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15

since the beginning of the 19

th

century. Unlike the issue of usury (

riba

), which is well defined in

the primary sources of Islam - the Holy Qur’an and Sunnah - as anything claimed by a lender

froma borrower above the principal of a debt or a loan (as explained in

surah

“al-Baqarah”, verse

275), the concepts of mutual solidarity, cooperation and insurance are left to the

ijtihad

(independent legal deduction) of Muslim jurists, to decide upon, depending on the

maslahah

(public benefit or utility). Hence, this has resulted in different opinions (Chachi, 2017).

Therefore, with the advancement in civilization, emergence of nation-states across the world

and the rising volumes of trade and commerce and the resulting complexity of life, new risks

emerged in an increasing manner that required the attention of policymakers. The more

mankind looks into the future, the more they encounter inexplicable uncertainties as Sidiqqi

(2000) pointed out. He argued that: “

handling risk and uncertainty became an increasingly

prominent aspect of economic life, even for ordinary men and women. Early ways and means of

handling risks and uncertainty took simple forms of cooperation between the near and the dear.

Pooling, sharing, diversification all occurred within the framework of trust, reciprocity and

mutuality. That was insurance/Takaful

”. He further reasoned: “

As uncertainties increased and risk

became more complex, shifting risks to those willing to take them (in expectation of gain, of course)

and unbundling them into manageable parts took new forms.

” (Sidiqqi, 2000).

Based on the fundamental Islamic principles of cooperation and social solidarity, preserved in

the Qur’an and Sunnah, every member of the early Islamic societies was naturally insured by his

relatives, neighbours and by the state against any misfortune that may happen to him. That is

why some of the contemporary Muslim scholars, like Abdullah Al-Qalqeeli (1961), Shawkat Al-

Ulayyan (1981), Suleyman Al-Thenayan (1993) and others, think that there is no need for

commercial or even

Takaful

insurance companies to exist. However, given the complexity of life

and the need for organised insurance, contemporary Muslim scholars agree that solidarity and

cooperation among the people are not only recognised but encouraged in any form possible,

including in an organised manner that would help in achieving the original value proposition of

Islamic economic principles. However, they disagree on the form of solidarity and cooperation

that such solidarity and cooperation may take. This is undoubtedly in view of its great

importance in reducing the impact of risk and uncertainties, pooling contributions from the

member of participants, investing the collected funds in profitable businesses, employing a

skilled staff to manage them, compensating the victims of misfortunes and, thus, contributing to

economic growth and development and also to social harmony and political stability of the state.

The Islamic finance industry is made up of three sections: Islamic banking, Islamic capital

markets and Islamic insurance or

Takaful

. Among other segments of Islamic finance, Islamic

insurance, which is called

Takaful

is the objective of this study. Being one of the major

constituents of the modern Islamic finance industry, the theory and practice of

Takaful

are based

on fundamental principles of Islamic finance. The concept of Islamic finance is based on some

core tenets of Islam, relating to just wealth distribution, property rights, social and economic

justice, and proper good governance. Given the Islamic finance industry’s current volume and

composition, Islamic finance has become an integral part of the global financial system. It has