Takaful

Takaful (Arabic: التكافل‎‎, sometimes translated as "solidarity" or mutual guarantee) is a co-operative system of reimbursement or repayment in case of loss, organized as an Islamic or sharia compliant alternative to conventional insurance, which Takaful proponents believe contains forbidden riba (usury) and gharar (excessive uncertainty).

Under takaful people and companies concerned about hazards make regular contributions ("donations") to be reimbursed or repaid to members in the event of loss, and managed on their behalf by a takaful operator. Takaful is grounded in Islamic muamalat (Islamic banking), observing the rules and regulations of Islamic law.

By the end of 2011, the takaful industry had grown to $12 billion "contributions" and is forecast to reach $20 billion by 2017. The movement has been praised as providing "superior alternatives" to insurance that "reinvigorate human capital, emphasize personal dignity, community self-help, and economic self-development"; but also criticized as having "dwindled" in scope to an industry of "conventional insurance with Arabic terminology and language of contract."

Theoretically, takaful is perceived as cooperative or mutual insurance, where members contribute a certain sum of money to a common pool. The purpose of this system is not profits, but to uphold the principle of "bear ye one another's burden". The principles of takaful are as follows:

Muslims scholar have "hardly any difference of opinion" on "the need for managing, redeeming and mitigating general, business and life risks covered by the insurance business." But whether conventional insurance is forbidden (haram) is disputed.

Orthodox (i.e. most) Islamic scholars believe Commercial insurance is disallowed for Muslims because it contains

They have two main concerns about conventional insurance:

Insurance is not like gambling because in gambling, no risk is covered and no damage is mitigated. The gamblers play a game of chance for entertainment and profit in which they can win or lose. Furthermore, while insurance involves uncertainty, "statistical techniques and actuarial sciences have progressed to a stage where the insurance company can calculate its risks and benefits with great precision", so that the uncertainty involved in insurance can scarcely be called excessive in normal circumstances.

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Wikipedia