Malaysia’s Economic
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CHAPTER 1
INTRODUCTION OF TAKAFUL
1.1 Introduction
The development of Malaysia’s economic currently shows its growth on Islamic muamalah
system. This positive establishment gives one situation that attracts the society to analyze and
choose between conventional and Islamic system. The economy system introduced Shariah rules
that compiled all methods such as al-Bank alla Ribawi (banking without interest), al-Rahn
(mortgage), Islamic business stock and of course Takaful (Islamic insurance). There are some
methods and products like the al-Bank alla Ribawi and Takaful have been spread out to our
neighborhood countries in example Brunei Darussalam, Indonesia and Singapore.
1.2 Definition
Takaful is derived from the Arabic root-word “kafala” , a verb, which means guarantee, bail,
warrant or an act of securing one’s need. Therefore, takaful (in its give and take form) means joint
guarantee, other against a defined loss. In the context of Islamic insurance, takaful refers to an
agreement for mutual indemnity in providing protection and compensation to the participants who
suffered from perils or hazards.
In a word, takaful can be considered as the Islamic alternative to insurance. From the
economic point view, takaful means a mutual guarantee or assurance based on the principles of alaqd (contract) provided by a group of people living in the same society against a specific risk that
befalls an individual’s life or possessions. Takaful can also be defined as a mutual pact among a
group of members or participants whereby all mutually share the consequences of risk that may be
inflicted upon any one of them (Salahuddin Ahmed, 2006)
The basic goal of takaful is to share burdens and to do with fairness for all parties involved
and not to maximize profit as business. Unlike the conventional stock insurers, takaful operators
are not owners of the Takaful funds that are managed by them,