System development life Cyc Essay Example | Topics and Well Written Essays - 250 words

Framework advancement life Cyc - Essay Example Most well known framework improvement strategy is framework advancement life cycle (SDLC) which underpins the business needs of the association, takes care of the recognized issue, and fits inside the current hierarchical structure. Framework improvement life cycle is significant in creating IT anticipates, portraying the various stages associated with the task planned from the underlying stage to its consummation. There are different models in the framework improvement life cycle that incorporate; Waterfall model, Iteration model, V-molded model, Spiral model, and Extreme model that assume an incredible job in programming forms. (McGonigle and Mastrian, 2011) The different models have likenesses and contrasts in their working. It is noticed that the model are altogether crucial in creating frameworks for various sizes of tasks and the different prerequisites to be accomplished in the various activities. Cascade model and winding model are the most regularly utilized models for creating of the frameworks. Each model has favorable circumstances and detriments for the improvement of the frameworks, along these lines each model attempts to dispose of the burdens of the past model. The Waterfall model is the most established, along these lines the models are dynamic from the Waterfall model to the outrageous model as they get the chance to improve their frameworks from one model to the

Analysis Of A Christmas Carol Essays

Examination Of A Christmas Carol Essays Examination Of A Christmas Carol Essay Examination Of A Christmas Carol Essay Article Topic: A Christmas Carol I think this is respectable of him since Bob Cratchitt wouldve been exceptionally appreciative to him and this likewise would have changed the remainder of the Cratchitts family, particularly Mrs Cratchitt (who communicated her extraordinary aversion of Scrooge on Christmas day) view of him. Anyway Scrooge doesn't need this brilliance since it vanquishes the object of sending the turkey he wishes to stay unknown. He additionally discovers that Christmas is a period for absolution and for being with family. He went to chapel, and strolled about the boulevards, and watched the individuals hustling forward and backward, and congratulated the kids on the head, and addressed homeless people, and looked and gazed down into the kitchens of houses, and up to the window; and found that everything could yield him delight. He definitely realizes that there is no benefit in observing Christmas, anyway he presently understands this isn't the point and he ought to value the delight that the Christmas season passes on. He discovers have a great time everything, even things that recently vexed him. He never envisioned that any walk that anything could give him so much bliss. Presently with this statement it sounds quite inconsequential with an absence of accentuation yet in the event that you look it will become clear that the easily overlooked details are starting to influence his convictions on Christmas and what its results are (not bad). Besides, it was indicating that he could never at any point fantasy about changing his activities towards Christmas so accordingly with that, it clearly appears with the sensational data he has had caused on him, has truly persuaded him for the Christmas season. I think as a rule Dickens is attempting to tell the Victorian crowd that it is conceivable to improve. He shows this through Scrooge when he visits Fred, his nephew. He was at home in a short time. Nothing could be heartier Wonderful gathering, great games, magnificent unanimity, won-der-ful joy! Here I think Scrooge is in dismay that his nephew despite everything needs to know him and doesnt reprove him in view of what he said before when his nephew visited him in his office. Thus we discover that there is change in everyone and once in a while it tends to be an amazement.

Get The Scoop

Get The Scoop Without fail, if I could only eat one food for the rest of my life, it would be ice cream. Fortunately, here at MIT, ice cream is only a few blocks away in any direction. First off, theres Toscaninis about a five minute walk from campus. This is actually where the bloggers went at the end of last semester before it was time for us to take our finals. One of the nice thing about Toscis is that they have some pretty interesting flavors including Olive Oil and Earl Grey Tea, and from this earlier blog entry, you can probably tell I support diversity in ice cream flavors. If you walk in the opposite direction up Mass Ave or take Saferide, you can walk down Newbury Street and pass JP Licks, Emack and Bolios, and Ben Jerrys. Personally, for ice cream, Im all about the JP Licks. Emack and Bolios is where I go for smoothies, but unfortunately, I never really do the Ben and Jerrys thing. I can buy that at the grocery store. There are a lot of other small eateries with ice cream, but these in my mind are the big ones for Boston and Cambridge. And what would a blog entry be without a vocabulary lesson? Heres a few ice cream related terms that you might only find in the northeast, so if someone asks you for a cabinet, youll know what youre talking about. Frappe: Made of milk, syrup, and ice cream, it ideally has a consistency that is something like loose cement, says J.P. Licks owner Vince Petryk. This is the Boston term for a milkshake, from the French frapper (to strike) or frappe (iced). Float: You need soda [soda = pop = coke], ice cream, and a tall glass to make a float. Suds and a sidecar is the old-fashioned term for the popular root beer float. Ice cream sodas, which are similar to floats, contain seltzer, milk, syrup, and a scoop. Milkshake: Technically, this is the same as a frappe. In Boston, however, still sometimes means milk and syrup. That can cause confusion for tourists, who are expecting something tall, thick, and full of ice cream. Smoothie: The best of these fruity cold drinks blend frozen fruit, juice, milk or yogurt and sometimes ice cream. Theyre often offered with an array of nutritional add-ins, such as protein powder, bee pollen, or spirulina. Avoid smoothies made with a high-sugar base, too often overly sweet and artificial-tasting. Source: Boston Globe, Food Section, Wednesday June 29, 2005 Cabinet: Another word for milkshake or frappe, typically used by people from Rhode Island because milkshakes were made behind a cabinet so the mess could be confined. Jimmies: Another word for sprinkles. A USA Today article on Ice Cream Joke (post your answer as a comment) Q. How do astronauts eat their ice cream? Trivia: (post your answer as a comment) What does the JP in JP Licks stand for?

Beowulf the Hero - Free Essay Example

Sample details Pages: 2 Words: 689 Downloads: 2 Date added: 2019/05/13 Category Literature Essay Level High school Topics: Beowulf Essay Did you like this example? Â  Every story has a character who is a hero and fights the monster they are presented with. Beowulf is named after the hero Beowulf who was the main character, Beowulf was declared a hero after he fought three battles to become a hero; he fought Grendel, Grendels mom, and finally a dragon. The first battle he fought to become to become a hero was Grendel. Grendel was terrorizing Hrothgars kingdom for twelve winters. Beowulf heard of the problem Hrothgar was having and wanted to help him. He went killing Grendel, and at first Grendel got the first Geat he saw and started eating him. Grendel then went to Beowulf and Beowulf grabbed Grendels arm with his bare hands. Grendel wanted to run away, but Beowulf ripped off his arm. Grendel then left wounded as he fled to his den. Beowulf puts Grendels arm up so everyone can see that Grendel was finally defeated. He became a hero after defeating Grendel because he showed everyone he could kill the monster with his bare hands. Don’t waste time! Our writers will create an original "Beowulf the Hero" essay for you Create order The second battle Beowulf fought was Grendels mom. After Beowulf defeated Grendel, Grendels mom found out and she was mad they killed her only son. Grendels mom went to Hrothgars kingdom and got Hrothgars closest friend to get revenge for killing her only son, and she takes her sons arm. Beowulf went to the lake where Grendels mom lived. He went to go kill her, but Beowulfs weapons did not work because his swords would not cut Grendels mom skin. Grendels mom took out a huge knife and tried to stab Beowulf in the shoulder, but his mail shirt did not let it go through Beowulf saw this old sword that was made from the giants and cut Grendels mom in the neck which finally killed her. Beowulf finds Grendel head and cuts Grendels head off to take it to his king to show the king the monster is dead. He also takes the sword but it melts when he was going to shore. Beowulf is the towns hero due to the fact that he took on two monsters no one wanted to face with one being harder than the first one. Finally, they are defeated thanks to Beowulfs bravery. Finally, the last battle Beowulf fought was a dragon. The dragon had many treasures in a cave, and while the dragon was asleep a slave stole a cup full of gold from the dragon, because he had ran away from his owner. The man did not want to die, so he gave his owner the gold cup so he would not kill him. The dragon was mad the slave stole treasure from him and he wanted to get it back. Beowulf said he was going to fight the dragon alone like all his other battles because he won all his other battles alone therefore he believes he can win this one too. Beowulf takes fourteen warriors with him. Beowulfs shield melted with the dragons flame. Then Beowulf stabbed the dragon and the dragon bit Beowulf in the neck. Wiglaf realizes Beowulf is getting beaten, so he goes and helps Beowulf by stabbing the dragon in the belly, and Beowulf cuts the dragon in half. In this battel, Beowulf proved his loyalty in being king and having a title of a hero. Beowulf is a hero in this book because he showed his strengths when he fought Grendel first, then Grendels mom, finally when he fought the dragon. He always showed he would not back down from a battle whether it was easy or hard. Everyone said he was a hero because he helped everyone with their problems. While he was king, his warriors never had to fight in a single battle because Beowulf would never let anything bad happened to his own town and neighbors. In this whole story it shows how Beowulf becomes a hero more in each battle he fought he showed his bravery, loyalty, honor, his physical strength, and that he is willing to risk his life for other people. He showed more in each battle he is the hero of the book.

Essay on Annie Liebovitzs Women - 2280 Words

Annie Liebovitzs Women After reading a book on various feminist philosophies, I evaluated Annie Liebovitzs book and collection of photographs entitled Women according to my interpretation of feminist philosophy, then used this aesthetic impression to evaluate the efficacy of feminist theories as they apply toward evaluating and understanding art. â€Å"A photograph is not an opinion. Or is it?† So begins Susan Sontags introductory essay to the book Women, a collection of photographs by Annie Leibovitz. Collected without a stated intention other than to treat on the subject matter at hand, Leibovitz’s images confront a wide spectrum of issues surrounding women living in America at the end of the twentieth century. Sontag explains, â€Å"Any†¦show more content†¦Of particular concern are the women who are celebrated and glamorized as successful and well-educated artists, actresses, and celebrities. We are so familiar with slick, glossy photographs of women such as Nicole Kidman, Drew Barrymore, rapper Lil’ Kim, or young actress Christina Ricci, that at first glance these portraits are far more celebratory, depicting the women in thoughtful, atmospheric lighting, perfect makeup and hair, beautiful clothing, and carefully-framed shots. It is very clear - these are not tabloid photos, but instead art istic portraits, to be viewed as such. The complication arises when we consider what statement Leibovitz is making about the real nature of their careers, however, as seen in a careful evaluation of the postures and presentations of these â€Å"powerful† and â€Å"successful† women. Drew Barrymore is wearing a gauzy flesh-colored dress, splayed out on a patch of ultra-green filtered grass. Her face is turned away from us, almost unrecognizable, looking downward and over her shoulder, her arms listlessly at her side and touching her shoulder. She is flat on the ground with her knees raised and spread slightly apart, shot from above, with a corpse-like pallor and demeanor. Were she not identified in the caption by name, a viewer would be hard-pressed to determine the identity of this accessible and apparently disposable body. Perhaps this is the

A Strong Business Leader Free Essays

Many of us have the perception that a leader is an all- knowing being, who stands and commands his subordinates at all cost; but this perception is archaic.In the 21st century world, where things are more global, and nothing huge gets done without some kind of complicated system, relying on traditional business leadership practices may stunt growth as a successful leader business. Successful business leaders in 21st century are defined and evidenced by some questions. We will write a custom essay sample on A Strong Business Leader or any similar topic only for you Order Now Are you courageous enough? Great business leaders dare to be different. They do not just talk about risk-taking, they actually do it.A business leader should be able to build the emotional stamina to withstand conflict. During my years in high school, I became very passionate about recycling and met a few people who shared the same. We decided to introduce a recycling club called the cleaning committee. Despite the challenges from the students and doubts from the authorities of the school, we still managed to overcome it all and if this doesn’t spell out courage I don’t know what else would. Where are you looking to create the next change? Is the change relating to your life and environment? Great leaders are not head-down. They see in between problems and shape the future rather than just reacting to it. The cleaning committee was responsible for ensuring cleanliness and recycling of items. This club also went to the extent of providing finance to the boarding school, since we usually sold our recyclable items to companies for money. This little organization brought about a lot of change, providing people some form of responsibility as well as invoking creativity in these students. What is the diversity of your network? A successful business leader should be able to develop relationships with different people. The difference could be in terms of culture or politics. Business leaders should understand that having a more diverse network is a source of pattern identification, because it involves working with different people from different cultures. This experience, as the head of the cleaning committee, helped me get out of my comfort zone. I also got the opportunity to work with different people hence helping me to make long lasting networks, this also motivated my colleagues and I to be more risk averse. In a few years, I see myself becoming a network architect. I will be responsible for designing computer networks and also dealing with network layout. I will also be responsible for developing systems that suit individual company needs. In conclusion, Hult is more than a business university, because it provides a global network for its students to reside in, I believe this will help me establish a more diverse network by participating in rotation programs, hence studying at different parts of the world.Hult gives its students the opportunity to put the theory in to practice. This will allow me to give solutions to some real-life problems, hence allowing me to have a first-hand experience as a network architect. How to cite A Strong Business Leader, Papers

Ethical Scenario

Question: Describe about recent ethical dilemma or ethically questionable situation relating to ICT that you are familiar with. This situation can be either in the media (for example one you have sourced from a newspaper, or online through social media) or through your workplace? Answer: In an article posted in the ProPublic on 9 February 2015, it was seen that one of the largest banks of USA has discriminated against the blacks of Latin America and the Asians. The fault that the bank made was that bank had qualified less qualified people for the loan using hidden racial criteria to give loan in one of the loan programmes. Cases have been filed in the Manhattan court the suit also accused the bank of directing homebuyers to particular neighborhoods on the basis of their ethnicity or race. It was said that the bank has broken the Fair Housing Act, a law passed in 1968. This law was passed to prevent the segregation of the countrys cities. Fair Housing Justice Center filed the suit, it is a non-profit organization based in New York City which is funded by the Housing and Urban Development of U.S. so as to put into effect the federal law which bans discrimination of houses (Business-ethics.com, 2015). It was enquired by the Fair Housing Justice Center, who sent trained actors to find out whether the non-white and white homebuyers was treated differently, when they were trying to qualify for a mortgage. They all said that they were married and that they had no children and they were applying for the first time in home loan. Even the black Latinos and the Asians were asked to show high qualification, and incomes. It was seen that a black was denied the loan by saying that she does not have enough savings, while a white people (actor) who had less income and savings and credit, was approved for the loan. It can be clearly seen that the bank was doing discrimination against the black and the whites in USA when it was banned in the year 1968. The black people were clearly suffering ad were losing out on their white counterparts even though they had higher qualifications and salary. It can be said that the honesty, right, duty and fairness plays an important role in the ethical decisions of a company. It can be said the companies should not breach the interest of the publics while they are practicing their profession. The trust of the stake holders should not be put under threat (Josephsoninstitute.org, 2015). It needs to be kept in mind that the public interest should not be breached as well as the trust of the stakeholders. Integrity and Honesty are essential for the people to make professional decision. Though there may be certain circumstances where, it will be beneficial for a person to be deceiving in some way or the other. But the persons should keep in mind that the he or she should not do any such thing that will enhance the reputation of the person at the cost of the reputation of the others. The people in general should have certain rights in order to survive in the place. America does have a strong record of human rights. Though some people are denied the basic rights based on their color, sex or race. The people should be equally treated in the public and all the information concerning them are to be shared, since the people have the right to information (Igi-global.com, 2015). If any people demands any sort of information which concerns them, then they have the right to get that information and anyone who keeps the information secret is to be dealt with seriously. People of Australia have thought of ethical issues for a long time, but the concept of ICT is a new phenomenon. It needs to be kept in mind that the ethical situation arises in the context of the relation with the people (Australia.gov.au, 2015). In the fast changing technological environment, the ethical issues are increasing. The ethical issues are raised and demand that the situation is to be resolved. The rise in the use of the ICT has enabled that the people get all the information and thus has resulted in affecting the society greatly. The vital issues that ICT raised was the invasion of corporate and individual privacy, societal and individual rights, intellectual property rights, values, accountability and preservation for the consequences that have arisen from the use of ICT. The ACS codes of ethics is based on the factors five factors The Primacy of the Public Interest The Enhancement of Quality of Life Honesty Competence Professional Development Professionalism It should be seen that the ACS deals with the following rules and code of ethics (ACS Code of Professional Conduct Professional Standards Board Australian Computer Society, 2015). In the above example, it was seen the people who were black were denied the loan and were given the reason that they had insufficient savings which was misleading information and the secrecy of information was done when the people demanded an analysis. The ACS one-page Code of Professional Conduct that has six ethical values, it encourage the corporate members, individual members, and other businesses as well as the ICT departments, to show prominent display. In the context of the American example it was seen that the company broke the law by discriminating among the people. By doing this they tried to give benefits to the white people and harmed the rights of the white people (Press.anu.edu.au, 2015). It can be said that the actions decreased the happiness of the people in the country. If the laws are set right and the codes of ethics are maintained then the people will be benefitted. And will increase their happiness. The people at large will see that the country is protecting their rights and they will feel that secure and can rely on the laws. There is as such no right or wrong practice. People who do wrong are in their mind and heart believes that they are right in their actions. People do not intend to harm other willingly, it is often a situation or practice that guides the mind of the people to do wrong things or practice wrong doings. References ACS Code of Professional Conduct Professional Standards Board Australian Computer Society. (2015) (1st ed.). Retrieved from https://www.acs.org.au/__data/assets/pdf_file/0014/4901/Code-of-Professional-Conduct_v2.1.pdf Australia.gov.au,. (2015).Rights | australia.gov.au. Retrieved 17 March 2015, from https://www.australia.gov.au/topics/law-and-justice/rights Business-ethics.com,. (2015).Housing Enforcement Group Sues MT Bank for Discrimination | Business Ethics. Retrieved 17 March 2015, from https://business-ethics.com/2015/02/09/1645-housing-enforcement-group-sues-mt-bank-for-discrimination/ Igi-global.com,. (2015).Ethics and Social Issues Related to Information Communication Technology (ICT): Computer Science and Information Technology Book Chapter | IGI Global. Retrieved 17 March 2015, from https://www.igi-global.com/chapter/ethics-social-issues-related-information/43777 Josephsoninstitute.org,. (2015).Josephson Institute of Ethics: Making Ethical Decisions: The Six Pillars of Character. Retrieved 17 March 2015, from https://josephsoninstitute.org/MED/MED-2sixpillars.html Press.anu.edu.au,. (2015).'15. Ethical issues of emerging ICT applications a Euro-landscape' in Professionalism in the Information and Communication Technology Industry by Edited by John Weckert and Richard Lucas | ANU Press. Retrieved 17 March 2015, from https://press.anu.edu.au/apps/bookworm/view/Professionalism+in+the+Information+and+Communication+Technology+Industry/10791/ch15.xhtml

Swiss Government

Swiss Government Free Online Research Papers This paper aims to unveil the politics of the neutral, independent nation of Switzerland. An outline of Switzerland’s political structure is presented. The Switzerland government is described as a federal parliamentary republic. The Swiss government is also the closest thing to direct democracy the world has ever seen. This structure represents the multidimensional aspects of Swiss society and how it affects policy. Secondly, this paper will address major political events of the past ten years, followed by a comparative analysis of both Switzerland and The United States. This critique attempts to prove how The United States might benefit from adopting some of Switzerland’s government and social policies. If the United States held a more neutral, less abrasive stance in international relations and conflict, the government might then focus on domestic issues, greatly benefiting its citizens. Also if the US were to adopt a proportional representation system as opposed to its current winner takes all system, citizens would feel spoken for. This might increase political participation by citizens. Switzerland is a small country located in the center of Western Europe. Landlocked between France, Germany, Italy, and Austria, the country is multicultural and multilingual. There are four national languages of Switzerland, French, German, Italian, and recently Romanish. With the wide-ranging languages and culture of Switzerland, the political system is of the same nature. Political scientist, Arend Lijphart, describes Switzerland as a consocionational state. A consocionational state, as Lijphart defines it, is a state with major ethnic, religious and linguistic differences that remains stable and peaceful despite these divisions Since World War II ended in 1945, Switzerland has been in a period of prosperity with no international conflicts. The country has been a neutral, peaceful, and independent nation. The preamble to the Swiss Constitution states, â€Å"We, the Swiss People and Cantons†¦resolve to renew our alliance to strengthen liberty and democracy, independence and peace in solidarity and openness towards the world† . This statement is representative of Switzerland’s neutrality in international conflicts and its consocianationalism. The Swiss Constitution defines the country as a federal republic containing 26 cantons, member states of the federation. Switzerland has a federal structure with three different political levels: the Confederation, the cantons and the communes. Confederation means the state, which includes three parts: â€Å"the executive (the Federal Council), the legislature (the Federal Assembly) and the judiciary (the Federal Supreme Court)† (FASC). The Federal Swiss Constitution is actually a revised version of the Swiss constitution of 1874. The Federal Parliament approved a revision of the constitution in December of 1998. However, the revision does not change any rights of Swiss citizens, but updates paragraphs and amendments in modern formation. This new constitution was officially adopted January 1 2000. The country is the closest thing to a direct democracy that the world has encountered. Citizens are encouraged by the government to frequently participate in voting, referendums and popular initiatives and they actively do so. There are only 10,000 votes required for a Constitutional revision. â€Å"According to the Federal Constitution, the Swiss people are sovereign and ultimately the supreme political authority† (FASC). The Swiss political system is a Federal Parliamentary Republic, made up of multiple parties with proportional representation of Swiss society. Some of the major political parties are the Social Democrats, The Christian Democrats, the Swiss People’s Party, and Free Democrats. The Social Democrats are a pro-European center-left party. The Christian Democrats are a centrist conservative party representing mostly a communal and Catholic ideology The Free Democratic party is a free-market friendly liberal party. The Swiss People’s party is a populist conservative party. The listed parties are part of a â€Å"magic formula†, dividing the seven executive seats, Switzerland began using 1959. The formula goes as follows: 2 Christian Democrats, 2 Free Democrats, 2 Social Democrats, and 1 Swiss Peoples Party . However, Switzerland’s political climate changed in 2003 when the Swiss People’s Party gained control in Parliament . Because of this new development, the â€Å"magic formula† was altered at the expense of the Christian Democrats. Parliament granted the Swiss People’s Part two seats and gave the Christian Democrats only one. Swiss banks are famous for their security and secrecy. Due to the country’s neutrality throughout Europe and the World Wars, the baking system flourished with business from around the globe. This business included accounts from Jewish people being persecuted during the Holocaust. For years the Swiss Banking Association was pressured by Jewish activists to release information about Swiss accounts held by victims of the Holocaust. Many deposits of Holocaust victims had remained unclaimed, and the Swiss banking law had long prevented access to information. In 1995, the Swiss Banking Association uncovered accounts containing millions of dollars. In August of 1998 Swiss banks agreed to compensate Holocaust survivors and families. Switzerland in the past was a laggard on women’s suffrage and abortion rights. Women’s suffrage wasn’t granted until 1971. In 1999, only 28 years later, a Social Democrat, Ruth Dreifuss, served as the first female President of the Confederation. In June 2002, Swiss people voted to decriminalize abortion. It would now be allowed in the first 12 weeks of pregnancy. Also in 2005, Swiss voters passed a law allowing same-sex marriages. These events recognize not only female equality but civil rights for all people. Switzerland’s second most populous city, Geneva, is the host for many international organizations and diplomatic meetings. Some major influential international organizations include the World Trade Organization, World Health Organization, the International Telecommunications Union, the European Organization for Nuclear Research, as well as many others. Frequently world leaders will meet with in Geneva to discuss treaties and other affairs. The neutral state provides a great court for these relations. This guarantees Switzerland as a great resource for the rest of Europe and the world. When the United States was attacked by terrorist on September 11, 2001, Swiss people were shocked and appalled by the catastrophe. Only 16 days later, Switzerland experienced its own tragedy. On September 27th, a Swiss citizen attacked the Parliament of Zug. The fanatic shot and killed 14 politicians. This resulted in heated debate in Parliament over gun- control and national security. That same year Swissair, the leading airline of Switzerland went bankrupt, resulting a national unemployment and financial crisis. Federal authorities funded the rehabilitated and renamed airline â€Å"Swiss† to preserve employment. The Swiss people were for the first time concerned with their safety from terrorism. This event made Switzerland feel insecure about their neutrality and become more interested in assembling with international institutions. Switzerland initially rejected joining the United Nations in 1986. But in 2002, the country joined after all. It was the last nation to join and the only one to have joined based on the popular vote of its citizens. Switzerland began negotiations with the European Union in 1992. The nation submitted an application to join, but after a national vote, the Swiss people voted against joining. Switzerland then suspended its negotiations with the EU. Traditionally, Switzerland has avoided alliances that might entail military, political, or direct economic action. These actions are believed to compromise their neutrality. Also they are against institutionalized integration. The Swiss People wish to remain sovereign. Over the years, The Swiss have debated joining the EU as the institution grows more and more powerful. The most telling action was taken in 2005 when the country agreed to sign the Schengen Treaty and the Dublin Convention. The first of which allows lenience of border controls between some European nations. The Dublin Convention is a product of the EU outlining the means by which a refugee can seek political asylum. Both of these actions suggest the Swiss’s intentions on becoming a greater part of the institution and soon an active member of the EU. Switzerland acts to benefit its citizens and progress as a nation, while consideration of merging with advantageous institutions. The United States has, under the current administration, acted in opposition to unifying and just precedents in an attempt to promote its own authority. The United States government needs to concern itself more with domestic issues, such as education, employment, housing, and healthcare, instead of governing other nations, such as Vietnam, Cuba, Bosnia, and currently Iraq. If this were to happen, I believe American citizens would lead healthier, more affluent lives with the possibility and benefit of better education, enhanced job security and reliable healthcare. The Swiss government is acting in coalition with its citizens as a greater force to secure its longevity and prosperity. I believe that if the United States educated and listened to its citizens as Switzerland does, the country would be more representative of its people. Switzerland recognized its constitution was outdated and needing improvement. In the United States, any idea of reevaluating notions written in a 200 year old document is â€Å"radical†. A jaded perception of conservatism has flooded American society and government. â€Å"Religious† or â€Å"moral† authority has taken power. The United States has in recent years feared progressive movements such as stem cell research, gay marriage, and allowing for increasing power among women and minorities. The United States would benefit politically and globally from being socially and domestically progressive. The fact is the United States, like Switzerland is made up of many cultures and races. Many Americans are from other countries and speak many other languages. It might benefit the country to practice Lijphart’s concept of consociationalism, wherein all the cultures can be represented in government and it remain stabilized. Many Americans cannot define themselves as either a Democrat or a Republican. Unfortunately, the current U.S. political system does not represent those people. There are currently little to no representatives from third parties in the United States Congress. The United States cannot stand â€Å"united† when a candidate when with only a slight majority of the vote and then gets to represent all of his/her constituencies. I believe that United States government and its citizens have allowed this to happen. The majority of citizens refuse to participate in or support government. There has been such a literal interpretation of â€Å"laissez-faire† government in America. Citizens reject and look down upon government involvement. Government makes society work, but society has to make government work. I believe this concept has been lost on the majority of Americans, and they choose instead, to allow other people to do all the dirty work. If the government represented all the diverging cultures and ideologies in America, then citizens would feel a deeper connection to the institution. This might encourage them to actively participate. Maybe if the United States had a proportional representation system, more people would vote. In turn, if more people voted, the more representative the government might then be. These matters require educating and citizens of their power and encouraging them to utilize it. The political structure of Switzerland allows and encourages the citizens to actively participate in government and legislation. It represents its dynamic multicultural society and concerns itself mostly with its own affairs. Since 1945, Switzerland has experienced little to no critical political movements or conflicts, other than those continuing its peaceful and cooperative nature. In that time, the United States has involved itself in many political conflicts across the globe, with no clear benefit to its own citizens. The United States could reshape its policies to benefit the multidimensional nature of its people, rather than reconstituting other nation’s governments. Research Papers on Swiss GovernmentAssess the importance of Nationalism 1815-1850 EuropeQuebec and CanadaPETSTEL analysis of IndiaThe Effects of Illegal ImmigrationBringing Democracy to Africa19 Century Society: A Deeply Divided EraAppeasement Policy Towards the Outbreak of World War 2Relationship between Media Coverage and Social andAnalysis of Ebay Expanding into AsiaAnalysis Of A Cosmetics Advertisement

Multiple Plurals, Multiple Meanings

Multiple Plurals, Multiple Meanings Multiple Plurals, Multiple Meanings Multiple Plurals, Multiple Meanings By Maeve Maddox One of the more interesting aspects of the changes that take place in English from generation to generation is the fact that as spellings change to conform to modern usage, some of the old forms stick around with different connotations or meanings. Two words for angel that came into English from Hebrew have plural forms ending in -im: cherub/cherubim and seraph/seraphim. In angel lore, a seraph is a fiery six-winged angel who guards Gods throne. A cherub ranks just below a seraph and has two large wings, a human head, and animal body. A cherub is the guardian of a sacred place. Seraph has not entered into general use, but in modern English cherub refers to the image of a pretty Cupid-like child with wings, or to the little faces with wings one sees as architectural decorations. A child with a beautiful, innocent face can be called a cherub. For these modern uses the plural of cherub is cherubs. The earlier plural of brother was brethren, a form still seen in the King James version of the Bible and still to be found in sermons and some religious writing. It suggests spiritual kinship. The plural fishes for fish has a kind of Biblical ring to it, as in the miracle of the loaves and fishes. Pence as the plural of penny is still used in Britain while Americans say pennies. The word dice is the plural of die: a cube with spots used in gaming. Die can also refer to an instrument used in manufacturing. The plural of that kind of die is dies. Some other words with more than one plural form: formula formulas formulae: The Latin plural formulae is often preferred by scientific writers. index indexes indices: The plural indices has a specialized mathematical meaning (a number or symbol or expression written to the left or right of and above or below or otherwise associated with another number or symbol or expression to indicate use or position in an arrangement or expansion or to indicate a mathematical operation to be performed). staff staffs staves: The plural staffs is the modern choice, whether youre talking about a group of workers or a stick used as a walking aid. If youre writing an historical novel, however, Robin Hood and Little John would fight with staves. The word stave occurs as a singular musical term. It is also the word for one of the strips of wood used to make a barrel. The plural of stave is staves. Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Expressions category, check our popular posts, or choose a related post below:The Meaning of "To a T""Replacement for" and "replacement of"How to Punctuate Introductory Phrases

Protecting Online Privacy Essay Example | Topics and Well Written Essays - 2000 words

Protecting Online Privacy - Essay Example And they should take care to protect it from spreading discriminately online. Protecting their privacy online will ensure that they are not leaving their personal information open to abuse (Australian Government). In an open environment any one can have a taste of the matter. The people have a general right to be granted access to the personal information that organizations and agencies hold about them (Australian Government). But such persons are less aware of the fact that their information may be used for the various purposes including the resource to earn money by scammers, spammers or phishers etc.. To avoid discrimination people should know their right. They have diversity of sources to know about their right to protect their personal information, which they have supplied to a range of companies for countless reasons. The more a person knows about his/her rights, the easier it will be for him/her to safeguard his/her privacy (Australian Government). But they are less aware that the companies have taken their consent in their agreement section that their information may be used for their business purposes. Most of them are even not aware what they have signed for. Many credit agencies have gathered information from other agency for handsome amount without the consent of the customer and sold them for their commercial use. There are instances where people don't know about their right and importance of their privacy. They commit such a nuisance that they defame their personal image. For example, the persons, specially crazy girls and even curious women who are interested in publishing their personal information including photograph on internet on free hosting websites, are not aware of the fact that their identity is revealed to the world and they may fall a prey to the world of the prohibited by pornographers. Their ignorance can easily give opportunities, putting themselves in various troubles, to them to earn handsome money out of their clandestine materials. Several examples can be sited to show that the delicate information provided on Internet can make such a big harm to the people that they may even take their life as the compensation of the fault. In early September, a web developer took an apparently real advertisement placed online by a woman looking for a sexual liaison and posted it on the Seattle "casual encounters" section of the Craigslist bulletin board, according to press reports. There were 178 responses to the phony sexual solicitation, many of which included compromising photos. The developer then posted all the responses on a public website, including photos, email addresses and other personal information -- where anyone could view them. (Wharton). Another case of taking the advantage of using the personal matter for the use of Internet shows the wild nature of misuse of the information. A young woman in Seoul was on a subway train with her pet dog when the animal relieved itself on the floor. The woman did not clean up the mess, angering other riders, and the woman herself reportedly became surly as tensions escalated. Using a camera phone -- at 99%, South Korea has the highest camera-phone penetration in the

Leadership Essay Example | Topics and Well Written Essays - 1250 words - 7

Leadership - Essay Example f leadership in business can be fully understood if it is applied to the leadership qualities exhibited and promoted by Jack Welch during his tenure at GE. His leadership has been credited as one of the primary reasons which took GE from a company which was in financial trouble and losing investor confidence to the position of the most admired and respected company in the world (Colvin, 2005). Jack Welch comes across clearly in terms of his leadership ideal when he gives the eight rules of leadership in his book titled Winning. These rules can be studied in the light of leadership theories and a final analysis can be made as to which are the exact ideals of leadership that are recommended by Jack Welch. The eight rules as suggested by Welch (2005) are: With these rules in mind, two theories of leadership can be applied to the style used by Welch and these are the trait theories set and the situational theories of leadership. Gardner (1995) presents us with several ideas which leaders can use to change their leadership styles or how they can balance the styles depending on the situation. The idea of leadership traits can come with several stereotypes or ideas that some people are born leaders, but leadership skills can also be taught to people although the right personality always helps (Welch, 2005). For example, when we consider the third rule given by Welch which states that leaders must give out and infect others with positive energy and optimistic views about situations. That is a key pointer towards the fact that Jack Welch considers the majority of leadership skills to come from the trait theory than any other applicable theory. Undoubtedly, optimism is a personality trait and being able to create optimism or any other emphatic feeling in others requires a leader to have charisma (DePree, 1989). Charisma is accepted by DePree (1998) to be a rare quality which is attributed to those leaders who create devoted followers. Devoted followers and employees who

Global Business Cultural Analysis In Turkey Commerce Essay

Global Business Cultural Analysis In Turkey Commerce Essay Peculiarities of running business and transnational communications are directly related to the culture of the country. Globalization of the economy has undoubtedly become a commonly accepted phenomenon. Even small and medium businesses, wanting or not, face problems of international business relationships: be it the purchase of equipment, materials or other trade and procurement activities, search for partners or investors, not to mention the direct competition with multinational companies in their own domestic market. Larger players of market, in connection with its inevitable saturation, are forced to think about entering the international arena. All these factors make the study of culture of business relationships and international communication increasingly relevant for managers. Awareness about the peculiarities of a particular culture, the ability to consider and use these peculiarities in practice help some companies quickly and at less cost to establish relations with partners, and others to deal more effectively with rivals. The knowledge of the features of international communication is also useful for managers working in foreign companies, since they help to better adapt to a foreign environment, understand the requirements of top-management, permissible frames of conduct and, accordingly, to move faster through the ranks. Major dimensions of culture in Turkey and their influence on Turkish economy and business practices When building business relationships, finding partners for business, developing private business in the territory of another country, it is always necessary to take into account the totality of the rules of business etiquette and specificities of traditions of each cultural environment. Turkey has long been a secular state with European style of doing business, but it should be remembered that the influence of Islam, though not pronounced in recent times is reflected in some aspects of the Turkish business etiquette and bears a deep cultural meaning. Turkey combines European and Middle East traditions in the business culture, therefore common business etiquette here has some nuances which are useful to know for building successful and lasting business relationships. Lets consider these nuances. First, Turkey has a sufficiently well developed family-owned business with a clear hierarchy. Family traditions in Turkey are very important, both in life and in business (Burnaz, 2009). Second, different spheres of life in Turkey are influenced by religion. If the partners are religious people, one should keep in mind that Friday is a holy day for Muslims when they visit temple to pray, so no important business meetings and negotiations should be appointed on this day. Ramazan is a month-long sacred abstinence of all Muslims, during which one cannot eat, drink, smoke cigarettes from sunrise to sunset. This should be kept this in mind when planning a business lunch or dinner in a restaurant. During Ramazan it is better to appoint business meetings with Turkish Muslims after sunset, however, if it is possible to avoid them, it is better to postpone all negotiations until after Ramazan. Many Turkey residents leave on vacation in July or August, so the middle of summer is not the best time for negotiations and business meetings, while from October to May is the most active and fruitful period for Turkish business culture (Burnaz, 2009; OECD Economic Surveys: Turkey, 201 0). It should be remembered that as in any other country, courtesy and respect for etiquette in business in Turkey is especially important. Good personal relationships based on trust and mutual respect play a significant role in building business relationships with Turkish partners, therefore, before proceeding to business negotiations, it is necessary to show them openness and readiness for friendship and to emphasize the mutuality of benefits (Burnaz, 2009; Ararat, 2008, Gupta, 2009). Motivation in negotiating with the Turks should be clear and precise. It is very important in the process of business negotiations to clearly outline the advantages and profitability of a proposal for the Turkish side, although it is not the only thing a benefit may be expressed in for Turkish partners. Instead of profits it is recommended to focus often on such points of the transaction as increased authority and power. Respect, recognition and other intangible benefits may also have a positive impact on the outcome of business negotiations in Turkey (Gupta, 2009). Thus, understanding that Turkish culture is very different from European or American business culture is a big step in doing business in Turkey and with the Turks. It takes patience and time to learn all the ins and outs, but the Turks also show patience towards foreigners and willing to make allowances for any mistake or error in etiquette made by a foreigner. In general, Turkey is an attractive country to do business with the positive dynamics in the economy. Turkey managed to avoid large losses that might have occurred as a result of the global economic crisis of 2008-2009 (Turkey passes the crisis test, 2009). Having analyzed the economic development of Turkey for the period from 2002 to the present day, it can be argued that the state of the economy has become particularly favorable, due to the below factors (OECD Economic Surveys: Turkey, 2010; Turkey passes the crisis test, 2009; Turkey: Business environment at a glance, 2011; Aydin, 2006): à ¢Ã¢â€š ¬Ã‚ ¢ The currency reform in Turkey, 2002; reforms in social security and health care; tax reform beneficial for entrepreneurs; à ¢Ã¢â€š ¬Ã‚ ¢ TOKÄ ° Innovations (Housing Administration Projects) gave impetus to the development of national construction companies; à ¢Ã¢â€š ¬Ã‚ ¢ State support for small and medium-sized enterprises, which constitute 97% of the Turkish economy; à ¢Ã¢â€š ¬Ã‚ ¢ Increased economic growth in Turkey, which is largely due to the automobile industry, real estate and textile industry; à ¢Ã¢â€š ¬Ã‚ ¢ Successful investments in tourism; à ¢Ã¢â€š ¬Ã‚ ¢ Active development of the logistics sector in Europe; à ¢Ã¢â€š ¬Ã‚ ¢ New international communications and new markets: the most promising emerging markets for Turkey are China, South Korea, India, BRIIC group, as well as markets of Pakistan and Bangladesh; à ¢Ã¢â€š ¬Ã‚ ¢ Regional and social development: 40% of the EU budget is allocated to regional development and social infrastructure; à ¢Ã¢â€š ¬Ã‚ ¢ Funding at the expense of TOBB (the Union of Chambers and Commodity Exchange of Turkey); à ¢Ã¢â€š ¬Ã‚ ¢ Development of higher education: there are already 95 public and 45 private universities in Turkey. Apart from that, the Government of the Republic of Turkey considers foreign direct investment as the driving force of economic development and prosperity of the country. Turkey has one of the most liberal legal regimes for FDI among the member countries of the Organization for Economic Cooperation and Development (OECD). Except for some sectors, businesses that are open to the private sector in Turkey are mostly open to foreign partners and investors (OECD Economic Surveys: Turkey, 2010). Nevertheless, all investors, regardless of nationality, face a number of specific obstacles characteristic of developing Eastern countries: excessive bureaucracy, slow acting justice system, high taxes, corporate governance weaknesses, sometimes unpredictability of the decisions taken at local government level, as well as frequent changes in legislation and regulatory framework (Gupta, 2009). However, foreign investment regulation, for the most part, is transparent. Turkey supports national regime, including the purchase of real estate by foreign capital companies registered in accordance with Turkish law, and in most sectors no investment audit is provided (only notification is required). The Turkish Government supports the principle of transparency with the associated nation as a precondition for the acquisition of real estate by foreigners, and imposes a limit of 2.5 hectare of property acquired by foreign individuals. Individuals cannot own more than 10% of the land in any of the areas of industrial development (Kalafatoglu, 2010; Keyman, 2005;). The maximum share of foreign equity participation is limited to 25% in broadcasting and 49% in aviation and maritime transport. Establishment of companies offering financial services including banking and insurance, as well as oil-related companies, requires special permission from the Government of Turkey for both domestic and foreign investors. In practice, regulators do not restrict foreign ownership in the financial sector: in 2005 and 2006 a series of acquisitions by foreign persons were approved, and several foreign financial companies has been operating in Turkey for a long time (Ulusoy, 2009). The privatization process in Turkey is currently going on. The Government of the Republic of Turkey privatizes the state economic enterprises through selling lots of securities, public offerings, or a combination of both. The total amount of transactions in the Turkish privatization program amounted to 8.1 billion dollars in 2006, 4.3 billion dollars in 2007, and 6.3 billion dollars in 2008. The state continues privatization process, despite the fact that the reduction of global financial flows, which began in 2008, may entail certain obstacles (Ulusoy, 2009; OECD Economic Surveys: Turkey, 2010). Bureaucratic delays used to be significant obstacles to both national and foreign companies. However, recent reforms have simplified the process of establishment of companies, reduced the requirements to obtain permits, set a single form of registration of companies and enabled individuals to register their businesses in the Union of Chambers and Commodities Exchange of Turkey. Cross-cultural analysis: business cultures of USA and Turkey Generally, two polar opposite styles of management are distinguished, and consequently, business relation cultures: American or Western and Oriental styles. They are fundamentally different in structure of collection and exchange of information, separation and segregation of duties, degree of standardization, coordination and subordination. The American system is characterized by management based on science, individualism and personal responsibility, a clear division of labor, specialization, planning based on the analysis of large amounts of quantitative information. Oriental management system is based on collective responsibility, rotation system, long-term career planning, equation of employees to the company and its customs (Burnaz, 2009; Gupta, 2009). At the same time, in line with the Western style, there has recently distinguished a pan-European, also partly inherent to Turkey as an EU member, with a simultaneous focus on economic and social indicators, such as a guaranteed opportunity for staff development, involvement of employees in decision-making process, the emphasis on favorable climate in the company (Burnaz, 2009; Gupta, 2009). However, despite the tendency to unify business methods and communication standards, we believe that the explicit differences in business culture will remain in the future. Despite the huge variety of business cultures, there are methods to predict certain aspects of behavior of representative of a certain culture. Ones of the most applicable methods are the classification of countries according to G. Hofstedes four variative characteristics reflecting basic differences of cultural values, and contextual ranking of cultures, proposed by E. Hall (Cateora, 2000). According to these theories, the USA is a notable example of a country with a high index of individualism (IDV=91), when a separate individual poorly integrates itself into the group, and strong individualistic mentality is observed with a focus on the importance of personal life and initiative. The Turkish society is rather a society where the mentality of community relations dominates, so it is based on morality, sense of duty, predominance of the interests of the collective over the individual ones, and loyalty (IDV=37) (Table 1). Another important cultural dimension is the parameter of power (hierarchical) distance. Power distance index measures the tolerance of the society towards social inequality, i.e., unequal distribution of power between superior and subordinate members of the social system. The degree of distancing shows the relation of employees to the power of managers. Turkey has a culture with a high index of power distance (PDI=66), and power in Turkey may even be inherited. Here there is a significant difference between the members of the society who are at different social levels and difference in the privileges, which are perceived by the members of the society for granted. In countries with a low power distance index, like USA (PDI=40), the reverse pattern is observed (Table 1). The next quality largely determined by culture is the control of the level of uncertainty, which shows the extent to which members of a cultural community are programmed to freedom of action in unstructured non-standard situations. In this aspect, the USA and Turkey also hold totally different positions. As a country with high uncertainty avoidance index, Turkey (UAI=85) is less resistant to stress, more concerned with security issues and following the rules, which leads to poor perception of change and slow adaptation to new ideas. USA is characterized by culture with low UAI (UAI=46) associated with greater mobility, willingness to take risks, innovation, tendency to rely on knowledge, rather than absolute knowledge (Table 1). Moreover, the USA is rather a country described by Hofstede as the country with masculinity behavior (MAS=62), i.e. dominance, encouragement to competition, high demands, desire for career achievements and entrepreneurship, greed and passion for capital accumulation, lack of caring about others. In contrast, though attached now to the European community, Turkey still belongs to femininity pattern (MAS=45) and the prevailing values are humility and altruism, gender equality, emphasis on serving people, mutual aid (Table 1). Table 1. Indexing USA and Turkey depending on cultural values by Hofstede. Country IDV Ranking by IDV* PDI Ranking by PDI UAI Ranking by UAI MAS Ranking by MAS USA 91 1 40 38 46 43 62 15 Turkey 37 28 66 18/19 85 16/17 45 32/33 * Classification among 53 countries of the world, by 2000. (Cateora, 2000) In addition to the parameters identified by Hofstede, the predominant and characteristic of the culture type of communication is of great importance in the typology of business cultures. On this parameter, all nations can be ranked by the degree of cultural contextuality. Recent studies have revealed a high correlation between high/low-contextuality and the Hofstedes indices of individualism/collectivism, and hierarchical level of distancing (Cateora, 2000). Thus, low-context American culture shares relatively low hierarchical differences and high level of individualism. On the contrary, high-context Muslim culture is typically characterized by a significant difference between the hierarchical levels and low levels of individualism. Therefore, the majority of modern managers, employees of international companies, are more effective in countries with the low-context language, since they are relying on the reports, contracts and other acts documented in writing. But even in low-context cultures, communication is largely dependent on cultural differences (Cateora, 2000; Gupta, 2009). High-context cultures require a considerable period of time before starting the business part of the relationship, because future partners must get to know each other for joint business. For example, if one cannot find time and desire to drink coffee and talk about abstract topics, one cannot advance to the business part of the conversation (Cateora, 2000; Gupta, 2009). Another indicator is the source of power and level of authority, which is a direct consequence of the level of the hierarchical distance, as it combines the effect of the power structure in business with the status and position of manager in the community, depending on the size of the company, publicity, type of property, and cultural values. In Turkey, the decisions are mainly made exclusively by the head of the company, who prefers to deal only with senior executives of other companies. Business here is not between companies or divisions, but between individuals. The latter also means that in case of leadership changes from one side or another, the achieved agreements may lose their power, if trust relationships arent re-established between new top executives of companies. Besides, the decentralized system, common for the U.S., enables managers at various levels to make decisions relevant to their functions, which is not common for Turkey (Ararat, 2008; Gupta, 2009). Thus, the obvious conclusion is that it is necessary for the authoritarian cultures as well as companies with a decentralized power structure to correctly determine the decision-makers, while working with companies in which decisions are taken by consensus, it is important to convince each member of the committee or group. Peculiarities of conducting business in Turkey Business in Turkey is quite difficult to arrange. But the results of registration of the business in Turkey and certain investments can be easily recouped. Peculiarities of doing business in Turkey determine such things as sale and purchase, opening bank accounts, tax system, offshore, ready business, small business and profitability of big business. In general, 2011 will be very important for Turkey. In June, the general election will be held. The current government has been successful in many areas of the economy; although some serious problems still remain. Therefore, opposition political parties should form new political-economic strategies with respect to the above areas. Turkey has to achieve significant economic growth, reduce unemployment, ensure social justice, and resolve tax issues. If it is done succeeds, it will be able to join the BRIIC (Kalafatoglu, 2010; OECD Economic Surveys: Turkey, 2010). The Government of Turkey since 2001 has been implementing a comprehensive program designed to accelerate all the procedures related to investments and attract more direct foreign capital into the country. The national body, the Coordinating Council for the Improvement of the Investment Environment (YOIKK) provides methodological support in this issue. In addition, in 2004 the Investment Advisory Council for Turkey (IAC) was established, whose recommendations serve as a guide for YOIKK, and activities undertaken within the Councils recommendations are published in annual reports of the Treasury of Turkey on the activities of IAC (Keyman, 2005). The government continues to implement legislative reforms, some of which are aimed at attracting foreign investment to Turkey. The draft of National Legislative Network, a project of automation and integration completed the process of developing the technical infrastructure in 2008, designed to accelerate the execution of business cases by facilitating the transfer of documents and transcripts of court proceedings and give the opportunity to file an application online. In addition, the government simplified the access of foreign investors to justice, including legal advice and Alternative Dispute Resolution, supported by the U.S., EU and World Bank (Turkey: Business environment at a glance, 2011; Kalafatoglu, 2010). Turkey made the tax system more convenient for investors as well. In 2006 the basic rate of income tax was reduced from 30 to 20%. The government also cancelled the income tax for foreign investors who own bonds, notes and shares, preserving it for bank deposits and repurchase transactions. In 2007 tax administration established a division designed to manage taxes collection from large corporations (Keyman, 2005). However, the Government of Turkey has not yet managed to implement further tax reforms, including reducing the tax on wages, which is one of the highest among OECD members. The Turkish Government also increased the VAT on leasing transactions from 1 to 18% in 2007. Special consumption tax on alcoholic beverages in 2008 reached 275.6% with the minimum requirements for special tax based on market prices of products (Ulusoy, 2008). Turkish laws affecting the investment climate continues to develop. It guarantees freedom of transfer of profits, fees and royalties and repatriation of capital. This guarantee is reflected in the bilateral investment treaties between Turkey and the United States in 1986, and in some similar agreements, which regulate the unlimited and proper handling of all funds related to investment in a freely convertible currency in the self-regulating market (Treaties and Agreements, Turkey-United States, 1986). Turkey is a member of the International Centre for Settlement of Investment Disputes (ICSID). Turkey also ratified the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA) in 1987. Turkish law provides the confirmation of international arbitration execution of investment disputes between foreign investors and the state. Turkeys is also a member of the WTO Agreement on Trade Related Investment Measures (TRIMS) (Keyman, 2005; Ulusoy, 2008). Turkey investment stimuli system was significantly improved in 2006 to support manufacturing industry, energy sector, and export. General regime of investment incentives suggests tax benefits and, in some cases, the possibility of lending. Turkish Treasury also regulates some issues regarding interest rates on investment loans for small and medium enterprises, RD projects, environmental protection, as well as projects in 50 provinces, where the annual income per capita is below 1500 U.S. dollars. For such provinces, the law provides income tax incentives, social insurance benefits, free land and reduced electricity cost up to 20-50% (Ulusoy, 2009; OECD Economic Surveys: Turkey, 2010). In RD sphere, Scientific and Technological Research Council of Turkey (TUBITAK) and Technology Development Foundation of Turkey (TTGV) deal with reimbursements for RD and capital borrowing. Projects that get such benefits include development concepts, technology research, technical feasibility evaluation, concept-to-design laboratory researches, samples study, test products production, experimental facilities construction, product testing, patent research and design problems solutions. In addition to these incentives, the Government of Turkey provides support for technological development zones, which involves the creation of infrastructure and production facilities, exemption from taxes, VAT, income taxes and revenues, and from customs duties for special IT-sector. Moreover, export stimulating program is focused on RD, market research, and participation in international exhibitions and fairs. In Turkey, no technical requirements for the beginning, implementation and expansion of investment projects are provided. There are also no restrictions to the acquisition by investors of goods from national sources and exporting specific percentage of products. Investors access to foreign currency does not affect exports. There are also no restrictions for domestic companies to own shares of foreign investors for the fact that the proportion of foreign shares will be gradually reduced or investor will transfer its technology on certain terms. There are also no conditions established by the state in terms of the permission to invest, including the location in specialized geographic areas, specific percentage of national resources for the production of goods and services, national shares packages, import substitution, export requirements, employment of the population the investor technically located in, technology transfer and financing from national sources (Ulusoy, 2008; Ulusoy, 200 9; OECD Economic Surveys: Turkey, 2010). The Government of the Republic of Turkey does not force investors to disclose proprietary information or any other kind of information different from the publicly available one during the process of obtaining permission from the supervisory authority. Companies with foreign capital are to send a report on their activities, submitted to the General Assembly of shareholders, the auditors report, and balance sheet in the Foreign Investment Department of the Treasury annually in May. Except for issues relating to openness to foreign investment and transparency of the system of regulation, Turkey provides all the rights, benefits, deductions and privileges available to national capital and companies, as well as foreign capital and companies on the basis of most favored nation regime (for selected countries). For example, American and other foreign firms can participate in publicly funded programs and programs of subsidizing research and development on the basis of national treatment. The Government of the Republic of Turkey has adopted policies and laws that, for the most part, should promote free competition and transparency in business. However, foreign companies in some sectors complain that the regulations are not transparent and understandable from time to time. One should keep in mind that Turkey is an observer, but not a member of World Trade Organisations Commission on Government Procurement. However, Turkey is an actively developing country, which tries to keep pace on all the contemporary European and American innovations. One of the most perspective areas in Turkey is internet and mobile commerce. For instance, recent researches show that mobile marketing has acquired great popularity with the development of technology SMS since 2000 in Europe and different parts of Asia. Over the past few years SMS-messages have become a major advertising channel in Turkey, and many experts even tend to view Turkey as an innovator in mobile marketing (Demirbag, 2008). The vivid example of this success is the experience of the Turkish branch of Pepsi, which in the last 3 years has been one of the most active players using mobile marketing tools. To date, according to the data of Pepsi Turkey, the level of participation in promotional campaigns conducted by the department is the highest in the category. The company uses mobile technologies, because it considers them more effective than TV tool to provide an opportunity for interactive communication with Turkish consumers. One of the campaigns introduced by Pepsi offered consumers wallpapers and ringtones, including the famous song Da Da Da. Over the course of a promotional campaign, users downloaded more than 200,000 ringtones (Tsalikis, 2009). Turkish companies (like Finansbank, BP, FritoLay) proved that simplicity and possibility of immediate gratification are of great importance for the Turkish consumer, and the mobile channel can provide this effect (Demirbag, 2008). In general, the trust of Turkish consumers continues to rise since February 2010, reaching 85.8. This is the highest level over the past 14 months (OECD Economic Surveys: Turkey, 2010). According to the report published by the Institute of Statistics of Turkey in 2010 jointly with the Central Bank of Turkey, the index of consumer confidence amounting to 85.8 points is the highest mark since February of 2009 when it amounted to 87.60% (Tsalikis, 2009). The index started to rise since November 2009, after reaching a record low value of 78.38 points. If the index exceeds 100, it means that consumers are optimistic, and if it equals to 100, it means that consumers are neither optimistic, nor pessimistic, but if the index is below 100, it indicates pessimistic consumers (Aydin, 2006). The report determines the growth of the index of consumer confidence through the increase of the purchasing power of consumers in the current and future period, the general state of the economy and employme nt opportunities in the coming quarter. Conclusion The research has shown that Turkey is characterized by the specific business culture, experiencing the influence of European Union, USA, and its Asian partners. Belonging rather to eastern patterns of business culture, Turkey differs much form the United States in the major cultural indicators, such as indices of power distance, individualism, uncertainty avoidance, and type of business behavior (masculinity vs. femininity). However, in recent years, Turkey demonstrates high indicators of economy growth, openness to reforms, laws adjustments and democratic investment policy, which makes Turkey a favorable business partner. In addition, Turkish policy and legislation on labor, health and safety do not impede investment, although legal restrictions on firing workers may create obstacles to labor-intensive activities in the formal economy. The specific tax policy sometimes hinders investment decisions, e.g. high taxation of beverages, similar to Coca-Cola, hinders investment in the sector. However, serious tax incentives for free trade zones provide incentives to invest in these zones. Similarly, incentives for investment in certain low-income provinces are designed to increase investments in these areas. Nowadays, international credit rating agencies insist that the investment level of the Turkish economy is still not high, but markets do not express much concern. Credit default swaps insuring Turkish securities against default for 5 years, are estimated at 1.84%. And while the Eurozone is struggling with budget deficits, Turkey states huge budget surplus due to the growth of tax revenues. Turkey is considered to be a country of investment grade in the market of credit default swaps after its dollar-denominated bonds started to exceed the bonds of developing countries in Europe largely due to accelerated economic growth. According to preliminary estimates of the Government, the economy of Turkey grew in first quarter by 12%, which allowed the Prime Minister of Turkey to claim that Turkeys credit rating wont be reduced in the coming 6-10 months. Generally, the country retains the trend towards improvement of economic performance, development and innovation, which opens new perspectives for foreign investment, collaboration and partnership.

Models of Takaful in Bangladesh Perspective

Milliman Research Report Prepared by: Safder Jaffer Farzana Ismail Jabran Noor Lindsay Unwin Reviewed by: Debo Ajayi November 2010 Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Milliman Research Report Contents EXECUTIVE SUMMARY 2 BACkgROUND AND MARkET OUTLOOk 3 PRINCIPLES AND PRACTICES UNDERLYINg TAkAFUL TAkAFUL OPERATINg MODELS 11 ISSUES AND ChALLENgES FACINg ThE TAkAFUL INDUSTRY 15 CONCLUSION 25 APPENDIX I: gLOSSARY 26 APPENDIX II: BIBLIOgRAPhIC REFERENCES 28 APPENDIX III: SELF REgULATINg BODIES & TAkAFUL gROUPS 29 Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 1 Milliman Research Report exeCu tive summary Through desktop research, one can get a plethora of materials and papers on Takaful, but most tend to focus either on the fundamentals of Takaful or on Takaful models.In contrast, the objective of this report is to highlight the key issues and challenges facing the world of Takaful and suggested areas where work is required to find solutions. Therefore this report is intended to provide useful reference material for practioners by summarising the following key items: †¢ An overview of Takaful and the intricacies of the models †¢ Insights into the issues and challenges facing the Takaful industry †¢ Finding sustainable solutions to some of these challengesTakaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 2 Milliman Research Report BaCkground and market outlook Muslims account for around 25% of the world’s total population, but despite rapid growth in recent yea rs, insurance sales within the Muslim population remain a small fraction of the total insurance market. Historically, the incompatibility between conventional insurance and key tenets of the Islamic faith has acted as a significant barrier to sales.These differences have led to very low penetration rates and have left many Muslims with little external protection for their dependents or possessions. The development of Takaful, which originates from the Arabic verb ‘kafalah,’ which means ‘to help one another’ or ‘mutual guarantee,’ has been driven by a need to overcome these obstacles and create an insurance proposition that is fully compliant with Shariah (Islamic law). It offers Muslims a valuable risk management tool and the first true alternative to conventional insurance in both the life and nonlife sectors that is acceptable to the Muslim faith.For non-Muslims, Takaful products potentially offer an alternative source of insurance protection —with different investment objectives, an approach to surplus distribution, and an oversight system with an ethical dimension. Hence in Malaysia, for example, non-Muslims account for more than 60% of the total Takaful premiums. Takaful offers Muslims a valuable risk management tool and the first true alternative to conventional insurance in both the life and non-life sectors that is acceptable to the Muslim faith. Figure 1: geographiCal spread oF muslims as a % oF total population No data 0-5% 5-10% 10-50% 50-75% 75-100% Sources: U.S. State Department, CIA WORLD FACTBOOK, Swiss Re Economic Research & Consulting Market Size and Outlook Whilst Takaful started in 1979 in Sudan, it only gained momentum in early 2000 when the Malaysian government promoted it and significant growth was witnessed thereafter. The growth of Takaful has varied significantly from country to country and its success, or otherwise, has been largely dependent on the awareness and affluence of the local popu lation, as well as on the robustness of the local regulatory framework. Hence the highest growth has been observed in places such as Malaysia (with its considerable awareness ofTakaful and robust regulatory framework), whereas growth in the Middle East has only recently begun to take off. Depending on the definition of Takaful, the currently quoted volumes in terms of premiums range from USD$1 billion to USD$5. 6 billion. Although the exact size of the Takaful market has often been disputed, there is general acknowledgment of the rapid growth of the industry. In 2007, Takaful premiums in emerging markets grew by roughly 26% and accounted for 5% of insurance premiums Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 3Milliman Research Report written in Muslim countries. 1 According to Takaful Re, a Dubai-based Retakaful company, Takaful premiums crossed the USD$3 billion mark in 2007 as seen in the table in Figure 2. Figure 2: takaFul premiums (usd$ millions) gCC 2004 2005 2006 2007 770 SAUDI ARABIA 1,238 1,579 2,046 645 1,065 1,340 1,695 KUWAIT 54 83 90 124 UAE 31 42 65 109 QATAR 25 34 50 76 BAHRAIN 15 15 34 59 south east asia MALAySIA 474 544 692 951 343 412 534 797 INDONESIA 77 75 80 94 THAILAND 30 30 32 35 24 27 30 35 aFriCa BRUNEI 121 181 215 317 levant 14 17 21 32 5 8 11 18 1,384 1,988 2,518 3,364 indian suB-Continent total Source: Takaful ReThe projected Takaful written premium estimates have often been debated by practitioners because of the wide range of numbers published by various sources. There is difficulty in determining firm estimates of the total industry potential as there is a wide variety of Takaful definitions and categorisation, as well as a lack of consistent and credible data. Oliver Wyman suggested in a recent study that the Takaful premium potential is at least USD$20 billion whereas Swiss Re in its annual Sigma report sees a potential of USD$56 bi llion. Takaful premiums by 2015 are estimated to be in the range of USD$7 billion to USD$8 billion.Hence it is necessary to exercise caution when analysing projected figures. Takaful provides access to a large, relatively untapped market, in which insurance penetration hovers somewhere well below 2% of gDP, and its growth in the global market is expected to continue in the long term. Takaful provides access to a large, relatively untapped market, in which insurance penetration hovers somewhere well below 2% of GDP, and its growth in the global market is expected to continue in the long term. Global estimates for the growth of the worldwide Takaful industry come in at 20% per year, far outstripping the 2. % annual growth for conventional insurance premiums. 2 It is interesting to note that many Takaful providers have emerged largely unscathed from the financial crisis, as investments are commonly held in highly liquid assets, which is due to limited Shariah-compliant investments. Ins urers considering entry to the Takaful market are better off assessing the markets and opportunities sooner rather than later. Targeted marketing and consumer education are essential to develop market awareness and established insurers can leverage their existing marketing and distribution platforms.The lack of a clear market leader in Europe and the UK means that insurers can take advantage of the challenges and opportunities present in a developing global industry. 1 2 Swiss Re (2008). Insurance in the emerging markets. Sigma, Issue No. 5. PricewaterhouseCoopers (2008). Takaful : Growth opportunities in a dynamic market. Retrieved Nov. 3, 2010, from http://www. pwc. com/en_GX/gx/financial-services/pdf/pwc_takaful. pdf. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 4 Milliman Research Report rinCiples and praCtiCes underlying takaFul Principles Underlying the Takaful Industry The Islamic F inancial Services Board (IFSB), a self-regulated organisation in Islamic finances, produced a paper on governance (in December 2009) and defines Takaful as follows: Takaful is the Islamic counterpart of conventional insurance, and exists in both Family (or ‘Life’) and General forms. Takaful is derived from an Arabic word that means joint guarantee, whereby a group of participants agree among themselves to support one another jointly for the losses arising from specified risks.In a Takaful arrangement the participants contribute a sum of money as a Tabarru’ commitment into a common fund that will be used mutually to assist the members against a specified type of loss or damage. The underwriting in a Takaful is thus undertaken on a mutual basis, similar in some respects to conventional mutual insurance. A typical Takaful undertaking consists of a two-tier structure that is a hybrid of a mutual and a commercial form of company – which is the Takaful operator (TO) – although in principle it could be a pure mutual structure.Hence there is a recognition that whilst the current ‘Takaful’ concept and practice is in fact a hybrid of a mutual and commercial insurer, in principle it needs to move more towards a pure mutual structure. This will be analysed later when discussing the opportunities and challenges of the Takaful industry. There is a common misunderstanding that insurance or risk mitigation is not allowed under Islam, as Muslims believe that only God knows one’s future and faith. The following conversation taken from the sayings of the Prophet Muhammad depicts an interesting message as to why Muslims should indeed reduce the risk of loss:Whilst the current ‘Takaful’ concept and practice is in fact a hybrid of a mutual and commercial insurer, in principle it needs to move more towards a pure mutual structure. Prophet Muhammad asked a Bedouin who had left his camel untied, ‘Why do you not t ie your camel? ’ The Bedouin answered, ‘I put my trust in God. ’ The prophet then said, ‘Tie up your camel first and then put your trust in God. ’ Every society has risk management needs and, with the evolution of time, the methodologies also evolve.Almost 10 centuries before the advent of conventional insurance companies, the Muslim societies in Arabia adopted concepts of risk mitigation such as ‘hilf’ to assist victims of natural disasters or hazards of trade journey. Another common practice widely used in Islam was ‘al-aqilah. ’ Under the custom of ‘al-aqilah,’ it is mutually agreed that, if a person is killed unintentionally by another person, the paternal relatives will take the responsibility to make a mutual contribution for the purpose of paying the blood money to the victim’s relatives.This practice of having a fund that pools contributions from a group of people to assist others in need is akin to mutual insurance. It is important to point out that the mutual assistance was not originally a commercial transaction and did not contain any profit or gain at the expense of others. Rather it evolved as a useful social practice to mitigate the burden of an individual by dividing it among fellow members. There are certain key issues within conventional insurance that Islam does not permit: †¢ Riba, or usury: The first of these is the earning of interest, referred to in Islam as Riba.It is a concept expressly prohibited at several points in the Quran. Traditionally viewed from the perspective of a loan, Riba is considered unfair and inequitable to the borrowing party and therefore earning interest is forbidden under Shariah law and Muslims must avoid Riba in all of their financial transactions. †¢ gharar, or uncertainty: The second element is the presence of uncertainty embedded in the design of conventional insurance products. Uncertainty and the trading in risk are cla ssed as Gharar, a concept forbidden in Shariah law to protect participants from hazardous or unjust transactions.Conventional insurance is designed around the transfer of risk in return for a premium, and the timing, severity, and/or frequency of insured events are each subject to Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 5 Milliman Research Report varying degrees of uncertainty. The perception that insurance products commonly contain unclear contract terms furthers the view that a high level of uncertainty pervades all aspects of conventional insurance. Maisir, or gambling: Related to Gharar is the concept of Maisir, also prohibited under Islam, which captures those transactions with an underlying gambling or speculative nature. In the context of life insurance, many contract designs can be viewed as gambles which ultimately benefit one side of an insurance contract at the expense of t he other. For example, by taking out a term assurance contract, the risk is transferred to the insurer for a fixed premium and the payment of a small sum could potentially yield a disproportionately large payout, benefiting the policyholder at the expense of the insurer.Alternatively, the payment of a stream of premiums for many years could result in no return at all, which benefits the insurer. †¢ haram, or forbidden: Conventional insurance designs may have investments in a number of asset classes that partake in activities prohibited within the Muslim faith, such as investments in alcoholrelated companies, pornography, or gambling-related enterprises such as casinos. Such activities are considered Haram or forbidden in Islam, and consequently, the proceeds of the conventional insurance are also deemed to be unacceptable in the Muslim faith.There is a further focus in Takaful (and in Islam in general) around the importance of moral values and ethics as business is meant to be conducted openly in accordance with the utmost good faith, honesty, full disclosure, truthfulness, and fairness in all dealings. It is not within the scope of this report to look into the Shariah matters in depth as there is a diversity of opinion on the exact principles of Takaful. There are some schools of thought within Islam that allow conventional insurance so long as it does not involve Riba (or usury) whilst others have a range of tolerance with some of the key issues mentioned above.However, by and large, there is broad consensus on the solution to these issues. This emerged in the late 1970s in Sudan, but gained more prominence in the 1980s in Malaysia and the Persian Gulf countries in the form of Takaful. Instead of paying an insurance premium, Takaful participants (policyholders) donate their Takaful contribution to a common pool to mutually assist the members against a defined loss or damage. Takaful can thus be seen as the Islamic counterpart of conventional mutual insu rance (i. e. , insurance that is compliant with the Shariah).Takaful is not a type of insurance but rather an alternative to insurance. It has to operate on cooperative principles and incorporate the concept of Tabarru’ (donation, gift). Instead of paying an insurance premium, Takaful participants (policyholders) donate their Takaful contribution to a common pool to mutually assist the members against a defined loss or damage. It is a one-way transaction which does not expect a definite return on the donation, unlike the more traditional bilateral conventional insurance contract where a premium is paid in return for an insurance benefit.The pooling does eliminate Gharar, as the uncertainty about future claim events certainly still exists but now is acceptable as the donation (Tabarru’) is meant for mutual assistance and not for profittaking or gambling (contracts of charity are not affected by the prohibition of Gharar). However, unlike conventional insurance where the risk is transferred to the insurer, all participants mutually share the risk in Takaful, which is an important fundamental difference. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay UnwinNovember 2010 6 Milliman Research Report The chart in Figure 3 summarises the key differences between conventional insurance and Takaful. Figure 3: Comparison oF Conventional insuranCe and takaFul Conventional insuranCe takaFul A risk transfer mechanism whereby risk is transferred Based on mutuality; hence the risk is not transferred but from the policyholder (the insured) to the insurance shared by the participants, who form a common pool. The company (the insurer) in consideration of an ‘insurance company (takaful operator) acts only as the manager of premium’ paid by the insured. the pool.In effect, the policyholders are both the insurer and the insured. Contains the element of uncertainty, i. e. , gharar, whic h The element of uncertainty, i. e. , gharar, is brought down is forbidden in islam. The terms of the contract are to acceptable levels under shariah by characterising unclear as to certainty of when any loss would occur contributions as donations (Tabarru’), not obligations, and and how much compensation would be payable. for a good cause, i. e. , To mitigate the loss suffered by any one of the participants, as opposed to payments linked to definite expectation of insured benefits to be received.Contains an element of gambling, i. e. , Maisir, in that the The participant pays the contribution (Tabarru’) in the insured pays an amount (premium) in the expectation spirit of ne’ea (purity) and brotherhood to cover mutual of gain (compensation/payment against claim). If the losses of members of the pool. Losses and gains are anticipated loss (claim) does not occur, the insured loses mutually shared by the pool members who contribute the amount paid as premium. If th e loss does occur, to the pool. That is, third parties (insurers or reinsurers) the insurer loses a far larger amount than collected as re not affected by the outcome of risk events. premium and the insured gains by the same. Funds are mostly invested in fixed interest-bearing Funds are only invested in non-interest-bearing, i. e. , instruments such as bonds, fixed interest securities, etc. Riba-free, instruments. Note that regular income hence these contain the element of riba (usury), which is investments are still possible (such as under forbidden in islam. Sukuk, islamic bonds) as long as the income is not interest-based. Surplus or profit belongs to both the shareholders and Surplus belongs to the participants and is accordingly he with-profit policyholders. The insured is covered returned to them. during the policy period but is not entitled to any return at the end of such period. The concept of Shariah (Islamic law) compliance is an evolving one and is overseen by the Islami c scholars that sit on the Shariah Supervisory Board, which provides the final certification of compliance. The scholars base their views primarily on the principles of the Quran, supplemented by Sunnah (the teachings of the Prophet), Fatwas (judicial opinions of Shariah scholars), and Islamic jurisprudence on economic transactions.While the words of the Quran and Sunnah are sacrosanct, the independent reasoning of Shariah scholars can be revoked or adapted to suit changing circumstances, and new developments are dealt with by legal reasoning and judgment of Shariah scholars. This creates a moving goalpost, which is one of the challenges in the Takaful industry which will be discussed further in Section 4. Takaful provides Shariah-compliant solutions to the prohibited concepts with conventional insurance while still protecting against uncertain events in return for a commensurate fee.The mutual guarantee offered by Takaful is centred on a transparent, ethical, and Shariah-compliant agreement between the i operator and participants. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Takaful provides Shariahcompliant solutions to the prohibited concepts with conventional insurance while still protecting against uncertain events in return for a commensurate fee. 7 Milliman Research Report Practices in the Takaful Industry This section provides an overview of the components and current practices in the Takaful industry, including: †¢ †¢ †¢ Practices within Family Takaful (Life) and General Takaful Shariah-compliant assets Retakaful Retro-Takaful Family Takaful (Life) and General Takaful As introduced above, conventional insurance as sold in Western markets is fundamentally irreconcilable with several tenets of the Islamic faith. In terms of life insurance, Shariah scholars view these contracts as a gamble on the insured’s life. There is uncertainty surrou nding when and if death will occur within the covered period, and in the event that no claim is made the policyholder is considered to have made a loss.For Muslims, this incompatibility rules out traditional life insurance as a means of obtaining protection for their dependents. Family Takaful offerings provide access to life coverage in a manner which does not conflict with their religious beliefs. Takaful is structured around the core principle of sharing and pooling mortality/ morbidity risk with fellow participants rather than transferring it to a profitoriented corporate entity. Takaful is structured around the core principle of sharing and pooling mortality/morbidity risk with fellow participants rather than transferring it to a profit-oriented corporate entity.The concept of mutual support allows many parallels to be drawn between Shariah-compliant Takaful operations and mutual insurers. However, unlike mutual insurers and friendly societies, current Takaful operations involv e shareholders who have a profit motive, who provide the capital and fund the administration of the risk pool, and who are separate from the participants. Hence, Takaful operations can be viewed as Shariah-compliant commercialised mutual insurance operations. This structure of necessity, which is due to the need for capital, creates another set of challenges to be discussed further inSection 4. Similar to the concept of with-profits products sold by mutual insurers, Family Takaful is designed to combine protection for the benefit of one’s dependents with a savings element and requires the distribution of surplus to participants. However, the requirement of transparent disclosure of charges makes Family Takaful contracts akin to the clear charging structure underlying a unit-linked insurance contract. Current practice is to develop Shariah-compliant variants of conventional insurance products.Family Takaful variants of most common life products, including level and decreasing term assurance, savings and retirement plans, and critical illness coverage, have been successfully launched in various markets. For example, a direct contribution style of savings scheme offering equity exposure could be developed by limiting investment to stock issued by companies that meet the non-Haram or Halal (lawful) requirements. Even product designs, such as annuities and whole life plans, whose inherent features include an uncertain duration, are currently being considered as Takaful offerings.A consequence of mutuality, voluntary contributions, and absence of third parties (such as the insurer in conventional insurance) to share in the risks is that Family Takaful contracts cannot (or do not) offer guarantees to the participants. Guarantees on investment returns, bonuses, risk charges, or premiums, etc. , are not offered under Takaful products. While Takaful practice allows the spread of risk through reinsurance from Retakaful companies, or conventional reinsurers on a ne cessity basis, this practice is not to allow guarantees as the reinsurance pool is seen as an extension of the primary risk pool.Accordingly, investment returns on contributed funds by the participants are based on actual investment experience. However, the Takaful operator is obligated to advance a loan (qard), on an interest-free basis, to support any shortfalls in the risk pool in meeting claims. This implicit guarantee of underwriting risk by shareholders of the Takaful operation creates some weakness in the current commercial model of a Takaful operation. Commonly, while there are no guarantees, there are expectations established at point of sale through product illustrations. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities SafderJaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 8 Milliman Research Report However, the concept of mutual assistance does not prohibit the use of underwriting and prospective pricing based on experience studies. As with conventional insurance, if the health of a potential participant would result in significant additional strain being placed on the underwriting fund then an extra contribution would be required. The prohibition of interest-bearing instruments does not impact on the use of interest functions in pricing or valuation of long-term liabilities in Takaful.The pricing interest assumption is based on expected returns from Shariah-compliant assets underlying the liabilities. In terms of surplus distribution, any distribution made to participants is based purely on actual surplus arising. As long as the underwriting fund is not in deficit, surplus arising from both investment and underwriting activities can be used to make a cash payment to participants and/or contribute to any claim fluctuation reserve. The latter is set up to cover short-term volatility in the size and incidence of payments out of the underwriting fund.As with regular bonus declarations on conventional with-profits con tracts in the UK, surplus distributions, if any, are most commonly made on an annual basis. Participants in a Takaful operation will need to be appropriately and comprehensively educated on this feature of the product design so that reasonable expectations are built up as to the level of distribution. Shariah-Compliant Assets The avoidance of Riba, Gharar, Haram, and Maisir in the design of Takaful products has a significant impact on the investment decisions of a Takaful operation.Contributions must be invested purely in Shariah-compliant assets, i. e. , assets that are non-interest-bearing and whose returns are not derived from activities considered unethical. Haram or forbidden investments in Islam include financial derivatives such as futures and options, interest-bearing bonds, and equity issued by companies partaking in non-Halal business activities as described earlier. The development of the Sukuk market and a robust Shariah-compliant stock selection process together offer T akaful providers an increasingly viable solution to this investment conundrum.Contributions must be invested purely in Shariahcompliant assets, i. e. , assets that are non-interest-bearing and whose returns are not derived from activities considered unethical. Shariah law forbids loan issues that are at a discount to their nominal value and, as already discussed, completely restricts the earning of interest (Riba). These two conditions effectively rule out conventional corporate or government bonds. The expanding Sukuk market offers access to an asset class which shares some properties with conventional bonds and others with equity stock, whilst remaining Shariah-compliant.Regular Income Assets: Sukuk are issued via the creation of a special purpose vehicle (SPV) by an issuing bank that has been approached by a company or government seeking funding for a particular project. Sukuk certificates are then issued in return for an investor’s funding contribution, and rank alongside the bank’s other senior, unsecured debt. Sukuk instruments are structured to provide a direct link to the assets that underlie the particular project and through this link confer shared ownership of these assets to the investor.Investors then receive a regular income based on a target rate of return. Neither this income nor the return of capital on maturity is guaranteed and both will typically vary in line with the revenue of the company (or equivalently the return on or value of the underlying assets). This potential variance is partially offset by the ability of the Sukuk manager to build up reserves when revenue exceeds the target rate, which can be subsequently used to make up shortfalls. Sukuk provides the Takaful market with a legitimate investment alternative to government and corporate bonds.Several issues surround these Sukuk, such as availability, control, and ownership. These issues impact their overall effectiveness in supporting long-term liabilities, especiall y income annuities. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 9 Milliman Research Report Equities: A Takaful operator does not need to seek an alternative investment in order to gain exposure to equity-type risk and return.Equity stock does not pay interest and offers direct participation in the profits of a listed business whether through dividends or growth in the price of the stock. However, restrictions do exist in relation to the type of company a Takaful operator may invest in to remain Shariah-compliant. To gain exposure to equity returns Takaful operators or their investment managers must apply a screening process to eliminate stocks of companies that are exposed to forbidden industries or breach certain financial conditions.The industries deemed to be non-Shariah-compliant include banking, insurance, gambling, and those linked to pork, alcohol, or tobacco. The financial screeni ng looks at key financial ratios of a particular company, such as conventional debt ratio and the sum of the interest and non-compliant income compared to total revenue. Where these ratios exceed limits laid down by a company’s Shariah Supervisory Board, the equity issued by the company in question is excluded from permissible investment.This screening is a continual process, as the evolving nature of a firm’s business practices and capital structure mean that its status as either compliant or noncompliant is not static. Real Estate and Mortgages: Although there are Shariah-compliant forms of investments in real estate and mortgages, these are currently under-utilised but have significant potentials. Retakaful By entering into a reinsurance contract, conventional insurance companies are able to share risk, gain capital support, or benefit from a broader base of experience in areas such as pricing, underwriting, and claim management.Historically, Takaful operators have sometimes also had to make use of conventional reinsurance owing to the lack of a Shariah-compliant alternative—this exception was based on the ‘dharura’ or necessity principle. The growth in the Retakaful market offers a solution to this problem. Retakaful provides these same facilities to Takaful operators but within a structure that remains Shariah-compliant and in a manner specifically tailored to the particulars of the Takaful market. In the same way as Takaful rovides a vehicle for participants to provide support to and share their own risk with a pool of other members, Retakaful allows Takaful funds to share risk among multiple Takaful pools. In the same way as Takaful provides a vehicle for participants to provide support to and share their own risk with a pool of other members, Retakaful allows Takaful funds to share risk among multiple Takaful pools. In this regard, the operation of a Retakaful fund is very similar to that of a direct Takaful fund.A Ret akaful fund must have a Shariah Supervisory Board and the criteria it must satisfy to be considered Shariah-compliant mirror those to which a Takaful fund must adhere. The Retakaful fund receives contributions from each participating Takaful fund and distributes back surplus arising from investment and underwriting activities using one of the models described later in this report. Further, if the Retakaful fund goes into deficit then the Retakaful operator is required to make an interest-free loan or Qard Hasan to the fund to eliminate this shortfall.Re-Takaful operators may not pay commission to a Takaful fund with which it is engaged. In recent years there has been a significant growth in global Retakaful capacity, owing to major reinsurance companies such as Swiss Re, Hannover Re, and Munich Re entering the market. Their entries will help facilitate further expansion of the Takaful market, and the capital support and depth of advice that these players can offer will be invaluable in setting up an operation, wherever the chosen market. Retro-TakafulSome Retakaful operators retrocede conventionally on the ‘basis of necessity’ because currently there is limited Retro-Takaful capacity available. There is talk of a Lloyd’s syndicate for Retakaful players that would imply retroceding each other’s business to reduce volatility and provide the spread of risk, but this has yet to materialise. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 10 Milliman Research Report takaFul operating modelsThe basic structure of a Takaful scheme involves the policyholders or participants enlisting a Takaful operator to perform the necessary investment and underwriting roles. Family Takaful, the Shariahcompliant equivalent of life insurance, is commonly structured so that a participant’s contributions are apportioned between two segregated funds: the investme nt fund and the underwriting fund. An individual (investment) account is maintained for each participant with the contributions made, net of any upfront fees. From this account, risk charges are deducted to be deposited into the pooled underwriting fund.Contributions paid into the underwriting fund are considered to be made on the Tabarru’ basis, to support all participants in their exposure to mortality/morbidity risk. Any covered claims suffered by the participants are paid from the underwriting fund to avoid the transferral of risk. The basic structure of a Takaful scheme involves the policyholders or participants enlisting a Takaful operator to perform the necessary investment and underwriting roles. The sharing of risk with fellow participants is in contrast to full or partial transfer of the risk to a proprietary company.This also means that if the underwriting fund is insufficient to pay claims then no recourse can be made to shareholder assets. However, in practical t erms, to prevent closure of the fund, the deficiency is covered by a temporary interest-free loan (Qard Hasan) provided by the Takaful operator. This would be repaid from future surpluses arising within the underwriting fund. Nevertheless, this arrangement acts as a strong incentive for operators to properly manage the fund, thereby limiting the possibility of making future loans.Takaful is most commonly structured using the following models: †¢ The Mudarabah model: This is a ‘Proprietary’ or ‘Partnership’ model that considers the Takaful operator as a business partner with the participants. It is structured on classic profit-sharing principles, i. e. , a partnership model where the participants provide the capital, while the Takaful operator provides expertise and management of the Takaful fund. A contract details how underwriting surplus and investment profits are shared between operator and participants, similar to conventional insurance (with-profi ts or articipating business). The Takaful operator shares in the investment and underwriting surpluses via a predetermined ratio mutually agreed with the policyholders at outset. Neither the operator nor the participant can unilaterally alter this agreed sharing ratio, which is usually explicitly set out in the contract at outset. From the perspective of the participants, they do not contribute directly to the operator’s costs and all contributions are effectively available to meet claims.Correspondingly, the operator can generally only expect to make a profit by ensuring that the expenses of managing the operation are less than the total share of investment profit and/or underwriting surplus it may receive. If the underwriting fund runs into deficit then the operator is obliged to provide an interest-free loan or Qard Hasan, to be repaid once the fund is in surplus. †¢ The Wakala model: This is an ‘Agency’ model that treats the Takaful operator as an agent of the participants tasked with the administration of the Takaful fund, for which it is compensated through a fixed fee.The operator does not share in the risk nor in the surplus generated from the two funds (investment and underwriting) but instead receives a fixed up-front fee (commonly a percentage of contributions paid) to cover management expenses, distribution costs—including intermediaries’ remuneration—cost of capital, and a margin for operational profit. This fee must be pre-agreed and is commonly expressly stated in the contract. This fee can vary by product and some contracts can change over time. Competitive consideration predominates in the setting of the level and structure of this fee.On the whole, the operator will be profitable if the fee it receives is greater than its incurred expenses. Theoretically, the Takaful operator bears no insurance risks itself. The risk-bearing is seen as a process of solidarity between participants and takes place s olely among the collective of insured persons (therefore the name ‘joint guarantee’). However, due to the obligation to make up for any deficits in the pooled underwriting fund, the insurer is indeed exposed to a non-negligible insurance risk: it might not be able to recuperate a Qard Hasan if insufficient surplus is generated Takaful (Islamic Insurance):Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 11 Milliman Research Report over time. Furthermore, no interest can be charged on the outstanding loan, but this is one of the very intrinsic principles of Islamic finance that has to be strictly followed. In reality, therefore, the Takaful operator under a Wakala model bears more risk than the designers of the model may have intended. In the extreme, the underwriting fund can be underfunded to create perpetual deficit in the fund thus making it the responsibility of the Takaful operator to be at risk perpetual ly.The diagram in Figure 4 compares a typical Family Takaful structure using the Mudarabah and Wakala models. Figure 4: Comparison oF mudaraBah and Wakala models Participants Participants Investment Fund ’d on at urp nt S me Ta b ar io n Underwriting Fund Surplus shared in predetermined ratio between participants and operator Operator est ru Inv urp nt S me est Inv ar Contribution Investment Fund ru ’d s& ent rplus ym Pa g Su im in Cla erwrit d Un Ta b s& ent rplus ym Pa g Su im in Cla erwrit d Un Contribution us Wakalah Model lus Mudarabah Model on at io n Underwriting Fund Wakalah Fee (% of Contribution) Operator In the 1980s, in a pioneering Takaful regulatory development in Malaysia, scholars initially accepted the more commercial Mudarabah model. However, recently there have been concerns raised by scholars that Mudarabah may not be appropriate because of the fact that Takaful is supposed to create a ‘surplus’ and not ‘profits,’ and under writing surplus is prohibited as this arises from insurance risk.Therefore the element of profit-sharing of underwriting surplus by the Takaful operator within the Mudarabah model is deemed to be not Shariah-compliant. The pure Mudarabah model seems more akin to a business venture rather than a mutually based contract based on solidarity of its participants, which would imply that the Tabarru’ is working capital and is arguably not in the spirit of a donation. Furthermore, the relationship between policyholders and operators lacks transparency. The development of Takaful n the Middle East took shape later in the 1990s, with the popular preference towards a Wakala model. The development of Takaful in the Middle East took shape later in the 1990s, with the popular preference towards a Wakala model. The Wakala (agency) framework emerged as the dominant model, and Malaysian scholars have moved in favour of this model too. However, in late 2004, some scholars—particularly t hose in Pakistan, Bangladesh, and South Africa—began to highlight deficiencies with the Wakala approach.As a result of the recent findings in the Takaful industry, there have been many variations of Mudarabah and Wakala developed by practitioners to address the limitations. The variant Takaful models considered in this section are: Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 12 Milliman Research Report †¢ Variant Mudarabah model: A variant of the pure Mudarabah model would be to limit the profitsharing element such that it is only applied to the investment portion, which would then be fully in line with Shariah.However, this model might not be commercially viable as it is likely that the income generated from the investment portion will be insufficient for the Takaful operator. Another variant of this model would be to charge the operating expenses directly from the Takaful fu nd instead of funding it from the shareholders’ fund (i. e. , the underwriting result is net of Tabarru’, claims, Retakaful, reserve adjustments, and operating expenses).The type and amount of expenses charged to the fund should be laid out to the participants in a transparent manner, although there are concerns about the type of expenses that can be charged to the fund. With the Mudarabah model, there is also the difficulty in managing fixed expenses alongside a variable and potentially volatile surplus, although this feature indirectly encourages the efficient management of the Takaful operation. However, given the many commercial challenges facing the pure and hybrid Mudarabah models, many Takaful operators have opted for the Wakala structure. Wakala with incentive fee model: Critics of the pure Wakala model cite the lack of incentives for the operator to manage the Takaful fund efficiently as the operator does not share in any profits. The operator’s income is a fee, which is based on turnover (i. e. , Takaful contributions). Therefore, the Takaful operator may be driven to write large amounts of new business without due regard to proper underwriting or claim management (although to some extent this action is deterred through the commitment of an interest-free loan or Qard).To encourage the operators to apply appropriate underwriting and investment approaches, some operators have adopted a Wakala model with incentive compensation, where the Wakala fee is adjusted (upwards) in the instance of an underwriting and investment surplus. This performance-related fee would not be permitted under a pure Wakala model though the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI, the self-regulatory body) recognises that an incentive fee is permissible. To encourage the operators to apply appropriate nderwriting and investment approaches, some operators have adopted a Wakala model with incentive compensation. †¢ Wakala Mudarabah model (hybrid): This is the most popular model today for Family Takaful operators, where a Wakala is applied on the underwriting fund and a Mudarabah on the investment profit. Specifically, the operator charges a Wakala fee from the Takaful contributions and all underwriting profits are distributed back to the participants. However, investment profit is shared between the participants and the operator based on a predefined ratio.There is an appeal within this model as investment profits are usually the major source of income for Takaful operators, whereas underwriting results can easily be managed using quota share Retakaful arrangements. †¢ Wakala with Waqf model: The main issue in the pure Wakala model is that the element of Gharar (uncertainty) is not fully eliminated because the contribution (treated as a ‘donation’) remains in the participant’s ownership and is effectively a ‘conditional’ donation. Hence the participant can expect to receive the surplus back, which therefore becomes a conditional gift.However, there is uncertainty about the level and timing of the surplus it will receive. Secondly, there is a relationship between the participant and operator and another amongst participants (exchange of gift for a gift). This creates doubts on the Wakala contract as a contract of compensation. The relationship of the Takaful operator with the participants is ambiguous because none of the participants are liable for the repayment of the outstanding loan. To overcome these concerns, Pakistani scholars developed the idea of a hybrid Wakala-Waqf model to remedy some of these inherent disadvantages.This model requires the setting up of a Waqf (endowment-trust or independent pool) that becomes the nucleus for the relationship between the participant (donor) and the operator (i. e. , both have obligations towards this trust). A Waqf is a well recognised Shariah entity which has the ability of accepting owner ship or appointing ownership of asset. The objective of the Waqf is to provide relief to participants against defined losses as per the rules of the Waqf fund. By setting up a Waqf, the following advantages are derived:Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 13 Milliman Research Report ? The relationship of participant and operator is with the Waqf fund (i. e. , ambiguity removed) ? Donation of participant to the Waqf is unconditional (Gharar removed) ? Operator can be a Mudharib (or manager) of the investments of Waqf and can share in the investment profits ? Contingency reserves within the fund may be set up ? Cross-subsidy of various generations of policyholders is permissible ?Surplus distribution can be predefined on a variety of criteria with the primary condition that the operator does not get any share as a Wakeel (or representative) to the Waqf fund Currently this model is wi dely used in Pakistan and South Africa, and has also been adopted by the Swiss Re Retakaful branch in Malaysia. Which Model to Choose An operator can choose any of the above-stated models but the choice depends on many factors, such as the target population, regional acceptance, Shariah board views, regulatory framework, product design, marketing, and pricing.As outlined above, the most common models are the Wakala and Mudarabah model or a hybrid of both: †¢ Mudarabah model is less acceptable globally but perhaps more attractive as profit is shared with the policyholders. However, there is a strong opinion of scholars from especially the Middle East that underwriting profit cannot be shared with the operator as it stems from donations. †¢ The Wakala model is by far the most recognised and has the positive effect of providing a fixed and steady income stream. However, in its purest form it has limited upside potential as the only source of income is the Wakala fee.This coul d harm competitiveness as a high up-front Wakala fee might look unattractive to participants and have adverse effects to new entrants because of the high initial costs. †¢ There has been an increasing trend towards the hybrid model which is based on the application of the Wakala model for the underwriting portion and the application of the Mudarabah model for the investment part. Considering that investment income usually makes up the bulk of the profits, this model is viewed by many Takaful operators to be commercially viable.This is widely practiced in the Middle East and Malaysia and accepted by virtually all scholars across the world. †¢ The AAOIFI has also endorsed hybrid versions of Wakala models. In all models, although not mandated by Shariah, the Takaful operator is commonly expected to provide an interest-free loan in case of a deficit in the underwriting pool. In all models, although not mandated by Shariah, the Takaful operator is commonly expected to provide a n interest-free loan in case of a deficit in the underwriting pool.This expectation requires careful risk management techniques as there is uncertainty in terms of the amount and timing of the loan to be repaid from future surplus arising. Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 14 Milliman Research Report issues and Challenges FaCing the takaFul industry The issues and challenges facing the Takaful industry are considered separately under the following sections: †¢ I. Key Issues and Challenges †¢ II. Technical Issues and Challenges †¢ III.Other Issues and Challenges I. key Issues and Challenges Some of the key issues and challenges facing the Takaful industry are: a. b. c. d. e. f. g. h. Lack of consumer awareness Scarcity of human resources with both insurance and Shariah expertise The shortage of Shariah scholars with appropriate experience Lack of standardisation in the industry that is due to Shariah interpretations Diverging regulatory approaches and the lack of centralised regulations Solvency and capital requirements Corporate governance Shortage of suitable assets These are discussed in further detail below. . Lack of consumer awareness Despite the introduction of Takaful, the increase in the level of penetration anticipated has yet to be realised. Many consumers are still unaware of Takaful as an alternative, and some view Takaful as commercialisation of conventional insurance into the Islamic world and reject the notion that it is a Shariah-compliant instrument. In addition, many individuals tend to downplay the importance of security and retirement planning and many are also heavily dependent on the social security systems—this is particularly evident in the Middle East.Similar to conventional insurance, Takaful coverage is typically a proposition that needs to be sold to consumers (instead of one that is bought by consumers). T here is a need to fundamentally address educational issues surrounding Takaful and individual risk management amongst the Muslim societies, to develop consumer awareness. Most of the current education on Takaful is among interested or related practitioners and investors, and very few awareness campaigns are aimed at or designed for the target population.Similar to conventional insurance, Takaful coverage is typically a proposition that needs to be sold to consumers (instead of one that is bought by consumers). b. Scarcity of human resources with both insurance and Shariah expertise Future growth may also be hampered by the currently narrow pool of professionals with sufficient Takaful knowledge in areas such as law, sales, and actuarial services. Most operators would typically employ human resources, such as legal advisors and actuaries, with conventional insurance experience.These resources would typically tend to learn the Shariah aspects of Takaful and adapt their previous experi ence to incorporate Shariah compliance rules in their new role. Hence the mindset of most operators tends to be driven by conventional thoughts and solutions and, as a result, there has been limited original thinking in the industry. Recently, there have been various Takaful courses offered, including one offered by the Chartered Insurance Institute (CII), which will assist in the development and creation of human resources with both insurance and Shariah expertise. c.The shortage of Shariah scholars with appropriate experience Every Takaful operator requires a Shariah Supervisory Board, which is typically comprised of three or more Shariah scholars. For a Takaful operator with regional ambitions, the need to build credibility in the target market means there are preferences for the board members to originate from the target markets or at least have experience in the target market. Scholars would ideally have experience and knowledge not only in Islamic jurisdictions but also in Tak aful. This is essential as board members are responsible for certifying the Shariah compliancy of the business operations.However, the number of Shariah scholars with experience in both Islamic jurisdiction and insurance is limited; inevitably, these scholars are currently sitting on multiple boards, which may create conflicts of interest and Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 15 Milliman Research Report compromise the quality of advice. The shortage in scholars remains a short-term barrier on new entrants and drives up the cost of setting up a Shariah board. As the Takaful industry has only recently been stablished, there is a wide range of issues currently being debated amongst Shariah scholars and technocrats, particularly those surrounding the definitions and practices that are deemed to be acceptable and Shariah-compliant. d. Lack of standardisation in the industry that is d ue to Shariah interpretations As the Takaful industry has only recently been established, there is a wide range of issues currently being debated amongst Shariah scholars and technocrats, particularly those surrounding the definitions and practices that are deemed to be acceptable and Shariah-compliant.For example, the inconsistency of Shariah interpretations can be seen in the following issues: †¢ Issues that are due to regional differences: There are significant regional differences in consumer attitudes and the extent of tolerance and innovation in the Takaful industry. For example, Malaysia is perceived to be more liberal and willing to embrace modern conventional concepts within the Takaful framework. In contrast, the approach in the Middle East countries is more conservative, with less willingness to embrace modern conventions.This creates challenges in transferring solutions across regions. †¢ Issues in the choice of Takaful models: There is a variety of models that may be adopted by the Takaful operator in the industry, as discussed in Section 3. There is a wide variation in practices and model preferences in various countries, which is due to the varying interpretation by scholars. For example, in Saudi Arabia, the regulators—Saudi Arabian Monetary Agency (SAMA)—approve a cooperative model in which only 10% of the surplus is mandatory for distribution to policyholders.Some scholars would argue that this model does not meet the requirements of Shariah compliance. For instance, there are no specific Shariah compliance requirements for assets. yet Takaful operations are still possible, and some have been approved, within the broader cooperative model framework. Similarly in Iran (where the entire legal system is Islamic-based), Takaful remains an unknown concept as the Shia Islamic school of thought (as practiced in Iran) does not view conventional insurance to be non-Shariah-compliant.However, despite these regional variations, t here is a global trend elsewhere towards a Wakalabased model without any sharing of the underwriting profits. This approach has also been formally approved by the AAOIFI, which is a step towards standardisation. However, a global standard for Takaful models remains to be seen, which is due to the varying opinions and interpretations of Shariah scholars around the world. †¢ Issues about the source of capital: There is a wide variety of issues that are subject to Shariah interpretations.One of the debates amongst scholars is whether it is necessary for the original capital in a start-up Takaful provider to be Shariah-compliant. In practice some scholars typically do not question the initial source of capital as this would impede the operation of global players. Instead, the scholars would usually only insist on the usage of capital to be fully Shariah-compliant. †¢ Issues surrounding the type of risk deemed acceptable in Takaful: Another topic of debate amongst scholars s th e type of risks that are deemed to be acceptable within Takaful, and this issue mainly relates to General Takaful. As the concept of Takaful is to mutually guarantee all participants, there is an argument that for large risks where the number of participants is limited, those risks may not fall within the concept of Takaful. For example, Takaful coverage for government-owned projects where all the participants within the pool are government agencies may not essentially achieve the concept of mutual guarantee (as arguably there is only one participant in the pool, the government).There is a debate on whether there should be a distinction between Halal (lawful) and Haram (unlawful) risk, and if prior screening of risks is necessary for acceptance within the Takaful pool. Related to the lack of standardisation in types of acceptable risks is the lack of uniformity in the definitions of insured events and exclusions. For instance, in Family Takaful treatment of suicide, Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 6 Milliman Research Report AIDS, and contestability is non-uniform. This complicates the applicability of pricing assumptions based on experience statistics drawn from conventional business and complicates pooling of experience among Takaful operations with differing underwriting and contract definitions. †¢ Issues surrounding Wakala fees and the cost of capital: Another issue that is constantly debated is the extent of expenses that can be charged by the operator as Wakala fees and whether the cost of capital can be included.Some Shariah scholars have argued that the operator cannot charge participants for the cost of capital, which raises the question of the commercial viability of Takaful operators. Some Takaful operators would also choose to allow for a profit margin to be embedded within the Wakala fees, and there is further debate on the extent that this is tolerable within the bounds of Shariah. The opposing views of Shariah interpretation in different regions make Takaful standardisation even more difficult to achieve, particularly for global companies wishing to provide similar product bases across various regions.This lack of standardisation in Takaful may undermine the credibility of the industry, and may have a subsequent negative impact towards consumer protection, transparency, disclosure, and the overall ethics of insurance. e. Diverging regulatory approaches and the lack of centralised regulations In the absence of standardisation of a global Takaful regulatory regime, the industry is relying heavily on the opinion of the Shariah boards of the Takaful companies, subject to any local regulatory constraints. Local regulators have adopted a variety of approaches when it comes to dealing with Takaful.There are three key categories of regimes: The opposing views of Shariah interpretation in different regions make Takaful s tandardisation even more difficult to achieve, particularly for global companies wishing to provide similar product bases across various regions. 1. A level playing field approach, such as the Financial Services Association (FSA) in the UK. This is the most common approach by regulators in predominantly non-Muslim countries. The FSA has adopted a ‘no obstacles, but no special favours’ approach in handling Takaful business and will regulate Takaful operators within its current regulatory framework. . A pragmatic middle ground, such as the Bank Negara Malaysia (BNM), in Malaysia, where the regulators have adopted a comprehensive Islamic financial system running parallel with the conventional system, with an evolving attitude to regulations over time. 3. A more specific ‘tailor-made’ approach, such as the Central Bank of Bahrain (CBB). The CBB has taken the lead in considering the unique characteristics of Takaful companies and aligns the regulations of Islami c insurance as far as reasonably possible.It is useful to note that based on a ‘level playing field’ regulatory approach, the FSA has outlined in its November 2007 publication entitled ‘Islamic Finance in the UK : Regulation and Challenges,’ three potential challenges in regulating the Takaful industry: †¢ Whilst Takaful products may appear similar to conventional products, the structure of the Takaful offerings and operations are fundamentally different compared to conventional products †¢ The role and responsibility of the Shariah Supervisory Board should be purely advisory (i. e. , not executive roles) The marketing and promotion of Takaful products must be fair, transparent, and not misleading, in the spirit of the ‘treating customers fairly’ principle Due to the variety of regulatory approaches, there is an incentive to develop a centralised global regulator for the Takaful industry. There have been talks within the industry part icularly expressed by practitioners at various conferences and seminars for the need to standardise the Islamic finance industry, with aims to develop standards and guidelines for Islamic financial institutions and regulators.These are mainly driven by four organisations (details of each of the following are provided in Appendix III): Takaful (Islamic Insurance): Concept, Challenges, and Opportunities Safder Jaffer, Farzana Ismail, Jabran Noor, Lindsay Unwin November 2010 Due to the variety of regulatory approaches, there is an incentive to develop a centralised global regulator for the Takaful industry. 17 Milliman Research Report †¢ Rulings of the Islamic Fiqh Academy of the Organisation of Islamic Conference (OIC) †¢ Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) †¢ Islamic Financial Service