Challenges and Opportunities
Studies in Islamic Finance, Accounting and Governance series
Edited by S. Nazim Ali and Shariq Nisar
Chapter 4: A proposed marriage between endowments, mutual insurance and the institution of agency in Islamic law: an introduction to the waqf-wakalah model of takaful
The chapter proposes that the waqf-wakalah model of takaful is the most shari’ah compliant and is best suited to serve as a viable lslamic alternative to conventional insurance. It discusses the mindset among many consumers that takaful is the same as conventional insurance, evaluates controversial practices within the takaful industry that reinforce this prevailing attitude and analyses the effects such practices have had in stunting the growth of the takaful industry. The chapter provides an overview of the three major unlawful elements of contemporary insurance, that is, riba, qimar and gharar, and describes how these elements are avoided in different takaful models in light of expert research. The chapter also highlights the history of the waqf model along with some of its salient features such as the waqf of money, the independent legal entity of the waqf fund and the right of the donor to benefit from the endowment. Finally, the chapter addresses some criticisms of the waqf model that have been lodged by shari’ah experts and practitioners and examines the practical challenges of implementing the waqf model in the United States.
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