The wakala-waqf model, used by Pakistani operators, turns the participants' fund into a waqf with its own legal personality, while the takaful operator acts only as the fund's paid agent and participants contract directly with the waqf itself.
Two contracts within a single structure
A waqf is an inalienable charitable endowment dedicated to a benevolent purpose. Wakala-waqf combines this endowment with a management mandate: the waqf holds the contributions and pays claims, while the operator runs it as wakil in return for a fee.
The fund becomes a legal person
According to State Life's takaful FAQ, the Pakistani fund is a waqf with legal personality. It can therefore own assets, receive donations and take on obligations towards participants, independently of the company that administers it on their behalf.
Participants contract with the waqf
Under this arrangement, the participant deals not with the shareholders but directly with the fund. The contribution becomes a donation to the waqf, and the right to compensation flows from the waqf's rules, extending the logic of tabarru' mutual giving.
Why set up a separate endowment
The waqf answers a debated question: who owns a donation that is later used to compensate the donor? By vesting ownership in a distinct entity, the model avoids the participant buying a guarantee, which would bring the contract closer to an exchange.
The gharar objection and the answer to it
State Life presents conventional insurance as a mu'awadat exchange contract tainted by excessive gharar, and therefore defective. Takaful, built on tabarru', keeps uncertainty within tolerable limits, and the waqf strengthens its character as a gift rather than a sale.
The regulatory basis in Pakistan
The SECP's Takaful Rules 2005 allowed products to be based on wakala, on mudaraba or on both. It was within this framework that operators in the Pakistani takaful market adopted the hybrid wakala-waqf formula as their standard approach.
Windows permitted since 2012
The SECP introduced the Takaful Rules 2012, which replaced the 2005 rules and allowed conventional insurers to open takaful windows. According to the regulator, Pakistan was then only the second country to permit this, after Indonesia.
How the operator is paid
The operator earns a wakala fee for managing the waqf and may add a share of returns if it invests the reserves on a mudaraba basis. The principles behind this fee are covered on the page the wakala agency mandate.
Surplus distributed by the waqf
In Pakistan, the year-end surplus is shared among participants in proportion to their contributions, after deducting claims already received, according to State Life. The exact clause appears in the waqf's rules, which should be read before joining the scheme.
Mandatory sharia governance
SECP rules require every operator to have a Shariah Board of recognised scholars and an annual sharia audit separate from the financial audit. This board approves the waqf deed, the wakala rate and the investment policy before they take effect.
A model not confirmed elsewhere
In South Africa, use of wakala-waqf could not be confirmed. The takaful policy launched in November 2021 by Safire Insurance and Genoa Underwriting Managers relies instead on a separate sharia-compliant bank account and the opinion of a sharia adviser.
The role of international standards
IFSB-14 on takaful risk management and AAOIFI Sharia Standard No. 26 provide the framework for operational models. Since 1 January 2025, FAS 43 has required a precise accounting presentation of the takaful structure and of the operator.
Checking a policy based on a takaful waqf
- Verify the licence of the operator or takaful window with the SECP or the relevant regulator.
- Ask for the waqf deed or rules, which set out the beneficiaries and how any excess is used.
- Identify the wakala rate charged by the operator and any share of returns taken under mudaraba.
- Read the rule for sharing the surplus among participants and when it is paid out.
- Obtain the names of the Shariah Board members and the date of the last sharia audit.
- Check who would fund a waqf deficit and on what repayment terms.
Price components in a wakala-waqf scheme
| Component | Recipient | Key parameter |
|---|---|---|
| Donation to the waqf (tabarru') | Participants' waqf fund | Risk covered, sum insured, age |
| Wakala fee | Managing operator | Rate set in the contract |
| Mudaraba share of returns | Operator, on investments | Agreed ratio, actual return |
| Retakaful contribution | Retakaful operator | Large risks, waqf capacity |
| Redistributed surplus | Participants, pro rata | Claims experience, claims already received |
Supporting documents to join the waqf fund
- Identity card or passport
- Proof of address
- Waqf membership form accepting its rules
- Health questionnaire for family takaful
- Vehicle registration or property deed for general takaful
- Murabaha or ijara contract where the cover secures financing
Common misunderstandings about wakala-waqf
- Believing the contribution remains the participant's property, when it becomes a donation to the waqf governed by its rules.
- Assuming every takaful operator uses a waqf, when verified practice mainly concerns Pakistan and not South Africa.
- Choosing a conventional insurer's takaful window without checking that the waqf is genuinely separate from shareholder funds.
- Accepting a halal claim with no identified Shariah Board and no annual sharia audit report, both required of Pakistani operators.
- Forgetting that the surplus is calculated after deducting claims already received, which lowers the share of a participant who has made a claim.
Common questions on the waqf model
Can a takaful waqf be dissolved?
A waqf is in principle a perpetual endowment, and its rules should state what happens to the assets on liquidation. This procedure is not documented in the public sources reviewed, so you need to ask the operator and its Shariah Board.
Is wakala-waqf more compliant than simple wakala?
Its supporters see it as a clearer answer to the question of who owns the donation. Both models fall within the structures recognised by the IFSB and AAOIFI Sharia Standard No. 26; the opinion of the operator's sharia board remains the reference.
Who pays out when a claim is made?
The waqf itself, since it owns the contributions and has legal personality. The operator handles the file as agent, but payment comes out of the participants' fund and not out of the company's own capital.
Can a conventional insurer offer wakala-waqf?
In Pakistan, yes, since the Takaful Rules 2012 that authorise takaful windows. The window must, however, run a separate fund with its own rules, kept apart from the accounts of the insurer's conventional business.