The astonishing results of the underestimated Islamic Banking in Pakistan have compelled the decision makers of normal
interest-based banks to dedicate at least one of their branches as Islamic Bank. With such a wide spread appreciation from
the general public in respect of Islamic Banking it is expected that any Islamic product like Takaful will reap the same result
because Muslim jurists conclude the fact that insurance in Islam is based on the principles of mutuality and
cooperation. Such Insurance encompasses the elements of shared responsibility, joint indemnity, common
interest and solidarity. This article is an endeavour to understand ifs and buts of Takaful, corporate law areas and taxation
aspects.
Concept of Takaful
Muslim jurists acknowledge that the basis of shared responsibility in the system of "aquila" as practised between Muslims of
Mecca and Medina laid the foundation of mutual insurance. Islamic insurance was established in the early second century of
the Islamic era when Muslim Arabs expanding trade into Asia mutually agreed to contribute to a fund to cover anyone in the
group that incurred mishaps or robberies along the numerous sea voyages (marine insurance).
Takaful is an Arabic word meaning “guaranteeing each other” or joint guarantee. The Tabarru' system is the main core of the
Takaful system making it free from uncertainty and gambling. Tabarru' means "donation; gift; contribution." Each participant
that needs protection must be present with the sincere intention to donate to other participants faced with difficulties.
Therefore, Islamic insurance exists where each participant contributes into a fund that is used to support one another with
each participant contributing sufficient amounts to cover expected claims. The objective of Takaful is to pay a defined loss
from a defined fund.
interest-based banks to dedicate at least one of their branches as Islamic Bank. With such a wide spread appreciation from
the general public in respect of Islamic Banking it is expected that any Islamic product like Takaful will reap the same result
because Muslim jurists conclude the fact that insurance in Islam is based on the principles of mutuality and
cooperation. Such Insurance encompasses the elements of shared responsibility, joint indemnity, common
interest and solidarity. This article is an endeavour to understand ifs and buts of Takaful, corporate law areas and taxation
aspects.
Concept of Takaful
Muslim jurists acknowledge that the basis of shared responsibility in the system of "aquila" as practised between Muslims of
Mecca and Medina laid the foundation of mutual insurance. Islamic insurance was established in the early second century of
the Islamic era when Muslim Arabs expanding trade into Asia mutually agreed to contribute to a fund to cover anyone in the
group that incurred mishaps or robberies along the numerous sea voyages (marine insurance).
Takaful is an Arabic word meaning “guaranteeing each other” or joint guarantee. The Tabarru' system is the main core of the
Takaful system making it free from uncertainty and gambling. Tabarru' means "donation; gift; contribution." Each participant
that needs protection must be present with the sincere intention to donate to other participants faced with difficulties.
Therefore, Islamic insurance exists where each participant contributes into a fund that is used to support one another with
each participant contributing sufficient amounts to cover expected claims. The objective of Takaful is to pay a defined loss
from a defined fund.
