TAKAF​UL​:

Takaful is a type of Islamic insurance wherein members contribute

money into a pool system to guarantee each other against loss or
damage. Takaful-branded insurance is based on sharia or Islamic
religious law, which explains how individuals are responsible to
cooperate and protect one another. Takaful policies cover health, life,
and general insurance needs.
Takaful insurance companies were introduced as an alternative to those
in the commercial insurance industry, which are believed to go against
Islamic restrictions on ​riba (interest), al-maisir (gambling), and al-gharar
(uncertainty) principles—all of which are outlawed in sharia.
All parties or policyholders in a takaful arrangement agree to guarantee
each other and make contributions to a pool or mutual fund instead of
paying premiums. The pool of collected contributions creates the takaful
fund. Each participant's contribution is based on the type of coverage
they require and their personal circumstances. A takaful contract
specifies the nature of the risk and the length of the coverage, similar to
that of a conventional insurance policy.
The takaful fund is managed and administered on behalf of the
participants by a takaful operator, who charges an agreed-upon fee to
cover costs. Much like a conventional insurance company, costs include
sales and marketing, underwriting, and claims management​.

Takaful Operating Principles

An Islamic insurance company operating a takaful fund must operate
under the following principles:

● It must operate according to Islamic cooperative principles.

● A reinsurance commission may only be received from or paid out
to Islamic insurance and reinsurance companies.
● The insurance company must maintain two separate funds: a
participant and policyholder fund, and a shareholder fund.
Differences Between Takaful and Conventional
Insurance​:
Most Islamic jurists conclude that conventional insurance is
unacceptable in Islam because it does not conform with sharia for the
following reasons:

● Conventional insurance includes an element of ​al-gharar or

uncertainty.
● Conventional insurance is based on the concept and practice of
charging interest. Islamic insurance, on the other hand, is based
on ​tabarru​, where a portion of the contributions made by
participants is treated as a donation. This is why policyholders in
takaful are usually referred to as participants.
● Conventional insurance is considered a form of gambling.

Global Takaful Market:

According to a ​report by Research and Markets​, the global takaful
market is growing at a rapid pace. The market was worth roughly $19
billion USD by the end of 2017, with the largest segment being the
life/family market. Takaful was expected to grow to $40 billion by 2023,
according to the report, thanks in part to a large global Muslim
population—especially in the Asia-Pacific region.

[Important: Young Muslims make up about 60% of the community,

making the takaful market even more likely to grow in the future.]

Some of the largest names in the takaful market, according to the report,
were believed to be:

● Islamic Insurance Company

● Standard Chartered
● Allianz
● Prudential BSN Takaful Berhad
● Zurich Malaysia
 ● Takaful Malaysia

FIQH-AL-MUAMALAT​:
A branch of Islamic jurisprudence that deals with
commercial and business activities in an economy. Fiqh
literally means understanding of rulings and precepts, whilst
muamalat, in this particular facet, refers to economic
transactions and activities such as ​ba'i​, ​ijarah​, ​istisna'a​,
salam​, ​murabaha​, ​mudaraba​, etc. This branch of fiqh covers
the rulings that define and govern the relationship between
humans, i.e., their financial rights and obligations towards
each other.
In general, fiqh muamalat can be divided into three main
categories:

● Ahkam al-siyasah and al-jinayat: rulings and

regulations related to the political and criminal law.
● Al-ahwal al-shakhsiyah: rules and regulations
associated with family law.
● Ahkam al-iqtisad wa al-muamalah: rulings
governing the commercial transactions, exchange,
contracts and agreements and how humans deal
with each other as far as financial rights and
obligations are concerned.
General Prohibitions​:
According to muamalat, contracts ...

● should not involve the selling or buying of ​alcohol or any other

haram​ substances.
● should not include any financial
● deal on the basis of usury (​riba​)
● should not involve gambling (​maisir)​
● should not involves major uncertainty (​gharar fahish)​ (minor
uncertainty is permissible).

Contracts​:

Some contracts in Mu'amalat include:

● Sale Contract;
● Cost plus profit
● Debt (al-Qard);
● Hiring/leasing (al-Ijarah);
● Lending (al-I'arah);
● Agency (wakalah);
● Mortgage (al-Rahn);
● Partnership
● Profit Sharing
WAQALAT-UL-ISTITHMAR​:
A method (Arabic for ‫ )وﻛﺎﻟﺔ اﻻﺳﺘﺜﻤﺎر‬whereby Islamic financial institutions
manage funds on behalf of their customers. This involves providing
agency (​wakalah​) services against specific fund management fees.
These fees are typically pre-agreed and don’t vary with the profit and
loss associated with the managed funds. The fees may be fixed
(charged as a lump sum amount) or a percentage of invested funds or
their net asset value. For instance, an ​Islamic bank​ may agree with a
customer that in return for its agency services, it will receive, at the end
of every financial year, 3% of the net asset value of the funds provided
by the customer. In wakalah structure, the investment agent (the bank)
can deduct its fees from the fund no matter how the amount of profit or
loss turns out to be.
Wakalat-ul istithmar functions in the same way as ​mudaraba​, except that
the profit in mudaraba is divided between the parties according to
pre-defined percentages, while in wakala the agent (investor) receives
only the agreed ratio in return for its efforts and expertise.
Wakalat-ul istithmar is also spelled as ​wakalah bil istithmar​.

WAKALAH​:
Wakalah is an Arabic term that implies, in literal meaning, the act of
taking custody of something or applying a skill to the benefit of others.
Originally, it is derived from “tawkeel” which denotes an act of
appointing someone to take charge of an object, task, responsibility,
etc. In the context of Islamic finance and banking, wakalah (or ​wikalah​)
is a non-core contract, i.e., it exists in association with a core contract
(such as sale, lease, etc). By definition, it a contract of agency in which
one person (a principal or ​muwakkel​) appoints another (an agent or
wakeel​) so that the latter performs on behalf of the former a certain
task in accordance with specific stipulations, usually against a preset
fee. The agent (wakeel) is legally and contractually required to
discharge his responsibility in an honest and straightforward way to the
best interest of his principal (muwakkel).
TYPES OF WAQALAH​:
In general, wakalah can be classified into the following categories, all
of which is undertaken by the agent on behalf of the principal:

● Wakalah bil khusoomah​: agency for taking up disputes or

legal cases.
● Wakalah bi taqadhi al-Dayn​: agency for receiving debt.
● Wakalah bi qabdh al-Dayn​: agency for taking possession of
debt.
● Wakalah bil shira’​: agency for undertaking purchase.
● Wakalah bil ba’i​: agency for undertaking sale.
MUDARBAH​:

Mudarabah is a partnership in profit (​ribh​) in which one party (​rab

al-mal​) provides funds, while the other (​mudarib​) contributes efforts,
experience, and labor. The mudaraba contract may be concluded
using any of the following designations: mudaraba, ​mu’amala​, or
qirad (all denotes the same meaning). Like any typical ​commutative
contract​, both parties to a mudarabah contract (​aqd al-mudarabah​)
should possess the ​legal capacity by which a party can authorize the
other by way of agency (​wakalah​) or accept authorization from the
other, also by way of agency. Accordingly, mudaraba cannot be
concluded in cases where either one or both parties (or their agents)
lack absolute legal capacity.

In essence, mudarabah is not a binding contract (​aqd lazim​), as each

party has the right to terminate the contract unilaterally anytime
before maturity date (however, ​that is not possible in two cases​). In
its basic structure, mudarabah is a ​trust-based contract (​fiduciary or
amanah contract​), and in consequence, the relationship between the
two parties is one of trust as the mudarib is perceived to be investing
mudarabah funds on behalf of the capital provider (rab al-mal) where
mudarib is not liable for any losses except in case of breach of trust
(and the terms of contract) or intentional negligence (​ihmal​).
Types of Mudarabah​:
Mudarabah​, in general, can be classified based on the number of
involved parties as a ​first-tier mudarabah (simple mudarabah) and a
two-tier mudarabah (intermediary mudarabah). The second type
(two-tier mudarabah) can also be categorized as ​restricted
mudarabah​ and ​unrestricted mudarabah​.
A first-tier mudarabah is concluded between two parties without an
intermediary, whilst a two-tier mudarabah involves three parties (the
three are not connected all at a time): a depositor (capital provider),
an intermediary bank, and a user of funds (​mudarib​). The
intermediary has connections with both parties, while these parties
are not linked in any way.
An unrestricted mudarabah is one in which the capital provider
allows the mudarib to invest the mudarabah funds without any
restrictions. An example is when the capital provider permits the
mudarib to do business according to his best judgment and in
accordance with the interests of both parties without breaching the
terms of the mudarabah contract. A restricted mudarabah is a
contract whereby the capital provider restricts the actions or choices
of the mudarib by stipulating that the mudarabah business be
confined to a particular location or type of investment, etc.