Modaraba
Islamic Investment Model
A Modaraba is more than a financial structure, it is a partnership of trust, built on Shariah, regulated by the state, and designed to empower entrepreneurs and investors alike.
Modaraba is one of Pakistan’s most established and trusted Islamic financial structures, governed under the Modaraba Companies and Modaraba Ordinance, 1980 and supervised by the SECP. It offers a fully Shariah-compliant framework for conducting business, investment, asset financing, leasing, trade, and specialized financial services without interest-based transactions.
In a world searching for ethical, interest-free, real-sector financing, the Modaraba framework stands out as one of Pakistan’s most under-utilized yet high-potential opportunities.
How Modaraba Operate
A Modaraba is a halal profit-sharing partnership where:
- Rabb-ul-Maal (Investors / Certificate Holders): Provide capital
- A Modaraba Management Company (Mudarib) operates the business
- Profits: Shared according to pre-agreed ratios
- No interest. No exploitation
Just a fair, transparent, Shariah-compliant partnership designed for real economic growth.
Why Establish a Modaraba in Pakistan?
Modarabas hold a unique position in the financial ecosystem due to:
Shariah-Compliant Structure
Ideal for investors seeking halal financial ventures. No riba, no gharar, no prohibited business activity.
Regulated Financial Vehicle
As an SECP-regulated entity, a Modaraba carries credibility, governance discipline, and protection for certificate holders.
Multiple Business Lines Allowed
A Modaraba can operate across diversified sectors, including:- Ijarah (leasing)
- Murabaha & Musawamah (trade finance)
- Diminishing Musharakah
- Commodity trading
- Manufacturing & industrial ventures
- Vehicle & equipment financing
- Agri-finance
- Technology and services
- Real estate development (within Shariah limits)
- Working capital financing
Fundraising Advantages
Modarabas can raise capital from:
- Public listings
- Private placement
- Rights issues
- Investor certificates
This allows large-scale growth without traditional borrowing.
Key Advantages for Investors & Entrepreneurs
For Sponsors
- Full management control as Mudarib
- Ability to scale without traditional banking debt
- High regulatory credibility
For Investors
- Halal profit-sharing
- Professional management oversight
- Strong regulatory protections
- Access to diversified sectors
Regulatory Highlights of Modaraba
Incorporated as a public limited Modaraba Management Company.
- Requires SECP registration and licensing before business launch.
- Minimum paid-up capital 50–100 million PKR (higher for larger operations).
- Minimum 3 directors, all meeting SECP Fit & Proper criteria.
- Mandatory appointment of a qualified Shariah Advisor.
- Business must operate only in Shariah-compliant, asset-based sectors.
Modaraba: Need, Benefits & Future
In a country where access to structured, ethical investment opportunities is limited, Modarabas provide a regulated platform for entrepreneurs and investors to pool resources, fund productive ventures, and share profits transparently.
The need for Modarabas is clear; businesses and investors seek halal, asset-backed investment solutions that combine governance, risk management, and profitability. Modarabas enable sponsors to manage ventures professionally while offering certificate holders a secure, Shariah-compliant avenue to grow wealth.
Benefits include are regulated operations under SECP, credible governance, access to public and private investors, diversified business options (leasing, trade, manufacturing, services), and tax efficiency. Modarabas also support financial inclusion and encourage ethical business practices.
Looking ahead, the future of Modarabas is bright. With rising investor interest in Shariah-compliant products, digital integration, and expanding sectors like leasing, microfinance, real estate and renewable energy, Modarabas are poised to become a core vehicle for sustainable growth and ethical investment in Pakistan.
Our Advisory Services
We provide complete end-to-end Modaraba setup, including:
- Sponsor qualification guidance
- Business plan & financial modeling
- Shariah structuring
- Internal control & risk frameworks
- Complete SECP documentation
- Prospectus drafting for public issue
- Pre- and post-licensing support
- Operational launch assistance
We are Pakistan’s first specialized advisory network for financial institution licensing and structuring.
At NBFC Advisory & Investment Network, we are always open to discussing your ideas and projects.