MohammadAshrafulMobin

Takaful
(Islamic Insurance )
An Ideal Alternative to Conventional
Insurance.
11th Feb, 16- Intl Takaful & Conventional Mutual Insurance
Consortium - Dubai

Muhammad Zubair Mughal

Chief Executive Officer

AlHuda : Centre of Islamic Banking & Economics

Introduction to Takaful ( Islamic Insurance )

Difference b/w Conventional Insurance & Takaful
Takaful Through Time
General & Faimly Takaful Types
Takaful Models Worldwide.
Takaful - Target Market
Challenges to Takaful
Prospects of Takaful in Turkey.

Takaful is the Sharia Compliant brand name

for the Islamic alternative to conventional
insurance. Its based on the principle of
Taawan or mutual assistance.
Takaful comes from the Arabic root-word
kafala guarantee.
Operationally, takaful refers to participants
mutually contributing to a common fund with
the purpose of having mutual indemnity in
the case of loss.

The contract between the insurer & insured is

technically wrong from the sharia
perspective because of
Interest (Riba)
Gharar (Uncertainty))
Gambling (Qamar & Maisir)
Risk Transfer Issue

Mutuality and cooperation.

Takaful contract pertains to Tabarru as against Aqd
e-muawadat in case of conventional insurance.
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.

Issue

Conventional
Insurance

Takaful

OrganizationPrinciple

Profitforshareholders

MutualBenefitforParticipants

Basis

RiskTransfer

Risksharing

ValueProposition

Profitsmaximization

Affordabilityandspiritual
satisfaction

Laws

Regulations

Shariaplusregulations

Ownership

ShareholdersareOwners

Participants

Managementstatus

ManagedbyCompanyManagement

Operator

FormofContract

ContractofSale

IslamiccontractsofWakalaor
MudarbahwithTabarru
(contributions)

Investments

Interestbased

Shariacompliant,Riba-free

Surplus

ProfitofInsuranceCompany.

DistributiontoParticipantson
proratabasis.

Origins in the First Constitution of Madina.

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.

Poor Insurance penetration in the Muslim countries

(<1% of GDP).

Average growth rate higher than

insurance companies (around 25%).

conventional

NonMuslims
increasingly
opting
products for commercial benefits.

for

Takaful

The number of Takaful operators worldwide is now

estimated at:

280+ Takaful companies

13 Re-takaful companies

In 56 Countries.

 General

Takaful offers all kinds of

non-life risk coverage. It is normally

divided into following classes:

Property Takaful
Marine Takaful
Motor Takaful
Miscellaneous Takaful

Term Life Takaful

Whole Life Takaful

Endowment Takaful

Universal Takaful

Marriage Plan

Education Plan

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.

Wakalah Based on Waqf Model : The participant's

donate the fund and operator charge an agency fee.

Pure Mudarabah Model : The participants and

operator enter into modarabah Contract.

Wakalah Model : An Agency Agreement is made

between participants and Operators on the basis of
Wakalah ( Agency agreements)

Participants Contribution
Participants

Pool of Contributions

Participants Contribution
Investment in
Shariah Complaint
Avenues

Participants

Pool of Contributions
Profit from Investment
(Part of the profit goes to the
Company for acting as
mudarib)

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Wakala Fee

Participants

Pool of Contributions

Claims

Re-Takaful Expense etc.

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Wakala Fee

Participants

Pool of Contributions

Claims

Re-Takaful Expense etc.

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Participants

Pool of Contributions

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Participants

Pool of Contributions

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Participants

Pool of Contributions

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve

Charity

Distribute Among Participants

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Participants

Pool of Contributions

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve

Charity

Distribute Among Participants

Participants Contribution
Investment in
Shariah Complaint Securities

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Participants

Pool of Contributions

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve

Charity

Distribute Among Participants

Participants Contribution

Investment in
Shariah Complaint Securities

Participants
Pool of Contributions

Profit from Investment

(Part of the profit goes to the
Company for acting as mudarib)

Wakala Fee

Claims

Re-Takaful Expense etc.

=
SURPLUS

Contingency Reserve

Charity

Distribute Among Participants

Wakala-Waqf Model

Share
Holder

SHARE

Wakalah
Fee

Takaful
Operator

H O L D E R S

Investmen
t
Income

Admin
Expenses,
Employees
etc.

F U N D (S.H.F.)
Management
Expense of
the
Company

Profit/Loss

Investment by
the Company

WAQF
Operational
Cost of Takaful
/ ReTakaful

Participant

Investment
Income

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.)

Skepticism.

Lack of uniformity in Models & Shariah decisions.

Regulatory issues.

Capacity constraints.

Limited Investment avenues.

H.R. issues.

Thank You for Listening with

Patience

Muhammad Zubair
Mughal
Chief Executive Officer
AlHuda Centre of Islamic
Banking and Economics
Zubair.mughal@alhudacibe.com
www.alhudacibe.com

AlHuda CIBE FZ LLE - U.A.E

P: + 971 56 9286664, + 971 55 938 99 00
AlHuda Center of Islamic Banking & Economics Pakistan
Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056
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Website:
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