2002?

A. FGM was formed in 1987 and is managed entirely by the Standard Chartered Group. FGM is primarily engaged in leasing of plant, machinery, motor vehicles ( both commercial and private), computer equipment, etc. FGM is listed on the Karachi and Lahore Stock exchanges.

Since its inception, FGM has written assets of over Rs. 9 billion to diversified sectors. Approximately 61% of such assets were plant & machinery and equipment.

FGM is one of the top 5 leasing entities in terms of assets leased out. However, it is the most profitable leasing entity based on the June 30, 2002 results and its profitability ratios of 'return on assets' and 'return on equity' continue to remain , by far, the highest amongst all leasing entities in the country.

During the year ended June 30, 2002 we recorded new business of Rs.1.2 billion resulting in an operating income of Rs.1.1 billion and net profit of Rs.172 million. Operating costs were down by 4.5% compared to the previous year and Rs.19 million was recovered from the non-performing portfolio.

The aforementioned resulted in a dividend declaration of 40% for 2002 which is the highest ever cash distribution by FGM. FGM's Earning per certificate for the year ended June 30, 2002 was Rs.4.61; 16% higher than last year's earnings resulting in a Return on Equity of 24.80%.

Q. The economic environment, in general, was not conducive to business yet FGM has had a record year in terms of profitability which is the highest in the entire leasing and modaraba sectors and has resulted in a dividend of 40%. Can you please comment on this?

A. The economic and business environment, has indeed, been extremely challenging. We have achieved the aforesaid results by increased customer focus and have relied on the prudent business practices of the Standard Chartered Group.

At FGM our vision is "to be the preferred provider of Islamic financial products in the market". Our entire focus is on building sustainable relationships with our customers and other partners. Our mission is to create exceptional value for our clients, investors and staff by being market leaders in providing innovative Shariah compliant products and solutions.

This standard of performance is also reflected in the financial strength rating of A2 assigned by Pakistan Credit Rating Agency. This is the highest rating in the entire modaraba sector and represents " a modaraba in outstanding financial condition with a consistent record of above average performance".

Q. You have the distinction of being the only Modaraba to have issued an Islamic commercial paper by the name of Certificates of Musharika. Can you briefly tell us about this product and its success so far? What other initiatives are you taking as far as product development is concerned?

A. FGM's Certificates of Musharika (COM) scheme for general public, which was launched in January' 2001 has provided opportunity to small investors to share in FGM's profitability and at the same time provided FGM with matched funds for its future growth.The pioneering Islamic instrument had attracted investments worth around Rs.375 million as at June 30, 2002.

Certificates of Musharika are easy to buy. For only Rs.10,000 you can buy them across 21 Standard Chartered or Standard Chartered Grindlays Bank branches without even opening an account. These certificates have maturities ranging from 3 months to 5 years. Profits are paid quarterly and the investors can encash the certificates at any time. Complete information, including the present expected profit rates, can be obtained on our web site at www.grindlaysmodaraba.com.

Apart from internal research work on Islamic finance, we at FGM are working closely with SCB's Malaysian operation in developing Shariah compliant products. A senior delegation from FGM visited Malaysia, earlier this year, to share our knowledge of operating leases and help the Malaysian operation in business development.

Q. Is there any other issue / area you would like to touch upon with respect to FGM?

A. Some other factors which continue to help FGM maintain its leadership position are investment in human resources and technology. We take pride in the quality of our staff who are well trained and experienced. We have also intensified our training program for staff which, inter-alia, is now more focused on Islamic finance.

We also maintain a state of the art computer environment. During the year ended June 30, 2002, FGM replaced substantially all of its computer hardware and software inorder to keep pace with technology advancement.

Performance, at FGM, is also measured in terms of contribution to society. It may therefore not be out of place to mention here that FGM is conscious of the significance of social, ethical and environmental matters to its business. FGM continues to contribute both in cash and kind, to some deserving social and environmental causes. During the year ended June 30, 2002 all personal computers replaced by FGM were donated for such causes.