MicroTakaful

( Islamic Micro
Insurance )
Presented by:

Muhammad Zubair
Mughal
CEO
 Contents
• Introduction
• Microtakaful defined
• Historical perspective
• MicroTakaful schemes in other countries
• Prospects in Pakistan
• The Takaful advantage
• The way forward
• Conclusion
 Introduction
Micro-insurance defined:
“Generally, micro-insurance is viewed just like other normal
insurance on small scale for low-income people”

MicroTakaful redefined:
“A mechanism to provide Shariah-based protection to the
blue collared, under-privileged individuals at an affordable
cost”.
 Introduction Cont’d. …
• MicroTakaful can help people improve.

• Microtakaful will help them sustain their financial well being.

• Feeling of togetherness & security.

• Opens avenues for joint efforts for mutual benefits.

• Cooperative approach and outlook.

• Result oriented

• Society benefits at large.

 Global Landscape of Microinsurance
• Only eighty million out of the world's 2.5 billion poor are
currently covered by some form of micro insurance.

• Only 3% of poor lives are insured in India and China.

• Only 0.3% of the poor are insured in Africa.

• In 23 of the poorest 100 countries in the world, there is

currently no identified micro insurance activity.
 Prospects in Pakistan
• Serious efforts at national level only picked up
during the last decade.
• Advent of Microfinance banks.
• Large rural/urban divide (65% : 35%)
• 40% population below poverty level.
• Scope for extensive work.
• Mushroom growth of NGOs.
 Prospects in Pakistan (Cont’d. …)
• Government’s initiatives – Rural support programs.
• SMEDA.
• Financial Support from ADB, WB, etc.
• State Bank’s initiative – 20% branches of commercial
banks required in rural areas.
• Agriculture/Crop & Livestock Finance and Takaful.
• Benefit of economies of scale to make these viable
ventures.
 Types of MicroTakaful Products
Property
Floo
Fire
in fall Theft ds
a
R
Agriculture Prices Health
Surgical
Disability
Permanent Out-patient

Optical
Total
Partial e
Temporary Hospitalisation i s eas
dD
Dismemberment b ility rea
i s a D
dit D
C r e
Life Insurance Dental
Pe

nds”
ns

t ion fu
i

s i
on

“Tra n
Credit Endowments Funeral
s

Life Educ
at i on Life
Benefits of MicroTakaful
 Potential areas of action
Health
Importance of Risk/Economic Stress

Marriage

Death

Prolonged Illness

Education of Children

Business Failure/Loss of Job

Birth of Children
 Micro Takaful initiatives in
Pakistan
• Coverage to over 100,000 low-cost houses.
• Synergy with NGOs.
• Micro Takaful Health Products – CWCD, KKCB &
Sungi
• Students Healthcare/Campus care cover
• Factory workers’ & Daily wagers
• Crop Takaful
• Credit coverage for Islamic Microfinance.
• Covers tailored for SMEs financing.
• All above at ‘no profit basis’.
 Takaful Pakistan’s MicroHealth
Products
Center for Women
Cooperative Development.
(CWCD).
No of Lives covered 14000
Beneficiaries ( Husband and Wife )
Benefits:
Hospitalization Rs. 35,000
Daily Room Limit Rs. 500
Maternity Rs. 5,000 (Sub limit)
Rate per family Rs. 570
 Takaful Pakistan’s MicroHealth
Products
Ministry of Zakat & Ushar
No of Lives covered 100,000,0
Beneficiaries (Husband, Wife and 3 Children's)

Benefits:
Hospitalization Rs. 150,000
Individual Limit Rs. 25,000
Daily Room Limit Rs. 500
Maternity Rs. 5,000 (Sub limit)
Rate per family Rs. 695/-
 Basic Elements of Takaful
• Mutuality and cooperation.
• Takaful contract pertains to Tabarru’at as against mu’awadat
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.
 The Takaful Advantage
Share SHARE H O L D E R S’ F U N D (S.H.F.)
Holder

Mudarib’s Management
Wakalah Investmen Share of PTF’s Expense of Profit/Loss
Fee t Investment the
Income Income Company

Takaful
Operator

Investment by
the Company

WAQF Operational Claims &

Cost of Takaful Investment Reserves Surplus
/ ReTakaful Income (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.)
Participant
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 Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala Fee Claims Re-Takaful Expense etc.

 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala Fee Claims Re-Takaful Expense etc.

 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS
 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS
 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve Charity Distribute Among Participants

 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve Charity Distribute Among Participants

 Participants Contribution

Investment in Participants
Shariah Complaint Securities

Profit from Investment

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

Wakala fee, Claims, Re-Takaful Expenses

SURPLUS

Contingency Reserve Charity Distribute Among Participants

 Investment in Participants Contribution
Shariah Complaint Securities

Participants

Profit from Investment Pool of Contributions

(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

 Comparing Takaful to Conventional Insurance
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

 Takaful through Time
• Origins in the First Constitution of Madina.

• The first Takaful company was set up in Sudan in 1979, almost

simultaneously followed by another one set up in Bahrain.

• There are now around 179 Takaful companies in over 40 countries.

• Poor Insurance rate 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.
 What is required?

When there is a will, there is way!

 End of presentation

Jazzakallah khair !

Zubair.mughal@alhudacibe.com