- FHM well positioned with strong equity base, sound assets size and profitability
Interview with Muhammad Shoaib Ibrahim — Managing Director & CEO, First Habib Modaraba
Muhammad Shoaib Ibrahim is the CEO of First Habib Modaraba, a 37 years old entity that has successfully maintained its leading position within Modaraba sector of Pakistan.
Under his leadership, at present, FHM is well positioned in the Islamic financial market with a strong equity base, sound assets size and profitability within the Modaraba sector of Pakistan. FHM holds a strong credit rating scale of AA+ in long term and A1+ in short term. Moreover, FHM has secured several awards/accolades on best performance, best corporate report, best corporate disclosure and corporate excellence from reputable bodies, such as NBFI and Modaraba Association, ICAP and ICMAP, Management Association of Pakistan, and SAFA an apex body of SAARC during his tenor as CEO of FHM.
With more than three decades’ experience in non-bank Islamic financial institutions and Modarabas, he is a senior expert on this topic in Pakistan. This experience has given him insight into the financial and technical aspects of the non-banking Islamic financial activities covering financial services, equity market and asset management.
Mr. Shoaib holds a Master of Business Administration (MBA) in banking and finance from the Institute of Business Administration (IBA). He has also completed a Post Graduate Diploma (PGD) in Islamic Banking from the Centre of Islamic Economics (Darul Ulum), Karachi Pakistan.
He also holds other portfolio in different prestigious forums details of which are as follows:
- Former Chairman of NBFI & Modaraba Association of Pakistan
- Former President of Memon Professional Forum
- Convener of FPCCI’s Central Committee on SMEs of Pakistan
- Former Member of FPCCI’s Central Committee on Capital Market and Securities
- Country Correspondent of Islamic Finance News – Malaysia
He also presented research papers on the Modaraba and other Islamic financial products at different local and international forums.
FHM was established in 1985 as Non-Bank Islamic Financial Institution as one of the pioneers within Modaraba sector. FHM completed 37 years of successful business operations within the Modaraba sector of Pakistan. Over the years FHM has been continuously recognizing for its satisfactory results, good corporate governance, best report culture and sound and stable credit rating. With a thrust to achieve operational excellence, FHM continue to improve operational processes, infrastructure and professional grooming of human resource in order to provide quality and reliable customer services including compliance of all regulatory and Shariah requirements.
At present, FHM is leading Modaraba within Modaraba sector of Pakistan, having highest assets base within the category of financial services Modarabas. Commitment of FHM to enhance value for our stakeholders, driven through resilience of its business model and determination of team members made FHM as financially sound and leading Modaraba within the Modaraba sector.
Our achievements are evidence to the solid business fundamentals and consistent financial management policies practiced across the Modaraba. Our focused business strategy keeps us firmly on path of sustainable growth and profitability. We take great pride in the resilience and commitment that we have shown during the last two years of turmoil.
By adopting cautious practices in our lending business, we were not only able to hold on to a trend of steady financial numbers but also achieved exceptional performance in last year. This was made possible due to blessing Allah (SWT) and unmatched support of our investors and our customers along with hard and dedicated efforts of entire of FHM.
So far, FHM has secured several awards/accolades on best performance, best corporate report, best corporate disclosure and corporate excellence from reputable bodies, such as NBFI and Modaraba Association, ICAP and ICMAP, Management Association of Pakistan, and SAFA an apex body of SAARC. Furthermore, since last 13 years FHM has been securing AA+ rating as long term rating from Pakistan Credit Rating Agency Ltd., (PACRA) which depict soundness of the entity and also matter of great satisfaction for our investors. This is again highest rating band within the Modaraba sector of Pakistan.
PAGE: In Pakistan, the concept of Modaraba was introduced in 1980 when the government realized that there was a need for the Islamization of economy of Pakistan. Your views:
Muhammad Shoaib Ibrahim: In Pakistan, the process of Islamization of the economy was initiated in late 70s. On the recommendations made by the Council of Islamic Ideology; the Government of Pakistan introduced certain changes in the Banking Companies Ordinance. Besides, the Modaraba Law was also promulgated to provide a legal framework for Islamic financial system. This was a major step through which the concept of Modaraba financing was transformed into an Islamic financial institution in order to allow Modaraba to operate as legal corporate entities.
In fact, Pakistan has the privilege of being the only jurisdiction which has instituted the concept of Modaraba with elaborate legislation and effective regulatory regime. Modarabas in Pakistan has played a key role to give ignition and momentum to the movement of Islamization of financial system of the country. These Modarabas were not only trend setters of Islamic modes of financing in a predominant conventional financial system in Pakistan but also built confidence among the general public regarding practice of Islamic modes of financing.
At present, around 27 Modarabas are operating in Pakistan market within the category of Non-Banking Islamic Financial Institutions and under the supervision of Securities & Exchange Commission of Pakistan (SECP).
According to its statuary requirements, these Modarabas are listed on Pakistan Stock Exchange and their large numbers of small Modaraba Certificate Holders are benefited with Shariah compliant profits in the shape of dividends every year.
PAGE: How would you comment on Mudarabah Al Muqayyadah which is a restricted Modaraba?
Muhammad Shoaib Ibrahim: Mudarabah Al Muqayyadah means a restricted Modaraba where the Rabb-ul-Maal may specify a particular business or a particular place for the Mudarib, in which case he shall invest the money in that particular business or place. The other kind of Modaraba is Modaraba Al Mutlaqah (unrestricted Mudarabah). In other kind of Modaraba, the investor gives liberty and independence to the manager i.e., Mudarib to engage in any Shariah compliant appropriate businesses or ventures.
At present in Pakistan market, all operating Modarabas are unrestricted Modarabas where their Managers i.e., Modaraba Management Company is authorized to engaged in any Shariah compliant businesses approved by SECP and Religious Board of Pakistan. The investors i.e., Rabb-ul-Maal give full authority to the respective managers of Modaraba to freely engaged in any Shariah compliant businesses. We also call these Modarabas as multi-purpose and perpetual Modarabas.
PAGE: What is your perspective on Prudential Regulations for Modaraba?
Muhammad Shoaib Ibrahim: Modarabas are operating under different set of rules and regulations and these are updated and supportive for strong monitoring and growth of the except Modaraba Ordinance 1980 which is under the process of revision. Regarding Prudential Regulations (PR) for Modarabas, last year SECP issued revised Prudential Regulation (PR) for Modarabas. Last PR was updated by SECP in 2004 for Modaraba sector. The revised PR is intended to reflect the rapid and extensive changes in the business of Modarabas.
In revise regulation, first time SECP issued Capital Adequacy Ration (CAR) for financial services Modarabas. Besides the above key changes, there are also several other changes have been made in PR for better surveillance, strong monitoring and protect investors funds. Similarly, few changes have been made keeping in view of strengthening of Modaraba entities in better way for long term sustainability and progress.
PAGE: Islamic banks practice Modaraba in its both forms. Your views:
Muhammad Shoaib Ibrahim: As earlier mentioned that under Islamic finance, the Modaraba is sort of arrangement between the two parties under the Islamic law of principles. In Islamic Jurisprudence, Modaraba is a kind of partnership, wherein one partner provides finance to the other partner for the purpose of carrying on business. The partner who provides the finance, is called the “Rabb-ul-Maal”, whereas the other party who puts its management skills for the Modaraba is called the “Modarib” (working partner).
In Pakistan this mode of arrangement was transformed into an Islamic financial institution in order to allow Modaraba to operate as legal corporate entities in late 80s. In fact, Pakistan has the privilege of being the only jurisdiction which has instituted the concept of Modaraba with elaborate legislation and effective regulatory regime. In our country, Islamic banks use Modaraba mode for generating deposits from investors. Within the Islamic banking, Modaraba is very popular mode for deposit generation and sharing of profits amongst the investors.