TURKEY to launch interest-free, participation insurance system

To expand the range of interest-free instruments, Turkey is preparing to introduce Islamic insurance into the financial system where members contribute money into a pooling system to guarantee each other against loss or damage.

In the interest-free insurance system, also called Takaful, policyholder premiums, which are considered donations, form the general fund from which any claims are met. At the end of the year, any remaining cash surplus (after deduction of expenses) is not kept by the company or its shareholders but returned to policyholders in the form of cash dividends or distributions.

Thus, the interest-free Islamic insurance system is different from the conventional form, in which shareholders, rather than policyholders, benefit from profits generated by the sale of insurance products and services and by insurance investment assets. Read the full story

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