Takaful: concept, history, development, and future challenges of its industry
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Mutual help and guarantee have been the ordinary practice of tribal Arabs even before the advent of Islam in Arabia. A similar but refined concept was reinforced by the Qur'an to be adopted by Muslims. It was widely applied in their daily lives. When the Muslims extended their trade by sea to the Far East, the concept of mutual assistance became more prominent and organised to protect their ships, merchandise and even lives from all sorts of dangers and mishaps. The practice by these merchants to put aside a sum of money before setting sail to the Far East for trade as a fund to compensate any loss incurred by any of them became the most prominent practice that led to the birth of what is today known as marine insurance. To circumvent some of the shari'ah non-compliant practices of mainstream insurance is the introduction of the concept of donating part of the participants' contribution which forms the special fund to compensate losses. From then on, the takaful operators started to emerge, first in Sudan and later in other parts of the Muslim world. Several models have been formulated, namely mudarabah, modified mudarabah, wakalah and wakalah-waqf. The success of the takaful companies around the world has also been strongly influenced by the recent upsurge in the petroleum price that has led to the unprecedented increase in sovereign and private wealth. The recent emergence of "re-takaful" companies add up further to the rapid growth in takaful operators and funds. Despite the success stories, there are a number of serious challenges facing takaful and "re-takaful" operators which are worth noting.
Alhabshi, Syed Othman & Shaikh Abdul Razak, Shaikh Hamzah. (2014). Takaful: concept, history, development, and future challenges of its industry. In Murat Cizakca (Ed.), Islam and the challenges of Western capitalism (pp. 447-462). Cheltenham, Glasglow: Edward Elgar Publishing Limited.
Edward Elgar Publishing Limited