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Takyīf Fiqhī of Takāful Contract from Shariah Perspective: A
Comparison between AAOIFI, IIFA and the Malaysian Shariah
Resolutions and Practices
Muhammad Hamdan Syafieq bin Ahmad
*
Academy of Contemporary Islamic Studies, Universiti Teknologi MARA (UiTM) Cawangan
Terengganu, Kampus Dungun, Sura Hujung, 23000 Dungun, Terengganu, Malaysia
DOI: https://dx.doi.org/10.47772/IJRISS.2025.910000099
Received: 06 October 2025; Accepted: 14 October 2025; Published: 05 November 2025
ABSTRACT
The juridical adaptation (takyīf fiqhī) of the takāful contract remains a subject of intense scholarly debate within
Islamic finance, reflecting divergent methodological approaches to reconciling modern financial products with
classical jurisprudence. This paper provides a comparative analysis of the takyīf fiqhī of takāful from the
perspectives of three major standard-setting bodies: the Accounting and Auditing Organization for Islamic
Financial Institutions (AAOIFI), the International Islamic Fiqh Academy (IIFA, or Majma’ al-Fiqh al-Islāmī),
and the resolutions and practices prevalent in Malaysia. The study begins by tracing the linguistic roots and
conceptual evolution of takāful, distinguishing it from its conventional insurance counterpart and pre-modern
risk-sharing practices like ‘āqilah and tanāḥud. The core of the analysis critically examines the distinct
contractual frameworks employed by each authority. AAOIFI’s Standard No. 26 conceptualizes takāful through
a tripartite structure, anchoring the participant's relationship in a binding donation commitment (iltizām bi-
tabarru’). In contrast, the Malaysian model operationalizes this through a hybrid tabarru’-hibah system, which,
while commercially effective, introduces juristic ambiguities concerning ownership and reciprocal benefit. The
IIFA, however, champions a paradigm rooted in the Qur’anic principle of mutual cooperation (taʿāwun), framing
takāful as a novel cooperative covenant (‘aqd taʿāwunī) governed by mutual forbearance (musāmāḥah). This
paper employs tarjīḥ (juristic preference) to evaluate these competing models, arguing that the IIFA's taʿāwun-
based framework, validated by the Prophetic precedent of tanāḥud, offers a theologically and jurisprudentially
more coherent foundation. It effectively resolves the ontological tensions inherent in the tabarru’ and hibah
models regarding ownership of the fund, the permissibility of unequal benefits, and the inherent gharar in risk-
sharing, thereby affirming takāful’s authentic nature as a manifestation of divinely ordained mutual
responsibility.
Keywords: Takyif Fiqhi, Takāful contract, Islamic insurance, AAOIFI, IIFA and Malaysian Shariah Resolutions
INTRODUCTION
The term takāful () derives from the Arabic root (), meaning “to guarantee”, “to support”, or “to take
responsibility”. Its morphological form (tafā‘ul) implies mutual reciprocity, rendering takāful conceptually as
“mutual guarantee” or “joint responsibility”. This is reflected in the Qur’anic account of the custodianship of
Maryam (Qur’an 3:44) and the protection of Prophet Mūsā (Qur’an 20:40), where yakfulu denotes assuming
guardianship. Classical Arabic usage, however, does not equate kafālah or takāful with the technical mechanisms
of modern insurance.
Pre-Islamic and early Muslim societies developed communal risk-sharing practices, such as ‘āqilah (
), a
tribal system mandating collective payment of blood money (diyah) to victims’ heirs and tanāḥud/munāḥadah
(
), voluntary pooling of resources (e.g., food) during crises, notably among the Ash‘arī tribe. While
these reflect Islamic principles of solidarity, they were neither systematic financial products nor precursors to
modern insurance. Modern insurance, as a commercial institution, emerged in 13th-century Italian maritime
trade (e.g., Genoese contracts of 1347) and later spread globally’ (Holdsworth, 1917). Its introduction to Muslim
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societies sparked scholarly scrutiny, with early fatāwā like Ibn ‘Ābidīn rejecting conventional insurance models
(Ibn ‘Ābidīn, 2003).
In Arabic, ta’mīn (
, “insurance”) remains a neutral term, qualified as ta’mīn islāmī (Islamic insurance) or
ta’mīn ta‘āwunī (cooperative insurance). While in Malaysia, takāful is a proprietary term for Sharīʿah-compliant
insurance, legally distinct from conventional “insurance” under Malaysia’s Takāful Act (1984) and IFSA (2013).
The evolution of Islamic insurance jurisprudence unfolded through pivotal fatāwā and institutional resolutions
across the 20
th
and 21
st
centuries (Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI), 2017; International Islamic Fiqh Academy, 2024; Rabitah al-’Alam al-Islami, 1978). In 1906, Sheikh
Muḥammad Bakhīt al-Muṭīʿī, Grand Mufti of Egypt, formally prohibited conventional insurance in his article
Aḥkām al-Sūkūrtah () (Ikaz, 2011). By 1965, Egypt’s Majma’ al-Buḥūth al-Islāmīyyah (Islamic
Research Academy) introduced a critical distinction: it permitted state-administered cooperative and social
insurance as vehicles for communal welfare (maṣlaḥah), while deliberately deferring judgment on commercial
insurance due to unresolved juristic concerns (al-Qaradaghi, n.d.). This bifurcation between cooperative and
commercial models became foundational for future discourse.
In 1968, the Fatwa Council of Al-Azhar hardened its stance, issuing a comprehensive prohibition (taḥrīm)
against commercial insurance while tacitly upholding the permissibility of non-profit alternatives (al-Qaradaghi,
n.d.). This position was further codified in 1977 when Saudi Arabia’s Hayʾat Kibār al-ʿUlamāʾ (Council of
Senior Scholars) explicitly endorsed cooperative insurance as Sharīʿah-compliant, while unequivocally banning
commercial insurance (Muwaffaq, 2021). Their ruling catalyzed broader acceptance, with the Majmaʿ al-Fiqhī
of the Muslim World League (Rābiṭah) affirming this view in 1978(Rabitah al-’Alam al-Islami, 1978) and the
OIC’s Majmaʿ al-Fiqh al-Islāmī formalizing it in 1985 through Resolution 9 (9/2), which recognized cooperative
takāful as grounded in tabarruʿ (charity) and ta‘awun (cooperation) (International Islamic Fiqh Academy, 2024).
Legislative milestones paralleled these juristic developments. Malaysia’s Takāful Act (1984) emerged as the
world’s first dedicated legal framework for Islamic insurance, institutionally separating takāful from
conventional models. Standardization advanced in 2006 when AAOIFI released its Sharīʿah Standard No. 26,
detailing operational models (e.g., wakālah, mudārabah) and risk-sharing principles (Accounting and Auditing
Organization for Islamic Financial Institutions (AAOIFI), 2017).
The most significant modern refinement came in 2013, when the OIC’s Majma’ adopted Resolution 200 (6/21),
comprehensively addressing taʾmīn taʿāwunī (Islamic Cooperative Insurance) with guidelines on hybrid
contracts, investment ethics, and surplus distribution (International Islamic Fiqh Academy, 2024). That same
year, Malaysia enacted the Islamic Financial Services Act (IFSA), strengthening Takāful governance and
consumer protection (Islamic Financial Services Act, 2013), followed by the Takāful Operational Framework
(2019), which optimized risk management and Sharīʿah compliance protocols (Takāful Operational Framework,
2019).
The objective of this assignment is to discuss the takyīf fiqhī (fiqhi adaptation) of takāful contract from the
Shariah perspective by doing a comparison between AAOIFI, Majma’ al-Fiqh al-Islāmī, OIC and the Malaysian
perspectives.
DISCUSSION
It is important to understand that a takāful product in practice may comprise more than one Shariah contract, and
it is governed by more than one document. Contracts such as hibah (as practiced in Malaysia), ju‘ālah,
muḍārabah and wakālah bil ajr may be included in a takāful product. Scholars have discussed on takāful
contracts and they have differing opinions on the takyīf fiqhī for takāful.
Takyif fiqhi for Takāful from Majma' al-Fiqh al-Islami perspective.
The Majmaʿ al-Fiqh al-Islāmī (OIC) classifies Islamic cooperative insurance (al-taʾmīn al-taʿāwunī) as a “novel
contract” (ʿaqd jadīd)—distinct from classical juridical categories—yet firmly rooted in Qur’anic principles of
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mutual cooperation (taʿāwun). In its landmark 1985 Resolution 9 (9/2) and refined 2013 Resolution 200 (6/21),
the Majma’ anchors takāful’s legitimacy in Allah’s command (International Islamic Fiqh Academy, 2024):
“Cooperate in righteousness and piety, and do not cooperate in sin and aggression” (Qur’an 5:2).
This theological framework redefines insurance beyond commercial transactionalism, positioning it as a
collective covenant (ʿaqd taʿāwunī) where participants pool contributions into a non-profit fund, assume joint
liability for specified risks, and prioritize mutual assistance over profit-seeking.
While takāful manifests through multiple contractual instruments (e.g., wakālah, muḍārabah), the Majma’
emphasizes that its core juridical essence remains singular whereby the participant-to-participant relations is
based upon solidarity, and not compensation. The relationship among members is governed by forbearance
(musāmāḥah) and mutual permissibility (ibāḥat huqūq baʿḍihim li-baʿḍ) where participants voluntarily
relinquish individual claims to contributions, permitting others to access the fund when harmed. Here,
ambiguities (gharar) in risk exposure are tolerated under the principle of mutual grace which also free from the
elements of riba. Unlike commercial insurance, contributions are not premiums exchanged for guaranteed
payouts.
This structure finds its precedent in Sunnah where it is mentioned under the concept of tanāhuḍ al-rifāq (
), mentioned in the book of Adab ash-Shar’iyyah by Ibn Muflih where tanāhud is described as follows (Ibn
Muflih, 1999):
“The meaning of An-Nahd (
) is that each member of the group contributes something from their provisions.
They give it to one man who manages the spending for them from this pool, and they all eat together. Even if
some eat more than others, there is no harm”
Imam Ahmad ibn Hanbal has attributed this practice to the practice of righteous predecessors and considered it
as prevalent custom () and established practice () while mentioned that it is part of cooperation
(ta‘āwun). It was also mentioned in the book that the Shafiites and others has considered it as sunnah (Ibn Muflih,
1999). As narrated in Sahih Muslim, hadith no. 2500:
“Abu Musa reported that Allah's Messenger (
) said: When the Ash'arites run short of provisions in the
campaigns or run short of food for their children in Medina they collect whatever is with them in the cloth and
then partake equally from one vessel. They are from me and I am from them.”
This is a foundational model for communal risk-sharing that conceptually parallels modern takāful. This practice
permitted those who run short of food (eg. travellers, those in war campaigns, etc.) to voluntarily pool resources
() under a designated fund manager, accepting unequal consumption (e.g., some eating more than others).
This practice is different from an-nithār (), which involves taking [things] through snatching, scrambling,
and grabbing as mentioned in Adab ash-Shar’iyyah.
Through this practice, we could see elements such as voluntary contribution, non-compulsion, shared risk, and
social solidarity which mirror takāful’s core operational framework, which replaces conventional insurance’s
risk-transfer with cooperative risk-sharing.
As for the relationship between insurance fund and the managing party is as follows:
a. Regarding management of insurance business: relationship is according to agency contract, with or
without pay.
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b. Regarding investment, the relationship is governed by either an agency or a muḍārabah contract. When
an agency contract is used, the agency can be against pay or not. When using muḍārabah, the managing
party is entitled to a share in the profit as per the agreement, whereas loss is borne by the capital owner,
except in case of negligence or default or breach of conditions or regulations.
As for the ownership of the fund contributions and returns on their investment is that the contributions and net
returns on their investment are considered the rights of cooperative insurance fund, whereas the rights of
policyholders in the fund are determined according to the insurance system and entitlement conditions regarding
compensation and insurance surplus.
Takyīf fiqhī for takāful from AAOIFI perspective.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) approaches takyīf fiqhī
for takāful through a tripartite contractual framework, articulated in Sharīʿah Standard No. 26 (Islamic
Insurance). First, relationship among the participants is based on mushārakah which leads to the establishments
of a company that has articles of association and all other documents. Second, relationship between the company
and the policyholders’ fund is based on Wakalah with regards to the management and muḍārabah or investment
agency () relationship in regard to the investment of the fund’s asset. Third, relationship between
the policy holders and the fund which takes the form of donation commitment at the stage of making
contributions, and indemnification commitment ( ) at the stage of providing
compensation for injury as per regulations and underlying constituent documents (Accounting and Auditing
Organization for Islamic Financial Institutions (AAOIFI), 2017).
From here, we could see that AAOIFI’s most significant departure from the Majmaʿ lies in its conceptualization
of participant contributions as iltizām bi-tabarruʿ ()—a binding donation commitment.
Takyīf fiqhī for takāful from Malaysia perspective.
IFSA 2013 interprets “takāful” as an arrangement based on mutual assistance under which takāful participants
agree to contribute to a common fund providing for mutual financial benefits payable to the takāful participants
or their beneficiaries on the occurrence of pre-agreed events (Islamic Financial Services Act, 2013).
We can see that IFSA 2013 has defined “takāful” as an “arrangement” and not the contract itself. On the other
hand, “takāful contract” refers to the whole legal documents that bind the participants and the takāful operator.
From here, we can agree that from Shariah perspective, we should differentiate between the Shariah contract
(takāful contract) and the specific takāful product agreements which comprises of multiple Shariah contracts.
In Malaysian practice of takāful operators, the relationship between takāful participants is based on tabarru’
concept whereby participant donates a portion of the contribution to help other participants.
Figure 1: Product Disclosure Sheet, Takāful myClick term, Takāful Malaysia
Some takāful providers have hibah in their takāful product as we can see below:
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Figure 2: Sun Inspirasi, Cimb Islamic
Tarjīh on takyīf fiqhī for takāful
The juridical adaptation (takyīf fiqhī) of takāful remains contested across three dominant frameworks: the
AAOIFI's contract-centric tabarruʿ model (iltizām bi-tabarruʿ), Malaysia's hybrid tabarruʿ-hibah system, and
the Majmaʿ al-Fiqh al-Islāmī's taʿāwun-based paradigm. A critical tarjīḥ (preferential weighting) reveals
fundamental tensions between classical jurisprudence and modern operational realities, necessitating a return to
the taʿāwun framework as the most Shariah-coherent foundation.
Tabarru’
The jurists did not formulate a comprehensive definition for “voluntary gratuitous transfer” () itself. Rather,
they defined its specific types – such as bequest (), endowment (), gift (), and others. Each
definition of these types delineates only its particular essence.
Nevertheless, the meaning of “voluntary gratuitous transfer” () according to the jurists – as inferred from
their definitions of these types – does not depart from being(Wizaratul Awqaf wa as-Shu’un al-Islamiyyah,
2006):
“The legally competent person bestowing property or a benefit upon another, either immediately or ultimately,
without compensatory consideration, predominantly with the intent of righteousness and benevolence.”
We can see the confusion in Malaysian practice whereby tabarru’ is meant by donation when tabarru’ is actually
not only donation but rather a gratuitous transfer of property or benefit. This makes donation part of tabarru’
but not the whole tabarru’. Tabarru’ is more than just a donation or gift (hibah) but it also includes other
gratuitous transfer as mentioned above. Thus, tabarru’ should be treated as a category of ‘aqd rather than
individual ‘aqd.
Hibah
Majallah al-Ahkam al-Adliyyah, has defined Hibah as follows (Majallah Al-Ahkam Al-’Adliyyah, 1884):
“Transfer of ownership of property to another without compensation.”
in Fathul Qadir (Ibn al-Humam, 2003):
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“Transfer of ownership of property without compensation.”
in Mawahibul Jalil (Al-Hattab, 2003):
“Hibah is transfer of ownership without compensation”
In Tuhfatul Muhtaj (Ibn Hajar al-Haytami, 1983):
“Transfer of ownership without compensation is Hibah”
In Kashshaf al-Qina’ (Al-Buhuti, n.d.):
“Hibah is the transfer of discretionary ownership over an identifiable asset, where unknown elements are
unavoidable, physically existing, capable of delivery, and given voluntarily during one's lifetime without
compensation.”
There are problems and confusion when using hibah as the basis for takāful. Firstly, is on the ambiguity of
ownership. Classical hibah requires full ownership (milkiyyah) of the transferred asset. However, participants
never “own” future takāful benefits (e.g., potential payouts 10x exceeding contributions), rendering the analogy
juridically void. Secondly is on the recipient confusion. One must ponder whether a hibah giver be the
beneficiary himself (eg. in general takāful, accident, Total Permanent Disability) where participants receive
payouts from their own donations. This violates hibah's requirement where hibah should not return to the giver.
Another problem is intentional misalignment. Agents promote tabarruʿ using Qur’anic verses on charity, but
participants intend financial protection—not altruism when they subscribe to a takāful. This creates a cognitive
dissonance where customers perceive contributions as premiums, not donations.
Treating takāful as a new contract under the basis of ta’āwun would eliminate these problems as it is governed
by forbearance (musāmāḥah) and mutual permissibility (ibāḥat ḥuqūq baʿḍihim li-baʿḍ) where participants
voluntarily relinquish individual claims to contributions, permitting others to access the fund when harmed.
The tanāḥud practice cited by the Majmaʿ offers a validated Sharīʿah blueprint (International Islamic Fiqh
Academy, 2024):
Voluntary Pooling: Like the Ashʿarīs’ food fund, takāful contributions are collective resources managed
for mutual benefit—not “donated” assets.
Flexible Distribution: Some consuming more than others (“even if some eat more”) mirrors variable
takāful payouts based on need, avoiding rigid hibah rules.
Managed by Custodian: The designated fund manager (“one man who manages spending”) parallels the
takāful operator’s role under wakālah.
CONCLUSION
The comparative analysis of the takyīf fiqhī (juridical adaptation) of the takāful contract undertaken in this
assignment reveals a complex landscape of scholarly interpretation, shaped by institutional perspectives and
operational realities. While AAOIFI, the Majmaʿ al-Fiqh al-Islāmī (OIC), and Malaysian practice all strive to
establish a Sharīʿah-compliant foundation for Islamic insurance, their conceptual frameworks diverge
significantly, leading to distinct classifications and attendant jurisprudential challenges. Upon rigorous
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examination of the arguments and evidence presented, the framework articulated by the Majmaʿ al-Fiqh al-Islāmī
emerges as the most conceptually sound, theologically coherent, and practically sustainable paradigm for
understanding the essence of takāful.
AAOIFI’s approach, enshrined in Standard No. 26, offers valuable operational clarity through its tripartite
contractual dissection. However, its core reliance on characterizing participant contributions as an iltizām bi-
tabarruʿ (binding commitment to donate) introduces significant juridical tensions. While tabarruʿ (gratuitous
transfer) as a broad category encompasses various forms of giving, its application within takāful creates
dissonance. The fundamental nature of tabarruʿ – the irrevocable transfer of ownership (tamlīk) without
compensatory consideration (‘iwad) – clashes with the reciprocal expectations inherent in the takāful
arrangement. Participants contribute expecting financial protection for themselves or their beneficiaries; they are
not making a purely altruistic donation where they relinquish all future claim. The problematic reality,
particularly evident in life/family takāful products, where participants or their beneficiaries often receive payouts
significantly exceeding their contributions directly from the fund built partly on their “donation”, starkly
contradicts the classical conditions of hibah (a subset of tabarruʿ). This inherent contradiction – where the
“donor” becomes the primary beneficiary – creates an ontological flaw in AAOIFI’s takyīf.
Malaysian practice, while innovative and commercially successful, further compounds these conceptual
difficulties by explicitly incorporating hibah into its operational model. As illustrated in product documentation,
hibah is often presented as the mechanism for beneficiary nomination. This directly confronts classical
definitions of hibah found in authoritative texts across the madhāhib all emphasizing the irrevocable transfer of
ownership of a known asset without compensation, where the donor cannot be the beneficiary. The Malaysian
model navigates this by contractual stipulation (shart), but this does not resolve the underlying jurisprudential
incompatibility. The promotional dissonance – framing contributions as charitable tabarruʿ while marketing
takāful as financial protection – further highlights the awkwardness of forcing takāful into the procrustean bed
of classical donation contracts.
In stark contrast, the Majmaʿ al-Fiqh al-Islāmī transcends these contractual constraints by anchoring takāful’s
legitimacy not in a specific, pre-existing nominate contract (‘aqd mu‘ayyan), but in the fundamental Qur’anic
principle of ta‘āwun (mutual assistance and cooperation) articulated in Surah al-Mā’idah (5:2): "Cooperate in
righteousness and piety, and do not cooperate in sin and aggression." This theological grounding elevates takāful
beyond mere commercial transactionalism, positioning it as a collective covenant (‘aqd ta‘āwunī) rooted in
social solidarity (takāful ijtimā‘ī). Within this framework, participant contributions are not conceptualized as
tabarruʿ donations to others, but as mutual commitments into a shared fund (ṣundūq al-ta‘āwun) owned
collectively by the participants themselves. The relationship among participants is governed by the principles of
mutual forbearance (musāmāḥah) and mutual permissibility (ibāḥat ḥuqūq ba‘ḍihim li-ba‘ḍ) – participants
voluntarily relinquish strict individual claims to their specific contributions, permitting the fund to be accessed
by any participant who suffers a defined loss. This mutual agreement inherently tolerates the unavoidable
element of gharar (uncertainty) regarding who will benefit and when, as it is subsumed under the overarching
grace (musāmāḥah) inherent in the cooperative pact.
The brilliance of the Majmaʿ’s approach lies in its validation through a robust Prophetic precedent: the practice
of tanāḥud or nahd among the Ash‘arī tribe, explicitly praised by the Prophet (PBUH) in Sahih Muslim (Hadith
no. 2500). This practice, meticulously documented in classical sources like Ibn Mufliḥ’s Ādāb al-Shar‘iyyah,
involved travelers pooling their provisions (nafaqah) into a common fund managed by one individual. Crucially,
consumption from this pool was based on need, not strict proportionality – "even if some eat more than others,
there is no harm." This Sunnah-based model provides an exact analogue for modern takāful: voluntary
contribution to a common pool, managed by a designated custodian (the takāful operator under wakālah), with
benefits distributed based on verified need (the occurrence of the insured event), accepting that some will draw
more than they contributed. It resolves the ownership question – the fund belongs to the participants collectively.
It resolves the gharar issue – uncertainty is inherent in mutual aid and accepted under musāmāḥah. It resolves
the reciprocal benefit dilemma – drawing more is the purpose of the arrangement, not a violation of donation
rules. It also avoids the problematic characterization of the operator's role regarding the fund; the operator acts
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purely as a manager (wakīl) for the participants' collective asset, not as a party receiving "donations" or engaging
in a profit-sharing venture (mudārabah) with the fund itself as the capital owner.
Therefore, while AAOIFI provides necessary operational standards and Malaysia demonstrates practical market
application, the Majmaʿ al-Fiqh al-Islāmī offers the superior foundational takyīf fiqhī. Its ta‘āwun paradigm,
validated by Qur’anic injunction and Prophetic Sunnah, provides a theologically robust and jurisprudentially
coherent explanation for the essence of the relationship among takāful participants. It successfully distinguishes
takāful from both conventional insurance (risk transfer for profit) and classical donation contracts (tabarruʿ),
establishing it as a unique, Islamically mandated mechanism for mutual financial protection grounded in
solidarity. This framework readily accommodates the use of auxiliary contracts like wakālah (for management)
and mudārabah (for investment) governing the relationship between the participants and the operator, without
distorting the core cooperative nature among the participants themselves. Adopting this Majmaʿ-endorsed takyīf
as the primary conceptual lens is crucial for ensuring the continued Sharīʿah integrity, theoretical clarity, and
authentic development of the global takāful industry. It moves beyond contractual patchworks to affirm takāful’s
true nature: a manifestation of divinely ordained mutual responsibility (takāful) within the Muslim community.
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