Diversification of Islamic Financial Instruments
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Table 35. Financial Instruments Used in Takaful Industry in Pakistan
Description
Minimum Capital Requirements For Life Takaful: PKR 700 million
For General Takaful: PKR 500 million
Paid up capital requirements make it easy for Insurance
companies to commence Window Takaful operations in
Pakistan, since 2015
Shariah Governance
requirements
Minimum one qualified resident Shariah Advisor for both
Life and General Takaful, full-fledged and Windows.
Advised but not necessary to have a Shariah Supervisory
Board. Pak Qatar and Dawood Takaful have Shariah
Supervisory Boards.
Model used for Life/Family
Takaful
Hybrid Wakala-Waqf-Mudarabah model used. Takaful
operator acts as Wakeel for Waqf fund (or Participants
Takaful Fund PTF, from which claims are paid), and
Mudarib for Participants Investment Fund.
Model used for General Takaful Hybrid Wakala-Waqf-Mudarabah model used.
Unlike Life Takaful, there is no separate Participants
Investment Fund (PIF) and PTF in general Takaful.
Products offered in Life Takaful Individual life insurance
Group Life insurance
Banca Takaful group Life insurance
Products offered in General
Takaful
Health insurance
Group health insurance
Motor takaful
Fire takaful
Marine Takaful
Engineering Takaful
Source: Annual Reports, Pak Qatar Family Takaful 2015, Pak Qatar General Takaful 2015.
In Pakistan, following the development of Takaful Rules in Pakistan in 2005, the Wakala-
Mudarabah-Waqf model was developed. This was partially in response to criticisms of earlier
models such as the Wakala-Mudarabah model (e.g. regarding the ownership of the Takaful
fund being with the operator), and Mufti Muhammad Taqi Usmani suggested declaring the
Takaful Fund a Waqf. The full hybrid model, called Wakala-Mudarabah-Waqf model, is now
used for both Life and General Takaful in Pakistan, and has been approved along with Waqf
deed by the SECP. A depiction is given in the Figure (Hybrid Wakala Waqf Mudarabah model)
below.
As the figure below explains, the main difference between the model used in Life Takaful and
General Takaful in Pakistan is the existence of a separate Participants’ Takaful Fund (PTF) in
Life/Family Takaful. This is the Waqf fund from which all participants’ claims are paid. Note
that when the participants or beneficiaries pay their risk coverage Takaful premiums, they are
first transferred to the Participants’ Investment Fund (PIF), and then only a fraction is
transferred to the PTF. The Waqf deed stipulates that, once funds are transferred to the Waqf
fund (as the ownership of this fund is neither with the Operator nor the Participants, but with
Allah alone), they cannot be withdrawn for any purpose other than that of the establishment of
the fund. All claims of participants for their risk coverage are paid from this Waqf fund. If a
client withdraws or the policy matures, he/she gets the remaining balance from PIF as well as
PTF.