We are a Modaraba under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and working since December 05, 1991. Modaraba is basically a contract between two parties: a capital owner (rabb-al-mal) and an investment manager (mudarib). Profit is distributed between the two parties in accordance with the ratio that they agree upon at the time of the contract. Financial loss is borne by the capital owner; the loss to the manager being the opportunity cost of his own labour, which failed to generate any income for him. Except in the case of a violation of the agreement or default, the investment manager does not guarantee either the capital extended to him or any profit generation. While the provider of capital can impose certain mutually agreed conditions on the manager he has no right to interfere in the day-to-day work of the manager. As a mode of financing applied by Modaraba, on the liabilities side, the certificate holders and depositors serve as rabb-al-mal and the modaraba as the mudarib. While funds from certificate holders are of a permanent nature, the modaraba deposits can be either general, which enter into a common pool, or restricted to a certain project or line of business and can be for certain period of time. On the assets side, the Modaraba serves as the rabb-al-mal and provides funds to client through various modes which include the following:

Morabaha (Sale Contract at a Profit Margin):
Morabaha is a contract in which the client requests the Modaraba to purchase for him a certain commodity at a specific cash price with a written promise to purchase such commodity from the Modaraba at an agreed price including profit margin called mark up. Thus there are two sale contracts. The first contract is concluded between the Modaraba and the supplier of the commodity. After the Modarba has taken possession of the commodity, the second contract is concluded between the client (for whom commodity was purchased) and the Modaraba. The price agreed between the Modaraba and the Client is either payable as lump sum or in mutually agreed upon installments on a future date(s). The Modaraba can appoint the client as its agent to receive the commodity purchased by the Modaraba directly form the supplier for which a separate agency agreement is executed between them.

Musharaka is another Islamic mode of providing capital for a business. In this mode the Modaraba and the Client(s) enter into a partnership agreement. Contribution of each party to this agreement towards capital of the business is specified along with pre-decided ratio of sharing profit and loss from the business. Profit from the business is shared between the parties as per ratio decided irrespective of their share in the capital. However, if there is loss in the business, it is shared between the partners in proportion to their share in the total capital. In a slightly modified form of Musharaka, the contracting parties to the partnership as described above enter into such agreement with the specific condition that the Modaraba will gradually sell its share to the other partner(s) at an agreed price and in accordance with an agreed schedule. This type of financing is made usually in case of house financing and financing for fixed capital assets of a business.

Ijara (leasing):
In this type of financing, the contract takes the form of an order by the Client (Lessee) to the Modaraba, requesting the Modaraba to purchase vehicle, plant & machinery, office equipments, furniture and fixture, and office buildings, etc., promising at the same time, to get it leased from the Modaraba after it has been purchased. The rental payment schedule is agreed upon with the Client at the beginning of the contract which is inclusive of agreed profit margin. The title to the asset through out the pendency of lease remains with the Modaraba. At the end of the contract period, an agreement may be executed according to which the client can purchase the leased asset at a nominal agreed price (promise to sell leased out asset at a predetermined nominal price to the lessee at the end of the lease period can be made at the beginning of the lease how