A-1: FOR THE GROWTH OF MODARABA AS A FINANCIAL INSTITUTION FLOATATION OF MEDIUM TERM AND LONG TERM TIME AND PROJECT BASE MODARABA

Abstract

The development of a nation's economy is virtually dependent on its financial sectors. For more than 40 years, Modaraba has been an established financial institution and the country's pioneer Islamic financial system. Although the Modaraba is regarded as a financing mode, it is more of a partnership in which one party contributes money and the other with labor, and the profit is shared according to a predetermined ratio. Modaraba is another legal financial institution in Pakistan and is governed by SECP rules and regulations. The Modaraba sector has been steadily declining rather than growing. Taking into account the past and present, the research aims to revitalize the Modaraba a tailor-made industry in Pakistan by introducing non-conventional mode and floatation modaraba. Through a questionnaire, a total of 90 respondents were evaluated. To the question of whether or not Modaraba institutions should be permitted to meet the needs for project financing and venture capital on a time-basis and for a specified purpose, 90% of respondents agreed or strongly agreed that the Modaraba Sectors in Pakistan should be revived. Until the Modaraba resource mobilization is made easy and convenient, the Modaraba should enjoy the tax benefit. The study concludes that further research is necessary to support the Modaraba sector's revival and emphasizes the necessity to look into the tax exemption of Modaraba. If the Modaraba sector is to revive, there is a need to amend the Modaraba laws by introducing of concept of unlisted modarabas along with the ease in floatation of time-based and project base modarabas.