Evaluation of Takaful Operators’ Efforts in Realising Maqasid Al-Sharīah

As the Islamic financial system has evolved over the last three decades, takāful has emerged as a Sharīʿah-compliant alternative to conventional insurance, which is embedded in realising its underlying maqasid (goals or objectives) of Sharīʿah. Contrary to previous studies that attempted to provide evidences that takāful products are compliant with theSharīʿah in practice of takāful operators (TOs) this paper seeks to take a different approach to investigate their compliance with the fulfillment of the three broad categories of maqasid al-Sharīʿah beginning with the essentials or daruriyyat, followed by the complementary benefits, or hajiyyat, and then the embellishment or tahsiniyyat. In light of the theoretical perspectives of maqasid, each objective was operationally defined for statistical analysis. Six TOs from Malaysia were selected, and five-years' data (2011-2015) have been collected from World Bank's websites and its annual reports. Secondary data were analysed through balanced panel data approach. Hausman test results indicate that fixed effect model is more appropriate in explaining the explored phenomena. Profitability of TOs is not found to have a significant impact in fulfilling maqasid al-Sharīʿah. Taxes paid by TOs were found to have a significant positive impact on economic growth and poverty alleviation while payment of zakah found to have a negative impact. The prohibition of riba (interest) should not be the only decisive difference between Islamic finance and its conventional counterpart. Islamic banks (IBs) and TOs are accountable toward Allah, and thus their activities should be directed toward the fulfilment of maqasid al-Sharīʿah. While earlier published literature has explored efficiency and profitability of TOs, the current paper has attempted to focus on the ability of TOs in serving the maslaha (public interest/common good of the community)