Role of Takaful (Islamic insurance) in mitigating risk

Commentators and analysts have analyzed the root cause of the recent inferno in Muhammad Abubakar Rimi (Sabongari Market) and Kebbi markets. Some are of the view that the fire emanated from power spark, some hold the view that it was deliberately ignited, while others believed whatever the cause was, it was a trial from Allah […]

Commentators and analysts have analyzed the root cause of the recent inferno in Muhammad Abubakar Rimi (Sabongari Market) and Kebbi markets. Some are of the view that the fire emanated from power spark, some hold the view that it was deliberately ignited, while others believed whatever the cause was, it was a trial from Allah (SWA) to awaken us so that we can remember Him.
For each of the perceptions or views held above, a Muslim should accept such trial as a destiny which is ordained by Allah, be it positive or negative, and believing in it is mandatory. Allah says; “And we will surely test you with something of fear and hunger and a loss of wealth and lives and fruits, but give good tidings to the patient” (Q: 2:155).
The patient ones are those when afflicted with pain they say; “Surely we belong to Allah and to Him shall we return. Therefore the first thing here is to submit everything to the will of Almighty
Allah (SWA), seek for his mercy and forgiveness because he is the sole giver and he gives to whom he wishes.
Secondly, Islam is a comprehensive way of life and fits to every generation and circumstances of the universe. Takaful is a deliberate plan and means towards preventing calamity or indemnifying someone afflicted by calamity. Takaful can be operated by institutions,  associations or by corporate entities like the conventional insurance.
The Islamic Fiqh Academy, of the Organisation of Islamic Conference, at its meeting in Jeddah, Kingdom of Saudi Arabia, from 10 to 16 Rabiul Thani, 1406 H (corresponding to December 22-28, 1985) resolved the following:
1. The Commercial Insurance Contract, with a fixed periodical premium, which is commonly used by commercial insurance companies, is a contract, which contains major element of risk, which voids the contract and, therefore, is prohibited (Haram) according to the Sharia.
2. The alternative contract, which conforms, to the principles of Islamic dealings is the contract of cooperative insurance, which is founded on the basis of charity and cooperation.
Similarly is the case of reinsurance based on the principles of cooperative insurance.
3. The academy invites Muslim countries to work on establishing Cooperative Insurance institutions and cooperative entities for the reinsurance, in order to liberate the ummah from the exploitation and violation of the system, which Allah has commanded.
The Quranic foundation of Takaful is based on the verse where Allah says: “Cooperate in righteousness and piety, but do not cooperate in sin and transgression.” (Q: 5:2).
According to this scheme, people or participants/members in a group jointly agree to guarantee and indemnify themselves against loss or damage. The amount contributed is known as Tabarru (donation). If a member(s) suffer a loss, the other members would assist to indemnify his loss and to provide him/them with financial help from the contributed fund. The Takaful funds will be continuously invested in a shariah compliant business also to ensure its growth and avoid loss of value. This scheme can be operated in all forms of businesses, companies, public offices and local markets.
Based on the predicament of the victims of Sabongari Market, Birnin Kebbi and other places that experienced similar mishap, the situation on ground requires critical reasoning and perhaps, what one can describe as “superior Takaful”, because the beneficiaries in this arrangement might not have contributed a penny but they are to be assisted based on the spirit of brotherhood.
It is quite obvious that the society faces untold economic hardship, unemployment and poverty. We are afraid, this incident would increase the rate of poverty, unemployment, crimes etc., but it is our hope that Allah will ease the difficulties and replace them with joy and happiness. For that to happen, one needs to classify people into seven categories.

To be continued

Dr. Aliyu Dahiru Muhammad and Musa Sani
International Institute of Islamic Banking Bayero University Kano
Email: [email protected]