MicroTakaful – the way forward by Capt. M. Jamil Akhtar

MicroTakaful – the way

      forward

           Presented by:

           Capt. M. Jamil Akhtar Khan

                                   ACII, MCIT, Master Mariner

           Chief Executive Officer

           TAKAFUL PAKISTAN LIMITED

                    Contents

• Introduction

• Microtakaful defined

• Historical perspective

• MicroTakaful schemes in other countries

• Prospects in Pakistan

• Incremental values – The Takaful advantage

• Takaful Pakistan’s initiative

• The way forward

• Conclusion

                   Introduction

             Micro-insurance defined:

“Risk-pooling products that are designed to be appropriate

for the low-income market in relation to cost, terms,

coverage, and delivery mechanisms”.

               MicroTakaful refined:

“A mechanism to provide Shariah-based protection to the

blue collared, under-privileged individuals at an affordable

cost”.

                                       Introduction Cont’d. …

• Microfinance can help people improve.

• Microtakaful will help them sustain their financial well being.

• Feeling of togetherness & security.

• Opens avenues for joint efforts for mutual benefits.

• Cooperative approach and outlook.

• Result – migration of individual level.

• Society benefits at large.

            Historical Perspective

• Takaful concept evolved from individual common interest.

• Industrial era of early 1900s…

• Microfinancing hand in hand with Microinsurance and later

 Microtakaful.

• Bancassurance/Bancatakaful

               Global Landscape

• Only eighty million out of the world's 2.5 billion poor are

 currently covered by some form of micro insurance.

• Only 3% of poor lives are insured in India and China.

• Only 0.3% of the poor are insured in Africa.

• In 23 of the poorest 100 countries in the world, there is

 currently no identified micro insurance activity.

   Types of MicroTakaful Products

                Property

Fire Theft

               Agriculture     Prices                Health

                                                Surgical

     Disability

        Permanent                                        Out-patient

Partial Total

           Temporary                      Hospitalisation

    Dismemberment

                    Life Insurance                 Dental

         Credit Endowments           Funeral

         Life

          Prospects in Pakistan

• Serious efforts at national level only picked up

 during the last decade.

• Advent of Microfinance banks.

• Large rural/urban divide (65% : 35%)

• 40% population below poverty level.

• Scope for extensive work.

• Mushroom growth of NGOs.

   Prospects in Pakistan (Cont’d. …)

• Government’s initiatives – Rural support programs.

• SMEDA.

• Financial Support from ADB, WB, etc.

• State Bank’s initiative – 20% branches of commercial

 banks required in rural areas.

• Agriculture/Crop & Livestock Finance and Takaful.

• Benefit of economies of scale to make these viable

 ventures.

                                    Potential areas of action

                                          Construction of a House

                                                                            Marriage

Importance of Risk/Economic Stress

                                                Death

                                                               Prolonged Illness

                                                             Education of Children

                                             Business Failure/Loss of Job

                                                               Birth of Children

      Takaful Pakistan’s initiatives

• Coverage to over 100,000 low-cost houses.

• Synergy with NGOs.

• Students Healthcare/Campus care cover

• Factory workers’ & Daily wagers

• Crop Takaful

• Credit coverage for Islamic Microfinance.

• Covers tailored for SMEs financing.

• All above at ‘no profit basis’.

               The way forward

• Tax incentives

• Goodwill

• Awareness

• Extensive documentation

• Distribution channels

• Strategic alliances

• Incentives & Awards

The way forward

              ?????

   NO

 THEN

             The Takaful Advantage

  “ … they seemed satisfied with the convenience and

  affordability of the policy, but some thought that the

premium should be reimbursed if they do not file a claim”.

                         Excerpt from

            The Demand for Micro insurance in Pakistan

                              by

    ELIZABETH MCGUINNESS AND VOLODYMYR TOUNYTSKY

                         MARCH 2006

             The Takaful Advantage

   Share            SHARE          H O L D E R S’     F U N D (S.H.F.)

  Holder

                                          Mudarib’s         Management

           Wakalah     Investmen        Share of PTF’s       Expense of      Profit/Loss

            Fee              t           Investment             the

                         Income            Income             Company

 Takaful

Operator

                                Investment by

                                 the Company

WAQF Operational Claims &

                    Cost of Takaful     Investment         Reserves      Surplus

                     / ReTakaful          Income                        (Balance)

                   P A R T I C I P A N T S’ T A K A F U L F U N D

                                           (P.T.F.)

Participant

The Paradigm shift

 ALONG

   WITH

Urban – Subsidy – Rural

           Surplus

      Subsidy for Takaful

         Contribution

           Surplus

Current scenario

 What is required?

When there is will, there is a way!

  End of presentation

     Jazzakallah khair !

captain.jamil@takaful.com.pk