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ISLAMIC MUAMALAT
OF TAKAFUL
Introduction to Shariah
Objective of Shariah
Shariah is the entire body of Islamic law, and the term literally means "the way to the water
source." It is a wide-ranging body of law and personal rules, regulating matters not limited to
jurisprudence, politics, business, banking, family, and society. The main objectives of the
Shariah is to ensure that human life is based on maruf (good) and to cleanse it of munkar
(evils). The term maruf denotes all the qualities that have always been accepted as good by
the human conscience, and conversely, the world munkar denotes all those qualities that have
always been condemned by human nature as evil.
Broken down to its bare elements, Islam comprises of Aqidah (a set of beliefs), Shariah (a set
of laws) and Akhlak (a code of moralitie).
Aqidah means a set of beliefs. From the Islamic point of view, Aqidah means strong belief in
Allah s.w.t, His Prophets and the hereafter, also belief in the angels, the holy books and
predestination.
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Shariah or Islamic law is also known as Fiqh . Fiqh is Islamic jurisprudence. Fiqh deals with
the observance of rituals, morals and social legislation in Islam. Branches of Fiqh includes
Ibadat, Muamalat, Munakahat and Jinayat.
Fiqh Ibadat
The rules of ritual purification, prayer, pilgrimage, fasting, zakat, jihad and some other forms
of worship are dealt under this heading. Most of these rules deal with the rights owed to Allah
s.w.t by the individual alone or by the community as a whole.
Fiqh Muamalat
This area deals with property, contracts, business organisation, security of debts and
insolvency, pre-emption, gifts, bequests and waqfs.
Fiqh Munakahat/Usrah
This area deals with marriage, divorce, inheritance, guardianship and related matters. This is
similar to conventional version known as personal law.
Fiqh Jinayat
This area deals with major offences like illicit sexual (zina), theft (sariqah), robbery, pirate
and brigandage (hirabah), and other matters collectively known as hudud laws.
Akhlaq is a term referring to the practice of virtue, morality and manners in Islamic theology
and falsafah (philosophy). It refers to ones disposition, nature, temper, ethics, morals or
character (of a person). Akhlaq covers all aspects of Muslim behaviour, attitude and work
ethics which influence his acts.
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Wajib (obligatory)
The term wajib means an act the performance of which is obligatory for the subject. Example:
performing solat and fasting in month of Ramadhan. In its technical sense, it is an act whose
commission is demanded by the Lawgiver (Allah s.w.t) in certain and binding terms.
Mandub (recommended)
Mandub is defined as a demand by the Lawgiver (Allah) for the commission of an act without
making it binding and without assigning any blame for its omission. The rule for mandub is
that for doing so there is reward (thawab) for the doer, while omitting it entails no penalty
such as giving charity to the others.
Haram (prohibited/unlawful)
Haram is defined as one which omission is required by the Lawgiver (Allah) in binding and
certain terms. An example of prohibited act (Haram) is the misappropriation of anothers
wealth.
Mubah (permissible)
The Mubah or permissible act is one in which the Lawgiver (Allah) has granted a choice of
commission and omission, without blame or praise for omission or commission. According to
this principle, all contracts and transactions are permissible, unless there is evidence
indicating otherwise.
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Secondary Source
i.
Ijma
Ijma is Juristic consensus of opinion of the imams mujtahid among Muslims in a particular
time after the death of the Prophet (s.a.w.) regarding the legal position of a matter or problem.
In its application, Ijma is an agreement of Muslim jurist in the event the ruling being sought
is not found in either of the main sources ie the Quran and the Sunnah. All the mujtahidin
must reach a consensus on a juridical opinion at the time an issue arises.
ii
Qiyas (Analogy)
Qiyas means to equate the legal position of a matter that has no ruling from the Quran and the
Sunnah to one that has due to the illat (underlying cause or reason) of the ruling. In other
words, the mujtahids refer back to the Quran and the Sunnah and make an analogical
reasoning between a new matter that has no ruling with the one that already has a ruling.
Literally, it is the extension of a Shariah value from the original case to a new case, because
the new case has the same effective cause as the original case.
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iii
Maslahah
Maslahah ('public interest') is a concept in traditional Islamic Law, invoked to prohibit or
permit something on the basis of whether or not it serves the public's benefit or welfare. The
concept is related to that of Istislah. While the meaning of maslahah is 'public interest', the
meaning of istislah is 'to seek the best public interest'.
iv
Urf
Urf is a term referring to the custom or 'knowledge' of a given society, leading to change in
the fiqh. `Urf is a source of Shariah rulings where there are no explicit primary texts of the
Qur'an and Sunnah specifying the ruling. `Urf can also specify something generally
established in the Quran and sunnah.
v
Istishab
Istishab means presumption of existence or non-existence of facts. It can be used in the
absence of other proofs (dalil). Istishab relates to the sense that the past accompanies the
present without any interruption or change.
vi
Istihsan
Istihsan means juristic "preference". Muslims scholars may use it to express their preference
for particular judgments in Islamic Law over other possibilities. It is one of the principles of
legal thought underlying personal interpretation or ijtihad.
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are equally bound by each other under contract of Wakalah. In Takaful business, the
participants appoint the takaful operator as their wakil and to manage their takaful coverage
and the takaful fund. The wakalah contract is practiced by all takaful operators in Malaysia
most of the takaful operators worldwide operational under the wakalah model
iv.
Ujrah
A contract of hiring whereby one person hires someone for definite services, in which the
hirer is under the duty to provide a reward for the services rendered to him.
In Takaful
business, the participant contributes to the Takaful fund by a mutual agreement that the
takaful operator is entrusted to manage the takaful fund prudently in terms of investment and
pay out takaful benefits to the eligible participants in the event of a misfortune. The takaful
operator is entitle to a fee for the service rendered. The Ujrah contract is practiced by all
takaful operators in Malaysia most of the takaful operators worldwide operational under the
wakalah model.
v.
Ju'alah
A contract of hiring for services, in which one party undertakes to pay a specified amount of
money for rendering a defined service in accordance with the terms negotiated between them.
In Takaful business, the participants contribute a sum of money to the takaful fund.
The takaful operator is entrusted to manage the takaful fund prudently in terms of investment
and pay out takaful benefits to the eligible participants in the event of a misfortune. The
takaful operator is entitle to a fee for the service rendered. The Jualah contract practiced by
all takaful operator in Malaysia and most of the takaful operators worldwide operational under
the wakalah model.
vi.
Mudharabah
The nature of Mudarabah (profit sharing) practices is that, it is a financial contract whereby
one party called Rabbu al-Mal provides fund to the other party called Mudharib who
undertakes to manage the fund through investment or trade and generates profits, in which
both the Rabbu al-Mal and also the Mudharib shre in the profit in a pre-agreed proportion. In
Takaful business, the participants contribute a sum of money to the Takaful fund in which the
participants are like Rabbu al-mal, while the Takaful operator is like Mudharib who agrees to
manage the fund in view of making profit in which both, the participants and also the operator
share the profit proportionately. Mudharabah contract as practiced by Syarikat Takaful
Malaysia when it first started operation. However, for some takaful operators in Malaysia
Mudharabah is still practiced only on certain products.
vii.
Musharakah
The contract of Shirkah (partnership). Musharakah is an agreement between two or more
parties to operate a particular business in which all parties contribute to the capital in view of
profit. In al-Musharakah dealing, the parties involved herein share the liability, profit, and also
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loss according to their agreement. In Takaful business, the respective shareholders mutually
agree to contribute a sum of money to initiate the takaful business. This mutual agreement
among the shareholders is called musharakah. Musharakah contract is practiced among all the
Shareholders of all takaful operators in Malaysia and most of the takaful operator worldwide.
Both parties to the insurance contract do not know exactly what their obligations and
responsibilities are to each other, neither the insurer nor the insured knows the
outcome of the contract
The insured does not know the amount of compensation he is likely to get in case of
an accident or a peril as the insured does not know if there will be compensation as the
outcome of the contract is not known
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The insurer does not know when the peril will occur.
There is no equity in insurance in that the insured has got to pay the premium but if
the peril insured against does not happen, the insured is not paid anything at all.
Insurance is a promise to pay compensation which is sometimes fulfilled and
sometimes not. Uncertainty in the results of the exchange as at the point the contract is
made, the result of the exchange is still uncertain.
Riba
The word riba literally means increase in or addition to anything. Islam has prohibited
lending of money for profit because it is often ruinous to the borrower and at the same time
makes the lender obnoxious and sullen.
Prohibition Justification
O you who believe, devour not usury, doubling and quadrupling, the sum lent. Fear Allah
and observe your duty to Him, that you may really prosper. Al-Imran 3:130
Types of Riba
Riba Duyun.
Riba Qardh. - Where interest is agreed upon at time of contract.
Riba Jahilliyah. - The increase levied on the borrower for late or failure to repay the loan.
Riba Buyu.
Riba Fadhl. - The difference in weight, volume and quantity.
Riba Nasiah. - The difference in time.
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CHAPTER 1 INTRODUCTION OF
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OF TAKAFUL
Maisir
The word Maisir means getting something too easily or getting a profit without working for it.
Islam forbids all forms of business in which the monetary gain comes from mere chance or
speculation and not from work. Unlike gharar which is tolerated to a certain degree, maisir is
not accepted at all.
Prohibition Justification
O Believers! Intoxicants and gambling - and divining arrows are an abomination of satans
handywork. Leave it aside in order that you may prosper. - Al Maidah 5:90
Maisir in Insurance Contract:
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