The sudden outbreak of COVID-19 has left all of us bewildered, and just in a span of a few months over 1.8 million people in Pakistan lost their jobs because of the lockdown. Such high and unanticipated unemployment is followed by disastrous impacts on the lives of the affected individuals and families. A typical family in Pakistan comprises of 5 to 6 members, all being supported by just a single breadwinner. And when in this scenario the only job feeding the entire household comes to a sudden halt, the family crashes. The savings, which were tiny, to begin with, become their sole reliance in such testing times. And God forbid, even if one member contracts the deadly disease the huge hospital bill multiplies their agony.
Now imagine the very same scenario, but with a slight change- the family has subscribed to health takaful. So even when the family’s breadwinner loses his job and household income falls to zero, there is one less worry on the family. The hospital expense will be borne by takaful. Therefore, with strong social protection (takaful) or insurance of individuals, the cost to society imposed by such severe lockdown may be reduced in terms of deprivation and hunger.
We have various takaful companies in Pakistan that are providing their current customers complimentary benefit with respect to COVID-19 and have also introduced a protection plan for COVID-19 which can currently be bought at an affordable price. These takaful companies have further eased the burden of their participants by providing a grace period for payment of the contribution of up to 75 days. How have these companies managed to provide all these benefits? It is therefore imperative here to mention, TAKAFUL.
Takaful is an alternative to conventional insurance but one that follows Islamic law. It is based on the concept of cooperation (ta’awun) and risk-sharing. All participants contribute to a pool of donation (tabarru) fund, which allows participants to provide financial assistance to fellow participants who might suffer a loss. The recompense to the participant, in the event of loss, is according to the actual loss either totally or partially depending on the resources of the fund.
A takaful model, therefore, can be depicted as a co-operation among participants who commonly secure and ensure the interest of each other, in the spirit of brotherhood, by mutually sharing obligation to pay for potential misfortunes that may happen, through donation into a common fund. A takaful operator(company) facilitates this cooperation by providing its expertise in managing the fund. It manages the funds by investing in halaal activities and since all the risk is shared among participants, the surplus that might arise because of the investment is added back to the fund.
It is important to note here that it is investing in halaal activities that always brings with it Allah’s blessing (barakah). A takaful operator(company), however, by adopting a mudharabah, wakalah or other contractual Islamic business models can adequately sustain a fund even in a calamity such as COVID-19.
ا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا الرِّبَا أَضْعَافًا مُّضَاعَفَةً وَاتَّقُوا اللَّهَ لَعَلَّكُمْ تُفْلِحُونَ
Allah says in Surah Al-Imran verse 130, “….devour not usury, doubling and quadrupling, the sum lent. Fear Allah and observe your duty to Him, that you may really prosper.”
Furthermore, the intention of donation and easing the burden of a fellow Muslim in times of need only brings with it more blessing(barakah) in any situation.
Abu Huraira reported: The Messenger of Allah, peace, and blessings be upon him, said, “Whoever relieves the hardship of a believer in this world, Allah will relieve his hardship on the Day of Resurrection. Whoever helps ease one in difficulty, Allah will make it easy for him in this world and in the Hereafter. Whoever conceals the faults of a Muslim, Allah will conceal his faults in this world and in the Hereafter. Allah helps the servant as long as he helps his brother. Whoever travels a path in search of knowledge, Allah will make easy for him a path to Paradise. People do not gather in the houses of Allah, reciting the book of Allah and studying it together, but that tranquility will descend upon them, mercy will cover them, angels will surround them, and Allah will mention them to those near him. Whoever is slow to good deeds will not be hastened by his lineage.” (Source: Ṣaḥīḥ Muslim)
With the right advisory compliance solutions and retakaful, one can manage risk and inefficient management practices. Unfortunately, because of ineffective marketing strategies, there is a lack of awareness among individuals and a lack of basic health information among the masses. Taking care of all these challenges and an affordable health takaful plan for groups, individuals, and families can create a snowball effect of wellness and serve the masses.
It comes in Surah Ar Raad verse 11,لَهٗ مُعَقِّبٰتٌ مِّنۡۢ بَيۡنِ يَدَيۡهِ وَمِنۡ خَلۡفِهٖ يَحۡفَظُوۡنَهٗ مِنۡ اَمۡرِ اللّٰهِؕ اِنَّ اللّٰهَ لَا يُغَيِّرُ مَا بِقَوۡمٍ حَتّٰى يُغَيِّرُوۡا مَا بِاَنۡفُسِهِمۡؕ وَاِذَاۤ اَرَادَ اللّٰهُ بِقَوۡمٍ سُوۡۤءًا فَلَا مَرَدَّ لَهٗۚ وَمَا لَهُمۡ مِّنۡ دُوۡنِهٖ مِنۡ وَّالٍ
“ …….Verily never will Allah change the condition of a people until they change it themselves…….”
Written by: Sadaf Sawant (MSC in Islamic Finance from INCEIF, Malaysia)