You are on page 1of 11

CHAPTER 1 INTRODUCTION OF

ISLAMIC MUAMALAT

OF TAKAFUL

INTRODUCTION OF ISLAMIC MUAMALAT

Introduction to Shariah
Objective of Shariah
Shariah is the entire body of Islamic law, and the term literally means "the way to the water
source." It is a wide-ranging body of law and personal rules, regulating matters not limited to
jurisprudence, politics, business, banking, family, and society. The main objectives of the
Shariah is to ensure that human life is based on maruf (good) and to cleanse it of munkar
(evils). The term maruf denotes all the qualities that have always been accepted as good by
the human conscience, and conversely, the world munkar denotes all those qualities that have
always been condemned by human nature as evil.

The Concept of Ad Deen (Shariah)

Broken down to its bare elements, Islam comprises of Aqidah (a set of beliefs), Shariah (a set
of laws) and Akhlak (a code of moralitie).
Aqidah means a set of beliefs. From the Islamic point of view, Aqidah means strong belief in
Allah s.w.t, His Prophets and the hereafter, also belief in the angels, the holy books and
predestination.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

Shariah or Islamic law is also known as Fiqh . Fiqh is Islamic jurisprudence. Fiqh deals with
the observance of rituals, morals and social legislation in Islam. Branches of Fiqh includes
Ibadat, Muamalat, Munakahat and Jinayat.

Fiqh Ibadat
The rules of ritual purification, prayer, pilgrimage, fasting, zakat, jihad and some other forms
of worship are dealt under this heading. Most of these rules deal with the rights owed to Allah
s.w.t by the individual alone or by the community as a whole.

Fiqh Muamalat
This area deals with property, contracts, business organisation, security of debts and
insolvency, pre-emption, gifts, bequests and waqfs.

Fiqh Munakahat/Usrah
This area deals with marriage, divorce, inheritance, guardianship and related matters. This is
similar to conventional version known as personal law.

Fiqh Jinayat
This area deals with major offences like illicit sexual (zina), theft (sariqah), robbery, pirate
and brigandage (hirabah), and other matters collectively known as hudud laws.
Akhlaq is a term referring to the practice of virtue, morality and manners in Islamic theology
and falsafah (philosophy). It refers to ones disposition, nature, temper, ethics, morals or
character (of a person). Akhlaq covers all aspects of Muslim behaviour, attitude and work
ethics which influence his acts.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

Mandatory Law (Hukm Taklif)


Taklifi law is the law that describes the commands, prohibitions and the option to run or leave
an activity / job. According to Islamic terminology, the acts of a Muslim must be guided by
these five commandments (al-Ahkam al-Khamsah) classified as follows:

Wajib (obligatory)
The term wajib means an act the performance of which is obligatory for the subject. Example:
performing solat and fasting in month of Ramadhan. In its technical sense, it is an act whose
commission is demanded by the Lawgiver (Allah s.w.t) in certain and binding terms.

Mandub (recommended)
Mandub is defined as a demand by the Lawgiver (Allah) for the commission of an act without
making it binding and without assigning any blame for its omission. The rule for mandub is
that for doing so there is reward (thawab) for the doer, while omitting it entails no penalty
such as giving charity to the others.

Haram (prohibited/unlawful)
Haram is defined as one which omission is required by the Lawgiver (Allah) in binding and
certain terms. An example of prohibited act (Haram) is the misappropriation of anothers
wealth.

Makruh (reprehensible or disapproved)


Makruh is defined as one which omission is demanded by the Lawgiver (Allah) in nonbinding terms. An example of reprehensible act (Makruh) such as debt which is not
documented (unrecorded).

Mubah (permissible)
The Mubah or permissible act is one in which the Lawgiver (Allah) has granted a choice of
commission and omission, without blame or praise for omission or commission. According to
this principle, all contracts and transactions are permissible, unless there is evidence
indicating otherwise.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

Primary and Secondary Sources of Shariah


Primary Source
i
Quran
The Quran is the very word of Allah s.w.t revealed to the Holy Prophet (pbuh) for the benefit
of all mankind. It is a divine revelation and is the first and main source of Islamic Law and to
the Muslims, the absolute authority in deciding the legality and every legal obligation. The
Quran is a comprehensive and indivisible guide and must be accepted and implemented in its
entirety
ii
As-Sunnah
The Sunnah, means method, that includes all that is from the Holy Prophet (pbuh)
comprises what the Prophet (pbuh) said (Qaulan), did/action (Filan) and agreed (Taqiran).
Whatever originated from the Holy Prophet does come out from his own desire, but it is an
inspiration from Allah s.w.t.
The word Sunnah should be distinguished from the term Hadith, which is a narration of the
saying of the Holy Prophet.

Secondary Source
i.
Ijma
Ijma is Juristic consensus of opinion of the imams mujtahid among Muslims in a particular
time after the death of the Prophet (s.a.w.) regarding the legal position of a matter or problem.
In its application, Ijma is an agreement of Muslim jurist in the event the ruling being sought
is not found in either of the main sources ie the Quran and the Sunnah. All the mujtahidin
must reach a consensus on a juridical opinion at the time an issue arises.
ii
Qiyas (Analogy)
Qiyas means to equate the legal position of a matter that has no ruling from the Quran and the
Sunnah to one that has due to the illat (underlying cause or reason) of the ruling. In other
words, the mujtahids refer back to the Quran and the Sunnah and make an analogical
reasoning between a new matter that has no ruling with the one that already has a ruling.
Literally, it is the extension of a Shariah value from the original case to a new case, because
the new case has the same effective cause as the original case.
DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

iii
Maslahah
Maslahah ('public interest') is a concept in traditional Islamic Law, invoked to prohibit or
permit something on the basis of whether or not it serves the public's benefit or welfare. The
concept is related to that of Istislah. While the meaning of maslahah is 'public interest', the
meaning of istislah is 'to seek the best public interest'.
iv
Urf
Urf is a term referring to the custom or 'knowledge' of a given society, leading to change in
the fiqh. `Urf is a source of Shariah rulings where there are no explicit primary texts of the
Qur'an and Sunnah specifying the ruling. `Urf can also specify something generally
established in the Quran and sunnah.
v
Istishab
Istishab means presumption of existence or non-existence of facts. It can be used in the
absence of other proofs (dalil). Istishab relates to the sense that the past accompanies the
present without any interruption or change.
vi
Istihsan
Istihsan means juristic "preference". Muslims scholars may use it to express their preference
for particular judgments in Islamic Law over other possibilities. It is one of the principles of
legal thought underlying personal interpretation or ijtihad.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

Objectives of Shariah (Maqasid Shariah)


Maqasid is the Arabic word for goals or purposes. In Islamic context, it can refer to the
purposes of Islamic faith. In terms of Shariah, there are five Maqasid (foundational goals).
The five maqasid are as follows:The preservation of:
Religion
Shariah requires the preservation and protection of Deen (religion) under all circumstances for
example defending the Islamic faith particularly if it attacked by the enemy of Islam.
Life
Shariah requires the preservation and protection of life under all circumstances as an example
in order to protect life is enacting a severe punishment for those who kill others. The
punishment for those who kill innocent human being is the death penalty in Islam.
Lineage
Shariah requires the preservation and protection of descendants and honour under all
circumstances like Islam prohibit it followers in committing adultery or other immoral
behaviors.
Intellect
Shariah requires the preservation and protection of intellect and mind under all circumstances.
Protection of mind requires safeguarding it from anything that might harm the ability and
functions of the brain, this include the consumption of liquor or similar substances that will
upset the functions of the brain.
Property/Wealth
Shariah requires the preservation and protection of property under all circumstances. There
are several ways of acquiring the property of others illegitimately. Among these are taking
riba, cheating in transactions, breaking the trust in matters related to property, stealing the
property of others and other similar means. The Shariah prohibits all these means.
DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

APPLICATION OF SHARIAH CONTRACT COMMONLY USED IN TAKAFUL


BUSINESS (MUAMALAT)
Contracts in Islamic law both bilateral as well as unilateral contracts. A contract can be define
as the connection of offer and acceptance that result in legal effort on the subject matter of the
contract. Any dealing in property needs a relevant underlying contract that is compatible with
the purpose of dealing.
A takaful scheme essentially involves two main parties, that is takaful operator and a group of
participant which is commonly known as policyholders in conventional insurans. Briefly, the
actual contract underlying relationship between takaful operator and participants can be any
of the following contracts, that are Kafalah, Tabarru Wakalah, Ujrah, Jualah, Mudharabah
and Musharakah depending on the need or prefence of the parties, the detail of those contract
are as follows:
Underlying Contract
Supported Takaful Contract
i.
Kafalah
A contract of guarantee whereby a person adds to himself a responsibility or liability on
behalf of another person.
In Takaful business, the participant contributes to the Takaful
fund by a mutual agreement that the takaful operator is entrusted to undertake in managing the
takaful fund prudently and to pay the takaful benefits to the participants in the event a
misfortune. The Kafalah contract is prevailing in the takaful operational system in Malaysia
and worldwide.
ii.
Tabarru
Means gift or donation which is given by one in favor of someone without seeking any
consideration. In Takaful business, the participants mutually agree to contribute a sum of
money to the Takaful fund based on the contract of Tabarru. Tabarru contract is the core
element in takaful business and is not only practiced in Malaysia but also the Tabarru contract
is practiced worldwide.
iii.
Wakalah
A contract of agency, in which a person delegates his business to another and substitutes the
other in his place. The person delegated is called Wakil. Thus, both the principal and the wakil
DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

are equally bound by each other under contract of Wakalah. In Takaful business, the
participants appoint the takaful operator as their wakil and to manage their takaful coverage
and the takaful fund. The wakalah contract is practiced by all takaful operators in Malaysia
most of the takaful operators worldwide operational under the wakalah model

iv.
Ujrah
A contract of hiring whereby one person hires someone for definite services, in which the
hirer is under the duty to provide a reward for the services rendered to him.
In Takaful
business, the participant contributes to the Takaful fund by a mutual agreement that the
takaful operator is entrusted to manage the takaful fund prudently in terms of investment and
pay out takaful benefits to the eligible participants in the event of a misfortune. The takaful
operator is entitle to a fee for the service rendered. The Ujrah contract is practiced by all
takaful operators in Malaysia most of the takaful operators worldwide operational under the
wakalah model.
v.
Ju'alah
A contract of hiring for services, in which one party undertakes to pay a specified amount of
money for rendering a defined service in accordance with the terms negotiated between them.
In Takaful business, the participants contribute a sum of money to the takaful fund.
The takaful operator is entrusted to manage the takaful fund prudently in terms of investment
and pay out takaful benefits to the eligible participants in the event of a misfortune. The
takaful operator is entitle to a fee for the service rendered. The Jualah contract practiced by
all takaful operator in Malaysia and most of the takaful operators worldwide operational under
the wakalah model.
vi.
Mudharabah
The nature of Mudarabah (profit sharing) practices is that, it is a financial contract whereby
one party called Rabbu al-Mal provides fund to the other party called Mudharib who
undertakes to manage the fund through investment or trade and generates profits, in which
both the Rabbu al-Mal and also the Mudharib shre in the profit in a pre-agreed proportion. In
Takaful business, the participants contribute a sum of money to the Takaful fund in which the
participants are like Rabbu al-mal, while the Takaful operator is like Mudharib who agrees to
manage the fund in view of making profit in which both, the participants and also the operator
share the profit proportionately. Mudharabah contract as practiced by Syarikat Takaful
Malaysia when it first started operation. However, for some takaful operators in Malaysia
Mudharabah is still practiced only on certain products.
vii.
Musharakah
The contract of Shirkah (partnership). Musharakah is an agreement between two or more
parties to operate a particular business in which all parties contribute to the capital in view of
profit. In al-Musharakah dealing, the parties involved herein share the liability, profit, and also
DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

loss according to their agreement. In Takaful business, the respective shareholders mutually
agree to contribute a sum of money to initiate the takaful business. This mutual agreement
among the shareholders is called musharakah. Musharakah contract is practiced among all the
Shareholders of all takaful operators in Malaysia and most of the takaful operator worldwide.

PROHIBITED ELEMENTS IN INSURANCE PRACTICES OR MUAMALAT


Gharar
Gharar means deficient clarity with regard to the subject-matter being contracted or as
uncertainty where the results are hidden or not known In business terms it means to
undertake anything blindly without sufficient knowledge; or to risk oneself in a venture not
knowing exactly what will be the outcome
Prohibition Justification
It is not permissible to sell an article without making everything (about it) clear, nor it is
permissible for anyone who knows (about its defects) to refrain from mentioning them. Al
Hakim and Al Bayhaqi.
Gharar in insurance contract occurs when one party takes what is due to him but the other
does not receive his entitlement. - Ibn Taymiyyah
Types of Gharar
1. Al Gharar al Kathir.
Excessive gharar, this would render the contract invalid.
2. Al Gharar al Yasir.
Trifling gharar, this is tolerable and permissible.
3. Al Gharar al Mutawassit.
Average gharar which falls between the two.
Gharar in insurance practices:

Both parties to the insurance contract do not know exactly what their obligations and
responsibilities are to each other, neither the insurer nor the insured knows the
outcome of the contract
The insured does not know the amount of compensation he is likely to get in case of
an accident or a peril as the insured does not know if there will be compensation as the
outcome of the contract is not known

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

The insurer does not know when the peril will occur.
There is no equity in insurance in that the insured has got to pay the premium but if
the peril insured against does not happen, the insured is not paid anything at all.
Insurance is a promise to pay compensation which is sometimes fulfilled and
sometimes not. Uncertainty in the results of the exchange as at the point the contract is
made, the result of the exchange is still uncertain.

Riba
The word riba literally means increase in or addition to anything. Islam has prohibited
lending of money for profit because it is often ruinous to the borrower and at the same time
makes the lender obnoxious and sullen.
Prohibition Justification
O you who believe, devour not usury, doubling and quadrupling, the sum lent. Fear Allah
and observe your duty to Him, that you may really prosper. Al-Imran 3:130
Types of Riba

Riba Duyun.
Riba Qardh. - Where interest is agreed upon at time of contract.
Riba Jahilliyah. - The increase levied on the borrower for late or failure to repay the loan.
Riba Buyu.
Riba Fadhl. - The difference in weight, volume and quantity.
Riba Nasiah. - The difference in time.

Riba in insurance practices;


Insurance company invest the premium in interest bearing investment.
Insurance company pay interest on their product.
Insurance company consider future interest when calculating the premium.
Insurance contracts contain usury, promise to pay more than the premium paid.
Interest charged on late payment of premium.
Interest charged on policy loan.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

10

CHAPTER 1 INTRODUCTION OF
ISLAMIC MUAMALAT

OF TAKAFUL

Maisir
The word Maisir means getting something too easily or getting a profit without working for it.
Islam forbids all forms of business in which the monetary gain comes from mere chance or
speculation and not from work. Unlike gharar which is tolerated to a certain degree, maisir is
not accepted at all.

Prohibition Justification
O Believers! Intoxicants and gambling - and divining arrows are an abomination of satans
handywork. Leave it aside in order that you may prosper. - Al Maidah 5:90
Maisir in Insurance Contract:

Insured could receive huge amount of money, without equivalent input.


Paying premium without getting any amount in return.
Insurer loses if there are too many claimants.
Premium collected exceeds the claims, Insurers could make huge profits.

DPN1023: PRINCIPLES AND PRACTICES OF TAKAFUL

11