Microtakaful as an Islamic Financial Instrument, for Poverty Alleviation in Iraq

Poverty is still prevailing in Iraq despite the Government?s efforts to implement programs to fight poverty in the country. Many researchers suggest that access to insurance services is an important strategy for poverty reduction. However, the poor and low-income households are often ignored or inadequately serviced by the private insurance market and social insurance schemes because the premiums are unaffordable. A specific type of insurance particularly developed to protect the poor and low-income households is microinsurance, or a shari?ah-compliant form of microinsurance known as microtakaful. Therefore, this paper considers microtakaful as an Islamic financial instrument for poverty alleviation to protect the poor and low-income households in Iraq. The objective of this paper is to propose a microtakaful model integrating the microtakaful scheme with the financial supports from the Government, Islamic institutions of zakat and waqf,contributions from the international zakat organisations and donations into a cooperative common pool of funds managed by the takaful operator or a microtakaful institution, which will be used to compensate participants in the event of loss.