DEFINITION & CONCEPT

OF TAKAFUL
Definition of Takaful :

 The word ‘takaful is derived from the Arabic verb kafala

which means to guarantee one another; to help; to take
care of one’s needs;

“ A scheme based on brotherhood, solidarity and mutual

assistance which provides for mutual financial aid and
assistance to the participants in case of need whereby the
participants mutually agree to contribute for the
purpose”. (Takaful Act 1984)

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Definition of Takaful :

According to Islamic Financial Services Act 2013

Takaful means:

“An arrangement based on mutual assistance under

which Takaful participants agree to contribute to a
common fund providing for mutual financial benefits
payable to the Takaful participants or their
beneficiaries on the occurrence of pre-agreed events”.

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Philosophy & Concept of Takaful

 In principle, Takaful system is based on mutual co-operation,

responsibility, assurance, protection and assistance between groups of
participants.

 1. Basis of Co-operation
Takaful, is based on the concept of ta‟awun meaning mutual assistance.
Participants of the Takaful scheme mutually agree to assist each other
financially in case of certain defined needs (as defined in the Takaful
contract) by contributing to a common fund.

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Philosophy & Concept of Takaful

 This concept is based on Allah (SWT) command in the following

verse:
Meaning:
"... Cooperate ye one another in righteousness and piety but help ye
not one another in sin and rancor"
(al-Maidah: 2)

 Prophet Muhammad (saw) reaffirmed it in the following hadith:

Meaning:
“Allah will always help His servant for as long as he helps others”
(Reported by Ahmad and Abu Daud)

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Philosophy & Concept of Takaful

 2. Basis of Responsibility
In tandem with the shariah discipline on Takaful (which means shared
responsibility and shared guarantee), the participants mutually agree
to provide compensation in the event of a misfortune.

Meaning:
The place of relationships and feelings of people with faith, between each
other, is just like the body; when one of its parts is afflicted with pain,
then the rest of the body will be affected.
(Reported by Bukhari and Muslim)

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Philosophy & Concept of Takaful

 3. Basis of Mutual Protection

The participants of the Takaful Scheme agreed to be mutually
responsible or shared responsibility.

Meaning:
By my life, which is in Allah‟s power, nobody will enter Paradise if he
does not protect his neighbour who is in distress.
(Reported by Ahmad)

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Philosophy & Concept of Takaful

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Philosophy & Concept of Takaful
The salient features of Takaful operations are as follows:

The operator is not the one assuming the risk, the Participants who
are mutually covering each other.

The Takaful Operator is acting as trustee on behalf of the Participants

to manage the operation of the Takaful business.

All contributions (premiums) paid by the Participants will be

accumulated in the Takaful fund for payment of the Takaful benefits.

The Takaful fund at the same time can be invested in areas approved
by shariah Committee.