Takaful by muhammad zubair mughal

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International Conference on Islamic Banking & Finance in Mauritius

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  • Is takaful haraam or halaal...can somebody solve this confusion with references...
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Takaful by muhammad zubair mughal

  1. 1. CENTER OF ISLAMIC BANKING & ECNOMICS Organized By :
  2. 2.
  3. 3. <ul><li>Zubair Mughal </li></ul><ul><ul><li>Chief Executive Officer </li></ul></ul><ul><ul><li>AlHuda : Centre of Islamic Banking & Economics </li></ul></ul><ul><ul><li>Editor in Chief. </li></ul></ul><ul><ul><li>Islamic Banking and Finance News , True Banking. </li></ul></ul><ul><ul><li>An Introduction to </li></ul></ul><ul><ul><li>Takaful </li></ul></ul><ul><li>(Islamic Insurance ) </li></ul>
  4. 4. <ul><li>Introduction to Takaful ( Islamic Insurance ) </li></ul><ul><li>Difference b/w Conventional Insurance & Takaful </li></ul><ul><li>Takaful Through Time </li></ul><ul><li>General & Faimly Takaful Types </li></ul><ul><li>Takaful Models Worldwide. </li></ul><ul><li>Takaful - Target Market </li></ul><ul><li>Challenges to Takaful </li></ul><ul><li>Prospects of Takaful in Mauritius. </li></ul>
  5. 5. <ul><li>“ 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. </li></ul><ul><li>Takaful comes from the Arabic root-word ‘ kafala ’ — guarantee. </li></ul><ul><li>Operationally, takaful refers to participants mutually contributing to a common fund with the purpose of having mutual indemnity in the case of loss. </li></ul>
  6. 6. <ul><li>The contract between the insurer & insured is technically wrong from the sharia perspective because of </li></ul><ul><li>Interest (Riba) </li></ul><ul><li>Gharar (Uncertainty)) </li></ul><ul><li>Gambling (Qamar & Maisir) </li></ul><ul><li>Risk Transfer Issue </li></ul>
  7. 7. <ul><li>Mutuality and cooperation. </li></ul><ul><li>Takaful contract pertains to Tabarru as against Aqd – e-mu’awadat in case of conventional insurance. </li></ul><ul><li>Payments made with the intention of Tabarru (contribution) </li></ul><ul><li>Eliminates the elements of Gharrar, Maisir and Riba. </li></ul><ul><li>Wakalah/Modarabah basis of operations. </li></ul><ul><li>Joint Guarantee / Indemnity amongst participants – shared responsibility. </li></ul><ul><li>Constitution of separate “Participants’ Takaful Fund”. </li></ul><ul><li>Constitution of “Shariah Supervisory Board.” </li></ul><ul><li>Investments as per Shariah. </li></ul>
  8. 8. 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.
  9. 9. <ul><li>Origins in the First Constitution of Madina. </li></ul><ul><li>Serious efforts were made in modern times, in 1970s to come up with an Islamic alternative to the conventional insurance. </li></ul><ul><li>The first Takaful company was set up in Sudan in 1979, almost simultaneously followed by another one set up in Bahrain. </li></ul>
  10. 10. <ul><li>Poor Insurance penetration in the Muslim countries (<1% of GDP). </li></ul><ul><li>Average growth rate higher than conventional insurance companies (around 25%). </li></ul><ul><li>Non–Muslims increasingly opting for Takaful products for commercial benefits. </li></ul>
  11. 12. <ul><li>The number of Takaful operators worldwide is now estimated at: </li></ul><ul><li>180+ Takaful companies </li></ul><ul><li>11 Retakaful companies </li></ul><ul><li>In 46 Countries. </li></ul>
  12. 13. <ul><li>General Takaful – offers all kinds of non-life risk coverage. It is normally divided into following classes: </li></ul><ul><ul><ul><ul><li>Property Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Marine Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Motor Takaful </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Miscellaneous Takaful </li></ul></ul></ul></ul>
  13. 14. <ul><li>Term Life Takaful </li></ul><ul><li>Whole Life Takaful </li></ul><ul><li>Endowment Takaful </li></ul><ul><li>Universal Takaful </li></ul><ul><li>Marriage Plan </li></ul><ul><li>Education Plan </li></ul>
  14. 15. <ul><li>People who do not insure due to religious reasons. </li></ul><ul><li>People who insure and are insensitive to religious reasons. </li></ul><ul><li>People who currently do not insure at all. </li></ul>
  15. 16. <ul><li>Wakalah Based on Waqf Model : The participant's donate the fund and operator charge an agency fee. </li></ul><ul><li>Pure Mudarabah Model : The participants and operator enter into modarabah Contract. </li></ul><ul><li>Wakalah Model : An Agency Agreement is made between participants and Operators on the basis of Wakalah ( Agency agreements) </li></ul>
  16. 18. Participants Pool of Contributions Participants Contribution
  17. 19. Participants Participants Contribution Pool of Contributions Investment in Shariah Complaint Avenues Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  18. 20. Participants Participants Contribution Pool of Contributions Wakala Fee Claims Re-Takaful Expense etc. Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  19. 21. Participants Participants Contribution Pool of Contributions Wakala Fee Claims Re-Takaful Expense etc. Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  20. 22. Participants Participants Contribution Pool of Contributions Wakala fee, Claims, Re-Takaful Expenses SURPLUS Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib )
  21. 23. Participants Participants Contribution Pool of Contributions Wakala fee, Claims, Re-Takaful Expenses SURPLUS Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  22. 24. Participants Participants Contribution Pool of Contributions SURPLUS Contingency Reserve Charity Distribute Among Participants Wakala fee, Claims, Re-Takaful Expenses Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  23. 25. Participants Participants Contribution Pool of Contributions Contingency Reserve Charity Distribute Among Participants SURPLUS Wakala fee, Claims, Re-Takaful Expenses Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  24. 26. Participants Participants Contribution Pool of Contributions Contingency Reserve Charity Distribute Among Participants SURPLUS Wakala fee, Claims, Re-Takaful Expenses Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib)
  25. 27. Participants Participants Contribution Pool of Contributions SURPLUS Contingency Reserve Charity Distribute Among Participants Wakala Fee Claims Re-Takaful Expense etc. Investment in Shariah Complaint Securities Profit from Investment (Part of the profit goes to the Company for acting as mudarib) + + - =
  26. 28. Investment Income 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 Investment Income 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
  27. 29. <ul><li>Takful for All , This the System – Not Religion </li></ul><ul><li>Good Regulatory Environment and Insurance Penetration. </li></ul><ul><li>Good Muslim Population. </li></ul><ul><li>Surplus Distribution </li></ul><ul><li>Emerging Islamic Financial Market. </li></ul><ul><li>A Sustainable system. </li></ul>
  28. 30. <ul><li>Skepticism. </li></ul><ul><li>Lack of uniformity in Models & Shariah decisions. </li></ul><ul><li>Regulatory issues. </li></ul><ul><li>Capacity constraints. </li></ul><ul><li>Limited Investment avenues. </li></ul><ul><li>H.R. issues. </li></ul>
  29. 32. 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_address] Web: www.alhudacibe.com

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