The document outlines a presentation on Takaful (Islamic insurance). It includes: 1. An introduction to Takaful, its characteristics including separate funds and equal surplus distribution. 2. An explanation of why conventional insurance is not halal and the differences between it and Takaful. 3. Details on the various models of Takaful including Mudarabah (profit-sharing), Wakala (agency with fees), and hybrid models. 4. A discussion of the role of Takaful in Islamic economic systems and some of the future challenges and suggested measures for the continued growth of the Takaful industry.

3. Group members:
MuHammad Hammad Mohsin
Muhammad Amir
Abdullah Saeed
Ejaz Ahmad
Haseeb Ahmad
Saud Javid

5. Outline of Presentation
• Takaful – introduction.
• Characteristics of Takaful.
• Why conventional insurance is not Halal.
• Difference between conventional insurance and Takaful
• Models of Takaful .
• Role in Economy.
• Challenges are facing by Takaful.
• Suggested Measure adopt by Takaful.
• Conclusion.

6. Meaning of Insurance
Insurance provides financial protection
against a loss arising out of happening of an
uncertain event. A person can avail this
protection by paying premium to an
insurance company.

7. What is Takaful:
Conceptually, 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 material risk.

8. The Quran says
“Help ye one another in righteousness and piety, but help ye not
one another in sin and rancour”. (Surah Al-Maidah verse:2)

9. The Prophet
Muhammad
(P.B.U.H) said:
“The believers, in their
affection, mercy and
sympathy to each
other, are like the
body, if one of its
organs suffer and
complains, the entire
body responds with
insomnia and fever”
(Muslim)

11. Practices of the doctrine of al-Aqilah among the ancient
Arab tribes as a tribal custom

12. Practices of the Holy Prophet (SAW)

13. Practices of the Companions

14. Development in the 19th Century

15. Development

16. Characteristics of Takaful:
The establishment of two separate funds
Solidarity principle and equal surplus distribution
Restricted Investments:
Establishment of a Shari’ah Board

17. Takaful Models
• Investment according to contract and Shari’ah.
• The principal operational model for insurance risk
management and the investment component shall be
based on the Islamic concept of Wakala and Modarbah,
respectively. (Section 8(1) Takaful Rules – 2005).
Followings' are Models:
 Modarbah (Partnership with profit sharing)
 Wakala (Agency with Fees)
 Hybrid (Profit Sharing /Fees)

18. Modarbah (Partnership with Profit Sharing)
• The Modarbah bias a true Islamic partnership
structure.
• Rab _ul_ Maal (capital provider trough tabaru
donation)
• Short fall in premium pool then get Qardy Hassna.
• wide spread used in the early days of the introduction
of Takaful.

19. Modarbah (Partnership with Profit Sharing)

20. Important points …..
• 1.An operator is selected and a Mudarabah partnership
is entered into.
• 2.The clients/policy holders feed the Tabarru Fund
with contributions and the operator invests these funds
on their behalf.
• 3.Profits split on those investments are according to
pre-agreed ratio, losses (on investments and through
claims) are charged to the Tabarru Fund.

21. Important points …..
• 4.Insurance claims are honored.
• 5.At various times, underwriting surpluses
may be computed and distributed between the
eligible clients / policyholders (or donated to a
charitable cause) and sometimes also the
operator.

22. Wakala (Agency with Fees)
•The term wakalah in Arabic means agency
•Acting as the agent or “wakil” to the participant as
the principal to manage the participation of the
latter in a variety of takaful products provided by
the operator
•The fee is payable from the takaful contribution
paid by the participant

23. Wakala (Agency with Fees)
• In the event of a cancellation or surrender, the
participant will be refunded of the net balance of
his contribution, if any, after deducting all the
upfront charges such the wakalah fees and other
management expenses from the takaful fund.

24. Wakala (Agency with Fees)

25. Important points …..
• 1. An operator is selected.
• 2. The clients / policyholders feed the Tabarru Fund
with contributions and the operator (agent) invests
these funds.
• 3. Insurance claims are honoured.

26. Important points …..
• The operator receives a fee for his efforts,
usually a fixed amount or a remuneration
linked to the gross contributions received.
• At various times, underwriting surpluses may
be computed and distributed amongst the
clients/policyholders16 or ultimately donated
to a charitable cause.

27. Hybrid (Profit Sharing/Fees)
• As the term denotes, takaful hybrid model is a
combination of the two principles .
• Under the model, a relationship between the
operator which combines the role of entrepreneur or
Mudarib as well as the agent or wakil of the
participant,the latter in the capacity as both provider
of capital or sahibul-mal and principal to the agent.

29. Role of Takaful in Islamic
Economic system
• An exploitation free society and up lift of the
entire society as a whole.
•The Islamic system based on utilization of wealth..
i) financial assistance to low bracket income
people
• Adequate capital formation

30. Prophet
Mohammad
(P.B.U.H) said,
“He advised a poor
companion to
sell all his
belongings for
purchasing an
axe for
collecting
firewood and
sell those in the
market.”

31. Role of Takaful in Islamic
Economic system
• To Meet the Financial services demand of Muslims
Around the Globe.
i) Muslims are 40% of total population.
ii) As result 70 takaful and others financial institutions
are working today's in Muslim and non Muslims countries also.

32. Role of Takaful in Islamic
Economic system
•Takaful was grown not innovative financial
instrument.
i) the purpose of Islam is well being..
ii) complete code of life(sharia,h guide lines)

33. Role of Takaful in Islamic
Economic system
• Helping neighbours, poor relations and the
distressed contribute to an exploitation free
society based on the principle of
brotherhood

34. Prophet
Mohammad
(P.B.U.H) said,
“ One who
eats to his
hearts
contents, while
his neighbour
starves, is not
a Mumin“
(faithful)

39. Future Challenges About Takaful
1. The family takaful business in Pakistan is
coming from the urban market and middle
income group.
2. Another challenge faced by the industry of
takaful is the lack of knowledgeable and
qualified people in the industry

40. Future Challenges About Takaful
3. The re-takaful industry needs a number of
takaful operators to operate effectively
4. At last, product features innovations are also
seen to be the future challenges for the
takaful industry.

41. Suggested measures
Takaful or Islamic Insurance is only a subset of the
global insurance industry of $ 2.5 trillion; where the
global Takaful business is approximately $ 3 billion
only. However, Takaful is the fastest growing areas of
world insurance market. At present, Takaful is growing
@ 20% to 25% per annum compared to world average
growth of conventional insurance @ 5% to 6% per
annum.

42. Suggested measures
1. In view of the importance of customer awareness.
2. Towards promoting the sound Takaful
Industry, formation of national and international Takaful
Association.
3. Market penetration to further entrench its development
underscore the importance of enhancing the productivity
and efficiency of distribution capabilities.

43. Suggested measures
3. Embracing smart collaboration or strategic alliance
with Islamic Banks and financial institutions and
building stronger customer allegiance and retention
would reinforce the efforts to achieve this
objective...
4. Policy initiatives of the Regulatory Authority ought to
be essentially devoted towards enhancing the
effectiveness of the internal control structure within
the Takaful Operators...

44. Conclusion

45. Concluding Remarks
 A dramatic rise in the demand for Takaful Insurance
is being predicted by market observers, as the
population of Islamic countries becomes more
financially sophisticated and more determined to
invest in Shariah compliant products. Moreover, due
to the ethical nature of the products Takaful ought to
be attractive to both Muslim and non-Muslims.

46. Concluding Remarks
The Global Takaful Industry is small in comparison
to Conventional Insurance counterpart. Therefore, the
market needs to gain worldwide brand recognition
and exceed performance standard set by the
Conventional Insurance Industry.
The Takaful Industry is fast evolving and entering a
stable development phase. However, only a few
National Regulators have enacted a Takaful
framework for the industry.

47. Concluding Remarks
Malaysia & Bahrain are leading examples of
having progressive Takaful Regulation. Recently,
Saudi Arabia & Pakistan have also established
Regulatory Framework for Takaful business. It is
heartening to note that the Govt. of Pakistan is
actively considering enacting a separate Takaful
Act. This will certainly help to grow Takaful
Industry of Pakistan.

48. In short
“Takaful is a viable Shariah compliant
alternative to insurance”!

49. End of Presentation
Thank you for your attention