Shari’ah and ethical issues in the practice of the modified mudharabah family takaful model in Malaysia
Takaful is known as a Shari’ah compliant insurance in Muslim and non-Muslim countries. In this regard, Malaysia is a global leader in offering Islamic financial products and supports takaful. Due to the rapid growth of the takaful industry, the prevailing guidelines and regulations might not be...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
International Association of Computer Science and Information Technology (I A C S I T)
2013
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/32865/ http://irep.iium.edu.my/32865/ http://irep.iium.edu.my/32865/ http://irep.iium.edu.my/32865/1/MUDARBAH_ISSUES.pdf |
| Summary: | Takaful is known as a Shari’ah compliant
insurance in Muslim and non-Muslim countries. In this regard,
Malaysia is a global leader in offering Islamic financial
products and supports takaful. Due to the rapid growth of the
takaful industry, the prevailing guidelines and regulations
might not be adequate to capture the current needs of takaful
operations. This has led to certain criticisms of the practice of
the takaful industry from Shari’ah and ethical aspects. It is
important to examine these issues because Shari’ah compliance
and ethicality are the distinguishing factors that differentiate
takaful from conventional insurance. If these issues are not
resolved, participants and investors are set to lose confidence in
the takaful industry. This paper focuses on the Shari’ah and
ethical issues related to profit (surplus) sharing practice and the use of interest free loans in the modified mudarabah model used in family takaful products. The findings of this paper reveal the existence of unfavorable Shari’ah and ethical issues in the practice of takaful operations in Malaysia. As a result, the paper suggests that the regulators, Shari’ah advisors and industry players should revisit these issues in order to avoid reputational risk, Shari’ah compliant risk and early
termination risk. |
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