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capital, risk governance, and transparency and disclosure are in place to ensure stability and
sustainability of the financial institutions including TOs. In addition, there are also prudential
standards and requirements which specifically cater to distinct features of Islamic finance.
These standards strengthen the governance of TOs, provide greater clarity on the use of multiple
Shari'ah contracts in the models and structures of Takaful, and safeguard the interests of Takaful
participants.
In general, the Takaful industry lacks a comprehensive legal and regulatory framework. The
major challenges include lack of Takaful Act, specific laws and standardization of financial
accounting and reporting, and tax laws related to Takaful. For example, in Turkey there is no
specific Takaful act. The banking sector in the country is mainly regulated by BRSA and CMB. In
contrast, Malaysia has Takaful regulatory framework in place pending specific laws.
8.2. Shari'ah Framework
All the activities of Takaful must be guided by the Shari'ah . Apparently, there is a variation to the
degree of Shari'ah framework for Takaful in the four countries selected for this study: Saudi
Arabia, Malaysia, Turkey and UK. Among all the four countries, Malaysia has made tremendous
progress in terms of Shari'ah framework for Takaful. Its Islamic Financial Service Act (IFSA,
2013) provides a comprehensive Shari'ah framework that recognizes the specificities of Takaful.
TABLE 23: S HARI'AH I SSUES AND POLICY RECOMMENDATIONS
No Issues Policy Recommendation Country Affected
2 2.1. Absence of a comprehensive
Shari'ah governance framework
for Takaful
Developing a Shari'ah
governance framework
for Takaful
UK, Turkey and
Saudi Arabia
2.2. Lack of Takaful Shari'ah
standards
Developing Takaful
Shari'ah standards
UK, Turkey and
Saudi Arabia
2.3. Conflict between the existing
legal framework and Shari'ah
requirements
Harmonizing the existing
legal framework with
Shari'ah requirements
Applies to all the
four countries
2.4. Absence of Shari'ah conflict
resolutions
Establishing Shari'ah units
for conflict resolutions
and empowering Shari'ah
committees
UK, Turkey and
Saudi Arabia
Source: Authors
The Shari'ah Advisory Council (SAC) as part of the Shari'ah governance framework is the apex
authority that guides the Takaful industry on Shari'ah related issues. IFSA has also paved the
way for the development of various Shari'ah standards to guide TOs. These standards
strengthen the governance of TOs, provide greater clarity on the use of multiple Shari'ah
contracts in the models and structures of Takaful, and safeguard the interests of Takaful
participants. In the other three jurisdictions, Turkey, Saudi Arabia and the UK, there is the
absence of Islamic finance and Takaful act and lack of central Shari'ah board. The insurance