MUHAMMAD YAMEEN KHAN is
the Executive Director of First Pak Modaraba. The Modaraba is managed by
Royal Management Services (Pvt) Limited. The present management has
taken over the management on September 22, 2002. It is a perpetual and
multipurpose Modaraba. He is a senior banker and has over 40 years of
diversified experience in commercial banking. Presently he is a member
of managing committee looking after the business development,
specialized projects and overall monitoring of the affairs of Modaraba.
Previously he has held different senior managerial positions. He had
been the Zonal Head and controlling sizeable number of branches, and the
Head of Legal and Recovery Division of leading nationalized commercial
bank. He has also attended a large number of courses and seminars
including one organized by the Common Wealth.
Why did you choose to make a switch over?
YAMEEN KHAN: I
have been working for conventional commercial banks for about four
decades. During this period I realized that there is a large number of
small, medium and large size traders and business houses that believe in
pure Islamic mode of financing. When the opportunity came to serve this
particular market segment, it really attracted me to be associated with
First Pak Modaraba particularly for catering to the needs of this market
segment. The size of this market is not only enormous but more and more
people are shifting from interest-based banking to Riba-free banking. It
is heartening to note that the government is keen in improving the
How the expertise is helping?
working for a large size commercial bank, I have been assigned various
management responsibilities, which included Business Development;
Legal/Recovery and Credit/Marketing. This diversified experience enabled
me to undertake the challenges of my current job responsibilities. In
addition, I would also like to say that despite of different operational
procedures of Modarabas and leasing companies, the basic function of
Credit/Marketing and risk management remains the same. The only
difference is that in conventional banking the return to the financial
institution is predetermined whereas in Riba-free system is based on
profit and loss sharing. In my views in such a system the responsibility
of financial becomes very crucial because they have to pick up each
transaction very prudently.
What is the difference between the mind-set of the clients interested in
Interest-based and Riba-free financing?
of all I would like to clarify that in Pakistan we do not practice
The banking system prevailing in our country is based
on Profit & Loss sharing system, which has recently witnessed its
effectiveness by an unprecedented mark-up scenario showing a historical
reduction in the cost of fund. As far as the difference in the mindset
of the two segments is concerned I would there is not much difference in
their business practices and mindsets. A lot of people are keen in
following Riba-free banking but the absence of supporting infrastructure
has been a serious issue.
What are the key business areas of your Modaraba?
Presently we are involved in Shariah compliant modes of business
activities such as Musharika; Murabaha and Ijara Financing, which
include providing working capital and assets leasing facility to our
customers. In addition to the above-mentioned areas, First Pak Modaraba
is also engaged in making investments in the shares of companies listed
at the local stock exchanges. The smooth working and growth of
construction industry in Pakistan has remained subdued due to inadequate
availability of funds for housing finance as well as higher mark-up
rates. I foresee a great business potential for Modarabas in the area of
housing finance. However, a lot of work has to be done for tapping this
fast growing business.
Do you believe that Modarabas can compete with the commercial banks in
January 2004, the Security and Exchange Commission of Pakistan (SECP)
has revised the prudential regulation to provide Modarabas a level
playing field in the financial sector. It was a great initiative by the
SECP, but due the low capital base and the lack of research and
development of new investment products the major challenges for
Modarabas are cost of fund and effective resource mobilization. In the
prevailing scenario if Modarabas rely on financial institutions they
will be at a disadvantage and cannot compete with them. However,
'Developers Financing, is an untapped area where Modarabas can play
their role and facilitate the reputed developers by providing them
structured financed products which would enable them in undertaking
quality housing schemes, which could be further taken up under consumer
finance offered by all the prominent banks of Pakistan.