Takaful - Sustainability, SDGs and Maqasid al-Shari’ah

• The Takaful industry should not focus only on providing financial protection.
• It should also help strengthen the sustainability of the wider financial ecosystem.
• Takaful operators are encouraged to take a more proactive approach in achieving the objectives of Maqasid al-Shari’ah.
• This means considering wider social, economic and environmental outcomes when designing:
• Products
• Business strategies
• Investment policies
• Internal policies

1. Strengthening the Sustainability of the Financial Ecosystem

• A sustainable financial ecosystem is one that can continue operating effectively over the long term.
• Takaful operators can contribute by:
• Managing risks responsibly
• Investing in sustainable activities
• Supporting financially vulnerable groups
• Avoiding activities that create long-term harm
• Developing products that strengthen social and economic resilience

Example

• A Takaful operator invests in Shari’ah-compliant renewable-energy projects.
• The investment may generate financial returns while also supporting:
• Cleaner energy
• Reduced pollution
• Long-term environmental sustainability

Simple Idea

Takaful should protect people today without creating harm for society tomorrow.

2. Proactive Approach to Maqasid al-Shari’ah

• Maqasid al-Shari’ah refers to the broader objectives and purposes of Shari’ah.
• These objectives aim to:
• Bring benefit to people
• Prevent harm
• Protect essential human interests
• Takaful should therefore not only react after a loss occurs.
• It can also help prevent risks and improve resilience before losses happen.

Example

• A Crop Takaful operator does not only pay farmers after floods.
• It may also support:
• Weather-monitoring technology
• Flood-risk education
• Better agricultural practices
• Early-warning systems

Simple Idea

Maqasid-based Takaful = Protection + Prevention + Long-term benefit

3. Integrating Sustainable Development Goals - SDGs

• Takaful operators can incorporate the Sustainable Development Goals (SDGs) into their business models and policies.
• The SDGs focus on improving:
• Social well-being
• Economic development
• Environmental sustainability
• Many of these objectives are consistent with the broader aims of Maqasid al-Shari’ah.

Areas That Takaful Can Support

• Poverty reduction
• Good health
• Financial inclusion
• Sustainable cities
• Climate protection
• Responsible investment
• Economic opportunity

4. Example - Poverty Reduction

• Takaful operators can develop Micro-Takaful for lower-income households.
• Affordable protection can help families recover from:
• Death of a breadwinner
• Accident
• Illness
• Property loss

Example

• A low-income family pays a small monthly contribution.
• The breadwinner dies unexpectedly.
• The family receives a Takaful benefit.

Connection

• Supports social protection
• Reduces financial hardship
• Supports the objective of protecting life and wealth

Simple Idea

Micro-Takaful → Financial resilience → Social sustainability

5. Example - Health and Well-Being

• Takaful operators can provide affordable health-related protection.
• They may also encourage:
• Preventive healthcare
• Health screening
• Wellness programmes

Example

• A Family Takaful plan rewards participants who attend regular health screenings.
• The aim is to reduce health risks before serious illness occurs.

Simple Idea

Prevent illness where possible, not only compensate after illness happens.

6. Example - Environmental Protection

• Environmental sustainability is consistent with the Shari’ah objective of preventing harm.
• Takaful operators can:
• Avoid investing in environmentally harmful businesses
• Support green Sukuk
• Develop climate-related Takaful products
• Encourage environmentally responsible behaviour

Example

• A Takaful operator invests in a Green Sukuk that finances solar-energy projects.
• The operator earns a return while supporting lower carbon emissions.

Simple Process

Takaful funds → Green Sukuk → Renewable energy → Financial return + Environmental benefit

7. Example - Climate and Disaster Protection

• Takaful operators can develop products for:
• Flood
• Drought
• Storm
• Crop loss
• Livestock loss
• These products help communities recover from climate-related disasters.

Example

• A farmer’s crops are destroyed by severe drought.
• Crop Takaful provides financial assistance.
• The farmer is able to restart production.

Simple Idea

Climate risk → Takaful protection → Faster recovery

8. Socio-Economic Development

• Takaful can support wider socio-economic development by:
• Protecting small businesses
• Supporting farmers
• Promoting financial inclusion
• Providing affordable protection
• Investing in productive sectors
• This helps strengthen households and businesses.

Example

• A small business obtains SME Takaful.
• A fire damages its premises.
• The Takaful benefit helps the business reopen and retain its employees.

Result

• Business survives
• Employees retain jobs
• Local economy remains supported

Simple Idea

Takaful protection can support both individuals and the wider economy.

9. Preservation of Life on Earth

• Sustainability also involves protecting resources for future generations.
• Takaful operators can consider the long-term effects of:
• Investments
• Business activities
• Product design
• This is consistent with the idea that humans should avoid causing unnecessary harm to the environment and society.

Example

A Takaful operator chooses between:

• Investing in a highly polluting company
• Investing in a Shari’ah-compliant clean-energy project

A sustainability-focused approach would favour the investment that provides financial return while creating less environmental harm.

10. Bringing Benefit and Preventing Harm

• A central objective of Shari’ah is to:
• Promote benefit
• Prevent harm
• Therefore, sustainable Takaful should consider whether its activities:
• Improve people’s lives
• Reduce vulnerability
• Protect the environment
• Strengthen economic stability
• Avoid long-term social or environmental damage

Simple Idea

Maqasid al-Shari’ah = Create benefit + Prevent harm

Overall Relationship

Maqasid al-Shari’ah

→ Provides the ethical and Shari’ah objectives

SDGs

→ Provide global sustainability goals

Takaful

→ Can translate these objectives into practical products, investments and policies

Example

Maqasid objective: Protect wealth and life

SDG objective: Reduce poverty and improve well-being

Takaful action: Develop affordable Micro-Takaful

Easy Way to Remember

Traditional Approach

Loss happens → Takaful pays claim

Proactive Sustainable Approach

Identify risk → Prevent harm → Provide protection → Invest responsibly → Support long-term recovery

Simple Formula

Maqasid al-Shari’ah + SDGs + Sustainable Takaful Practices = Stronger Social, Economic and Environmental Impact

Final Simple Idea

Takaful should not only compensate losses; it should also help create a more resilient, sustainable and beneficial society.