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Takaful

Dr Karim UllahAssistant Professor, IMSciencesPhD (Islamic Financial Service)Brunel University, London

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Aim

To develop theoretical and practical understanding of Islamic alternative to Insurance called Takaful

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Course PlanTakaful & Risk (miscellaneous)

Shariah Based Life and Takaful (Mohammad Ayub, 2008; Karim Ullah & Wafi Al-Karagholi, 2015– In write-up)

Perspectives of Takaful (Service) (Karim Ullah and Wafi Al-Karagholi, 2015 – in write-up)

The Business Models of Takaful (Ayub, 2008; Simon Archer et al, 2011)

Takaful Package Development Process (Habib Ahmed, 2011)

Designing Takaful as Service (Karim Ullah, 2014)

Takaful Typology (Miscellaneous)

Takaful Operations (Miscellaneous)

Supervisory Issues in Takaful (SECP Takaful Rules 2012)

Takaful Market (Global Takaful Insights 2013)

The Case in Focus: Pak-Qatar Takaful Limited Pakistan

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Class Engagement Lecture

Critical Discussion

Readings: KYK (Know Your Knowledge) Sheets, Transcripts, Slides.

Semester Project

A note on Arabic terminology

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Shar

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Com

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How to fail the course! effectively

Absence

When technology is playing with you

Over simplicity/complexity assumption

Bi-polar approach

Plagiarism

Respect

Inferiority & superiority complex

Discipline 6

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Takaful & Risk

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Takaful Defined

A Shariah based preparedness mechanism (service) for Risk

Is it acceptable in Islam?

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Risk: The Reason for Takaful

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Risk

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Risk

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Risk

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Risk: some definitions • The possibly of loss

• The probability of an unfavorable event(s)in future

• The potential variability of future outcomes

• Synonyms:

• The possibility of loss

• The probability of loss

• Danger

• A hazard

• The property of person exposes to damage or loss

• Potential losses

• Variation in potential losses

• Uncertainty concerning loss

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So,

Uncertainty | Loss

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Knowledge and Risk: Islamic perspective

• To Allah belong all things in Heaven and earth: verily Allah is He that is free of wants, worthy of all praise. “Holy Quran, 31: 26

• “Verily, Allah is all-knowing, all-aware” 31:34

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The nature of risk• Unpleasant outcomes

• Takaful (attempts to) guarantee risk avoidance

• Preparedness and compensation towards potential

loss, damage, or destruction of items of value

(including Life)

• The impact of risk can be mitigated by human

intervention (management)

• Risk measurement 20

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Types of Risk• Pure Risk: Loss | No change

• Speculative Risk: Loss | no change | gain (Maysir)

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Maysir ا أ=ي?ه= يـ=

Cل ع=م= GنIم KسGجCر Oال=م GزSو=اال Oاب و=االSنص= Oر CسGي الGم= و= Oر Gم الGخ= ا Cنم= إ G نOوا آم= الذCين=ون= OحCل GفOت GمOل=ع=لك OوهOبCت=ن Gاج ف= Cن الشيGطـ=

“O you who believe! Khamr, Maysir, Ansab (stone alter), and Azlam (arrows or dicing) are a filth of Shaytan’s handiwork. So avoid that

in order that you may be successful.”

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(Usually) Qualified Risks for Takaful1. A Large number of familiar loss exposure units

2. Losses are definite, measurable, and important

3. Losses are fortuitous and beyond the control of

the individuals or group (s) concerned; and

4. The potential for catastrophic loss is unlikely to

be covered

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(Usually) Disqualified Risks1. No monetary value2. No insurable interest (as required by law)3. Illegal or unlawful activity (including Shariah Law)4. Vice or dishonest behavior contributing to the risk

(i.e., fraud)5. Some catastrophes: nuclear accident, famine or war6. Public policy exclusions such as fines or criminal

acts7. Usual wear and tear and depreciation on property8. Other factors: delay, vermin, market agreements,

government confiscation or authority, etc.

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Shariah Based Life (& Takaful)

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Shariah Based Life

“There is no God but Allah, and Muhammad is the Massager of Allah”

Sources

• Quaran• Sunnah• Ijmah• Qiyas

Commandments

• Faith & Belief (Aqidah)

• Ethics & Morality (Akhlaq)

• Laws and Rules (Fiqh)

Means for Life

• Essentials (Duruiyyat)

• Complements (Hajiyyat)

• Beautifications (Tahsiniyat)

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Islam

Moralities and Ethics

Practices and Activities (rules)

Faith and Belief

Man to Man Activities

Man to God Worship

Economic Activities Social Activities

Banking and Finance Activities

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Primary Objectives (Maqasid) of Shariah

Safeguarding Faith

Safeguarding Life

Safeguarding Progeny

Safeguarding Property

Safeguarding Intellect

Safeguarding Honour

Takaful:Relevance?

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The Practice of Takaful Service

Introduction

Rational Behavior (Roshd)

Co-operation

Zakat, Ushar, Sadqah

Deya, Acqela, Qasama

Local Takaful Practices 30

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What is Wrong with The Commercial Insurance (Service)

Exploitative Profits

Gharar

Maysir

GhabanJahalah

Prohibited goods/actio

ns

Riba

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Cores of risk protection in Takaful Service

Nea’a

Shariah conditions

Moral values and ethics

Islamic commercial contracts 32