"TAKAFUL, ISLAMIC FINANCE AND LESSON FROM ADVERSITY"
Apr 9 - 15, 2012
Islamic finance has developed mainly in two directions vis-a-vis Islamic banking and Islamic Insurance (Takaful). While information about Islamic banking is being increasingly disseminated, features models and structures of Takaful are little known particularly in Pakistan.
Different views have been expressed about the status of conventional insurance from the stand point of Islam. An overwhelming majority of the Shariah Scholars believe that it is unlawful due to involvement of Riba (interest), Maisir (gambling) and Gharar (Uncertainty), Takaful the Islamic alternative to Insurance is based on the concept of social solidarity, cooperation and mutual indemnification of losses of members. It is a pact among a group of persons who agree to jointly indemnify the loss of a damage that may inflict upon any of them, out of the fund they donate collectively.
Takaful is not a new concept in Islamic Commercial Law. The contemporary jurists acknowledge that the foundation of shared responsibility or Takaful was laid down in the system of Aaqilah, which was an arrangement of mutual help or indemnification customary in some tribes at the time of the Holy Prophet (PBUH). In case of any natural calamity everybody used to contribute something until the loss was indemnified. Similarly, the ideas of Aaqilah in respect of blood money or any disaster was based on the concept of Takaful wherein payments by the whole tribe distributed the financial burden among the entire tribe.
The distribution between the conventional Insurance and Takful business is more visible with respect to investment of funds. While Insurance Companies invest their funds in interest base avenues and without any regard to the concept of Halaal or Haram, Takaful Companies undertake only Shariah Complaints business and the profits are distributed in accordance with the agreed mechanism of the Takaful Model.
Notwithstanding the global economic turmoil where the conventional financial system has almost failed, Islamic banks have shown tremendous resilience. Backing for greater use of Islamic Finance to overcome the present financial woes has come from an unexpected source. An article in the Vatican newspaper says, "The ethical principles on which Islamic Finance is based may bring banks closer to their clients and to the true spirit. Which should mark every financial service." For example Sukuk could be used to even fund "Car Industry or the next Olympic games in London," it says. The newspaper had also criticized the free market model for having ,ì grown too much and badly in the past two decades." The Vatican's stand that ì the great religions have always had a common attention to the human dimension of the economy.
With a call for Islamic finance to the developed as an alternative to the Wall Street model of doing business, Malaysian, Prime Minister Abdullah Ahmed Badawi said the Islamic Finance system's ability to remain largely unscathed by the difficulties affecting the conventional international financial system is a testimony to its integrity and validity and it is envisaged, to see Islamic Finance play a more prominent role in the international financial system. In the wake of the global financial turmoil generated by the current system.
The current economic crisis provides all the amo for a populist backlash. What has the corporate world learned from the economic crisis, the fortune 500 companies having its worst slump over, but the survivors have been taught a few things about thinking long term and sticking to principles. While it may be comforting to react to a messy year like 2008 with righteous anger, a more useful approach would be to look within the list for the clearer truth we can find.
The lesson can be summarized with the following principles guidelines.
* Gorging on easy profits can be fatal.
* Highly disciplined companies can thrive in all seasons.
* The technology sector is now a pillar of stability.
* The next five year----- redefine everything in business.
* Business will be more accountable.