IFMP Bancatakaful Certification (BTC), Pakistan key terms

A cooperative system of risk sharing in which participants contribute into a pooled fund that pays claims, with the company managing the pool under Shariah rules instead of selling risk cover for profit.

Any guaranteed excess paid or received on a loan of money, or an unfair advantage in an exchange of goods, which Islamic law prohibits; it covers interest on deposits, lending and late payment charges.

Excessive uncertainty about the subject matter, price or timing of a contract that can lead to dispute. Conventional insurance is criticised on this ground, so takaful contracts are drafted to narrow uncertainty.

Gambling, or gaining wealth purely by chance where one party's gain equals another's loss. It is used in classical reasoning to distinguish takaful from speculative forms of conventional cover.

A voluntary donation a participant makes into the pooled fund with the intention of helping other participants meet losses, rather than to obtain a commercial return on the money paid.

An agency contract in which one party acts on another's behalf for an agreed fee. In takaful the operator manages underwriting and investment of participants' money for a disclosed agency fee.

A profit-sharing partnership where one party provides capital and the other provides management; profit is split in an agreed ratio, while losses on capital fall on the capital provider alone.

A benevolent interest-free loan carrying no excess or benefit for the lender. In takaful the operator may advance one to the participants' fund to cover a shortfall, repaid from later surplus.

The amount a participant pays into the takaful pool. It performs the practical role of a premium but is structured in the contract as a donation rather than a price for transferring risk.

A ring-fenced pool built from participants' contributions and the investment income earned on them, out of which claims, retakaful costs and required reserves are met for participants' benefit.

The operator's own capital, kept separate from the participants' pool, which meets company expenses and working capital and receives the operator's fee or profit share.

An operating model in which the operator manages the participants' fund for a fixed agency fee, commonly a stated percentage of contributions, and bears its own expenses from that fee.

An operating model in which the operator takes a share of the fund's profit under an agreed ratio instead of a fixed fee, so its reward depends on performance of the pool.

A combined arrangement where the operator charges an agency fee for managing contributions and also shares in investment profit earned on the participants' fund, as approved by the Shariah advisor.

The amount by which contributions plus investment income exceed claims, retakaful cost and reserves in the participants' pool over a period; it may be shared with participants under the certificate terms.

Cover that a takaful operator obtains from another takaful company to protect the participants' fund against very large single claims or a concentration of claims from one event.

Long-term takaful covering death, disability and savings needs of individuals, usually funded by regular contributions and combining protection with an investment or savings element.

Short-term takaful, normally renewed each year, covering property, motor, health, marine and liability risks, with contributions pooled to meet claims arising in that period.

Distribution of takaful products through bank branches, where the bank uses its existing customer relationships and account data to offer Shariah-compliant risk protection alongside banking services.

A bancatakaful arrangement in which the bank merely introduces interested customers to a takaful operator, and the operator's own authorised staff give advice and complete the sale.

An arrangement in which the bank is appointed as a corporate agent of the takaful operator, so trained bank employees may market, advise on and finalise takaful certificates inside branches.

A family takaful plan in which part of each contribution buys units in an approved Shariah-compliant fund, so the final value depends on unit prices rather than a guaranteed amount.

A panel of qualified scholars appointed by a takaful operator to review and rule on the Shariah compliance of products and processes; its rulings bind the company's practice.

The board-level structures, policies and reporting lines that ensure every takaful product, contract and process is reviewed, approved and continuously monitored for compliance with Shariah principles.

Pakistan's securities and insurance regulator, which licenses takaful operators, approves takaful products and supervises market conduct and solvency in the insurance sector.

Pakistan's central bank, which licenses and supervises banks and issues the Islamic banking and anti-money laundering instructions that govern how banks conduct bancatakaful.

Pakistan's dedicated takaful regulations issued by the SECP, setting out licensing, separation of participants' and shareholders' funds, product approval and Shariah advisory requirements for operators.

A structured discussion that records a customer's dependants, income, liabilities, existing cover and financial goals before any takaful plan is recommended to them.

The match between a recommended takaful product and the customer's documented needs, affordability and attitude to risk; a poor match exposes the seller to mis-selling claims.

A brief plain-language document given before purchase that summarises a plan's benefits, exclusions, charges, term, contribution obligations and cancellation rights.

A cooling-off window, commonly fifteen days after delivery of the certificate, in which the customer may cancel a family takaful plan and recover contributions less medical and incurred costs.

Persuading a customer to buy a takaful product that does not meet their needs, or misstating benefits, charges or Shariah features through pressure, omission or a misleading illustration.

The share of issued takaful certificates that stay in force and keep receiving contributions; low persistency usually points to poor advice, unaffordable plans or weak customer service.

The process by which a bank or takaful operator establishes who a client really is, covering identity, address, beneficial ownership and the expected pattern of transactions.

Identifying a customer, verifying identity from reliable independent documents and understanding their business and source of funds before a takaful relationship is established or continued.

A confidential report filed with Pakistan's financial intelligence unit when a firm suspects that funds or a transaction are linked to crime or terrorism; the customer must not be told.

Someone entrusted with a prominent public function, or a close relative or associate of such a person, whose accounts and takaful purchases attract enhanced due diligence and senior approval.

A situation where a bank employee's commission, sales target or personal interest could bias the advice given to a customer, and which must therefore be disclosed and managed.