The concepts of mutual assistance and charity often come to mind when takÉful (Islamic insurance) is mentioned. This is understandable given that takÉful, in the generic sense, has played an essential role in risk sharing in Muslim history. However, another feature has been added to the modern practice of takÉful. The current takÉful scheme has added the investment element to its products, one of a number of features that it shares with conventional insurance. The investment feature has become an inherent part of takÉful activities, departing from its original core roles of providing mutual guarantee, assistance and solidarity. This is most apparent when looking at family takÉful where the participant’s fund is segregated into two pools: the participant’s risk fund (PRF) and the participant’s investment fund (PIF). The offering of a number of investment-linked products in the market has led to making the takÉful scheme more appealing and competitive. This evolution has been the result of a natural progression to ensure that takÉful operations remain continuously viable and compatible in the current economic and social environment

The organisation of pilgrimage welfare in Malaysia traces back to the Sultanate of Malacca in the 15th century, as recorded in the classical Malay literature of Hikayat Hang Tuah. In modern times, the Muslim Pilgrim Ordinance was launched in 1951 by the British administration to oversee the welfare of pilgrims. Among the primary areas in which the ordinance wishes to assist are the financial management and preparation by the pilgrims before they depart to Mecca, in addition to funeral arrangements of pilgrims who passed away. Based on the idea of Ungku Abdul Aziz bin Ungku Abdul Hamid, a renowned Malay economist and Royal Professor, the Parliament established the Malayan Muslim Pilgrims Savings Corporation in August of 1962, under the Parliament Act No. 34. The corporation was initially established to pioneer a shariah compliant investment vehicle to help Malayan Muslims perform the last pillar of Islam and manage their funds in a shariah-compliant manner.

The objective of the paper is to set parameters for the application of wadi'ah concept in family takaful which is the alternative of guaranteed benefits (non-participating benefits) of life insurance for family takaful. The paper uses analytical and evaluative approach to set parameters to ensure Shari'ah compliancy of the product and therefore, classical and modern Islamic jurisprudence literatures has been reviewed. The wadi'ah-based family takaful product allows various forms of guaranteed benefits (non-participating benefits) to be offered to participants in a manner similar to their conventional counterparts. However, there are some guidelines that should be followed. Every contract should be executed separately to avoid Shari'ah prohibition. Different types of funds need to be separated as well. Takaful Operators (TOs) can provide guaranteed cash surrender benefits only from the Participants' Wadi'ah Fund (PWF). Finally, Takaful Operators (TOs) should be transparent in the dripping process and charges. Takaful Operators (TOs) should be transparent in taking charges for managing wadi'ah funds, sharing investment profit ratio under mudarabah contract and sharing surplus from the tabarru' fund. The study would serve the needs of the takaful industry, particularly family takaful, in order for them to avoid Shari'ah compliance risk. Key words: Takaful, wadi'ah, tabarru', Participants' Wadi'ah Fund, Shari'ah Parameter

The concern over Shariah compliant transactions is firmly entrenched in activities and operation of Islamic financial institutions (IFI). As a business entity established within the ambit of Shariah, IFI is expected to be guided by values, principles, objectives and rulings of the Shariah. However ensuring effective Shariah compliance is not a straightforward matter. As financial markets are increasingly becoming sophisticated, heightened product innovations and engineering in Islamic finance entails the genuine concern over the need to strengthen Shariah compliance throughout the product life cycle. This inevitably means while a product may be deemed Shariah compliant prior to its launch (ex-ante), IFI must also be cognizant of the need to ensure the entire ex-post process including contract execution, utilization of fund, investment activities, audit and governance process are all in place. This paper focuses on the framework of dealing with Shariah non-compliant transactions in Islamic finance. The framework delineate the concept of illegitimate income and its sources from Islamic perspective insofar to develop a cohesive approach in dealing with diverse non-compliance situations based on established principles of Shariah. Although it is not expected for IFI to deliberately involve in illegitimate activities, any incident of non-compliance needs to be immediately addressed, rectified and reported. This is not only to ensure the purity of the income earned but more importantly for IFI to put in place adequate systems and controls to ensure such non-compliance with Shariah rules and principles can be averted.

the authorities however, need to put certain parameters and limitations in the use concept

This study aims to determine the effect of Sharia Compliance (SC) on the performance of Islamic banking in Indonesia. This type of research is a descriptive verification study, with the method of collecting secondary data obtained from annual reports or annual reports published by Islamic Commercial Banks (BUS) for the 2014-2018 period. Sampling was using by purposive sampling. The number of samples used was 11 BUS in Indonesia with five study periods, so that 55 observant data were obtained. The statistical analysis used is descriptive analysis and simple linear regression analysis, preceded by a normality test and a linearity test, then a regression test using the F test and t test with a significance level of 5%. The results of the study using simple linear regression showed that SC has a positive effect on Sharia banking performance in Indonesia. This means that the higher the SC level, the BUS performance level will also increase

the study aims to uncover the determinants of Islamic financial exclusion in Indonesia by gathering the response from financially-excluded respondents. A total of 110 respondents were surveyed, representing five provinces, namely West Java, South Sulawesi, Aceh, East Kalimantan, and North Maluku. The criteria of financially-excluded respondents are those who do not have any Islamic financial products, neither saving, financing, nor capital market account. The study employs Confirmatory Factor Analysis (CFA) to identify indicators explaining Islamic financial exclusion determinants in Indonesia. The paper found that location is the key barrier to obtain financing from and participate in saving in Islamic banks/Islamic microfinance, while lack of financial knowledge is identified as the critical barrier to deal with Islamic capital market products. Overall, most of the respondents perceive human capital, as well as product and services as the two most significant determinant of Islamic financial exclusion in Indonesia, followed by infrastructure, policies and regulation, financial literacy, social influence, and religious commitment, respectively. The originality of the paper lies in detailed insight into the perception of financially-excluded on the factors leading to Islamic financial exclusion

The study aims at discussing the approach toward Shari'ah non-compliance transactions in Islamic financial institutions (IFIs). The Hanafi's approach in dealing with invalid contracts is employed. The study reveals that defects in contracts requires either re-execution or rectification. Based on the Hanafi's approach, not every defect in contracts calls for re-execution and purification. Some defects need only rectification. Once the necessary amendments have been made, the contract is valid and the legal effect is then operative. Moreover, not all Shariah non-compliant transactions is to be purified by way of channeling it to charity. There are also possible instances whereby the proceeds generated need to be returned to the original owner. The study provides a new approach to IFIs in dealing with Shari'ah non-compliant transactions and gives clear insight on how the defects in contracts are to be treated. The finding of the study is valuable for regulators in formulating the appropriate methodology on how to treat Shari'ah non-compliant transactions in IFIs.

Tawarruq has been extensively used by Islamic financial institutions (IFIs) recently, mainly to address liquidity shortages and to structure risk management tools. The common term used in the market to denote tawarruq is “commodity murÉbaÍah” or sometimes “commodity musÉwamah”. The concept of tawarruq has gained wide acceptance among market players due to its flexibility, which allows IFIs to provide cash with predetermined fixed income, just as their conventional counterparts do.

This chapter’s goal is to define the kind of seeds to be planted for moving forward in the safe and stable drive toward a leading central banking role directed at achieving a sustained Islamic banking and finance development within the global financial system. The system witnessed the input of Islamic banking with its fruitful contribution as a feasible banking structure in both implementing agreed reforms and shaping the next steps directed toward crisis prevention and crisis resolution.

The adopted approach is based upon scientific conceptual basis as well as the practical experience related to the central banking role and Islamic banking evolution. This chapter will define the strategic role of Central Banks and highlight the conceptual basis governing the leading role of central banks as well as the practical basis derived from our central banking and Islamic banking experience.

In light of the conceptual and practical basis for enabling an efficient and effective role of Central Banks as a regulatory body in shaping the future of the Islamic Financial System. Legal, institutional and managerial strategic determinants for this role have been defined.

The analytical work of this chapter crystallises in a pioneering initiative the main determining factors governing the role of central banks as the main regulatory body for Islamic banking, and how this role could be effective in affecting the future role to be played by the Islamic banks in the global financial system. Also, to this end, the integrated required role by central banks, public policies, multilateral institutions and Islamic banks are illustra

Energy and cooperative hard work and commitment from all players, including the regulators of Islamic banks supported by public policies, international and multilateral institutions and members of the Islamic banking family is thought to be the main determining factor for transforming the Islamic banking family into one that will make the Islamic people and all humanity – through the global financial system – live with more stability, welfare and happiness.

Takaful (Islamic insurance), being an important emerging sector in the Islamic financial industry, has exhibited remarkable growth across the globe over the last few decades. This indicates an enormous demand for takaful products, from short-term general takaful to long-term family takaful. As a result, takaful has attracted sizable attention from both Muslim and non-Muslim countries. Nevertheless, the industry continues to experience a plethora of contentious issues in its operational models. The present study explores the evolution of takaful models and their future direction.

islamic financiall products have evolved from simple and straight forward structures to highly sophicasted and multiifaceted instruments during 1880s and 1990s , islamic financial products were dominated by deposits and sayings, syindicated project finance , syariah-compliant stocks and mutual funds 

world over the last decade, demonstrating an enormous demand for takaful products ranging from short-term general takaful to long-term family takaful. It has attracted considerable attention not only from the Muslim countries, but also from the non-Muslim countries. Despite its promising growth, however, the takaful industry continues to face numerous contentious Shari'ah issues. The present study aims to discuss some of the most fundamental Shari'ah issues in takaful, namely the issue of applying tabarru' concept in takaful and the issue of underwriting surplus of tabarru' fund

The concern over SharÊÑah-compliant transactions is firmly entrenched in the activities and operations of Islamic financial institutions (IFIs). As a business entity established within the ambit of SharÊÑah, an IFI is expected to be guided by values, principles, objectives and rulings of the SharÊÑah. However, ensuring effective SharÊÑah compliance is not a straightforward matter. As financial markets become increasingly sophisticated, heightened product innovations and engineering in Islamic finance entail genuine concern over the need to strengthen SharÊÑah compliance throughout the product life cycle. This means that, while a product may be deemed SharÊÑah compliant prior to its launch (ex-ante), the IFI must also be cognizant of the need to ensure that the entire ex-post process—including contract execution, utilization of funds, investment activities, the audit and governance process—are all in place. This paper focuses on the framework for dealing with SharÊÑah non-compliant transactions in Islamic finance. The framework delineates the concept of illegitimate income and its sources from the Islamic perspective in order to develop a coherent approach to dealing with diverse non-compliance situations based on established principles of the SharÊÑah. Although it is not expected that an IFI will deliberately involve itself in illegitimate activities, any incident of non-compliance needs to be immediately addressed, rectified and reported. This is not only to ensure the purity of the income earned but, more importantly, for IFIs to put in place adequate systems and controls to ensure such that non-compliance with SharÊÑah rules and principles can be averted.

The purpose of this study is to compare the cost efficiency of takaful and its conventional insurance counterparts in Malaysia. The study measures the cost efficiency scores of takaful and conventional insurance companies in Malaysia over the period 2009-2011 using non-parametric Data Envelopment Analysis (DEA) based on selected multiple input and output variables. Output variables used are gross premium and investment income while input variables are management expenses, fees and commission expenses. The study finds that conventional insurance companies in Malaysia performed better efficiency than takaful companies in 2011. The finding is consistent with study by Ismail, et al (2011) and Saad (2012). The study suggests that takaful and conventional insurance companies should allocate input more efficiently and improve the quality of services as the average scale efficiency is higher than the average of overall and technical efficiency. Takaful must also be more alert towards external factor costs as the scale of efficiency continuously decreased. In order to be more focused, the study only compares the efficiency of takaful and conventional insurance companies from an input oriented approach. The study is also limited to 7 takaful operators and 19 conventional insurance companies and, as such, the finding is most probably indicative, but does not reflect the overall performance of the takaful industry. As part of a policy recommendation, the study provides data on cost efficiency of conventional insurance and takaful companies in Malaysia, which is valuable for regulators in formulating appropriate policy to enhance the competitiveness of the takaful industry in Malaysia.