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Express Tribune
03-06-2025
- Business
- Express Tribune
Understanding Takaful from the Islamic perspective
Photo: Renowned Shariah scholars from the Islamic finance industry discuss the principles and benefits of Takaful, an Islamic insurance model based on the principles of mutual cooperation, solidarity and brotherhood. Listen to article Shariah perspectives on Takaful Renowned Shariah scholars from the Islamic finance industry discuss the principles and benefits of Takaful, an Islamic insurance model based on the principles of mutual cooperation, solidarity and brotherhood. Karachi (Faisal Arshad) In the second episode of the Tribune Podcast on Takaful, host Adeel Azhar engaged in a comprehensive discussion with Mufti Irshad Ahmad Aijaz, Chairman, Shariah Advisory Committee, State Bank of Pakistan, and Mufti Muhammad Ibrahim Essa, Shariah Advisor, EFU Hemayah Takaful. The conversation centered around Shariah perspectives on Islamic insurance, identifying the fundamental differences between conventional insurance and Takaful. Takaful Versus Conventional Insurance Mufti Irshad said that people are often skeptical about the appropriateness of Takaful from a Shariah perspective, arguing that any form of insurance negates the concept of Tawakkul. However, he maintains that Takaful operates on the principle of mutual protection, which is encouraged as a principle in Islam. In the case of Takaful, he says, a collective pool of funds is established by the participants to provide protection against losses to individuals against unforeseen events. In contrast to conventional insurance, Takaful does not involve selling risk; the fund remains intact even if there are no claims. Conventional insurance follows a commercial model where the insurer keeps any unclaimed funds as profit, whereas Takaful operates on a cooperative model where participants share in any surplus. This approach ensures that the system is free from betting, where the service provider claims entitlement to the fund even if no loss is incurred. Surplus distribution in Takaful The key difference between conventional insurance and Takaful is about the treatment of the fund in the event that the pool of funds exceeds the payment made on account of compensation, as explained by Mufti Ibrahim. In Takaful: The contribution made by each participant in a Takaful plan is divided into three parts: Investment – allocated for savings or investment purposes. Wakala Fee – a fixed fee paid to the Takaful operator for managing the funds. Tabarru (Donation) – a portion voluntarily donated to the Participant Takaful Fund (PTF), used to provide financial support to participants in need. At the end of the financial period, if there is any surplus remaining in the PTF (after claims and expenses), it is handled in two ways: A portion may be distributed among eligible participants as a surplus sharing, based on predefined criteria. The remaining surplus is retained in the fund to ensure future stability and sustainability of the Takaful pool. This approach is based on a Hadith of the Holy Prophet Muhammad PBUH, which presents the concept of mutual protection and distribution of surplus among participants. Almost Rs. 800 million of surplus has been distributed amongst EFU Hemayah Takaful participants over the past years, in accordance with Shariah principles. How Takaful operators make money Mufti Ibrahim addressed the question of how Takaful operators make money when they distribute the leftover pool of premiums among contributors. He cited Mufti Irshad's explanation that Takaful operators are considered as managers of the fund. To perform the arduous task of management, they are entitled to a management fee, known as the Wakala fee. This fee is similar to the salary drawn by employees of Awqaf and is approved by the Shariah advisor. The Takaful operator's role is to manage the pool, collect funds, make investments, and process claims, all while ensuring Shariah compliance. The Wakala fee is a key component of the Takaful system, as it allows the operator to cover its costs and management expenditures. However, the fee must be reasonable and approved by the Shariah advisor to ensure that it is in line with Shariah principles. Islamic reference for Takaful Host Adeel Azhar asked about the Islamic reference for Takaful, and Mufti Irshad explained that while there may not be a direct reference to modern-day Takaful in Islamic history, the concept of mutual protection and harmony among a group of people facing similar challenges is encouraged in Islam. He referenced a historical example praised by Prophet Muhammad (PBUH), where a tribe (Asharijin) collectively pooled dates to survive a famine, highlighting Islam's encouragement of mutual support. By working together and pooling resources, individuals can protect each other against risks and challenges. Investment approaches in Takaful Mufti Ibrahim also noted the differences in investment approaches between Takaful and conventional insurance. In Takaful, investments must be Shariah-compliant, including the collection and parking of funds. Complying with the Shariah guidelines EFU Hemayah Takaful ensures that participants' contribution is invested in Islamic banks and other Islamic investment avenues, ensuring that the system remains true to its Islamic roots. Growth of the Takaful industry Mufti Irshad discussed the growth of the Takaful industry, noting that while it is regulated by SECP, the State Bank of Pakistan is also working to increase financial penetration among the general public. Ulemas are playing a crucial role in promoting Shariah-compliant options and convincing people to avoid fraudulent investment schemes. He urged the need for financial literacy so that people may benefit from legitimate and Shariah-compliant financial services. Mufti Ibrahim added that, like Islamic banking, Takaful services are also growing. The companies are now opting for conversion to Shariah-compliant business models rather than maintaining parallel windows of both Islamic and conventional banking or insurance. He acknowledged that all stakeholders and regulators, as well as Ulema, are playing a role in this regard, with Ulemas providing inputs in product development, investment rules, and Shariah audit. With the growing demand for Islamic financial services, Takaful is poised to play a significant role in the financial landscape of Pakistan, helping individuals and businesses protect themselves against risks while adhering to Islamic principles. With scholars, regulators, and companies working together, the industry is well-positioned to redefine financial protection in Pakistan.
Express Tribune
27-05-2025
- Business
- Express Tribune
Redefining faith and finance: Pakistan's evolving Takaful industry
The Takaful industry in Pakistan has come a long way since its inception in 2006, when the Securities and Exchange Commission of Pakistan (SECP) promulgated Takaful Rules. Azeem Iqbal Pirani, Chief Operation Officer and Executive Director at EFU Life, recalled the history of Takaful in the recent Tribune Podcast held in collaboration with EFU Hemayah Takaful. EFU Life Assurance Ltd. was the first life insurance company to obtain a Takaful Window license under the SECP's regulatory framework For years, a significant portion of Pakistan's population avoided insurance products, viewing them as contrary to Shariah principles. Pirani shared that when he entered the industry, the public hesitated to engage with any form of insurance—life, general, or health. The mission was clear: to create a Shariah-compliant system that aligned with people's values and beliefs. EFU Life's introduction of Takaful aimed to bridge this gap, and while uptake is still growing, meaningful progress has been made. As per last year's report by SECP, Takaful's share was around 12 percent in the total sales of the insurance sector. The share is still modest because of two reasons, one, that people still have doubts about its religious legitimacy, and second, people are not aware of these services as yet. But SECP now has a particular mandate in expanding the user base of Takaful, aiming to take its share to 35 percent from 12 percent by 2028. Host Adeel Azhar, who has been an influential personality in the finance & insurance sector of Pakistan, agreed that lack of awareness is the main stumbling block. He cites the example of insurance in the auto-finance sector, where he said that it is high only due to SBP making it mandatory. He said that it is indeed a double challenge to convince people to take finance on Islamic principles and then also add to Islamic Insurance i.e. Takaful. Dr. Irum Saba, Director of the Center for Excellence in Islamic Finance at IBA Karachi, explained the reasons behind poor concentration of Islamic finance in Pakistan. She noted that our country has a huge population of 250 million, but the commitment of the government and the regulators is not as strong. She compared this to Malaysia, the country with a very large concentration of Islamic finance, maintaining that the government and regulators there are very much committed and awareness is accordingly much more than Pakistan. She said that in Malaysia, students, entrepreneurs, businesses, and every institution is protected by Takaful. Compared to Pakistan, she said state institutions in Malaysia are headed by people who are committed to Islamic finance, including their ministry of finance, securities commission, and central bank. She advocates that such commitment, coupled with awareness, is the key to expansion of the Takaful industry. In particular, she advocates that such awareness be spread at the level of schools, colleges, and even villages. Dr. Irum also cited the examples of other neighboring countries, where she said the financial literacy is much more prevalent than Pakistan. She quotes her experience of seeing street hawkers having QR Code Machines for payments, which she said reflects the good financial acumen of otherwise less educated people. She stressed on educating the younger generation through tools, techniques, and AI. When asked about the milestones EFU Hemayah Takaful has achieved over its 10-year history and its plan forward, Pirani said that EFU Life was the first company which obtained the Window License for its services. He mentioned that EFU not only launched a Takaful product, it also gave it a brand identity. Currently, Takaful contributes to 35 percent of EFU Life's business, which reflects its growth over the decade. One strategy that particularly worked was providing customers the option to convert the existing life insurance products into Shariah-compliant ones. This was an unparalleled offer which not only boosted the company's business but also helped in expanding Takaful penetration in Pakistan. EFU Life then moved to inclusive and digital options, which also helped expand customer base. Thanks to the growing business, the company has distributed a surplus of Rs 800 million among its customers, which now stand at 1.4 million. Responding to a question on the steps taken by academia such as IBA for connecting the academia with the industry, Dr. Irum elaborated that her center regularly conducts training, engages in research, and holds discussions and debates on Islamic finance. She mentioned that specialized training programs to impart solid understanding of Takaful were administered by expert trainers from both national and international institutions. She also stated that the center is doing research on Wakala-Waqf model of Takaful, which is applicable in Pakistan. She said that the training is also offered to companies which are seeking services for their employees from Takaful operators. In another program, the center offers training on Islamic wealth management and planning, where students are educated about how to save and invest, and when it relates to investment, the role of Takaful is also highlighted. The episode served as a compelling reflection on how Pakistan's Takaful industry is transforming. Supported by regulatory mandates, academic research, and evolving consumer awareness, Takaful is no longer a niche offering. As EFU Life and institutions like IBA continue to educate and innovate, the future of Islamic insurance in Pakistan appears increasingly inclusive, accessible, and in sync with the values of the people it aims to serve.
Express Tribune
25-05-2025
- Business
- Express Tribune
Takaful industry in Pakistan: challenges and opportunities
Listen to article The Takaful industry in Pakistan has come a long way since its inception in 2006, when the Securities and Exchange Commission of Pakistan (SECP) promulgated Takaful Rules. Azeem Iqbal Pirani, Chief Operation Officer and Executive Director at EFU Life, recalled the history of Takaful in the recent Tribune Podcast held in collaboration with EFU Hemayah Takaful. He mentioned that EFU was the first company incorporated as a General Takaful Company with the aim of expanding insurance services to the general public in accordance with their beliefs. Pirani mentioned that at the time, ordinary citizens would not avail any kind of insurance, be it general, life, or health insurance, because people believed that the insurance services were against Shariah. Those like him who joined to serve the Takaful industry aimed to expand the services for common citizens in line with their beliefs, so that they could avail themselves without any resistance or reluctance. This objective has been achieved to some extent, not as much as desired, but still, the share of Takaful services among general users has increased. As per last year's report by SECP, Takaful's share was around 12 percent of the total sales of the insurance sector. The share is still modest because of two reasons, one, that people still have doubts about its religious legitimacy, and second, people are not aware of these services as yet. But SECP now has a particular interest in expanding the user base of Takaful, aiming to take its share to 35 percent from 12 percent by 2028. Host Adeel Azhar agreed that a lack of awareness is the main stumbling block. He cites the example of insurance in the auto-finance sector, where he said that it is high only due to the SBP making it mandatory. He said that it is indeed a double challenge to convince people to take finance on Islamic principles and then also add to Islamic Insurance, i.e., Takaful. Dr Irum Saba, Director of the Center for Excellence in Islamic Finance at IBA Karachi, explained the reasons behind the poor concentration of Islamic finance in Pakistan. She noted that our country has a huge population of 250 million, but the commitment of the government and the regulators is not as strong. She compared this to Malaysia, the country with a very large concentration of Islamic finance, maintaining that the government and regulators there are very much committed, and awareness is accordingly much higher than in Pakistan. She said that in Malaysia, students, entrepreneurs, businesses, and every institution is protected by Takaful. Compared to Pakistan, she said state institutions in Malaysia are headed by people who are committed to Islamic finance, including their ministry of finance, securities commission, and central bank. She advocates that such commitment, coupled with awareness, is the key to expansion of the Takaful industry. In particular, she advocates that such awareness be spread at the level of schools, colleges, and even villages. Dr Irum also cited the examples of other neighboring countries, where she said the financial literacy is much more prevalent than Pakistan. She quotes her experience of seeing street hawkers having QR Code Machines for payments, which she said reflects the good financial acumen of otherwise less educated people. She stressed on educating the younger generation through tools, techniques, and AI. When asked about the milestones EFU Hemayah Takaful has achieved over its 10-year history and its plan forward, Pirani said that EFU Life was the first company which obtained the Window License for its services. He mentioned that EFU not only launched a Takaful product, it also gave it a brand identity. Currently, Takaful contributes to 35 percent of EFU Life's business, which reflects its growth over the decade. One strategy that particularly worked was providing customers the option to convert the existing life insurance products into Shariah-compliant ones. This was an unparalleled offer that not only boosted the company's business but also helped in expanding Takaful penetration in Pakistan. EFU then moved to inclusive and digital options, which also helped expand the customer base. Thanks to the growing business, the company has distributed a surplus of Rs 800 million among its customers, which now stands at 1.4 million. Responding to a question on the steps taken by IBA for connecting the academia with the industry, Dr. Irum elaborated that her center regularly conducts training, engages in research, and holds discussions and debates on Islamic finance. She mentioned that specialized training programs to impart solid understanding of Takaful were administered by expert trainers from both national and international institutions. She also stated that the center is doing research on the Wakala-Waqf model of Takaful, which is applicable in Pakistan. She said that the training is also offered to companies that are seeking services for their employees from Takaful operators. In another program, the center offers training on Islamic wealth management and planning, where students are educated about how to save and invest, and when it comes to investment, the role of Takaful is also highlighted.
Express Tribune
09-05-2025
- Business
- Express Tribune
HBL PSL has acted as an ambassador for Pak
HBL's Chief Marketing and Communications Officer Ali Habib seen during an exclusive interview with famous Express News anchor Mirza Iqbal Baig about HBL PSL's brand power and tremendous appeal. PHOTO: Express NEWS Pakistan and cricket have become inseparable, and the HBL Pakistan Super League (PSL) is the realization of a long-held dream. The Pakistan Cricket Board (PCB) envisioned an exceptional cricket event, a vision shared by the entire nation. HBL played a national role in bringing that dream to life. Even after ten years, the journey of HBL PSL continues with consistency. HBL has remained committed to strengthening the PSL. Thanks to the league, international cricket returned to Pakistan, and talented young cricketers got the opportunity to showcase their abilities. HBL PSL has acted as an ambassador for Pakistan, sending a strong message globally that the country is suitable for investment. These views were expressed by Ali Habib, HBL's Chief Marketing and Communications Officer, during a conversation with host Mirza Iqbal Baig on the Tribune Podcast. He stated that the HBL PSL has successfully completed its first ten years. When the league started, no one imagined it would become such a strong national brand or that emerging Pakistani cricketers would rise through its platform to represent the country. The league continues to succeed, aiming not just to promote cricket but also to encourage healthy activities. In 2016, when the league began, international cricket had practically vanished from Pakistan, and it was hard to imagine top global cricketers ever playing there again. However, the PCB, franchise owners, government bodies, and provincial and city administrations worked together to change that reality. HBL, with its 80-year history, has a long-term vision tied to Pakistan's progress and success. The bank has consistently aimed to strengthen the PSL and has served as a bridge between Pakistan and the world. Much like the Olympics reflects a host country's success, the HBL PSL signals that Pakistan is a viable destination for global investment. Since 2020, all PSL matches have been held in Pakistan. Last year, the arrival of well-known England cricket fans at Multan Stadium was a sign that cricket is regaining strength in the country. Wherever HBL PSL matches are held, the local economy gets a boostMultan being a prime example. Innovation has led to gradual improvements. PSL has successfully connected with the younger generation by integrating youth culture, music, and artificial intelligence. The responsibility of creating the annual PSL anthem lies with the PCB, and HBL is informed of the plan accordingly. Criticism of the anthem often indicates its popularity and engagement. Regarding the PSL trophy unveiling ceremony, Ali Habib said that as title sponsor, HBL provides input to the PCB. This year's unveiling included modern elements. Today's youth are familiar with AI, social media, and mobile tech, and the PSL's fan tunes appeal to them. HBL's slogan is "Jahan Khwab, Wahan HBL" (Where there are dreams, there is HBL), and now they also say, "Jahan PSL, Wahan HBL" (Where there is PSL, there is HBL). After completing 10 years with the PSL, HBL will decide on renewing the sponsorshipsuch decisions are made commercially. Ali Habib emphasized that PSL is the fulfillment of a dream and a prime example of hard work and sincere effort. Even the COVID-19 crisis could not halt its progress. He concluded with a message to cricket fans to attend HBL PSL matches and enjoy witnessing top-level cricket in Pakistan, with world-class players showcasing their skills. HBL will continue supporting positive activities and playing its part in Pakistan's development.
