The Framework and Practice of
Islamic Insurance in Malaysia
/oni Tamkn Bn Borhan

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56

Al-lam{ah,Yol.tCI,No. 1,January- Iune2002

JoniramkilBin BorharuTheFrnmeworkandpracticeof IslamicInsurance...

Abstrak
Asuransi telah menjadi fenomenayang jamak di era modem di belahan
dunia manapun. Di Malaysia, asuransikonvensional dipandang oleh Komisi
Fatwa sebagaitidak Islami karena mengandung beberapa elemen seperti
nba, gharardan masanzPermasalahaninilah yang akhimya mengundang
perhatian kalanganMuslim sehinggamereka mengupayakan asuransi yang
lebih sesuai dengan syariat Islam. Maraknya bisnis asuransi Islami atau
takafuI inilah yang menarik perhatian saya (penulis) untuk melihat secara
dekat wacana dan praktek asuransi Islam di Malaysia. walupun banyak
bisnis asuransi Islam yang muncul, rurmun penulis hanya akan membahas
salah satunya, yaitu syarikat Takaful Malaysia Berhad (srMB) yang
merupakan asuransi takaful pertama di Malaysia. Banyak permasalahan
yang bisa dilihat dan didiskusikan dalam artikel ini, rliantaranya adalah
awal tradisi asuransi, pandangan Islam tentang praktek asuransi modern
dan beberapa pernusalahan yang berhubungan dengan praktek asuransi
di Malaysia. psntrlis akan lebih memfokuskan pada bagaimanapelaksanaan
konsep takaful dalam Islam di dalam pelaksanaan asuransi ini. Apakah
konsep mudharabah dan tabarnt rnenjadi dasar dalam praktek asuransi
takaful pada syarikat Thkaful Malaysia Berhad (srMB) khususnya dan
asuransi takaful yang lain pada umumnya.
Introduction
his paper will analysethe framework and its application the operations of syarikat Takaful Malaysia Berhad (formerly known as
syarikat Takaful Malaysia sendirian Berhad), the first company
granted permission to operate Islamic Insurance (Takaful) businessesbased
on contracts of mudarabah and taka,fuLThe topics to be discussedinclude
the nafure of insurance, an Islamic view on present-day insurance, the establishment of syarikat Thkaful Malaysia Berhad (srMB) and some issues
relating to the takaful schemein Malaysia.
Nature of Insurance
The term'insurance'in its real senserefers to community pooling to
alleviate the burden of the individual, which might be ruinous to him. The
Al-lami'ah,Vol.4ONo. L,January-June2002

57

Joni Tamkin Bin Borhan,TheFrameworkandPracticeof IslamicInsurnnce.'.

simplestand most generalconceptionof insuranceis "a provision made by
a group of persons,each singly in danger of some loss, the incidence of
which cannotbe foreseen,that when such loss shall occur to any of them, it
has been
P' described
lnsurance nas
whole grouP. Irrsurance
the wnole
drstrDutecl over tne
shall be distributed
as a device provided by the community or grouP of people to cover loss,'
or an arrangementagainst risk,' or against the dangers' which besethuman life and dealings, when they occur to the members of that communitl'
or group of people, by creating funds to cover losses or against that risk.In its modern form, insurance can be described as a contract whereby
one person called the "insurer" undertakes, in refurn for the agreed consideration called the "premium" , to pay another Person called the "insured",
a sum of money or its equirralent, on the happening of a specified event.u
The aim of insurance is to make provision against the dangers to which a
group of persons are all equally subject. Insurance is thus a mutual coverug" of accidental loss by a group of persons subject to a common danger.t
In the present form of insurance,o losses are not distributed but funds are
created to cover the losses calculated in advance with the aid of past experience.t Thus, it can be seen that insurance involves the spirit of mutuality
and co-operation.
The modern contract of conventional insurance seems to have its oritEr,try

ott "krsurance" n Enqclo@ia Ainericana, Vol. )C(, Connecticut, 1984,p.
?33; ThgNew Encydopadia Bntannica, Vol. X)(I, Chicago, 1985,p.678.
tfnose
who describe insurance as "Pooling of losses" is E. Cannan, A Reuiew of
Economic Theory, London, 7929, p . 424; Encydopaedta of Bankng and Finance, p . 385;
"Distribution of losses", W. F. Gephart, Pnnoples of ltaurance, New York, 1911' pp- 4 5;
Economics:
D.
Edie,
losses",
L.
2; "Indemnifying of
"Mitigation of losses",Ibid,pp.1
Princtpla and Problens, London, 7926,p.215 and "Meeting of losse", A. H. Silverman,
The Supstance of Economic, London, 193,p. 164.
'See
C. Gide, Polib'calEconom;tlondon, 191'4,p.745;S. H. Patterson and K. W. H.
Schholz,EconoaicPtoblemsofMdern LtfeNewYorkandLondon, 1931,p.98;M. Dobb,
CapitalbtEntuprise,LondorU 7925,pp.53 and 164;Marks Dordman says that risk canbe
ditided into four categories, i. e. subjective risk, objective risk, pure risk and speculative
risk. SeeIn toducfr on to Ira urance, Englawood Chffs, 1982,p - 9trrtorgut (ed.), Porter's Laws of Insurance, Part I, London, 1933,p.
ItW.
'H.
Batou, Coperative Insurance, London, 1936,p. tg1;Seealso Adam Smlth, TIte
Wealth ofNatiotts, Edwin Caruran (ed.), Vol. II, London, 1950'p-248.
h. R. Hardy tvany, C,aneralPtitcipleoflnsuranceLarv, Londoru 1975,p.3; Seean
entry "[nsuranc e" in The New Encydopeadia Bntannica,Yol. XX, p. 578.
^T.W. Morgan (ed.), (1933).
n. Barou (1936),op. cit,p.40.
]See
'H.
Barou (7936),op. cit"p.40.

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oni Tamkin Bin Borhan, TheFramaoorknnd practice

gin in the marine loans of ancient Greeks.toAs against the ancient Greek
marine loan, the idea of mutual insurance finds its expressionin the payment of biood moneytt ('aglatt) which was prevalent in Arab tribes aurmg
the pre-Islamictimes." This virtue of pre.Islamic times was approved and
incorporated into Islam by the Prophet, and later acted upon by Caliph
'umar.^The nature of blood-money was neither usurious, nor exploitative. It ingrained the spirit of mutuality, co-operation and mutual insurance, and eliminated the danger of wars of revenge which continued in
pre-Islamic Arabia for decades.
An Islamic view on present-day insurance
Insurancehas undoubtedly assumedtremendous importance in modem commerce,trade and industry. The conlract of insurance has been the
subjectmatter of prolonged and aetalea #di"r, examination and scrutinv
by and amongst eminent Islamic scholars,who havEcome to different conclusions, views and opinions. There at least three standpoints: that it is
toTLis

marine loans of ancient Greeks described by Demosthenes; ,,Money was
advanced on a_shipor cargo, to be repaid with large intereit if the voyage prospered, but
not rePaid at all if the ship be lost, the rate of interest being made higir eirough io pay not
for the use of capital, but for the risk of losing it". (Entry on -Inst-"",i
u he'New
l$r
Encydopaedt'a of Britannica, vol. x)o, 1999, p. oza;. eccoraing to Barou, ,,The rate of
interest includes together with other elements a premium for Gurance in order to provide compensation for the loan to the lender, in cise of a loss incurred through the Uant<ruptcy of the borrower". (see-H. Barou, Cooperative rnsurancq London, lezs, p. zsy.
Thus it can be said that the modem contract of insurance is basically the same (usurious in
nature) as the old marine loan of ancientGreeks.(M. Muslehud dii, Insuranceand Islamic
La W New Delhi, 1982,p p. 27- 28).
-'or
blood-wite.
'lvluslehuddiru SeeJuynboll,,,'aqila,,, p. 239.
op, a t, pp - 10 - 11; Th. w. f uynbolf "' ak:,ra", txtEttcyclopea& a rslam
(Ftrst Edition) vol. I, 1913,pp.239 - 240. 'aklah ii the name of the ma11,smale relations
who according to the precept-of the religious law have to pay the penalty (the hgll for
him, when unintentionally he has causedthe death of a M,sii-. ttrir aecreewas basedon
a verdict of the Prophet.
in a quarrel between two women of the Hudhayl trib_e,
9"g 9iy
one of them who was with child was killed by the other with a stone, which hit her in the
womb. when, soon after, the other woman also died, the prophet decided, that her kin
('aqilah, or, accordingto a different reading her bsabah,i. e. agnates),in accordancewith
an old custom,had to pay the penalty to the relativesof the w6man who had been killed.
(Muslehuddin, op. cit. p. 11;]uynboll,',' aktla,,,p. 239).
..'-Muslehuddin,op.cit,p.23;Seealsoal-Marghinani,al-I{tdayah,yol.Iy,p.642;M.
Hamidullah, TheFtrst wntten Constitution tn the world, Lahore, ney pp. 4l - 42 and,M
- 45.

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59

I

...
ofIslamiclnsurance
JoriTan*inBinBorhan, TheFramamrk andPractice
i

permissible(mubilt), that it is.prohibited (haram)and that someforms are
allowed others disapproved.'The proponents of the permissibility of insurance(ta'mn)" declare
that such contract is allowed if it is free from riba.lt is consideredas a
collective undertaking ('amal ta'awun) which takes care of the welfare
(masaTih\of individuals and society.In so far as maslahahis achieved,it is
in compliance with the law. Moreover, originally all contracts are permissible and a such it can be equated by analogy to various permissible contracts.tt fustification based on public interest and even on the socio-economic survival of the Muslim Ummah has also been put foward.tt
'Al alThe iustifications of ta'min advancedby Mustaia Zarqa"' and
Khafif,t'leading contemporary scholars,have been overwhelmingly
accepted. Firstly, it is argued that ta'min is a newly known contract not
coveredby a text (nash) whether approving or disapproving of it. It should
thus be consideredallowed (la'tz) and permissible (mubilt). Secondly,since
it is a contract based on masJahahand since there is no aspectof any harm
(darar), it complies with the prescribed law. Thirdly, insurance has become
'amm) necessaryfor the attainmerrt of private and
a common uffige ('uf
public interests. Arfis considered to be a source of law, as long as it does
not contradict the precepts of the Shari'ah.n
The proponmts of the prohibition of insurance argue that it contains
the elements of riba (usury), Shou(risk), iahalah (uncertainty), maysir
ttA-ud

Strarafal.D& Ugud al- Ta'min wa'Llgud hman at-Istithmar, pp. S
"l-S"'d ha unne and Islamic Laz, New Delhi, 1982,pp. lW' lE.
- 94; M..Musl ehuddtn,
" Ta'minbxatpthe Arabic tersr for insurance in the 20th century. (E. Klingmuller,
"The Concept and Development of Insurance in Islamic Countries', ICYol. XXXXIII (1),
1959,pp.77 - 37). Ib'n'Abidin, however, a Hanaf jurist who is considered the first Muslim
siguarcandtheTurkish
tonameinsurance sukn(sestrity),influencedbytheItalianterrn
st|orta. ( hash A., Vol. IV, pp. 170-773;Yardrt Risper{haim, "Insurance and Semi-lnsuranceTiansactionsinIslamicHistoryUntil the 19thCentury",IESlIO,YoL X)OOV,191,pp.
742-143).
S. st atx al-Din, op. cit, p. 9o.
i]i.
t]uuammaa
a -nalii, zqd a|)Ta'mn, p. 23.
this
finding on this ^ittet was delivered rnthe LIsbu'al-Fiqh al-Islanin Damascus (1961)
'ttHis as well as in his deliberation at the Mecca Conference (1976).
aI'
opinions submitted to the second assembly of the Maima'al'Buhith
Istamyyah (lslamic Reearch Academy) of al-Azhar University in which he excluded life
insurance from the list of validated insurances.
'A.
S. Sharafal-Din, op. at, p. 90.

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JoniTarr*inBinBolhan,TluFrametpork
andPractice
ofIslamicInsurance
...

(gambling and unearned gain), and attempting to supersedethe will of
God, all of which is said to be diametrically opposed to the ethical standards setby Islamic law.tt Muhammad Abuzahrah hasmade the qualification that ta'mth not foundedon a collective b asis(al-a,mn ghasnal-ta h wun)
is reprehensible (makruh). Such a decision is establishedon the basis of the
classicalmethodolow of '[,tlama'al-salafthat no prohibition will be pronounced except where there is an explicit evidence (daltl qatfJ.z
The third group hold that some forms of. ta'min are allowed and
some are prohibited. some of them allowed the use of ta,mn on property
but ban life insuran.".' Flo*"rrer, an overwhelming majority of Islamic
scholars are now on the opinion that the conventional insurance contract
does not, in its present form, confor:mto the Shan'ahbecauseit includes an
element of gliarar(rncertarnty), based on the practice of nbaand a sort of
gambling (malrfl.'=

The Establishment of syarikat Takafur Malaysn Berhaf,
The need in lvlalaysia for a schemeof insurance which is in line with
lslamic teachings was officially affirmed when the Fatwa committee defr1*f9fr" ddyn, op, cit,p. 1@ A. S. Sharaf al-Din, op. a?, p. ffidetails on thepolemic between Muharnmad abu2ahrah and Musta"faAmad
see-Zarqa"sworks Agd al-h'mn wa mawgaal-shan'ah al-rslanisyah minhu
,
1t'!3rqa'
( A lecture deliirered duringtheUsbu'al-riqhal-Islam),
Damascus, 1952and arecent work
A qd aI- Ta'mn f al-Slzan'ah al-IslamiSyafi l9f31.
-Siddiqi,
op.ot,p.26.
--Insurance
has beendiscuseeclata number of Islamic conferences,but a favourable
verdict on commercial insurance has been withheld in view of the objections of the eminent scholars. This is brought out by the resolutions passed at the 1965Islamic Research
Congress at Cairo and those adopted in 1969at Kuali Lumpur. SeeSiddiqi, MusJim Economtc 7Zmkng : A suruey of Contetnporary r,rteraturc, Leiiester, lgg1, p:27 . As recently
as
1976the First Intemational Conference on Islamic Economics held at Mecca resolved that
: "The Conference feels that commercial insurance as presently practised does not .ealise
the Shan'ah aims of co-operation and solidarity beciuse it does not satisfy the Islamic
conditions for it to become acceptable". Furthermore, the conference recommended the
establishment of a committee coruisting of specialists in 56arz h1rand economics to recommend a system of insurance which is free from nba and speculation, promotes co-operation in accordance with the Shan"ah, and helps replace the current fbrm of commercial
insurance. See General Recommendations, no. 6, First Intemational Conference on Islamic Economic$ M9""-u, 1976cited in Si ddrql Muslun Economic Thinkng, p. 27.
*Hereafter
cited to as Syankat Takaful
-For
)4.

Al-fm{ah, Vol.40,No. 1,}anuary- June2002

61

joni Tamkin Flngot}rr;v Ttn Fro**o*

*d Prortio ofltk^i, kt**

clared 1g;-lg7zthathe conventional concept of life lnsurance as practised in
Malavsia was unlawful in Islam as it contained the elementsof riba, gharar
arrdma1air."
Gltarar
Gharar means obvious indeterminancy, hazatd or risk (khataVor
mukhatarah) and ignorance that is likely to cause disputes which, when
applied to insurance,meansthe p,resenceof unknown and uncertain factors
in the operation of the contract."This element of gharar (or uncertain) is
found in the operation of conventional insurance, both life and general
insurance contracts. In such a contract, the insured or the policy holder
agreesto pay a certain flrm as a premium and in tum the insurance company guarantees to pay a certain sum o{ compensation in the event of a
catastrtphe or disaster.The uncertainty reliatesto the fact that the insured
or the plt"y holder is not infolrred, for example,of how the amount of the
that the comPany will pay him-is to be derived'28
"o*p"n**ilr,

nR"portof

ofan Islamiclnsurance Companyin
th" Committe on tlnHting-up
LumPur, l9Bl,P. 1.
Malap!4,Kuala
'
V pp. 13 - 14; Lane, Vol. tr, p. 2239;ln Islamic terminology, this
" t ot
"t-'*ihvol.
orthesale of an artideof goods,
goodswhichisnotpresentathand;
anarticleof
isa saleof
the consequence Qqt:6ah7 or outcome of which is not knon'n; or a sale involving risk or
hazard *,her" one d-oesnot lcrow whether the comnodity will later come to be or otherwise. Ibn Qayyim, Alam al-Muwaggi'.in,vol. L P.358; Zurqani, Vol.III, p.313; al-Ramli,
Itr, p.335;. Ttre term means that such transactions, which are pre'
mUy*at-*tiA1,Vol.
hibitld in tstam, in form are apparently no different from those prohibited in Islam for
deceiving when in reality the nature of the obiect is noJ known and therefore risk involved. *veral r€alnns are 6.'m for the prohibition of bay'al-gharar Some of them are
related to fraudulence since-such a sale amounts to obtaining the property of others by
selling unavailable goods and the contract may lead t9 dispuq and_disagreemg"q bT
tweerithe parties in lhe contract. Sanun, Vol .I\t,p. 207.Zu1qani, VoL qll P. 313; al-San'ani,
- 4fi); Seealso alMuanna|YoL MII, pp. 108-109;Ibn Haz,n, aJ-MuaIIa,Vol. VItr, gn.l{
fi al-Figh al'Islam-:
addq Muammad al-imin al-Dar.)at4harar wa Atharuhu.f *'Ugd
1975,
Islam,I',eiden,
Gamblingin
Dlrisah Muqaranalt,Cayo,7967,p. 27; Franz Rosenthal,
p
.
1
3
9
.
^
8STMB,
Rialah Perlindungan Takafu6,M. F. Yusuf, "Takaful lruurance Company
Malaysia Sdn .Bhd." , Syariah t^aw-/oumat, $ntemational Islamic University, Petaling Jaya,
september, 1991),p.87; Cf y'Jr,filur Rahman, Banking and lttsurance, vol. IV, London,

1979,pp.1$-rn'

62

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JontT arr*"rrBinBorhan, TheFrameworkand practiceof IslnmicInrurqtc, ...

Maysir
Closelyrelatedto and justifiedby Islam'swider prohibitionagainst
unearned gains, is the prohibition of all transactions containing an element
of maysiz Maysh though similar to, is far wider than the concept of gambling, gaming and wagering. Generally,it means unnecessaryrisk by entering into a transactionwith the hope of gain as well as the fear of loss,"
or undertaking a risk in the spirit of speculation.* Insuranceis said to contain the element of maysq when a life policyholder dies before the end of
his insurance policy after paying only part of the premium, so that for example, his dependents will receive a certain sum of money which exceeds
what the insured paid in premiums. similarly, in non-life insurance, if the
insured event occurs and results in a huge loss, the insured will recover
more than which he has paid in premium. on the other hand if the insured
event does not take place, the insured gets nothing tangible in retum for
his premiums.3t
Riba
The practice of nba and other related practices which contraven the
rules of the Sltan'ahenter into the investnrent activities of the cqrrventional
insurance companies."
tn1982, a Committee set up by the Govemmmt to study the imple'the
mentation of
Islamic system of insurance in Malaysia recommended the
introduction of the takafuI scheme of insurance. The Committee also included in its report a draft proposal for the hIefuI BrIl 1984which provided for the setting-up, control and regulation of takafuIbusihesses and
other related matters. Following the acceptanceby the Government of in-

Siddiqi, Inswancein an IslaaicEcottomy,Leicesteq, U. K., 19g5,p.34.
iy,t
--S
H.rqmin, Islanic Law In Ihe Contempora4;, Wodd, Glasgow,l9g5, pp. 71 - 94.
-'srurB,
Risalah Peflindtngan hkafit rdem, Rbalah pelan TakafuIr<etiarga (A)
and(BLM.F. Yusuf(1991),op. cit"p.$;NikRartlahN.Mahmood,
"Thkaful: ThelJlamic
system of Mutual Insurance- The Malaysian Insurance", Arab Laweuatterl1lFeb.,199"l.,
p.285..,
--Afzalur
Rahman, op. cit., pp. 108 - 114;Muhammad Samiullah, ,,prohibition of
Riba(Interest)andlnsurancelnTheLightof Islam", ISYI\.XXI(2), (1982),pp.S3-76;M.
A. Choudhury, "Insurance and Investrnent in Islamic perspective", rntemidonal/oumal
olSoctal Economia, Vol. X 95), Fresno,1983,pp. 1,6-17.

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Joni Tamkin Bin Borhan, TheFrameuorkandPracticeof lslamiclnsurnnce...

troducing takafulbusinessesin Malaysia, the Parliamentgazettedthe Taka,{ul
ActtnIgS4,'" and finally a TakartilCompanywas.incorporatedas a private
limited company under the Companies Act L965- on 29th November 1984,
taking the name of Syankat Taka.fulMalaSrsiaSendirian Berhad (STfutSB),
with its registered office situated in Malaysia. The Company started its
businesson 2nd August 1984.35
To underline the importance of its Islamic character, the Takaful
Company's Memorandum of Association prefaces that "all businessesof
the Company_will be transactedin accordancewith Islamic principles, rules
and practices,* The Company has an authorized capital of RM 100million,
divided into 100 million ordinary sharesof RM 1 each.The initial paid-up
capital of the Company is RM 10 million, 51 per cent of which is held by
8n44, and the other shareholders are the StateReligious Councils and the
State Religious Agencies of Malaysia." This ownership of shares makes
Syarilcat Takaful a subsidiary of BIMB.ln 1996the company was incorporated as a public company and listed on KISE, taking the name of Syarikat
Takaful Malaysia Berhad. (STMB)
The Concept of Takaful

(Mutual

insurance) and Muaraba.h

Literally, takaftil means mutual guarantee; joint guarantee and cooperation" and these are the hallmarks of this scheme.This concept em*Thu

A.t r*k" to provide for the licensing and regulating of takafulbusiness in
Malaysia. See S. (1), Takaful Ad 1984. It has been modelled on Malaysia's existing
Insurance Act lftSSwithmodifications and ammdments as ar€ necessaryto conforrr with
the takafiilbusiness practices. However, according to the provisions of the Takaful Act
l98{,, for example 5.67 (2\, TakafuI Ad 19&l provides that the supervisory authority
responsible for the supervision of all regulations over the TakafulCompany is vested in
the Ministry of Finance through the Director€eneral of Syankat TakafuI.
--S.
4 (1) (a), Taka.fulAd 19&l provides "Subject to this Act, takafulbusinessshall
not be carried on in Malaysia by any person as Thkaful operator except by a Company as
defined in the CompaniesAct 1955".
-STMSB,
Annual Report 1986,pp.5 - 6.
*STMSB,
Atn ual Report I 986,p. 5; Mohd. Fadzli Yusuf, "Thkaful Insurance Company Malaysia Sdn. Bhd. : Islamic Altemative to Insurance" in Intemational Islamic Unversity ^fyanbh La w /oumal September 1997,p. 92.
" STn464 AnnualReport 1986,p.5; BIMQ AnnualReport 1985,p.7;Seealso S. W.
Ahmad, "Islamic Insurance in Malaysia" in Mohamed Ariff (ed.), Zhe MusJim Private
Sector iI Southeast Asia,Singapore,1991, pp.197 - 198;
sl-ane.
Vol.

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JoniTarnkinBinBorhan,Tlu Framework
ofIslamicInsurance
...

bodies the principles of co-operation,mutual help and shared responsibility.'- The TakafuIAct 1984of Malaysiadefines taka.ftilasa schemebasedon
brotherhood, solidarity and mutual assistancewhich provides for mutual
financial aid and assistanceto the participants in caseof nee^d,whereby the
participants mutually agree to contribute for that purpose.s
Takafulis characterisedby three aspectsof mutuality, namely, mutual
help, mutual responsibility and mutual protection from losses.The "insurance" that is provided is not dispensed by one party (the insurer) to another (the insured). The person,seekingprotection participates in a scheme
of co-operationwith another." The syarikat Takafut (TalcafuI company)
that runs the schemeis not the insurer but is merely an institution which
provides the entrepreneurial and administrative skills required to bring
the participants together, to collect and invest the contribution and to process the claims. Therefore, this scheme can be seen as a method of
ioint
guarantee among a group of members, that is, participanb in any scheme
against loss or damage that may fall upon any of them. The members of the
group agree to guaranteejointly that should any of them suffer a catastrophe or disaster,he would receivea certain some of money to help him meet
the lossor damage.This meansthatparticipants pledge mutual help amongst
the group and eadr memberof the grouppools efforttosupport the needy.'
In the practice of Syankat hkafuIMalaysa furhad (SIfofA) the concept of takafulhas been developed as a forrn of business and the principle
of mudarabah has been applied in the contract between $ankat Takaful
and the participants. Under the contract of.takafulbased on the principle of
muarabah, Syarikat TakafuIa$ as an entrepreneur or investor (mudanb)
and accepts takaful contributions or payment of the takafuI tnstalments

"For e*ample, see sami A. Hanna, " Af-TakafuI al-j'tima'and Islamic socialism",
TheMuslm Wodd,Yol.LX,l96),pp.275- 286;Nik RamlahN. Mahmood , op. at,pp.2g6
-287.
*'lhkufrrl
Act, l98!., s. 2.
WaseemAhmad, -Islamic Insurance In Malaysia,,, in Mohamed Ariff (ed.),
- _ntsyed
Zhe Muslan pnvaE ,fuor tn fuutheast Asia, Singapore, 1991,pp. 191- 192.
Report of the committe on the ktfrng-up of an rslamic rnsurance Company n
Malaystb,KualaLumpur, 1984,p.8;Mohd. Fa&liYusuf, "Theoperationof syarikatTakaful
MalaysiasendirianBerhad",p.5.APaperPresentedat,*minaronrnsurancenMalaysia
for /oumalist, Kuala Lumpur, 7985; Idem, "The Principle of Islamic tnsurance", p.-5.A
Paper Presentedat kmnar on rssua tn Economia,2T - 29 Dicember 1985,petaling ]ava,
Malaysia.

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Joni Tamkin Bin Borhan, TheFramantorkand Practice lslamiclnsurance

termed as ra's al-mal (capital) from particiants, who are treated as investors or providers of capital (sahrb al-mal.The taka.fulcontract which is made in accordancewith the principle
of muarabahspecifieshow the.profit (surplus) from the operations of.takaful
managed by Syanlcat Tal@fuf is to be shared between the participants as
the providers of the capital and Syarilcat Takaful (cortpany) as the entre'
preneur (investor). The sharing of such profit may be in a ratio of, for
example,5 :5,6 : 4,7 :3, et ceteraas mufually agreedbetweenthe contracting parties. The contract also clearly states th; rights and obligations of
both the participants and the Syarikat Vakaful.'The Concept of Tabarru'
Another special feature of akafut.contract is the concept of tabamt'
which means to donate, to contribute. Under the takafulcontract, the participants agree to relinquish as donations, in accordancewith the concept
of tabarnti a certain proportion of their hlcafuI contributions of mutual
help as ernbodied in the concept of takafttl Therefore, the purpose of
tabarnt'as stipulated in the contract is to enable the participants to Perform their obligations in assistingand helping fellow participants who might
suffer a loss or damage due to death or disasters.The sharing of the profits
or surplus from the operations of takarttl according to the principle of
mudarabah, is made only after the obligations of assisting fellow participants have been fulfilled. Syarilcat Takafullws to meet these obligations as
well as generatea reasonablelevel of profits by maintaining adequateassetsin iE takafuItvnds, whilst at the sametime striving prudently to protect the funds against undue u*p**".*

ogfJ,lSB,

nl*ht Perlindungan TakafuI,n.d.;Mohd. Fadzli Yusof, "Thkaful Insurance Company Malaysia Sdn. Bhd. : Islamic Alternative to Insurance", in Syan'ah I'aw
/ournal Petaling faya, Selangor, September 1997, p. 88; Taiuddin Saman, "Takaful
BerasaskanMudarabah" in krita I{an'an, 22 May 1992,P. 9; Johari }aafar, "Skim Takaful
Bantu MasyarakatIslam" in Eerita Minggu,S |uly 192, p' 10.
-"STMB,
Risalah Perlindungan Takaftrl;
*Risalah
Perlindungan Takaful; Mohd. Fadzli Yusuf (1985.b),"The Principles of
Islamic Insurance", p.7; Idem, "Sumbangan Takaful Kepada Usahawan", p. 7. A Paper
Presented at the kntnar l(eusahawanan dan Perniagaan IsJam,28 - 29 Novemb et 7987,
Petaling |aya, Malaysia; Idem, "Berbakti Kepada Rakan Melalui lhbarm"' in Berita IIarian,
7 October 7994,p.3; Iohari Jaatar(192), op cit"p.l0;

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I

JoniT arnkinBinBorhan, TheFrameworkandPracticeof IslamicInsurance..,

I

Types of Taka.fulBusiness
Thereare two typesof taka.fuIbtsiness
offeredby syaritcatTakaful
namely, Family TakafulPlans and General rakafuISchemes." In the context
of ordinary ilrsurance, the Family TalcafuIplarrs and the General rakaful
scheme can be compared with life and non-life insurances respectively.*
The Family TakafuIPlarrs provide various f"*ily takafuIpransbased
on a mudarabalt contract. The plans provide cover of mufual financial aid
and assistance from the takafttlbeneh9, in case of the untimely death of a
participant.u' Th" General raka,fuI*herrre provides various general taka.fuI
schemes as a fonn of a protection for an individual or a body corporate
against material loss or damage arising from catastrophes, disasters or mishap inflicted upon properties or assets belonging to participants such as
buildings, houses, vehicles, stock in trade, et cetera."
Although the Actintroduces anew scheme whidris supposed tocomply with Islamic principles, the Act itself has a few provisions as to how the
sc\eme should operate, except that it must be in accordance withthe shan'ah.
The general operation of the scheme is a matter of practice and it was recommended that the practices of existing insurers, as long as they comply
the Sltan'aJt principles, ought to be followed.
a)

Family

TakafulPlans

A Family Taka.fuIPlan, which is essentially an investnent prograrnme,
provides investment retums to a participant as well as mutual financial aid.
Any individual or a corporate body may participate in this takafulplan so
that he will be able to save regularly a sum of money as a measure to
relieve the financial burden that his dependents may face should he die
n'Th"

TukufuIAct l9?4dividrsthe takaful business into the Family solidariw BusinessorFamily TakafulPlansand theGeneralThkafulBusiness(Schemq.(n*antZctIg84,
s. 3). The former is defined as Takaful for the benefit of individual and his family, while the
latter is defined asall takaful businesswhich is not Family Solidarity Business.('TakafuIAct
1984,s.].a(i) and (ii).
'See
S. 3 (2) InsuranceAct 1963.
srMSB, Risalah Pelan Takaful r(eluarga (a) and (b) srMSB, Attnual Report 19g6,
p.6; Mohd. Fadzli Yusuf (1987),"SumbanganTakaful Kepada Usahawan,,,p .l,i;Ba4oyai
Bardai,"skim-rakaful Keluarga dan operasinya" in Benta Mrnggu,3 fanuiry 1992,p.'g.
STMB, RtlsalahPerhndungan Takafuf SIIUISB,AtnualReport 19g6,p.7.

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ofIslamiclnsufance...
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prematurely or as a form of contigencyshould he survive the term of the
plu .'' Therefore,the objectivesof the Family TakaftilPlanshave beendescribed to enablea person:
1. to save regularly
2. to invest this saving with a view to eaming profits in accordancewith
the rules and requirement of threShari'ah
3. to provide cover in the form of a payment of.takafuIbenefits to an heir
or heirs should a participant die before the maturity date of his takafuI
,52

PlaN.

Syankat TakafuI offers to an individual or a corporate body the following Family Taka,{ulPlans:
t. Family TakafulPlanswith a maturity of 10, 15,20 and up to 40 year.?
which must mature before the partigipant reachesthe age of 60 years
2. Family TakartilPlans for Mortgage"
3. Family TalcafuIPlansfor Education
4. Group Family TakafuLPlans" and etcAperson who wishes to participate in the Family TakafuIPlans,who
is then called a participant,- may choosea.ry/one of the types of plans
offered by Syarikat Takaful (or the operator)"' as mentioned above. Any
plan has a defined period of participation such as 10, 15 or 20 year terms.
The age groups covered under any Family hlcafuIPlanwith various maturity periods range from 18 to 50 years. The participants and the Syarikat
TakafuIenter a bka.ftilcontract based on the principle of mudarabah and
the participants agrce to pay regularly to the Syatikat TakafuI the hkaful
utRinlah perlindungan

hkafu4Mohd.

Fadzli Yusuf 1987), "Sumbangan Takaful

Kepad4psah aw an", p. 12.
'j
SZUA Pelan Taka,fulKeluary:a (A) and (B)
(a) and (b)'
]SfUSl, Arnual Repofi 1956,p. 6; Ristah Pelan hkafuI Keluarga
TakatuL
enn ual Repott 1986,p. 6; Rinlah Perlindungan
iSZUSA
*
SZUSA Arn uaI RiPort BSA P' 7; Atn uaI Repoft I 982 p. 6; Ann uaI Reprt 19fr,
p.
' 5; Arytual RePort 191, P- 5.
"S.Z Ta*afuIAdTg%Prodides that "Participants" includes, where a certificate has
been assigned, the assigneefor the time being and, where they are entitled as against the
takafuIoierctor to the 5enefit of the certificate, the personal representatives of a deceased
particip.?nt.
-"S.
'
2 Takaful Act 1984 provides that "operator" means a comPany or a society
which carries on takaful business.

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contributions (instalments)(premium), monthly, quarterly orannually which
are then credited into a fund (Family TakafulFund).'oThe contract spells
out clearly the rights and obligationsof the contractingparties.
Each taka,fufinstalment (contribution) paid by the participant and
credited into the Family TakafulFwrd shall in tum be divided and credited
by the Syadkat Takafulnto two separateaccounts,namely:
1. The Participant's Account (PA), and
2. The Participant's SpecialAccount (PSA).
A substantial proportion of the instalments is credited into the pA
solely for the purpose of savings and investnent. The balanceof the instalment is credited into the PSA as tabarnt'wlich depends on the age group
and maturity period of the participants. As shown in table 4.1, the tabanu'
proportion varies from two per cent to twelve and a half per cent. The
remaining proportion of the instalment is credited into the participant's
account. It is out of the PSA that Syarikat TaI@fuIis to pay the takafut
benefits to the heir(s) of a participant who may die before the maturity of
his Family TakafulPlxr. In other words, nloney
into the psA is paid by
' paid
the participant is in the spirit of tabarru:e
The tabatzu'proportion increaseswith the lu.gth of maturity of the
Family TakafuIPlanas well as with the age of the participant at entry. The
factors determining the tabarnt'proportion in the Family Takafiilplans are
the age at entry and the timeframe of the contract.* In this regard, the
instalment (contribution) remains the same but the tabarru'proportion
.ises.utIt can be said that the purpose of the tabatnt'proportion that goes
into the f5A account is to createa form of mutual fund, whilst that the pA
servesto accumulatesavings.

oThe

amount of takaful instalment to be paid during the term of the plan is determined by the participants themselves.Suchamount, however,should be within the finanm99s of the participants and also subject to the minimurn surn fixed by the Syankat
1{
TakafuI which at present is RM 15.00 per month payable on a monthly, quarierly or
annuallgbasis.fu RinlahPelan hkartIKeluarga (a)and(b)RralahPedatdungan TakafuL
srMB, Risalah Perlindungan Takaful, Mohd. Fadzli Yusuf (1991),"Takatul InsuranceCompany MalaysiaSdn.Bhd.", p.90; Nik RamlahN. Mahmood, op. ctt,p.288.
--These
factors are the same as those determining for the annual cost of a term
assurancepolicy in conventionalinsurance.In Conventional Insurance,the premium rate
rises boJh with age at entry and the length of the maturity period.
'
Mohd. Fadzli Yusuf (1991),p.90; Seealso Nik Ramlah N, Mahmood, op. cit.,p.
288.

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Joni Tamkin Bin Borhan, TheFramantorkand Practiceof Islamiclnsurance...

Table I: Syarikat Takaful Malaysia Berhad: Ratios of. tabarru'proportion credited into PSA accounts
Age Group (Years)Maturity Period (Years)
Age Group (Years)

10

15

20

25

40

30

35

7.5o/o

9.5Y" 12.5%

18-25

2.0"/" 3.5T" 5.0Y" 5.5%

26-30

2.0%

3.5Y" 5.0o/" 6.5"/" 9.0/" 1.2.5%

31-35

2.5"/"

4.57o

%-44

3.5%

6.0"/o 9.0"1"

4t-45

5.0%

8.57" t2.5y"

46-50

7.0o/"

12.57"

6.5T" 9.0"/" 12.5"/"
'1.2.5"/"

Risalah Peldn TakafuIIGIuarya (a) and (b).
Source: 57-11[4,
One of the functions of the Syarikat TalafuIn managing the Family
TakafuIbrsrn*s is the investment of the taka.fulinstalments in line with
the principle of mudarabahor profit and loss sharing. The instalments credited into the two accounts,i.e. PA and I|SA accounts,are pooled as a single
fund as shown in figure 4.1. Therefore, money from both the accounts are
invested by Syarikat Takaful on a profit and loss sharingbasis in enterprise
which are not contrary to Islamic Law either in their operations or in nature of theirbusiness. The profits generatedfrom the inveshnent are shared
between the participanLsand Syankat Taka.(uln a ratio mutually agteed
between them. For example, a participant in the age group of 18 - 25 taking
up a 10yearsplan under Family Taka.fulPlanmight have 2.0per cent in PSA
and 98 per cent in PA. The distribution of profits realized _frominvestrnent
by Syankat Takafulis first divided according to the profit-sharing agreement, for example 70 :30, between the participant and Syarikat Takaful
respectively.The proportion (30 per cent) of the profits allocated to Syarikat
Taka.fulgoesinto the profit and loss sharing account of Syankat TakafuI,
while the profit accruing to the participant (70 per cent) is then distributed

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IoriTarnkinBinBorhan,TlrcFramanork

proportionately between his PA and PSA6'.ln other words, 2.0 per cent of
the profits will go into his PSA and the remaining 98 per cent will go into
PA
In the case of loss of the investments of the Family TlakafuI Fund,
however, it was recommendedby the Report of the Committeet' tlrut it
should be bome by the Syar*at Taka,(tilaloneas part of its operating costs,
to be paid from the following year's profits. This departure from the Islamic prinqiple of mudarabahcontract which requires both the participants
and Syarikat Talcafzilto share not only the profie of the investnents, but
also in its losses,was thought to be necessarybecausethe prospect, however minimaf of losing all or part of their inveshents might deter people
from participating in this scheme.
Family

TakafulBenefitse

Under the Family TakafulPlaru the akafulbenehE shall be paid to
the participants or their heir(s) upon the occurenceof any of the following
cases:
Case one (1) : the participant survives the maturity of his takafulplart.
Case two (2) : the participant dies before the maturity of his taka,fuIpLan.
In the fust case,he shall be paid the total amount of takafufinstalments
paid by the participant during the period of his participation arid all the
profits,_if any, from the investment of the takafuIinstalments crbdited into
his PA.'"
hr the second case, the takafulbenefits to be paid to the heir(s) or
proper claimant6 is all the money in the participant's PA as at the time of
his death"'. This includes all his contributions until the time of his death
t"tun Takafut Ketuarga (b).
ln*"U,
$Report
of the Committee on the Setfrng-up of an hlamic Insurance Company n
MaIaustb.
- *According
to S. 2 TakafuI Act1984, takaful benefits includes any benefit, pecuniary or not which is secured by a takaful certificate, and."pay" and other
where llsed in relation to takaful benefits, shall be construed accordingly. "*pt"""iot",
Pelan TakatuIlGluarga (a)and (b).
lSrrr4n,
*S.65
(4) TakafulAct L984provides : "Proper claimant means a person who claims
to be entitled to the sum in question as executor of the deceased,or who claims to be
entitled to that sum under the relevent law".
67The
takaful benefit is to be paid to a proper claimant without the need for the
production of any probate or letters of administration. SeeS. 65 (1) Takaful Act 1984.

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and all the profits that his contributions have eamed and credited into his
PA over the same period. This amount, however, will inevitably be less
than the amount which the participant would have expected to get if he
survived until the maturity of his plan. The difference between these two
casesis that his heir(s) will be paid the outstanding takafuIamounts which
would have been paid by the deceasedinto his f'SA should he have survived. This amount is calculatedfrom the date of death to the date of maturity of his Family TakafulPlart Through the instrumentality of the IISA,
therefore,a participant in the Family Takafulis able to determinethe amount
(subject only to variations of profits) that either he or his heir(s) would get
as talcafuIbenehts.*
If the participant decides to withdraw his participation before the
maturity date of his Family TalcafuIPlan,he shall be able to surrenderbenents,t tfrat is all his takafuIinstalmentswhich have beencredited into his PA
with the prcfits which those instalments have eamed so far. His contribution to the PSA is a fonn of donation which he has agreedto make and it is
not returned.rc
b)

General Takafut Schemest'

The General Takafulis a sdreme which provides cover for an individual or a body corporate against losses or damage consequentuPon a
catastrophe or disaster such as fire, flood and accident, usually inflicted
upon properties or assets.The main types of the General TakaftilvJteme
.rre, .rmont others, General TakafulSchemesfor motor vehicles, fire and
theft, accidents and marine.z
A participant in this schemealso enters ina mudarabahcontract with
Syankat Takaful The contract stipulates the amount which the participant

Pelan TatcafulKeluatga (a) and (b).
lSfUn,
-There
is no minimum perid of payment of takafulinstalmmts after which the
participant is entitled to surrender benefits, while in the conventional insurance, the iry
iuredbecome entitled tosurenderbenefits onlyif hehaspaidhispremium instalmmts
for a minimum period, for example three years. There is no forfeiture in the Family
Syed WaseemAhmad, op. ctL, p. 196.
TalcafuPlart.
'1M.
f. Yusuf, " TakafuIhtstsanceCompany Malaysia Sdn' Bhd.", p.91; Seealso N.
R. Mahgrood,op. ct't,pp.289'290.
-See s.3 (1) (ii), Takatul Act 1984.
" STME Risalah Pulindtngan TaIQfuL

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has to contribute under the scheme.Like the amount of premium in general
insurance,this amount is determinedby Syankat TakafuIwlidr takes into
account factors such as the value of the property and the risk involvedT'.
The term of participation or the period of akafuIrn respect of the General
TakafuISchemesis usually for a span of one year. On expuy of the.period
of takafiil, the term may be renewed for another one-year perid."
Unlike the Farnily TakafulPlans,the General Takafulschensare not
structured to function as a means of savings, although the participants are
entitled to some form of profit sharing as expressed in the principle of
mudarabalt. However, under the General rakalfu[*hemes, the entire contributions are paid as tabartzt'for the purpose of creating defined assetsor
funds (General TakafuIFvnd) to pay against a defined loss. Part of the
tabatnt'funds are used to cover the expensesof the scheme.The remainder is invested by Syanlcat Taleful n the same way, subject to the same
restriction as the investnent of funds from the Family hkaful Nlthe profits
from such investments are refumed to the Fund.
In line with the virtue of solidarity, mutual help, shared responsibility and joint guarantee as embodied in the concept of TakafuI, Syanlkat
TakafuI(Company) as the manager (operator) or trustee of the Fund, shall
pay from this Fund any benefits, compensationor indemnity to any participant who suffers a defined loss or damageconsequentupon the occrurence
of a catastropheor disaster.All operational costsfor managing the General
TakafuIbusinesssuch as the cost of re-takafiil(re.insurance) and setting-up
of reservesshall be bome by the Fund. If, at the end of the financial year,
there is a surplus, it is shared between Syankat TakafuI and the participants who have not made any claims under their respective plans. The
sharing of the surplus will be made according to a ratio agreed to in advancein accordancewith the principle of mudarabahsuch as 6 :4,5: 3, 5 :
5, etctu.This provides a form of incentive to the participants along the line
provided by the No Claims Bonus (NCB) in motor insurance.
'In

the deterriiination of General Taka.tul contributions, the same principle,
methods and technique apply as in the case of conventional insurance. The difference
from conventional insurance lies in sharing the surplus (profits) after deducting all operational c_osts
such as rc-takafuL SeeSyed WaseemAhmad, op. ctt,p.L9T.
')SfUA
RtsalahPerln d ungan Takafut
-Rtsalah
Perlindungan Takaful N. R. Mahmood, op. at, p.290; Syed Waseem
Ahmad, op. cit, p. 197; M. F. Yusuf (1991),op. ctt, pp. 9l - 92.

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Some issues relating to the Takaful Scheme
a)

The Takaful Act 1984

The TakafuIAct was intended to be only a regulatory piece of legisIation and not a statutory source of the substantive law relating to an Islamic schemeof mutual insurance.It was recommendedthat the takafiil
operators should be regulated in the same way as commercial insurers.
However, as the taka,(ulbusinesshad to be operated along Islamic lines, it
was felt that it was inappropriate to extend the lnsurance Act 1963to cover
such operators. It was for this reason that the TakafuI Act 1984was passed.
The Act not only enablesthe Government of Malaysia to regulate and control takaful operators like all other insurers but also to ensure that the
operation of the scheme does not depart from the teachings of Islam.
Notwithstanding the application of the principles of Islamic law in
the operation of the schemeis only implied in a few provisions of the TakafuI
Act. As such even the scope and application of those principles is unclear.
According to the Act, a tal<afuIbusinessis defined as a business of.takafiil
whose aims and operations do not involve elements opposed by the
Syanah." Moreover, in relation to the registration of taka.futbusinesses,
the Act provides that the Director General of. Takafiilshall refuse to reguter an applicant unless he is satisfied, inter alia, that the aim and operation
of the proposed takafulbttsiness will not involve any element which is
"not approved" by Syariah.n The Act does not define Shari'ahnor does it
explain what is meant by * element "approved" or "not approved" by
Shari'ah. This is a serious omission as "approv"d by Shari'all'may have a
meaning far wider than "being penrtitted in Islam". This is becausein Islam, apart from elements which are strictly prohibited (haram), there are
also elementswhich are discouraged or frowned upon (makrul) and those
that are greatly encouraged (sunnah).While the presenceof elementswhich
areharamwill clearly notbe approved by the Sltari'ah, it is not clear whether
the presenceof makruh elements will be approved or disapproved by the
Shari'ah.

j.z,ruwtutAct,1984.
"S.8 (5)(a),TakatulAct,1984.

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b) The Syariah Supervisory Council.
The TalcafulAct makes it a condition for the registration of a TakafuI
Company that its articles of association has a provision for the establishment of a syanbhSuperuisory Council whose function is to advise the company on matters pertaining to the syariah.n The report of the committee
also recommended that members of the council should be persons with
expertise in areas like the Syamhand Islamic Economics.'Ii*u,
also recommended that all decisions of the Council be made on the basis of the
Islamic concept of Shura or consensus.The Council's function is strictly
supervisory; it does not participate in the daily affairs of the company.Both
the Act and the Report are silent on the status of the council's advice.
Perhaps a company that fails to act upon such advice can be regarded as
pursuing aims contrary to the Shari'ah, thus allowing the Director General
of TalcafuIto cancel the company's registration
c)

T'}l.e Takaful Contract

The Takafulcontract is a contract based on the Islamic concept of
mudarabah between syarikat Takaful as the entrrepreneur(mudane and
the participant as the provider of capital (ahfi al-mar1.In consi{eration for
his participation in the scheme,the latter agreesto provide the former with
the capital in the fomr of hkafuIcon&ibutions. The entrrepreneurin return
agreesto prcivide the participant with a schemefor investment and protection.
Tl:.e TakafuI conhact clearly spells out the rights and obligations of
both parties, such as the way in which the contributions will be used and
the ratio in which the profits, rt *y, will be shared. The Family Takaful
contract also clearly spells out what proportions of the participant's contributions will be paid into the Participant SpecialAccount (pSA) and the participant Account (PA) respectively.It also declares that the proportion that
is paid into the former is a donation made by the participant to help fellow
participants. Thus everything there is to know about the contract is made
known to the participant in the contract itself.

ls. a 1s1(b),TalefrrlAct,tgu.
Report of Committee, op. cit

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The TakafulAct provides that a person under eighteenshall not have
the capacity to enter into a taka.ftil contract.* This differs from the Insurance Act L963,whidr provides that a Person above ten years of age can
enter into a contract of insurance provided that if he is below sixteen, he
must have the wriften consentof his parents or guardian' Under the Age of
Majority Act 197111a person attainsthe age of majority on his eighteenth
birthday, but this is not the age of majority in Islam. In Islam, a person's
legal capacity depmds, among others, on whether he is baligrt (mature;
legally major) and there is no definite age for this. Rather,it is determined
by physical indications or by the declaration of the youth in question, or
failing these,by readring the age of fifteen years.
Admittedly, problems may arise if no specific age of majority is stipulated and the subiective test of buluglz is used. The Ta.lcafulschemeis not
exclusively for Muslims and such a test cannot be applied to others. Even
amongst Muslims, the determination of buluglinny grve rise to problems.
Hence, while the departure from the strict Islamic concePt of majority is
understandable, it is unclear why in this of all respects, the TakafuJ Act
differs froni the Insurance Act 1963.
In Islam as under the Common T-aw,a Person continues to have the
capacity to enter into a legal relationship for as long as he remains saneand
fully responsible for his actions. Rightly therefore, the TalcafuIActdoes not
provide any maximun age for a participant to enter a Ta,kafuIcontract.In
practice, however, the TakafuICompany of Malaysia requires participants
in the Family TakafuIto be between the ages of eighteen and fifty years at
the time they mter the contract. Thus, while someone who is over fifty
legally has the capacity to enter into any contract, he cannot, in fact, enter a
Family Taka.{ulconhact.
Conclusion
The above discussion clearly shows that the Islamic Insurance
(Takaful)businessis both theoretically feasibleand practically possible.The
fact that the Takaful business'in Malaysia is, so far, functioning successfully
side-by-side with Oie other conventional insurance companies.
os.64,
TatafuIAct,lgu.
tts.
2.
eschacht,
r4nIn toducfr'on to IstamicIa t{, P. 124.

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loni ramkin bin Borhan is a Lecturer in the Dept. of Syariah and Economics
and Head of the Dept. of Syariah and Management, Academy of Islamic Studies, University of Malaya, KL.

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