TAKAFUL FUND MANAGEMENT

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TAKAFUL FUND MANAGEMENT
Prof. Dr. Mohd. Masum Billah www.drmasumbillah.bl
ogspot.com
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INTRODUCTION AND CENTRAL IDEA
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INTRODUCTION

• Some say prostitution is the oldest profession
  history actually suggests that the oldest
  profession may indeed be that of the
  moneylender.
• Martin Armstrong, Princeton
  Economic Institute

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CENTRAL IDEA

• Lets start with a Quranic evidence which
  support the argument yes indeed riba is the
  oldest profession
• O ye believe! Devour not usury, doubled and
  multiplied but fear God that ye may (really)
  prosper.
• Al-Imran130

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SYARIKAT TAKAFUL MALAYSIA BERHAD(STMB)
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BACKGROUND OF THE COMPANY

• 29th November1984
• Authorized paid up capital of RM100 billion and a
  paid up capital of RM10 million.
• Shareholders
• BIMB
• Syarikat Takaful Malaysia Berhad (STMB)

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• Governed by Section 8 article 3(a) of Takaful Act
  1984, in which the act says that
• A religious supervisory council should be made
  up of Muslim religious scholars in the country
  and shall advise the company on the operations of
  Takaful business.

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CORPORATE STRUCTURE
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FAMILY
GENERAL
FRUITSTAKAFUL PRODUCTS
ROOTSPRINCIPLES DEVELOPED
FERTILIZERMUSLIM SCHOLARS
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IDEA OF TAKAFUL FUND MANAGEMENT

• To have a good fruit, the fertilizer must be
  from a very good quality. Only then the root can
  be developed to produce a branch of good fruits.

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• Fertilizers Muslim Scholars
• Roots are principles developed by knowledgeable
  Muslim Scholars
• Fruits refers to the successful insurance product

• The very basic idea we are stressing here is that
  in order to manage funds in an Islamic way, the
  rules developed by Muslim must be very clear and
  there should be no room for doubt

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• If the funds are managed very well (according to
  Shariah principles), then only people
  (especially the Muslims) will come and buy the
  product.
• Getting the trust from people is much is much
  more important than promoting the product for
  long term plan (sustaining customers)

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FLOW FUND MANAGEMENT
TABARRU
MUDHARABAH
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STMB FUND MANAGEMENTPractical Scenario
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• FUND MANAGEMENT
• Sources of Income To The Company
• Idea of Managing The Takaful Fund
• STMB Fund Management
• Few Models of Takaful Fund Management
• Existing Phenomena
• Tauni Model
• Tijari Model
• Wakalah Model
• Proposed Model of Family and General Takaful Fund
  Models II and I
• Model I
• Model II
• Shareholders Fund

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• PSA-Retakaful, Claim Reserve, Unearned Takaful
  contributions and General Reserve
• PA-Investment and Profit
• Surplus
• PA-Investment and Profit
• Shareholders Fund
• Shareholders Fund-Expenses
• Net Profit for shareholder

• Tabaru
• Hypothesis AnalysisCompanys Performance
• Family Takaful Fund
• Family Takaful Business
• Individual Sector
• Group Sector

• General Takaful Fund
• General Takaful Business
• Staff Commission in Takaful Buying Policies By
  The Policy Buyer

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FUND MANAGEMENT

• I) Sources of income to the company
• Profit from the investment of its
  shareholders fund
• Its share of profits from the management of
  both the family takaful business and general
  takaful business

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FUND MANAGEMENT
II) Idea of Managing the Takaful Fund
Current Profit Sharing Ratio
General Business
Family Business

• Profit From
• General
• Family Business
• Funds and Investment

Total Income will be credited into
the shareholders fund
Profit/Loss will be determined
Income - Operating Expenditure
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FUND MANAGEMENT

• III) Syarikat Takaful Malaysia Fund Management
• Few Models of Takaful Management
• 1) Tauni Model
• Middle East, Bank Jazira in Arab
• Those did not face any risk will get nothing
• - All the surplus will go straight away to the
  
• companys account and also the shareholder's
• fund

Existing Phenomena
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• 2) Tijari Model
• adopted by Malaysia especially STMB
• - underwriting surplus is done based on the
• agreed ratio. Therefore, it depends on the
• economic conditions
• - Example
• recession - 60 40
• booming - 80 20
• - Those participant who did not claim will get
• the mudharabah bonus

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• 3) Wakalah Model
• - Also known as agent/broker model
• - Adopted by May bank Takaful
• - What differentiate this model with the other
  two is the commission given to the agent
  straight away from the premium given by the
  participant. But with two condition the
  participants must
• know and agree
• percentage of deduction must be known

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FUND MANAGEMENT
I (Tabarru') (Mudharabah) PSA
PA SSF Total Family 8
90 2 100 General 90
8 2 100
Proposed Model of Family and General Takaful Fund
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What differentiate Model 1 from Model 2

• Model 1
• Agent do not get his commission
• Do not need to get consent from participants

• Model 2
• Agent get his commission
• In this case, the company must get a
• written consent from participants

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What are the similarities between Model 1 from
Model 2

• All of them have
• 1. Takaful fund which is divided into four
  divisions
• Retakaful
• Claim Reserve
• Unearned Takaful Contribution
• General Reserve (which is subject to
• Technical, IBNR, etc

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What are the similarities between Model 1 from
Model 2

• 2. The investment is generated from
• participants (Mudharabah) account. Example
• of investment are
• Income from investment account
• Income from Islamic Accepted Bill
• Malaysian Government - certificates
• If we see the, the investment income (net
• return) is RM 894,355 as compared to
• RM 9,013,989 last year

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RECOMMENDATION

• Say no to RIBA. Even Julius Caesar in Romania
  Empire mentioned that riba can destroy the
  institution of a society. What else being a
  Muslim, we should be very bold in upholding the
  Quranic teachings

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What we can do?

• 1. Train employees
• The employees must equip themselves
• before promotion
• They also must be actively seek all the
• available facts and base their decision
• upon the research
• 2. General Takaful Insurance product should be
• treated as one of the competitive advantage
• over conventional insurance whereby the
• money back guarantee is there

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What we can do?

• 3. Offer more insurance products that has to do
• with umrah, hajj or educational package
• 4. In terms of investment, STMB should expand
• its branch worldwide because
• Malaysia has been a leading platform for
• takaful insurance business in the world
• see total revenue page 31
• 5. Role of education

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CONCLUSION

• 1. DOUBT
• Once the room for doubt arises in the insurer and
  also the assured, either one party will find some
  difficulties in implementing the roles governance
  the management of funds
• 2. COMMISSION
• Different models had been presented
• Tauni
• Tijarah
• Wakalah - Only in wakalah the commission is given
  to the agent

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THE FUTURE OF ISLAMIC INSURANCE
For a body to be healthy, the organs must work
well first So, for an organization to work
well, the mechanisms used in the system should
be checked first whether it fulfills the shariah
requirements or not