The Concept of Takaful (Insurance) and Risk Management in Islam
TAKAFUL
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INTRODUCTION: Insurance is not a new concept within Islam. The principle of a person protecting himself against loss or misfortune is even described in the Qur'an through stories of some of the prophets. In Arabic this concept is known as "takaful". It is acknowledged that the foundation of shared responsibility or Takaful was laid down in the system of "Aaqilah", which was an arrangement of mutual help or indemnification. In case of any natural calamity, every body used to contribute something until the loss was indemnified. Similarly, the idea of Aaqilah in respect of blood money or any disaster was based on the concept of Takaful wherein payments by the whole tribe distributed the financial burden among the entire tribe. Islam accepted this principle of reciprocal compensation and joint responsibility.
It is also a generally accepted view that Islamic insurance was first established in the early second century of the Islamic era. This was the time when Muslim Arabs started to expand their trade to India, Malay Archipelago and other countries in Asia. Due to long journeys/voyages, they often had to incur huge losses because of mishaps and misfortunes or robberies along the way. Based on the Islamic principle of mutual help and cooperation in good and virtuous acts, they got together and mutually agreed to contribute to a fund before they started their long journey. The fund was used to compensate anyone in the group who suffered losses through any mishap. In fact the Europeans copied this, which was later known as marine insurance.
DEFINITION: Takaful, means "guaranteeing each other", is the same as insurance. It represents the concept of insurance based on mutual co-operation and solidarity of people by participating in a takaful scheme. Takaful (which is based on the concept of social solidarity,
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INTRODUCTION: Insurance is not a new concept within Islam. The principle of a person protecting himself against loss or misfortune is even described in the Qur'an through stories of some of the prophets. In Arabic this concept is known as "takaful". It is acknowledged that the foundation of shared responsibility or Takaful was laid down in the system of "Aaqilah", which was an arrangement of mutual help or indemnification. In case of any natural calamity, every body used to contribute something until the loss was indemnified. Similarly, the idea of Aaqilah in respect of blood money or any disaster was based on the concept of Takaful wherein payments by the whole tribe distributed the financial burden among the entire tribe. Islam accepted this principle of reciprocal compensation and joint responsibility.
It is also a generally accepted view that Islamic insurance was first established in the early second century of the Islamic era. This was the time when Muslim Arabs started to expand their trade to India, Malay Archipelago and other countries in Asia. Due to long journeys/voyages, they often had to incur huge losses because of mishaps and misfortunes or robberies along the way. Based on the Islamic principle of mutual help and cooperation in good and virtuous acts, they got together and mutually agreed to contribute to a fund before they started their long journey. The fund was used to compensate anyone in the group who suffered losses through any mishap. In fact the Europeans copied this, which was later known as marine insurance.
DEFINITION: Takaful, means "guaranteeing each other", is the same as insurance. It represents the concept of insurance based on mutual co-operation and solidarity of people by participating in a takaful scheme. Takaful (which is based on the concept of social solidarity,