Takaful is an Arabic word meaning ‘guaranteeing each other’ for mutual protection. It is not a new concept – it has been practiced by the Muslim immigrants (Muhajrin) of Mecca and the Muslim residents (Ansar) of Medina in the Muslim society following the migration (Hijra) of the Prophet (PBUH) 1,400 years ago.
Muslim rejection of conventional insurance originated in 1903, when an Islamic ruling made by prominent Muslim scholars declared that conventional insurance was un-Islamic. This prompted the search for an acceptable alternative, but it was not until the 1970s that the debate gathered momentum and Takaful was re-discovered as an accepted alternative. In 1985, the Council of the Islamic Jurisprudence Academy (Majma’ al-Fiqh al-Islami) approved Takaful as a Shari'a compliant system of co-operation, risk sharing and mutual assistance.
The Basic Principles of Takaful are:
- Takaful Participants cooperate for the common good.
- Every Participant contributes / donates their subscription into a fund to help other Participants in need.
- Losses are divided and liabilities spread according to a community pooling system.
- Uncertainty (Al-Gharar) is eliminated in respect of contributions based on donation and fixed benefits.
- Advantage is not derived at a cost to others and surplus, if any, is distributed fairly to the Participants.
In this way, Takaful is a truly cooperative insurance concept for the mutual benefit of all Participants and the community as a whole. Thus, the main purpose of this system is to “bear ye one another’s burden” rather than solely being a profit oriented enterprise. |
