A REVIEW OF SHARIAH PRINCIPLE APPLIED FOR TAKAFUL BENEFITS PROTECTION SCHEME AND ITS APPLICATION BY MALAYSIAN DEPOSIT INSURANCE COOPERATION (PIDM)

Abstract

Takaful and Insurance benefits protection scheme is an innovative
product introduced by the Malaysian Deposit Insurance Coporation
(PIDM) to provide takaful certificate and insurance policy owners
with an explicit protection against the loss of part or all of their
benefits in the event of an insurer member failure. The main objective
of takaful and insurance benefits protection is to promote public
confidence in Malaysia’s financial system by protecting takaful
certificate and insurance policy owners against the loss of their
benefits. This paper reviews the possibility of implementing
al-kafalah bi al-ajr, or charging fee from or a guarantee from
Shari’ah perspective. It also attempts to explore other possible viable
alternative instrument in compliance to Shari’ah principles. Any
issues and recommendations in this paper are intended to provide
positive and constructive improvement for the benefit of the Islamic
finance industry.