Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani

1. Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing & Alternate Distribution Pak-Qatar Family Takaful August 11th, 2007 – Avari Hotel, Lahore

2. Agenda • Takaful – A product and an ideology • Differences between Takaful & Insurance • The Pakistani Market • Overview • Challenges • Opportunities • Our responsibility • Conclusion

3. Takaful- A product and an Ideology • Takaful comes from the Arabic root-word ‘kafala’- guarantee • Takaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which promotes • Solidarity and joint guarantee • Self reliance and self sustainability for community well being • Assistance to those that need it • Community pooling system

4. Differences between Takaful & Insurance • What is Insurance? • A tool for Risk Mitigation and Financial Protection • A tool to enable people to save (Life Insurance) • Key differences between Takaful and Insurance are: • Risk Sharing Vs. Risk Transfer • Wakeel Vs. Guarantor • Ameen Vs. Owner • Different type of Contract

5. Differences between Takaful & Insurance (cont.)

6. The Pakistani Market – An Overview • Pakistan - Overall • Population: 6th amongst global nations. 166 m. • Population in 2015: Still 6th . 193 m. • Urbanization: Presently at 33% • Urbanization by 2015: 39% • GDP Per Capita: $753

7. The Pakistani Market – An Overview (cont) • Pakistan – Insurance Market • Penetration of Insurance • Pakistan: 0.7% of GDP • India: more than 3% of GDP • Iran: approx. 1% of GDP • Family & General Companies • Few Innovative Products. Very recent change in this area

8. The Pakistani Market – Challenges for Takaful • Resistance to Insurance, and its benefits, due to different reasons • Conservative spending habits • Ignorance of its benefits • Products which do not meet buyers needs • Religious reasons • Tawakkul issue • “Tie your camel first, then put your trust in Allah (SWT)”. <Tirmidhi> • “It is better for you to leave your heirs wealthy rather than poor and asking others for their needs”. • Non-Shariah compliant elements

9. The Pakistani Market – Challenges for Takaful (cont.) • Government regulations untested • Human resources for the sector • Shortage of trained human resources in insurance • Negligible knowledge of Takaful present amongst the public • Few training programs available for Takaful and insurance • Insurance has generally never been the occupation of first choice for new graduates

10. The Pakistani Market – Challenges for Takaful (cont.) • Education and Awareness • Lack of knowledge about Takaful and insurance amongst the masses • Ignorance of Takaful amongst the ulema • Significant budget required just to ensure that knowledge permeates to all segments/levels of society • Marketing & Sales issues • Poor impression of insurance sales persons amongst the public • Generally poor ethical standards amongst insurance sales persons • General lack of faith on insurance companies meeting their obligation in a efficient and polite manner

11. The Pakistani Market – Challenges for Takaful (cont.) • Operational Issues • Limited avenues for revenue at Takaful co. as compared to insurance ones • To be competitive Takaful co. will need to use effective IT systems – heavy investments • New Takaful co. will need to ensure that they do prudent underwriting; thus eating into the possibility of having a larger number of customers

12. The Pakistani Market – Opportunities for Takaful • Economic/Social conditions in Pakistan make Takaful a NECESSITY • Lack of govt. social safety net • Negligible provision of reliable health care by the govt. • Quality education is beyond the reach of the average citizen and the institutions provided by the govt. lack the required standards

13. The Pakistani Market – Opportunities for Takaful (cont.) • Strong growth in the Islamic financial sector provides Takaful with a natural market • Islamic Banks and mutual funds will need Takaful to package with their other products • Islamic Financial institutions presently have no Family coverage for their staff • Massive untapped market in Pakistan for risk mitigation tools • Given the necessity of these tools insurance has not even touched the surface • Given the ‘plain vanilla’ menu provided to customers there is a great opportunity for innovation

14. The Pakistani Market – Opportunities for Takaful (cont.) • Ethical and Shariah compliant model for risk mitigation and financial protection • Large number of people who stay away from insurance due to religious beliefs • Large number of our population can be considered as ‘religious’ and so Takaful will be in line with their beliefs • Educated citizens, although not religious would prefer to use an ethical model than one which is built on making profits by trying to avoid having to pay claims

15. Takaful – What should you do about it? • As educated professionals WE have a responsibility to our fellow citizens to guide them to what is good for them. This is especially important when the people are living at a level where income equals expenses • Convey the critical nature of financial protection to others • Explain the benefits of getting financial protection • Introduce the new concept which is not only ethical but also Shariah compliant • Just start from those around you….

16. Conclusion • Takaful is not only here to stay; it’s going to GROW! • It’s ethical and Shariah compliant nature allows Takaful to overcome the inherent problems with Insurance • The Pakistani market has challenges but also has a lot of opportunities • There are a lot of opportunities for Takaful operators to make healthy profits in Pakistan • Although Insurance coverage is not the norm in Pakistan we need to work to make Takaful something everybody uses

17. Conclusion (cont.)

18. Jazak-Allah khair For further information contact: (021) 438-0357 to 61 info@pakqatar.com.pk www.pakqatar.com.pk(launching soon!)