International Conference onIslamic Microfinance
CENTER OF ISLAMIC BANKING & ECNOMICS
Organized By :
Held At:
Faisal Auditorium Islamabad - Pakistan
MicroTakaful – the way forward
Presented by:Capt. M. Jamil Akhtar Khan ACII, MCIT, Master Mariner
Managing DirectorTHE UNIVERSAL INSURANCE COMPANY LTD.
Contents
• Introduction• MicroTakaful defined• MicroTakaful schemes in other countries • Prospects in Pakistan• Incremental values – The Takaful advantage• The way forward• Conclusion
Introduction
Micro-insurance defined:
“Risk-pooling products that are designed to be appropriate for the low-income market in relation to cost, terms, coverage, and delivery mechanisms”.
MicroTakaful refined:
“A mechanism to provide Shariah-based protection to the blue collared, under-privileged individuals at an affordable cost”.
Introduction Cont’d. …• Microfinance can help people improve.
• Microtakaful will help them sustain their financial well being.
• Feeling of togetherness & security.
• Opens avenues for joint efforts for mutual benefits.
• Cooperative approach and outlook.
• Result – migration of individual level.
• Society benefits at large.
Global Landscape
• Only eighty million out of the world's 2.5 billion poor are currently covered by some form of micro insurance.
• Only 3% of poor lives are insured in India and China.
• Only 0.3% of the poor are insured in Africa.
• In 23 of the poorest 100 countries in the world, there is currently no identified micro insurance activity.
Prospects in Pakistan
• Serious efforts at national level only picked up
during the last decade.• Advent of Microfinance banks.• Large rural/urban divide (65% : 35%)• 40% population below poverty level.• Scope for extensive work.• Mushroom growth of NGOs.
Prospects in Pakistan (Cont’d. …)• Government’s initiatives – Rural support programs.
• SMEDA.
• Financial Support from ADB, WB, etc.
• State Bank’s initiative – 20% branches of commercial banks required in rural areas.
• Agriculture/Crop & Livestock Finance and Takaful.
• Benefit of economies of scale to make these viable ventures.
Construction of a House
Marriage
Death
Prolonged Illness
Education of Children
Business Failure/Loss of Job
Birth of ChildrenImp
ort
an
ce o
f R
isk/E
con
om
ic S
tress
Potential areas of action
“ … they seemed satisfied with the convenience and affordability of the policy, but some thought that the
premium should be reimbursed if they do not file a claim”.
Excerpt from
The Demand for Micro insurance in Pakistan
by
ELIZABETH MCGUINNESS AND VOLODYMYR TOUNYTSKY
MARCH 2006
The Takaful Advantage
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
Income
Wakalah Fee
InvestmentIncome
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
Investment by the Company
The Takaful Advantage
The way forward
NO
?????
THEN
The way forward• Tax incentives• Goodwill• Awareness• Extensive documentation• Distribution channels• Strategic alliances• Incentives & Awards
• Setting up a dedicated micro-Takaful
company!
The way forward (Cont’d. …)
Setting up a dedicated micro-Takaful
company!• Initiative by DFIs, NGOs, and other interested
investors.• Ideal synergies with micro-finance institutions
and other lending organizations. • Govt. to prescribe lower paid-up capital. • Managed by dedicated professionals.
Current scenario
What is required?
Where there is will, there is a way!
Thank 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 : [email protected]: http://www.alhudacibe.com