TAKAFUL: CONCEPT, EVOLUTION AND GROWTH

Abstract

The establishment of Islamic insurance (Takaful) can be traced back to 1979 in Sudan and later Malaysia and Saudi Arabia. Compared to Islamic banking, it is rarely discussed in the Islamic finance literature, which makes the concept less understood. There are concerns from Muslim scholars regarding the permissibility of insurance in Islam. This paper examines the basic concept of Takaful, its evolution and growth, and the modes of doing Takaful business- the Mudharabah, wakalah, and hybrid or mixed models. The findings revealed that although insurance is not explicitly prohibited in Islam, conventional insurance is frowned upon due to the high level of uncertainty and the business model involved in it.