Policy Perspectives 2016: Volume 13, No. 2
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Questions and Answers

What is the primary role of Mudarib in relation to Qarz-e-Hasan?

  • To recover loans by providing additional support
  • To manage investments for profit generation
  • To act as a guarantor for the Takāful fund
  • To arrange loans from shareholders without any responsibility (correct)
  • Why is sharing of underwriting surplus considered problematic within Takāful?

  • It transforms Takāful into a commercial business venture (correct)
  • It leads to higher risks for the shareholders
  • It complicates the donation processes
  • It eliminates the mutual protection concept
  • What does the term 'Urf' signify in Islamic finance?

  • A financial strategy for maximizing profits
  • A legal basis derived from customary practices (correct)
  • An investment risk assessment technique
  • A contractual obligation among shareholders
  • What triggers the maturation of the donation contract under the model discussed?

    <p>Only if a loss is incurred by participants (D)</p> Signup and view all the answers

    In the context of General Takāful, when is the actual tabarru determined?

    <p>Only when a loss occurs (C)</p> Signup and view all the answers

    How is profit defined within the General Business framework discussed?

    <p>Only as underwriting surplus, akin to traditional models (B)</p> Signup and view all the answers

    What is the main purpose of the guidance provided by Bank Negara Malaysia?

    <p>To provide Shari’ah resolutions for Islamic finance (D)</p> Signup and view all the answers

    What does 'Hiba bis-Sawab' refer to in this context?

    <p>A conditional act of giving a gift with mutual expectation (B)</p> Signup and view all the answers

    What is the primary purpose of the Takāful contributions made by participants?

    <p>To create a defined asset for mutual benefit (A)</p> Signup and view all the answers

    In a Takāful arrangement, what happens to the investment returns generated by the Takāful company?

    <p>They are pooled back into the General Takāful Fund (B)</p> Signup and view all the answers

    What happens if there is a surplus in the General Takāful Fund after deducting operational costs and no claims are incurred?

    <p>The surplus is shared between participants and the Takāful operator (A)</p> Signup and view all the answers

    What is a key criticism made by scholars regarding the use of the Muḍārabah model in Takāful?

    <p>It links tabarru with profit-sharing which is deemed inappropriate (A)</p> Signup and view all the answers

    Which of the following is NOT true regarding operational costs in a General Takāful business?

    <p>They are reimbursed from the surplus of participants (D)</p> Signup and view all the answers

    What income sources contribute to the earnings of the Takāful company?

    <p>Investment income and a share from surplus (A)</p> Signup and view all the answers

    What is a major objection related to commercial insurance mentioned in the context of Takāful?

    <p>Presence of gharar in commercial contracts (A)</p> Signup and view all the answers

    When are profits attributed to Takāful participants usually distributed?

    <p>Upon expiry of their respective General Takāful Schemes (A)</p> Signup and view all the answers

    What is the primary principle of the Muḍārabah model?

    <p>Profit and loss sharing between capital provider and manager. (C)</p> Signup and view all the answers

    In the context of the Muḍārabah model, who is referred to as Rab-ul-Māl?

    <p>The entity providing initial capital. (D)</p> Signup and view all the answers

    Which region primarily utilizes the Muḍārabah model of Takāful?

    <p>South-East Asia (A)</p> Signup and view all the answers

    What distinguishes the Muḍārabah model from other Takāful models?

    <p>It features a profit-sharing contract between participants and operators. (C)</p> Signup and view all the answers

    What role does the Mudarib play in the Muḍārabah model?

    <p>They are responsible for managing the business. (A)</p> Signup and view all the answers

    How are profits distributed in the Muḍārabah model?

    <p>According to a mutually agreed-upon contract between the parties. (C)</p> Signup and view all the answers

    What is a common misconception about the Muḍārabah model?

    <p>It guarantees profit for the capital provider. (D)</p> Signup and view all the answers

    What aspect of the Muḍārabah model requires careful attention from a Shariʻah perspective?

    <p>The clarity of profit-sharing arrangements. (D)</p> Signup and view all the answers

    Flashcards

    Mudarabah Model

    A profit-and-loss sharing principle in a business contract between the capital provider (Rab-ul-Mal) and the business manager (Mudarib). In Takāful, it's a profit-sharing contract between participants and operator.

    Rab-ul-Mal

    The party in a Mudarabah contract who provides the capital.

    Mudarib

    The party who manages the business in a Mudarabah contract.

    Takaful

    Islamic insurance.

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    Wakalah Model

    A Takāful model used in the Gulf region, often called the Bahrain model.

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    Waqf-Wakalah Model

    Takāful model initiated in Pakistan and South Africa. Also known as Pakistan's Model of Takaful.

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    Contractual Relationship (Takaful)

    The agreement between a Takaful company and participants determines how the business is managed in different models.

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    Operational System (Takaful)

    The practical workings of different Takaful models, largely the same across models, but differing in details.

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    What is Qarz-e-Hasan?

    A type of interest-free loan in Islamic finance, often given for charitable purposes.

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    What is 'Urf'?

    A common custom or established practice that is accepted as a legal basis in Islamic law.

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    What is 'Urf Iqtisadi'?

    A common business practice that is considered a basis for Islamic finance rulings.

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    How is Tabarru used in Takaful?

    A donation (Tabarru) is made by Takaful participants in case of a loss, with the intention to help those affected.

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    What is underwriting surplus?

    The profit earned by a Takaful company from its operations, after covering expenses and claims.

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    How is General Takaful different from conventional insurance?

    In General Takaful, the actual amount of Tabarru needed is determined only after a loss occurs.

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    What is Raas-ul-Mal?

    The initial capital contributed by Takaful participants, used to start and operate the Takaful business.

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    How does Takaful's 'Urf allow for underwriting surplus?

    Takaful 'Urf considers profit from general business operations, including underwriting surplus, to be part of the Takaful business.

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    General Takāful Fund

    A pool of money created from contributions by participants in a Takāful scheme, used to compensate members for losses.

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    Tabarru

    A voluntary contribution made by participants in a Takāful scheme, with the intent to help others in case of loss.

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    What is the Mudarib's role in Takāful?

    The Mudarib acts as the manager of the General Takāful Fund. They invest the funds and share the profits with participants.

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    How are profits distributed in Takaful?

    Any surplus in the General Takāful Fund, after expenses and claims are paid, is shared between the participants and the Takāful operator according to an agreed ratio.

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    What is the core objection against commercial insurance in Islamic finance?

    The presence of Gharar, which refers to uncertainty or ambiguity in a contract, is considered unacceptable in Islamic finance, as it is seen as gambling.

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    What is the concern about linking Tabarru and Mudarabah contracts in Takāful?

    Some scholars argue that directly linking a voluntary contribution (Tabarru) to a profit-sharing contract (Mudarabah) blurs the distinction between charity and business, potentially conflicting with Islamic principles.

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    What are some benefits of Muḍārabah model in Takāful?

    It allows for risk sharing, promotes ethical investment, and aligns with Islamic principles of profit-sharing, transparency and accountability.

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    What is the 'Takaful company's' role in the Muḍārabah model?

    The Takāful company acts as the Mudarib, managing the General Takāful Fund, investing the funds, and sharing profits with the participants.

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    Study Notes

    Policy Perspectives Volume 13, Number 2, 2016

    • The publication is Policy Perspectives, Volume 13, Number 2, published in 2016 by the Institute of Policy Studies, Islamabad.
    • It contains articles on various topics, including the Sustainable Development Goals (SDGs), Islamic insurance, Middle East refugee crisis, European approaches, Pan-Arabism, US-Israel aid relationship, Pakistan, Afghanistan, Gwadar, nuclear energy security, and power sector review.
    • The publication includes an "Editor's Note," and a section with "Contents."
    • Specific articles include "Realizing Sustainable Development Goals (SDGs): Need for an Indigenous Approach," "Islamic Insurance: Evolution, Models and Issues," "Middle East Refugees' Crisis," "Pan-Arabism," "U.S.-Israel Special Aid Relationship," "Afghanistan: Finding Peace Amidst Chaos," "Gwadar: A Historical Kaleidoscope," "Nuclear Energy Security," and "Review of Government's Performance in Power Sector (2013-2016)."
    • Detailed information is provided on the "Evolution of Takaful" including timelines of key events between 1976 and 2010.
    • The articles cover various aspects, including theoretical debates, models, and practical implementations of Islamic insurance (Takaful), and the development of Takāful companies over time including experiences with early Islamic Insurance Companies from different countries.
    • Analysis of different approaches to Takaful, particularly the Mudarabah, Wakalah, and Waqf-Wakalah models, is provided.
    • The papers examine the historical context and contemporary issues related to the respective topics.
    • The publication also contains a summary of dialogues at the Institute of Policy Studies.

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    Explore the diverse themes covered in Volume 13, Number 2 of Policy Perspectives, published in 2016. This publication discusses critical issues such as the Sustainable Development Goals, Islamic insurance, and the Middle East refugee crisis among others. Gain insights into the dynamics of U.S.-Israel relations and the challenges facing Pakistan and Afghanistan.

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