With more than two 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.
Under his leadership, at present, FHM is well positioned in the Islamic financial market with a strongequity base, sound assets size and profitability within the modarabasector of Pakistan. FHM holds a strong credit rating scale of AA+ in long term and A1+inshort 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.
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 (DarulUlum), Karachi Pakistan.
He is country correspondent of Islamic Finance News, Malaysia and also has presented research papers on themodaraba and other Islamic financial products at different local and international forums.
Presently he is Chairman of said NBFI and Modaraba Association of Pakistan. In past he has remained Chairman and also on number of times severed as Executive Member of said Association.
1. As a Chairman of NBFI & Modaraba Association of Pakistan, how do you see Non Banking Financial Institutions (NBFIs) sector of Pakistan and further growth of this sector within the financial market of Pakistan.
The non-Banking Financial Institutions (NBFIs) run in parallel to the traditional deposit taking commercial banks and supplement banks in providing financial services to individuals and firms. While banks may offer a set of financial services as a package deal, NBFIs unbundle these services, tailoring their services to particular groups. Furthermore due to diversity a single segment of NBFIs may specialize in particular sector which can cater the need of different categories of customers.
• Strong tool for Mobilization of Resources
• Provide Long-term Credit
• Support for capital formation
• Support for development Debt and Equity market.
• Provide diversified financial services and modes investment to customers.
By having variety of financial system the non-bank financial institutions, can protect economies from financial shocks and vulneraries. NBFIs provide multiple alternatives to transform an economy's savings into capital investment and act as backup facilities financial intermediations.
According to last annual report of SECP, the NBFI sector is steadily improving and as per last reported figures it is reached to around Rs.1.200 trillion. Mutual Fund industry is having large size within said sector followed by leasing companies, Modarabas, investment banks etc. With the enabling regulatory support, I am confident that the market reach of said segment will be further enhanced particularly in SME, Micro Finance, Takaful, and in Mutual fund segment.
2. What is the role of NBFI and Modaraba Association related to co-ordination, training and public awareness etc. How you are planning to lead Association in your tenor.
The NBFI and Modaraba Association of Pakistan, as a forum of Leasing and Modarabas Companies, provide a platform to interact with each other in order to deal with the Sectors' issues and formulate strategies for its consolidation and growth in the context of market challenges and opportunities. Association also maintains an active coordination with the regulatory authorities to achieve a consultative and supportive regulatory environment. The Association deals all sectoral issues and matters and coordinate with regulators, government functionaries, industry practitioners and other relevant entities.
With the support of members of Executive Committee and secretariat of the association it is our utmost priority to address the issues of the sector and work for further development of the sector. Furthermore, we are also concentrating on to arrange training workshop and interactive sessions for the members and their staff in different disciplines for professional grooming and capacity building. The Association is also actively engaged with SECP for updating relevant laws and regulation for further growth and progress of the sector with a view to make it a vibrant and progressive component of the financial industry. It is our ambition that the Association continues to play its due role in enhancing strength, vision and professionalism within the sectors and promote good corporate governance practices.
3. How do you see the growth of Islamic finance in Pakistan particularly in non-banking segments?
Pakistan is located at a region which has a great economic, political and strategic importance. South Asia is home to well over one fifth of the world's population, making it one of the most populous geographical region in the world. In the South Asian context, Pakistan is the second largest country having important strategic endowments and development potential. The country is well connected with regional markets with a vast population, large and diverse resources, and untapped potential for trade, banking and finance.
Until the first half of 20th century, the Islamic finance was more or less just idea or hypothetical concept. Alhamdulillah, now the shape of Islamic Finance has been completely changed. The concept has been clear to great extent by user and service provider of Islamic services. The Islamic finance has made a remarkable growth during last several years. The government of Pakistan is committed to advancing its Shariah finance industry with effective regulations and measures and it has had considerable success in development of Islamic Finance Service Industry (IFSI).
At present network of Islamic banking industry consisted of 22 Islamic banking institutions i.e., 5 full-fledged Islamic banks and 17 conventional banks having standalone Islamic banking branches having total branch network of 2,913 by the end of June, 2019. SBP has been playing a leading role in the promotion and development of Islamic banking in the country on sound footings. The State Bank of Pakistan (SBP) has played a key role in facilitating Islamic banking industry to reach a point of recognition both at the local and international level. SBP is one of the few regulators that have introduced comprehensive legal, regulatory and Shariah compliance framework for the Islamic banking industry.
On non-banking side Securities & Exchange Commission of Pakistan (SECP) is also playing its leading role for promotion of Islamic Finance through non-banking and capital market segments. Within the regulatory regime the Commission regulates important elements of IFSI. These elements include Modarabas, Takaful Companies and Windows, Islamic mutual and pension funds, Shariah compliant REIT, Islamic capital markets and Shariah compliant listed and private companies.
Within the non-banking Islamic Financial sector of Modarabas are playing significant role for promotion of Islamic finance within the country since last more than 3 decades. The Modaraba Sector being the pioneer in providing Islamic financial services in Pakistan is an important segment of the financial sector. At present 28 Modarabas are operating in Pakistan's financial market as listed entities and engaged in various Shariah compliant business activities.
Islamic Finance Department (IFD) which was established in 2015 has done remarkable job for growth of said industry. IFD carry out functions of Shariah regulations and compliance, product development, market awareness, Shariah securities market development, formation of news and amendment in existing laws. Last year SECP notified Shariah Governance Regulations 2018, the landmark regulations entail a comprehensive Shariah governance framework for Shariah compliant companies and Shariah compliant securities.
The future outlook of the Islamic Finance industry is very positive with bright prospects. Both the regulators i.e. SBP and SECP are playing their due role for the growth and promotion of the Islamic finance industry within the country. According to recent growth particularly induction of new sections and product innovations within Non-Banking Islamic Finance segments, I am confident that said sector will further grow and successfully expand its market outreach and customers acceptability.
3. How do you see the role and impact of Fintech in non-banking segments?
Globally, the services sector has been witnessing a shift towards digitization. Growing internet penetrations is revolutionizing conduct of businesses, speedy exchange of information and executes transactions on real time basis. Improved digital connectivity is reshaping consumer behavior which is more convenient and cost effective. Pakistan is also among the economies where digitization is triggering changes in financial services sector.
Financial Technology (Fintech) has transformed the financial world as one of the fastest-growing segments within financial services and other sectors of economy. With the usage of underlying principles of Blockchain technology, Fintech is bringing the financial community together and making financial services accessible to everyone. Fintech has far-reaching implications for Islamic finance such as Banking, Investment, Equity Market, Mutual Fund, Takaful and Wealth management, which can be greatlybenefited from this usage.
Currently the financial inclusion in Pakistan is very low and it is high time to transform financial services from traditional to digital. With the support of FinTech, the base of Shariah compliant services can be expanded across the country particularly in financially underserved segment. SME sector play pivotal role for economic growth and through FinTech support the Islamic financial institutions can successfully deploy their funds by using Blockchain based FinTech solution in order to expand the numbers of SMEs within financing portfolio. Fintech can enable Islamic finance to attract more customers, increase efficiency and reduce operational costs.
4. Please tell us about Modaraba sector of Pakistan, its performance and role of regulator for the sector.
Over the years Modarabas have emerged as major sector within the segment of non-banking Islamic financial institutions. It is a viable and dependable source of medium term financing which also offer opportunity to investors to earn Riba-free income. At present Modaraba sector is vibrant and performing very well.
Within Islamic financial sector Modarabas are playing significant role for promotion of Islamic financial within the country. The concept of Modaraba introduced in Pakistan was the first Islamic Shariah business model with statutory framework and proper regulations. Modaraba's business model remains extremely versatile and dynamic. Within the Modaraba model, any type of Shariah compliant business activity can be undertaken with the permission of regulators and Shariah board of SECP. The diversity of the Modaraba concept provides a unique universe of business opportunities to the sector, including financing, trading, manufacturing, equipment rental, portfolio management and distribution business.
During last 10 years, Modaraba sector has performed very well. The assets size reached to around Rs.52.0 billion from of Rs.25.0 billion in 2009. The said progress clearly reflects better performance of the sector and growing interest of investors in Modaraba model and Islamic Finance as whole.
The office of Registrar Modaraba, SECP is continuously updating applicable laws and regulation on Modaraba sector for promotion and further facilitation of the sector. The amendment in Modaraba Ordinance, Modaraba Rules and Prudential Regulations are underway and legal and consultations processes are also going on with the regulator.
5. What is the corporate strategy of First Habib Modaraba and how you have been able to implement said strategy as CEO of said Modaraba?
First Habib Modaraba (FHM) is operating in Pakistan's financial market as Non-Bank Islamic Financial Institution as one of the pioneers in Modaraba sector. FHM was a first perpetual Modaraba started its business operation in 1985 as a first full fledge Islamic Financial service provider within the non-banking sector. Recently FHM completed 34 years of successful business operation and grow over the year on sound footing with the commitment of adding value to all our stakeholders particularly Certificate Holders and investors.
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 compliances of all regulatory and Shariah requirements.
Our commitment to enhance value for our stakeholders, driven through resilience of our business model and determination of our team members made us sound and leading Modaraba within the Modaraba sector. The relationships that exceed beyond normal business this is how we have acquired the standing we possess today as most progressive Modaraba holding the loyalty and trust of thousands of stakeholders across the country. 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.
As one of leading non-banking Islamic financial institutions, our core corporate objective always drive to create value for the society at large. Our financial strength, risk management protocols, governance framework and aspirations for sustainable growth are directly attributable to a discipline that regularly brings prosperity to our all stakeholders particularly our worthy investors and customers. Ambition, discipline and corporate excellence always motivate us for even better results. It is the combination of these key elements that frame our optimistic outlook for the future as well.
We sincerely believe that above all success and achievements are due to Blessing Allah (SWT) and hard dedicate work of entire staff members through excellent team work across all levels of the organization. We thank Almighty Allah and bow our head for His blessing and bestowing upon us of journey of continuous success.
6. What are achievements/hallmarks which make FHM prominent Modaraba within the sector?
FHM is a diversified Islamic Financial services provider known for its quality products and services to customer, prudent risk management and Shariah governance. Since inception, the FHM has been committed to follow its core values which always remain cornerstone of FHM's business philosophy. Being the forerunner in Modaraba sector, FHM grew over the year on sound footing with the commitment of adding value to customers and investors.
Our constant commitment for performance excellence and good governance have not only kept us as leading Modaraba within the sector but also earned us recognition at national and international level. Following are achievements/hallmarks which make FHM prominent within the sector.
• Sound Equity of over Rs.3.300 billion
• Highest assets size within the category of financial services Modarabas
• Unbroken history of payment of excellent dividends every year since inceptions
• Highest rating scale within the Modaraba sector i.e., AA+ of long term and A1+ of short term.
• Highest recipient awards and accolades from various prestigious forums at local and international levels. These awards are on best performance, best corporate report, best corporate disclosure and corporate excellence, best non-bank Islamic finance entity from reputable bodies, such as NBFI and Modaraba Association, ICAP and ICMAP, Management Association of Pakistan, and SAFA an apex body of SAARC and FPCCI.
7. How do you see future outlook of Modaraba and NBFI sector particularly with context of overall Islamic finance industry of Pakistan.
During last one decade, the IFIS has made impressive progress and completely changed landscape of Islamic Finance within Pakistan. The industry has delivered several innovative Shariah compliant product and services which have met the need and demand of faith based customers to great extent. Islamic financial institutions have the potential to be major contributors towards growth and broad based development of a country due to their closer link with real economic activities. There is a natural connection between Islamic finance principles and responsible finance. The aim is to create a more equitable financial system that should have positive and tangible impact on the economy and people at grace root level.
Islamic finance is taking strong roots in Pakistan with the support from the government, SBP and SECP. Besides the growth in Islamic financial assets, a sustained progress is being made on long term basis in regulations, legal framework and capacity building of market players. The IFSI has been established on solid footing and has very bright future in Pakistan for further growth.
Modaraba model in Pakistan having the corporate status is a unique business model all over the world. It provides an opportunity of Halal business/investment to the general public and its custody to the skilled managers. It can carry out a universe of Shari'ah compliant businesses encompassing financial products and services, local and international trading, manufacturing, distribution and various corporate functions under one umbrella and one license.
Recently we have seen few new Modarabas have entered within the Modaraba sector through public floatation which is very encouraging move within non-banking segment. I am confident that with the accommodative approach of regulator to address the issues in the competitive environment there is no doubt that Modarabas would definitely find their way to very bright future and set new milestones.
Within upcoming changes in Modaraba laws and regulations will support for further development and facilitation of the sector within financial market particularly most significant expected change of provision of unlisted or private Modaraba within the sector. It is anticipated that said new change in regulations will encourage new corporate group to initially establish new Modaraba as unlisted Modaraba and covert the same into a listed within few years if the venture perform well.