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project on Takaful
- 3. Group members: MuHammadHammad 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 Insuranceprovides 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: “Thebelievers, 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 thedoctrine of al-Aqilah among the ancient Arab tribes as a tribal custom
- 12. Practices of theHoly Prophet (SAW)
- 13. Practices of theCompanions
- 14. Development in the19th Century
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- 16. Characteristics of Takaful: Theestablishment of two separate funds Solidarity principle and equal surplus distribution Restricted Investments: Establishment of a Shari’ah Board
- 17. Takaful Models • Investmentaccording 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 withProfit 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 withProfit 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 withFees) •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 withFees) • 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 withFees)
- 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 Takafulin 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 Takafulin 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 Takafulin 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 Takafulin 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, “ Onewho eats to his hearts contents, while his neighbour starves, is not a Mumin“ (faithful)
- 39. Future Challenges AboutTakaful 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 AboutTakaful 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 orIslamic 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. Inview 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. Embracingsmart 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...
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- 45. Concluding Remarks Adramatic 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 GlobalTakaful 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 isa viable Shariah compliant alternative to insurance”!
- 49. End of Presentation Thank you for your attention