Shariah Status of Conventional Insurance: An overview of Takaful Framework in Pakistan

Abstract

Emerging awareness of the necessity for protection is creating the demand for takaful. Islamic Finance and Takaful have appealed for the strong ethics of the system of fairness, transparency, and distribution of wealth leading to social goodness and an environmentally friendly focus for generating economic activity. In this study, we will provide a comprehensive concept of takaful along with its legal status under Shari’ah law. This study will clarify the differences between conventional insurance and Takaful and the significant emerging importance of Takaful in Pakistan. Conventional insurance is based on uncertainty with the traditional system, which is not allowed under Shariah Law. The rich data also show this difference, so this study will also deal with the legal status of conventional insurance along with the conceptual and practical framework of Takaful in Pakistan. We used a qualitative approach based on library research, books, articles, research papers, and juristic analogies. The main purpose of this study is to provide a comprehensive conceptual framework of Takaful and conventional insurance and its legal status under Shari’ah law in Pakistan.