Takaful – Waqf Model

• The term waqf referred for this model explains the

contract of takaful that underlines the agreement
or consent of the participant that the takaful
contribution paid in return for participating in the
takaful product to be credited by the operator into
the takaful fund in accordance with the principle
of waqf or endowment. To begin with, a waqf
account has to 
• be established by the operator within the takaful
fund. To this effect the operator is required to
relinquish some kind of “seed” money as waqf to
generate the said waqf account. This waqf account
of the takaful fund will be invested similar to the
three business models hereinbefore. The Waqf fund
shall work to achieve the following objectives:
• a) To extend financial assistance to its members in
the event of losses.
• b) To extend benefits to its members strictly in accordance with
the Waqf Deed.
• All the expenses related to the underwriting and operational
cost of takaful shall be charged to the Waqf fund. As manager,
the takaful operator will perform all functions necessary for the
operations of the Waqf against a Wakala fee to be deducted
from the contribution paid by the participants. As Mudarib, the
operator will manage the investment of the takaful fund
including its Waqf account in Shariah-compliant investment
avenues and will share its returns on the investment at an
agreed ratio similar to the profit sharing structure under
the Mudarabah contract.
• It is important to note the different principles of Shariah are used in
the takaful contract to express the consent of the participants for their
contributions to be credited into the takaful fund for the purpose of
undertaking the concept of joint guarantee as encapsulated in the
term takaful. In contrast to the Waqf model, the other three models
applied the principle of tabarru to the contract.
• It is a basic feature of the model below that the Waqf Fund will lay
down the rules for distribution of its proceeds to the beneficiaries and
will determine how much compensation be paid out to a participant.
In addition, the Waqf will be the owner of the contributions and has
the right to act as a legal entity and dealing with its surplus. The
operator, whilst managing the Waqf Fund, will assume two different
functions at the same time – manager and Mudarib or entrepreneur.
Takaful Waqf Model Chart