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Innovation in Takaful: The Musharakataan Business Model
Abstract
Takaful, an alternative to conventional insurance, is based on Shari'ah principles. It is founded on the concept of ta'āwun, which means “mutual assistance”. The practice of Takaful is to provide participants financial security based on mutual responsibility and assistance. The primary objective of Takaful is not to maximize profits as in conventional insurance but rather to help participants—in a spirit of solidarity—to face well-defined risks. Despite its steady growth, the Takaful industry faces many challenges. The core issue remains, the structure and application of the Takaful business model. This chapter critically analyzes the main business models and proposes a Takaful business model that matches the expectations of both the shareholders and the participants in line with Shari'ah rules and principles. The model is structured on Musharakah principles at both the shareholder and participant levels and has been termed “The Musharakataan Business Model.”
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