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.