Takaful is an Islamic alternative to conventional insurance based on mutual cooperation and responsibility. It involves participants contributing to a common fund to guarantee each other against loss or hardship. Several fatwas have confirmed takaful's compliance with Sharia. In Pakistan, takaful is growing but faces challenges like lack of awareness, regulatory issues, and limited investment options. Improving products, services, and education can help takaful fulfill its potential.

3. What is takaful ? Basic Elements of Takaful Different fatwa's confirming Takaful Takaful Process Takaful models/ Types Objections to Conventional Insurance Difference b/w Conventional Insurance & Takaful Takaful Prospects in Pakistan Challenges to Takaful Suggestions for further improvement Conclusion

4. Takaful comes from the Arabic root-word ‘ kafala ’ — guarantee. Takaful means mutual protection and joint guarantee. Operationally, takaful refers to participants mutually contributing to a common fund with the purpose of having mutual indemnity in the case of peril or loss.

5. Help (ta’awan) one another in furthering virtue (birr) and Allah consciousness (taqwa) and do not help one another in furthering evil and enmity”. Al Maidah: verse 2 (5:2). Takaful is a form of mutual help (ta’awun) in furthering good/virtue by helping others who are in need / in hardship .

6. “ tie the camel first, then submit (tawakkal) to the will of Allah” The hadith implied a strategy to mitigate/reduce risk. Takaful provides a strategy of risk mitigation/reduction by virtue of collective risk taking that distributes risks and losses to a large number of participants. This mitigates the otherwise very damaging losses, if borne individually.

7. I used the qualitative research methodology, as the research based on description and analysis and clear from nature of study. Rationale of the study Takaful is going to grow as Islamic Insurance. Takaful should be the first choice of people against Conventional Insurance. Takaful is that product, for which, there is direct need to develop the awareness among the people. The study eliminates all the confusions of the people related to Islamic insurance.

8. Mutuality and cooperation. 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.

9. Fatwa issued in Judicial Conference held in Makkah in Shaban 1398 AH. Verdict of Supreme Court of Egypt on Dec. 27, 1926. Unanimous resolutions and fatwa by Ulama in the Muslim League Conference in Cairo in 1965. Unanimous decision by Muslim Scholars in seminar held in Morocco on May 6, 1972. Fatwa issued by Higher Council of Saudi Arabia in 1397 A.H. Fatwa Issued by the Fiqh Council of Muslim World League in 1398 A.H. Fatwa issued by the Fiqh Council of the OIC in 1405 A.H. (1985) . .

10. Takaful Operator creates the Waqf Fund or the “Taburru Fund” Participants contribute their premiums/contributions on the basis of “Taburru” into this Waqf Fund The Waqf Fund pays the claims .

11. Point # 1 Contributions are paid on the basis of Taburru. In Shariah such a contract is called Aqd Taburru Point # 2 Contributions are credited to the Waqf Fund; Operator acts as Wakeel Point # 3 The Waqf Fund pays the claims Point # 4 Contributions are invested only in Shari’ah Compliant investment avenues Point # 5 An independent Shariah Board supervises business activities for Shariah compliance WAQF

12. Piety (individual purification) Brotherhood (mutual assistance) Charity (Tabarru or contribution) Mutual Guarantee Community well-being as opposed to profit maximization. .

13. “ The beauty of Islam lies in its plurality … ! “ Mudaraba Model Wakala Model Wakala -Waqf Model

14. .

15. Definition of an Insurance Contract “ An agreement whereby one party, the insurer , in return for a consideration, the premium , undertakes to pay to the other party, the insured , a sum of money or its equivalent in kind on the happening of a specified event, which is contrary to the insured’s financial interest” Subject-matter of an Insurance Contract “… what is it that is insured in a fire policy? Not the bricks and materials used in building the house, but the financial interest (i.e. money) of the insured in the subject-matter of insurance …” (Lord Justice Brett in Castellian v. Preston – 1883) .

16. Certain aspects of normal insurance conflict with Sharia principles Maysir (Gambling) Gharar ( Risk & Uncertainty) Riba (Interest) Haram (Forbidden / Unlawful) insurers make bets on the loss occurrence and this is deemed to be gambling timing and amount of the loss are uncertain investments in interest bearing securities and possible interest on loans investments in commodities or involvement in activities that are forbidden (alcohol, pork etc).

17. Issue Conventional Insurance Takaful Organization Principle Profit for shareholders Mutual for participants Basis Risk Transfer Co-operative risk sharing Value Proposition Profits maximization Affordability and spiritual satisfaction Laws Secular/Regulations Sharia plus regulations Ownership Shareholders Participants Management status Company Management Operator Form of Contract Contract of Sale Cooperative, Islamic contracts of Wakala or Mudarbah with Tabar’ru (contributions) Investments Interest based Sharia compliant, Riba-free Surplus Shareholders’ account Participants’ account

18. Fatwa issued in Judicial Conference held in Makkah in Shaban 1398 AH. Verdict of Supreme Court of Egypt on Dec. 27, 1926. Unanimous resolutions and fatwa by Ulama in the Muslim League Conference in Cairo in 1965. Unanimous decision by Muslim Scholars in seminar held in Morocco on May 6, 1972.

19. . Origins in the First Constitution of Madina. It evolved and continued in one form or the other throughout the Abbaside period and even later during the Ottoman empire. 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.

20. There are now around 180 Takaful companies in over 40 countries. The total insurance premium of OIC countries for 2006 was USD 75 Billion; of this, Takaful contribution accounts for 5% (i.e. USD 3.5 Billion). This is expected to increase to USD 12 Billion by 2015. 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.

21. 97% Muslim population. Demand for insurance increasing with increase in per capita income. Islamic banking on sound footing with support of the Govt.

22. 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.

23. Objectives Resolution 1949 1992 1983 Review by Council of Islamic Ideology Report by the Council 2000 Insurance Ordinance 2005 Takaful Rules T I M E L I N E – T A K A F U L I N P A K I S T A N

24. Skepticism. Lack of uniformity in Shariah decisions. ‘ Windows’ issue. Regulatory issues. Lack of consumer awareness Limited Investment avenues. H.R. issues.

25. Takaful operators should follow best practices with great commitment Awareness among general public is required because of following reasons low literacy rate Misconception about traditional insurance Low insurance penetration Training and development

26. It should be promoted as the tool of first choice for risk mitigating. This can only be achieved through better product offerings and top class quality services. Alternate distribution channels should be utilized e.g. Bankatakaful.

27. Takaful defined. Comparison with conventional insurance. Takaful Models. Takaful Types. Pakistan prospects Need of hour Awareness among people