View source for Takaful

{{short description|Islamic form of insurance}}
{{Fiqh |economic}}
{{more footnotes needed|date=August 2016}}

'''Takaful''' ({{langx|ar|التكافل}}, sometimes translated as "solidarity" or mutual guarantee)<ref name=WIWWIE2013:403>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.403</ref> is a co-operative system of reimbursement or repayment in case of loss, organized as an [[Islam]]ic or  ''[[sharia]]''-compliant alternative to conventional insurance, which contains ''[[riba]]'' (usury) and ''[[gharar]]'' (excessive uncertainty).<ref name=WIWWIE2013:402>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.402</ref>

Under takaful, people and companies concerned about hazards make regular contributions ("donations") to be reimbursed or repaid to members in the event of loss, and  managed on their behalf by a takaful operator.<ref>Ajmal Bhatty, President & Chief Executive Officer, Tokio Marine Middle East, Takaful Summit 2011.</ref> Like other Islamic finance products, Takaful is grounded in Islamic ''[[Muamalat]]'' (commercial and civil acts or dealings branch of Islamic law).

In 2018, the takaful industry had grown to a size of $27.7 billion of "contributions" (from a 2011 figure of $12 billion).<ref>{{Cite web|date=July 2019|title=Islamic Financial Services Industry Stability Report 2019, Page 10|url=https://www.ifsb.org/download.php?id=5231&lang=English&pg=/sec03.php|website=Islamic Financial Services Board}}</ref>  The movement has been praised as providing "superior alternatives" to insurance that "reinvigorate human capital, emphasize personal dignity, community self-help, and economic self-development";<ref name=PfEoTit21C/> but also criticized as having "dwindled" in scope to an industry of "conventional insurance with Arabic terminology and language of contract".<ref name=WIWWIE2013:410>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.410</ref>

==Principles==
Theoretically, takaful is perceived as cooperative or mutual insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits, but to uphold the principle of "bear ye one another's burden". The principles of takaful are as follows:

* Policyholders cooperate among themselves for their common good.<ref name=coop/>
* Policyholders' contributions are considered as donations to the fund (pool).<ref name=coop/>
* Every policyholder pays his subscription to help those who need assistance.<ref name=coop/>
* Losses are divided and liabilities spread according to the community pooling system.<ref name=coop/>
* Uncertainty is eliminated concerning subscription and compensation.<ref name=coop/>
* It does not derive advantage at the cost of others.<ref name=coop>{{cite web|title=About Takaful Insurance|url=http://www.takaful.coop/index.php?option=com_content&view=article&id=2&Itemid=111|website=takaful.coop|publisher=International Cooperative and Mutual Insurance Federation|access-date=12 August 2016|url-status=dead|archive-url=https://web.archive.org/web/20161013101519/http://www.takaful.coop/index.php?option=com_content&view=article&id=2&Itemid=111|archive-date=13 October 2016}}</ref>

Muslims scholar have "hardly any difference of opinion" on "the need for managing, redeeming and mitigating general, business and life risks covered by the insurance business".<ref name="WIWWIE2013:402"/> But whether conventional insurance is forbidden (''[[haram]]'') is disputed.

=== Fiqh scholars ===
In its second session (December 1985),<ref>{{Cite web|url=https://uaelaws.files.wordpress.com/2012/05/resolutions-and-recommendations-of-the-council-of-the-islamic-fiqh-academy.pdf|title=RESOLUTIONS AND RECOMMENDATIONS Of THE COUNCIL OF THE ISLAMIC FIQH ACADEMY 1985- 2000|website=uaelaws.files}}</ref> the [[International Islamic Fiqh Academy, Jeddah|Fiqh Academy]] of the [[Organisation of Islamic Cooperation]] (also called the International Islamic Fiqh Academy) ruled conventional commercial (but not social) insurance ''[[haram]]'' (forbidden). Its ninth resolution stated: <blockquote>The commercial insurance contract, with a fixed insurance premium, as practiced by commercial insurance companies, contains substantial ''gharar'', which renders the contract defective. Consequently, it is legally forbidden.<ref name="MeGIFLEP2006:147">[[Murabaha#MeGIFLEP2006|El-Gamal, ''Islamic Finance'', 2006]]: p.147</ref> </blockquote>

===Argument against conventional insurance===
Islamic scholars began forbidding commercial insurance as early as the late nineteenth century CE.<ref>{{Cite book |url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |title=Islamic Finance : Law, Economics, and Practice |last=el-Gamal |first=Mahmoud A. |publisher=Cambridge |year=2006 |isbn=9780521864145 |location=New York, NY |ref=MeGIFLEP2006 |page=61 |access-date=2017-03-09 |archive-date=2018-04-03 |archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |url-status=dead }}</ref> The majority of Islamic scholars believe [[Insurance|commercial insurance]] is disallowed for Muslims because it contains
* ''Al-Gharar'' ([[uncertainty]])
* ''Al-Maisir'' ([[gambling]])
* [[Riba]] ([[usury]])
They have two main concerns about conventional insurance:
#The uncertainty "if and when  the insured event will take place and, if it does take place, what would be the relationship of compensation to the insurance premium paid". (What if the holder of collision insurance policy never has a motor vehicle accident? they lose and the insurance company wins. Regarding life insurance, everyone dies, but what if the death occurs after the first payment of a premium for life insurance? they win and the insurance company loses.)<ref name=WIWWIE2013:402/>  This "makes the insurance business similar to gambling, where the gambler does not know the fate of the game". Thus, uncertainty in the conventional insurance business "is excessive and borders on prohibited gharar".<ref name=WIWWIE2013:402/>
#"Insurance companies invest surplus funds on the basis of interest and pay out a part of such earnings to policyholders as bonuses." According to the 'orthodox interpretation', this is riba.<ref name=WIWWIE2013:402/>

According to Jamal Zarabozo, the majority of modern Muslim such as scholars from Islamic Fiqh Council of the [[Organisation of Islamic Cooperation]], the Board of the Leading Scholars of [[Saudi Arabia]], the Fiqh Council of [[Mecca]] under the auspices of [[Muslim World League]],  Siddiq ad-Dharir, [[Wahbah al-Zuhayli]], Muhammad Mustafa as-Sinqithi, Salaah al-Saawi, Abdullah al-Muslih, Sulaiman Thunayaan, Ali Abu al-Basl, Abdur Rawf al-Shaadhili, Faisal Maulawi, Mohammad Muslehuddin, Afzalur Rahman, and numerous other respected scholars and jurists agreed that commercial insurance were forbidden.<ref name="Zarabozo">{{cite web |last1=M. Zarabozo |first1=Jamaal al-Din |title=The Question of Insurance Outside of the "Lands of Islam" |url=https://docplayer.net/10449026-The-question-of-insurance-outside-of-the-lands-of-islam.html |website=Doc Player |publisher=JamaalZarabozo.com|page=16 |date=2003 |archive-url=https://web.archive.org/web/20211224071428/https://docplayer.net/10449026-The-question-of-insurance-outside-of-the-lands-of-islam.html|archive-date=December 24, 2021|url-status=unfit}}</ref>

=== Defense of conventional insurance ===
A minority of Islamic scholars argue that insurance is not like gambling because in gambling, no risk is covered and no damage is mitigated.  The gamblers play a game of chance for entertainment and profit in which they can win or lose, based on a conscious decision.<ref name="WIWWIE2013:403"/><ref name="FJIFD2012:295">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]: p.295</ref> Insurance provides coverage for events out of the insured policyholder's control. When the policyholder collects a payout, they are not a winner, but a loser who at least has some compensation.<ref name="FJIFD2012:295" />  Furthermore, while insurance involves uncertainty, "statistical techniques and actuarial sciences have progressed to a stage where the insurance company can calculate its risks and benefits with great precision," so that the uncertainty involved in insurance can scarcely be called excessive in normal circumstances.<ref name="WIWWIE2013:403"/>

===Scriptural basis===

Islamic scholars supporting takaful point to Qur'an {{Cite quran|5|2}} {{#tag:ref|ISLAMIC INSURANCE THEORY and PRACTICE states: `All legal evidence permits Cooperative Insurance, as God says in the
Holy Quran, "Cooperate for good and pious deeds and do not cooperate to do evil and aggression."`<ref name="mulhim">{{cite book|last1=Mulhim|first1=Ahmed Salem|last2=Sabbagh|first2=Ahmed Mohammed|title=The ISLAMIC INSURANCE THEORY and PRACTICE|date=c. 2001|url=http://www.albaraka.com/media/pdf/Research-Studies/Book-Islamic-Insurance.pdf|access-date=9 August 2016}}</ref> But does not specifically cite {{Cite quran|5|2}}. Shakir translates part of  {{Cite quran|5|2}} as "and help one another in goodness and piety, and do not help one another in sin and aggression;"<ref name="corpus">{{cite web|title=Verse (5:2) - English Translation|url=http://corpus.quran.com/translation.jsp?chapter=5&verse=2|website=corpus.quran.com|access-date=7 September 2017}}</ref> 
|group=Note}} and several sayings ([[hadith]]) of the Islam prophet [[Muhammad]].  Some examples are:
;Qur'an
''Basis of Co-operation'': Help one another in ''al-Birr'' and in ''al-Taqwa'' (both: virtue, righteousness and piety), but do not help one another in sin and transgression. ([[Al-Ma'ida|Sūrat al-Māʼidah]], Verse 2){{Cite quran|5|2}}<ref name="proof">{{cite web|title=Proof for the concept of Takaful in Quran and Sunnah|url=http://www.takaful.com.pk/uploads%5CResearch1.pdf|website=takaful.com|access-date=12 August 2016}}</ref>{{citation needed|date=August 2016}}

;Hadith
* [[God in Islam|God]] will always help his servant for as long as he helps others. (Narratives by Imam [[Ahmad ibn Hanbal]] and Imam Abu Daud.){{citation needed|date=August 2016}}
*''Basis of Responsibility'': The place of relationships and feelings of people with faith, between each other, is just like the body; when one of its parts is afflicted with pain, then the rest of the body will be affected. (Narratives by Imam al-[[Muhammad al-Bukhari|Bukhari]] and [[Imam Muslim]])<ref name="FIB-2011-190">{{cite book|editor1-last=Ariff|editor1-first=Mohamed|editor2-last=Iqbal|editor2-first=Munawar|title=The Foundations of Islamic Banking: Theory, Practice and Education|date=2011|publisher=Edward Elgar Publishing|page=190|url=https://books.google.com/books?id=SkqoA9FfMCEC&q=just+like+the+body%3B+when+one+of+its+parts+is+afflicted+with+pain%2C+then+the+rest+of+the+body+will+be+affected&pg=PA190|access-date=7 September 2017|isbn=9781849807937}}</ref>
* One true Muslim (''[[Mu'min|Mu’min]]'') and another true Muslim are like a building, whereby every part in it strengthens the other part. (Narratives by Imam al-[[Muhammad al-Bukhari|Bukhari]] and [[Imam Muslim]])<ref name="DHO">{{cite web|title=Daily Hadith Online|url=https://abuaminaelias.com/dailyhadithonline/2010/09/28/believers-are-like-a-structure-supporting-each-other/|website=abuaminaelias.com|access-date=7 September 2017|date=2010-09-28}}</ref>
* ''Basis of Mutual Protection'': By my life (which is in God's power), nobody will enter [[Jannah|Paradise]] if he does not protect his neighbour who is in distress. (Narrative of Imam Ahmad bin Hanbal.)<ref name="IESME-2017-15">{{cite book|editor1-last=Alam|editor1-first=Nafis|editor2-last=Rizvi|editor2-first=Syed Aun R.|title=Islamic Economies: Stability, Markets and Endowments|date=2017|publisher=Springer|page=15|url=https://books.google.com/books?id=nrsyDwAAQBAJ&q=bukhari+protect+his+neighbour+who+is+in+distress.&pg=PA15|access-date=7 September 2017|isbn=9783319479378}}</ref>

The fundamentals underlying takaful are very similar to co-operative and mutual principles, to the extent that the co-operative and mutual model is one that is accepted under Islamic law.{{citation needed|date=August 2016}}

==History & models ==

The concept of takaful has reportedly been practised in various forms since 622 CE.<ref name=PfEoTit21C>{{cite web |url=http://ifpprogram.com/login/view_pdf/?file=Prospects%20for%20the%20Evolution%20of%20Takaful%20in%20the%2021st%20Century.pdf&type=Project_Publication |title=Prospects for Evolution of Takaful in the 21st Century: Origins of Takaful |author=Omar Fisher and Dawood Y.Taylor |date=April 2000 |work=[[President and Fellows of Harvard College]] |access-date=2016-08-10 |archive-date=2020-08-02 |archive-url=https://web.archive.org/web/20200802012313/http://ifpprogram.com/login/view_pdf/?file=Prospects%20for%20the%20Evolution%20of%20Takaful%20in%20the%2021st%20Century.pdf&type=Project_Publication |url-status=dead }}</ref> The first practitioner of Takaful were known as Zubayr ibn al-Awwam, companion of the prophet, as this practice were allowed according to classical scholar consensus, such as Ibn Taymiyyah in his [[Majmu Fatawa]].<ref name="Ensiklopedi Ijma' Ibnu Taimiyyah2">{{harvtxt|al Bushi|2019|p=685,686}}</ref> In practice, Takaful were regarded as technically as zero interests banking with fundraising business model.<ref>{{cite journal |last1=Hasan |type=Dr. |first1=Zulkifli |title=Islamic Banking, Takaful and Al Rahnu LCA4562 DR. ZULKIFLI HASAN |date=2008 |url=http://financedocbox.com/Insurance/65839955-Islamic-banking-takaful-and-al-rahnu-lca4562-dr-zulkifli-hasan.html |access-date=15 December 2021 |publisher=Universiti Sains Islam Malaysia |language=en}}</ref> In the eyes of scholars and researchers, al-Zubair [[Entrepreneurship]]  of Tafakul has become serious object of study by scholars of [[Islamic schools and branches|Islamic institutions]] regarding the conduct and ethics in business in accordance of Islamic [[Fiqh]], such as Dr Erwandi Tarmizi.{{sfn|Tarmizi|2017|p=242}} Additionally, Modern researchers of Islamic banking,{{sfn|Al-Harbi|2017|p=331-350}} and Islamic financing theorists,{{sfn|Hailu|Yatoo|2021}} has delved the business aspect of Zubayr during his lifetime as rolemodel.{{sfn|Al-Harbi|2017|p=331-350}}{{sfn|Hailu|Yatoo|2021}} One of the principles of az-Zubayr business were the [[Ethics in religion|ethics]] of [[Fundraising]] based business according to [[Sharia]].{{sfn|Lateh|2016||p=46}} This type of fundraising business consisted of Zubayr practice of accepting safety deposits as a [[loan]] and [[Investment|investing]] the [[money]],{{sfn|Karaoğlu|2020|p=4l}}{{sfn|منان|2020|}} without accepting [[interest]] as [[Profit (economics)|profit]] of the business, which regarded as [[usury]] in Islam teaching.{{sfn|Zaroni|2007|p=1}}

According to Ali Ahmad Salih, professor of [[Middle East University (Jordan)|Middle East University in Jordan]], this fundraising Takaful business of Zubayr ibn al-Awwam were centered in Medina with its branches spread in [[Alexandria]], Kufa and Basra.<ref name="Ihab Abdul Khaliq">{{cite book |last1=Abdul Khaliq |first1=Ihab |title=الهندسة المالية المعاصرة: رؤية شرعية اقتصادية مقارنة |date=2021 |publisher=Al Manhal |isbn=9796500450896 |page=103 |url=https://books.google.com/books?id=4yM3EAAAQBAJ |access-date=18 December 2021 |language=ar |quote=المدينة وفروعه متعددة كالإسكندرية ، والكوفة ، والبصرة ؛ مستدلا بذلك بما جاء في الطبقات الكبرى لابن سعد ، " عن عروة قال : كان للزبير بمصر خطط}}</ref> Ali Ahmad Salih pointed out the evidences based on the records of [[Hisham ibn Urwah]] narration in Tabaqat al Kubra which written by [[Ibn Sa'd]].<ref name="Ihab Abdul Khaliq" />
	
During [[Abbasid Caliphate]] era, such Islamic banking system were apparent.{{sfn|Al-Harbi|2015|p=1}} there were even one business center named ''Dar-uz Zubayr'' in Basra that accept any [[deposits]]. [[Zafarul Islam Islahi|Zafarul Islam]] theorized in his [[Academic journal]] released by [[Aligarh Muslim University]], that the deposit center were named after Zubayr ibn al-Awwam.{{sfn|Islam|1984|p=783}} Meanwhile, modern day Pakistani Islamic business theorist, Zubair Mughal, has further observed the model of Zubayr ibn al-Awwam practice of Tafakul to avoid the [[Gharar]] (risky business), gambling, and Riba, which all forbidden by Islamic law.<ref name="Muhammad Zubair Mughal">{{cite journal |last1=Zubair Mughal |first1=Muhammad |title=Takaful cover for Ijarah & Muharaba |publisher=al Huda center|doi=10.1017/9781108654241.008 |s2cid=243249574 }}</ref>

=== Modern era ===
Muslim jurists acknowledge that the basis of shared responsibility (in the system of ''aquila'' as practised between the Muslims of [[Mecca]] and [[Medina]]) laid the foundation of mutual insurance. "In the case of insurance, as with commercial banks, orthodox opinion prevailed," and with "a consensus among Muslim scholars" about the legitimacy of takaful and the illegitimacy of conventional insurance, the "movement for Islamizing the contemporary insurance business" started around the mid-1970s. In 1976, a fatwa was issued by the Higher Council of Saudi Arabia "in favor of an Islamic model" of insurance.<ref name=PfEoTit21C/> The [[International Islamic Fiqh Academy, Jeddah]] of the [[Organisation of Islamic Cooperation]] also approved takaful as a legitimate form of business in 1985.<ref name=EY-WTR-2008/><ref name=WIWWIE2013:403/> The Islamic Insurance Company of Sudan started as the first takaful company in 1979.<ref name="IFDCS">{{cite web|url=http://www.dummies.com/how-to/content/islamic-finance-for-dummies-cheat-sheet.html|title=Key Sharia Principles and Prohibitions in Islamic Finance|last1=Jamaldeen|first1=Faleel|access-date=24 July 2016}}</ref> By the mid-1990s, there were seven takaful companies in Sudan, Dubai, Saudi Arabia, Bahrain and Jordan.<ref name=WIWWIE2013:408>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.408</ref>

The industry grew from $1.384 billion in 2004 to $5.318 billion in 2008.<ref>Ernst & Young, ''World Takaful Report'' 2010</ref> By the end of 2011, total takaful contributions amounted to $12 billion (as compared to $4 trillion for conventional insurance).<ref name=WIWWIE2013:408/>
In 2005, there were 82 companies around the world engaged in takaful business (77 dedicated takaful companies, and five "offering takaful products" from "Islamic windows").<ref name=WIWWIE2013:408/>  By 2006, there were 133.<ref name=EY-WTR-2008>Ernst & Young, World Takaful Report 2008</ref>
As with the traditional forms of insurance, reinsurance of a takaful operation may be used, known as "retakaful".<ref>{{cite web
| url=http://www.bnm.gov.my/guidelines/06_others/Concept%20Paper%20-%20Guidelines%20on%20Takaful%20Operational%20Framework.pdf
| title=Concept Paper – Guidelines on Takaful Operational Framework
| publisher=[[Bank Negara Malaysia]]
| date=2009-12-01}}</ref>  Also in 2006, [[American International Group|AIG]], a non-Muslim US-based company (with more than 88 million customers in 130 countries), established a takaful subsidiary called AIG Takaful Enaya, headquartered in Bahrain.<ref name="FJIFD2012:302">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]: p.302</ref>  
As of 2013 the leading takaful countries are "Malaysia and the Gulf states".<ref name=WIWWIE2013:408/> It was reported in 2016 that out of total 308 takaful companies, 93 are takaful windows; however, these takaful windows own only 2.5% of the total takaful assets.<ref>{{Cite web|url=http://www.takafulprimer.com/main/downloads/ms_5860.pdf|title=WORLD TAKAFUL REPORT 2016|date=2016|access-date=2019-05-01|archive-date=2022-02-10|archive-url=https://web.archive.org/web/20220210082707/http://www.takafulprimer.com/main/downloads/ms_5860.pdf|url-status=dead}}</ref>

===Models===
There are several models (and several variations) of how takaful can be implemented:
* ''Mudharabah'' model (profit-sharing): the managers (shareholders) are sharing profit and losses with the policyholders; used initially in Far East.
* ''Tabarru'<nowiki/>''-based: "donations" (''Tabarru'''), i.e. premiums, are accumulated into a fund to meet members' losses. Members are not allowed to take back any contributions or profits from investments.<ref name=WIWWIE2013:405>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.405</ref>
* A combination of ''Tabarru''' and ''Mudharabah'': Bahrain, UAE and Middle East countries.
* ''[[Wakala]]'' model: agency fee, received up front from the contributors and transferred to shareholders fund.
* ''Al Waqf''-based model: Waqf is a distinct entity and a legal person. According to one critic, "except for names and terms, the essence" of both ''Al Waqf'' takaful and conventional insurance is the same, and as a consequence this structure "has come under a lot of criticism from Shari'ah scholars".<ref name=concepts-63-4>{{cite book |last1=Archer |first1=Simon |first2=Riffat Ahmed |last2=Abdel Karim|first3=Volker |last3=Nienhaus |year=2009 |title=Takaful Islamic insurance: Concepts and regulatory issues |location=Singapore |publisher=John Wiley & Sons (Asia) |pages=63–4}}</ref>  Mainly used in Pakistan and South Africa.{{citation needed|date=August 2016}}

===The ''Mudharabah'' model (profit-sharing)===
According to this principle the ''al-Mudharib'' (takaful operator) accepts payment of the takaful installments or takaful contributions ([[Insurance premium|premiums]], known as ''ra's-ul-mal'') from investors or providers of capital or funds (takaful participants), acting as ''sahib-ul-mal''. The contract specifies how the [[Profit (economics)|profits]] (or surplus) from the operations of the takaful is to be shared in accordance with the principle of ''al-mudharabah'' between the participants (as providers of capital) and the takaful operator. The sharing of such profit may be in a ratio of 50:50, 60:40, 70:30 and so forth, as mutually agreed between the contracting parties.{{citation needed|date=August 2016}}<ref>{{cite web|last1=Mahbubi Ali|first1=Mohammad|title=TAKAFUL MODELS: THEIR EVOLUTION AND FUTURE DIRECTION|url=http://www.icrjournal.org/icr/index.php/icr/article/download/582/542/Cached|website=icr journal|access-date=7 September 2017}}</ref>

In order to eliminate the element of uncertainty in the takaful contract, the concept of ''tabarru'<nowiki/>'' ("to donate, contribute, or give away") is incorporated. Relating to this concept, a participant agrees to relinquish (as ''tabarru''') a certain proportion of his takaful installments (or contributions) that he agrees or undertakes to pay, should any of his fellow participants suffer a defined loss. This agreement enables him to fulfill his obligation of mutual help and joint guarantee.{{citation needed|date=August 2016}}

In essence, ''tabarru''' enables participants to perform their deeds in assisting fellow participants who might suffer a loss or damage due to a catastrophe or disaster. The sharing of profit (or surplus) that may emerge from the operations of a takaful is made only after the obligation of assisting the fellow participants has been fulfilled. It is imperative, therefore, for a takaful operator to maintain adequate assets of the defined funds under its care whilst striving prudently to ensure the funds are sufficiently protected against over-exposure. Therefore, the provision of insurance coverage is in conformity with Shariah based on the Islamic principles of ''al-takaful'' and ''al-mudharabah''.{{citation needed|date=August 2016}}

''Al-mudharabah'' is the commercial [[profit-sharing]] contract between the provider or providers of funds for a business venture and the entrepreneur who actually conducts the business. The operation of a takaful may thus be envisaged as the profit-sharing business venture between the takaful operator and the individual members of a group of participants who desire to reciprocally guarantee each other against a certain loss or damage that may be inflicted upon any one of them.{{citation needed|date=August 2016}}

==Criticism==
One complaint made against (most) takaful (by Muhammad Akram Khan) is that despite the talk of solidarity, (most) takaful-holders "do not have any 'voice'" in the management of the takaful. The "TO (takaful operator) makes all the crucial decisions, such as rate of premium, risk strategy, asset management and allocation of surpluses and profits". The shareholders of the TO, and "not the takaful-holders, appoint and dismiss managers of the takaful".<ref name=WIWWIE2013:409>[[#WIWWIE2013|Khan, ''What Is Wrong with Islamic Economics?'', 2013]]: p.409</ref> Similarly, Mahmud El-Gamal complains that "even companies that use the term ''takaful ta'āwun'' (cooperative mutual guarantee or insurance) are structured with stockholder rather than policyholder ownership", despite the 9/2 ruling of the [[International Islamic Fiqh Academy, Jeddah|International Islamic Fiqh Academy]] that permitted insurance as "cooperative insurance, built on the principles of voluntary contribution (tabarru') and mutual cooperation".<ref name="MeGIFLEP2006:170">[[Murabaha#MeGIFLEP2006|El-Gamal, ''Islamic Finance'', 2006]]: p.170</ref> An exception to this state of affairs can be found in Sudan, where the takaful-holders have more say in the management of the takaful business.<ref name="concepts-63-4"/>

Whether takaful is significantly different from conventional insurance has been questioned. Islamic economist [[Mohammad Najatuallah Siddiqui]] writes that: <blockquote> "The form of organization chosen to take advantage of the [[law of large numbers]] does not change the reality. We can make insurance a not-for-profit activity (provided we can ensure efficient management), but it does not change the essential nature of what is being done."<ref>Siddiqui, Mohammad Najatuallah "Islamic banking and finance in theory and practice: A survey of the state of the art." ''Islamic Economic Studies'', 13 (2) (February): 1-48</ref></blockquote>

According to Rakaan Kayali, the fact that benefits for the takaful members are distributed as funds allow, rather than defined by the policy, may lead to conflict among members—if, for example, one member's claim uses up takaful funds so that another member with an equally valid claim a short time later is not compensated, or not compensated in full.<ref name=kayali>{{cite web|last1=Kayali|first1=Rakaan|title=The True Difference Between Takaful and Insurance|url=https://foundationsforislamiceconomics.wordpress.com/2016/01/15/the-true-difference-between-takaful-and-insurance/|website=Practical Islamic Finance|publisher=wordpress|date=2016-01-15}}</ref>{{self-published source|date=August 2016}}

Additionally, there has been doubt cast on the legitimacy of claiming that takaful participants are making "donations". This is because the word "donations" implies giving with no expectation of worldly return. This is clearly not the case with takaful participants who are seeking insurance.<ref name=kayali/>{{self-published source|date=August 2016}}

==References==
===Notes===
{{reflist|group=Note}}

===Citations===
{{Reflist}}

===Books, documents, journal articles===
*{{Cite book |url=http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |title=Islamic Finance : Law, Economics, and Practice |last=el-Gamal |first=Mahmoud A. |publisher=Cambridge |year=2006 |isbn=9780521864145 |location=New York, NY |ref=MeGIFLEP2006 |access-date=2017-03-09 |archive-date=2018-04-03 |archive-url=https://web.archive.org/web/20180403160351/http://iugc.yolasite.com/resources/Reference%20Book%2004%20-%20Islamic%20finance,%20law%20economics%20and%20practice,%20M.%20El%20Gamal.pdf |url-status=dead }}
*{{Cite book|url=https://books.google.com/books?id=T7ImTjBd1gQC&q=islamic+finance+for+dummies|title=Islamic Finance For Dummies|last=Jamaldeen|first=Faleel|date=2012|publisher=John Wiley & Sons|isbn=9781118233900|language=en|ref=FJIFD2012|access-date=15 March 2017}}
*{{cite book|last1=Khan|first1=Muhammad Akram|title=What Is Wrong with Islamic Economics?: Analysing the Present State and Future Agenda |date=2013|publisher=Edward Elgar Publishing|url=https://books.google.com/books?id=Fr36Gd1X_rcC&q=khan+sum+up+the+modernist+interpretation&pg=PA178|access-date=26 March 2015|ref=WIWWIE2013|isbn=9781782544159}}
* {{cite journal |last1=Al-Harbi |first1=A. T. |title=Determinants of Islamic banks' profitability: international evidence |journal=International Journal of Islamic and Middle Eastern Finance and Management |date=2017 |volume=10 |issue=3 |pages=331–350 |url=https://www.emerald.com/insight/content/doi/10.1108/IMEFM-12-2015-0161/full/html |doi=10.1108/IMEFM-12-2015-0161 |access-date=6 November 2021 |url-access=subscription }}
* {{cite book |last1=Tarmizi |first1=Erwandi |title=Haram Wealth in Contemporary Muamalah |date=2017 |publisher=PT Erwandi Tarmizi Konsultan |location=Indonesia |isbn=9786021974209 |edition=English |url=https://books.google.com/books?id=ylRhDgAAQBAJ |access-date=24 October 2021 }}
* {{cite journal |last1=Zaroni |first1=Akhmad Nur |title=Gharar Transactions (Tinjauan terhadap Proses dan Obyek Transaksi Jual Beli) |trans-title=Jual Beli Gharar (Overview of the Process and Object of the Sale and Purchase Transaction) |journal=Mahazib Jurnal Pemikiran Islam |date=2007 |volume=4 |issue=1 |page=1 |url=https://journal.iain-samarinda.ac.id/index.php/mazahib/article/view/516 |archive-url=https://web.archive.org/web/20211111194624/https://journal.iain-samarinda.ac.id/index.php/mazahib/article/view/516 |access-date=11 November 2021 |archive-date=11 November 2021 |url-status=dead }}
* {{cite journal |last1=Hailu |first1=Suadiq Mehammed |last2=Yatoo |first2=Nissar Ahmad |title=Islamic Finance in Ethiopia: Current Status, Prospects and Challenges |journal=International Journal of Islamic Banking and Finance Research |date=2021 |volume=6 |issue=1 |pages=1–18 |url=https://www.cribfb.com/journal/index.php/ijibfr/article/view/1317 |doi=10.46281/ijibfr.v6i1.1317 |s2cid=240627919 |access-date=6 November 2021 |doi-access=free }}
* {{cite book |last1=al Bushi |first1=Abdullah bin Mubarak |title=Ensiklopedi Ijma' Syaikhul Islam Ibnu Taimiyah |date=2019 |publisher=Darul Falah |isbn=9786029208078 |url=https://books.google.com/books?id=YTq2DwAAQBAJ |access-date=20 November 2021 }}
* {{cite journal |last1=Karaoğlu |first1=Ömer |title=An Overview of the Financial History of Muslims |journal=Journal of Knowledge Economy and Knowledge Management |date=2020 |volume=15 |issue=1 |url=https://dergipark.org.tr/en/pub/beyder/issue/55730/689910 |access-date=11 November 2021 }}
* {{cite journal |last=منان |first=عتاب |title=مقارنة الأداء المالي للمصارف الإسلامية والتقليدية في الأسواق الناشئة (بالغة الانجليزية |trans-title=Comparing the financial performance of Islamic and conventional banks in emerging markets (in English) |url=https://journals.ekb.eg/article_106078.html |language=ar |journal=مجلة الاسکندرية للبحوث المحاسبية (مجلة الاسکندرية للبحوث المحاسبية) |volume=4 |issue=2 |date=2020 |doi=10.21608/aljalexu.2020.106078 |s2cid=225896422 |doi-access=free }}
* {{cite journal |last1=Lateh |first1=Bukhoree |title=Multiple Contracts According to the Fatwa of National Sharia Council |journal=International Journal of Nusantara Islam |date=2016 |volume=4 |issue=1 |pages=41–48 |url=https://journal.uinsgd.ac.id/index.php/ijni/article/view/1184 |doi=10.15575/ijni.v4i1.1184 |access-date=6 November 2021 |doi-access=free }}

==Sources==
{{commons category}}
Chakib Abouzaid: Presentation of the World Islamic Insurance Directory at the World Takaful Conference  (2006/07/08/09/10/11/12) www.takaful-re.ae 
{{Islamic banking and finance}}
{{Islam topics|state=collapsed}}
{{Insurance}}

[[Category:Islamic banking]]
[[Category:Types of insurance]]
[[Category:Islamic banking and finance terminology]]