Takaful Models: Origin, Progression and Future

Journal of Islamic Marketing, ISSN: 1759-0833 Publication date: 23 November 2019

Posted: 16 Jan 2020

Date Written: November 23, 2019

Abstract

Purpose: The concept of Takaful has a long history. It is linked with the era of Prophet Muhammad 1,400 years ago. The globalization and development of socio-economic systems have made business activities more complex in response to emerging human needs and requirements. Similarly, Takaful insurance has fully commercialized and become an important indicator of the international financial market. The purpose of this study is to understand the Takaful mechanism and progression of its procedures to date since its inception.

Design/methodology/approach: This study seeks to examine the origin, evolution and historical developments of Takaful mechanism, operations, models and governing framework with extant literature review from previous studies and current practices.

Findings: The modern Takaful insurance first began in Sudan back in 1979. The Takaful operations must abide by the Sharia laws and work under the supervision of the Sharia Supervisory Board. Since its evolution, Sharia scholars have introduced various Takaful models that are going to be explained in this study. Moreover, several Islamic organizations, including the “Islamic Financial Services Board” and the “Accounting and Auditing Organization for Islamic Financial Institutions,” have provided guidelines and supervision to develop and strengthen the Takaful industry further. The study acknowledges Takaful as a growing insurance industry with huge potential and promising future in both Pakistan and the international market.

Practical implications: During the analysis, various deficiencies and loopholes were identified, which are responsible for the unmatched growth of conventional insurance. They can be eliminated with the joint efforts of industrial players, Sharia scholars and Takaful insurance companies. Hence, Islamic scholars and academic researchers are encouraged to develop and modify the current practices of Takaful mechanism according to current market demands and consumer approach. The research efforts will help Takaful operators to develop more innovative Takaful products adhering Sharia compliance. Consequently, it will help to access more consumer market and further enhances the Takaful growth.

Originality/value: This study is an effort to provide a basic understanding of the mechanism of Takaful models. The study helps to comprehend how Takaful models have evolved and been modified over the course of time. Moreover, it provides a base for further development and improvement in current practices of Takaful models, which will result in increased progress for the Takaful industry.

Keywords: Islamic Insurance, Takaful, Takaful Models, Sharia, Mudharaba, Wakalah, Waqf

JEL Classification: G32

Suggested Citation

Hassan, Hafiz Ali, Takaful Models: Origin, Progression and Future (November 23, 2019). Journal of Islamic Marketing, ISSN: 1759-0833 Publication date: 23 November 2019 . Available at SSRN: https://ssrn.com/abstract=3509683

Hafiz Ali Hassan (Contact Author)

University of the Punjab ( email )

New Campus
Pakistan
Lahore, Punjab 54000
Pakistan

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