Mutual in
substance, not
only in name.
The fund is not the operator.
Takaful works because the participants’ fund and the operator are genuinely separate: risk is shared between participants, and the operator is paid to manage it, not to underwrite it.
Almost every issue we find in takaful traces back to that separation eroding — in the surplus, in the qard, or in how the investment book is run.
What comes up in takaful.
- Model choice.Wakala, mudaraba or a hybrid. Each puts the operator’s incentive in a different place.
- Surplus distribution.Whose surplus it is, and on what basis it is returned, retained or carried forward.
- Qard hasan.An interest-free loan from operator to fund is a backstop, not a business model. A deficit that never clears is telling you something.
- Retakaful.A takaful fund reinsured conventionally is a common and material gap, usually justified by scarcity that no longer exists.
- Underwriting.The risks that are underwritten must be Shariah compliant.
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