OLP Modaraba ('the Modaraba') was incorporated in 1987 under Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 as an Islamic Financial Institution and is listed on the Pakistan Stock Exchange.

The Modaraba was initially titled First Grindlays Modaraba and was controlled by ANZ Grindlays Bank. In 2000, Standard Chartered Bank acquired it and renamed it Standard Chartered Modaraba. Subsequently, in 2016, the management and control of the Modaraba were assumed by OLP Services Pakistan (Private) Limited (the Management Company), which is a wholly owned subsidiary of OLP Financial Services Pakistan Limited (formerly ORIX Leasing Pakistan Limited), part of the ORIX Group. Following this change in management, the Modaraba was renamed ORIX Modaraba. In 2021, as part of a group-wide rebranding initiative, the Modaraba was renamed OLP Modaraba.

The Modaraba primarily finances plant and machinery, motor vehicles (both commercial and private), computer equipment, and housing through Ijarah (Islamic leasing) and Diminishing Musharika. Its registered office is in Karachi, while two branch offices are located in Lahore and Islamabad.

OLP Financial Services holds a ~20% stake in the Modaraba, of which ~10% is directly held, while the remaining ~10% is held through its subsidiary, i.e., OLP Services Pakistan (Pvt.) Ltd. (the Modaraba Management Company). Insurance companies hold ~12.3% stake, followed by financial institutions (~8.1%), and joint stock companies (~4.6%). The general public holds the remaining ~54.9% stake in the Modaraba.

The Modaraba's ownership structure is marked by diversity, encompassing a broad spectrum of individuals and corporate entities as integral components of its shareholding composition.

ORIX Corporation (ORIX) was set up in Japan in 1964 as a leasing company. The scope of ORIXs business today has widened considerably from the starting point of leasing to include lending, investment, life insurance, banking, asset management, automobile, real estate, and environment and energy-related business.

ORIX is listed on the Tokyo and New York Stock Exchanges and with six decades of operational experience, it has a total asset base of ¥ 16,917bln with an equity of ¥ 4,086bln as of Dec-24.

The Modaraba has a seven-member Board comprising one Executive, three Non-Executive Directors, and three Independent Directors, including one female director.

Mr. Naveed Kamran Baloch was appointed the Board's Chairman on 6-Aug-24. He brings over four decades of experience as a civil servant and has worked as a Federal Secretary, Cabinet Secretary, and Finance Secretary. Previously, Mr. Shaheen Amin chaired the Board for eight years. Mr. Ramon Alfrey, a Non-Executive Director, has more than three decades of experience in the leasing business through OLP Financial Services Pakistan Limited (OLPFSP). He has been associated with the Modaraba for five years. Other Board members have diverse experiences to facilitate the decision and policy making process.

The Board meets quarterly and is assisted by three committees: (i) Audit Committee, (ii) HR & Remuneration Committee, and (iii) Risk Committee to ensure rigorous monitoring of management’s policies and the entity’s operations. These committees are headed by Non-Executive Directors. The Audit Committee meets quarterly, while the HR and Risk Committees meet annually. Attendance at all Board and sub-committee meetings remains adequate, and detailed minutes have been diligently documented.

The Modaraba’s annual financial statements for FY25 were audited by M/s KPMG Taseer Hadi & Co., who expressed an unqualified audit opinion. The auditors are QCR-rated and placed in Category ‘A’ on the State Bank of Pakistan’s panel, which supports the adequacy of the Modaraba’s financial reporting, disclosure practices, and overall transparency.

The Modarba has a well-established organizational structure. The Modaraba operates through Human Resources, Information Technology, Operations, Client Relationships, Credit Risk Control, and Internal Audit. All heads of departments, except Internal Audit, report to the CEO, who then reports to the BoD. However, the head of Internal Audit reports to the BoD through the Audit Committee.

The CEO, Mr. Raheel Qamar Ahmad, possesses over three decades of corporate and investment banking experience. He has served as Chairman of the NBFI and Modaraba Association of Pakistan and the Vice President of the Asian Financial Services Association. Mr. Muhammad Siddique holds the position of CFO and has two decades of overall experience in various financial institutions and audit firms. He is assisted by a team of experienced professionals.

There are five committees at the management level: i) Management Committee (MANCOM), ii) Asset and Liability Committee (ALCO), iii) Country's Operational Risk Committee (CORC), iv) IT Steering Committee (ITSC) and Principal's Committee. The CEO chairs all the management committees and includes senior staff members. The Management Committee comprises seven (7) senior members and the managing director, who meet and discuss major business plans, issues, and progress updates of their respective functions. The major matters are then submitted to the Board for consideration and approval.

The Modaraba has implemented several policies and procedures, such as IT Security Policy and Business Continuity & and Disaster Recovery Plan, to mitigate the risks associated with the increasing use of information technology.

The Modaraba manages and monitors risk exposure very prudently. Extensive Credit & Due Diligence (decision-making related) reviews are carried out, both when booking a new client and at every annual review of all relationships.

Non-Banking Finance Companies (NBFCs), particularly Modarabas, continue to play a complementary role to the conventional banking system by catering to SMEs, trading, manufacturing, and selective infrastructure-related segments, which remain relatively underserved by banks. While the sector supports financial inclusion and private-sector credit expansion, its overall outreach remains limited due to funding constraints, regulatory requirements, and relatively higher cost of funds. As per the latest sector study (May’25), the NBFC sector has maintained a moderate growth trajectory, with asset growth largely driven by Modarabas, which account for a significant portion of the sector’s asset base. The growth momentum has moderated compared to the sharp expansion witnessed in FY24, mainly due to monetary easing, declining benchmark rates, and cautious credit expansion. Modarabas remain highly rate-sensitive, as their portfolios are predominantly floating-rate based, while funding is largely sourced from short- to medium-term bank borrowings and deposits, resulting in asset-liability maturity mismatches. This structure constrains their ability to price long-tenor financings competitively, particularly in a declining interest rate environment. Despite these structural challenges, Modarabas benefit from operational flexibility, Shariah-compliant product offerings, and niche market positioning.

The Modaraba maintains a strong relative position within the Modaraba segment, supported by its sizeable equity base and established market presence. As of 3MFY26 (Sep’25), the Modaraba’s equity stood at ~PKR 1.25bln (3MFY25: ~PKR 1.19bln), placing it among the top-tier Modarabas in terms of equity size. The relatively strong capitalization provides the Modaraba with better loss-absorption capacity and funding access compared to smaller peers. However, continued balance sheet expansion amid a high dividend payout requirement may exert pressure on capital buffers over the medium term. Nevertheless, its scale, diversified financing portfolio, and stable operating track record support its competitive standing within the Modaraba universe.

The Modaraba’s topline remains primarily driven by Diminishing Musharika ~62%, followed by income from other earning assets, as the contribution from Ijarah has continued to taper off over time. During FY25, the topline declined to ~PKR 1,890mln (FY24: ~PKR 2,111mln), mainly on account of a reduction in benchmark rates, which adversely impacted returns on the Modaraba’s largely floating-rate portfolio. Income from advances declined to ~PKR 1,793mln (FY24: ~PKR 1,980mln), while income from investments and other earning assets moderated to ~PKR 97mln (FY24: ~PKR 132mln). During 3MFY26 (Sep’25), the Modaraba reported a topline of ~PKR 385mln compared to ~PKR 526mln in 3MFY25, reflecting a notable decline. The contraction in revenue is primarily attributable to the lower interest rate environment, which compressed yields, despite relatively stable average advances. Going forward, the Modaraba’s ability to actively reprice its portfolio, optimize its asset mix, and enhance financing volumes will remain critical to stabilizing and improving topline performance amid a declining benchmark rate cycle.

During FY25, easing benchmark rates led to a decline in finance cost, with financial charges reducing to ~PKR 903 mln (FY24: ~PKR 1,058 mln). Meanwhile, non-financial charges stood at ~PKR 767 mln (FY24: ~PKR 821 mln), reflecting continued cost rationalization amid inflationary pressures. Consequently, OLP Modaraba reported a Profit After Tax of ~PKR 174 mln (FY24: ~PKR 158 mln). During 3MFY26, PAT remained stable at ~PKR 33 mln, supported by controlled operating expenses and stable net mark-up income.

The Modaraba intends to continue its cautious approach while targeting quality customers. The management is exploring various business strategies to enhance the standalone profitability of the Modaraba prospectively.

The Modaraba’s gross finances increased to ~PKR 7.37bln as of FY25 (FY24: ~PKR 6.37bln), reflecting portfolio expansion. However, the gross finances-to-funding ratio moderated to ~107.4% (FY24: ~110.6%), indicating a relatively improved alignment between advances and funding sources, though advances continue to slightly exceed funding levels. Leverage remained elevated, with debt-to-equity (funding excluding lease security deposits) at ~5.1x as of FY25, highlighting continued reliance on borrowings to support asset growth. As of 3MFY26, the gross finances-to-funding ratio increased to ~109.0%, suggesting renewed pressure on funding coverage and sustained dependence on external borrowings. Asset quality showed slight deterioration, with non-performing advances rising to ~2.6% as of Sep’25 (FY25: ~2.3%), indicating emerging credit stress amid the evolving economic environment. While impairment levels remain manageable, the uptick underscores sensitivity to borrower repayment capacity.

The Modaraba focuses primarily on the core financing business and has adopted appropriate policies to minimize its exposure to market risk. Moreover, ALCO and the Group treasury use different parameters to monitor the market risk performance of the Modaraba’s funding base.

Total funding of the Modaraba increased to ~PKR 7.0bln as of FY25 (FY24: ~PKR 5.9bln), primarily driven by higher borrowings and lease security deposits. During 3MFY26, total funding stood at ~PKR 6.7bln, reflecting partial reliance on short-term funding. The liquidity profile strengthened notably, with the Liquid Assets / Funding ratio improving to ~11.3% as of 3MFY26 (FY25: ~8.6%, FY24: ~5.6%), supported by higher bank balances and deposits with banks reported at ~PKR 757mln. While liquidity indicators have improved, the Modaraba remains exposed to short-term funding concentration, necessitating prudent liquidity management.

As of FY25, the Modaraba’s equity base improved to ~PKR 1.32bln (FY24: ~PKR 1.24bln), driven by profit retention. However, due to balance sheet expansion, the Capital Adequacy Ratio (CAR) declined to ~15.0% (FY24: ~16.1%). As of 3MFY26, equity stood at ~PKR 1.25bln, while CAR further declined to ~14.5%.  The capitalization profile remains adequate, though reduced buffers indicate limited headroom under stress scenarios, warranting close monitoring as the balance sheet continues to expand.