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22 September 2004, Jeddah Ajmal Bhatty, Saudi British Bank

What makes a company “Takaful”?. 22 September 2004, Jeddah Ajmal Bhatty, Saudi British Bank. THE EVOLVING INDUSTRY. New and old companies adhering to or not adhering to the underlying takaful concepts The small beginnings in the ‘70s

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22 September 2004, Jeddah Ajmal Bhatty, Saudi British Bank

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  1. What makes a company “Takaful”? 22 September 2004, Jeddah Ajmal Bhatty, Saudi British Bank

  2. THE EVOLVING INDUSTRY New and old companies adhering to or not adhering to the underlying takaful concepts The small beginnings in the ‘70s From religious application to business practices to application of business and technical know-how within the boundaries of Shariah principles

  3. THE SIZE OF ISLAMIC BANKING INDUSTRY Financial assets: US$260 billion Funds: US$16 billion to US$20 billion 15% + per annum

  4. ISLAMIC INSURANCE Islamic insurance picked up in the ‘90’s Low life insurance premium per capita Potential - US$1 current to US$10?

  5. THE SIZE OF TAKAFUL INDUSTRY 2002: US$2 billion of premium income 2015: US$12 billion 15% + per annum average, 21% Family, 8% General takaful AUM: approx. US$30 billion

  6. Critical Success Factors Takaful offers what the customer needs Educated Muslim middle classes Growing awareness Ethical system is appealing

  7. Takaful - better insurance understanding Misunderstandings - Insurance haram Customers can relate to takaful Takaful aligned with personal values / belief

  8. The Global Takaful Space Do takaful providers genuinely provide answers to the very reasons for which customers want to buy takaful? Are these takaful providers doing justice to the ideals that the customers aspire to? Or are they driven to maximise market shares and profits while it lasts?

  9. The Global Takaful Space Is Co-operative same as Takaful? Is Takaful same as a Mutual Company? Is the only thing that is needed is a Fatwa to tell the customers that our products and operations are Shariah compliant?

  10. The Global Takaful Space Is it that if we were just to invest insurance funds in accordance with Shariah guidelines, the system of insurance becomes takaful? Is it sufficient just to have a Shariah compliant preamble to policy wordings of a conventional product to make our products takaful?

  11. What makes a company “Takaful”? Mems. and Arts. non-contradictory to Shariah norms Investment management Shariah compliant Financial transactions distinguishable separately Clarity and transparency of benefits, charges and operations

  12. What makes a company “Takaful”? Contracts based on recognized Shariah norms of methods and principles Policy unambiguous Structure and operation to minimize doubt (al-gharar) and maisir (exploitation) through contracts and concepts based on collective rights, clarity of role of the company, ownership of funds and profit sharing

  13. Questions revisited Is Co-operative same as Takaful? A co-operative insurance company could be a normal conventional company as the concepts of insurance are based on law of large numbers Fund ownership?

  14. Questions revisited Is Takaful same as a Mutual Company? A mutual company: has no access to external capital policyholders are its shareholders manages its affairs out of premiums

  15. Questions revisited Is the only thing that is needed is a Fatwa to tell the customers that our products and operations are Shariah compliant? A fatwa usually has pre-conditions Regular Sharia reviews Products and operations to be in line with Shariah principles

  16. Questions revisited Is it that if we were just to invest insurance funds in accordance with Shariah guidelines, the system of insurance becomes takaful? Shariah compliant investment management is only one of takaful requirements There are others like donation aspect, expenses, surplus, policyholder rights, shareholder obligations etc

  17. Questions revisited Is it sufficient just to have a Shariah compliant preamble to policy wordings of a conventional product to make our products takaful? gross misrepresentation if the letter is not followed by the spirit of its meaning

  18. Conclusions Scarce talent and resource The need to build resource through education and training Better polarization of knowledge and understanding of Shariah issues versus technical and business issues

  19. Conclusions Insurance to customers is interesting when they see it through the filters of takaful Building credible Islamic institutions that would provide consumer confidence and bring benefits to the society in which we live, whether it is in Asia, Europe or the US

  20. Conclusions If we do not address the real underlying issues then it merely means: Opportunistic exercise built on shortcuts Unsound foundations Lose credibility somewhere down the line Costly to shareholders in the long run

  21. Thank you Ajmal Bhatty

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