Uncertainty can never be eliminated; it remains in the Takaful Contract as well. But, since the Takaful contract comes under Tabarruaat, the uncertainty (gharar) is considered to be within tolerablelimits underShariah. lnsurance, beinga contract of exchange (muawadat), contains "excessive gharar" and is termed as fasid.

Risk or uncertainty can be divided into: Pure Risk and Speculative Risk. Pure Risk involves the possibility of loss or no loss. For example, damage to property due to fire. Pure Risks a[e the subject of insurance risk protection and Takaful. On the other hand, Speculative Risk involves the possibility of loss, no loss or gain. For example, venturing into a new business, orgambling on horse race. Speculative Risks that include a potential Gain or Profit cannot be insured. Takaful schemes use the principle of indemnification to compensate for the loss that occurs to a Takaful Participant. Takaful insures only Pure Risks and the claims are only payable in the event of Loss to cover repairs, damage, replacement of property, or an agreed fixed amount.

Takaful operators are mutual or cooperative entities. The goal ofTakaful is community well-being and self-sustaining operations, not high profits. Under the Takaful Mudarabah Model, surplus (or profits) is shared fairly and equitably between the share holders and the policyholders (i.e. the 'Participants'). Under the Takaful Wakalah Model, surplus is returned entirely to the P rrticipants.

A Takaful scheme gives usan opportunity to practice the virtues of lslam, including self-purification. Surah Al Maa'idah (V.2) says: "Help one another infurthering virtue and Taqwa (God-consciousness), and do not help one another in evil and transgression". ln a Hadith narrated byAhmad and Abu Daud: Whosoever fulfills the intentions (needs) of his brother, Allah willfulfill his intentions. And Allah always helps those who help their brothers in need. The first Constitution in Medina (622 CE) arranged by Prophet Muhammed (PBUH) contained three aspects directly related to risk protection:social insurance for the Jews, Ansar and Christians; Article 3 concerning 'wergild' or 'blood money'; and provision for Fidyah (ransom) and 'aaqila'. We should follow his (PBUH) example to meet our needs and social obligations.

No. Takaful companies are as competitive as their conventional insurance counterparts. Opting for Takaful will not make you pay any higher costs, as such.

Yes, Takaful companies offer the same variety of products offered by any insurance company, whether it is Fire, Marine, Motor, etc. ln addition, most ofthe Takaful operators have the expertise and experience to deliver tailor-made specific so lutions fo r the be nefit a nd convenience of their clients. The only exceptions are those risks that are not in conformity with the Shariah, e.g. breweries, casinos etc.

procedures, including claims, are the same as in conventional insurance companies. The difference lies in the nature of the contract, not in the procedures.

All Takaful Operators are governed by the SECP's Takaful Rules, 2005 that require the Takaful operators to constitute a "Shariah Board" comprising of Shariah Scholars of repute. Moreover, all Takaful companies have to undergo a "Shariah audit" as well, in addition to the customary Accounting audit, in each accounting period.

Takaful is a new phenomenon in Pakistan. The first Takaful company was established in 1979 - The lslamic lnsurance Company of Sudan. Now, there are more than 100 Takaful Companies in over 20 countries.

ln lslam, there is room for diversity within certain prescribed parameters. Overthe centuries, several Takaful Models have evolved which are approved by the lslamic scholars. While they ar'share the same fundamental Boal of co-operative risk sharing, these models differ slightly in legal strur:ture and organizational operations. Takaful Models are usually described by the lslamic contra(ts used; namely, Hibbah, or 100% Tabarru' [Sudanl, orAl Mudarabah IBahrain/Malaysia], or Al Wakalah [SaudiArabial, or Wakala/Waqf IPakistan].

According to the SEcP's Takaful Rules, 2005, in Pakistan a Takaful product shall be based on the
principle of Wakala or Mudaraba or both. Therefore, Takaful Operators in Pakistan follow a refined
hybrid model named "Wakala - Waqf model. lt is a Wakala model in which thefund is made a separate
legal entity by virtue of it being a waqf. The relationship of the participants and the operator is directly
with the Waqf fund. The operator is the 'Wakeel' of the fund and the participants pay contribution to
the Waqf fund by wayofTabarru (contribution).

Unlike insurance companies, whose investment income may contain Riba, Takaful companies invest
funds in Property, lslamic Banks, Shariah compliant Stocks and other Shariah approved securities like
Sukuk bonds etc.

Although the end result is the same since both insurance and Takaful aim to provide compensation against possible losses, yet the crucialdifference lies in the way that each does this. Thc notion "ends justify means" does not hold when it comes to lslam where both the ends as well as the means have to be in order. Chicken can either be slaughtered or given an electric shock; both achieve the same end, a dead chicken. However, the former way makes the meat Halaal for eating where as the later renders it Haraam.

The Takaful Operatoracts only as the Wakeel of the Waqf Fund. lf, at the end of the year, there is surplus in the Fund (1.e. after adding all its income and deducting all the outgo), such surplus Will be distributed amongst the participants proportionately after taking into account any clair r benefits already availed.

A General Takaful operator may create a single PTF or separate PTFS for different classes of business." (Section 8(5) of the SEECP'S Takaful Rules, 2005). The surplus is thus calculated in accordance with the practice adopted.