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Zubair MughalChief Executive Officer
AlHuda : Centre of Islamic Banking & Economics
Editor in Chief.
Islamic Banking and Finance News , True Banking.
An Introduction to
Islamic Banking & Takaful
Awareness Road show on Islamic Banking and Takaful
From
Khyber to Karachi
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` Introduction to Takaful ( Islamic Insurance )
` Difference b/w Conventional Insurance & Takaful
` Takaful Through Time
`
General & Faimly Takaful Types` Re-Takaful
` Takaful Models Worldwide.
` Takaful - Target Market
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` Takaful is the Sharia Compliant brand name
for the Islamic alternative to conventionalinsurance. Its based on the principle of Taawan or mutual assistance.
` Takaful comes from the Arabic root-word
kafala guarantee.
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` Takaful means mutual protection and jointguarantee.
` Operationally, takaful refers to participantsmutually contributing to a common fund withthe purpose of having mutual indemnity in the
case of loss.
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Is Some thing wrong with Concept ?
` Risk Aversion` Assuring others
` Risk sharing
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The need for insurance is shown in the
following verse of The Quran.
Those of you who die and leave widowsshould bequeath for their widows a years
maintenance and residence (2.240)
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By Anas-bin-Malik, One day ProphetMuhammad(PBUH) notced a bedouin leaving
his Camel without tying it. He asked thebedouin, Why dont you tie down your
camel? The Bedouin answered, I put mytrust in Allah (SWT). The Prophet (PBUH) thensaid, Tie your camel first, then put your trust
in Allah(SWT)
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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
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` Mutuality and cooperation.
` Takaful contract pertains to Tabarru as against Aqd e-
muawadat 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 ParticipantsTakaful Fund .
` Constitution ofShariah Supervisory Board.
` Investments as per Shariah.
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` Piety (individual purification)
` Brotherhood (mutual assistance)
` Charity (Tabarru or contribution)
` Mutual Guarantee
` Community well-being as opposed to profit maximization.
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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 Tabarru
(contributions)
Investments Interest based Sharia compliant, Riba-free
Surplus Profit of Insurance Company. Distribution to Participants on
pro rata basis.
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` Poor Insurance penetration in the Muslim countries (
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` General Takaful offers all kinds of non-liferisk coverage. It is normally divided into
following classes:
x Property Takaful
x Marine Takaful
x Motor Takaful
x Miscellaneous Takaful
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` Term Life Takaful
` Whole Life Takaful
` Endowment Takaful
` Universal Takaful
` Marriage Plan
`
` Education Plan
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Currently few ReTakaful companies worldwide offering a relativelysmall capacity:
` Sudan (1979) National Reinsurance.
` Sudan (1983) Sheikhan Takaful Company.
` Bahamas (1983) Saudi Islamic Takaful and ReTakaful Company.
` Bahrain/Saudi Arabia (1985) Islamic Insurance and ReinsuranceCompany.
` Tunisia (1985) B.E.S.T. Re
` Malaysia (1997) ASEAN ReTakaful International.
` Dubai (2005) TakafulRe by ARIG.
` Lloyds of London to have a ReTakaful Syndicate in 2007.
` SwissRe has formed a separate ReTakaful Pool
` MunichRe set up ReTakaful Co. in Malaysia 2008
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` 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.
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` Wakalah Based onWaqf Model : The participant's donate the
fund and operator charge an agency fee.
` Pure Mudarabah Model : The participants and operator enterinto modarabah Contract.
` Wakalah Model : An Agency Agreement is made between
participants and Operators on the basis ofWakalah ( Agency
agreements)
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InvestmentIncome
OperationalCost 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.)
MudaribsShare of PTFs
InvestmentIncome
WakalahFee
Investment
Income
ManagementExpense of
theCompany
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 bythe Company
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Wakala -Waqf Model
It is a WAKALAH model with a separate legal entity ofWAQFin-between.
` The relationship of the participants and the Takaful Co. is directly
with theW
AQF fund.` The contributions received would also be a part of this fund.
` Losses to the participant are paid by the company from the same
fund.
` Operational expenses that are incurred for providing Takafulservices are also met from the same fund.
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Profits
attributable
to
Shareholders
Companys
Admin. &
Mangt.
Expenses
Takaful
Contribution
paid by
Participant
GeneralTakaful
Fund
GeneralTakaful
Fund
OperationalCost of
Takaful
Surplus
(Profit)
Participants
Share
from Surplus
Companys
Share from
Surplus
Investment
ByCompany
Profit
FromInvestments
Company
Participant
Mudaraba Model
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GeneralTakaful
Fund
OperationalCost ofTakaful/
ReTakaful
Surplus(Profit)
SurplusDistribution
toParticipants
Participants
Takaful Fund
Wakala Model
Takaful
Contribution
paid
by Participant
Company
(Capital)
Mudarib'sShare
ofPTFsInvestmentIncome
Management
Expense
of the Company
Profit/Loss
attributable to
Shareholders
Wakala
Fee
(30% to 35%)
ProfitFrom
Investments
Investment
IncomeReserves
Investment bythe Company Investment Income Sharingon Mudaraba Basis
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` Skepticism.
` Lack of uniformity in Models & Shariah decisions.
` Regulatory issues.
` Capacity constraints.
` Limited Investment avenues.
` H.R. issues.
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` Forum for the Development of Islamic Banking and Finance.
` Training & Education of Islamic Banking and Finance.
` Advisory Services & Shariah Certification.
` Publication & Research.
` Distance Learning Programs
For Further details
www.alhudacibe.com
www.sukuk.com.pk
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