The Concept of Waqf and its Application in an Islamic Insurance Product: The Malaysian Experience

This article discusses the application of waqf in a takāful product. Waqf is a charity with special features of permanency and irrevocability which enable the benefits to be obtained by its beneficiaries across generations and centuries. This becomes possible by the transfer of property from the original owner to Allah. Takāful, i.e. Islamic insurance, is a risk-management tool whereby participants donate part or all of their contributions which are used to pay claims for damages suffered by its participants. Syarikat Takaful Malaysia Berhad, which is the pioneer takāful operator in Malaysia, has combined the concept of waqf and takāful to design and offer a takāful product known as the Takāful–Waqf Plan. This product enables young Muslims in particular to save continuously and at the same time assure their ability to establish waqf, even if events make it impossible for them to continue contributing to the plan. Customers who participate in such a takāful plan will contribute to it regularly and, at the end of the policy, will bequest all benefits from it to appointed beneficiaries as a waqf endowment. Syarikat Takaful Malaysia Berhad will be the trustee who allocates the funds collected to orphanages, religious schools, mosques, and other appointed beneficiaries. Being the operator, it will also provide for the assigned sum in cases where customers may not be able to fulfil their contracted sum. However, after 7 years of operation, the plan was cancelled on 9 February 2009. However, we find that the collection of cash waqf, managed by religious authority bodies such as Selangor State, is increasing each year. This waqf fund that has been collected illustrates that awareness of waqf is increasing among Muslims. This article will examine the mechanics of the plan in order to understand the reasons behind its demise. We suggest that waqf can be integrated in the takāful policy, using different models to compare what has been implemented by the Syarikat Takaful Malaysia Berhad.