1. ESSENTIAL CONTRACT IN TAKAFUL OPERATION
A takaful scheme essentially involves two main parties which is takaful operator and group participants
There are two aspects of the contractual relationship between two parties;
i. the contractual relationship among the group of participants
ii. The contractual relationship between the group of participants and the takaful operator

2. The contractual relationship among the group of participants
The contractual relationship among the group of participants is tabbaru’ contract
Tabbaru’ means a sum of contribution/donation/gift/waqaf that participants agrees to pay into a takaful fund
The purpose of this donation is to provide protection/help or mutual indemnity/compesation to the takaful participants if any participant suffers

3. Contractual relationship among the group of participants
mutual mutual
indemnity indemnity
Takaful participant
Tabbaru’/donation
Takaful fund

4. Contractual relationship between the participants and takaful company
In takaful, the participants are insuring themselves
The takaful company is engaged by the participants to manage the takaful scheme for them;
i. manage the undewriting of takaful contribution and claims
ii manage any investment portfolio of the fund

5. Contractual relationship between the participants and takaful company
donation Contract; mudarabah
wakalah
manage jihalah
wadiah yad dhamanah investment pay claim
Takaful participant
Takaful funds
Takaful operator

6. Mudarabah Concept
Mudarabah means the giving of a specified amount of capital to another person who will trade with the capital for the purpose of sharing the profits generated according to agreed ratio
Once the money had been contributed by the participants into takaful fund, the participants then appoint takaful company to be their manager by way mudarabah contract

7. Wakalah Concept Wakalah means agency contract
The participants as a group, apoint and authorise the takaful operator to be their agent to manage the takaful fund

8. Jihalah Concept
Jihalah means the commitment to pay a specified amount of reward for the performance of a prescribed task
The participants contibute to the takaful fund as tabbaru’, then the participants collectively apoint the takaful company to manage the takaful fund in a prescribed manner for a specified amount of reward if the task is done

9. Wadiah yad dhamanah Concept
Basically means quaranteed safe custody
This concept combines wadiah and dhaman
The participants donate to the takaful fund, then deposit the fund to be safe-kept by takaful company
As quarantor, the takaful operator can be use the fund for investment purpose

10. Wadiah yad dhamanah Concept
Profits from investment belong to the takaful company
In practice, the takaful company may want to give some of the profits as hibah (gift) but this cannot be promised upfront.

11. Conclusion
Takaful is a viable and shariah compliant alternative to conventional insurance
Whatever the choice of contract, it should aim at being fair and just to all of the parties involved (participants and takaful company)