Shariah Appraisal of the Takaful Model Based on ‘Tabarru’ (Donation)

By Farrukh Habib & Mughees Shaukat

Abstract

The perception of donation (‘Tabarru’) is one of the basic elements in most of the composition of Takaful models. It intends not only to facilitate the modern Takaful structures from an Islamic law perspective, as it immunizes these structures from prohibited factors; but also to promote the noble concept of Islamic law of contracts, which is risk sharing among the participants of an Islamic financial system, or of a Takaful scheme for that matter. However, in current Takaful practices, the notion of ‘Tabarru’ is quite vague and controversial. It is argued that the concept of ‘Tabarru’ has been implemented while following only the letters of the Islamic law, but not the spirit. In order to support such practices, some dubious and perplexing explanations have been utilized; making the whole structure of such Takaful models questionable. This study critically examines the ‘Tabarru’ based models of Takaful; our analysis shows that the present practices of ‘Tabarru’ based Takaful models, renders it more in violation of Shariah ordainments than in compliance to them. Such deviations lead to an increasing absence of risk sharing in finance; a necessary requirement of an Islamic economic system. Therefore, it is suggested that the ‘Tabarru’ structure, as implemented today, needs to be re-examined and reformed on the basis of the concept of risk-sharing.