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| − | Microinsurance,
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| − | cooperatives and
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| − | Takaful
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| − | DFID Workshop May 22nd 2006
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| − | Overview of presentation
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| − | ► Insurance and Poverty Alleviation
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| − | ► Why is conventional insurance not allowed in Islam
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| − | ► Principles and models of Takaful
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| − | ► The possibilities for microtakaful
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| − | Can insurance assist poverty
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| − | alleviation?
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| − | ► The poor are the most vulnerable
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| − | ► The impact of losses are more severe
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| − | ► They have minimum means of recovery
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| − | ► Success of microfinance schemes show the poor can and
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| − | want to save
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| − | ► Savings and credit are used unproductively
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| − | ► The poor need a safety net to escape poverty
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| − | “Insurance is being recognized
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| − | as an important tool for
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| − | poverty alleviation”
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| − |
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| − | Providing microinsurance
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| − | The challenges
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| − | ► Coverage
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| − | ► Regulation
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| − | ► Moral hazard and Fraud
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| − | ► Adverse selection
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| − | ► Education and trust
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| − | ► Technical expertise
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| − | ► Affordability
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| − | ► Retention
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| − | ► Sustainability
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| − |
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| − | Providing microinsurance
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| − | The possibilities
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| − | ► The cooperative microinsurance model
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| − | History of organising the poor
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| − | Operate for the interest of members by
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| − | members
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| − | Trust
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| − | Ownership and loyalty
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| − | Peer pressure
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| − | Surplus reinvested or redistributed
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| − |
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| − | Providing microinsurance
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| − | The possibilities
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| − | ► The partner agent model
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| − | No-risk fee for microinsurance provider
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| − | Better coverage for policyholder
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| − | Access to new market
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| − | Pooling of risks between informal and formal
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| − | sector
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| − |
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| − | Providing microinsurance
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| − | The possibilities
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| − | ► The donor agent model
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| − | Access to expertise
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| − | Financial sustainability
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| − | Guiding hand
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| − |
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| − | Why is conventional insurance
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| − | not permissible in Islam?
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| − | ► Uncertainty (Gharar)
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| − | ► Gambling (Maisir)
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| − | ► Interest (Riba)
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| − |
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| − | Earlier forms of Islamic insurance
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| − | ► Dawania – Mutual indemnification amongst officers during
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| − | the rule of Umar Ibn Al Khattab (2nd Caliph)
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| − | ► Diyyah and Aquilah – Blood money and concept of
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| − | removing hardship from victims family by payment of
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| − | Diyyah, on a mutual basis, by relatives of offender
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| − | ► Marine Insurance – Early second century – mutual fund to
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| − | cover robberies and mishaps
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| − |
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| − | Fiqh Academy Resolution 1985
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| − | ► Commerical insurance is prohibited
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| − | ► Alternative contract confirming to principles of Islamic
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| − | dealings is the contract of cooperative insurance, which is
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| − | founded on the basis of charitable donation and Shariah
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| − | compliant dealings
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| − |
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| − | Principles of Takaful
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| − | ► Solidarity and joint guarantee
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| − | ► Self reliance and self sustaining for community well being
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| − | ► Assist those that need assistance
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| − | ► Community pooling system
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| − | ► Shari’ah approved investments and products
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| − | “Bear ye one another’s burden”
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| − | Takaful models in practice
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| − | ► Not for profit model
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| − | ► Ta’awuni model – “cooperative insurance”
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| − | ► Al Mudharabah model – profit sharing
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| − | ► Al Wakala model – agency agreement
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| − |
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| − | The Global Takaful sector
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| − | ► 1979 First Takaful Company established
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| − | ► 1996 – 30 Institutions transacting Takaful
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| − | ► 2002 – 50 Takaful operators and four Retakaful providers
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| − | ► 2004 – 80 Takaful operators, 200 Takaful windows and 12
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| − | Retakaful providers
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| − | Source: IBB Solicitors, UK – (2005)
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| − | The Global Takaful sector
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| − | Source: Bhatty (2001)
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| − | ”A cooperative and mutual scheme providing
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| − | Shariah approved products and investments
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| − | is permissible under Islamic Law”.
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| − |
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| − | Ruling by the European Council of
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| − | Fatwa and Research
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| − | “… It is well known that in most non-Islamic countries there
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| − | are cooperative and mutual insurance companies. There is
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| − | no harm from the Shari`ah point of view to participate in
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| − | these services. So, it is unlawful for a Muslim living in a
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| − | country where there is such a cooperative insurance
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| − | company to make an agreement with a commercial
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| − | insurance company…..”
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| − |
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| − | Providing Takaful to
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| − | the low-income
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| − | sector
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| − | The need in Muslim countries
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| − | ► Social services inadequate or unavailable
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| − | ► Large sectors of poverty in many Muslim countries
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| − | ► Over half of world’s lowest developed countries have a
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| − | majority Muslim population
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| − | ► Increasing inequality in Middle East and Gulf countries
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| − | ► Religious considerations are important in villages and small
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| − | communities
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| − | ► Established Takaful sector neglecting low income sector
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| − | “Takaful is the second most
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| − | important social institution to
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| − | counter poverty and
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| − | deprivation”
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| − | Omar Fisher,1999
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| − | How can microtakaful be
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| − | provided?
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| − | ► Establish informal microtakaful schemes
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| − | ► Encouragement of pro-poor organisations
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| − | ► Education of government and donor
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| − | agencies
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| − | ► Involvement of Takaful sector
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| − | Technical expertise
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| − | Financial assistance
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| − | Partner-agent model
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| − | The Agricultural Mutual Fund of
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| − | Lebanon
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| − | ► Established in 1997
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| − | ► Health insurance
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| − | ► Available for Muslims and non-Muslims
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| − | ► 23,000 beneficiaries
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| − | ► Premium per family is ten dollars a month
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| − | Conclusions
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| − | ► Insurance has an important role to play in poverty
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| − | alleviation
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| − | ► Cooperative based microinsurance schemes are an
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| − | effective vehicle to provide insurance to the poor.
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| − | ► There is a need for microinsurance to be provided to low
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| − | income sectors in Muslim countries and communities.
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| − | ► A microtakaful scheme based on cooperative/mutual
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| − | principles is acceptable under Islamic Law
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| − | Thank you
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