Islamic Finance

134 Islamic Finance in Practice

Figure 1.Mudarabamodel

Wakala model

In thewakala model, the shareholders act as an agent (wakil)tothe

policyholders. In this model, shareholders are paid:

• A pre-agreed proportion of the contributions paid by the policyholders in
  return for running the insurance operations of thetakafulbusiness. As
  with themudarabamodel, if the policyholders’ funds make a loss, the
  operator does not share the losses, though it will provide theqard al-
  hasanto cover this loss; and


• A pre-agreed proportion of the policyholders’ investment funds in return
  for running the investment of thepolicyholders’ investment funds.

Figure 2 gives an overview of this model.