Takaful is a shariah complied product. Its principles, guidelines, rule and regulations have originated from the Islamic legal system whose sources of authority emanated from Al’ Qur’an and Hadith. 

Sharia Justification for Islamic Insurance (Takaful) Practice

That is why in the noble Qur’an, it was stated that “O you who believe! Obey Allah (SWT) and obey the Prophet (SAW) and those charged with the authority among you. If you differ in anything among yourselves, refer it to Allah (SWT) and His Messenger, if you do believe in Allah and the last Day. That is best and most suitable for final determination;” (Qur’an: 4:59). 

This is a declaration in the noble Qur’an which shows that the general sources of Islamic Law (Takaful inclusive) are the noble Qur’an, and sunnah (tradition of Holy Prophet).In another verse of the noble Qur’an, its (Qur’an) own definition is deduced which states: “It is a plain statement to man, a guidance and instruction to those who fear Allah (SWT)… (Qur’an: 3:138). 

Sunnah, however, is a practice of or tradition of Holy Prophet as he is the best interpreter of the noble Qur’an. Other sources of Shari’ah Law can be from the practice of the companions of the Holy Prophet (S.W.A) followed by the Ijtihad that is consensus of opinions, among the Islamic scholars as instructed by Allah (SWT) which says to that effect “… think deeply O you who understand… (Qur’an: 59:2) Ali, (2000:257). 

The institution of Islamic insurance is built on the basis of mutual cooperation, responsibility and mutual protection; among participants. Many Islamic injunctions can be forwarded to that effect. On the basis of mutual cooperation, the noble Qur’an says “Help one another in furthering virtue and God – Consciousness (At – Taqwa) and do not help one-another in furthering evil and enmity (Qur’an 5:2). In the Holy Prophet’s (SWA) Hadith; it was reported that Prophet said “Allah (SWT) will always help His servant for as long as he helps others (Narrated by Imam Ahmad Ibn Hambal and Imam Abu Daud). 

On the basis of responsibility, however, the Holy Prophet’s Hadith states that 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 also be affected (Narrated by Al-Bukhari & Muslim). More so, the Holy Prophet said” One true Muslim (Mu’min) and another true Muslim is just like building whereby every part in it strengthens the other part (Narrated by Al-Bukhari & Muslim). 

To establish the basis of mutual protection among members, the Holy Prophet (SAW) in his Hadith, warns that “by my life, which is in Allah’s power, nobody will enter paradise if he does not protect his neighbor who is in distress (Narrated by Imam Ahmad Ibn Hambal). These fundamentals are what have constituted the core tenet of the business of Takaful (SECP, 2010).

It has, for long, been justified that the Muslim Ummah should work hard in order to be able to change their conditions as can be seen in the noble Qur’an “…verily never shall Allah (SWT) change the condition of people until they change it themselves (with their own souls) (Qur’an, 3:11). This is in line with aim of Takaful which is to change the condition of Muslim Ummah through sound financial planning and risk management that is inherent in human life to conform with the wishes of Allah (SWT) to humanity as stated in Qur’an 

verse,”  Allah  (SWT) intends  you  to  enjoy  an  easy life.  He does  not  wish  you  to  face hardships… (Qur’an, 2:185).

As noted that the core value of Takaful that distinguishes it from conventional insurance include: avoidance of Riba (interest), avoidance of gharah (uncertainty) and avoidance of Maisir (gambling). 

These are vitiating elements of contract in Shari’ah and are forbidden in Qur’an and Sunnah. Allah (SWT) warns Muslim against Riba (interest) as said “...Allah (SWT) permits trade and transaction while he prohibits anything involving usury (interest)… (Qur’an 2:275), Takaful transaction is made to be free from element of uncertainty to comply with the Holy Prophet (S.A.W) saying as reported by Said Ibn al-Musayyib (R.A) that verily the  Holy  Prophet  (S.A.W)  forbids  Muslim  from  uncertain  transaction  (Muwatta  Imam Malik). 

Allah (SWT) also said “O ye who believe! Intoxicants and gambling, sacrificing to stones and (divination by) arrows, are an abomination; of satan’s handiwork: Eschew such (abomination) that ye may prosper (Qur’an; 5:90). This is what has made the Takaful transaction to be free from gambling (Ali, 2000).

On the other side, the validity of Takaful practice is sourced and originated from the Arab tribal custom (urf) and the practice of Al-Aqila which has been approved by the Holy Prophet (SAW) in the Hadith. 

“Narrated by Abu Hurairah (R.A), he said that once two women from Huzail tribe had clashed. One of them hit the other one with a stone which had killed her (the pregnant) and the unborn baby. The heirs of the victim brought an action to the court of the Holy Prophet (SAW) who gave a verdict that the compensation for the Foetus shall be a male or female slave; while the compensation for the killed woman is a blood money (dyat) to be paid by the Aqila the relatives of the Father’s side of the killer (Sahih Al – Bukhari, vol. 9. No 45:34). 

Takaful transaction is permissible in Islam as it can be considered under the hadith saying, that “… people are bound by their condition except the  condition which prohibits the lawful one or the one which permits the unlawful one… (Al-Tirmizi).

Therefore, the scope of an Islamic insurance is very wide and flexible which is designed for the purpose to ensure a smooth life in the society and this is in line with the Qur’anic injunction “… our lord, give us happiness in this world and happiness in the hereafter… (Qur’an: 2:201). 

Takaful success is dependent upon the sincerity and pure intention in order to achieve the desired result from Allah (SWT) that says “…And they have been command no more than this, to worship Allah (SWT), offering him sincere devotion. (Quran, 98:5). The tradition of the Holy Prophet (SAW) also shows validity of action is depending on intention and therefore every man shall have but that which he intended… (Al – Bukhari and Muslim). In the similar direction, the Holy Prophet (SAW) is saying that “verily Allah (SWT) never looks at your physical shape or at your appearance but considers sincerity in your hearts… (Sahih Muslim in Riyadussalihin).

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