Characteristics of Takaful
Need of Takaful
Difference between Takaful and Conventional Insurance
Products of Takaful
Models of Takaful
Role of Takaful in Islamic Economic System
Issues & Challenges
A contract in which an individual receives financial
protection against losses from an insurance company. The
company pools clients' risks to make payments more
affordable for the insured.
Takaful (Islamic insurance) is a
financial transaction of a mutual
co-operation between two
parties towards providing a
financial security for one of
them against an unexpected
Legally binding agreement
Losses & liabilities
Fair distribution of surplus
Development of Islamic
insurance in five stages
Practices of the doctrine of al-Aqilah among the
ancient Arab tribes as a tribal custom
The relevant legislations
passed in the first constitution
of Medina was in 622 B.C
Hazrat Umar (R.A) ordered to a group of
Mujaheedin in each district, to contribute an
equal amount of money to help legal heirs of
those victims, in case if any person is killed by
any other person of the same district.
Ibn Abidin a Hanafi lawyer was
the first person to discuss about
the idea of insurance and its legal
A well-known Islamic jurist,
Muhammad Abduh issued
two ‘fatwa’s’ mentioned that
1:-Insurance transaction is
like the transaction of al”Mudarabah” financing and
2:- Life insurance is legal.
Establishment of two separate funds
Solidarity principle and equal surplus distribution
Establishment of Shariha board
Scholars view the insurance contract as an
exchange contract – money is being exchanged
for money over time.
Insurance is a buy and sell agreement.
•Uncertainty – Gharrar
•Gambling – Maisir
•Interest – Riba
•Investment of funds
•Nature of capital
Gharar is forbidden in Islam because it is
not showing the full knowledge , disclosure
Gharar describe ‘RISK’..
In insurance Gharar exist in three forms:
Gharar in the outcomes
Ghaarr in the results of exchange
Gharar in contract period
Maisir resembled with ‘Risk taking‘ whereby
insured get a huge amount without any
Insurance include Maisir where insured
makes a bet on the happening of loss and
insurer also do it.
“ …. Allah has permitted trading and forbidden
riba” (Al Baqarah 2 : 275).
Every profit must be based on liability and risk
otherwise it is Riba according to Islam.
Conventional insurance companies normally
place the insurer fund in interest bearing instruments like loans and
Insurance companies invest in such type of assets
that are totally prohibited in Islam such as
alcohol, gambeling, bonds etc. while the Takaful
companies invest in interest free funds that are
In Takaful every policyholder has the right to know
How their money is used?
How the surrender value is calculated?
& the Takaful policyholders must be careful that the
funds are used for halal purposes.
Insurance contract based on interest.
In Takaful every policy holder has the right to
know about the distribution of profit among
partners but in conventional insurance there is no
hard and fast rule about that, it’s totally depend
upon management of company
Roll NO: MC12152
General takaful offer all kinds of non life risk coverage
It is normally divided into following classes
Long term savings
Protection for child education
Education will continue when you are not around
Plan will continue
"A companion of Prophet Muhammad
(s.a.w.w.) asked: 'O Prophet of Allah!
Should I tie my camel and then entrust
Allah or should I leave the camel untied
and then entrust Allah?' The Prophet
(s.a.w.w.) replied: 'Don't leave your
camel untied; instead first tie the camel
and then put your Tawakkal on Allah.'"
"It is narrated that Hazrat Muhammad Mustafa
It is better to leave your heirs
wealthy rather than poor and
asking others for their needs.“
Well planed lifestyle
The period of plan and if he completes this plan
successfully by a disciplined savings than he will have a
handsome amount in his hands on the maturity for his
remaining life’s financial needs.
Investment of amount in Halal business
Availability of other financial riders
Maturity of amount
Availability of plan
Tax free plan
Takaful models implemented in
Reasons why other takaful
models not implemented in
Role of takaful in Islamic
There are three main different Takaful Models use today.
Takaful models implemented in Pakistan
Wakala model with
The wakala concept is essentially an agent-principal relationship,
where the takaful operator acts as an agent on behalf of the
Operator as wakil/Agent: Operator is an organization
which manages Takaful Fund of participants.
Participant as principal: A contributor to Takaful Fund by
participating in any protection scheme.
Wakala fee: The fee received by a Takaful Operator
from the Participants to manage Takaful fund.
Initial donation by shareholders.
Tabarru / Donation: The contribution of participants in
/ Waqf fund
This portion is
invested, or used
Investment in 100% Islamic
transactions or sharia complaint
Profit sharing on MUDARBAHA basis
Profit for the
Profit for the
Profit distribute between
sharing profit and loss)
Manage the whole
takaful operation and
Takaful models not implemented in
Issues in Mudarabah model.
Nature of contract is undermine.
Sharing in underwriting surplus.
Issues in wakalah model.
1. Sharing in underwriting surplus.
2. Not reduce operator fee for largest clients reduce
the risk premium rates.
3. Initial expenses of takaful are not born by
Status and Potential of Takaful industry
Profile of Global Takaful Industry
The first Takaful company was established in 1979 - the
Islamic Insurance Company of Sudan. Malaysia started in
Presently 150 Takaful companies in 25+ countries
worldwide offering General and Family Takaful with
estimates of Takaful contributions at over $ 5 billions
Trinidad & Tobago
United Arab Emirates
Takaful is obstacle by less human resources.
Lack of talented, skilled and experienced
It is good to teach people Takaful concept.
Islamic financial institutions are not putting too much effort in
It is crucial for marketers to enhance the industry and the innovation
of new products.
Financial markets must understand the needs and wants of customer
Many consumers are still stick to conventional insurance.
It is important to address educational issues and to develop
Often, scholars are not agree each
other to establish a framework for
The issue of different regions i.e
Malaysia and Middle East countries.
Model of Takaful is being practiced
by specific region.
Quite self interest between Shariah
Supervisory Board and the board of
directors of the Takaful.
There is no clear mission and
responsibility of Shariah board.
At present, there are no manual and
standard terms of reference.
The lack of appropriate
investment vehicles, especially
with the long term duration.
The limited range of shariah
compliant asset could be the
result of asset risk.
Kind of model of Takaful
Every nation has its own model of Takaful.
Terms of standardization is mainly based on different
The lack of standardization will harm the
development of Takaful.
Role of takaful in Islamic economic system.
1.Create exploitation free society.
2.It is a safeguard against people faith, life, prosperity and
3.Facilitate capital formation.
4.Motivate individual for saving.
5.Utilization or resources.
6. Greater employment.