““NEED OF A TAKAFUL COMPANY NEED OF A TAKAFUL COMPANY IN AFGHANISTAN”IN AFGHANISTAN”

A PRESENTATION BY A PRESENTATION BY ADNAN MALIKADNAN MALIK

ACII (UK), FLMI (USA),MBA (PAK)ACII (UK), FLMI (USA),MBA (PAK)

Senior ManagerSenior Manager

TAKAFUL PAKISTAN LIMITED TAKAFUL PAKISTAN LIMITED

Afghanistan needs a Takaful Afghanistan needs a Takaful company for:company for:

•Supporting the reconstruction Supporting the reconstruction process process

•The Stability of economyThe Stability of economy•Helping a common man when Helping a common man when

something goes wrongsomething goes wrong•The growth of financial sectorThe growth of financial sector

• These benefits can be achieved with an These benefits can be achieved with an insurance company, then why we are talking insurance company, then why we are talking about a “TAKAFUL COMPANY” about a “TAKAFUL COMPANY”

•BECAUSEBECAUSE• A 2009 UN estimate shows that the Afghan A 2009 UN estimate shows that the Afghan

human population is 28,000,000 with nearly human population is 28,000,000 with nearly 99% muslim majority.99% muslim majority.

• Consensus stands developed among Consensus stands developed among contemporary Islamic scholars that Takaful is a contemporary Islamic scholars that Takaful is a Shariah compliant alternative to conventional Shariah compliant alternative to conventional insurance.insurance.

Meaning of TakafulMeaning of Takaful

• Takaful comes from the Arabic root-word Takaful comes from the Arabic root-word ‘kafala’ ------- guarantee.‘kafala’ ------- guarantee.

• Takaful” is the Shariah Compliant brand name Takaful” is the Shariah Compliant brand name for the Islamic alternative to conventional for the Islamic alternative to conventional insuranceinsurance..

• Operationally, Takaful refers to participants Operationally, Takaful refers to participants mutually contributing to a common fund with mutually contributing to a common fund with the purpose of having mutual indemnity in the the purpose of having mutual indemnity in the case of peril or loss.case of peril or loss.

Continues…..Continues…..• This perspective is upheld by numerous meetings and This perspective is upheld by numerous meetings and

resolutions including the following:resolutions including the following:

• The Islamic conference, Makkah, 1976.The Islamic conference, Makkah, 1976.

• Resolution by Council of Saudi Ulama in 1977.Resolution by Council of Saudi Ulama in 1977.

• In 1985,Fiqh Council of the Organization of Islamic In 1985,Fiqh Council of the Organization of Islamic Conference declared conventional insurance Haraam Conference declared conventional insurance Haraam and recommending Takaful as the Shariah compliant and recommending Takaful as the Shariah compliant alternative.alternative.

Supporting Reconstruction Supporting Reconstruction Process:Process:

• Life, health and disability coverages for Life, health and disability coverages for deminersdeminers

• In building contracts of roads, bridges, In building contracts of roads, bridges, buildings, takaful company can provide buildings, takaful company can provide guarantees to contract awarding entity if the guarantees to contract awarding entity if the contractor fails to fulfill his contract.contractor fails to fulfill his contract.

• Once a building is built, takaful company can Once a building is built, takaful company can provide compensation if any defined loss provide compensation if any defined loss occurs occurs

Stability of Economy:Stability of Economy:• If any nation wants its economy moving in If any nation wants its economy moving in

upward direction, it has to add risk mitigation upward direction, it has to add risk mitigation tools in the economy.tools in the economy.

• Exports Exports $2.128 billion (2009)$2.128 billion (2009)• Imports Imports $8.550 billion (2009)$8.550 billion (2009)• GDP GDP $13 billion (2009 est.)$13 billion (2009 est.)• GDP per capita GDP per capita $457 (2009 est.)$457 (2009 est.)

Continues….Continues….• GDP by sectorGDP by sector• agriculture: 31% : 31% industry: 26% : 26% servicesservices: 43% : 43%

(2008)(2008)• According to the World Bank, "economic According to the World Bank, "economic

growth has been strong and has generated growth has been strong and has generated better livelihoods" since 2001better livelihoods" since 2001

• Farmers need crop coverages against drought, Farmers need crop coverages against drought, floods, pest attacks and fire etc.floods, pest attacks and fire etc.

• Industrialists needs coverages for their Industrialists needs coverages for their industries.industries.

Helping a common man when something goes Helping a common man when something goes wrong:wrong:

• Takaful helps people in following situations by way of Takaful helps people in following situations by way of paying claims:paying claims:

• When a general takaful company pays claim cheque to When a general takaful company pays claim cheque to the factory owner whose factory has been destroyed the factory owner whose factory has been destroyed due to fire.due to fire.

• When a general takaful company pays claim to a When a general takaful company pays claim to a person whose only car got stolen.person whose only car got stolen.

• When a life takaful company pays death claim cheque When a life takaful company pays death claim cheque to a widow on the death of her husband.to a widow on the death of her husband.

• When a health takaful company pays claim to a person When a health takaful company pays claim to a person undergone heart by pass surgery.undergone heart by pass surgery.

Continues…Continues…• Afghanistan has the highest Afghanistan has the highest infant mortality rateinfant mortality rate

in the world – 257 deaths per 1,000 live births – in the world – 257 deaths per 1,000 live births – and 70 percent of the population lacks access to and 70 percent of the population lacks access to clean waterclean water

• Every half hour, an average of one Afghan woman Every half hour, an average of one Afghan woman dies from dies from pregnancypregnancy-related complications.-related complications.

• According to According to ReutersReuters, "Afghanistan's healthcare , "Afghanistan's healthcare system is widely believed to be one of the system is widely believed to be one of the country's success stories since reconstruction country's success stories since reconstruction began.began.

• Health takaful coverages for the people can be Health takaful coverages for the people can be another tool for further improvement.another tool for further improvement.

The growth of financial sector in The growth of financial sector in Afghanistan:Afghanistan:• Number of operating banks = 18Number of operating banks = 18• Number banks offering Islamic banking = 05Number banks offering Islamic banking = 05• Number of microfinance institutions = 15Number of microfinance institutions = 15• MFI’s Gross loan portfolio USD, 2008 113.2 MFI’s Gross loan portfolio USD, 2008 113.2

millionmillion• Number of active borrowers 2008 334,218Number of active borrowers 2008 334,218• All lending institutions need tools for risk All lending institutions need tools for risk

management.management.

Continues….Continues….• In absence of these tools, lending if made will be In absence of these tools, lending if made will be

on very limited scale.on very limited scale.• Takaful is one of the most important risk Takaful is one of the most important risk

management tool.management tool.• Takaful can provide comfort level to the lending Takaful can provide comfort level to the lending

institution by providing following covers institution by providing following covers depending on type of financing:depending on type of financing:

• Life and health Coverage of the debtorLife and health Coverage of the debtor

Continues…..Continues…..

• Coverage for the assets mortgaged by the Coverage for the assets mortgaged by the institution.institution.

• Motor coverage.Motor coverage.• With these services, lending can be made on With these services, lending can be made on

large scale.large scale.• If any defined loss occurs to the mortgaged If any defined loss occurs to the mortgaged

property, lending institution will receive property, lending institution will receive compensation from the takaful companycompensation from the takaful company

CONCLUSIONCONCLUSIONWe have discussed the following reasons due to We have discussed the following reasons due to

which Afghanistan needs a Takaful company which Afghanistan needs a Takaful company for:for:

• Supporting the reconstruction process Supporting the reconstruction process • The Stability of economyThe Stability of economy• Helping a common man when something goes Helping a common man when something goes

wrongwrong• The growth of financial sectorThe growth of financial sector

Thank YouThank You

CENTER OF ISLAMIC BANKING & ECNOMICS

Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056E-mail : info@alhudacibe.comWeb: http://www.alhudacibe.com