Takaful Dr Karim Ullah Assistant Professor, IMSciences PhD (Islamic Financial Service) Brunel University, London Class: BBA (Hons) Course: Takaful Instructor: Dr Karim Ullah 1
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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
iah
Com
plia
nt M
arke
ts a
nd In
str
umen
ts
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
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