Evaluation of Contemporary Takaful ¯ Practices from the Perspective of Maqas¯ . id-al-Shar¯ı‘ah

Abstract

Purpose: Insurance has always been a matter of concern among Islamic scholars owing to its involvement in interest, gharar, gambling, and other prohibited elements. Tak¯aful has been introduced, as a Shar¯ı‘ah compliant alternative to conventional insurance. However, Shar¯ı‘ah scholars and economists have reservations and doubts regarding the current practices of tak¯aful with regard to maq¯as. id-al-Shar¯ı‘ah. Methodology: The current study has examined as to how far the current tak¯aful practices are in conformity with the objectives of Shar¯ı‘ah relevant to Islamic finance and tak¯aful. For this purpose, at first place, the study identified the related objectives of Shar¯ı‘ah through utilizing the classical and contemporary writings on the subject. For the current study, the important objectives of Shar¯ı‘ah i) h. ifz . al-d¯ın, ii) h. ifz . al-m¯al, iii) establishment of justice, fairness and equity, and iv) social welfare and wellbeing of the society, have been selected, as they are very close to and directly linked with the Islamic finance. Findings: The paper finds that current tak¯aful practices meet, to a greater extent, requirement of a valid or Shar¯ı‘ah compliant transaction. However, these tak¯aful institutions have failed to achieve the desired objective of Shar¯ı‘ah related to financial dealings. Tak¯aful institutions lack transparency and fairness in their transactions. Moreover, many unethical practices have been reported on part of tak¯aful agents. Significance: The study is unique in its nature as tak¯aful practices have not been analyzed against these four specific maq¯as. id of Shar¯ı‘ah. The study may open a discussion on the objectivity of tak¯aful institutions in the context of Pakistan. The study would also help tak¯aful institutions in reformulating their policies in the light of objectives of Shar¯ı‘ah.