Sri Lanka's First Shariah Insurance Plan Launched by Amana Takaful

24th May 2011, www.dailymirror.lk

Amana Takaful has announced the launch of Sri Lanka’s first Sharia’h compliant unit linked Insurance Plan. The product, branded “Amana Takaful Prosper”, is the first of its kind, where the customer will be able to obtain a Takaful (insurance) cover as well as enjoy a choice of Sharia’h compliant investment options.

“We felt the time was right for us to make available this option for all Sri Lankans as part of our expansion plans of product offerings in the backdrop of a peaceful environment and apt economic conditions. The appetite for investment by the public and private entities has increased. On the other hand, developments in the Islamic Banking sphere and the expected changes conducive to Islamic finance will augur well for such a product. All these developments have been combined in this offering that caters to the needs of all Sri Lankans.”, said Reyaz Jeffrey, General Manager/ Chief Executive Officer, Amana Takaful Life.

“Prosper offers a 3 unique funds, namely the Safe fund and the Volatile fund, which consist of varying degrees of investments in Mudarabah deposits and White listed equity and a Growth fund, which a has a balanced mix of the two, enabling policy holders to make investment choices based on individual risk appetites, all the while offering a Life and Accident Takaful cover”, said Jeffrey adding that it is always prudent to have a spread of financial solutions to build and protect ones financial and personal needs.

“Prosper is structured in a highly transparent manner so that charges and fees are visible to its participants and the policy holder is able to monitor the performance of his funds via the unit price that will be published daily. In keeping with the Takaful principle, we have also ensured that the entry charges are kept low, so that policy holders would derive maximum benefit.”

A Unit Linked Insurance Plan is a special Life product that gives more emphasis for investment and enables a policy holder to plan for his retirement, education of a child or any other financial requirement that one foresees. Based on one’s financial capacity, he or she can choose to make a single investment or make regular payments in order to build his required fund all the while enjoying the benefits of a Takaful (insurance) cover. Additionally, the policy holder makes the choice on the investment of funds and can switch between funds to benefit from market performance.

Where required, besides switching funds, clients can choose to make part withdrawals after 3 years to facilitate any interim financial requirements.

All Equity investments are in accordance to the whitelist screening criteria, which is now gaining popularity. Amana Global, a subsidiary of Amana Takaful, recently made public the whitelist and its basis, in a move to make the whitelist more transparent and allow all Sri Lankans to benefit from it.

“What is special in this policy is the expertise that has been brought together to offer the best protection, advice and solutions to the customers. We have NDB Aviva Wealth Management acting as the fund manager and Deutsche Bank as its custodian and Administrator. NDB Aviva Wealth Management is Sri Lanka’s largest private sector fund manager having over LKR 45 Billion under its portfolio and Deutsche Bank who have many Global and Asian awards for custodianship and cash management services amongst many others. These expertise combined with Amana Takaful’s expertise in Takaful, is a unique and strong combination that will mark amilestone in Sri Lankan Financial markets history.” said Ehsan Zaheed Director/CEO of Amana Takaful PLC.

Amana Takaful is the pioneer of the Takaful way of insurance and has carved itself a strong market over a decade of operations in Sri Lanka. With plans to establish a regional footprint for Takaful in South Asia, the group recently established Amana Takaful Maldives, a fully-fledged licensed operation in the Maldives. Recently, the Maldivian company also sought a listing on the Maldivian Stock Exchange making history in the country. It will make its Initial Public Offering (IPO) in June.

Takaful Plans (Life Takaful Policies) facilitate risk sharing amongst a pool of participants as against the conventional norm of risk transfer. The manager of the plan, in this instance Amana Takaful, is only a manager of the funds and is entitled to a fixed fee for the service, making it more equitable and transparent.

According to Moody’s Investors Service of the US, from US$ 5.3 Billion in 2008 as mentioned in the Ernst & Young World Takaful Report of 2010,globally Takaful is growing fast and is estimated to reach a staggering US$ 7.4 billion by the year 2015. World over there are approximately 80 Takaful operators with an additional 200 Takaful windows. Furthermore, according to Bank Negara of Malaysia the global Takaful growth rate stands at 20 percent.

Related Info :

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• Shariah Compliant Share List from Sri Lankan Stock Broker Lanka Securities

• Heraymila of Saudi Arabia's Al Mashal Group Invests in Sri Lanka

Shariah Compliant Share List from Sri Lankan Stock Broker Lanka Securities

23rd March 2011, www.lankabusinessonline.com

Sri Lankan stock broker Lanka Securities has introduced a 'Shariah' compliant share list to meet the requirements of both local and foreign Islamic investors on the Colombo Stock Exchange.

The screening methodology for stocks is designed to ensure compliance with the Shariah laws and principles of Islamic finance, a statement said.

Lanka Securities, a joint venture between Pakistan's First Capital Securities Corporation, Bank of Ceylon and Merchant Bank of Sri Lanka, said the list will be reviewed on a weekly basis to capture the impact of the price movements of the equities.

"LSL Shariah Compliant Securities List has been designed and developed to be used as a basis of Shariah complaint equity investments at the CSE," it said.

Shariah forbids interest and making ‘money from money’ and encourages that wealth be generated through legitimate trade.

While Shariah compliant investment avenues are now becoming available in most countries, Sri Lanka has not seen large-scale development, the statement said.

Companies involved in several activities will be filtered out as non Shariah-complaint, Lanka Securities said.

These are conventional banking, insurance, financial services, or any other interest-related activity, alcohol, pork-related products and non-halal food production, packaging and processing or any other activity related to pork and non-halal food.

Entertainment like casinos, gambling and pornography, tobacco, weapons, arms and defense manufacturing are also excluded.

Lanka Securities said the remaining companies are then further screened on a financial basis.

It identified several financial ratios that must be met for companies to be considered Shariah-complaint.

Total interest and income from non-compliant activities should not exceed 5.0 percent of the total revenue and interest bearing debt must be less than 30 percent of the market capitalisation.

Also, interest earning deposits must be less than 30 percent of the market capitalisation, and accounts receivable, prepayments and cash must be less than 50 percent of the total assets.

New firms listed in the CSE it will be added to the list if they meet the criteria.

The financial data on which the list is based on will be updated quarterly when the companies release the interim financials.

Lanka Securities said the business and financial screeners have been identified looking at the industry best practices along with the guidance set by the Accounting and Auditing Organisation for Islamic Financial Institutions.