1. Takaful Opportunities & Challenges for the Pakistani Market Azeem Pirani Head of Marketing & Alternate Distribution Pak-Qatar Family Takaful August 11 th, 2007 – Avari Hotel, Lahore 11th August 2007 1

2. Takaful – A product and an ideology Differences between Takaful & Insurance The Pakistani Market Overview Challenges Opportunities Our responsibility Conclusion Agenda 11th August 2007 2

3. Takaful- A product and an Ideology Takaful comes from the Arabic root-word ‘kafala’- guarantee Takaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which promotes Solidarity and joint guarantee Self reliance and self sustainability for community well being Assistance to those that need it Community pooling system 11th August 2007 3

4. Differences between Takaful & Insurance What is Insurance? A tool for Risk Mitigation and Financial Protection A tool to enable people to save (Life Insurance) Key differences between Takaful and Insurance are: Risk Sharing Vs. Risk Transfer Wakeel Vs. Guarantor Ameen Vs. Owner Different type of Contract 11th August 2007 4

5. IssueConventional Insurance Takaful Basis Risk TransferCo-operative risk sharing Laws Secular/RegulationsShariah & Prudential regulations Ownership ShareholdersParticipants Mgmt status Company ManagementOperator Form of Contract Contract of SaleCooperative, Wakala or Mudarbah with Tabar’ru (contributions) Investments Interest basedShariah compliant Surplus Shareholders’ accountParticipants’ account Differences between Takaful & Insurance (cont.)

6. The Pakistani Market – An Overview Pakistan - Overall Population: 6 th amongst global nations. 166 m. Population in 2015: Still 6 th. 193 m. Urbanization: Presently at 33% Urbanization by 2015: 39% GDP Per Capita: $753 11th August 2007 6

7. The Pakistani Market – An Overview (cont) Pakistan – Insurance Market Penetration of Insurance Pakistan: 0.7% of GDP India: more than 3% of GDP Iran: approx. 1% of GDP Family & General Companies Few Innovative Products. Very recent change in this area 11th August 2007 7

8. The Pakistani Market – Challenges for Takaful Resistance to Insurance, and its benefits, due to different reasons Conservative spending habits Ignorance of its benefits Products which do not meet buyers needs Religious reasons Tawakkul issue “Tie your camel first, then put your trust in Allah (SWT)”. “It is better for you to leave your heirs wealthy rather than poor and asking others for their needs”. Non-Shariah compliant elements 11th August 2007 8

9. The Pakistani Market – Challenges for Takaful (cont.) Government regulations untested Human resources for the sector Shortage of trained human resources in insurance Negligible knowledge of Takaful present amongst the public Few training programs available for Takaful and insurance Insurance has generally never been the occupation of first choice for new graduates 11th August 2007 9

10. The Pakistani Market – Challenges for Takaful (cont.) Education and Awareness Lack of knowledge about Takaful and insurance amongst the masses Ignorance of Takaful amongst the ulema Significant budget required just to ensure that knowledge permeates to all segments/levels of society Marketing & Sales issues Poor impression of insurance sales persons amongst the public Generally poor ethical standards amongst insurance sales persons General lack of faith on insurance companies meeting their obligation in a efficient and polite manner 11th August 2007 10

11. The Pakistani Market – Challenges for Takaful (cont.) Operational Issues Limited avenues for revenue at Takaful co. as compared to insurance ones To be competitive Takaful co. will need to use effective IT systems – heavy investments New Takaful co. will need to ensure that they do prudent underwriting; thus eating into the possibility of having a larger number of customers 11th August 2007 11

12. The Pakistani Market – Opportunities for Takaful Economic/Social conditions in Pakistan make Takaful a NECESSITY Lack of govt. social safety net Negligible provision of reliable health care by the govt. Quality education is beyond the reach of the average citizen and the institutions provided by the govt. lack the required standards 11th August 2007 12

13. The Pakistani Market – Opportunities for Takaful (cont.) Strong growth in the Islamic financial sector provides Takaful with a natural market Islamic Banks and mutual funds will need Takaful to package with their other products Islamic Financial institutions presently have no Family coverage for their staff Massive untapped market in Pakistan for risk mitigation tools Given the necessity of these tools insurance has not even touched the surface Given the ‘plain vanilla’ menu provided to customers there is a great opportunity for innovation 11th August 2007 13

14. The Pakistani Market – Opportunities for Takaful (cont.) Ethical and Shariah compliant model for risk mitigation and financial protection Large number of people who stay away from insurance due to religious beliefs Large number of our population can be considered as ‘religious’ and so Takaful will be in line with their beliefs Educated citizens, although not religious would prefer to use an ethical model than one which is built on making profits by trying to avoid having to pay claims 11th August 2007 14

15. Takaful – What should you do about it? As educated professionals WE have a responsibility to our fellow citizens to guide them to what is good for them. This is especially important when the people are living at a level where income equals expenses Convey the critical nature of financial protection to others Explain the benefits of getting financial protection Introduce the new concept which is not only ethical but also Shariah compliant Just start from those around you…. 11th August 2007 15

16. Conclusion Takaful is not only here to stay; it’s going to GROW! It’s ethical and Shariah compliant nature allows Takaful to overcome the inherent problems with Insurance The Pakistani market has challenges but also has a lot of opportunities There are a lot of opportunities for Takaful operators to make healthy profits in Pakistan Although Insurance coverage is not the norm in Pakistan we need to work to make Takaful something everybody uses 11th August 2007 16

17. Conclusion (cont.) 11th August 2007 17

18. Jazak-Allah khair For further information contact: (021) 438-0357 to 61 info@pakqatar.com.pk www.pakqatar.com.pk www.pakqatar.com.pk (launching soon!) 11th August 2007 18