Frequently Asked Questions

What is Ijarah wa iqtina? + Subject to the payment of all amounts of rent during the lease period, the lessor signs a separate promise to gift the leased asset to the lessee at the end of the lease period. This is referred to as 'Ijarah wa iqtina. The promise to gift or sell the asset at nominal value is not part of lease contract and its performance is only binding on the promisor.

What are the different models of Takaful used currently? + There are many Takaful models in operation, but the two most important ones are Wakalah and Mudarabah. In Wakalah model, the Takaful Company, also called Takaful operator only gets a stipulated fund management fee just like an asset management company does for its mutual funds. In Mudarabah model, the Takaful Company invests its own funds too and agrees to a profit sharing ratio with the participants of the pool. Any surplus/profit in the fund is then distributed on the basis of a pre-agreed ratio.

What is Wakalah? + Wakalah is an agency agreement. It is used in Islamic mutual funds and other asset management relationships. The Fund Manager in a mutual fund is a Wakeel (investment agent) for the unit holders of the fund who had provided their funds to the Fund Manager to invest in different financial and real assets which comply with Islamic principles.