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Takaful

The word takaful is derived from the Arabic verb kafala which simply means to take care of one’s need. We explore concepts behind takaful and the key models: Wakalah Model; Mudarabah Model; Hybrid Model; Waqf Model.

Lessons

Takaful Insurance - Explained

The word takaful is derived from the Arabic verb kafala which simply means to take care of one’s need. In other words “A” for example, guarantees to take over the liability of “B” in the event of a calamity afflicted upon the latter. Under this simple illustration it is only a one-sided relationship in the sense that only “A” would be the party that assumes the responsibility.

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Takaful - Wakalah Model

The term wakalah in Arabic means agency. Therefore under the structure, an agency relationship is agreed between two parties to conduct a certain business undertaking. Based on this premise, the model describes an agency agreement between the operators, acting as the agent or “wakil” to the participant as the principal to manage the participation of the latter in a variety of takaful products provided by the operator.

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Takaful – Mudarabah Model

Basically, Mudarabah is defined as a profit-and-loss sharing principle applied normally to a business or commercial contract between the party that provides the fund or capital and the party that manages the business. For takaful this would mean the contract of profit sharing between the takaful participants and the operator from the profit, if any, of the takaful business.

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Takaful – Hybrid Model

As the term denotes, takaful hybrid model is a combination of the two principles above. Under the model, a relationship between the operator which combines the role of entrepreneur or Mudarib as well as the agent or wakil of the participant, whilst the latter in the capacity as both provider of capital or sahibul-mal and principal to the agent.

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Takaful – Waqf Model

The term waqf referred for this model explains the contract of takaful that underlines the agreement or consent of the participant that the takaful contribution paid in return for participating in the takaful product to be credited by the operator into the takaful fund in accordance with the principle of waqf or endowment. To begin with, a waqf account has to be established by the operator within the takaful fund. To this effect the operator is required to relinquish some kind of “seed” money as waqf to generate the said waqf account.

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Shariah-Compliant Models for the Deposit Insurance System

Shariah-Compliant Models for the Deposit Insurance System

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Shariah-Compliant Structures for a Deposit Insurance Scheme

Shariah-Compliant Structures for a Deposit Insurance Scheme

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