Takafol
The word Takafol literally means ‘Joint Guarantee’ in Arabic and can be described as a scheme based on brotherhood, solidarity and assistance, providing financial aid to participants in need whereby the participants mutually agree to contribute for that
purpose. This assistance scheme fosters genuine Islamic brotherhood amongst participants who have agreed to bear each other’s specific losses.
As we know, risk is an undeniable fact of life and today that risk is greater than ever.
At Al Baraka Bank we appreciate how much time and effort it took for you to build up your possessions and assets. We are pleased to have found a way to help you protect these the Islamic Way with an organisation that has adopted stringent codes and established delivery standards that will meet the needs of every person and their particular circumstance.
Individual clients’ requirements may dictate the need to protect their residential properties, household contents such as furniture, computers and electronic goods, as well as higher risk items such as motor vehicles against mishaps, damage and theft.
The attentiveness to service, together with the ability to structure a product to protect you against any risk-related eventuality has resulted in a product that is not only Islamically acceptable but also of enormous benefit to its participants.
Al Baraka Bank now offers you Shari’ah compliant asset protection via its association with Takafol South Africa, a subsidiary of the worldwide Hannover Reinsurance Group.
Although the Takafol Waqf Fund seems similar to conventional insurance with their concept of “where the fortunate many help the unfortunate few”, it nevertheless differs fundamentally in that with Takafol your payment is done with the sole intention of it being a donation for the purpose of helping other participants in their hour of need. Conventional insurance, as it exists today, does not conform to a buy-sell contract as required by Shari’ah and is therefore not acceptable. With Takafol your regular donation effectively means that you will transfer such amounts from your ownership to that of the Takafol Waqf Fund. The amount donated by you and others into this fund is a guarantee for yourself and other participants in order that you and they may benefit from it according to the rules of the Fund.
Also, Takafol can become an instrument for economic growth and development by channelling funds into Shari’ah approved investment projects.
Other insurance companies generally ensure that their investment income is maximised at the lowest possible risk. To minimise their risks most insurance premiums are thus deposited in interest-bearing investments. The Takafol Waqf Fund, however, is Riba-free.
It must be remembered that the concept of Takafol already existed during the time of the Prophet (SAW) whereby the Muslims contributed to a fund called Al-Kanz under the system of Aqila. The contribution to this fund was for the purpose of helping members of their own community in time of need.
The Takafol Waqf Fund is a participation/benefitcontract in terms of the Shari’ah and is thus a viable alternative to an insurance policy.
The most important aspects of Takafol can be summarised as follows:
Each participant contributes a with the intention of it being a donation.
All donations paid by the participant will be accumulated in the Takafol Waqf Fund.
All payments (claims) will be made from the Takafol Waqf Fund. Money credited to the Fund will only be channelled in Shari’ah approved investments.
Any declared surpluses will be distributed to the participants according to the rules of the Fund.
Any deficit in the Fund will be covered by a free benevolent loan and repaid from future surpluses in the Fund.
Takafol South Africa manages the operations of the Fund and acts as a trustee on behalf of the participants.
Takafol is a Shari’ah acceptable contract and is governed by a Shari’ah Supervisory Board. Takafol operations provide an effective method to accumulate savings of the individual for the collective well-being of the community.
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