Pioneers in Islamic Finance

June 23 - 29, 2003

First Grindlays Modaraba (FGM) has played a pioneering role in the introduction of financial products compliant with the Shariah. Established in 1987 it has over the years developed a diverse range of products leasing, murabaha, musharika, consumer leasing and most recently a liability product, Certificates of Musharika.

FGM's primary focus has been leasing of assets plant & machinery, motor vehicles, generators and office equipment which includes computers, photo copiers and fax machines. Its customers comprise of local corporates, public sector entities, international companies and corporate employees. A quick glance at FGM's portfolio mix will reveal that the modaraba is involved in all the sectors that contribute to the economic activity in Pakistan. Thus one will find exposures to the Textile Industry: Spinning, Weaving, Composite, Synthetics; Sugar, Cement, Pharmaceuticals, Chemicals, Fuel & Energy and Financial Institutions.

In terms of assets the portfolio mix maintains an equal balance between plant & machinery and motor vehicles. For motor vehicle leases the focus is on corporates who acquire vehicles for their executives and sales staff. FGM also offers motor vehicle leases to individuals, primarily to employees of corporate institutions.

Motor vehicles leased by FGM include both commercial as well as non-commercial cars. Commercial cars are generally leased for distribution purposes or to fulfill the transport needs of companies. Commercial vehicles include vans, pick up trucks and large containerized trucks. Vehicles can be imported as well as locally manufactured. With the increase in manufacturing activity in Pakistan, we find that the proportion of locally assembled vehicles is higher than imported vehicles. FGM allows leasing of used cars as well as new cars as long as the vehicle is in a good condition and its value can be established by a professional valuation agency.

Plant and machinery leases are generally offered for new projects where the machinery is being imported or for normal BMR and expansions that a manufacturing concern is involved in from time to time. By offering plant & machinery leases FGM continues to support the economic activity in the industrial sector of Pakistan. FGM's contribution to the economic development of Pakistan can be gauged by the quantum of disbursement made in the past 15 years. This figure now exceeds Rs10 billion.

On the liability side FGM has for the past two years offered an investment product to individuals who are looking for an avenue to invest their funds in an Islamic manner. The launch of Certificates of Musharika or COMs was a pioneering effort on the part of FGM. COMs have been well received in the market and to date FGM has raised over Rs430 million.

First Grindlays Modaraba (FGM) was established by ANZ Grindlays Bank (now Standard Chartered Bank) as a standalone leasing vehicle providing a tax efficient medium to long term financing product and Shariah compliant solutions. It attracted substantial investments from local as well as overseas investors, primarily from the Middle East. Listed on the Karachi and Lahore Stock Exchanges, FGM is now one of the largest modarabas in Pakistan. It is managed by Grindlays Services of Pakistan (Pvt) Ltd (GSP), a wholly owned subsidiary of Standard Chartered Bank.

Standard Chartered Group in Pakistan comprises of Standard Chartered Bank and First Grindlays Modaraba. Standard Chartered has been providing banking services in this region for over 140 years. It is the world's leading emerging markets bank with presence in the Asia Pacific Region, South Asia, the Middle East, Africa, United Kingdom and the Americas. The bank serves both Consumer and Wholesale banking customers. With nearly 150 years in the emerging markets the bank has unmatched knowledge and understanding of its customers in its markets.

Over the past decade and a half, FGM has paid out handsome dividends to its certificate holders which touched 40% in 2002. Total dividend pay out since 1987 has exceeded Rs900 million. Its share price has increased by over 90% since June 2001 and has earned a place in the KSE Top 50 index. Most recently it was short-listed for a Corporate Excellence Award by the Management Association of Pakistan. This makes FGM one of the most successful and respected names in the leasing industry. As recognition of this success story, it has been assigned ratings of AA+ (Double A Plus) and A1+ (Single A1 Plus) for long term and short term respectively, by the Pakistan Credit Rating Agency. This signifies low expectation of credit risk and very strong capacity for timely payment of financial commitment. This is the highest entity rating in the entire Modaraba and Leasing Sector.

The demand for motor vehicle leasing is increasing due to large choices available to individuals both in terms of make of vehicle and number of financing institutions. FGM has proved itself capable to meeting the challenges faced by numerous new entrants in the leasing business. It continues to support economic activity in the country by providing lease finance and Islamic financing solutions when required to individuals, industry leaders and entrepreneurs. It has been rewarded for this dedication by remaining preferred financier for most professional organizations.