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  • NBFI & Modaraba Association of Pakistan in collaboration with Pakistan Global Law Academy is organizing a “Law Seminar on Corporate Governance, Compliance & Litigation in Pakistan” on Wednesday the 2nd May 2018 at Karachi Gymkhana Auditorium
  • NBFI & Modaraba Association of Pakistan launched its Year Book 2017 on 14th February 2018.
  • Mr. Jawed Hussain, Executive Director & Registrar Modaraba, SECP is giving a presentation on “The Companies Act, 2017” and “The Modaraba Bill, 2017” on 2nd February 2018 at the Conference Hall of the Association
  • Mr. Basheer A. Chowdry, Chairman, NBFI & Modaraba Association of Pakistan has been appointed as Chairman of FPCCI Standing Committee on “NBFI & Modarabas” for the year 2018.
  • Mr. Basheer A. Chowdry has been elected Chairman for the Year 2017-18 while Mr. Muhammad Naimuddin Farooqui as Senior Vice Chairman and Dr. Fakhara Rizwan as Vice Chairperson of NBFI & Modaraba association of Pakistan.
  • SECP issued Draft Amendments in Modaraba Companies and Modaraba (Floatation & Control) Ordinance, 1980
  • The NBFI & Modaraba Association of Pakistan announced its Election Schedule for the election of Executive Committee and Office Bearers for the year 2017-2018

The investment banking concept emerged when long term projects/investments and financing were conceived to be financed through a separate banking channel. The target financial resources were therefore envisaged to be equally long term based.

Thus a system was evolved which though would function as a bank, but would not cater to day to day customers, cash counters and other sundry businesses which the commercial banking system is allowed.

The business model of Investment Banks varies from country to country, however our system was jolted when the Central Bank assigned the regulatory functions to the SECP, without establishing the fact that the SECP would not be having adequate machinery to be directly involved in enforcing a sensitive regulatory framework. SECP therefore, having no options had to adopted almost the same policies, as has been practiced by the Central Banks for commercial banking.

This abrupt step changed the whole dynamics of the NBFC sector including Investment Banks. The Banking license which comes under the purview of Central bank, was renamed as Investment Finance Services for the Investment Banks, which further made it improbable to fix such business parameters, which besides having room for sustainable growth would reasonably be offering profitable opportunities to the share and stakeholders.

Having no specific and a truly workable resource mobilization product/ module, the leasing sector in general and Investment banks in particular started borrowing surplus liquidity of the commercial banks through money market mostly through clean placements, where the tenure of lending would be decided by the lender. Thus the sector had to be patient with a continued per-forced large liquidity and assets gaps.

The year 2002 to 2007 will be remembered as an era of a robust economic growth for Pakistan. The financial sector was amongst the most conspicuous as the banking and NBFC sector both enjoyed tremendous growth in its assets base as well as profitability. However abrupt global financial crises, coupled with political upheavals in the country, affected the liquidity of the commercial banking system.

An easy prey was available to the liquidity constrained banks, who withdrew their money market lines, without foreseeing that their this act would trigger un warranted defaults at the NBFC and would render them striving for survival.

Today is the day when there is a series of questions marks, which needs to be addressed sooner the best

  1. Was it an appropriate decision to segregate NBFC, to be regulated through an institution other than the Central Bank?
  2. Was it an appropriate decision from the NBFC Sector, to say NO, when some four years back, the Central Bank and SECP have reached an understanding that the NBFC once again should be monitored by the Central Bank?
  3. Why the NBFC in so many years could not evolve a mechanism of having core resources, where dependency on bank borrowings could have been lowered?
  4. What steps or products could have been in place where major exposure of the NBFC could have avoided the 2nd and 3rd tier clients?
  5. Why the high risk of mismatched assets & liabilities was allowed to run and not checked in the system for years?
  6. Were the sponsor share holders ever ready to induct and install high standards human and technical resources?

The list is long, but the Investment Banks must now rise to come up with sustainable business modules particularly on the liability side. This would need tremendous efforts at the conceiving stage as well as getting it approved through the regulators. Similarly a process must be evolved where liaison could be established with the Central Bank, to guarantee availability of a lender of the last resort.

On the other hand, the continued commitment of the sponsor shareholders is a prime factor towards regaining glory. They must re-consolidate their resources, and offer reasonable support to these institutions, as if a large number have faced and passed through the onslaught of 2008-09, the time is ripe, that a nominal cash injection would not only assure survival but will pave ways for a remarkable sustainable future viability and growth.

The Investment Banks do need flexible and durable products, which could only be practiced, once efficient and soft mechanism of resource mobilization is at hands. The future of this industry could then be guided towards attaining the real essence of providing the desired and much needed Investment & Finance Services.