Wakala and Mudaraba takaful models
Remuneration structures of the takaful operator, by management fee (wakala) or sharing of investment profits (mudaraba).
The wakala and mudaraba models are the two main remuneration structures of the operator in takaful, determining how it is paid for managing the participants' fund. In the wakala model, the operator acts as an agent receiving agreed management fees, generally a percentage of contributions, regardless of the fund's technical result. In the mudaraba model, the operator acts as a manager sharing with participants the profits generated by investing the funds, under a predefined split. Many operators combine the two in a hybrid model, management fees on contributions and sharing of investment results. The choice of model has implications for the alignment of interests, transparency and compliance, examined by each operator's compliance committees. Understanding these structures is necessary to analyze the economics of takaful and the profitability of its operators, distinct from that of conventional insurance where the technical profit goes directly to the insurer.
Textbook case: a takaful operator on the wakala model receives fixed fees on contributions, while on mudaraba it shares the fund's investment profits with participants.
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