Risk Management in
Islamic Financial Instruments
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“treasurers” of the fund. Purchasers often view them as the fund’s actual owners.20 One distinct
feature of takaful, as mentioned above, is that the participant and the operator of the fund are
clearly segregated, with the operator’s reward being contingent upon which kind of takaful
model is used.
Figure 2.5: Takaful – Cooperative Model
Generally, the theoretical model, seen above, is, at its core, based on a mutually beneficial and
cooperative framework. Historically, the main conflict that has arisen in the context of
conversations concerning takaful models is that contributors may demand financial
remuneration in exchange for their participation in the fund. Hassan (2014) states that this has
allowed for the development of the two main takaful models, wakalah and mudarabah.
Figure 2.6: Takaful- Mudarabah on Investments
20 Al-Qyardawi (1989) quoted in Hassan, Kabir, and Maryn K. Lewis. "Governance Issues in Islamic Insurance." FMA International, 2011. Web.