Oman First Islamic Finance Banking Conference Session Takaful

Oman First Islamic Finance & Banking Conference Session: Takaful Services and Efficient Market Presence January 24 th, 2012 $10 Million - $100 Million Omani Riyal Facility December 24 th 2011

UM Financial Group (UMFG) n n n n Canada’s Premier Islamic Financial Institution Established a financing facility with a Canadian institution which approached $120 million and a network of eight branches Since it’s inception UMFG has undertaken the research, development, launch and implementation of Islamic financial products UMFG has been invited by government invitation to Saudi Arabia and Kuwait to share technical skills and investments opportunities Listed in The Banker magazine's Top 500 Islamic Financial Institutions for the last four years World Finance North American Business Leadership and Pioneering Leadership Award in Islamic Finance Only Canadian member of Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) Shariah Ethics Board formulated: Sh. Nizam Yacuby (Bahrain), Dr. Aznan Hassan (Malaysia), Mufti Dr. Zubair Usmani (Pakistan) 2

UM Financial Group Products 2003 - 2011 n n n Residential Home Financing structured Shariah compliant in 2005 ¨ Reached close to $120 million in home financing Pioneered Deposit Accounts based on Islamic principles: ¨ Deposit Account by Metro Credit Union in 2004 ¨ Deposit and Term Deposit Account by Mc. Master Credit Union in 2006 Real Estate Investment Fund ¨ Established in 2007 for Canadian Islamic community-based investments and mortgages Project Launch of Co-branded ETF off the Toronto Stock Exchange in 2009 ¨ Managed by Jovian Capital (JOV-TSX). Compliant with Islamic principles. Project Launch of Pre-Paid Master. Card in 2010 ¨ Partnered with Mint Technology/GE Money (MIT-TSX-V) 3

Canada’s Demographics n Population of over 34 Million Second Largest country in size Second Largest country in oil reserves after Saudi Arabia Seventh most traded currency - Canadian Dollar Ninth largest economy globally n Toronto n n Fifth largest city in North America (Population 5. 4 Million) TSX 3 rd largest stock exchange in North America and 7 th largest internationally - Best educated work force in the G 7 - Diverse Multicultural Population with over 50% of the population visible minorities ¨ 160 million customers are within one-day’s drive ¨ - 4

Canada’s Muslim Demographics n Statistics Canada Census Muslim Population 1991 – 256, 000 0. 9% Canada Population 2001 – 597, 000 2. 0% Canada Population 2011 – 1, 299, 300 (Projection) 3. 8% Canada Population 2017 – 1, 784, 300 (Projection) 4. 9% Canada Population Muslim population is doubling every 10 years (86% live in 6 cities) ¨ 2001 Census Mississauga 6. 9% (1 in 14) Toronto 5. 5% (1 in 18) n Islamic Finance in Canada 30 years ago (1979) within Co-operatives with pooled funds funding homes. Limited resources and growth n Islamic Financial products being Usury free have attracted interest from sects within the Christian and Jewish groups. Other non-religious group on social benefit also open to accepting Islamic finance products. Future consolidation to a Multicultural bank. 5

Takaful Insurance n n Takaful means mutual guarantee Conventional insurance is not permissible due to elements of: Gharar (uncertainty) and riba (usury) Solution: § is to design contracts that are mutual in nature and premiums collected are structured to be as a mutual or voluntary benefit § Premiums collected must also be invested shariah compliant § For muslims living in the west after mortgage payments the next largest expenditure is car and home insurance 6

Comparison between Models Conventional Insurance Companies Takaful Companies Based on mutual cooperation. Based solely on commercial factors. free from interest (Riba), gambling, Insurance includes elements of interest, (Maysir), and uncertainty (Gharar). gambling, and uncertainty. All or part of the contribution paid by the The premium is paid to conventional Participant is a donation to the Takaful insurance companies and is owned by Fund, which helps other Participants by them in exchange for bearing all providing protection against potential risks. expected risks. There is a full segregation between the Premium paid by the Policy holder is Participants Takaful Fund account and the considered as income to the company, shareholders' accounts. belonging to the shareholders. The Plan Owners’ and shareholders’ The capital of the premium is invested capital is invested in investment funds that in funds and investment channels that are Shari’a compliant. are not necessarily Shariah compliant. 7

Takaful Insurance Definition n Takaful is an Arabic word that means "guaranteeing each other". It is a system of Islamic insurance based on the principle of Ta-Awun (mutual assistance) and Tabarru (Voluntarily) where the risk is shared collectively by the group Voluntarily. This is a pact among a group of members or participants who agree to jointly guarantee among themselves against loss or damage to any of them as defined in the pact. 8

Problems with Conventional Insurance n n The participant contributes a small amount of premium in a hope/risk to gain a large sum is Khatar (similar to gambling) The participant loses the money paid for the premium when the insured event does not occur is Gharar (uncertainity) The company will be in deficit if the claims are higher than the amount contributed by the participants is Gharar. The element of Riba (Interest) exists in lending or borrowing funds/investments at fixed interest, and other related practices in the investment activities. 9

Objectives of Takaful n What is Insurance? A tool for Risk Mitigation and Financial Protection A tool to enable people to save (Life Insurance) n Takaful is not only a tool to mitigate loss or to make halal profits. It is an ideology which promotes 1. Solidarity and joint guarantee 2. Self reliance and self sustainability for community well being 3. Assistance to those that need it 4. Community pooling system 10

Education on Takaful n n n Most markets launch with financing and investment products which are then followed by Takaful products Education is needed on the nature of Takaful The Holy Quran describes how Prophet Yusuf (peace be upon him) filled the grain store with the excess resulting from seven years of good harvests to mitigate the effects of any future crop failure. “Tie your camel first, then put your trust in Allah (SWT)”. <Tirmidhi> “It is better for you to leave your heirs wealthy rather than poor and asking others for their needs”. <Bukhari> 11

Takaful Plans in Canada n n n Insurance companies in Canada have been meeting our group for the last few years to see how to launch Takaful insurance All automobile and home owners are required by law to have insurance To launch a segregated product a market size of 50, 000 clients are needed Goal will be to acquire these clients with our i. Freedomplus Mastercard and then launch Takaful products with these clients With UM various Shariah compliant investments in Canada we can now offer diversification for premiums collected. This can be in Islamic mortgages, equity market and fixed income (sukuk), etc. Some of the largest insurance companies are from Canada. Such as Manulife and Sunlife. Both have launched Takaful insurance in Indonesia. 12

Thank you For further information contact: Omar Kalair okalair@umgroup. ca www. UMGroup. ca 13