Takaful, or Islamic insurance, is a cooperative scheme where participants pay contributions into a common risk pool. It is based on the principles of mutual assistance and donation rather than risk transfer. Takaful aims to avoid issues like riba (interest), gharar (uncertainty), and maisir (gambling) that are prohibited in Islam. General takaful contracts involve participants making donations to cover fellow participants' losses. The takaful operator manages the fund and provides assistance if it becomes insolvent. Takaful differs from conventional insurance by being based on cooperation instead of commercial exchange and by investing contributions in sharia-compliant ways.
Mudarabah is an Islamic contract where one party provides capital to another party for investing in a commercial enterprise. The capital provider is called rabb-ul-mal and the manager is called mudarib. Profits are shared according to a predetermined ratio, while losses are solely borne by the capital provider except in cases of misconduct or negligence by the mudarib. There are two main types of mudarabah - restricted and unrestricted. The contract can be terminated by either party with notice. Mudarabah is used by Islamic banks to accept deposits and invest funds on behalf of depositors based on profit and loss sharing. However, there are also risks involved for the banks in applying mudarabah.
Takaful is an Islamic alternative to conventional insurance that is based on mutual assistance and cooperation between participants. It involves participants contributing to a common pool and receiving compensation from that pool in the event of a valid claim. Takaful aims to avoid elements of uncertainty (gharar) and gambling (maisir) that are prohibited in Islamic finance by structuring the arrangement as a cooperative donation (tabarru) scheme rather than a commercial insurance contract involving the exchange of risk for premium. General takaful provides short-term coverage for risks like motor, health, fire and marine insurance through participants' contributions to the general takaful fund.
The document discusses the concept of Mudarabah, an Islamic financing structure. Mudarabah is a partnership between an investor and a manager, where the investor provides capital and the manager provides labor/expertise. Profits are shared according to a pre-agreed ratio, while losses are borne solely by the investor. The document outlines the key elements of Mudarabah contracts including capital requirements, management roles, profit/loss distribution, and termination procedures. It also compares Mudarabah to other structures like Musharakah and analyzes various risks in Mudarabah like credit, market, and liquidity risks.
Riba refers to usury or interest charged on loans. It is prohibited in Islam based on evidence from the Quran and hadith. There are two main categories of riba - debt riba, which includes interest on loans, and trade riba, which involves unequal exchange of goods. Certain goods like gold, silver, wheat and barley are considered ribawi items where rules on quantity and time of exchange must be followed to avoid riba. The prohibition aims to prevent injustice and burden on borrowers that can destabilize societies.
Family takaful provides protection and long-term savings through contributions that are partially placed in a risk fund for financial benefits upon tragedy or death and partially deposited in a savings account with investment returns. It offers tax relief and covers death, permanent disability, medical costs, and more through basic plans and riders. Key terms include contribution amounts and periods, grace periods, and maturity periods, while claims require notification and documents verifying death, identity, and claimant relationship.
This document provides an overview of the nature of insurance. It defines insurance as an agreement where individuals facing similar risks can share losses through transferring risks to an insurer. The insurer collects premiums from many policyholders and uses these funds to pay losses of the unlucky few. This allows for losses to be shared across all policyholders rather than borne solely by those who experience losses. It also discusses key concepts like insurable risks, premium calculation, functions of insurance, and differences between life and other forms of insurance.
This document discusses the principles of Islamic investment. It begins by outlining Islamic worldviews related to investment such as accountability to God and society, justice, and public interest. It then defines Islamic investment as investments that adhere to Islamic principles through profit and loss sharing and avoiding interest, uncertainty, and gambling. The document outlines the sources of Islamic laws, criteria for permissible investments and activities, and challenges in Islamic finance. It also discusses concepts like zakat, speculation vs gambling, and the roles of Sharia supervisory boards and screening.
The document defines al-Wadi'ah as property left with someone to take care of it based on trust. It discusses the evidence from the Quran and hadith supporting al-Wadi'ah. The pillars of al-Wadi'ah are the depositor, deposited property, and depositary. There are two main types: al-Wadi'ah Yadd al-Amanah based on trust without liability, and al-Wadi'ah Yadd al-Dhamanah which allows the depositary to use the property and be liable for damages. Issues like conditions, flows, and disputes over profits are also summarized.
Mudarabah is an Islamic contract where one party provides capital to another party for investing in a commercial enterprise. The capital provider is called rabb-ul-mal and the manager is called mudarib. Profits are shared according to a predetermined ratio, while losses are solely borne by the capital provider except in cases of misconduct or negligence by the mudarib. There are two main types of mudarabah - restricted and unrestricted. The contract can be terminated by either party with notice. Mudarabah is used by Islamic banks to accept deposits and invest funds on behalf of depositors based on profit and loss sharing. However, there are also risks involved for the banks in applying mudarabah.
Takaful is an Islamic alternative to conventional insurance that is based on mutual assistance and cooperation between participants. It involves participants contributing to a common pool and receiving compensation from that pool in the event of a valid claim. Takaful aims to avoid elements of uncertainty (gharar) and gambling (maisir) that are prohibited in Islamic finance by structuring the arrangement as a cooperative donation (tabarru) scheme rather than a commercial insurance contract involving the exchange of risk for premium. General takaful provides short-term coverage for risks like motor, health, fire and marine insurance through participants' contributions to the general takaful fund.
The document discusses the concept of Mudarabah, an Islamic financing structure. Mudarabah is a partnership between an investor and a manager, where the investor provides capital and the manager provides labor/expertise. Profits are shared according to a pre-agreed ratio, while losses are borne solely by the investor. The document outlines the key elements of Mudarabah contracts including capital requirements, management roles, profit/loss distribution, and termination procedures. It also compares Mudarabah to other structures like Musharakah and analyzes various risks in Mudarabah like credit, market, and liquidity risks.
Riba refers to usury or interest charged on loans. It is prohibited in Islam based on evidence from the Quran and hadith. There are two main categories of riba - debt riba, which includes interest on loans, and trade riba, which involves unequal exchange of goods. Certain goods like gold, silver, wheat and barley are considered ribawi items where rules on quantity and time of exchange must be followed to avoid riba. The prohibition aims to prevent injustice and burden on borrowers that can destabilize societies.
Family takaful provides protection and long-term savings through contributions that are partially placed in a risk fund for financial benefits upon tragedy or death and partially deposited in a savings account with investment returns. It offers tax relief and covers death, permanent disability, medical costs, and more through basic plans and riders. Key terms include contribution amounts and periods, grace periods, and maturity periods, while claims require notification and documents verifying death, identity, and claimant relationship.
This document provides an overview of the nature of insurance. It defines insurance as an agreement where individuals facing similar risks can share losses through transferring risks to an insurer. The insurer collects premiums from many policyholders and uses these funds to pay losses of the unlucky few. This allows for losses to be shared across all policyholders rather than borne solely by those who experience losses. It also discusses key concepts like insurable risks, premium calculation, functions of insurance, and differences between life and other forms of insurance.
This document discusses the principles of Islamic investment. It begins by outlining Islamic worldviews related to investment such as accountability to God and society, justice, and public interest. It then defines Islamic investment as investments that adhere to Islamic principles through profit and loss sharing and avoiding interest, uncertainty, and gambling. The document outlines the sources of Islamic laws, criteria for permissible investments and activities, and challenges in Islamic finance. It also discusses concepts like zakat, speculation vs gambling, and the roles of Sharia supervisory boards and screening.
The document defines al-Wadi'ah as property left with someone to take care of it based on trust. It discusses the evidence from the Quran and hadith supporting al-Wadi'ah. The pillars of al-Wadi'ah are the depositor, deposited property, and depositary. There are two main types: al-Wadi'ah Yadd al-Amanah based on trust without liability, and al-Wadi'ah Yadd al-Dhamanah which allows the depositary to use the property and be liable for damages. Issues like conditions, flows, and disputes over profits are also summarized.
This document outlines Capt. M. Jamil Akhtar Khan's presentation on Takaful (Islamic insurance) to the Hailey College of Banking & Finance in Lahore, Pakistan on August 13, 2007. The presentation covers an introduction to Takaful, including its meaning and basis in the Quran and Hadith. It discusses objections to conventional insurance and how Takaful differs. The presentation also examines the history of Takaful, various Takaful models, types of Takaful coverage, and the foundations and prospects of Takaful in Pakistan.
This article will describe about an overview of derivatives in Islamic Finance. Derivative is a "claim on a claim" the value of the derivative will depend on the value of the asset (stocks, bonds, etc) on which it has a claim.
Musharakah, Mudarabah, Riba, Islamic modes of financinghameedrehman96
This document discusses various Islamic financing concepts including musharakah, mudarabah, and prohibitions on riba. It provides definitions and rules for each:
Musharakah is a partnership where two or more parties contribute capital and labor to a business, sharing profits and losses. Mudarabah involves one party providing capital (rabb-ul-mal) and another providing labor (mudarib), with profits shared according to agreement. Riba refers to interest charged on loans, which is prohibited in Islam as it is unjust. The document outlines other Islamic modes of financing like project financing, securitization of musharakah, and using these structures for working capital or single transactions.
This document discusses the concept of Musharakah, which is an Islamic form of partnership or joint venture. It defines Musharakah, discusses its evidence in the Quran and Hadith, outlines its key pillars and types. It also covers the conditions of Musharakah partnerships, examples like Musharakah Mutanaqisah, and its modern applications.
The document discusses the legal framework of Islamic capital markets. It provides an overview of key concepts like Islamic capital market products, regulatory bodies that govern the Malaysian capital market, and the development of the Islamic capital market in Malaysia over time. Various regulatory frameworks and guidelines introduced by the Securities Commission are also summarized to facilitate a conducive environment for the growth of the Islamic capital market.
Takaful is an Islamic insurance system based on mutual assistance and donation. It involves participants voluntarily contributing to a collective fund to guarantee each other against losses. If a participant suffers a loss, they receive money from the fund to help cover costs. Any surplus contributions are shared among participants according to a Mudarabah agreement. Takaful aims to help those in need without involving interest, gambling or other prohibited elements unlike conventional insurance.
This document provides an overview of Islamic investment funds. It begins by defining investment funds and unit trusts. It notes that investment funds can take the form of mudharabah or wakalah contracts. The document then discusses the classification of investment funds as either open-ended or close-ended. It provides examples of different types of funds categorized by investment portfolio, including equity funds, fixed income funds, money market funds, balanced funds, Islamic funds, sukuk funds, real estate investment trust funds, and exchange traded funds. The key differences between Islamic and conventional funds and how a unit trust works are also summarized.
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.
This document defines various types of contracts of sale (bay') in Islamic law and discusses their elements and permissibility. It begins by defining bay' as the exchange of property for property, money for property, or money for money by mutual consent. It then examines several types of bay' such as bay' bithaman ajil (deferred payment sale), bay' al-murabahah (cost-plus sale), and bay' al-salam (advance payment sale). Each type is explained and the document discusses whether it is permissible according to Islamic sources like the Quran and hadith.
Takaful is an Islamic alternative to conventional insurance that is based on mutual cooperation and donation rather than commercial transactions. It involves participants contributing to a common fund as a tabarru (donation) to be used to compensate members in case of valid claims. This spreads risk among members and draws from historical systems like aaqilah. Takaful minimizes issues of riba, gharar and maisir by operating through tabarru rather than interest-based investments. General takaful provides short-term coverage through contributions invested and profits shared according to set ratios to cover operational costs.
This document summarizes the key differences between conventional insurance and Islamic insurance (takaful). Takaful is based on risk-pooling and mutual protection among policyholders, rather than risk transfer from policyholders to insurers. It avoids elements of riba (interest), gharar (uncertainty), and maisir (gambling) through a cooperative donation scheme where participants contribute to a common fund to make payouts to those affected by losses. While based on tabarru (donation), takaful also provides participants rights to claim compensation, so it is considered a qualified rather than pure tabarru contract.
This document discusses different types of contracts according to Islamic law. It defines unilateral contracts as promises made by one party for acceptance by another, and bilateral contracts as requiring offer and acceptance by two parties. Quasi contracts are obligations similar to contracts but do not originate from agreement.
Contracts are also classified based on legal consequences. Valid contracts meet all legal requirements. Invalid contracts are lawful but have unlawful attributes. Void contracts are unlawful in substance and attributes. Binding contracts are sound without defects. Enforceable contracts cannot be delayed. Withheld contracts are lawful but made by someone without ownership of the subject.
Here are the accounting entries for the salam transaction described:
1. Payment to Mr. First
Debit - Salam Financing (Mr. First) A/C 10000
Credit - Cash A/C 10000
2. Receipt of goods from Mr. First
Debit - Salam Inventory A/C 10000
Credit - Salam Financing (Mr. First) A/C 10000
3. Receipt of funds from Mr. Second
Debit - Cash A/C 10125
Credit - Parallel Salam (Mr. Second) A/C 10125
4. Delivery of goods to Mr. Second
Debit - Parallel Salam (Mr
The document defines and discusses the concept of Mudharabah, which is a contract of partnership where one party provides capital and the other provides labor and management. It provides key details on the definition, pillars, categories, conditions and evidence for Mudharabah based on classical Islamic literature. The summary highlights that Mudharabah is a profit-sharing partnership where profits are shared according to a predetermined rate but losses are borne solely by the capital provider.
This document discusses the concept of al-kafalah (suretyship) in Islamic finance. It defines al-kafalah and provides evidence from the Quran and hadith. It outlines the pillars (elements) of al-kafalah including the guarantor, creditor, principal debtor, and guaranteed item or debt. It describes different types of al-kafalah including for a person and for property. It also discusses the advantages, effects, and conditions of al-kafalah contracts.
This document discusses various types of risks faced by Islamic banks, including market risk, interest rate risk, credit risk, liquidity risk, operational risk, legal risk, equity investment risk, rate of return risk, displaced commercial risk, fiduciary risk, Shari'ah compliance risk, reputation risk, and strategies for managing these risks. It provides details on the sources and impacts of each risk and emphasizes the importance of comprehensive risk management systems, internal controls, oversight committees, regular reporting, and adherence to Shari'ah principles for Islamic banks.
Risk management is a vital process for Islamic banks that consists of several interconnected phases. It includes establishing a risk management framework based on ISO 31000:2009, identifying risks through analysis of products and activities, measuring risks using a composite risk index, developing a risk matrix to plot risks by severity and impact, reviewing risks and monitoring actual risk levels. Effective risk management also requires infrastructure like documentation of policies, an organizational structure with risk management committees, use of information technology systems and databases, and selecting appropriate risk measurement models. The goal is to properly manage both generic financial risks and unique risks to Islamic banks like Sharia non-compliance, displaced commercial, and equity investment risks.
Shirkah refers to partnership in Islamic commercial law. There are two main types: shirkah al milk which is joint ownership of property, and shirkah al 'aqd which is a joint commercial enterprise where partners share capital and profit. Mudharabah is a specific type of partnership where one partner provides capital to another to invest in a business venture. The capital provider shares profit according to a profit ratio but bears any losses. Double mudharabah allows the capital from one mudharabah partnership to be invested in another mudharabah contract.
The document discusses the Islamic financing contracts of Salam and Istisna. Salam allows payment in advance in exchange for deferred delivery of goods, while Istisna is used for manufacturing goods where the price is paid in installments over time or on delivery. Both contracts aim to fulfill financing needs and provide alternatives to interest-based loans. Key conditions and differences between the two contracts are outlined.
This document discusses the differences between conventional insurance and Islamic (takaful) insurance. It explains that takaful is based on risk-pooling and mutual guarantee between participants, avoiding issues like riba (interest), gharar (uncertainty), and maisir (gambling) that are present in conventional insurance. It describes the key concept of tabarru in takaful, where participants donate contributions to a common fund to mutually insure one another. If the fund faces a deficit, the operator can provide an interest-free loan (qard hassan) to ensure solvency, though the terms of repayment are sometimes unclear.
This presentation provides an overview of Takaful (Islamic insurance):
1) Takaful is an alternative to conventional insurance that is based on mutual assistance and joint guarantee between participants. It follows Shariah principles by avoiding elements of uncertainty, gambling and interest.
2) There are different Takaful models including Mudaraba and Wakala that structure the risk-sharing arrangement and distribution of surplus between participants and the Takaful operator.
3) Takaful Pakistan Limited is a new Takaful company that aims to set benchmarks for client service, operations and prudent underwriting in the growing Pakistani Takaful market.
This document outlines Capt. M. Jamil Akhtar Khan's presentation on Takaful (Islamic insurance) to the Hailey College of Banking & Finance in Lahore, Pakistan on August 13, 2007. The presentation covers an introduction to Takaful, including its meaning and basis in the Quran and Hadith. It discusses objections to conventional insurance and how Takaful differs. The presentation also examines the history of Takaful, various Takaful models, types of Takaful coverage, and the foundations and prospects of Takaful in Pakistan.
This article will describe about an overview of derivatives in Islamic Finance. Derivative is a "claim on a claim" the value of the derivative will depend on the value of the asset (stocks, bonds, etc) on which it has a claim.
Musharakah, Mudarabah, Riba, Islamic modes of financinghameedrehman96
This document discusses various Islamic financing concepts including musharakah, mudarabah, and prohibitions on riba. It provides definitions and rules for each:
Musharakah is a partnership where two or more parties contribute capital and labor to a business, sharing profits and losses. Mudarabah involves one party providing capital (rabb-ul-mal) and another providing labor (mudarib), with profits shared according to agreement. Riba refers to interest charged on loans, which is prohibited in Islam as it is unjust. The document outlines other Islamic modes of financing like project financing, securitization of musharakah, and using these structures for working capital or single transactions.
This document discusses the concept of Musharakah, which is an Islamic form of partnership or joint venture. It defines Musharakah, discusses its evidence in the Quran and Hadith, outlines its key pillars and types. It also covers the conditions of Musharakah partnerships, examples like Musharakah Mutanaqisah, and its modern applications.
The document discusses the legal framework of Islamic capital markets. It provides an overview of key concepts like Islamic capital market products, regulatory bodies that govern the Malaysian capital market, and the development of the Islamic capital market in Malaysia over time. Various regulatory frameworks and guidelines introduced by the Securities Commission are also summarized to facilitate a conducive environment for the growth of the Islamic capital market.
Takaful is an Islamic insurance system based on mutual assistance and donation. It involves participants voluntarily contributing to a collective fund to guarantee each other against losses. If a participant suffers a loss, they receive money from the fund to help cover costs. Any surplus contributions are shared among participants according to a Mudarabah agreement. Takaful aims to help those in need without involving interest, gambling or other prohibited elements unlike conventional insurance.
This document provides an overview of Islamic investment funds. It begins by defining investment funds and unit trusts. It notes that investment funds can take the form of mudharabah or wakalah contracts. The document then discusses the classification of investment funds as either open-ended or close-ended. It provides examples of different types of funds categorized by investment portfolio, including equity funds, fixed income funds, money market funds, balanced funds, Islamic funds, sukuk funds, real estate investment trust funds, and exchange traded funds. The key differences between Islamic and conventional funds and how a unit trust works are also summarized.
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.
This document defines various types of contracts of sale (bay') in Islamic law and discusses their elements and permissibility. It begins by defining bay' as the exchange of property for property, money for property, or money for money by mutual consent. It then examines several types of bay' such as bay' bithaman ajil (deferred payment sale), bay' al-murabahah (cost-plus sale), and bay' al-salam (advance payment sale). Each type is explained and the document discusses whether it is permissible according to Islamic sources like the Quran and hadith.
Takaful is an Islamic alternative to conventional insurance that is based on mutual cooperation and donation rather than commercial transactions. It involves participants contributing to a common fund as a tabarru (donation) to be used to compensate members in case of valid claims. This spreads risk among members and draws from historical systems like aaqilah. Takaful minimizes issues of riba, gharar and maisir by operating through tabarru rather than interest-based investments. General takaful provides short-term coverage through contributions invested and profits shared according to set ratios to cover operational costs.
This document summarizes the key differences between conventional insurance and Islamic insurance (takaful). Takaful is based on risk-pooling and mutual protection among policyholders, rather than risk transfer from policyholders to insurers. It avoids elements of riba (interest), gharar (uncertainty), and maisir (gambling) through a cooperative donation scheme where participants contribute to a common fund to make payouts to those affected by losses. While based on tabarru (donation), takaful also provides participants rights to claim compensation, so it is considered a qualified rather than pure tabarru contract.
This document discusses different types of contracts according to Islamic law. It defines unilateral contracts as promises made by one party for acceptance by another, and bilateral contracts as requiring offer and acceptance by two parties. Quasi contracts are obligations similar to contracts but do not originate from agreement.
Contracts are also classified based on legal consequences. Valid contracts meet all legal requirements. Invalid contracts are lawful but have unlawful attributes. Void contracts are unlawful in substance and attributes. Binding contracts are sound without defects. Enforceable contracts cannot be delayed. Withheld contracts are lawful but made by someone without ownership of the subject.
Here are the accounting entries for the salam transaction described:
1. Payment to Mr. First
Debit - Salam Financing (Mr. First) A/C 10000
Credit - Cash A/C 10000
2. Receipt of goods from Mr. First
Debit - Salam Inventory A/C 10000
Credit - Salam Financing (Mr. First) A/C 10000
3. Receipt of funds from Mr. Second
Debit - Cash A/C 10125
Credit - Parallel Salam (Mr. Second) A/C 10125
4. Delivery of goods to Mr. Second
Debit - Parallel Salam (Mr
The document defines and discusses the concept of Mudharabah, which is a contract of partnership where one party provides capital and the other provides labor and management. It provides key details on the definition, pillars, categories, conditions and evidence for Mudharabah based on classical Islamic literature. The summary highlights that Mudharabah is a profit-sharing partnership where profits are shared according to a predetermined rate but losses are borne solely by the capital provider.
This document discusses the concept of al-kafalah (suretyship) in Islamic finance. It defines al-kafalah and provides evidence from the Quran and hadith. It outlines the pillars (elements) of al-kafalah including the guarantor, creditor, principal debtor, and guaranteed item or debt. It describes different types of al-kafalah including for a person and for property. It also discusses the advantages, effects, and conditions of al-kafalah contracts.
This document discusses various types of risks faced by Islamic banks, including market risk, interest rate risk, credit risk, liquidity risk, operational risk, legal risk, equity investment risk, rate of return risk, displaced commercial risk, fiduciary risk, Shari'ah compliance risk, reputation risk, and strategies for managing these risks. It provides details on the sources and impacts of each risk and emphasizes the importance of comprehensive risk management systems, internal controls, oversight committees, regular reporting, and adherence to Shari'ah principles for Islamic banks.
Risk management is a vital process for Islamic banks that consists of several interconnected phases. It includes establishing a risk management framework based on ISO 31000:2009, identifying risks through analysis of products and activities, measuring risks using a composite risk index, developing a risk matrix to plot risks by severity and impact, reviewing risks and monitoring actual risk levels. Effective risk management also requires infrastructure like documentation of policies, an organizational structure with risk management committees, use of information technology systems and databases, and selecting appropriate risk measurement models. The goal is to properly manage both generic financial risks and unique risks to Islamic banks like Sharia non-compliance, displaced commercial, and equity investment risks.
Shirkah refers to partnership in Islamic commercial law. There are two main types: shirkah al milk which is joint ownership of property, and shirkah al 'aqd which is a joint commercial enterprise where partners share capital and profit. Mudharabah is a specific type of partnership where one partner provides capital to another to invest in a business venture. The capital provider shares profit according to a profit ratio but bears any losses. Double mudharabah allows the capital from one mudharabah partnership to be invested in another mudharabah contract.
The document discusses the Islamic financing contracts of Salam and Istisna. Salam allows payment in advance in exchange for deferred delivery of goods, while Istisna is used for manufacturing goods where the price is paid in installments over time or on delivery. Both contracts aim to fulfill financing needs and provide alternatives to interest-based loans. Key conditions and differences between the two contracts are outlined.
This document discusses the differences between conventional insurance and Islamic (takaful) insurance. It explains that takaful is based on risk-pooling and mutual guarantee between participants, avoiding issues like riba (interest), gharar (uncertainty), and maisir (gambling) that are present in conventional insurance. It describes the key concept of tabarru in takaful, where participants donate contributions to a common fund to mutually insure one another. If the fund faces a deficit, the operator can provide an interest-free loan (qard hassan) to ensure solvency, though the terms of repayment are sometimes unclear.
This presentation provides an overview of Takaful (Islamic insurance):
1) Takaful is an alternative to conventional insurance that is based on mutual assistance and joint guarantee between participants. It follows Shariah principles by avoiding elements of uncertainty, gambling and interest.
2) There are different Takaful models including Mudaraba and Wakala that structure the risk-sharing arrangement and distribution of surplus between participants and the Takaful operator.
3) Takaful Pakistan Limited is a new Takaful company that aims to set benchmarks for client service, operations and prudent underwriting in the growing Pakistani Takaful market.
This presentation provides an overview of Takaful (Islamic insurance):
1) Takaful is based on mutual protection and joint guarantee, with participants contributing to a common fund to provide indemnity in case of loss. It avoids elements of uncertainty, gambling and interest that are objections to conventional insurance.
2) There are various Takaful models including Mudaraba and Wakala that structure the operations and distribution of surplus differently but are based on cooperation instead of profit-maximization.
3) Takaful Pakistan Limited is a new company that offers both general and family Takaful products in Pakistan, which has strong potential for Takaful given its predominantly Muslim population.
The document provides an overview of Takaful (Islamic insurance), including its definition, differences from conventional insurance, various Takaful models and types, the history and development of Takaful in Pakistan, and prospects for growth in Pakistan. It also introduces Takaful Pakistan Limited, a new Takaful company established in Pakistan as a joint venture between local and international institutions.
The document provides an overview of Takaful (Islamic insurance) including:
1. Takaful is based on mutual protection and joint guarantee, with participants contributing to a common fund to provide indemnity in case of loss.
2. There are different Takaful models including Mudaraba and Wakala that structure the risk-sharing and distribution of surpluses.
3. Takaful has grown significantly in recent decades and now operates in over 40 countries, providing an alternative to conventional insurance that is in line with Sharia principles.
1. Takaful, or Islamic insurance, originated from early Islamic community practices of pooling resources to help cover financial losses. It operates based on Sharia principles of welfare, shared responsibility, and cooperation.
2. There are three main models of takaful contracts: wakalah, mudarabah, and a hybrid model. Wakalah uses an agency fee structure while mudarabah is a profit-sharing model between participants and managers.
3. Key differences between takaful and conventional insurance include that takaful participants are both the insurer and insured through risk-sharing, and investments must be Sharia-compliant rather than allowing interest.
Islamic insurance, also known as takaful, is an insurance model based on mutual cooperation and responsibility rather than profit. Takaful originated in ancient Arab tribes as a system where members contributed to a fund to cover losses. In takaful, policyholders jointly invest in an insurance fund operated by a manager, sharing profits and losses. Payouts are based on actual losses rather than guaranteed profits, complying with Islamic principles prohibiting interest and gambling. Takaful provides insurance options for Muslims while avoiding risks of conventional insurance that are incompatible with Islamic law.
The document compares and contrasts insurance and takaful. It provides details on:
1) Insurance is a contract where one party agrees to take on the risk of another in exchange for premium payments. The risk bearer is the insurer and the party whose risk is covered is the insured.
2) Takaful is an Islamic insurance system based on mutual assistance and donation, where risks are shared collectively. It follows the principles of tabarru (donation) and ta'awun (mutual guarantee).
3) There are several takaful models including mudarabah, wakalah, and waqf models. The waqf model establishes a waqf fund through shareholder contributions to compensate
The document discusses Takaful, the Islamic alternative to conventional insurance. It begins with an introduction to Takaful and the differences between Takaful and conventional insurance. It then covers the history and evolution of Takaful over time, the different types of Takaful coverage, and Takaful models used worldwide. The document also addresses the target market for Takaful, challenges facing the Takaful industry, and prospects for growth in Turkey. It concludes with a discussion of operational aspects of the Takaful model and challenges that still need to be addressed.
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Aamer Rahim
This document provides an introduction and overview of Takaful (Islamic insurance). It discusses:
1) The background and need for an Islamic alternative to conventional insurance due to issues like gharar (uncertainty) and riba (interest).
2) The key principles of Takaful including tabarru (voluntary donation or contribution) and ta'awun (mutual assistance).
3) The types of Takaful products and some ongoing Shariah issues regarding concepts like nomination, distribution of surplus, and tabarru.
Takaful industry in Pakistan,GCC & Malaysia: Growth Challenges & future Prosp...Aamer Rahim
This document provides an introduction and overview of Takaful (Islamic insurance). It discusses:
1) The background and need for an Islamic alternative to conventional insurance due to issues like gharar (uncertainty) and riba (interest).
2) The key principles of Takaful including tabarru (voluntary donation or contribution) and ta'awun (mutual assistance).
3) The types of Takaful products and some ongoing Shariah issues regarding concepts like nomination, surplus distribution, and tabarru that the industry continues working to address.
The document discusses the legal framework of Takaful (Islamic insurance) in Malaysia. It provides context on the historical development of Takaful, key differences between Takaful and conventional insurance, and the current legal and regulatory structure governing Takaful. This includes the Takaful Act of 1984, licensing requirements for Takaful operators, governance standards, and the importance of Shariah compliance and advice. Issues like insurable interest are also examined in relation to Takaful.
The document provides an overview of the fundamentals of Takaful, which is an Islamic insurance system based on mutual cooperation and donation. It discusses the key principles of Takaful, including tabarru' (donation), ta'awun (mutual cooperation), and mudharabah (profit-sharing). The three elements typically found in conventional insurance that are not compliant with Islamic law - gharar (uncertainty), maisir (gambling) and riba (interest) - are also examined. The document then outlines the basic Takaful operating models used in practice and the legal/regulatory framework governing the Takaful industry in Malaysia.
1. Takaful is an Islamic insurance model based on mutual assistance and solidarity where participants contribute funds to help others in times of need, as opposed to conventional insurance which is based on a commercial transaction.
2. Conventional insurance involves elements prohibited in Islam like maisir (gambling) and gharar (uncertainty), and may invest funds in interest-bearing assets. Takaful aims to be free from these elements and can only invest in Sharia-compliant assets and businesses.
3. The key differences are that in Takaful, benefits are paid from participants' funds, profits are shared among participants, and the model operates according to Sharia principles of avoiding riba and promoting risk-
Takaful is an Islamic insurance concept based on mutual assistance and cooperation. It involves participants contributing to a common fund, which is used to pay compensation to any participant who suffers losses according to the terms of the Takaful agreement. There are different models for structuring Takaful, such as the Tabarru' model where contributions are seen as donations, or the Mudharabah model where profits from investing contributions are shared. Takaful aims to be free from elements like uncertainty and gambling that are prohibited in Islam. It is overseen by a Sharia Supervisory Council to ensure compliance.
Takaful, or Islamic insurance, is based on the principles of mutual guarantee and cooperation. Participants contribute premiums to a common fund, with part being set aside as tabarru' or donation to help other participants facing losses. The takaful operator manages the fund according to mudharabah, where profits are shared between participants and operator based on a pre-agreed ratio. Takaful provides insurance coverage while also allowing participants to invest their savings in Shariah-compliant ways and collectively participate in the economy and good deeds like charity.
This document provides information about riba (usury or interest) in Islam. It begins by defining riba in Arabic and in fiqh (Islamic jurisprudence) terminology. It then quotes a relevant verse from the Quran that forbids riba. Next, it shares a hadith from the Prophet Muhammad (peace be upon him) regarding the prohibition of increasing amounts in exchanges of gold and silver. The document goes on to explain the two types of riba: riba al-nasi'ah, which relates to loans, and riba al-fadl, which relates to trade. It concludes by stating that both types of riba are forbidden in the Quran and traders are allowed as
Takaful is an Islamic insurance model based on mutual assistance and contribution. It avoids elements prohibited in Islam like gharar (uncertainty), maisir (gambling), and riba (interest). Under takaful, participants donate portions of their contributions to a collective fund to cover losses. The fund is invested based on profit-sharing to generate returns. Participants assist each other by sharing risks from the fund as defined in their pact, with an operator managing operations and receiving a fee. Takaful can insure property, vehicles, goods, health and life in accordance with Islamic principles.
This document provides an overview of the history and development of Islamic insurance, also known as Takaful. It discusses the Islamic perceptions and prohibitions around conventional insurance, and introduces the concept of Takaful as an alternative based on mutual assistance and cooperation. The document then examines the key differences between conventional insurance and Takaful models, products, and operations. It provides details on the global growth of Takaful, focusing on the success of the industry in Malaysia, as well as developments in other regions such as the GCC, Southeast Asia, and Africa.
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Takaful Islamic Insurance IF for Lawyers
1. TAKAFUL (ISLAMIC
INSURANCE)
By: Camille Paldi
CEO of FAAIF
Mediterranean Week of
Economic Leaders Summit
of Islamic Finance, 28th of
November 2014. Casa Llotja
de Mar, Barcelona, Spain
3. WHAT IS TAKAFUL?
Takaful, or Islamic insurance, is a cooperative scheme, where in which
the participants pay a premium in the form of donation or tabarru in
a common pool in return for the ability to draw upon that pool upon a
valid claim.
The word takaful originates from the Arabic world kafalah, which
means "guaranteeing each other" or "joint-guarantee."
4. AAQILAH
The basis of shared responsibility is taken from the system of
aaqilah, which was an arrangement of mutual help or indemnification
customary in many tribes of the Arab world.
Under this system, if a member of a tribe was accidentally or unjustly
killed, the murderer was obliged to pay blood money (dia) to the
deceased's next of kin as a form of life insurance for the deceased's
relatives.
5. CONVENTIONAL V ISLAMIC
INSURANCE
Proprietary insurance is concerned with risk transfer, insured risks
being transferred from the insured to the insurer in return for a
premium;
Takaful is concerned with risk-pooling, whereby the policyholders
(takaful participants) mutually insure one another in a common risk
pool financed by their contributions (premium payments).
6. CONVENTIONAL V ISLAMIC
INSURANCE
The purpose of this Holy Book insurance system is not profits, but to
uphold the Qu’ranic, Christian, and Jewish principle of "bear ye one
another's burden."
Therefore, in contrast to conventional insurance, takaful is not a
contract of buying and selling where a party offers and sells
protection and the other party accepts and buys the service at a
certain cost or price.
Rather, it is an arrangement whereby a group of individuals each pay
a fixed amount of money and compensation for losses of members of
the group is paid out of the total sum.
7. CONVENTIONAL V ISLAMIC
INSURANCE
Return On Funds for the Participant.
The funds remaining in the takaful fund on maturity of the policy are
distributed back to the participants after deduction of the charges
due to the operator and according to the type of takaful management
model utilized by the fund.
8. CONVENTIONAL V ISLAMIC
INSURANCE
In conventional insurance, one enters a bilateral sale contract or
contract of exchange with the insurance provider and transfers risk of
loss to the provider.
The provider will bear the risk of loss in the event of an accident or
harm to the insured item or person.
In addition, the insurance provider speculates on risk in the
underwriting process.
9. CONVENTIONAL V ISLAMIC
INSURANCE
A conventional insurance company speculates on the risk by making
an assessment of the risk and then pre-determining profit based on
the estimated payout versus the premium.
It is in a sense gambling (Paldi: 2014).
In regards to transfer of loss or speculation on risk, there is neither in
Takaful.
10. CONVENTIONAL V ISLAMIC
INSURANCE
In Islamic Insurance, the loss and risk are essentially distributed
amongst the policyholders.
Overall, Takaful is a scheme of mutual protection that exists amongst
the participants making them both the insurer and the insured, which
is a concept promoted by all of the people of the Holy Books (Paldi:
2014).
11. CONVENTIONAL V ISLAMIC
INSURANCE
In conventional insurance, riba (interest) occurs as the amount of
money received by the insured, either on the occurrence of the
insured event or upon maturity of the policy may be more or less than
what is actually paid by the insured.
Furthermore, since the payments are deferred, the compensation
paid, which is greater than the instalments paid by the insured may
constitute surplus riba (riba al fadl) and credit riba (riba al-nasiah).
Secondly, the profits of conventional insurance companies result from
riba related transactions (ISRA: 2012).
12. CONVENTIONAL V ISLAMIC
INSURANCE
In addition, conventional insurance contracts contain gharar
(uncertainty) in that the subject-matter of the contract is not certain
until the insured event has taken place.
The amount being paid by the two parties is not known at the time of
execution of the contract.
13. CONVENTIONAL V ISLAMIC
INSURANCE
For example, an accident may occur immediately after the insured
makes the first payment requiring a payout or he or she may make all
the payments without any accidents happening, never receiving any
compensation back from the insurance company during the duration
of the policy (ISRA: 2012).
14. CONVENTIONAL V ISLAMIC
INSURANCE
In a conventional insurance contract, the policyholder agrees to pay a
certain premium sum in consideration for the guarantee of the
insurance company that they will pay a certain sum of compensation
in the event of a valid claim.
However, the policyholder is not informed of how much
compensation the company will pay him or her or how the amount
shall be derived (ISRA: 2012).
15. CONVENTIONAL V ISLAMIC
INSURANCE
Maisir or gambling means to court such risk as it involves both the
hope of gain as well as the fear of loss, which is not a necessary part
of any normal activity in life.
In conventional insurance, policyholders are gambling by betting
premiums on the condition that the insurer will make payment
contingent upon the circumstance of a specified event.
On the other hand, the insured does not get anything from his
premiums if the insured event does not happen at all (ISRA: 2012).
16. TAKAFUL MINIMIZES RIBA AND
GHARAR
Takaful minimizes riba (interest), gharar (uncertainty), and maisir
(gambling) through its cooperative donation scheme (tabarru) and
investment in halal activities.
17. GENERAL TAKAFUL
The general takaful contract is a short-term policy where takaful
participants pay contributions and operators undertake to manage
the risk.
According to ISRA (2012:512), the contributions paid by the
participants are credited into the general takaful fund, which is then
invested and the profits generated are paid back to the fund and
eventually to the participants in accordance with the terms of the
contract in a pre-agreed upon ratio after deducting operational costs.
18. GENERAL TAKAFUL
The tabarru element is more apparent in general takaful as
participants will normally undertake to regard their contributions as
donations to fellow participants (ISRA, 2012:513).
Tabarru is an agreement by a participant to relinquish, as a donation,
a sum of contribution that he or she agrees to pay with the purpose
of providing mutual indemnity to takaful participants, where the
donation acts as a mutual help and joint guarantee should any fellow
participants suffer from a defined loss (ISRA, 2012: 514).
19. GENERAL TAKAFUL
Tabarra is derived from the word tabarra'a, which means contribution,
gift, donation, or charity.
The purpose of this contract is to give a favor to the recipient without
any specific consideration in return (Al Huda CIBE).
Essentially, tabarru is a contribution or donation, which entails no
return, but rather a reward from Allah alone.
20. GENERAL TAKAFUL
There are two important pillars of tabarru, namely the absence of
counter-value and the intention to perform tabarru.
For example, if a donor contributes with an expectation of a counter-
value from the donation given, then the whole transaction will be
perceived as an exchange (muawadah) rather than a tabarru contract
(Al Huda CIBE).
21. GENERAL TAKAFUL
Takaful, unlike its conventional counterpart, is based on the
principles of mutual cooperation (ta'awun) and donation (tabarru).
Under the Islamic law of transactions, the existence of gharar
(uncertainty) and maisir (gambling), which normally nullifies an
exchange contract (muawadah) are tolerated in a contract of donation
(tabarru).
22. GENERAL TAKAFUL
This corresponds to the Islamic legal maxim, "uncertainties are
tolerable in a gratuitous contract." (Al Hude CIBE)
This is mainly due to the fact that parties who enter into a tabarru
contract do not aim to make profit out of the contributed sum, and
hence the potential dispute, which normally arises in a profit-making
transaction is deemed to be negligible in a gratuitous-based
transaction.
23. GENERAL TAKAFUL
Furthermore, the issue of uncertainty is nullified as the contributor
voluntarily gives away his property or right to the recipient without
any consideration (Al Huda CIBE).
In contrast, conventional insurance is based on exchange
(muawadah), aims at making profit from the insurance operations,
and is not Shari'ah compliant due to excessive gharar (uncertainty),
maysir (gambling), and riba (interest).
24. GENERAL TAKAFUL
A takaful contract cannot be considered a pure tabarru contract, but rather a
qualified or conditional tabarru contract due to the following reasons:
(1)The contribution made by a participant in takaful is with consideration to a
right to claim for compensation in the event of loss or damage of subject-
matter.
Thus, the tabarru is not merely for charity, but conditional upon certain
consideration, namely the right to claim takaful benefits in the event of loss.
This is a violation of the fundamental objective of tabarru.
25. GENERAL TAKAFUL
(2) Takaful participants are normally obliged to pay different amounts
of contributions depending on the different degree of risk exposure.
This implies that their participation in the fund is conditional upon a
certain amount of contribution, which deserves compensation.
This is in contradiction to the principle of tabarru as the real intention
of the contracting parties is not for donation, but rather to make
them eligible for certain benefits under takaful.
26. GENERAL TAKAFUL
(3) Takaful includes a few controversial practices such as
surrendering of benefit, survival of benefit, or sharing of underwriting
surplus among participants of takaful although they have surrendered
all of their rights over the monies of the fund.
27. GENERAL TAKAFUL
(4) Furthermore, when a participant pays a premium to the takaful
operator, he has effectively donated his contribution as tabarru,
hence, relinquishing his ownership over the object donated as
prescribed by the rules of tabarru.
Therefore, it should not return to the participants upon maturity of
the policy or liquidation of the fund (Al Huda CIBE).
28. GENERAL TAKAFUL
Many takaful products and operations are starting to converge closely
with conventional insurance.
The fundamental structure of takaful, which is premised on the basic
concept of tabarru, is questionable as many benefits are offered to
the participants in the beginning of the takaful contract in return for
the contributions paid to the tabarru pool managed by the takaful
operators (Revisit the Principle of Tabarru in Takaful Structures).
29. CONVENTIONAL PROPRIETARY
INSURANCE V CONVENTIONAL MUTUAL
INSURANCE V TAKAFUL
Takaful participants are not insured in the sense of proprietary
insurance, but share the profits and bear the deficits of the
takaful undertaking in a manner similar to conventional mutual
insurance.
30. CONVENTIONAL PROPRIETARY
INSURANCE V CONVENTIONAL MUTUAL
INSURANCE V TAKAFUL
The takaful operator plays an important role that the
management of a conventional mutual does not play in the
event of a periodic deficit in a takaful fund that exceeds the
reserves of the fund, thereby making it potentially insolvent.
In this case, the takaful operator acts as a lender of last resort
by providing a qard hassan loan to the takaful fund.
Such a loan will be repaid out of future underwriting surpluses.
31. CONVENTIONAL PROPRIETARY
INSURANCE V CONVENTIONAL MUTUAL
INSURANCE V TAKAFUL
In mutual insurance and takaful, investment profits belong to the
policyholders, except that, in takaful, the operator may share in these
profits as a mudarib or by virtue of a performance-related wakalah fee
for fund management.
32. Conventional
Proprietary
Insurance
Conventional
Mutual Insurance
Takaful
Contractual
Relationship
A policy in the form of an
exchange contract (sale and
purchase) between the
insured (policyholder) and the
insurance company.
A policy in the form of a risk-
sharing contract between the
individual insured and the
pool of insureds as
represented by the
cooperative insurance
company.
A combination of tabarru
contract (donations) and
contractual relationship
between (a) the individual
participants and the pool of
participants, and (b)
participants and the Takaful
Operator, as represented by
the takaful.
Responsibility of
Policyholders/Partic
ipants
Policyholders pay premium to
the insurer.
Policyholders pay
contributions to the pool in
the form of premiums paid to
the cooperative insurance
company. Any underwriting
surplus belongs to the
policyholders, who are also
liable for any deficit. Annual
surpluses are normally
retained in underwriting
reserves out of which any
annual deficits are normally
met.
Participants make donations
(tabarru) to the scheme, as
well as an element of savings
in life takaful where a plan
includes such a component.
Any underwriting surplus
belongs to the policyholders,
who are also liable for any
deficit (or see following
alternative allowed by Shariáh
scholars). In some takaful
undertakings, the TO
manages underwriting under
a mudarabah contract and
receives a share of the
underwriting surplus as a
mudarib fee. Something
similar may also occur in a
wakalah contract with a
wakalah performance-related
fee based on the surplus.
33. Conventional
Proprietary
Insurance
Conventional
Insurance Mutual
Takaful
Liability of the
Insurer/Operator
Insurer is liable to pay claims
according to the policy using
the underwriting fund and, if
necessary, shareholders
funds.
Pool is liable to pay claims
according to the policy using
the underwriting fund.
Takaful operator acts as the
administrator of the scheme
and pays the takaful benefits
from the takaful
(underwriting) fund. In the
event of the impending
insolvency of a takaful
underwriting fund, the takaful
operator may be expected to
provide an interest-free loan
to the takaful fund to enable
it to meet its obligations.
Access to Capital Access to share capital and
debt with possible use of
subordinated debt.
No access to share capital,
but access to debt with
possible use of subordinated
debt.
Access to share capital by
takaful operator, but not to
debt, except for interest-free
loan from operator to
underwriting fund.
Investment of Fund There are no restrictions
apart from those imposed for
prudential reasons.
There are no restrictions
apart from those imposed for
prudential reasons.
Assets of the takaful funds
are invested in Shariáh
compliant instruments.
34. I DEDICATE THIS PRESENTATION TO
MICHAEL BROWN AND ALL THE VICTIMS
OF EXCESSIVE POLICE VIOLENCE,
BULLYING, HARASSMENT, AND
SURVEILLANCE.