What is Takaful in Islamic Banking

In a nutshell, takaful refers to a type of Islamic insurance that can be both provided and purchased in full compliance with Shariah law. The system differs from traditional western insurance in that members of the scheme contribute financial resources to create a collective pool, which in turn guarantees and protects each contributor from loss or damage. It is therefore regarded as a system of mutual benefit where cooperating individuals protect each other, rather than simply profiting from the system. A full understanding of takaful-branded insurance is essential for anyone looking to make it in the world of Islamic banking and finance.

Study the role, the value and the mechanics of takaful with this advanced financial tutorial. Learn why conventional insurance is prohibited under Shariah law, along with the Shariah basis of takaful, the main objectives of the takaful system and how the modern takaful system works. Additional concepts introduced include models of takaful, the wakalah model, the mudharabah model, issues in the mudarabah model, issues in wakalah and wakalah–mudarabah models, takaful and conventional insurance compared, status and potential of the takaful industry, takaful challenges and more.