risk management and takaful
DESCRIPTION
Takaful and Risk Management in Islamic Products course is designed on risk management aspects, especially with in the context of financial products which are Sharia Compliant. This course is comprehensive in its approach and detailed in information which will render it as a valuable position for attendees.TRANSCRIPT
Takaful and Risk Management in
Islamic Products
IN HOUSE TRAINING PROGRAM
OUTLINE
PROGRAM SCOPE:
HOW THIS COURSE WILL ASSIST?
The objective of the program offered by Sharia House is to educate and train Risk
Managers of Islamic Banks and Insurance companies in order to get 360 degree on
Risk Management and Takaful products & services to ensure that the Risk Managers
are self-equipped with knowledge and technical skills to understand their area of
work to meet industry challenges and market expectations by providing QUALITY
service.
COURSE DESCRIPTION
Takaful and Risk Management in Islamic Products course is designed on risk
management aspects, especially with in the context of financial products which
are Sharia Compliant. This course is comprehensive in its approach and detailed in
information which will render it as a valuable position for attendees. This course will
provide various methodologies and logical steps involving mathematical models to
identify and measure risk in Islamic Finance. This will also give all attendees the skills
to understand, identify, and mitigate the different risks involved in Islamic financial
structures. More over this course will provide the attendees the in-depth knowledge
about the Islamic Insurance Takaful. The mechanism of Takaful such as the different
models of Takaful will be discussed in detail; in addition the products and services
will be emphasized. Course is developed around the followings;
Introduction to Islamic Finance & Products
Islamic modes of finance
Risk Management Issues in Islamic Financial Contracts
Identifying Risk in Islamic Finance
Understand Takaful – Islamic Insurance
Understand Insurance and Takaful Products
Training Methodology
In order to engage diversified group of participants and ensure learning of the
comprehensive concepts to every participant, we have developed diversified and
tested training techniques that include:
- Discussion based interactive class room sessions
- Case Studies
- Group Discussion/ Class Exercises
- Presentations
TRAINING COURSE OUTLINE
DAY – 1
“Introduction to Islamic Finance"
Topic 1: Overview of Islamic finance, main prohibitions and understanding of
the elements and types of the contract.
Session 1 introduces the fundamentals of Sharia for Islamic Finance. It will
highlight the sources of Sharia, and its objectives. Difference between trade and
usury is particularized in terms of application of Sharia principles in the conduct
of Islamic banking. It will highlight the main prohibited elements in Islamic
transactions and will discuss the norms of ethics in Islamic financial system.
Introduction Sharia and its Objectives
Sources of Sharia Tenets
Objectives (Maqasid) of Sharia
Prohibition of Riba
Prohibition of Gharar
Prohibition of Maisir/Qimar (Games of Chance)
Topic 2: Philosophy and features of Islamic Finance
Session 2 will develop the understanding of basic philosophy of Islamic finance
and rulings on avoidance of elements in Islamic Finance.
In this session we will discuss the basic features of Islamic finance directly
affecting the products, instruments, institutions and markets in the framework of
business and finance. This includes avoiding interest, involvement in genuine
trade and other business, Kharaj bi-al-Daman (Risk and Return), and other
requirements for profit entitlement in various kinds of businesses, money earning
money versus risk-based business and their impact on banks, depositors and the
fund users.
The Philosophy of Islamic Finance
Debt versus Equity
Islamic Banking: Business versus Benevolence
Exchange Rules
Time Value of Money in Islamic Finance
Money, Monetary Policy and Islamic Finance
Topic 3: Islamic Law of Contracts and Business Transactions
Session 3will develop the understanding of basic concepts about Wealth, its use
and ownership from Islamic viewpoint. It will cover the sharia‟s standpoint on
contract, and the basic elements of contracts. Different transactions have
different features that need to conform to the tenets of the Sharıa. We will
comprehensively discuss Contracts that do not conform to Sharia doctrines or
that involve prohibited elements to have an in-depth understanding of these
elements to avoid invalid contracts.
Islamic banks and financial institutions are dealing in goods by entering into
contracts like sale, leasing, partnership, surety ship, agency, assignment of debt,
and mortgages it will be valuable discussion in detail.
Maal (Wealth), Usufruct and Ownership
General Frame work of Contracts
Elements of a contract
Broad Rules for the validity of Muamalat
Wadah (Promise) and related matters
Types of Contracts
Commutative Contracts and Non-commutative Contracts
Legal Status of Conditional and Contingent Contracts
Topic 4: Islamic Modes of Finance
This session will cover the Islamic modes of financing that are being operated
across Islamic banks and financial institutions. This will support the concepts of
attendees to further grasp the basic knowledge of Islamic Finance mechanism
and will help in understanding the advanced knowledge that will be presented
in approaching sessions.
Murabaha and Musawamah
Salam and Istisna (Forward Sale)
Ijarah – Leasing
Shirkah - Diminishing Musharaka
Tawarruq
Istijrar
DAY – 02
“Risk Management in Islamic
Finance”
Topic 1: Risk Management Issues in Islamic Financial Contracts
In this topic, a brief overview of financial risks will be presented, along with a
detailed risk profiling of Islamic financial contracts, for the existence of the
different types of financial risks. Examples, with detailed graphical time line
analysis of the contract life will be provided to support attendee‟s
understanding of the risks inherent with the different financial contracts.
Overview of Financial Risks
Credit Risk
Market Risk
Operational Risk
Topic 2: Identifying Risk in Islamic Finance
In this session an overview of risks in Islamic finance will be explained, along with
the comparison with conventional finance. It will demonstrate that how Islamic
financial contracts are exposed to different risks. Moreover, it will demonstrate
that how all Islamic contracts that are dealing with commodities are exposing
the financial institutions to commodity price risk and equity risks. In this session we
will further discuss in detail, with the help of graphs, the several overlapping risk
which can arise out of single events.
Furthermore, this session also presents risk management strategies for different
modes of finance in relation to different resulted risks. This session will be a useful
in a way that attendees will be able to identify for all the existing as well as
future types of Islamic financial contacts the different types of risks that may
arise within their life time.
Sharia Non-Compliance Risk
Main Element used in Financial Risk Analysis
Musharaka Contracts of Partnership and Financial Risks
Mudarabah Contracts of Partnership
Salam Contract Agreements and Financial Risk
Istisna Contracts and Financial Risks
Ijarah Contracts and Financial Risk
Sukuk
DAY – 03
“Credit, Market and Operational
Risk”
Topic 1: Credit Risk in Islamic Finance
In this session, the risks of credit defaults referring to counterparties, collaterals,
and guarantees will be fully covered for all Islamic types of financial contracts.
Furthermore, this topic will identify different methods and techniques for
developing models for credit risk that result from Islamic Products. Moreover in
this topic we will also highlight credit Value-at-risk (VaR) based on expected and
unexpected losses. This session will also discuss how financial institutions can
mitigate credit risks by employing collaterals or guarantees granted by tier
counterparties.
Credit Risk Exposure Identification.
Credit Risk Assessment Models
Credit Risk Valuation
Credit Risk Mitigation
Credit Rating Systems
Validating the Credit Rating Systems
Topic 2: Market Risk in Islamic Finance
In this session we will cover how Islamic financial institutions are exposed to
market risk primarily through four types of risks, which are: rate of return (markup)
or benchmark rate risks related to market inflations and „interest rates‟,
commodity price risk, Foreign exchange rate risks in the same way as
conventional banks and equity price risks mainly in regards to the equity
financing through the profit and loss sharing contract modes. In financial
analysis, the most prominent techniques to valuate market risks such as Value-
at-Risk (VaR), and analysis will be discussed.
Identification of Market Risk Factors
Rate of Return Risk
Commodity Risk in Islamic Finance
Foreign Exchange Rate Risk
Equity Price Risk
Valuation Issues on Equity Prices and FX Rates
Quantification of Foreign Exchange Risk, Equity Risk and
Commodity Risk
Data Referring to Market Risk Factors
Sensitivity in Market Risk
Market Risk Valuation Models
VaR Models for Islamic Financial Contracts
Position and Market Data
Position Risk and Exposure Risk
Evaluation Methods of Market Risk
Variance-co-Variance Method
Monte Carlo Simulation Method
Historical Simulation
Back-Testing and Stress-Testing for Market Risk Exposures
Topic 3: Operational Risk in Islamic Finance
One of the major topics in today‟s financial risk management i.e. operational risk
will be discussed. This session will present all the key aspects of operational risk
management by giving guidelines on how to identify and qualitatively map risks
in operations within all the business lines as well as how to transfer their
qualitative attributes to quantitative measurement indicators. We will outline
some of the initial main elements of operational risk analysis, which includes the
identification, mapping, assessment, measurement and evaluation.
Main Elements in Operational Risk Analysis
Identification of Operational Risk
Measuring Operational Risks
Loss Events
Evaluating Operational Risk Based on VaR Analysis
Elements in the Framework of the Operational Risk
Management
DAY – 04
“Takaful”
Topic 1: Introduction to Conventional Insurance
In this session, we will discuss the conventional insurance and its working
mechanism from Islamic point of view and will also discuss what the possible
Islamic alternatives available are. This session will begin with how conventional
insurance is practiced and undertakes an assessment of the same from the
standpoint Takaful focus on present industry of Islamic Funds and we will put
technical importance on available avenues for investment. We will discuss the
current scenario and future outlook in the Islamic fund industry and what are the
recent developments. We will also put a light on growth of new Islamic funds
different from already existing in the mass market.
Conventional Insurance
Islamic Appraisal of Conventional Insurance
Islamic Alternatives
Topic 2: Takaful – Islamic Insurance
This session will be devoted to discuss the permissibility of Takaful from Islamic
point of view; Islamic alternative of models of insurance will be presented briefly.
We will look into the room available for conditional gifts, and will finally enlighten
the attendees with the concrete differences between Islamic and conventional
insurance.
Sharia basis for Takaful
Conditional Gifts
Undertaking of Tabarru
Waqf
Introduction to Mudarabah and Wakalah with the perspective of Takaful
Comparison with Conventional Insurance
Topic 3: Insurance and Takaful Products
In the final session, the Islamic insurance products based on Tabarru,
Mudarabah and Wakalah will be discussed in a more elaborate manner. We will
lay emphasis on Re – Takaful and the current global market for Takaful, what are
the regulatory challenges faced by Takaful industry and what does the future
hold for this industry.
Tabarru Based Takaful
Mudarabah Based Takaful
Wakalah Based Takaful
Re – Takaful
Global Market for Takaful
Takaful Products and Services – Family Takaful
Regulatory Regime
DAY – 05
COURSE AGENDA
“WORKSHOP & CERTIFICATION”
Session – 01: Workshop & Case Study
Session – 02: Q&A
Session – 03: Certification
Contact
AFSHEEN SHAIKH
CHAIRMAN
Emirates Towers, Level 41. Sheikh Zayed Road, Dubai, P O Box 31303, UAE
M: +971 (55) 5565980
T: +971 (4) 458 5116
F: +971 (4) 458 5178
EHSAN WAQUAR
CEO
Business Centre, Office No. 701, 7th Floor, Shahre- Faisal Road, Karachi. Pakistan
M: +92 - 300 – 8286191
T: +92-213-4324102
F: +92-213-4324101