ISLAMIC FINANCE PRODUCTS AND SERVICES
Chapter 11 - takaful
Topic Details/ Explainations
Introduction To Takaful MEANING
“Takaful” is derived from ‘Kafāla” = means to jointly guarantee.
According to Islamic Financial Services Act (IFSA) 2013, Takaful means: “An arrangement based on mutual
assistance under which Takaful participants agree to contribute to a common fund) providing for mutual
financial benefits payable to the Takaful participants or their beneficiaries on the occurrence of pre-agreed
events”.
(main diff. from insuran - payment not mixed with SHareholder fund (conventional mixed up),
contribution made by participants dedicated to common fund, not belong to takaful operator, but for
takaful participants and beneficiary.
COMMERCIAL CONTRACTS USED
Kafala :the principle of guarantee which is the basis of Takaful.
The majority guarantees the loss of the minority by sharing the burden of loss via the pooling of
funds.
Takaful combines several Shari’ah compliant contracts, The combinations may differ according to the different
business models adopted by Takaful Operators.
tabarru’ (donation) wakālah (agency) muḍārabah
(profit-sharing).
The Participant agrees to cONTRACT OF A contract between a capital
relinquish all or certain TAKAFUL AMONG provider (rabbul māl) and an
, portions of his contribution THE PARTICIPANTS entrepreneur (muḍārib), under
as donation. THENSELVES BY which the capital provider
GIVING provides capital to be managed
▰ The tabarru’ portion is COMMITMENT TO by the entrepreneur.
credited into the CONTRIBUTE.
Participant Risk Fund ▰ Takaful participants enter into a
(PRF) for the participant to Separate wakalah muḍārabah contract
fulfil his obligation of contract between
mutual help and joint participants and takaful
guarantee in the event any operator (TO). TO as Rabbul mal (Capital Provider) :
of the participants suffers a wakeel to manage the Capital
defined loss. scheme. Loss
Time / Efforts
▰ Under this mutual A contract of agency,
assistance (Ta’awun) which means doing any
concept, the contribution work or providing any Mudarib (Entreprenuer) with the
pooled in Tabarru` Fund service on behalf of Takaful Operators (entrepreneur),
will be used to pay Takaful any other person. who manages the Takaful
claims to the eligible ▰ An action performed business. The participants (capital
participants. by an agent on behalf providers), pay the Takaful
of the principal will be contribution.
deemed as action by
the principal. ▰ The contract define the profit of
▰ In return for his the Takaful business and the ratio
services, an agent gets to be shared between the two
a certain appoint to parties
manage the fund with
fee (Wakalah Fee) A partnership model
wage within the ▰ A contract between the Takaful
incentive structure of Operator (entrepreneur) who
the principal. manages the business and the
▰ The Takaful Operator participant(s) (capital provider)
(TO) will act as the who pays the Takaful
Chapter 11 - takaful
Topic Details/ Explainations
Introduction To Takaful MEANING
“Takaful” is derived from ‘Kafāla” = means to jointly guarantee.
According to Islamic Financial Services Act (IFSA) 2013, Takaful means: “An arrangement based on mutual
assistance under which Takaful participants agree to contribute to a common fund) providing for mutual
financial benefits payable to the Takaful participants or their beneficiaries on the occurrence of pre-agreed
events”.
(main diff. from insuran - payment not mixed with SHareholder fund (conventional mixed up),
contribution made by participants dedicated to common fund, not belong to takaful operator, but for
takaful participants and beneficiary.
COMMERCIAL CONTRACTS USED
Kafala :the principle of guarantee which is the basis of Takaful.
The majority guarantees the loss of the minority by sharing the burden of loss via the pooling of
funds.
Takaful combines several Shari’ah compliant contracts, The combinations may differ according to the different
business models adopted by Takaful Operators.
tabarru’ (donation) wakālah (agency) muḍārabah
(profit-sharing).
The Participant agrees to cONTRACT OF A contract between a capital
relinquish all or certain TAKAFUL AMONG provider (rabbul māl) and an
, portions of his contribution THE PARTICIPANTS entrepreneur (muḍārib), under
as donation. THENSELVES BY which the capital provider
GIVING provides capital to be managed
▰ The tabarru’ portion is COMMITMENT TO by the entrepreneur.
credited into the CONTRIBUTE.
Participant Risk Fund ▰ Takaful participants enter into a
(PRF) for the participant to Separate wakalah muḍārabah contract
fulfil his obligation of contract between
mutual help and joint participants and takaful
guarantee in the event any operator (TO). TO as Rabbul mal (Capital Provider) :
of the participants suffers a wakeel to manage the Capital
defined loss. scheme. Loss
Time / Efforts
▰ Under this mutual A contract of agency,
assistance (Ta’awun) which means doing any
concept, the contribution work or providing any Mudarib (Entreprenuer) with the
pooled in Tabarru` Fund service on behalf of Takaful Operators (entrepreneur),
will be used to pay Takaful any other person. who manages the Takaful
claims to the eligible ▰ An action performed business. The participants (capital
participants. by an agent on behalf providers), pay the Takaful
of the principal will be contribution.
deemed as action by
the principal. ▰ The contract define the profit of
▰ In return for his the Takaful business and the ratio
services, an agent gets to be shared between the two
a certain appoint to parties
manage the fund with
fee (Wakalah Fee) A partnership model
wage within the ▰ A contract between the Takaful
incentive structure of Operator (entrepreneur) who
the principal. manages the business and the
▰ The Takaful Operator participant(s) (capital provider)
(TO) will act as the who pays the Takaful
