{"id":5953,"date":"2021-01-26T14:52:23","date_gmt":"2021-01-26T14:52:23","guid":{"rendered":"https:\/\/cometinsure.com\/blog\/?p=5953"},"modified":"2021-01-26T15:00:57","modified_gmt":"2021-01-26T15:00:57","slug":"islamic-fintech-why-there-is-a-need-for-islamic-insurance","status":"publish","type":"post","link":"https:\/\/cometinsure.com\/blog\/islamic-fintech-why-there-is-a-need-for-islamic-insurance\/","title":{"rendered":"Islamic Fintech, Why there is a need for Islamic Insurance?"},"content":{"rendered":"<div  class=\"tatsu-gjw15s6q1h2qhloh tatsu-section  tatsu-bg-overlay   tatsu-clearfix\" data-title=\"\"  data-headerscheme=\"background--dark\"><div class='tatsu-section-pad clearfix' data-padding='{\"d\":\"15px 0px 15px 0px\"}' data-padding-top='15px'><div class=\"tatsu-row-wrap  tatsu-wrap tatsu-row-one-col tatsu-row-has-one-cols tatsu-medium-gutter tatsu-reg-cols  tatsu-clearfix tatsu-gjw15s6q9s6mzpiz\" ><div  class=\"tatsu-row \" ><div  class=\"tatsu-column  tatsu-bg-overlay tatsu-one-col tatsu-column-image-none tatsu-column-effect-none  tatsu-gjw15s6qhtc1b442\"  data-parallax-speed=\"0\" style=\"\"><div class=\"tatsu-column-inner \" ><div class=\"tatsu-column-pad-wrap\"><div class=\"tatsu-column-pad\" ><div  class=\"tatsu-module tatsu-text-block-wrap tatsu-gjw15s6qpd9ji23s  \"><div class=\"tatsu-text-inner tatsu-align-center  clearfix\" ><style>.tatsu-gjw15s6qpd9ji23s.tatsu-text-block-wrap .tatsu-text-inner{width: 100%;text-align: left;color: rgba(0,0,0,1) ;}.tatsu-gjw15s6qpd9ji23s .tatsu-text-inner *{color: rgba(0,0,0,1) ;}<\/style>\n<p>Fintech is something that offers digital financial services anytime and everywhere. It is possible because of the technologies introduced in the field of financing. Islamic Fintech is no different from Fintech, but it works according to Islamic law and Shariah. Islamic Fintech does not permit taking interest payments and investments that are not ethical. Therefore it is something that is using the latest technology such as <a href=\"https:\/\/en.wikipedia.org\/wiki\/Machine_learning\">Machine learning<\/a>, AI, Big Data for promoting <a href=\"https:\/\/en.wikipedia.org\/wiki\/Islamic_banking_and_finance\">Islamic financing methods<\/a>. Now it is becoming popular worldwide. Technology has made everything so easy that now you can solve any complex problem just in a few clicks or steps and Islamic financing industry is using this technology for promoting the Fintech according to principles of Islamic Shariah. It clearly shows that Fintech is acceptable in Islam but only when all the rules are made according to Islamic law. The point to highlight here is this that Islam supports the business even if its Fintech, but when all the happenings are in the circle of Islam.<\/p>\n<p>A summarized definition of Islamic Fintech can be as that it is digital delivery of Islamic finance and use of Fintech utilities in Islamic finance such as<\/p>\n<ul>\n<li>KYC \/ AML<\/li>\n<li>Block-chain<\/li>\n<li>DLT<\/li>\n<li>Cyber<\/li>\n<li>Payments<\/li>\n<li>Big Data<\/li>\n<li>Machine Learning<\/li>\n<\/ul>\n<p>Islamic Fintech provides a choice that is more in range to an individual&#8217;s need.<\/p>\n<h2 style=\"font-size: 28px; text-align: left;\"><strong>Islamic Finance Domains served by Fintech<\/strong><\/h2>\n<ul>\n<li>Sharia-compliant Digital Banking<\/li>\n<li>Sharia-compliant investment products<\/li>\n<li>Sharia-compliant financial advisory<\/li>\n<li>Sharia-compliant crowd-funding<\/li>\n<li>Sharia-compliant P2P payments or business financing<\/li>\n<li>Sharia-compliant Remittance &amp; FX<\/li>\n<\/ul>\n<h3><strong>Why there is a need for Islamic Insurance? <\/strong><\/h3>\n<p>As the point discussed above that Islam supports finance only when it is according to the Islamic rules then what will be the alternative of Insurance as <a href=\"https:\/\/cometinsure.com\">Insurance<\/a> is the first thing that clicks in mind when the topic is about buying safety. We know that a fixed and guaranteed profit is not allowed in Islam. That is why <a href=\"https:\/\/cometinsure.com\/blog\/takaful-in-pakistan\/\">Takaful Insurance<\/a> is introduced by <a href=\"https:\/\/cometinsure.com\/\">Insurance companies<\/a> to satisfy their customers by giving them an Insurance plan that is according to Islamic laws. Cometinsure is the pioneer in aggregator&#8217;s industry for distributing awareness about Takaful insurance.<\/p>\n<ul>\n<li>It forms a co-operation for helping the needy and form brotherhood which help each other when they need it most.<\/li>\n<li>This automatically gives them a sense of shared responsibility as they can feel the pain the other person is suffering from.<\/li>\n<li>It also contributes to societies welfare.<\/li>\n<\/ul>\n<h3><strong>What is Takaful Insurance?<\/strong><\/h3>\n<p>Takaful is the type of Islamic Insurance that is based on the concept of social solidarity, co-operation and mutual indemnification in case of loss of any member. It is formed by the group of people that contributes equally and, in case of loss, it is paid from the money they have donated. It works with the three key features to maintain the process flow.<\/p>\n<p><strong><em><u>Policy Holder<\/u><\/em><\/strong>: It&#8217;s the who pay for the subscription through its fund. For Takaful, profit is not the goal. Instead, the Takaful focuses on squarely on helping its members share their risks, thereby potentially reducing the risk facing any one individual member.<\/p>\n<p><strong><em><u>Fund Manager<\/u><\/em><\/strong>:\u00a0 The funds in a Takaful company are invested according to sharia rules, including equity funds and Sukuk (the Islamic alternative to conventional bonds).<\/p>\n<p><strong><em><u>Common pool:<\/u><\/em><\/strong>\u00a0 People contribute money into a pool system to guarantee each other against loss or damage. The loss is distributed among the members equally, which is something different from normal insurance.<\/p>\n<p>The modern Islamic finance industry is young. Its timeline begins, only a few decades ago, but. Islamic finance is evolving rapidly and continues to expand to serve a growing population of Muslims as well as conventional, non-Muslim investors.<\/p>\n<h4><strong>Cutting down of Interest and limit of Gharar and Maysir <\/strong><\/h4>\n<p>Conventional insurance is based purely on commercial factors. It is buying and, selling of contracts includes elements of interest, uncertainty and gambling. Whereas, In Takaful, there is full segregation between the Participant fund account and the Shareholder fund account.<\/p>\n<p><strong><em><u>Gharar or Uncertainty<\/u><\/em><\/strong>: Element of Gharar or uncertainty is always there in case of transactions, but it should not lead to fraud and cheating.<\/p>\n<p><strong><em><u>Gambling<\/u><\/em><\/strong>: When there is speculation, gambling is also present. To simplify more in case of no claim, all the profit is in the Company\u2019s pocket. In Conventional Insurance, the advantages can lead to selfishness.<\/p>\n<table>\n<tbody>\n<tr>\n<td width=\"201\"><strong>Issue<\/strong><\/td>\n<td width=\"201\"><strong>Normal Insurance <\/strong><\/td>\n<td width=\"201\"><strong>Takaful<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Organization Principle<\/td>\n<td width=\"201\">Profit for shareholders<\/td>\n<td width=\"201\">Mutual for participants<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Basis<\/td>\n<td width=\"201\">Risk Transfer<\/td>\n<td width=\"201\">Co-operative risk sharing<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Value Proposition<\/td>\n<td width=\"201\">Profits maximization<\/td>\n<td width=\"201\">Welfare and spiritual satisfaction<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Laws<\/td>\n<td width=\"201\">Secular Regulations<\/td>\n<td width=\"201\">Shariah regulation<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Ownership<\/td>\n<td width=\"201\">Shareholders<\/td>\n<td width=\"201\">Participants<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Management status<\/td>\n<td width=\"201\">Company Management<\/td>\n<td width=\"201\">Operator<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Form of Contract<\/td>\n<td width=\"201\">Contract of Sale<\/td>\n<td width=\"201\">Co-operative<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Investments<\/td>\n<td width=\"201\">Interest-based<\/td>\n<td width=\"201\">Interest-free<\/td>\n<\/tr>\n<tr>\n<td width=\"201\">Surplus<\/td>\n<td width=\"201\">Shareholders\u2019 account<\/td>\n<td width=\"201\">Participants\u2019 account<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>In case of a deficit in the participants\u2019 Takaful fund, the Takaful operator provides an interest-free loan to the participants\u2019 fund. But in conventional insurance, the company bears it.<\/p>\n<\/div><\/div><\/div><\/div><div class = \"tatsu-column-bg-image-wrap\"><div class = \"tatsu-column-bg-image tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div class=\"tatsu-overlay tatsu-column-overlay tatsu-animate-none\" ><\/div><\/div><style>.tatsu-row > .tatsu-gjw15s6qhtc1b442.tatsu-column{width: 100%;}.tatsu-gjw15s6qhtc1b442.tatsu-column > .tatsu-column-inner > .tatsu-column-overlay{mix-blend-mode: normal;}.tatsu-gjw15s6qhtc1b442 > .tatsu-column-inner > .tatsu-top-divider{z-index: 9999;}.tatsu-gjw15s6qhtc1b442 > .tatsu-column-inner > .tatsu-bottom-divider{z-index: 9999;}.tatsu-gjw15s6qhtc1b442 > .tatsu-column-inner > .tatsu-left-divider{z-index: 9999;}.tatsu-gjw15s6qhtc1b442 > .tatsu-column-inner > .tatsu-right-divider{z-index: 9999;}<\/style><\/div><\/div><\/div><\/div><div class=\"tatsu-section-background-wrap\"><div class = \"tatsu-section-background tatsu-bg-lazyload\" data-src = \"\"><\/div><\/div><div 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