SECP Approves Reforms for Modaraba Sector
The introduction of unlisted Modarabas and the strengthening of the insurance regulatory framework are expected to improve the long-term sustainability and resilience of these sectors, ultimately contributing to the growth and development of Pakistan's economy.
The Securities and Exchange Commission of Pakistan (SECP) has approved the introduction of unlisted Modarabas to facilitate financial resource mobilization and performance-based profit sharing in the Islamic finance sector, aiming to enhance transparency and ease regulatory compliance.
The revised proposal retains key reforms, including enhanced investor rights, improved governance provisions, and regulatory alignment with the Companies Act. The amendments allow for special resolutions on management changes, investor access to winding-up proceedings in courts, and streamlined oversight by shifting disciplinary actions from criminal to civil proceedings. This move is expected to modernize the Modaraba sector, aligning with the government's economic transformation agenda and the Federal Shariat Court's ruling to eliminate Riba (interest) from the economy.
In addition to the Modaraba reforms, the SECP has also approved amendments to the Insurance Rules 2017, Insurance Accounting Regulations 2017, and General Takaful Accounting Regulations 2019. These changes aim to strengthen the insurance regulatory framework in Pakistan, enhance industry resilience, and address sector challenges. Key changes include increasing the minimum capital requirements for life and non-life insurance companies, enabling insurance companies to issue subordinated debt instruments, and streamlining reporting requirements.
The SECP's approval of these reforms demonstrates its commitment to promoting the development of the Islamic finance sector and strengthening the insurance regulatory framework in Pakistan. The proposed amendments will now be submitted to the Finance Division for further legislative action, marking a significant step towards enhancing the country's financial landscape.
