TAKAFUL

DEFINITION OF TAKAFUL

 Takaful is an arabic word and this word means

Guarantee against a loss or an uncertain event
 In a takaful model a mutual fund is created in which
participants contribute as per agreed ratio to
compensate contributors in case of an uncertainty
 FEATURE OF TAKAFUL

 Islamic profit sharing models Mudharaba,Wakala

and wakala-waqf models are used
 Those operations are used which are permitted by
shariah.
 Takaful is free from excessive gharar
 Company(insurer) is Known as operator
 Policy holder(insured) is Known as participant
 Insurance agent is known as wakeel
 Contribution of participant is known as Tabarru
Features of Takaful
 ISLAMIC SCHOLAR IN TAKAFUl

 • The takaful contract is permissible because of

following conditions :
(a) It contains no riba clause
(b) Its subject is legitimate(Islamic)
(c) Takaful is free from elements of
Riba(excessive),Gharar(covers inflation) and
Maysir
 WAKALA-WAQF MODEL

 In wakala waqf model two type of funds are created

Participant Investment Account (PIA) & Participant
Takaful Fund (PTF).
 Participant Takaful fund is also known as Waqf fund.
 A waqaf fund is created by share holders of takaful
by contributing amount as per the agreed ratio to
compensate participants on maturity or happening
of a certain event.
 TAKAFUL PROCESS

 Takaful operator plays two roles at same time they

work as an operator and as a mudarib.
 After deduction of the operations & Services fee all
the amount of (PIA) fund is tranfererd to waqf
fund(PTF) account and then operator plays its role
as mudarib and invest the fund in those organization
which are working on Islamic principles
 TAKAFUL CHALLENGES

 Takaful operations are facing various challenges

some of them are mentioned below ;
 Investment restrictions (only specific companies)
 Retakaful (reinsurer hasn't adopted takaful
principle)
 Distribution channel(specific channel)
 Islamic qualified staff (conventional studies
approach)
 Accounting standards (interest based)
 Risk Rating ( conventional rating would differ)
 SOLUTION

 Risk Rating standards differ because of Islamic mode

of financing so a properly qualified staff is required
for takaful operations.
 Fatwa on takaful by the most trust worthy and well
reputed Alam-e-din.
 Different department for takaful operations
 Takaful business must be retakaful(reinsured) by an
organization which is following takaful operations
strategy , because Islamic mode of financing differs
from conventional.