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The's Responsibility Of A Fund

Better Essays

In the name of Allah, the most merciful, the most beneficent.
The root word ka-fa-la in arabic is derived from the meaning ‘take responsibility of’. Conjugations can be seen in Quran in several spots. In surah Ali Imran [3:37] the word is used to indicated Zakariya’s taking responsibility of Mariam. In the Islamic Finance realm, takaful has taken the meaning of [Islamic] insurance via mutual agreement.

The concept of takaful has been practiced for over a millenia. In theory it takes the form of a compensation fund. Contributors pay into a fund. In the event of a ‘covered loss,’ the compensation fund pays the damaged. Such compensation funds are present in the United States where consumers deal with professional service providers, such as real estate brokers and doctors, in which part of the required licensing fee’s are placed into the compensation fund. In the event of malpractice, or fraud, the consumer is reimbursed. Similarly funds are present in other areas as well, such as unemployment insurance [compensation] and workplace injury [workmans compensation], in which employees pay into such funds and are compensated in the event of unemployment or injury.

In theory, the Islamic method of takaful would take a similar form:

Potential Policyholders [PH] are grouped together under the concept of working together - mutual assistance [taawun]. The PH contribute an amount based on the type/amount of coverage required and personal history (risk). This contribution

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