Comparative Study of Insurance and Takafol (Islamic Insurance)

Ibn Abidin (1784-1836) was the first scholar in the Muslimworld to discuss the meaning and legal character of insurance.1Islamicity of insurance has been under discussion since then. Opinionsregarding legitimacy, adoption, and adaptability of insurance arenumerous. Recently, however, a consensus was emerging for adaptinginsurance in the name of takafol and solidarity. As a result, severalIslamic takafols and solidarity companies have been established since1979. During the last decade the Council of Islamic Ideology Pakistan(ClIP) reviewed the operations of the existing takafols in order to finda suitable model for Pakistan.2 While declaring all of them incompatiblewith the injunctions of Islam, the ClIP proposed its own model oftakafol, instead. Its rejection of existing takafols is a littleparadoxical since the operations of all the takafols are claimed to becompatible with the Shariah. Each takafol guarantees Shariahcompatibility of its operations by sUbjecting itself to the dictates ofa Shariah Supervisory Board, which are empowered to review the company'spractices, contracts, transactions and operations. This paper attemptsto delineate the points of contact and convergence between insurance andtakafol, and to .make recommendations for possible improvement in thetakafol concept. The study is organised as follows: Islamic debate oninsurance, with special reference to its application to takafols, isreviewed in Section II. Pertinent operational features of takafols arecompared with insurance in Section III. The ClIP model is examined inSection IV. The final section features proposals meant to augment theconformity of takafol with the principles of Shariah.