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Article

Muhammad Ali Jinnah Ahmad and Burhanuddin Lukman

This paper aims to examine the implications of compensation on late payment of takāful benefit imposed in the Islamic Financial Services Act 2013 on the takāful industry…

Abstract

Purpose

This paper aims to examine the implications of compensation on late payment of takāful benefit imposed in the Islamic Financial Services Act 2013 on the takāful industry in Malaysia. It also aims to identify the issues and challenges faced by takāful operators in the implementation of the compensation and propose solutions for the benefits of the takāful industry.

Design/methodology/approach

This research uses the qualitative approach to understand the practices of claims in takāful and to analyze the implication of compensation on late payment of takāful benefit to the takāful industry in Malaysia. Data are collected through survey and interview with various takāful stakeholders.

Findings

Some of the key findings in this research are that the compensation of late payment of takāful benefit has a positive impact to the takāful industry. The research also found some Sharīʿah operational issues in terms of its implementation among takāful operators.

Research limitations/implications

The research focuses on compensation on late payment of takāful benefit claim in death and personal accident only.

Practical implications

The research offers certainty to the takāful industry and an explanation to academic and legal fraternities on the implementation of compensation on late payment of takāful benefit according to Islamic Financial Services Act (IFSA) 2013.

Originality/value

The research provides a valuable contribution to the current practices of takāful operators, identifies some issues and challenges of its implementation and proposes the solution.

Details

ISRA International Journal of Islamic Finance, vol. 9 no. 2
Type: Research Article
ISSN: 0128-1976

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Article

Waheed Akhter and Tajammal Hussain

The purpose of this paper is to attempt to see the effectiveness of operational and transformational standards raised by joint working group of Islamic Financial Services…

Abstract

Purpose

The purpose of this paper is to attempt to see the effectiveness of operational and transformational standards raised by joint working group of Islamic Financial Services Board (IFSB) and International Association of Insurance Supervisors (IAIS) as well as respondents' perceptions about Takāful (Islamic insurance) practices in Pakistan.

Design/methodology/approach

A total of two questionnaires were designed for this purpose: one for Takāful operators in Pakistan and other for insurance customers. For the first questionnaire, three Takāful operators were visited at Karachi. For the second questionnaire, a sample of 150 insurance customers was surveyed at Rawalpindi. Descriptive statistics and Chi‐square test was used to analyze the data.

Findings

Reporting standards and internal controls were found to have low level of observance among Takāful operators in Pakistan. The survey of insurance customers revealed that majority of the respondents (91 percent) are unaware of Takāful concept. Education was found to be the single important factor affecting income of the respondents, their perceptions and level of Takāful awareness.

Research limitations/implications

The survey is conducted at one major city of the country based on convenient sampling technique and its results have been generalized for the entire country. However, actual results might differ when a sufficiently large sample is taken from all the main cities of the country.

Practical implications

The study would help the policy makers to focus on strengthening regulatory framework for Takāful. It will also help Takāful operators in understanding public perceptions about Takāful and devising strategies to promote Takāful business to the vast population of Pakistan.

Originality/value

This is the first empirical research conducted on Takāful in Pakistan that analyzes the Takāful practices both from managerial perspective as well as from regulatory perspective.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

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Article

Burhanuddin Lukman and Saba’ Radwan Jamal Elatrash

This paper aims to ascertain the Sharīʿah (Islamic law) stance on the imposition of goods and services tax (GST) on tabarruʿ-based takāful (donation-based Islamic…

Abstract

Purpose

This paper aims to ascertain the Sharīʿah (Islamic law) stance on the imposition of goods and services tax (GST) on tabarruʿ-based takāful (donation-based Islamic insurance) products in Malaysia. The paper aims to do so by analysing the philosophy, purposes and structure of GST on takāful products and comparing the imposition of GST on tabarruʿ-based takāful with its imposition on conventional insurance while probing into the Sharīʿah texts and opinions of classical and contemporary scholars about taxation in Islam.

Design/methodology/approach

The paper uses a qualitative research methodology. In addition to the literature and text on websites, the information on how GST is applied in practice is also obtained through interviews, discussions and documents from takāful operators. To determine the Sharīʿah position on GST, reference has been made to classical and contemporary Sharīʿah literature, including local and international Sharīʿah advisory bodies’ resolutions and standards.

Findings

This study finds that a strict interpretation of Sharīʿah does not allow for the imposition of GST; however, there is still room for the government to justify it using a broader interpretation of maṣlaḥah (public interest). Takāful has become a need for the society and is subscribed to by all income groups, and not only by the rich. Hence, the government should consider exempting takāful products from GST. The basis of tabarruʿ in takāful does not provide conclusive Sharīʿah evidence for takāful to be exempted from GST.

Originality/value

This research paves the way for the industry to propose further measures on GST for takāful products such as the exemption of GST on the tabarruʿ amount or imposition of a zero rate of GST on the relevant takāful fees and charges that are currently burdensome to consumers.

Details

ISRA International Journal of Islamic Finance, vol. 9 no. 2
Type: Research Article
ISSN: 0128-1976

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Article

Khalid Al-Amri

The purpose of this paper is to analyze the performance of the Takaful insurance firms in the Gulf Cooperation Council (GCC) countries and do a relative analysis for its…

Abstract

Purpose

The purpose of this paper is to analyze the performance of the Takaful insurance firms in the Gulf Cooperation Council (GCC) countries and do a relative analysis for its different units.

Design/methodology/approach

This paper analyzes the technical, pure technical, cost and allocative efficiency of Takaful firms in the GCC countries using data envelopment analysis (DEA) methodology.

Findings

The Takaful insurance industry in GCC is highly technical and pure technical efficient. However, it is moderately cost efficient, and there is a large opportunity for improvement. UAE and Qatar score the highest technical efficiency, while Saudi Arabia and UAE are the most cost efficient among the GCC countries.

Originality/value

The primary contribution of this paper is to provide the first DEA analysis of the Takaful industry in the GCC countries. To the best of the author’s knowledge, this is the first study on the Takaful insurance industry that uses different types of efficiency measures, namely technical, pure technical, allocative and cost efficiency, in the GCC countries. This paper also contributes in the literature of the inputs and outputs selection for the Takaful insurance efficiency calculation.

Details

Humanomics, vol. 31 no. 3
Type: Research Article
ISSN: 0828-8666

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Book part

Nesrine Bouzaher, Okba Necira and Sabrina Kerdoudi

The purpose of this chapter is to provide a description of the integration of Takaful in the domestic market, based on experiences in regional markets, focusing on the…

Abstract

Objective

The purpose of this chapter is to provide a description of the integration of Takaful in the domestic market, based on experiences in regional markets, focusing on the explanation of factors that could enhance the position of Takaful in certain areas.

Methodology

The chapter describes the evolution of Takaful insurance in international and regional markets, and explains the articulation of this product in these markets. The chapter also provides an analysis of the Algerian market characteristics related to the Takaful product.

Value

This work will be based on an analytical research of emerging markets and their success factors; then it will be necessary to provide an overview of the product containing Takaful; and finally we will try to follow the experience of the national insurance market with the new product, supplied by the Salama Company, and determine the potential of Algeria in this area.

Findings/Prospects

This work offers an opportunity to understand the mechanisms needed to activate the local market and opens the prospects for effective integration of Islamic financial products gradually, in order to prepare for changes that would provide more financial products suited to the requirements of social development in the Algerian economy.

Details

The Developing Role of Islamic Banking and Finance: From Local to Global Perspectives
Type: Book
ISBN: 978-1-78350-817-4

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Book part

Safinar Salleh, Akmal Hidayah Halim, Uzaimah Ibrahim and Mohamad Asmadi Abdullah

A family takaful certificate is subscribed by a takaful participant for the purpose of preparing financial support for his dependants after his death. The takaful benefits…

Abstract

A family takaful certificate is subscribed by a takaful participant for the purpose of preparing financial support for his dependants after his death. The takaful benefits could then be made payable to a nominee named as the beneficiary under conditional hibah (gift). In this respect, the participant is free to decide to whom the benefits are to be given since the law is silent as to the criteria of the beneficiary. This situation gives rise to the issue on whether such a practice fulfils the objectives of Sharīʿah, especially when the nominated beneficiary is not the sole dependant of the deceased participant. Therefore, this research aims to evaluate the status of family takaful benefits, analyse the rules of conditional hibah from the Sharīʿah perspective and propose solutions whenever necessary. The research adopts doctrinal analysis by examining existing primary and secondary materials including statutory provisions and other legal and non-legal literatures. The study predicates that the application of conditional hibah to the whole benefits does not reflect the objectives of Sharīʿah if determination on the status of the benefits is solely based on the nomination made by the participant. It is observed that takaful benefits payable from the Participant’s Account should be considered as the deceased’s estate and must be distributed according to fara’id or Islamic law of inheritance. Conversely, the sum covered payable from the Participant’s Special Account may be paid to the deceased’s dependants whose criteria are determined by the Sharīʿah Advisory Council as the highest authority in Islamic financial matters.

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

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Book part

Mirwanee Ha, Asmak Ab Rahman and Azizi Che Seman

Purpose – The objective of this study is to assess the level of understanding of family takaful among the Muslim community of southern Thailand.Methodology/approach – This…

Abstract

Purpose – The objective of this study is to assess the level of understanding of family takaful among the Muslim community of southern Thailand.

Methodology/approach – This study used a questionnaire as the data collection tool. It sampled 400 respondents who were selected in a simple way, regardless of whether they owned protection policies or not. The methods used to analyse the data are descriptive statistics and means, and independent samples T-testing.

Findings – The study found that the Muslim community in southern Thailand had a generally low level of understanding of family takaful. However, the differences in the level of understanding between those who participated in family takaful and those who did not were examined. The research findings were then found to indicate that there was a distinction between the two groups: those who participated in family takaful had a clear and positive understanding of it, while those who did not had no clear understanding of it. These are significant differences which signify that participation in family takaful by Muslims in southern Thailand was influenced by their understanding of it.

Research limitations/implications – This study was conducted in the Muslim community in and around Muang District, Narathiwat Province, in southern Thailand.

Practical implications – This study clearly indicates, especially to those involved directly or indirectly in the takaful industry, that there are still many in the community who do not participate in family takaful because they lack understanding and have negative perceptions of it. Those who are involved must make the effort to communicate more in-depth insights to target communities, which could effectively enhance the uptake of family takaful.

Originality/value – This is the first empirical study of takaful in Thailand. It was conducted to determine the level of understanding of family takaful in the Muslim communities of southern Thailand and to compare the levels of understanding of family takaful between those who have participated in it and those who have not.

Details

New Developments in Islamic Economics
Type: Book
ISBN: 978-1-78756-283-7

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Book part

Nuurshiraathal Firdaws Abd Rani and Asmak Ab Rahman

Purpose – Women are more susceptible to specific health risks such as breast cancer, cervical cancer, and risk during pregnancy and childbirth. These can affect women’s…

Abstract

Purpose – Women are more susceptible to specific health risks such as breast cancer, cervical cancer, and risk during pregnancy and childbirth. These can affect women’s well-being and also need to be managed to avoid financial loss. Takaful operators in Malaysia have been offering special takaful products for women. Women can mitigate exposure to these risks through insurance. This study examines the risks faced by Malaysian women and the coverage they are offered by Islamic insurance.

Methodology/approach – The study used a qualitative methodology involving documentary evidence and interviews with four Islamic insurance agents and four product development officers from four Islamic insurance providers in Malaysia.

Findings – Among the risks faced by women are female-specific illnesses, the cost of expensive treatments, crime-related accidents or loss, social or career risks and privatisation policy. Due to these risks, women are in need of female-specific takaful products to reduce risk and protect themselves.

Originality/value – Specific takaful products for women are crucial to protect them from risks, improving their well-being and increasing their participation in the nation’s economic and social development.

Details

New Developments in Islamic Economics
Type: Book
ISBN: 978-1-78756-283-7

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Book part

Noor Aimi Mohd Puad and Zurina Shafii

Shari'ah governance is a vital aspect that ensures internal shari'ah compliance function in Islamic financial industry, including the takaful industry. Shari'ah audit is a…

Abstract

Shari'ah governance is a vital aspect that ensures internal shari'ah compliance function in Islamic financial industry, including the takaful industry. Shari'ah audit is a component of shari'ah governance in any Islamic institution as it independently attests the state of shari'ah compliance. Besides, it contributes towards shari'ah non-compliance risk management and enhances the quality of internal shari'ah audit function. The main aim for this chapter is to discuss the scopes and processes of shari'ah audit function in takaful operation. In addition, a discussion on applicable key controls in takaful operation is also provided. This chapter provides an insight into shari'ah audit implementation in a takaful operator, based on the information solicited from an interview session with its shari'ah auditor. This chapter provides fundamental aspects of shari'ah audit exercise in takaful operation and raises takaful operator's views on the challenges and adequacy of guidelines on shari'ah audit for its effective implementation.

Details

Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice
Type: Book
ISBN: 978-1-78973-007-4

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Book part

Rafiza Zuliani and Asmak Ab Rahman

Purpose – The purpose of this study is to review the responses of low-income earners to micro-takaful and its implementation in Banda Aceh.Methodology/approach – The data…

Abstract

Purpose – The purpose of this study is to review the responses of low-income earners to micro-takaful and its implementation in Banda Aceh.

Methodology/approach – The data for the study were obtained by interviewing three parties. These parties were practitioners, academic experts and low-income earners selected by purposive sampling in each zone of Banda Aceh.

Findings – The study found that there is a potential for micro-takaful to be offered in Banda Aceh due to the needs of low-income groups for it; however, there are many challenges which need to be overcome for successful implementation.

Research limitations – The study is limited to the potential implementation of micro-takaful in Banda Aceh. Therefore, the study involves only its residents.

Originality/value – This study makes a positive contribution to stakeholders by ensuring that they can provide micro-takaful schemes for the benefit of low-income earners. The study also adds to the literature on the concept of micro-takaful.

Details

New Developments in Islamic Economics
Type: Book
ISBN: 978-1-78756-283-7

Keywords

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