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Article
Publication date: 16 August 2023

Yusuff Jelili Amuda and Sarah Alabdulrahman

Conventional insurance creates a gap in the financial system across the world that manifests from the global financial and economic crisis. There is an increasing demand for…

Abstract

Purpose

Conventional insurance creates a gap in the financial system across the world that manifests from the global financial and economic crisis. There is an increasing demand for insurance schemes that will bridge the gap of financial and economic crisis globally. More recently, there is an advocacy in Saudi Arabia for achieving Vision 2030 by various facets of human endeavours such as strengthening financial markets and boasting economic development. The purpose of this paper is to deeply explore policy and reinforcement of the legal framework of Islamic insurance as essential bedrocks in Islamic finance that are Shari’ah compliant to achieve Saudi Vision 2030 for overall sustainability of all spheres of human endeavours in the country.

Design/methodology/approach

Content analysis and systematic literature review are used as methodological approaches in this paper. There are various sources of accessing secondary data used in this study such as online peer review, journals and library-based sources. Through the exploration of various secondary data, five major themes were identified in this study, namely, policy, legal framework, Islamic insurance, Islamic finance and Saudi Vision 2030. Analysis of various themes were done systematically in this paper. The methodology provides theoretical and practical foundations for reinforcing policy and legal framework for Islamic insurance, specifically in Islamic finance to achieve Vision 2030 in Saudi Arabia. It is the policy and legal framework that can provide necessary dynamics for strengthening Islamic insurance in particular and Islamic finance in general towards attaining sustainable Vision 2030 in the country.

Findings

The paper demonstrated that policy period is explicitly associated with Islamic insurance, whereby Takaful insurance is regarded as policyholder rather than shareholder-oriented. Similarly, it is established that there is need to specifically mention the policy period and the nature of contract in Islamic insurance should not be limited to only mutual cooperation among the participants in connection with the losses but it should capture element of sharing income generated from investment between insurer and policyholders using predetermined ratio for such as provided with theoretical legal framework (Shari’ah) in connection with Islamic insurance model as an integral part of Islamic finance.

Research limitations/implications

It will depart completely from conventional insurance where borrowing of funds and investment are put at fixed interest (Riba), uncertainty (Gharar) and speculative ideas (Maisir). Avoidance of different elements ascribed with conventional insurance would enable Saudi Arabia to strengthen financial system and boast economic development with an emphasis on an effective policy and efficient legal framework towards attaining Vision 2030 in the country.

Practical implications

The methodology provides theoretical and practical foundations for reinforcing policy and legal framework for Islamic insurance, specifically in Islamic finance to achieve Vision 2030 in Saudi Arabia.

Social implications

Conventional insurance creates a gap in financial system across the world that manifests from the global financial and economic crisis. There is an increasing demand for insurance scheme that will bridge the gap of financial and economic crisis globally. More recently, there is an advocacy in Saudi Arabia for achieving Vision 2030 by various facets of human endeavours such as strengthening financial market and boasting economic development.

Originality/value

With this emphasis, it will depart completely from conventional insurance where borrowing of funds and investment are put at fixed interest (Riba), uncertainty (Gharar) and speculative ideas (Maisir). Avoidance of different elements ascribed with conventional insurance would enable Saudi Arabia to strengthen financial system and boast economic development with an emphasis on an effective policy and efficient legal framework towards attaining Vision 2030 in the country.

Details

International Journal of Law and Management, vol. 65 no. 6
Type: Research Article
ISSN: 1754-243X

Keywords

Open Access
Article
Publication date: 28 September 2023

Ahmad Alrazni Alshammari, Othman Altwijry and Andul-Hamid Abdul-Wahab

From 1979 to 2023, the takaful structure has been adopted in many jurisdictions, making the documenting of its early days of establishment relatively difficult and somewhat…

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Abstract

Purpose

From 1979 to 2023, the takaful structure has been adopted in many jurisdictions, making the documenting of its early days of establishment relatively difficult and somewhat unreliable. This is unlike conventional insurance, where the history and legislation are well documented and archived in various research (Hellwege, 2016; Marano and Siri, 2017). The purpose of this paper is to provide a chronology for the establishment and development of takaful via the takaful establishment in each jurisdiction, documenting its first takaful operator and first takaful regulation.

Design/methodology/approach

This paper has used a qualitative method in the form of reviewing literature and available data such as journals, books and official resources. The data is thoroughly analysed in order to build the chronology for takaful. It adopted an exploratory research design, which is deemed suitable in situations where few works of literature have examined the subject (Neuman, 2014). The paper explores the establishment and non-establishment of takaful in 57 countries. The paper categorises the countries into seven regions starting with the GCC, Levant, Asia, Central Asia, Africa, Europe and Others.

Findings

The takaful chronology presented in this paper shows that takaful operations exist in 47 jurisdictions, starting from Sudan and the UAE in 1979, with the most recent adopters being Morocco and Iran in December 2021. It is found that 22 jurisdictions do not have takaful regulations, and the Takaful Act 1984, issued in Malaysia, is considered the first takaful regulation that sets the basis for other regulations that follow.

Originality/value

The paper contributes to the literature by providing a comprehensive chronology of takaful, especially as the few existing timelines have been found to be incomplete and consist of contradictory information.

Details

PSU Research Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2399-1747

Keywords

Article
Publication date: 16 May 2023

Desmadi Saharuddin, M. Arief Mufraini, Abdul Ghoni, Inayatul Chusna, Ade Sofyan Mulazid and Supriyono Supriyono

This study aims to determine the prospect of takaful funerals as an Islamic insurance product and its marketing strategy. The multicase study analyzed is the Takaful Funeral…

Abstract

Purpose

This study aims to determine the prospect of takaful funerals as an Islamic insurance product and its marketing strategy. The multicase study analyzed is the Takaful Funeral Amsterdam of Indonesia, launched in 2015, Millî Görüs of Turkey in 1970 and Arrahma of Morocco in 2006.

Design/methodology/approach

This study delivers an analytic hierarchy process to qualitatively and quantitatively describe Muslim customers’ priority choice and interest criteria for takaful funerals as a forerunner of Islamic insurance products.

Findings

Based on the priority choice and interest criteria, the highest priority element of takaful funeral products is market need (49.21%). The group subcriteria were dominant compared to the individual subcriteria. Product design is the second choice (20.9%), with function as the priority in subcriteria.

Practical implications

This indicates that the Muslim community urgently needs funeral service products that are consistent with Islamic law, which emphasizes its function. The market needs as the highest priority element implies that bundling products, affordable prices and simple design are the most suitable methods for developing takaful funeral products in Indonesia.

Originality/value

To the best of the authors’ knowledge, this is the first study to discuss Islamic funerals in Indonesia, with the potential to be further developed with the increasing need of the Islamic insurance industry for new products. Previous research did not examine the PPME Al-Ikhlas Takaful Amsterdam, Millî Görüs of Turkey and Arrahma of Morocco as case studies for developing Islamic funeral insurance in Indonesia. Therefore, this gives the present study high originality.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 16 no. 5
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 27 February 2024

Burhanuddin Susamto and Akhmad Akbar Susamto

This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.

Abstract

Purpose

This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.

Design/methodology/approach

The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model.

Findings

The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks.

Practical implications

The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability.

Originality/value

This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 5 August 2022

Hussain Mohi-Ud-Din Qadri, Hassnian Ali, Ahmad Jafar, Atta Ul Mustafa Tahir and Muhammad Azhar Abbasi

Islamic Insurance (Takaful) played a dynamic role in Islamic Social Finance (ISF). The popularity of the Takaful concept is being increased with each passing day. To describe the…

Abstract

Purpose

Islamic Insurance (Takaful) played a dynamic role in Islamic Social Finance (ISF). The popularity of the Takaful concept is being increased with each passing day. To describe the process, it is important to understand past areas of research, research differences, areas of unknown Takaful research, as well as the existing data. However, the purpose of the paper is to provide a comprehensive analysis of the development of qualitative research by carefully examining the nature of science and aspects of social relations in ISF.

Design/methodology/approach

Field, concerns with analysing and measuring the scholarly literature, quantitative characteristics of sciences and scientific technologies are known as scient metrics. This research includes queries such as “Islamic Insurance”, “Takaful” and “Shariah Insurance” as a reference in “Article title, Abstract and Keywords” based on Scopus from 2002 to 2022. This analysis was conducted in February 2022. The Bibliometrics, R-Studio, VOSviewer and Excel software are used to analyse the collected data and apply the bibliometric analysis.

Findings

The gist of the results and findings is that there are clear research gaps in the existing literature on Takaful. The available research on this subject does cover historical background, concept and models of Takaful and customer satisfaction towards Takaful model. Very important areas such as use of technology for bringing innovation in Takaful products and Shariah issues in existing practice and their solutions were not found in the present literature on Takaful.

Originality/value

This is the comprehensive research article to examine current literature on Takaful with bibliometric analysis. Results and potential areas of this research could be much helpful for scholars and researchers to create more dynamic improvements in the scientific development of Takaful in ISF.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 23 November 2023

Ersa Tri Wahyuni, Zubir Azhar and Novy Fajriati

The global insurance industry has implemented International Financial Reporting Standards (IFRS) 17 insurance contracts effective from January 1, 2023. The Islamic insurance…

Abstract

Purpose

The global insurance industry has implemented International Financial Reporting Standards (IFRS) 17 insurance contracts effective from January 1, 2023. The Islamic insurance (Takaful) industry would find itself at a crossroads if IFRS 17 should also be adopted for Takaful contracts. This paper aims to explore the process of IFRS 17 adoption for Takaful contracts in Malaysia and the implementation of the standard in the early adoption year.

Design/methodology/approach

Applying a qualitative approach, this study uses a literature review search and interviews to analyze deeper into the adoption process in Malaysia. Using institutional work, this paper analyses the process timeline, the actors and their roles and actions in the adoption process. The authors interviewed 12 informants from different backgrounds comprising the national standard setters, preparers and the IFRS 17 consultants.

Findings

The adoption process of IFRS 17 in Malaysia is an interplay between the accounting standard setter, the government and the industry associations who are the major actors in the process. These actors have different roles and contributions, but they work together to accomplish a single vision, adopting IFRS 17 for all. There is an interplay between actors to disrupt the accounting practice and involved in creating various institutional work to ensure the concerns of Takaful practitioners are well addressed. This research also found that the companies faced significant challenges in applying the standard in the early months of implementation.

Research limitations/implications

This paper contributes to the literature by providing an explanation and examples of the IFRS adoption for Shariah transactions. The story of Malaysia can become a case study for other countries that are still deciding on adopting IFRS 17, especially for the Islamic insurance industry.

Practical implications

The story of Malaysia can become a case study for other countries that are still deciding on adopting IFRS 17, especially for the Islamic insurance industry.

Originality/value

This paper contributes to the literature on the debate of the application of IFRS to Shariah transactions by using institutional work theory as a framework.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 25 July 2023

Asma Hamzeh and Mitra Ghanbarzadeh

The Islamic financial system consists of three functional areas of Islamic banking, Islamic insurance and the Islamic capital market, which, with its development and progress, has…

Abstract

Purpose

The Islamic financial system consists of three functional areas of Islamic banking, Islamic insurance and the Islamic capital market, which, with its development and progress, has become an important part of the global financial market and as an alternative, efficient financial model in front of the financial system. Takaful insurance is a relatively new but growing sector of the Islamic financial industry. Today, this insurance has attracted the attention of many researchers and executives. To further improve, it is important to identify the key factors according to the demand and also to evaluate their importance. In Iran’s insurance industry, Takaful product has not yet been released, and insurers have recently entered this field. Therefore, the purpose of this paper, an attempt has been made to identify the factors affecting the demand for Takaful insurance in Iran. The results of this research can be useful for policymakers and Takaful providers in formulating appropriate strategies to increase the demand for Takaful insurance.

Design/methodology/approach

In this regard, in this research, using library studies, indicators affecting demand were identified. After that, using a field study and distributing a questionnaire among experts in the field of research, the importance of the indicators was analyzed relative to each other and the indicators were ranked based on their importance.

Findings

Based on the results, the indicators are divided into five categories of economic, social, demographic, marketing and sales and features of Takaful insurance products.

Originality/value

To the best of the authors’ knowledge, this is the first study regarding the identification and ranking of factors affecting the demand for Takaful insurance in Iran’s insurance industry.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 13 June 2023

Yonis Ali Mukhtar and Galad Mohamed Barre

The purpose of this paper is to determine current and potential takaful customers’ perception of takaful product and its adoption in Somalia.

Abstract

Purpose

The purpose of this paper is to determine current and potential takaful customers’ perception of takaful product and its adoption in Somalia.

Design/methodology/approach

This study used three originally selected constructs of perceived relative advantage, perceived compatibility and perceived complexity of diffusion of innovation (DOI) theory and adds three additional constructs of level of customer awareness, culture and perceived trust. A total of 427 questionnaires were collected from the participants of the study using a nonprobability convenience sampling technique. For data analysis, Smart PLS3 and SPSS software were used. The survey was conducted in Somalia, with respondents being current and potential takaful product’s customers. The DOI theoretical model was put to the test using structural equation modeling.

Findings

The findings showed that perceived relative advantage, perceived compatibility, awareness, perceived culture and perceived trust have a positive and significant influence, whereas perceived complexity has an insignificant influence on the adoption of takaful products.

Originality/value

This research is a pioneering attempt to investigate the determinants of current and potential takaful customers’ adoption by changing the DOI theory, and it presents a unique contribution to the field with regard to Somalia.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 12 January 2023

Almira Z. Nagimova

Over the past decades, Islamic finance has expanded its presence to many countries including post-Soviet region. The purpose of this paper is to empirically investigate this…

Abstract

Purpose

Over the past decades, Islamic finance has expanded its presence to many countries including post-Soviet region. The purpose of this paper is to empirically investigate this phenomenon in Kazakhstan by adopting qualitative sociological approach. The study also aims to provide vital information and propose recommendations for market participants to contribute to the development of Islamic finance industry in Kazakhstan.

Design/methodology/approach

Primary data were gathered using the qualitative method of in-depth expert interviews with nine Islamic finance professionals representing Islamic banks, ijarah companies, funds and development institutions in Kazakhstan who occupy senior positions (directors, managers, heads of departments, etc.). Furthermore, the primary data of interviews were analyzed and processed using another qualitative method of cognitive mapping, the essence of which is to graphically display the concepts that are most often used by informants.

Findings

The study has shown that first there is a demand for Islamic finance among Kazakh business and population. At the same time, Muslims are not the only consumers of Islamic financial services; therefore, it is affordability rather than religiosity that is an important criterion for choosing Islamic finance. Second, murabaha and ijarah are the two most popular Islamic financial products in Kazakhstan, while equity-based instruments are hardly ever used. Third, Kazakhstan government policy toward Islamic finance received controversial assessments of experts: the state support is declared, but specific actions required by the market participants are not taken. Fourth, key factors that significantly limit the development of the Islamic finance market in Kazakhstan include a shortage of supply, which, in turn, is strongly associated with the second factor – limited funding of local Islamic finance institutions, the absence of insurance (or guaranteeing) system of investment accounts of the local Islamic banks, insufficient economy of scale, lack of convenient service and weak marketing policy of the existing Islamic banks and, finally, lack of educational programs.

Practical implications

The study reveals the potential development of Islamic finance in Kazakhstan which is a rarely studied topic. The findings and recommendations of this study can be used by the regulators, market players and policymakers of Islamic finance industry in Kazakhstan, post-Soviet and other Islamic finance-oriented countries.

Originality/value

This study offers new insights on the future of Islamic finance in Kazakhstan: in long term, the development will be determined by new financial technologies – Islamic FinTech, but in short term – by Islamic windows (currently not allowed by Central Bank) that will help to significantly expand the audience, increase awareness and demand for Islamic finance among local businesses and public. The current study is original, important and up-to-date, as it uses an approach that sources primary data in the form of experts’ point of view instead of relying on literature or document analysis. It is not a mere theoretical study of the literature but an empirical investigation of the problem. Moreover, it seeks to contribute to the Islamic finance literature in the post-Soviet region, particularly from the experts’ perspective.

Details

Journal of Islamic Accounting and Business Research, vol. 14 no. 8
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 25 July 2023

Elias Abu Al-Haija and Asma Houcine

The purpose of this study is to extend previous literature and examine risk management efficiency among Takaful (TI) and conventional insurance (CI) firms in the Kingdom of Saudi…

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Abstract

Purpose

The purpose of this study is to extend previous literature and examine risk management efficiency among Takaful (TI) and conventional insurance (CI) firms in the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE). This study also aims to determine whether Takaful firms are more efficient in managing risks, compared to CI firms.

Design/methodology/approach

This study examines risk management efficiency among Takaful and CI firms in the KSA and the UAE for a sample of 20 insurance firms comprising 10 TI firms and 10 CI firms for the period 2018–2020. The authors use Data Envelopment Analysis to estimate efficiency scores among insurance companies to compare risk management efficiency between CI and TI companies and apply two-way analysis of variance to statistically analyze the data.

Findings

The results of this study show that TI firms have a higher efficiency score than CI firms, but not significantly and that insurance firms in KSA have higher efficiency scores than insurance firms in UAE. The results also reveal that TI firms did not significantly outperform CI firms in managing risks; however, there is a significant difference in efficiency scores among insurance firms in KSA and UAE.

Research limitations/implications

The authors also contribute to the literature by providing important insights into how the operational business environment of the country can influence the risk management efficiency of CI and TI companies.

Practical implications

This study promotes understanding the insurance industry, its efficiency and risk management, thus offering key implications for decision-makers, regulators and managers associated with the insurance industry in UAE, KSA and other emerging insurance markets. Regulators could provide enabling policies that foster and promote the business environment, as there is a need to improve risk management efficiency in the insurance industry. Also, the results of this study show that the operating status of the UAE insurance industry in terms of efficiency and risk management is lower than that of KSA. Hence, it would be useful for UAE managers and regulators in taking steps to improve the overall insurance industry market.

Originality/value

The results of this study make significant contributions by providing new insights to the existing literature on the risk management efficiency in the insurance industry, as it adopts a different methodological approach that examines risk management efficiency among TI and CI companies.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

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