MUHAMMAD SAMIULLAH is
the Corporate Secretary of Modaraba Association of Pakistan since July,
2001. Prior to this assignment he was Vice President & Company
Secretary, First Habib Bank Modaraba, a subsidiary of Habib Bank
Limited. Samiullah has a vast experience of banking. He has worked as
Head of Shares Floatation Department and has also managed Equity
Investment Portfolio of First Habib Bank Modaraba and Habib Bank
Financial Services (Pvt.) Limited. Samiullah holds a Masters Degree in
Economics, LL.B and Diplomaed Associate of the Institute of Bankers in
Pakistan (DAIBP). He has also attended various courses,
seminars/workshops including 18 days course on Credit Administration
organized by Lahore University of Management Sciences (LUMS), Lahore.
What is the role of Modaraba Association of Pakistan?
main objectives of Modaraba Association of Pakistan (MAP) are to
coordinate the activities of the members and to help them in resolving
the problems as well as to adopt a unified approach and develop a
healthy corporate culture based on Islamic Sharia. At present
there are 44 Modarabas listed at Karachi Stock Exchange. Out of these 34
Modarabas are members of the MAP. The Association is also working hard
to create awareness among the general public about the Modaraba and Sharia
compliant mode of financing to earn Riba free return on their
Why Modaraba Certificates are being traded below par value?
A typical Modaraba Management Company normally holds 10% to 20% of the
total issued certificates of the Modaraba. Whereas remaining
certificates are held by the general public and financial institutions.
It may look a little strange that despite paying very attractive
dividend the Modaraba Certificates are being traded below par. The
prices of those blue-chip scrips are normally high where foreign fund
managers have some interest. Since Modarabas are operating on Islamic
Sharia most of the foreign fund managers prefer not to invest in
PAGE: What is
the difference between the boom of equities market of 1990s and the
euphoria going on at present?
boom of equities market of 1990s in Pakistan was mainly driven by the
interest of foreign fund managers in emerging market. However, this was
confined to limited number of sectors — mostly telecommunication,
energy, banks and some other sectors. Around the time, some big IPOs
like HUBCO and PTCL were also offered. A large number of companies were
also listed where NIT, ICP, investment banks and others acquired
significant exposure. The spill over also pushed the prices of other
scrips. However, a large number of listed companies were not able to pay
attractive dividends. This did not allow the investors to keep their
investment in the listed companies and prices of shares came down across
the board. As opposed to this, the present euphoria is very well
supported by corporate earnings. Though, foreign fund managers have not
entered the market as yet in any significant manner, the active
participation of local retail investor has kept the market robust. At
present the investment horizon comprises of over two dozen companies
having large capital base as well as large free float. Profitability of
these companies has remained high even in the post 9/11 era. These
scrips also offer incredibility attractive dividend yield.
Is the current movement sustainable?
beginning of this calendar year, the KSE-100 index has shown consistent
and sustained upwards movement. The index also crossed 2,300 level.
Though, the index has witnessed some erosion, market punters are now
talking about 2,600 level and beyond. The index movement is supported by
strong economic indicators. Revival of economy, supported by corporate
earnings, has kept the interest of investors alive. Growing foreign
exchange reserves and current account surplus has helped Pakistan in
improving its sovereign rating. So far only the local investors have
been responsible for the upward movement of the KSE-100 index. The
large-scale entry of foreign fund managers into Pakistan can provide
further vigour. The retail investors have started investing in equities
mainly because of the dividend yields. No other investment offers
What is the plan of Modarabas to overcome resource mobilization
Modaraba Association of Pakistan has recently concluded deliberations
with Securities and Exchange Commission of Pakistan (SECP) for the
flotation of Musharaka Certificates, equivalent to Term Finance
Certificates (TFCs) floated by other business entities. It is expected
that once the Sharia experts give the final approval, Modarabas will be
able to overcome their resource mobilization constraint and further
strengthen their support to economy of Pakistan.