E-BOOK OF PRINCIPLES AND PRACTICES OF TAKAFUL AHMAD YUSRI BIN ABD NASIR ZULAIKHA BINTI ZAINUDDIN NUR ALIAH HASNA BINTI ANWAR HOSSAIN ABUL HOSSAIN
E-BOOK OF PRINCIPLES AND PRACTICES OF TAKAFUL AHMAD YUSRI BIN ABD NASIR ZULAIKHA BINTI ZAINUDDIN NUR ALIAH HASNA BINTI ANWAR HOSSAIN ABUL HOSSAIN
Preface Principles and Practices of Takaful is the concept of Takaful has emerged as a significant alternative to conventional insurance, offering a Shariah compliant framework that aligns with the principles of Islamic finance. There is decrease in grades among insurance diploma students for this subject because students starting lost interest in learning theories subject. The main objective of this project is to simplify and enhance the learning process aiming to make studying more captivating and interactive. Additionally, it has the potential to reduce the workload of educators by eliminating the need to constantly develop new teaching materials, thereby introducing students to innovative technology like this project. Pre and post-test forms are distributed to students and according to the results of the survey form, most students are satisfied with the e-book that will be established because it will make it easier for them to obtain various materials from a single source. This project is develop using the SAM Model in order to generate an e-book that provides an interactive and flexible platform for students. This ebook is more user friendly since it includes animation, video, interactive exercises, quizzes, riddles and other elements. Students will be intrigued to learn if this e-book is included into teaching and learning activities. It is created specifically for Polytechnic students studying Principles and Practices of Takaful. AHMAD YUSRI BIN ABD NASIR SITI RAWAIDAH BINTI MOHD RAZIKIN ZULAIKA BINTI ZAINUDDIN NUR ALIAH HASNA BINTI ANWAR HOSSAIN ABUL HOSSAIN
BIOGRAPHY NAME : SIR AHMAD YUSRI BIN ABD NASIR INSTITUTION : POLITEKNIK PREMIER SULTAN SALAHUDDIN ABDUL AZIZ SHAH, SHAH ALAM, SELANGOR NAME : ZULAIKHA BINTI ZAINUDDIN INSTITUTION : POLITEKNIK PREMIER SULTAN SALAHUDDIN ABDUL AZIZ SHAH, SHAH ALAM, SELANGOR NAME : CIK SITI RAWAIDAH BINTI RAZIKIN INSTITUTION : POLITEKNIK PREMIER SULTAN SALAHUDDIN ABDUL AZIZ SHAH, SHAH ALAM, SELANGOR NAME : NUR ALIAH HASNA BINTI ANWAR HOSSAIN ABUL HOSSAIN INSTITUTION : POLITEKNIK PREMIER SULTAN SALAHUDDIN ABDUL AZIZ SHAH, SHAH ALAM, SELANGOR
ACKNOWLEDGMENT Above all, we would like to express our heartfelt gratitude to the divine, Allah SWT, for enabling us to finalize this e-book within the designated timeframe. We would like to thank Dr. Mohd Zahari bin Ismail, the director of Politeknik Sultan Salahuddin Abdul Aziz Shah, for providing us with the opportunity to hone our talents in mobilising ideas and creativity through this e book and publishing e-book for reference to all students and lecturers at Politeknik Sultan Salahuddin Abdul Aziz Shah and at other institutions for current and future lessons. Furthermore, we extend our heartfelt appreciation to our supervisor, Sir Ahmad Yusri Bin Abdul Nasir and Miss Siti Rawaidah Binti Razikin for their invaluable guidance in crafting this e-book, which now encompasses the entire syllabus along with knowledge and exercises for use as a reference in the lessons. We are also grateful for his continuous support as a lecturer at Politeknik Sultan Salahuddin Abdul Aziz Shah throughout this e-book publication process. Additionally, we are deeply thankful to our parents for their unwavering prayers, moral support and encouragement as well as to other family members who have been involved. Finally, we extend our sincere appreciation to everyone who contributed including parents, lecturers and all our dedicated partners who worked tirelessly to ensure the timely completion of this e-book. We hope that our diligent efforts in creating this interesting e-book will provide a valuable reference for future generations seeking knowledge.
Table of content Topic 1 Topic 2 Topic 3 Topic 4 Topic 5 Topic 6 Topic 7 1 - 22 23 - 49 50 - 64 65 - 79 80 - 89 90 - 127 128 - 132
TOPIC 1 INTRODUCTION TO SHARIAH & MUAMALAT Page 1
Recognize the basic of Shariah 1. Recognize the basic of Muamalat 2. Page 2 CONTENT At the end of this topic you should be able to:
INTRODUCTION TO SHARIAH & MUAMALAT Page 3 A glimpse on concept of Islam Islam means ‘Peace’ Islam is Ad-Deen (Way of life) Islam comprises of the following elements scope: Aqidah ( A set of beliefs ) Shariah ( A set of law ) Akhlaq ( A code of moralities )
Page 4 Concept of Ad-Deen
Introduction to Shari’ah The word "shari'ah" means "a way." In Islamic terminology, it means the legal system of Islam. Shariah is a God-made law ( law from the creator) God as the creator, fully knows the humans as well as the world in which they live God-made laws are superior because of the following facts: God is above class status God is above racial prejudice God is above the general rivalry Page 5
Munakahat Jinayat Ibadah Rules of Worshipping Ritual prayer, fasting, zakat, jihad and etc Page 6 Concept of Shariah Muamalat Trade and commercial law Rules relating to commercial transaction Involving property, contracts, business, debts, and etc Family law of Islam Dealt with marriage, divorce, inheritance, guardianship and etc Criminal law of Islam Dealt with theft, murder, illicit sexual(zina) and etc
SOURCES of Shariah Page 7
Objective of Shari’ah/Maqasid Shariah Maqasid al-Shari’ah is the aims or goals intended by Islamic law for the realization of benefit to mankind. The primary objective of Islamic law is the realization of benefit to mankind concerning their affairs both in this world and the hereafter. It is generally held that Islamic law in all its branches aims at securing benefit for the people and protecting them against corruption and evil. Page 8
Maqasid shariah 1) Preservation of Religion Preservation and protection of Deen under all circumstances. Example, defending the Islamic faith particularly if it attacked by the enemies of Islam. 2) Preservation of Life The preservation and protection of life under all circumstances. Example, in order to protect life is enacting a severe punishment for those who kill another. Page 9
3) Preservation of Lineage The preservation and protection of descendants and honor under all circumstances. Example, Islam is prohibit it followers in committing adultery. 4) Preservation of Intellect The preservation and protection of intellect in all circumstances. Example, the consumption of liquor or similar substances that will affect the functions of the brain. 5) Preservation of Property The preservation and protection of property under circumstances. Example, the pro-active initiatives and planning in safe guarding ones property against misfortunes Page 10
ISLAM AND SHARIAH OVERVIEW Page 11
Muamalah is from the verb “aamala” literally meaning to interact. Muamalat means interactions or transactions. Fiqh Muamalat refers to the understanding of commercial or business transactions which are concluded through contracts permitted by the Shariah as evidenced by the Quran, the Sunnah and other sources of Islamic Law. Fiqh Muamalat/adat governs the relationship and interaction of humans among themselves. It includes Munakahat (Family law), Muamalat (commercial law), jinayat (offences, crimes and punishments), siyasah shariyyah (constitutional law & administration), alaqah dawliyyah (laws on diplomatic relations). MUAMALAT Page 12
Prohibited elements in Muamalat RIBA MAISIR Page 13 Any increment incurred upon specific usurious items and upon debt due to the deferred payment term. GHARAR Uncertainty regarding the subject matter being contracted. A game of pure chance where any party might gain at the expense of the loss of the other party.
Concept of contract in Muamalat TABARRU’ Unilateral declaration of intent to give a favour to recipient without any consideration in return. In Takaful, participant commits to donates the contribution regularly. it is a Tabarru’ with conditions : In the event of misfortune, participant will get sum covered. 1. Tabarru’ rate is based on risk carried by participant. 2. Page 14
MUDARABAH Profit sharing agreement between two parties, the first is the provider of capital (rabb al-mal) and the second is the provider of expertise (mudharib). The investment profit will be shared between participants and the takaful operator based on a agreed ratio. Any losses will be borne by participant. Page 15
An arrangement whereby one party (the principal) delegates another (agent) to act on its behalf in a known and permissible dealing. Participants authorised the Takaful Operator to manage and invest the contribution. The Takaful Operator is entitled to receive fees as pre-agreed in the beginning of the contract. WAKALAH Page 16
A contract in which one party offers specified compensation to anyone who achieve a determined result in a known or unknown period. In Takaful, this concept used in situation where surplus is shared among participants and Takaful Operator. Takaful operator is entitled to the surplus if they can achieve the surplus in the Participant’s Risk fund. JU’ALAH Page 17
QARD Transfer of ownership in fungible wealth to a person on whom it is binding to return wealth similar to it without any increment in amount. In the event of deficit in the Participant’s Risk Fund, Takaful operator will arrange for Qard. Page 18
HIBAH A unilateral voluntary contract that results in uncompensated ownership transfer between living individuals. In Takaful, it applied in nomination and benefits payable from Takaful Operator’s fund. Page 19
WATCH THIS VIDEO !! Scan the QR code below to watch the video Page 20
1) What is the meaning of Shariah? 2) Explain four concept of Shariah 3) List five preservation of Maqasid Shariah Page 21 QUESTIONs Scan the QR code for the answer
E -L E A R N I N G G A M E S Page 22 HANGMAN GAME Student need to guess the answer based on the hint. If the student fail to guess, the person will be hang and they lose the game. Scan the QR code to play the game : WORD MATCH GAME Student need to select the answer based on the question. There is time limit and student can select the same answer for 2 or more in 1 question.
TOPIC 2 INTRODUCTION TO TAKAFUL SYSTEM Page 23
Describe the concept of Takaful 1. Describe the application of Shariah contract commonly used in Takaful bussiness 2. Page 24 At the end of this topic you should be able to: CONTENT
The concept of insurance is not a new phenomenon in the history of human civilization. It has been around since the days of mesopotamia aimed at protecting private property, real estate, commercial and family affairs. The history can be traced from early evolution and modern era both internationally and locally Page 25 History of takaful
1. Al-Diat 2. Al-Aqilah 3. Al-Khanz 4. Al-Qasamah 5. Akad Muwallah History of takaful (EARLY EVOLUTION) There a few practices of Arabian tribes that have been adopted in the concept of today’s takaful which are : Page 26
History of takaful (EARLY EVOLUTION) AL-DIAT The form of compensation. “Diya” is the indemnity paid as “blood-money” to the next-of-kin of a murder victim. It is considered as compensation to he family of the slain. Example, if a person inflicts bodily injured, the family member will get the “diya” which is the compensation for the injury. Page 27
AL-AQILAH Covenant of Mutuality. The concepts relate to the principle of compensation and group responsibilities. Encouraged by the holy prophet (Muhammmad SAW) and practiced by muslims of Makkah and Medina at the time. Through this convenant, all muslims of Medina irrespective of their tribe became one community so they are responsible for each other. Example, where homicide is unintentional, a third party (aqila) pays blood money where it is offered by the aqila on voluntary basis. Page 28
Al-khanz practiced in Al-Aqilah. It is a pooling system where members will pay certain amount of money to the fund according to period agrees (monthly/annually contribution) This aims to help the members who were involved with unintentional murdered / to pay to the enemy / in order to enable the member to be free AL-KHANZ Page 29
AL-QASAMAH The system in Al-Qasamah is related to human life. It worked by pooling fund from its member Every member needs to pay certain amount of money to the fund The purpose of the fund is to pay to the victim’s heirs when the killer is unknown or the witness’s statement cannot be accepted Page 30
AL-MUAWALLAH An agreement meant for people who migrate to another country. It is a bond between two parties – the guarantor and the guarantee. Guarantor will guarantee immigrant with unknown heirs. The guarantor agreed to pay compensation if the guaranteed person performs a criminal act If the guarantee dies with no heirs, the guarantor shall possess the estate of the deceased. Page 31
History of takaful ( LOCALLY ) The history of the takaful industry in Malaysia began on 25 October 1982 when a special task force was created to study the possibility of establishing Islamic insurance companies in Malaysia. Syarikat Takaful Malaysia Sdn. Bhd. was established and incorporated as a private limited company in accordance with the Companies Act 1965 on 29 November 1984. The Takaful Act 1984 was created to enable the establishment of this Takaful company as well as the introduction of takaful products. Page 32
History of takaful ( LOCALLY ) Syarikat Takaful Malaysia Sdn. Bhd. became a public listed company known as Syarikat Takaful Malaysia Berhad (STMB) on 31 July 1996. On 15 october 1993, Syarikat Takaful Nasional Sdn. Bhd. (STNSB) was established which was formerly as Malaysia Nasional Insurans Takaful Berhad (MNIT). In 2002, Maybank Takaful was established. At the end of 2007, a merger between Maybank Fortis, Malaysia National Insurance and Syarikat Takaful Nasional Sdn. Bhd. gave Birth to Etiqa Malaysia National Insurance which became Known as Etiqa Takaful Berhad Page 33
History of takaful ( LOCALLY ) In 2003, Syarikat Takaful Ikhlas Sdn. Bhd. was established. Commerce Takaful Berhad was incorporated on 23 March 2005 and began its operations on 2 January 2006. On 8 August 2007, Commerce Takaful changed its name to CIMB Aviva Takaful Berhad. However in 14 April 2013, this operator was taken over by Khazanah Nasional Berhad and Sun Life Insurance to become Sun Life Malaysia Takaful Berhad. Page 34
DEFINITION OF TAKAFUL The word Takaful derives from an Arabic root word “kafala” which means to guarantee. TAKAFUL POOLING CONCEPT In Islamic Financial Services Act 2013, Takaful means an arrangement based on mutual assistance under which Takaful participants agree to contribute to a common fund providing for mutual financial benefits payable to the takaful participants. Page 35
Philosophy & Concept of Takaful BASIS OF CO-OPERATION Takaful, is based on the concept of “ta’awun” means mutual assistance. Participants of the Takaful scheme mutually agree to assist each other financially in case of certain defined needs by contributing to a common fund. Page 36
In the shariah discipline on Takaful (which means shared responsibility and shared guarantee), the participants mutually agree to provide compensation in the event of a misfortune. BASIS OF RESPONSIBILITY Page 37
BASIS OF MUTUAL PROTECTION The participants of the Takaful Scheme agreed to be mutually responsible or shared responsibility. Page 38
BENEFITS OF TAKAFUL The participant can fulfill his social obligation towards family Financial assistance for the unfortunate Promotes moral values and ethical dealing Page 39
PRINCIPLE OF TAKAFUL Page 40
Permissible Takaful Interest The insured must be in a position to lose financially if a covered loss occurs. Example, the employers have legal liability to pay compensation to their employees if accidents occurred during employment. Page 41
UTMOST GOOD FAITH This is a higher degree of honesty is imposed on the applicant for takaful. Thus all important facts regarding the risk covered has to be disclosed. This duty can be defined as the duty to disclose fully and accurately all material facts relating to the proposed risk that a proposer knows or is reasonably expected to know, whether asked or not. Page 42
INDEMNITY This states that the fund manager agrees to pay no more than the actual amount of the loss stated differently, the covered person should not profit from a loss. For example if you are insured your house with value of RM200,000, unfortunately your house are under fire which caused loss of RM80000, the insurer only will pay you RM80,000. Page 43
SUBROGATION It strongly supports the principle of indemnity. Subrogation means substitution of the insurer in place of the participant for the purpose of claiming indemnity from a third party for a loss covered by takaful. Therefore, the operator is entitled to recover from a negligent third party of any loss payment which made to the participant. Page 43