20 septembre 2017 SAAFI.FR

The legal qualification under the Shariah law of Takaful contributions

Scholars unanimously recognize that Tabarru is a noble concept of the Muslim jurisprudence. This practice in the Takaful industry, however, raises a crucial issue as the contributions paid by the participants are not a pure gift, but rather a conditional gift: each participant gives an amount in expectation of receiving a financial benefit in the future.

In addition, the amount of the donation is adjusted according to the nature of the risk to be covered. This is problematic from the Shariah point of view because the amount given as Tabarru is supposed to be voluntary and not obligatory.

The terms Tabarru and Hibah are in principle interchangeable and share a common sense of ‘donation’.

When a person performs an act of Tabarru or Hibah, he does so in a disinterested manner, without seeking anything in return or for his own spiritual fulfillment.

This has the legal consequence that once the donor has made the gift, the property is immediately transferred to the donee in perpetuity.

In a Takaful fund, the participant settles a contribution for which the operator and the participant mutually agree that it will be intended to cover the secured risk.

In the case of realization of the risk, the Takaful fund will pay a compensation to cover the loss, and in case of the nonrealization of the risk, the participant will have the right, depending on the technical result, to receive a share of the surplus.

The contribution paid into a Takaful fund cannot be considered as Tabarru or Hibah, since the participant expects a guarantee in return.

Given that in a Takaful contract, the participant essentially pays a contribution for the purpose of the material benefits, it procures and not in consideration of spiritual benefits, Prof Dr Md Ma’sum Billah believes that the contribution paid by the participant should instead be considered as a Musahamah contribution rather than as a Tabarru donation.

With a Tabarru gift, the property is transferred with a spiritual benefit to the donor while with a Musahamah contribution; the contributor retains the material and legal benefits of its contribution. The Musahamah is, in an insurance contract, a monetary counterparty paid by the participant under the contractual obligation, which obliges him to pay a contribution in exchange for the coverage of the insured risk.

The Musahamah does not necessarily imply the idea of donation; it does not necessarily have to be in favor of others, and can be realized for the benefit of the contributor himself. In a Musahamah, the contributor does not lose his right to
receive his contribution.

Through this legal classification of the contribution as a Musahamah, there is no longer any legal incompatibility with the Shariah that prevents the contributor from benefiting from it. Because of this legal qualification, participants no longer have any restrictions in claiming any form of mutual benefit from the fund to which they have contributed.

This article was first published in Islamic Finance news Volume 14 Issue 39 dated the 20th September 2017.

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