Religious and socioeconomic implications of Islamic insurance: A review

Abstract

In this paper, our purpose is to evaluate religious and socioeconomic implication of Islamic insurance to the society. Islamic insurance i.e. takaful is a form of protection and wealth preservation method based on the principles of mutual cooperation, encompassing the elements of Shari"ah compliancy such as prohibitions of riba (interest/usury), gharar (uncertainty) and maysir (gambling), while upholding the virtue of mudharabah (profit sharing), wakalah (trusted agency), tabarru" (donation/charity) and ta"awun (cooperation). Recently, there are numerous literatures on religious and socioeconomic realms with regards to takaful industry due to the financial product being widely accepted in the modern day. In addition, contemporary scholars made various efforts to study the legality and feasibility of takaful as an alternative to the conventional insurance. Within the legality and feasibility of takaful, it is essential to recognize its implications to the society. As such, this paper reviews the implications of takaful products within the context of religious duty and spiritual fulfilment, at the same time towards the socioeconomic attainment. The finding of this paper embodies that takaful industry indeed substantially influence the religious and socioeconomic behavior, hence influence the society in making decision with regards to protection of their life, family as well as preservation of their wealth. Besides, this paper outlines the benefits and pitfalls of takaful which open the door for improvement. Nonetheless, this paper limits itself to the implications in general context, hence it provides space for a more focused setting in the near future. On the other hand, as this paper is evaluative in nature, review process is done via analysis of the current literature from academic papers, journals and books obtained via library and online research databases.