Search results

The purpose of this paper is to examine the use of the social welfare concepts of Takaful and Tabarru’ (donations) as tools to guarantee deposits in the Islamic banking industry, and the effect of such practice on the concept of risk sharing in Islamic finance.

The study critically analyzes the Mudaraba contract used by Islamic banks to mobilize funds, the use of Profit Equalization Reserves and Investment Risk Reserves, the use of other income smoothing techniques and the insurance of Islamic banks’ by regulatory agencies in some countries based on the Takaful and Tabarru’ concepts.

This paper shows that Islamic banks are increasingly using the concepts of Takaful and Tabarru’, which are intended originally for social welfare, as tools to justify the move to more guaranteed-in-substance type of deposits, and hence, more risk shifting rather than risk sharing in the Mudaraba contract. This use, is argued, moves Islamic banking towards more market-oriented, but less Shariaa-compliant in substance.

This papers examined the behaviour of Islamic financial institutions and Islamic scholars based on the available literature. No empirical analysis was conducted.

This paper contributes to the ongoing debate about the substance of Islamic banking transactions and the risk shifting inherent in such transactions. Furthermore, it is the first study that examines the extent of utilizing different social welfare concepts to legalize – from Shariaa perspective – Islamic banking transactions.

The purpose of this paper is to investigate the techniques used by Islamic financial institutions (IFIs) to shift conventional instruments to Shariah-compliant instruments. The paper additionally aims to explore the effect of these techniques on financial reporting.

The study recognized two techniques used by the IFI: the combination of contracts which compartmentalizes the economic transaction into a series of linked sub-transactions, and the inclusion of donation (Tabarru) in commercial contracts. The paper also reviews the accounting treatment according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and compares it to the concepts adopted by the traditional financial reporting framework concepts (especially substance over form concept).

With regard to the combination of contracts technique, the major accounting challenge is whether the substance over form concept is considered. Mixed results are found: in some products, the economic substance is presented in the financial reports, while in other cases, the legal form of the contract is reported. This ambiguity may hinder the faithful representation of financial statements. The Tabarru contract is used to justify the risk-shifting practices by Islamic banks. The accounting effects of such contracts may result in failure to recognize assets or liabilities in the financial reports, earnings management and incomplete financial information for the users of the financial reports.

This study is a response to the call raised by the consultative group established by the International Accounting Standards Board. It provides an additional insight into the accounting treatments for a combination of contracts and Tabarru contracts. It also contrasts the accounting treatments, as stipulated by the AAOIFI, with the conventional accounting frameworks.

As custodians of takaful contributors’ tabarru’ (donation) funds, takaful operators are expected to fulfil a stewardship role propagated under the precepts of Islam. The purpose of this paper is to analyse takaful operators’ stewardship, focusing on investment practices.

Structured interviews were conducted with senior investment staff from all of Malaysia’s takaful operators. Questions, developed using Delphi-style techniques, allowed a five-point Likert scale response addressing specific issues revolving around seven dimensions of governance quality – using the Malaysian Rating Corporation’s (MARC’s) governance rating guidelines for Islamic financial institutions (IFIs). Interviewees’ responses were assigned composite scores.

Malaysia’s takaful operators score well on most prescribed governance quality dimensions, although performance varies between operators and across dimensions. Areas for improvement are identified, especially regarding disclosure of information and contributor involvement in takaful operators’ management.

Predetermined questions restrict flexibility in obtaining takaful operators’ information; however, end-of-interview, open-ended questions were asked to tap interviewee opinions on pertinent issues. A focus on takaful operators’ governance quality and stewardship of investments means findings may not be representative of all operational aspects of their businesses.

This study identifies governance quality guidelines which takaful operators may benchmark against and identifies where best to focus attempts to improve performance. These guidelines will also assist regulators assessing takaful operators’ stewardship performance.

This study uses governance quality as an indicator of stewardship, a concept aligned with the precepts of Shariah. It covers the opinion of the takaful industry in a country with a comprehensive Islamic financial system, Malaysia, extending understanding of takaful operators’ governance quality.

Participation in micro-family takāful plans amongst low-income earners remains low despite the various initiatives promoted by the Malaysian Government. Therefore, this study aims to conduct an in-depth examination on the indicators of having micro-takaful tafakul in Malaysia.

Questionnaires were distributed to respondents residing in Selangor, the state with the highest recorded percentage of low-income earners in Malaysia. Regression analysis was conducted in this study. Demographic characteristics and knowledge were treated as the independent variables, whereas the tendency of having a micro-family takāful plan was considered the dependent variable.

Gender and knowledge on the benefits of micro-family takāful plans have significant and positive effects on the tendency of having a micro-family takāful plan. Married and employed women are more likely to own a micro-family takāful plan compared with their male counterparts.

This study contributes to the growing literature on the research of micro-takāful determinants in Malaysia.

Industry players and regulators need to tailor the operating and marketing strategies of micro-family takāful plans based on the gender and knowledge of potential participants. The industry may also improve the features of takāful plans to ensure that they are even more attractive and comprehensive.

This study offers a much deeper analysis compared with past research owing to the identified dimensions of a demographic factor that can influence the tendency of having micro-family takāful plans. Besides, this study offers a comprehensive measurement of the knowledge on micro-family takāful plans by considering all aspects (i.e. concept, importance and benefit) of these plans. Moreover, this study examines the influence of each element of knowledge on the tendency of having a micro-family takāful plans, a topic that was rarely studied in the past.

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.

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.

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.

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.

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.

Purpose – This chapter examines whether the underwriting processes of takaful operators for health takaful products conform to shariah.

Methodology/approach – A qualitative research method has been used for this study. Data have been collected from primary sources through interviews and from secondary sources by examining relevant documentation. Interviews were conducted with underwriters from takaful operators A, B, C and D. Interviews were also conducted with the shariah executives of these takaful operators and with shariah experts from two institutions – University A and Research Institute B – for their opinions on the underwriting process. This selection of respondents from those responsible for the underwriting process and from experts in shariah has assisted us in locating data for our research, based on their experience and the practices in which they are involved.

Findings – The study found that the underwriting process used by takaful operators was in accordance with Islamic principles.

Research limitations/implications – The study is limited to four takaful operators in Malaysia who have received awards for best operators; this study focuses on health takaful products.

Originality/value – This study provides a view about the process of risk selection which determines the contribution rate and whether a risk will be acceptable or not to the company.

This research aims to examine the viability of micro-health takaful in Malaysia. Current practices in the takaful industry in Malaysia reveal that takaful operators (TOs) are keen on offering products that are affordable for middle- to high-income people. However, the concept of takaful is based on mutual help, and, hence, it is believed that TOs should offer products affordable by the poor and lower income people.

To achieve this objective, the interest of the poor to participate in this product is examined by sending the questionnaire. In addition, TOs were approached to understand why micro-health takaful products have not been offered as yet. The regulator was also interviewed to gauge whether the government is supportive of this scheme.

From the survey, it was noted that the poor people are interested to participate in such a scheme. However, most of them are only willing to contribute about RM5 per month, while some of the respondents, especially, zakat recipients are unable to afford to pay at all. The zakat authority when interviewed stated they were unable to contribute on behalf of the zakat recipients. To a certain extent, zakat authority is required to obtain an approval from the National Fatwa Council with regard to that issue. The regulator views that the micro takaful is still in an experimental stage. From the perspective of TOs, it might be viable if the product is offered as part of the corporate social responsibility, rather than by individual operators. Therefore, it could be summed up that micro-health takaful will be viable if and only if TOs collectively offer it as a part of their corporate social responsibility, and it must be subsidized by the zakat or waqf authorities.

Particularly, this study only considers a limited geography in Malaysia to understand the viability of micro-health. On the same note, the current focus of the study is on micro-health takaful in which it has not tapped other potential micro takaful products.

This study is a pioneering effort in understanding the viability of the micro health takaful in Malaysia.

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

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

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

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

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

Given the scarcity of Takaful products to provide financial preparation for flood victims, this study aims to propose an alternative Takaful model based on Waqf principle for the flood victims in Malaysia. This study serves as an initial stage to propose the above Takaful model and discusses the theoretical background of the model, which includes identifying the suitable Islamic principles and roles of parties involve in the model framework.

To achieve the said objectives, this paper reviews previous studies, opinions of scholars and existing Takaful models that are currently offered in the market.

In an effort to alleviate the financial burden of businesses and individuals affected by flood, Takaful industry needs to offer a special Takaful scheme to the flood victims and achieve its main objective to prepare a financial protection for social well-being. There is no harm for the various institutions (Takaful operators and State Islamic Religious Council) to do collaboration in realizing the Waqf-based Takaful model to ensure it is done in its original form to achieve the maqasid Shariah.

As an Islamic entity, the objective of Takaful business should focus on assisting the society in reducing their financial burden rather than just concentrating on achieving business profit. Thus, Waqf-based Takaful model would give platform to the operators to play their role in the society.

The views discussed in this paper originally from the researchers which is done by integrating the Islamic principles and roles of all stakeholders that may involve to implement Waqf-based Takaful model mainly for risk and financial protection for the future flood victims. The proposed framework discussed in this paper is in original form as a result of literatures and market practice in Malaysia.