Takaful Industry Globally & in Pakistan

Takaful Industry Globally & in

Pakistan

By: MAH Kharal

Takaful:

The term takaful is an Islamic alternative to conventional insurance. It is based on the concept of Ta’awun, mutual assistance and brotherhood. Islam also teaches us the equality, brotherhood and mutual assistance. Takaful is based on the contract of Tabarru. Tabarru or Unilateral contract means a contract which is promised by one side and conditions are set by only one party. Like gifts, donations and Sadqats etc. 

First of all in takaful the shareholders donate a portion of money. From this money a pool is made. After that shareholder known as waqif and the ownership of pool is transferred to Allah. Who donate in this pool he becomes a participant of pool. Participants donate money as Tabarru at some conditions. Participant who suffered from some loss, he can fulfill his loss by the pool on conditions. Surplus is also divided among the participants. The operator is also charge a fee to operate the pool fund and from pool fund the claims are fulfill. Participants can donate money quarterly, semi annually and yearly.

Need of Takaful:

In takaful the Riba (Interest) is prohibited. There is also no element of Gharar and Qimar. Its risk sharing, profit or surplus is also divided among the participants, ownership is transferred to Allah. And most important is sharia based. There it is the need of Muslims and all other humans.

History of Takaful:

There are many examples of takaful in Islam where families, friends and relatives make pool to sport or help the needy at voluntary basis. The practice of people was valid by the Hazrat Muhammad (SAW). Examples:

Like merchants of Makkah were made a pool satisfy the loss suffers from the natural disasters.

Daman al Tareeq was placed on traders to fulfill the loss by any hazard in the journey.

Aqila was placing to alive the victims by group donation or families.

In modern age the first takaful company was made in Sudan in 1979 and in the same year another Takaful company was made in Bahrain. This process is till increases and know about 281 companies are working in 46 plus countries.

Globally & Pakistan Takaful Industry

281+ Takaful companies are working in 46+ countries having the total Size 28 Billion of capital and 13 Re-takaful companies are in operation. Average growth rate higher than conventional insurance companies (around 25%). Non-Muslims increasingly joining the Takaful products for commercial benefits.

In Pakistan 5 Takaful Companies till now are working. Total takaful contributions for 2010 was USD 26 million (3% market share) of which Family Takaful was USD 15 million (57%). 52% Growth in total takaful contributions over 2009.  Banca insurance has a major distribution for individual family products in 2010 was 45% of New Family Takaful contributions.

Takaful Companies Working in Pakistan are:

◦      Pakistan Takaful Limited

◦      Pak Qatar General Takaful Limited

◦      Pak Qatar Family Takaful Limited

◦      Pak Qwat Takaful Limited

◦      Dawood Takaful Limited

Challenges & Solutions:

Awareness is required from All Islamic Financial Market Players to establish Islamic Finance Awareness as a Cause with dedication & commitment. Risk is highly dependent on Re-Takaful Operators capacity which is very limited compared to Conventional Re-insurers. Takaful Industry’s growth is not backed by required technically skilled Human Resources. New and public beneficial products which meeting participant’s requirement. Investment options in leads with Sharia principals are limited.

Creating awareness among masses both for risk mitigation and takaful concept is difficult. Wrong market practices by conventional insurance makes difficult to make awareness about takaful to customers. More Takaful professionals required to implement the takaful in market.

There also no trained staff for the takaful and no sales distributors perfectly trained. They just want their commission in any way. This leads to wrong concept of Takaful in masses.

There is a need of inspired, motivated and good reputed personalities with experience for Takaful Industry in Pakistan. Distributors should be trained perfectly to sale out the takaful policies.

Issues:

Efforts are required to establish National Sharia Board. Comparison of Takaful with Conventional Insurance Companies on various matters (Rates, Service, Commission etc.). Strong back-office support services such as

◦      Strong Risk Management

◦      Market Intelligence

◦      Market Research

◦      Rapid Product Development

◦      Innovative Information Technology

◦      Management Accountancy

◦      Strong Human Resource Development

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