MIF4053

FIQH MUAMALAT

GROUP ASSIGNMENT

WAKALAH

PREPARED FOR : MISS IZNI NADIRAH NAJMUDDIN

PREPARED BY :

NURSYAFIQAH BINTI MOHD FAIZAN ( D20112668 ).

ZULAIKHA FITRI BINTI MUHAMAD FADHIR KHAZANI

( D20112572 ).

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TABLE OF CONTENT

1.0 Introduction ......................................................................... 3

1.1 The Theory And Concept Of Wakalah ......................................................................... 3

2.0 The Definition Of Wakalah ......................................................................... 4

3.0 Sources Of Legitimacy ......................................................................... 5 - 6

4.0 The Conditions Of Wakalah ......................................................................... 6 - 7

5.0 Wakalah Contract In Takaful Product ......................................................................... 8

6.0 Type Of Wakalah Contract In Takaful Product ............................................................ 8 - 9

7.0 Modus Operandi Wakalah Contract In Takaful Product .............................................. 10

8.0 Advantages Of Al-Wakalah Application In The Takaful Industry ............................... 12

9.0 Dissolution of wakalah ......................................................................... 12

10.0 Completation of Wakalah ......................................................................... 13

11.0 Conclusion ......................................................................... 13

12.0 Refference ......................................................................... 14

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1.0 INTRODUCTION

Al-Wakalah is a notion that is well-known in the application of muamalah islam. As a result,

in this study, we will explain in the first chapter how this is related to al-Wakalah in the Islamic
puzzle that includes al-Wakalah according to Islamic perspective in general, before this study
explains the discussion of al-Wakalah in more detail according to hadiths related to al-Wakalah
in the following chapter. This chapter discusses the definition of al-Wakalah, the pillars and
conditions of al-Wakalah, the distribution of al-Wakalah, the termination of al-Wakalah
contracts, and takaful conversations that utilise the idea of al-Wakalah. This debate tries to
clarify the introduction to al-Wakalah in muamalah Islam and to focus more on the perspectives
of jurists in discussing al-Wakalah-related issues.

1.1 THE THEORY AND CONCEPT OF WAKALAH

In Islamic Law, a contract encompasses both bilateral and unilateral agreements. A contract is
defined as the link of an offer and acceptance that results in legal consequences on the contract's
subject matter. The purpose of having a contract is to meet both parties' consent. Contract
appears to be the best accessible way of reflecting the parties' desire and assent; not just in the
Islamic legal system, but also in other legal systems.

In Islamic law, the type and categorization of a contract are heavily influenced by the aim of
the contract's conclusion. Wakalah is one of the contracts recognised by Islamic law. It is also
known as an agency contract. In such case, it is an authority for the agent to act on behalf of
the principal, for a fee or not. Before proceeding, it is vital to have a concise and clear
knowledge of the basic idea of wakalah in Islamic Law.

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2.0 THE DEFINITION OF WAKALAH

The term wakalah is a noun derived from the word wakala, which has numerous connotations
such as agency, representation, proxy, mandate, authority, delegation, and empowerment
(Hassan 1998). In technical terms, wakalah means permitting another individual to conduct
business on one's behalf. It is sometimes referred to as an agent.

Scholars have differing views on the technical definition of wakalah.

i. The Maliki School holds that wakalah is:

"One replaces (occupies) a place of another in the right (duty), he is managing at that
position."

ii. The Hanafi School views that wakalah is:

"One replaces the other people in the management."

iii. The Shafie School opines that wakalah is:

"Like a person hand over something or a job to another during his lifetime"

iv. According to the Hanbali School, wakalah is a demand for replacement that offers a
balancing management to another individual in situations when there is a replacement
of Allah's rights and human rights.

Wakalah, according to the Accounting and Auditing Organization for Islamic Financial
Institutions (AAOIFI) Shari'ah Standard, Standard No.23, Clause 2/1, is the act of one party
delegating to the other to act on its behalf in what can be a subject matter of delegation (Islamic
Financial System 2012). Wakalah is essentially a nonbinding contract in which the principal
or agent may withdraw at any moment by mutual consent, unilateral termination, discharging
the obligation, destruction of the subject matter, and the contracting parties' death or loss of
legal ability.

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3.0 SOURCES OF LEGITIMACY

The contract of agency is legally approved and practiced on several evidences from the Al –
Quran , As- Sunnah and Ijma’.

3.1 Al – Quran

a. Surah Al – Kahfi : 19

a. ‫قَالُوا۟۟ َربُّكُم۟۟أَعلَ ُ۟م۟ ِب َما۟لَ ِبثتُم۟۟فَٱبعَث ُ ٓوا۟۟أ َ َح َدكُم۟ ِب َو ِرقِكُم۟۟ َه ٰـ ِذ ِٓ۟ۦه۟إِلَى۟ٱل َمدِين‬
“ Now, send one of you with your money to the town . Let him find out which is the
best food ( to be had) and bring some to you, that ( you may) satisfy your hunger
therewith : and let him behave with care and courtesy : not inform any one about you
.” ( Surah Al – Kahfi : 19)

b. Surah An – Nisa’ : 35

ِ۟ ‫شقَاقَ۟۟بَينِ ِه َما۟فَٱبعَثُوا۟۟ َحك ًَۭما۟ ِمن۟۟أَه ِل ِۦه۟ َو َحك ًَۭما۟ ِمن۟۟أَه ِل َه۟ا ٓ۟إِن۟يُ ِري َد۟آ۟ ِإصلَ ٰـ ًۭحا۟يُ َو ِف‬
۟‫ق‬ ِ ۟۟‫َوإِن۟۟ ِخفتُم‬
‫ع ِليما۟ َخ ِب ًۭيرا‬ َ۟ ‫ٱّللَ۟ك‬
َ ۟‫َان‬ َ۟ ۟‫ن‬َ۟ ِ‫ٱّللُ۟بَينَ ُه َم۟ا ٓ۟ۗ۟إ‬
َ۟

“If you anticipate a split between them, appoint a mediator from his family and another
from hers. If they desire reconciliation, Allah will restore harmony between them.
Surely Allah is All-Knowing, All-Aware.” ( Surah An – Nisa’ : 35)

c. Surah At – Taubah : 60

ِ۟ ‫ٱلرقَا‬
۟‫ب‬ ِ ۟‫علَي َها۟ َوٱل ُم َؤلَ َف ِ۟ة۟قُلُوبُ ُهم۟۟ َو ِفى‬ َ۟ ‫ين۟ َوٱل َع ٰـ ِم ِل‬
َ ۟‫ين‬ َ ‫ص َدقَ ٰـتُ۟۟ ِللفُقَ َرا ِ۟ٓء۟ َوٱل َم‬
ِ۟ ‫س ٰـ ِك‬ َ ‫۞۟ ِإنَ َما۟ٱل‬
٦٠‫يم‬
ًۭ۟ ‫ع ِليم۟۟ َح ِك‬
َ ُ۟‫ٱّلل‬
َ۟ ‫ٱّللِ۟ۗ۟ َو‬
َ۟ ۟‫ن‬ َ ‫س ِبي ِ۟ل۟ۖ۟فَ ِري‬
َ۟ ‫ض ًۭ۟ة۟ ِم‬ َ ‫ن۟ٱل‬
ِ۟ ‫ٱّللِ۟ َوٱب‬
َ۟ ۟‫س ِبي ِ۟ل‬ َ۟ ‫َوٱلغَ ٰـ ِر ِم‬
َ ۟‫ين۟ َو ِفى‬

“ Alms-tax is only for the poor and the needy, for those employed to administer it, for
those whose hearts are attracted ˹to the faith˺, for ˹freeing˺ slaves, for those in debt, for
Allah’s cause, and for ˹needy˺ travellers. ˹This is˺ an obligation from Allah. And Allah
is All-Knowing, All-Wise.” ( Surah At- Taubah : 60 )

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3.2 As-Sunnah

a) "Narrated by Jabir ra, he said. I went out to Khaibar, and I came to the Prophet saw he
said, "If you meet my agent, take or ask from him fifteen wasq. "(Sunan Abu Daud).

b) "Narrated by Jabir ra, that the Prohet saw slaughtered his sacrifices of 63 animals and
Ali karramallahu wajah was asked to slaughter the sacrifices animals that have not been
slaughtered yet.” (Sahih Muslim)

c) "Indeed the Prophet s.a.w delegate to Abu Rafi' and the other from the Ansar,
afterwards they marry the Prophet saw with Maimunah ra."(Malik's Muwatta)

Several hadiths above clearly indicate the Prophet's s.a.w. and his companions practising
wakalah. This method was widely used throughout the early Islamic period. Indeed, Prophet
Muhammad was both personally and indirectly involved with wakalah, and he supported its
spread.

Due to the people's dire need for aid in achieving specific duties that they are incapable of
undertaking on their own, a consensus of Muslim scholars agrees on the permissibility of the
wakalah contract (Islamic Financial System 2012). Ibn Qudamah emphasised that they had
adopted the notion of wakalah as a proclamation since it is required by all people in all sorts of
activity. The wakalah contract, which has been included into Islamic law, emphasises that
human conduct is weak, that people cannot exist alone, and that they rely on one another to
govern their lives. Islam encourages the use of wakalah in a variety of activities as long as they
do not violate Shari'ah standards (Jemizan 2011).

4.0 THE CONDITIONS OF WAKALAH

1. The Agent ( ‫) الوكيل‬

The agents' conditions are quite similar to the principal's. The agent must be of sound
mind; else, the contract is null and void. According to the Hanafi School, a wakil is a
youngster who can distinguish between good and harmful things. This is based on the
fact that during the Prophet's s.a.w time, Amar bin Sayyidah Ummu Salamah married
her mother with the Prophet s.aw while he was a kid who was not yet born (Sabiq 1977).

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 2. The Principal ( ‫) الموكل‬
The principle must be a person who owns the goods or has power over them. The
principal must also be a person who is qualified to take action and of sound mind. As a
result, a wakalah from a mad person or a kid is void.

According to Hanafi scholars, a wakalah from a youngster in financially advantageous conduct

such as receiving presents is allowed. In contrast, in intermediate cases where the action may
result in financial gains or losses, such as trading and leasing, the permissibility of a wakalah
from a child is determined by whether he is permitted to deal with those actions (Hendi 2008).

Furthermore, the principal should delegate on his own free will, without any
compulsion from others. The same is true for the agent, who should not be compelled
to complete the mission assigned to him.

3. The object ( ‫)الموكل به‬

Financial concerns, for example, should be qualified for legal authorisation as the
subject of the agency contract. Most scholars accept agency in acts of worship with a
financial component, such as zakat, hajj, and slaughtering sacrifice animals.

Furthermore, it should not entail banned Islamic activities or dishonest behaviours such
as theft and takeover of property. The purpose, according to the Shafie School, must be
known in order to prevent doubt (gharar).

4. Offer and Acceptance ( sighah ) ‫ اإليجار والقبول‬: ‫الصيغة‬

Sighah is a declaration of delegation. It is uttered as a mark of satisfaction by the
principal and the agent to delegate and accept a work. The jurists believe that wakalah
acceptance is not limited to vocal indication. It can also be formed by other ways like
as action, writing, and signing (gesture). The jurists also rule that acceptance might be
done either immediately or later (Idris 1986).

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5.0 WAKALAH CONTRACT IN TAKAFUL PRODUCT

Takaful is Arabic for "joint assurance." Takaful's goal is collaboration and mutual aid among
members of a designated group. Takaful may be thought of as a technique of joint assurance
among a group of members or participants against loss or damage that may befall any of them.
The group members agree to collectively guarantee that if any of them suffers a catastrophe or
disaster, he will get a specified quantity of money to cover the loss or damage. All members of
the group work together to help those in need.

Takaful is a system where participants contribute to the Tabarru Fund and intend to mutually
guarantee each other, such as compensating participants who are burdened with certain risks.
The focus of participation is to contribute to the Tabarru Fund in line with the principles of
mutual help and sharing.

The Takaful method is based on the Tabarru' system, which eliminates uncertainty and
gambling. Tabarru' translates as "gift; contribution." Takaful's goal is to pay a defined loss from
a defined fund. According to Muslim jurists, insurance in Islam should be founded on mutuality
and cooperative principles. Including shared duty, joint indemnification, mutual interest, and
unity.

6.0 TYPE OF WAKALAH CONTRACT IN TAKAFUL PRODUCT

Wakalah contracts are divided into several forms such as;

a) unlimited agency (wakalah mutlaqah):

an agency contract where the principal appoints someone as an agent to perform certain tasks
without any specific restrictions or conditions; .For example, Mr. Karim delegated Saiful to
give alms no matter when and how much to give.

b) limited agency (wakalah muqayyadah):

an agency contract where the principal appoints someone as an agent to perform certain tasks
with certain restrictions or conditions. For example, Puan Marina as a takaful product
participant submits the agreed contribution to the takaful operator to manage the money for the
purpose of protection between participants or in the concept of ta'awun.

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c) Wakalah bi al-ujrah

This types of wakalah is used in Takaful product which is an agreement where a takaful agent
is appointed to manage the overall service provided under the customer's takaful certificate.
Therefore, the takaful agent company has the right to charge for the wakalah contract

The wakalah contract shall take effect immediately after entering wakalah contract or,
if it is a conditional wakalah contract, when it occurs specified conditions.Terms and conditions
that have been mutually agreed upon and agents and participants must comply with the
principles of sharia that have been set.

Wakalah Fee

A wakalah contract may be arranged for a fee.If the wakalah contract is arranged with a
fee, the agent is entitled to receive the wakalah fee for carrying out the authorized task or
matters that have been delegated to him.The wakalah fee must be determined and agreed at the
time of entering into the wakalah contract and may be agreed as a fixed amount or as a
percentage ratio of a certain amount or an amount linked to a benchmark.The wakalah fee may
be paid in a manner that is mutually agreed by the contracting parties such as in one lump sum
or in several payments.In addition to the wakalah fee, the contracting parties may agree to an
additional fee, over and above the initially agreed fee (performance fee). The performance fee
may be in the form of excess of a certain threshold set for the authorized task.If the wakalah
contract involves sub-agent, the principal and the initial agent may agree on the party that
should pay the wakalah fee for the sub-agent

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7.0 MODUS OPERANDI WAKALAH CONTRACT IN TAKAFUL PRODUCT

Takaful goods are classified into two types: Family Takaful and General Takaful. Family
Takaful is made up of four parts: Family Takaful, Investment related Takaful, Child Education
Takaful, and Medical and Health Takaful. The other category, General Takaful, included Home
Takaful, Motor Takaful, and Personnel Accident Takaful.

Wakalah employed the notion of agency, in which the participants are the true owners of the
takaful fund and the takaful operator acts as an agent in administering the fund for a fee. The

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agent will eventually be compensated and paid a commission for their efforts. The agency
charge is set yearly in advance during a meeting with the company's Shari'ah committee. The
surplus from the member's fund investment is returned to the participant under this notion.

Participants in general takaful insurance will pay payments to the takaful system, which will
be split into agency fee and takaful fund. The contribution split between the agency fee and the
takaful fund is determined by the agreed-upon ratio in the contract between the takaful operator
and the participants. The agent's pay and administrative expenses are included in the agency
fee and will be paid to the takaful operator. The takaful money will eventually be invested, and
the profits will be channelled to the collective fund. The takaful operator will be paid a
commission for the service of managing the investment. Finally, at the conclusion of the year,
the surplus (the amount remaining after subtracting claims, re-takaful, and reserve) will be
distributed to the participants.

Participants in family takaful insurance will contribute to two accounts: the agency fee and the
takaful fund. The separation is based on the ratio agreed upon in the contract between the
takaful operator and the participants. The agency charge, which includes the agent's pay and
administrative costs, will be paid to the takaful operator. The takaful fund is separated into two
accounts: the participants' investment account, which is used to save, and the participants'
special account, also known as the participants' risk account, which is developed from the
tabbarru' idea. The sums allotted to these two accounts are based on previously agreed-upon
percentages in the contract. The funds in both accounts will be invested in assets such as
government Islamic instruments and others in the future. Profits from the investment will be
returned to the fund. The takaful operator will be paid a commission for their assistance in
managing the investment. The monies in the participants' accounts will be reimbursed to them
upon the death, delivery, or maturity of a takaful plan. In the meanwhile, the funds in the special
account will be utilised to pay claims, retakaful, reserves, and management. Finally, the excess
will be dispersed among participants and the takaful operator in accordance with the agreed-
upon ratio-modified model.

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8.0 ADVANTAGES OF AL-WAKALAH APPLICATION IN THE TAKAFUL INDUSTRY

By using the al-Wakalah model, the takaful operating company can ensure that the
development of the company happens quickly and quickly as a result of the appointment of
agents to the takaful company. The company's agents play an important role to expand the
company's market, while the agents' agents also benefit from their work because they given a
reward as a motivation for them to ensure that the company they represent becomes the choice
of the community. The operating company will ensure that they have many and quality agents
so that the company continues to thrive. The presence of quality agents can accurately explain
the company's products to the community and provide services advice on the importance of
takaful for Muslims. In addition, the agent can also help participants to participate in the takaful
scheme and make claims for benefits, which can further reduce the operating company's
expenses.

The company can also expect costs and profits from wakalah fees charged. As a result, the
participant's gross contribution will be deducted from the wakalah fee and deposited into the
participant's account or directly deposited into the risk fund depending on the type of plan.
Therefore, the company has already got income that can be used to manage his business and
part of it.

9.0 Dissolution of wakalah

A wakalah contract shall dissolve under any of the following circumstances:

(a) demise, dissolution or loss of legal capacity of the principal;

(b) demise, dissolution or loss of legal capacity of the agent if the wakalah contract stipulates
that the task shall be personally performed by the agent

(c) the principal loses his right to the subject matter of the wakalah;

(d) both contracting parties mutually agree to terminate the wakalah contract

(e) the principal exercises the option to terminate the wakalah contract due to misconduct,
negligence or breach of specified terms of the contract by the agent

(f) the agent withdraws from the wakalah contract due to breach of specified terms of the
contract by the principal.

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10.0 Completation of Wakalah

A wakalah contract completes upon fulfilment of all obligations of the contracting parties under
the wakalah contract which include settlement by the principal of the wakalah fee.Upon
completion of the wakalah contract, the contracting parties are free from any contractual
obligations under such wakalah contract

Satisfaction of the wakalah fee may be made through any of the following methods:

(a) full payment of the agreed sum by the participants

(b) waiver of right to receive the outstanding wakalah fee by the agent;

(c) set-off (muqassah) of obligations between the contracting parties; or

(d) transfer of the obligation to pay the fee to a third party through transfer

of debt (hiwalah al-dayn).

11.0 CONCLUSION

The concept of al-Wakalah plays an important role in the operation of takaful companies. It
also provides advantages and helps in the development of the takaful industry, especially in
Malaysia. Therefore, the application of al-Wakalah in takaful is in the form of representative
payment or al-Wakalah bi al-Ajr and the principle this is in line with the wishes of the Hadith
of the Prophet SAW and also the views of the jurists. In addition, the al-Wakalah transaction
is a blessing to Muslims because it can provide an alternative to replace the conventional
insurance system. The application of the concept of al-Wakalah in this industry is also
necessary guarding the ethical values of representation so that it does not violate the limits of
syar'a and is in line with the principles according to the will of al-Sunnah.

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12.0 REFERENCES

http://studentsrepo.um.edu.my/5240/9/9._BAB_PENDAHULUAN-BIBLIOGRAFI.pdf

Takaful in Malaysia: Emergence, Growth, and Prospect ( Monther EldaiaUniversiti Sains

Islam Malaysia, Malaysia) from ……..
https://www.researchgate.net/publication/340427067_Takaful_in_Malaysia_Emergence_Gro
wth_and_Prospects

Takaful Model and Types of Product , Syazwan Aziz from……

https://www.academia.edu/10697548/Takaful_Model_and_Types_of_Product

Al Wakalah and Customers’ Preferences toward It: A Case Study of Two Takaful Companies
in Malaysia , Hairul Azlan Annuar1 January 2005Association of Muslim Social Scientists

ArchiveTakaful Models and Global PracticesWaheed AkhterCOMSATS Institude of

Information Technology, Lahore, Pakistan2010 . from
https://www.researchgate.net/publication/254445792_Takaful_Models_and_Global_Practices

BANK NEGARA MALAYSIA .. CENTRAL BANK OF MALAYSIA ..ISSUED ON 24

JUNE 2016…from
https://www.bnm.gov.my/documents/20124/938039/PD_Wakalah.pdf/fe87974d-190f-0e11-
b0e3-9cb7ab96eb02?t=1592244614898

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