Takaful - Moving Beyond Shari’ah Compliance

• The statement means that Islamic finance and Takaful should not stop at simply asking:
• “Is this product Shari’ah-compliant?”
• Instead, institutions should also ask:
• Does this product benefit customers?
• Does it help society?
• Does it support the economy?
• Does it protect the environment?
• Does it create long-term sustainable value?
• This is what is meant by shifting the current paradigm beyond compliance.

What Does “Beyond Compliance” Mean?

• Shari’ah compliance remains the minimum requirement.
• But institutions are encouraged to go further by creating:
• Social value
• Economic value
• Environmental value
• Financial inclusion
• Sustainable business opportunities

Example

A Takaful operator develops a normal Family Takaful product.

If it only focuses on compliance:

• The contract avoids riba
• The investment is Shari’ah-compliant
• The product follows Takaful principles

If it goes beyond compliance:

• The product is made affordable for lower-income families
• Digital technology is used to reduce cost
• Part of the investment supports green Sukuk
• Customers receive financial education
• The product helps strengthen family financial resilience

Simple Idea

Compliance = Make sure the product is permissible

Beyond compliance = Make sure the product is also useful, sustainable and beneficial

How This Creates More Business Opportunities

• By looking at wider social and economic needs, Takaful operators can develop new products for groups that may previously have been ignored.

Examples

• Micro-Takaful for low-income households
• Crop Takaful for farmers
• Cyber Takaful for small businesses
• Green Takaful linked to sustainable projects
• Digital Takaful for underserved communities
• Health protection for vulnerable groups

Simple Process

Wider social needs → New Takaful products → New customers → New business opportunities

Benefits to Financial Consumers

• Customers may receive:
• More affordable products
• Better protection
• More relevant products
• Easier digital access
• Better long-term value

Example

• A low-income family that previously could not afford protection may now access Micro-Takaful through a mobile application.

Benefits to Wider Stakeholders

• The benefits are not limited to the customer who buys the product.
• Wider stakeholders may include:
• Employees
• Investors
• Communities
• Small businesses
• Governments
• Future generations
• The environment

Example

• A Takaful operator invests in a renewable-energy Sukuk.
• The operator earns investment income.
• The project creates jobs.
• The community receives cleaner energy.
• The environment benefits from lower emissions.

So one financial decision can create benefits for many stakeholders.

Benefits to the Economy

• A value-based Takaful industry can support:
• Business growth
• Employment
• Financial inclusion
• Sustainable investment
• Economic resilience

Example

• SME Takaful protects small businesses against major losses.
• If a fire occurs, the business can recover faster.
• Employees keep their jobs.
• Suppliers continue receiving orders.
• The local economy remains active.

Easy Way to Remember

Traditional approach:

“Is it Shari’ah-compliant?”

Beyond-compliance approach:

“Is it Shari’ah-compliant, financially sustainable and beneficial to customers, society, the economy and the environment?”

Simple Formula

Shari’ah Compliance + Positive Impact + Sustainability = More Business Opportunities + Wider Stakeholder Benefits