Operational Mechanism of Takaful by Mr. M. Vaqaruddin
From HodHood
Presented by:
M Vaqaruddin
CEO
Pak-Qatar General Takaful Ltd.
Karachi
Mudharabah-Based Takaful
• In this model, a clear distinction is made
between the business of takaful or insurance
and the business of investing funds mobilized
from policyholders and/or the shareholders. The
takaful operator seeks no returns from managing
the takaful business in line with the spirit of
takaful. It seeks returns from the business of
investing the takaful funds under a mudaraba
agreement with the policyholders for managing
their funds. The policyholders assume the role of
fund provider or rabb-al-maal. As a mudarib the
takaful company receives its share of profits
generated on investments.
Mudharabah Model PROFITS
ATTRIBUTABLE TO
SHAREHOLDERS
COMPANY
COMPANY'S
ADMINISTRATION &
MANAGEMENT
EXPENSES
TAKAFUL CONTRACT PROFITS
INVESTMENT BY
BASED ON PRINCIPLE OF FROM
COMPANY
AL-MUDHARABAH INVESTMENT
OPERATIONAL SHARE OF
COST OF SURPLUS FOR
TAKAFUL THE COMPANY
TAKAFUL
PARTICIPANT PARTCIPANT 40% (Example Only)
PARTICIPANT CONTRIBUTI OPERATIONAL SURPLUS
TAKAFUL TAKAFUL
ON PAID BY COST OF TAKAFUL (PROFIT)
FUND FUND 60% (Example Only)
PARTICIPANT
OPERATIONAL SHARE OF
COST OF SURPLUS FOR THE
TAKAFUL PARTICIPANT
Wakala-Based Takaful
• In the wakala-based model, the takaful
operator acts as the wakil or agent of the
policyholders. As such it is entitled to a
known remuneration. It incurs all the
operational expenses on behalf of its
principal.
Wakala Model
COMPANY MANAGEMENT PROFIT / LOSS
TAKAFUL ADMIN & MARKETING SHARE OF PROFIT
EXPENSES OF ATTRIBUTABLE TO
EXPENSES 25% TO 35% FOR THE COMPANY
COMPANY SHAREHOLDERS
40%
TAKAFUL
CONTRACT BASED INVESTMENT PROFITS FROM
ON PRINCIPLE OF BY FUND INVESTMENT
AL-WAKALAH
60%
OPERATIONAL
COST OF TAKAFUL /
RETAKAFUL
TAKAFUL PARTICIPANT SHARE OF
PARTICIPANT PARTCIPANT
CONTRIBUTI TAKAFUL OPERATIONAL SURPLUS SURPLUS FOR
TAKAFUL
ON PAID BY FUND COST OF TAKAFUL (PROFIT) THE
FUND
PARTICIPANT 65% TO 75% PARTICIPANT
OPERATIONAL
100%
COST OF TAKAFUL
• Waqf:
Charity, religious endowment testamentary bequest of
real estate.
• Waqf can be made for Property, Money or any other
asset.
• Waqif should be Sain, Adult, Owner, Free.
• It is not necessary for the Waqif to be a muslim.
• The Waqif can put conditions at the time of Waqf.
• ( Hazrat Usman RA)
Wakala-WAQF Based Takaful
• Some of the Shariah scholars have critically analyzed
the Wakala system and have suggested to incorporate
the concept of Waqf into the Wakala model. Under this
revised model, the operator would initially make a
donation to establish a benevolent fund called the Waqf
Fund. When this Waqf is created, the shareholders will
lose their ownership rights on the waqf. However, this
fund will be administered by the operator. The donations
received from the participants, seeking takaful
protection, will also be deposited into this fund and the
combined amount will be used for investment. Profits
earned will be deposited into the same fund. Participants
will be given benefit from this Waqf fund. The Waqf fund
would be allowed to form contingency reserve fund apart
from usual technical reserves. The Waqf fund rules
would define the basis for compensation and financial
help, and rules for sharing surplus between the members
and operators.
Wakala Waqf Model
COMPANY TAKAFUL OPERATOR FEES FOR MANAGEMENT PROFIT / LOSS
SHARE OF PROFIT
ADMIN & MARKETING EXPENSES EXPENSES OF ATTRIBUTABLE TO
FOR THE COMPANY
25% TO 35% COMPANY SHAREHOLDERS
40%
PROFIT SHARING ON
INITIAL DONATION BY MUDARABHA BASES
SHAREHOLDERS TO
CREATE WAQF FUND
Waqf Waqf INVESTMENT PROFITS FROM
BY FUND INVESTMENT
60%
OPERATIONAL COST OF
TAKAFUL /RETAKAFUL
TAKAFUL SHARE OF
PARTICIPANT CONTRIBUTION WAQF FUND SURPLUS SURPLUS FOR
WAQF FUND OPERATIONAL COST OF
PAID BY 65% TO 75% TAKAFUL (PROFIT) THE
PARTICIPANT PARTICIPANT
OPERATIONAL COST OF
TAKAFUL 100%
