What is TAKAFUL?

What is TAKAFUL?

Takaful is defined as a mutual arrangement between parties in which they agree to provide material assistance to one another or a group, in time of a misfortune. The agreement also stipulates that each party shall first agree on the form of contribution which will be utilized later on the basis of mutual benefit. The Takaful scheme fulfills the spirit of Islamic Jurisprudence (Syariah) which is the combination of the concept of co-operation, protection, and responsibility and they are implemented together. This will bring out the beauty of Islam which is more practical rather than conventional Insurance which is not allowable in Islam.

The idea to set up a takaful system stems from the Islamic community¢s wish to conduct their affairs according to Islamic law. This in turn is a consequence of the efforts of the Islamic Mujaddids (reformists) in the nineteenth and twentieth centuries who propounded that Islam is not only restricted to a set roles and regulations concerning ibadah (worship) and munakahat (marriage), but a complete way of life (nizamul hayah) including the spheres of business transactions.

The concept of conventional insurance has not achieved full agreement from scholars whether it is permissible (halal) or prohibited (haram). Since conventional insurance as it is being practiced now did not exist during the Prophet¢s time, ¡ijtihad¢ is used to determine whether it is permissible or otherwise. Among scholars who ruled that conventional insurance is haram, there are disagreements as to the reasons why it is haram.