From Shariah Compliance to Consumer Justice: A Critical Maqāṣid al-Sharīʿah Evaluation of Contemporary Takaful Products and Regulatory Practices

Abstract

Takaful products are intended to provide financial protection through mutual cooperation and collective responsibility in accordance with Islamic principles. However, the expansion of the Takaful industry has brought new challenges relating to product complexity, investment-linked arrangements, disclosure of charges, distribution practices and consumer protection. Some contemporary products resemble conventional insurance in their economic outcomes, despite having different contractual structures. This study critically examines the design and operation of contemporary Takaful products, with particular attention to family Takaful, investment-linked family Takaful, savings-oriented arrangements, credit Takaful and general Takaful. It analyses issues relating to investment risk, allocation of contributions, fees and deductions, surplus distribution, mis-selling and regulatory oversight. The study employs a qualitative and analytical methodology and evaluates these issues in the light of Maqāṣid al-Sharīʿah, particularly the protection of life and wealth, justice, transparency, informed consent and prevention of harm. It argues that the Shariah assessment of a Takaful product should extend beyond its contractual form to examine the information provided to participants, the actual distribution of risk and the protection delivered. The study recommends simpler product structures, clear disclosure, responsible sales practices, stronger regulatory supervision and greater emphasis on affordable protection. It concludes that the future credibility of Takaful depends on ensuring that product innovation remains consistent with its fundamental purpose of mutual assistance and social protection.