Outline of Presentation

Introduction and Brief Perspective of Islamic Finance Product Tree for Islamic Agricultural Finance Takaful Takaful Products for Islamic Agricultural Finance.

Presented by :

Zubair MughalAlHuda : Centre of Islamic Banking & Economics

Regional Head – Takaful Pakistan Limitedzubair.mughal@alhudacibe.comzubair.mughal@takaful.com.pk

Industry Progress in Pakistan

Currently there are 6 full fledged Islamic Banks, while

6 Full fledge Banks having 186 and 12 Conventional Banks have 103 SAIBBS

Total IB Branches = 289

Year 2001

•Meezan Bank•Al Baraka

•Meezan Bank•Al Baraka•MCB•Alfalah•SCB•Bank AlHabib•Habib AG Zur.•Metropolitan•Bank of Khyber•Soneri Bank

2002 2003

•Meezan Bank•Al Baraka•MCB

•Meezan Bank•Al Baraka•MCB•Alfalah

2 10

2006 - 07

•Meezan Bank (100) •Al Baraka (18) •MCB (8) •Alfalah(32) •SCB (8) •Bank AlHabib(4 ) •HMB(4) •Bank of Khyber(17) •Soneri Bank ( 4) •HBL(1) •Bank Islami(36) •DIB (17) •EGIBL (10) • Dawood(5) •NBP(3) •ABN AMRO (3) •Askari(14) •UBL (5)

2004 - 05

1843

Industry Progress in Pakistan

Industry Progress in Pakistan

Industry Progress in Pakistan

Takaful Companies in Pakistan

There are Four Takaful Companies now Operating in Pakistan

1. Takaful Pakistan Limited2. Pak Kuwait Takaful Company Limited.3. Pak Qatar General Takaful4. Pak Qatar Faimly Takaful.

Sukuk Development in Pakistan.

Motorway Sukuk - Wapda 1th & 2nd Sukuk Pakistan Shipyard Sukuk Pakistan Industrial Park Sukuk PIA Sukuk Sui soturen PASSCO Liberty Energy Sitara Chemicals PEL Amtex Textile HBFC Sukuk Arzo Textile Dawood Hercules etc

Islamic products and services offered by 300+ Financial Institutions around the world

.United States: 20- Al Manzil Financial Services- American Finance House- Failaka Investments- HSBC - Ameen Housing Cooperative

Germany:4- Bank Sepah- Commerz Bank- Deutsche BankSwitzerland: 6

UK: 26- HSBC Amanah Finance - Al Baraka International Ltd- Takafol UK Ltd- The Halal Mutual Investment Company- J Aron & Co Ltd (Goldman Sachs)

Bahrain: 26 - Bahrain Islamic Bank- Al Baraka- ABC Islamic Bank - CitiIslamic Investment Bank

Malaysia: 492 - Pure Islamic Banks (Bank Islam, Bank Muamalat)Rest - conventional banks

Saudi Arabia: 17- Al Rajhi - SAMBA- Saudi Hollandi - Riyadh Bank

UAE: 13- Dubai Islamic Bank- Abu Dhabi Islamic Bank- HSBC Amanah

Qatar: 4- Qatar Islamic Bank- Qatar International Islamic

Kuwait: 9- Kuwait Finance House

Iran: 8

Egypt: 12- Alwatany Bank of Egypt- Egyptian Saudi Finance

Indonesia: 4

Sudan: 9

Pakistan: 21India: 3Bangladesh:9

Turkey: 7- Faisal Finance Institution- Ihlas Finance House

Yemen: 5

International Overview

The size of Islamic Financial Industry has reached US$

300 Bln. and its growing annually @ 15% per anum.

71 countries have Islamic Banking Institutions

38 Muslim countries including Bahrain, UAE, Saudi

Arabia, Malaysia, Brunei and Pakistan

33 non-Muslim countries including USA, UK, Canada,

Switzerland, South Africa and Australia

International Overview

Leading foreign Banks have opened Islamic

Banking windows or subsidiaries such as:

• Standard Chartered Bank

• Citibank

• HSBC

• ABN AMRO

• UBS

International Overview

In Feb 1999, Dow Jones introduced the Dow

Jones Islamic Market Index (DJIM) of 600

companies world wide whose business

complies with Islamic Shariah laws

At present there are more than 105 Islamic

Funds operational through out the world with a

total fund base of over USD 3.50 billion

International Overview

Governments of Bahrain ,Malaysia and now

Pakistan have issued Islamic Bonds (Sukuk) in

order to facilitate Islamic Banks in managing

their liquidity.

Issuance of these bonds has also paved the

way for Shariah compliant Government

borrowings

International Overview

Institutions like Accounting and Auditing Organization

for Islamic Financial Institutions (AAOIFI) and Islamic

Finance Services Board (IFSB) have been formed.

These institutions are playing a key role in setting up

and standardizing Shariah , Financial and Accounting

standards for Islamic Financial Institutions.

Due to these collective efforts Islamic banking is now

recognized by IMF, World Bank and Basel Committee.

PRODUCT TREE

Modes of Islamic Agricultural Finance

Trade Based Modes

Partnership Based Modes

Rental Based Modes

MusharakaMudarabaMuzarah

MurabahaMusawamaSalamIstisna

IjarahDiminishing Musharaka

Takaful( Islamic Insurance )

Introduction

“Takaful” is the Sharia Compliant brand

name for the Islamic alternative to conventional insurance. Its based on the principle of Ta’awan or mutual assistance. It provides mutual protection and joint risk sharing in the event of a loss by one of its member

Why Insurance ?

Is Some thing wrong with Concept ?

Risk Aversion Assuring others Risk sharing

From the Holly Quran

The need for insurance is shown in the following verse of The Quran.

“ Those of you who die and leave widows should bequeath for their widows a year’s maintenance and residence” (2.240)

From the Hadiths By Anas-bin-Malik, One day Prophet

Muhammad(PBUH) notced a bedouin leaving his Camel without tying it. He asked the bedouin, “Why don’t you tie down your camel”? The Bedouin answered, “ I put my trust in Allah (SWT)”. The Prophet (PBUH) then said,” Tie your camel first, then put your trust in Allah(SWT)” <Tirmidhi>

What wrong with practice ?

The contract between the insurer & the insured is technically wrong from the sharia perspective because of

Gharar (Uncertainty)) Gambling (Qamar & Maisir) Interest (Riba)

Riba in Insurance

Direct RibaExcess on one side in case of exchange

between the amount of premium.

Indirect RibaThe interest earned on interest based

investments

Gharar

Lexically it means uncertainty and technically it means the uncertainty of the counteract or the subject matter.

InvestmentIncome

Operational Cost of Takaful

/ ReTakaful

Claims &Reserves Surplus

(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.)

Mudarib’s Share of PTF’s Investment IncomeWakalah

Fee

Management Expense of

the Company

Profit/Loss

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

Participant

WAQF

Takaful Operator

Share Holder

Operating Model in Pakistan

Investment by the Company

.

Takaful Products for Islamic Agricultural Finance

Trade Based Modes

Partnership Based Modes

Rental Based Modes

MusharakaMudaraba

MurabahaMusawamaSalamIstisnab

IjarahDiminishing Musharaka

Other Products

Livestock'sCrop TakfulCredit Takaful

Takaful Pioneers

Later in 1984, Malaysia played a pioneering role in setting the first Legal framework specific to Takaful (Takaful Act).

This was instrumental in the successful launching of the Takaful movement in Malaysia and in other countries of South East Asia.

Takaful Operators The number of Takaful operators worldwide is

now estimated at: 128 Takaful companies 8 Retakaful companies In 41 Countries. Average growth rate higher than

conventional insurance companies (around 25%).

Non–Muslims increasingly opting for Takaful products for commercial benefits.

Takaful Geographical Spread

South& East Asia : 56% Middle East : 36% Africa: 7% Europe, USA & Others: 1%

Thank You.