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| − | The Takaful
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| − | Current Achievements
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| − | &
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| − | Future Outlook
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| − | Zubair Mughal.
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| − | Director : AlHuda : Centre of Islamic Banking and Islamic Economics.
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| − | 042-5858990 - 8407850
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| − | Introduction
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| − | “Takaful” is the Sharia Compliant brand
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| − | name for the Islamic alternative to
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| − | conventional insurance. Its based on the
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| − | principle of Ta’awan or mutual assistance.
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| − | It provide provides mutual protection and
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| − | joint risk sharing in the event of a loss by
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| − | one of its member
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| − |
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| − | Origins of Takaful
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| − | In the event of death caused by
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| − | someone from another tribe, the
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| − | member of the offender’s tribe would
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| − | share the “ blood money” (Khoon Baha)
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| − | to provide for the family of the victim.
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| − | From the Holly Quran
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| − | The need for insurance is shown in the
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| − | following verse of The Quran.
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| − | “ Those of you who die and leave widows
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| − | should bequeath for their widows a
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| − | year’s maintenance and residence”
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| − | (2.240)
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| − | From the Hadiths
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| − | By Anas-bin-Malik, One day Prophet
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| − | Muhammad(PBUH) notced a bedouin
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| − | leaving his Camel without tying it. He
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| − | asked the bedouin, “Why don’t you tie
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| − | down your camel”? The Bedouin
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| − | answered, “ I put my trust in Allah
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| − | (SWT)”. The Prophet (PBUH) then
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| − | said,” Tie your camel first, then put
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| − | your trust in Allah(SWT)” <Tirmidhi>
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| − | Why Insurance ?
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| − | Is Some thing wrong with Concept ?
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| − | Risk Aversion
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| − | Assuring others
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| − | Risk sharing
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| − | What wrong with practice ?
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| − | The contract between the insurer & the
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| − | insured is technically wrong from the
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| − | sharia perspective because of
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| − | Gharar (Uncertainty))
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| − | Gambling (Qamar & Maisir)
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| − | Interest (Riba)
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| − | Gharar
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| − | Lexically it means uncertainty and
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| − | technically it means the uncertainty of
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| − | the counteract or the subject matter.
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| − |
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| − | Riba in Insurance
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| − | Direct Riba
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| − | Excess on one side in case of exchange
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| − | between the amount of premium.
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| − | Indirect Riba
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| − | The interest earned on interest based
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| − | investments
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| − |
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| − | The concept of Takaful
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| − | Taburro (Contribution) from the
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| − | participants (Policy Holders)
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| − | Partnership among the participants.
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| − | Need of an Operator
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| − | Investment in Sharia Compliant modes.
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| − |
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| − | Shariah Compliance
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| − | Shariah compliance is an essential
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| − | element in Takaful .
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| − | It is ensured through a Shariah
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| − | Supervisory/ Advisory Board at the level
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| − | of each Takaful company.
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| − | The role of the Shariah Board is vital in
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| − | meeting the specific demand of a public
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| − | who would not insure otherwise.
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| − |
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| − | Different Models of Takaful
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| − | Pure Mudarabah Model : The participants
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| − | and operator enter into modarabah Contract.
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| − | Wakalah Model : An Agency Agreement is
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| − | made between participants and Operators on
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| − | the basis of Wakalah ( Agency agreements)
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| − | Wakalah Based on Waqf Model : The
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| − | participant's donate the fund and operator
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| − | charge an agency fee.
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| − |
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| − | Takaful Pioneers
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| − | Takaful started some 27 years ago in
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| − | the Middle East with the launching of
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| − | two companies:
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| − | The Islamic Arab Insurance Co. (IAIC) in
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| − | the UAE and
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| − | The Islamic Insurance Co. of Sudan
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| − | But it took some time for the
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| − | movement to take shape.
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| − |
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| − | Takaful Pioneers
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| − | Later in 1984, Malaysia played a
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| − | pioneering role in setting the first Legal
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| − | framework specific to Takaful (Takaful
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| − | Act).
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| − | This was instrumental in the successful
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| − | launching of the Takaful movement in
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| − | Malaysia and in other countries of South
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| − | East Asia.
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| − | Other Islamic/ Takaful
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| − | Legislations
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| − | Other markets such as the Sudan and
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| − | Iran have Islamic regulatory
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| − | environments and became naturally
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| − | Takaful markets.
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| − | In the Gulf countries specific Takaful
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| − | legislations are coming through in
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| − | Bahrain and in Saudi Arabia
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| − |
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| − | Takaful drivers
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| − | This movement is driven by
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| − | A strong demand from a public who would
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| − | not insure otherwise (because of religious
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| − | beliefs); and
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| − | The successful development of Islamic
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| − | banking institutions providing capital and
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| − | Islamic financial instruments for asset
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| − | management and investment.
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| − |
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| − | Takaful Drivers
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| − | Islamic banks and financial institutions play a
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| − | strategic and important role in the distribution
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| − | of Takaful products (especially Life Takaful
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| − | Products).
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| − |
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| − | Takaful Operators
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| − | The number of Takaful operators
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| − | worldwide is now estimated at:
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| − | 60 Takaful companies
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| − | 3 Retakaful companies
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| − | This number may reach 90 + if so-
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| − | called Takaful windows are to be
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| − | included.
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| − | Takaful Premium
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| − | Takaful is one of the fastest growing
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| − | segments in insurance (at around 20%
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| − | pa. on average)
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| − | World Takaful contributions are
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| − | conservatively estimated at around US$
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| − | 3billions, of which:
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| − | 60% General Takaful
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| − | 40% Family Takaful
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| − | Takaful Geographical Spread
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| − | South& East Asia : 56%
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| − | Middle East : 36%
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| − | Africa: 7%
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| − | Europe, USA & Others: 1%
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| − | Main Markets
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| − | Malaysia
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| − | Indonesia
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| − | Iran
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| − | GCC countries
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| − | Other Arab countries
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| − | Other Asia Pacific
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| − | Pakistan ( Emerging Market )
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| − | The Challenges ahead
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| − | Despite a remarkable breakthrough and
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| − | a dynamic and sustained growth, there
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| − | are challenges facing the Takaful
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| − | industry.
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| − | Challenges
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| − | Business Model Dilemma
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| − | Could create an uneven / unfair business
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| − | environment to operate
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| − | Need to reach a consensus internationally on a
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| − | common and standard Takaful business model
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| − | Takaful Best Practices
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| − | Regional Takaful institutions and
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| − | organisations need to come together
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| − | internationally in order to promote and
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| − | standardise best practices within the industry:
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| − | Islamic Financial Services Board (IFSB)
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| − | ASEAN Takaful Group (ATG)
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| − | International Takaful Association (ITA)
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| − | Accounting and Auditing Organization of Islamic
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| − | Financial institutions (AAOIFI)
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| − | Growth Outlook
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| − | World Muslim population is estimated at
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| − | 1.5 billions, of which around 97% are
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| − | based in Asia and Africa.
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| − | A two-digit growth in the range of 15%
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| − | to 20% can be reasonably sustained for
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| − | at least the next 10 years in the existing
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| − | markets (Far and Middle East).
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| − | Takaful Products to Non-
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| − | Muslims
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| − | Takaful Products are not exclusive to
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| − | Muslims.
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| − | Competitively priced and sold through
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| − | the right channel it could attract any
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| − | consumer irrespective of their origin or
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| − | faith.
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| − | Conclusions
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| − | Despite the challenges facing this “new”
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| − | industry, exciting times are ahead once
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| − | the latent potential is unleashed.
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| − | The success of Takaful largely depends
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| − | on that of Islamic Financial institutions
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| − | on a global basis.
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| − | Conclusions
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| − | There is a need for
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| − | More strategic alliances and synergy
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| − | between Islamic Financial institutions
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| − | More cooperation between Islamic
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| − | operators at an international level
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| − | A better legal and regulatory environment
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| − | Better competencies in Islamic Finance.
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