Abstract
Ethics is crucial in every part of human life irrespective of religion, race, place, and time. Every religion teaches its followers to be good and enjoin virtue. Ethical conduct is a mission central to any religion and ethical behaviour is highly demanded in any part of the world. As a result of the global financial crisis, regulators and related authorities are realising the importance of ethics as a defensive measure to avoid the recurrence of financial crises. Religions such as Islam, Christianity, Judaism Hinduism, Sikhism, and Buddhism condemn the practice and involvement in interest, gambling, and uncertainty as they are tools of injustice and create an atmosphere of inequality. Unfortunately, insurance involves the elements of interest, gambling, and uncertainty. Human beings seek an ethical and just business environment where they can finance, participate, and invest their capital without being involved in prohibited activities and elements. The objectives of this paper are to provide the reasons behind the prohibition of insurance not only from Islam but also from other religious perspectives and to show that the suitability of Takaful as an ethical insurance in all aspects of religious teachings. Takaful is a cooperative, mutual, and solidarity product that can be used as a risk management tool. The main advantage of Takaful over conventional insurance is that it is free from religiously forbidden elements and promotes a spirit of caring and sharing in the society. This knowledge should be disseminated to ensure that Takaful becomes the universal ethical insurance product. DOI: 10.5901/mjss.2016.v7n4p96
Highlights
IntroductionWhen interest is imposed on the borrower, the borrower needs to pay back the interest regardless of financial position and the lender is guaranteed a profit without assuming risk
Takaful has been introduced as an alternative to insurance to ensure that people can participate in Takaful which is free from interest, uncertainty, and gambling
Ethical society and environment cannot be achieved without eliminating interest, uncertainty, and gambling which are the main fostering elements of unethical practices, especially in the business environment
Summary
When interest is imposed on the borrower, the borrower needs to pay back the interest regardless of financial position and the lender is guaranteed a profit without assuming risk In such a case, lending money does not help the borrower and constitutes an additional burden. Takaful products are widely offered all over the world, including both Muslim and non-Muslim countries. The objectives of this paper are to show why insurance is prohibited in Islam as well as in other religions and that Takaful is an ethical and alternative to insurance. Library research method is used in additional to the documentary approach because adequate documents such as articles, books and internet sources are required to be referred in preparing this paper. Section four explains Takaful and its ethicality and the last section concludes the paper
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