takaful by muhammad zubair mughal

CENTER OF ISLAMIC BANKING & ECNOMICS

Organized By :

3

Zubair MughalChief Executive OfficerAlHuda : Centre of Islamic Banking & EconomicsEditor in Chief.Islamic Banking and Finance News , True Banking.

An Introduction to

Takaful (Islamic Insurance )

Introduction to Takaful ( Islamic Insurance ) Difference b/w Conventional Insurance & Takaful Takaful Through Time General & Faimly Takaful Types Takaful Models Worldwide. Takaful - Target Market Challenges to Takaful Prospects of Takaful in Mauritius.

“Takaful” is the Sharia Compliant brand name for the Islamic alternative to conventional insurance. Its based on the principle of Ta’awan or mutual assistance.

Takaful comes from the Arabic root-word

‘kafala’ — guarantee. Operationally, takaful refers to participants

mutually contributing to a common fund with the purpose of having mutual indemnity in the case of loss.

The contract between the insurer & insured is technically wrong from the sharia perspective because of

Interest (Riba) Gharar (Uncertainty)) Gambling (Qamar & Maisir) Risk Transfer Issue

Mutuality and cooperation. Takaful contract pertains to Tabarru as against Aqd –

e-mu’awadat in case of conventional insurance. Payments made with the intention of Tabarru

(contribution) Eliminates the elements of Gharrar, Maisir and Riba. Wakalah/Modarabah basis of operations. Joint Guarantee / Indemnity amongst participants –

shared responsibility. Constitution of separate “Participants’ Takaful

Fund”. Constitution of “Shariah Supervisory Board.” Investments as per Shariah.

Issue Conventional Insurance

Takaful

Organization Principle Profit for shareholders Mutual Benefit for Participants

Basis Risk Transfer Risk sharing

Value Proposition Profits maximization Affordability and spiritual

satisfaction

Laws Regulations Sharia plus regulations

Ownership Shareholders are Owners Participants

Management status Managed by Company Management Operator

Form of Contract Contract of Sale Islamic contracts of Wakala or

Mudarbah with Tabar’ru

(contributions)

Investments Interest based Sharia compliant, Riba-free

Surplus Profit of Insurance Company. Distribution to Participants on pro rata basis.

Origins in the First Constitution of Madina.

Serious efforts were made in modern times, in 1970s to come up with an Islamic alternative to the conventional insurance.

The first Takaful company was set up in Sudan in 1979, almost simultaneously followed by another one set up in Bahrain.

Poor Insurance penetration in the Muslim countries (<1% of GDP).

Average growth rate higher than conventional insurance companies (around 25%).

Non–Muslims increasingly opting for Takaful products for commercial benefits.

The number of Takaful operators worldwide is now estimated at:

180+ Takaful companies

11 Retakaful companies

In 46 Countries.

General Takaful – offers all kinds of non-life risk coverage. It is normally divided into following classes:

Property Takaful Marine Takaful Motor Takaful Miscellaneous Takaful

Term Life Takaful

Whole Life Takaful

Endowment Takaful

Universal Takaful

Marriage Plan Education Plan

People who do not insure due to religious reasons.

People who insure and are insensitive to religious reasons.

People who currently do not insure at all.

Wakalah Based on Waqf Model : The participant's donate the fund and operator charge an agency fee.

Pure Mudarabah Model : The participants and operator enter into modarabah Contract.

Wakalah Model : An Agency Agreement is made between participants and Operators on the basis of Wakalah ( Agency agreements)

Participants

Pool of Contributions

Participants Contribution

Participants



Investment in Shariah Complaint Avenues

Profit from Investment(Part of the profit goes to the Company for acting as mudarib)

Participants



Wakala Fee Claims Re-Takaful Expense etc.

Investment in Shariah Complaint Securities


Participants



Wakala fee, Claims, Re-Takaful Expenses

SURPLUS



Participants



SURPLUS

Contingency Reserve Charity Distribute Among Participants




Participants




SURPLUS




Participants



SURPLUS


Wakala Fee Claims Re-Takaful Expense etc.



+ +

-

=

InvestmentIncome

Operational Cost of Takaful

/ ReTakaful

Claims &Reserves Surplus

(Balance)

P A R T I C I P A N T S’ T A K A F U L F U N D (P.T.F.)

Admin Expenses,

Employee’s etc.

Wakalah Fee

InvestmentIncome

Management Expense of

the Company

Profit/Loss

S H A R E H O L D E R S’ F U N D (S.H.F.)

Participant

WAQF

Takaful Operator

Share Holder

Wakala-Waqf Model

Investment by the Company

Takful for All , This the System – Not Religion

Good Regulatory Environment and Insurance Penetration.

Good Muslim Population.

Surplus Distribution

Emerging Islamic Financial Market.

A Sustainable system.

Skepticism.

Lack of uniformity in Models & Shariah decisions.

Regulatory issues.

Capacity constraints.

Limited Investment avenues.

H.R. issues.

CENTER OF ISLAMIC BANKING & ECNOMICS

Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan

Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056

E-mail : [email protected]: www.alhudacibe.com

takaful by muhammad zubair mughal

Education

takaful prospects of

takaful contract

takaful company

case of conventional

islamic alternative

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