‘Takaful’ windows


By Najmullah Khan


Recently, there has been a growing demand from the conventional insurers requesting the authorities to allow window Takaful operations in their companies. It shows their half-hearted approach to the issue.

If they are serious in promoting the cause of Takaful, they should come into the field as a full-fledged Takaful company under the Sec 5 of the Takaful Rules-2005. . These rules allow a conventional company to convert its business into Takaful operations within a period of one year.

A proper commitment on their part will send a positive message to a market. Lobbying for window operation is a time-consuming job and requires a change in the rules which has its own procedure. It is laid down in the rules that window operations can only be considered after five year’s time.

Any change in rules at this stage will send a wrong message investors who want to invest in Takaful operations which permit a breathing time of five years for any company to establish itself in the market. It is always difficult to bring in any new concept in the market. One has to work hard and be patient in the beginning.

If this breathing time is suddenly taken away, it will give wrong signals to foreign investors who shy away from a market where rules are frequently changed. The government on the other hand is trying to come up with ideas that may attract such investors. The operations of a Takaful company cannot be compared or seen as similar to the conventional business. In Takaful, the risk is not transferred but shared. The surplus from the pool at the end of the period goes back to the participants and not to shareholders or the company itself. The contribution in the pool fund is voluntary and equitable. Takaful is not insurance; it’s a different arrangement based on the concept of mutuality..

The phrase “Islamic Insurance” is used only to explain the concept to a lay man who may not know the meaning of the word-Takaful. It is an Arabic word derived from the word “Kafala” which means taking care of each other or standing by the side of someone who has suffered or is in need. The participants’ fund is strictly invested in Islamic Securities and Bonds.The Shariah body continuously watches the operators of a Takaful operations who, on their part, also keep seeking guidance.

If allowed, window operations will function as a subordinate office of a conventional company set up, which will remain answerable to the parent company not exclusively devoted to a pioneering job The subordinate Takaful window operator may end up doing something not permissible under a Takaful operation for want of proper guidance in an intricate and complicated business with no rich experience to fall back upon.

Fully authorised, separate Takaful companies will go into the market with the new concept. They will be able to show dedication and commitment to the participants who are interested in an Islamic form of arrangement. The window operation on the other hand will sell this concept as just “another product” of their parent company; at least the client will see it in that perspective. If the present conventional insurers see a promise in Takaful operations and are sincere is promoting Takaful cause, they may come up with a full-fledged Takaful company under Sec 5 of the Takaful rules or convert their present set-up into a Takaful operation or may wait for five years for the Security Exchange Corporation of Pakistan (SECP) to consider allowing them Takaful windows.

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