The Securities and Exchange Commission of Pakistan (SECP) is merging three small Islamic investment firms after the central bank took control of Karachi-based KASB Bank Limited, accelerating efforts to strengthen financing by investment partnerships.
Last week, the government directed the central bank to reorganise or amalgamate KASB Bank in the next six months, after the lender failed to meet minimum capital requirements.
On Friday, KASB Modaraba said it had taken management control of First Pak Modaraba and First Prudential Modaraba, three of a total 26 modarabas active in the country.
Modarabas are a form of Islamic investment partnership where assets are managed on behalf of clients, with income and expenses shared under a pre-agreed ratio.
The sector remains a small part of the country’s Islamic finance industry, with several firms lacking scale to compete.
As of March, the three modarabas held a combined 1.9 billion rupees ($18.7 million) worth of assets.
SECP has also developed risk management guidelines for modarabas, last year introducing sharia compliance and sharia audit mechanisms to strengthen the sector.
