Abstract
The purpose of this study is to compare the performance of a full-fledged takaful operator versus shared or outsourced operators in Malaysia. Currently in Malaysia, there is only one full-fledged takaful company which bases its operation on the Shariah principles without conventional counterparts. In this paper, full-fledged takaful company refers to a takaful operator with no conventional parent or subsidiary. The paper uses the maqasid index approach which implements certain ratios based on the objectives of Shariah. The objectives of Shariah are threefold; first is to educate the individual, second is to establish justice and third is to maintain public interest. These objectives are well-suited to and consistent with the sustainable development goals (SGDs) within the financial institutions (FIs) to enhance a healthier economic system. The study used a maqasid index approach on six takaful operators in Malaysia to see whether there are any differences among the operators which are full-fledged takaful companies and those having shared or outsourced functions. The result showed that being a full-fledged takaful operator does not hinder financial institutions to have an acceptable Maqasid index figure by using the approach in this study. In fact, from the findings, a full-fledged takaful operator showed the highest Maqasid index compared to other types of takaful operators in Malaysia. Due to the limited data availability, the study only focuses on selected companies and variables in order to implement the use of ratios. This paper reflects the importance of the study to enhance that Islamic financial institutions should grow in achieving Malaysia’s goal to become an Islamic financial hub.This paper fulfils a gap towards the area of Islamic insurance, which is still very new compared to other topics in Islamic finance.
Highlights
Islamic insurance or takaful, which means joint guarantee, has been practiced for more than thirty years in Malaysia and has already spread to other Muslim countries
The findings show that the maqasid index is highest for Syarikat Takaful Malaysia (STM), which may indicate that lesser sharing with conventional parties will produce higher index
Syarikat Takaful Malaysia, which is the only fullfledged takaful operator in Malaysia produced the highest maqasid index score based on the data from 2012 to 2014
Summary
Islamic insurance or takaful, which means joint guarantee, has been practiced for more than thirty years in Malaysia and has already spread to other Muslim countries. Takaful in essence brings a group of people together in helping each other to face the occurrence of unexpected or unwanted events. Such will rarely happen to everyone in the group. Takaful is somewhat a consensus of among policyholders to help one another when facing unwanted events such as accidents or injuries (Salman et al, 2019). This is much upheld by the Shariah and is among the reasons why takaful is not prohibited (haram)
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