This analysis highlights the need for a regulatory framework for takaful in Nigeria, suggesting improved governance and compliance with Shariah principles.
The concept of insurance originates from mutual assistance in times of need and distress, rather than as a commercial enterprise for profit-making as practiced today. In conventional insurance, the relationship between the insurer and the insured is that of buyer and seller, which differs fundamentally from Islamic insurance (takaful). Takaful promotes shared responsibilities, solidarity, mutual assistance, and cooperation to protect participants (policyholders) against risks and misfortunes in accordance with the policy terms. Consequently, profit maximization is not takaful's primary objective. This study examines takaful in Nigeria with emphasis on the need for an improved legal and regulatory framework. It provides conceptual clarification of Islamic insurance while addressing common misconceptions about takaful and explaining why conventional insurance violates Shariah principles. The research further analyzes the meaning, essential elements, and distinctive features of takaful; compares the profit mechanisms of conventional insurers and takaful operators; highlights key differences between conventional insurance and Islamic takaful; explores the foundational principles of takaful under Islamic law; and clarifies the governance and regulatory requirements for takaful operations.
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Khalid et al. (2025) studied this question.
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