Abasyn Journal of Social Sciences. Special Issue: AiCTBM 2018

Agency problem in Wakala with Waqf (Principal Agent) model of Takaful

Adnan Malik, Muhammad Wahab, Safyan Iqbal

Lecturer, Institute of Management Sciences, Peshawar, Pakistan
Content Writer, Institute of Management Sciences, Peshawar, PakistanLecturer, Institute of Management Sciences, Peshawar, Pakistann


The global Takaful market is growing at a rate of 14%, while conventional insurance is growing at 5.5%. According to World Takaful Report (2016), number of Takaful companies operating globally has reached to over 300 in 2016. These companies are using different modes of Islamic business like mudarabah, agency (Wakala) and agency with Waqf models in providing their services. Takaful companies in Malaysia are operating on mudarabah model while GCC companies are using an agency (Wakala) model. Beside these models, Wakala with Waqf (principal - agent model) is the recent model supported by renowned religious scholar, Mufti Taqi Usmani, and is the only allowed model for Takaful companies operating in Pakistan. It is modified version of agency model being operated in the GCC countries in which pool fund is declared as Waqf. The use of Waqf in agency model is introduced with an aim to improve the consumption of pool fund regarding paying claims of the clients. The use of the agency model with Waqf in Takaful is increasing globally; however, there are some technical issues undermining the performance of Waqf and invite discussions on them. In agency model with Waqf, Takaful company act as an 'agent' as well as 'Principle' at the same time. In other words, Takaful company also runs the 'Waqf' which may result in conflict of interest. Therefore, to address this issue, the current study focuses on the role of 'Principal' in agency model and tries to put forward suggestions for addressing the potential conflict of interest. This will also help to improve the performance of Waqf, ensuring its existence in longer terms and beneficial to the global and national Takaful industry.
Keywords: Mudarabah, Takaful, Wakala, Waqf.


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