A Conceptual Understanding and Significance of Takaful (Islamic Insurance): History, Concept, Models and Products

Ilhamiddin Ikramovich  Nazarov; Naeem Suleman  Dhiraj

doi:10.31686/ijier.vol7.iss4.1408

Authors

Ilhamiddin Ikramovich Nazarov

International Islamic University Malaysia
Naeem Suleman Dhiraj

International Islamic University Malaysia

https://orcid.org/0000-0003-0832-1813

DOI:

https://doi.org/10.31686/ijier.vol7.iss4.1408

Keywords:

Takaful, Islamic insurance, conventional insurance, mudarabah, waqf, wakalah

Abstract

Human beings are naturally inclined towards safeguarding and protecting themselves from future misfortunes. This natural tendency of risk mitigation has given rise to the concept of insurance which existed thousands of years ago and was fervently practiced by many ancient tribes. Over time, the concept of insurance has changed since it is now being commercialized and have been transformed into a profit-oriented business. To revive the legacy of the real concept of insurance, the takāful (Islamic insurance) scheme was introduced in the second half of the 20th century differentiating itself from conventional insurance practices. The takāful scheme is strictly based on Islamic law known as Shari'ah. This paper thus expounds on the concept of takāful assimilating a holistic overview of this emerging industry while sorting the differences between the takāful scheme and the conventional insurance mechanisms. It concludes that the takāful (Islamic insurance) scheme is a robustly viable and sustainable alternative to conventional insurance.

Author Biographies

Ilhamiddin Ikramovich Nazarov, International Islamic University Malaysia

Postgraduate student of Islamic Banking and Finance
Naeem Suleman Dhiraj, International Islamic University Malaysia

Postgraduate student of Islamic Banking and Finance

References

[1] Abdul Rahman, Z., & Redzuan, H. (2009). Takaful-The 21st Century Insurance Innovation. In McGraw-Hill (Malaysia) Sdn. Bhd, 1–135.
[2] Abdullah, S. (2015). The Objectives Of Takaful And Shariah: Towards The Achievement Of Maqasid Shariah, 8(1), 93–104.
[3] Ahmad, A. M. L. (2007). Nadhariyah Al-ta’min: Al-mushkilat Al’imiyah val Hulul Al-Islamiyah (1st Edition). Iskandariya, Egypt: Dar El-fikr Al-jam’i.
[4] Al-Hanis, M. M. (1979). Mabadi al-Ta’min. Dar al-Fikr, Cairo.
[5] Al-Salih, M. B. A. B. (2004). Al-Tamin Bayan Al-Hazr Wa-al-ibahah (Insurance Between Prohibition and Acceptance). Al-Riyad: Maktabat Al-Mslik Faha Al-wtaniyah, Saudi Arabia.
[6] Alhabshi, S. O., & Shaikh Abdul Razak, S. H. (2009). Takaful: Concept, history, development, and future challenges of its industry. Interdisciplinary Journal of Contemporary Research in Business, 1, 276–291.
[7] Ali, K. M. M. (1989). Principles and Practices of Insurance under Islamic Framework. Insurance Journal, 29–38.
[8] Andrew, S. (2007). Takaful business models. In S. Jaffer (Ed.), Islamic Insurance: Trends, Opportunities and the Future of Takaful, 1–266. London, UK: Euromoney Institutional Investor Plc.
[9] Anwar, M. (1994). Comparative study of insurance and Takaful (Islamic insurance). The Pakistan Development Review, 33(4), 1315–1330.
[10] Archer, S., Karim, R. A. A., & Nienhaus, V. (2009). Takaful Islamic Insurance: Concept and Regulatory Issues. John Wiley & Sons (Asia) Pte. Ltd. Retrieved from https://www.wiley.com/en-us/Takaful+Islamic+Insurance%3A+Concepts+and+Regulatory+Issues-p-9780470823521
[11] Attar, A. T. (1983). Hukm Al-Tamin Fi Al-Shariah Al-Islamyah (Insurance Contract Under Shari’ah Law). Al-Qahirah: Maktabat Al-Nahdah Al-misriyah, Egypt.
[12] Billah, M. M. (2013). Islamic Life Insurance. Thomson Reuters Malaysia Sdn Bhd.
[13] BISC Group. (2008). What’s Takaful? A Guide to Islamic Insurance (1st ed.). BISC Group, Beirut - Lebanon.
[14] Engku, A., & Odierno, H. S. P. (2008). Essential Guide to Takaful (Islamic Insurance). CERT Publications Sdn. Bhd.
[15] Hachemi, M., Mohamaed, A. A., Eshebani, R. O., Abd, M., Julia, W., Abd, W, Aziz, A. (2014). Takaful and Conventional Insurance: A Comparative Study. International Journal of Management Sciences, 2(12), 543–551.
[16] Hassan, H. A., Abbas, S. K., & Zainab, F. (n.d.). Anatomy of takaful. Global Scientific Journal, 6(3), 1–14.
[17] IFSB & IAIS. (2006). Issues in Regulation and Supervision of Takaful (Islamic Insurance). Kuala Lumpur, Malaysia.
[18] Ismail, E. (2011). Basic takaful broking handbook. Course manual for basic certification course in takaful broking (BCCTB). Kuala Lumpur. Islamic Banking and Finance Institute Malaysia (IBFIM).
[19] ISRA. (2016). Islamic Financial System (2nd ed.). Kuala Lumpur, Malaysia: International Shari'ah Research Academy for Islamic Finance (ISRA).
[20] Kahf, M. (2003). The Role Of Waqf In Improving The Ummah Welfare. Presented To International Seminar On “Waqf As a Private Legal Body” Organized By The Islamic University Of North Sumatra, Medan, Indonesia.
[21] Khan, L. A. (2005). How does Takaful differ From insurance? Retrieved from http://ara.assaif.org/Working-groups/Takaful
[22] Khorshid, A. (2004). Islamic insurance - A modern approach to Islamic banking. Routledge Curzon. Retrieved from https://doi.org/10.4324/9780203458280
[23] Marifa Academy Team. (2014). Islamic Banking & Finance: Principles and Practices.
[24] Maysami, R. C., Golriz, H., & Hedayati, H. (1997). Pragmatic Interest-free Banking: Metamorphosis of the Iranian Financial System. Journal of International Banking Law.
[25] Muhammad, R. A. A. (2013). Introduction to Islamic Institutions In Economics and Finance. Negeri Sembilan.
[26] Obaidullah, K. (2005). Takaful-meeting the Growing Needs for Islamic Insurance. Journal on Insurance and Finance. Bahrain Finance Institute, (4), 17–22.
[27] Ochieng, G. O. (2013). Challenges in the adoption of Takāful Insurance in Kenya. University of Nairobi.
[28] Pfeffer, I. (1956). Insurance and Economic Theory. Homewood, Illinois: Richard D.Irwin Inc.
[29] Raynes, H. E. (1948). A History of British Insurance (2nd ed.). London: Sir Isaac Pitman & Sons.
[30] Redzuan, H., Abdul Rahman, Z., & Aidid, S. H. (2009). Economic determinants of family takaful consumption: Evidence from Malaysia. International Review of Business Research Papers, 5(5), 193–211.
[31] Serap, O. (2013). Takaful and Mutual Insurance: Alternative Approaches to Managing Risks. (Gonulal, Ed.). Washington DC 20433: The World Bank.
[32] Sharifuddin, S. S., Kasmoen, N. A., Taha, N. H. M., Talaat, N. S. M. A., & Talaat, A. Z. M. A. (2016). The Concept of Takaful (Islamic Insurance) and Its Functions in the Establishment of Syarikat Takaful Malaysia; the First Takaful Operator in Malaysia. International Journal of Humanities and Social Science Invention, 5(12), 43–48. Retrieved from http://ijhssi.org/papers/v5(12)/G05124348.pdf
[33] Siddiqi, M. N. (1985). Insurance in an Islamic Economy. Nairobi, Kenya: Islamic Foundation.
[34] Solomon, F. O. (2014). Takaful (Islamic Insurance) practices : Challenges and prospects in Nigeria. Journal of Insurance Law & Practice, 4(2), 12–28.
[35] Tolefat, A. K., & Asutay, M. (2013). Takaful Investment Portfolios - A Study of the Composition of Takaful Funds in the GCC and Malaysia. John Wiley & Sons Singapore Pte. Ltd.
[36] Yasin, N., & Ramly, J. (2011). Takaful: A Study Guide (1st ed.). Kuala Lampur: IBFIM.
[37] Yousof, M. F. (1990). Takaful: An Islamic Alternative to Insurance. Islamic Banking and Insurance, Islamic Bank Bangladesh Limited, Dhaka.