This blog explains takaful and waqf fund by examining Qur’anic principles of collective responsibility, zakat, waqf, and the aqilah system. It also analyzes contemporary Islamic takaful models to clarify how takaful and waqf fund differ structurally and ethically from conventional insurance systems.
The Islamic concept of takaful, kafalah, and collective responsibility
Before understanding the Islamic concept of takaful and waqf fund, it is essential to clarify a fundamental point. Takaful in Islam is not the name of a financial product, an insurance scheme, or a commercial contract. Rather, it is a social and moral system based on mutual responsibility, collective support, and social cooperation. Under this concept, an individual is not left alone when facing economic risks. Instead, society stands behind him. Therefore, the Islamic concept of takaful and waqf fund is not merely about transferring risk, but about bearing risk at a collective level.
From a linguistic perspective, the root of the word “takaful” is “kafalah,” which means that one individual or group accepts responsibility for another individual. This responsibility is not limited to temporary assistance or individual charity. Instead, it includes continuity, commitment, and organized responsibility. Islam did not confine kafalah to the level of moral virtue alone. Rather, it presented it as a structured social principle that becomes embedded within the fabric of society.
Kafalah in the Qur’an and the Foundations of Collective Responsibility
In the Qur’an, the concept of kafalah appears with clarity and institutional depth, forming a direct foundation for the Islamic concept of takaful and waqf fund. Regarding Maryam (peace be upon her), Allah states: وَكَفَّلَهَا زَكَرِيَّا
“And Zakariyya took responsibility for her.” (Aal ‘Imran: 37, https://www.quran.com/3/37)
This verse establishes that kafalah is not a voluntary or emotional gesture. Rather, it is an assigned and recognized responsibility. The Qur’an reinforces this point by describing how this responsibility was determined collectively: إِذْ يَخْتَصِمُونَ أَيُّهُمْ يَكْفُلُ مَرْيَمَ “When they disputed among themselves as to which of them should take responsibility for Maryam.” (Aal ‘Imran: 44, https://www.quran.com/3/44)
The wording of these verses makes one fact unmistakably clear. Kafalah is a structured and responsibility-based collective arrangement. Guardianship is not left to informal charity or personal virtue. Instead, it is decided through an organized communal process. This principle forms a central intellectual foundation of the Islamic concept of takaful and waqf fund.
The Qur’an’s broader ethical framework further strengthens this collective orientation. Allah commands: وَتَعَاوَنُوا عَلَى الْبِرِّ وَالتَّقْوَىٰ “And cooperate with one another in righteousness and piety.” (Al-Ma’idah: 2, https://www.quran.com/5/2)
This command does not function as mere moral advice. Instead, it establishes cooperation as a binding social principle. Responsibility shifts from isolated individuals to the collective body of society. It is this Qur’anic logic that later assumes an institutional form within the Islamic concept of takaful and waqf fund, where cooperation evolves from personal virtue into organized social obligation.
The Qur’an further clarifies that support for vulnerable members of society is grounded in rights, not charity. Allah states: وَفِي أَمْوَالِهِمْ حَقٌّ لِلسَّائِلِ وَالْمَحْرُومِ “And in their wealth there is a right for the one who asks and the one who is deprived.” (Adh-Dhariyat: 19, https://www.quran.com/51/19)
The use of the word ḥaqq establishes that kafalah is a binding social responsibility embedded within wealth itself. This distinction separates the Islamic concept of takaful and waqf fund from charity-based welfare models, where assistance is discretionary rather than due.
Islamic social thought also rejects the isolation of individuals during financial distress. The Qur’an states: وَإِنْ كَانَ ذُو عُسْرَةٍ فَنَظِرَةٌ إِلَىٰ مَيْسَرَةٍ “And if someone is in hardship, then grant him time until ease.” (Al-Baqarah: 280, https://www.quran.com/2/280)
This verse captures the ethical temperament of takaful and waqf fund. Financial hardship is addressed through relief and collective understanding, not coercion or exclusion. Economic risk is recognized as a shared social reality that must be managed collectively.
This framework marks a clear divergence from conventional insurance systems. In modern models, risk is transferred and monetized. In contrast, within the Islamic concept of takaful and waqf fund, risk is shared, not sold. Cooperation becomes a social value embedded in the structure of society, where individuals contribute today with the understanding that collective support will exist tomorrow. It is upon this Qur’anic foundation that institutions such as zakat, ‘ushr, ‘aqilah, and waqf were later established, translating collective responsibility into durable social structures.
Practical and institutional forms of takaful in Islamic society
The Islamic concept of takaful and waqf fund did not remain confined to theoretical discussion. Instead, it consistently took practical and institutional form within Islamic society. The Qur’anic vision of collective support and mutual responsibility was not merely moral preaching. Rather, it was translated into enduring social institutions. These institutions demonstrate that Islam did not treat economic insecurity as a private problem of the individual. Instead, it addressed it through organized collective arrangements.
The most prominent and structured manifestation of this approach is the system of zakat. Zakat is not voluntary charity. Rather, it is a mandatory financial institution closely linked to the social and, historically, the state framework. By clearly defining the recipients of zakat, the Qur’an established that supporting vulnerable groups is not optional generosity. Instead, it is a binding collective obligation. Through zakat, wealth is circulated within society so that it does not remain concentrated in a few hands, and economic burden does not permanently fall upon weaker groups. For this reason, zakat is regarded as the strongest foundation of Islamic takaful, because here support is provided as a right, not as a favor.
In the agricultural economy, the system of ‘ushr represents another form of collective takaful. Through ‘ushr, a portion of production is automatically allocated for society. In this arrangement, the farmer’s personal intention or voluntary generosity is not the central factor. Rather, collective welfare is ensured through an organized financial obligation. This highlights a fundamental Islamic principle. Economic activity is never separated from social responsibility. Instead, the right of collective support is attached directly to production itself.
Obligatory financial institutions and organized collective support
Sadaqat al-fitr forms another important link in this system. Its purpose is not to allow a few individuals to earn moral merit. Instead, it ensures that no member of society remains deprived of basic needs at a moment of collective celebration. Here again, takaful moves beyond individual charity and takes the form of social balance, because its timing, amount, and beneficiaries are all institutionally defined.
Historically, educational stipends, student support, and scholarly patronage also represented civilizational expressions of takaful. Through waqf, Islamic societies provided housing, food, and education to students in madrasas, universities, and centers of learning. The objective was to ensure that the pursuit of knowledge was not restricted by financial capacity. In this way, takaful extended beyond economic survival into intellectual and civilizational development. This demonstrates that the Islamic concept of takaful and waqf fund is not limited to poverty relief alone. Rather, it also serves as a mechanism for long-term social advancement.
‘Aqilah, diyah, and the extension of takaful in state systems
In Islamic jurisprudence, the ruling of diyah in cases of accidental killing further illustrates this principle of collective responsibility. Financial liability is not placed solely upon the individual offender. Instead, it is distributed among his ‘aqilah. The objective is not to trivialize the offense. Rather, it is to prevent complete economic destruction of a single person or family. This arrangement confirms that Islam provides collective structures for bearing financial burdens, and these structures later became intellectual foundations for institutions such as takaful.
In the modern era, as the state assumed a central role in social organization, the same spirit of takaful migrated into state-based social protection systems. Pensions, old-age benefits, and cash assistance programs reflect the understanding that economic vulnerability is a collective responsibility rather than an individual failure. Although such programs are not juristically classified as zakat or waqf, their underlying logic mirrors collective takaful. Their purpose is to protect individuals from economic shocks through organized social support.
Across all these examples, one shared value stands out. Islam did not confine economic risk, accidents, or vulnerability to the individual level. Instead, it developed institutions grounded in continuity, structure, and shared responsibility. These institutions transform the Islamic concept of takaful and waqf fund into a living social reality rather than a theoretical abstraction.
The purpose of this discussion is to clarify that takaful is not a modern innovation or an imported concept. Rather, it is deeply rooted in Islamic social thought and has manifested in different institutional forms across history. With this intellectual and historical background in place, a critical question now emerges. When a formal financial system is presented today under the name of “Islamic takaful,” to what extent does it remain aligned with these traditional institutions and values? This question sets the stage for the next section.
Cooperation, mutual aid associations, and modern economic necessity
The practical expression of the Islamic concept of takaful and waqf fund is not limited to acts of worship or traditional charitable institutions. Rather, this concept extends into the broader sphere of social organization and economic cooperation. As societies grow more complex, populations increase, and the nature of risks changes, individual charity or unorganized assistance becomes insufficient. Under such conditions, cooperation-based collective institutions become a fundamental necessity. It is within this context that cooperative societies and mutual aid associations can be viewed as a natural continuation of Islamic social thought.
The core spirit of a mutual aid association lies in pooling limited individual resources so that larger risks and unexpected losses can be managed collectively. The objective is not to accumulate capital for profit. Instead, it is to create a shared support system that rescues individuals from economic isolation. This objective aligns closely with the ethos of the Islamic concept of takaful and waqf fund, where the collective, rather than the individual, occupies the central position.
From an Islamic perspective, cooperation is not founded on transfer of ownership, but on sharing of responsibility. This means that participants are not purchasing someone else’s risk. Rather, they are carrying that risk together. This distinction sets mutual aid associations apart from purely commercial partnerships. Here, financial participation is driven not by profit-seeking, but by the aim of ensuring collective protection.
When cooperation becomes subject to financial logic
At this point, however, a subtle yet decisive question arises. When cooperation is transformed into a formal financial structure, and administrative interests, profit objectives, and market logic enter that structure, the original spirit of cooperation begins to weaken. This is precisely where questions emerge regarding certain modern institutions established in the name of the Islamic concept of takaful and waqf fund. The issue does not lie in the idea of cooperation itself. Rather, it arises when cooperation is subordinated to financial logic.
The true value of a mutual aid association lies in promoting equality, trust, and shared responsibility among participants. However, when such an association evolves into a structure where a few individuals or institutions concentrate administrative control and financial benefit, cooperation gradually shifts from being a social service to becoming an artificial financial product. As this transformation occurs, the ethical dimension of takaful weakens, while its financial dimension becomes dominant.
It is also important to note that the Islamic concept of takaful and waqf fund does not promise the complete elimination of risk. Instead, it recognizes risk as a human reality and seeks to distribute its effects fairly. In contrast, modern financial thinking often either claims to eliminate risk entirely or converts it into a source of profit. Both approaches differ fundamentally from the spirit of Islamic takaful, because here risk is neither denied nor commodified.
For this reason, cooperative institutions and mutual aid associations remain meaningful in Islamic society only so long as they remain anchored in the principles of cooperation, shared participation, and collective responsibility. Once guarantees of profit, promises of return, or capital-growth objectives become central, the social concept of takaful begins to retreat, and financial logic takes its place.
This section clarifies that cooperation itself is neither the problem nor its institutionalization. The critical issue is the purpose for which cooperation is organized, and who holds decisive authority within that organization. This question becomes central when examining contemporary models of Islamic takaful, where a visible tension emerges between claims of cooperation and the underlying financial structure. That tension will be examined in the next section.
The emergence of contemporary Islamic takaful and the waqf fund as its foundation
After outlining the intellectual and social background of the Islamic concept of takaful and waqf fund, it becomes necessary to examine the stage at which “Islamic takaful” emerged in the modern era as a formal financial system. This emergence was not driven by theory alone. Rather, it was shaped by the rise of the modern state, increasingly complex economies, and the widespread expansion of conventional insurance. These developments created a practical vacuum that scholars and practitioners attempted to fill using Islamic legal terminology and juristic frameworks. It was in this context that the institutional model of contemporary Islamic takaful took shape.
Juristic objections to conventional insurance, particularly the presence of gharar (excessive uncertainty), qimār (gambling), and interest-based elements, had become a serious challenge for scholars. On the one hand, modern economic life made it increasingly difficult to ignore insurance altogether. On the other hand, accepting conventional insurance in its existing form posed juristic difficulties. Islamic takaful was therefore presented as an alternative that claimed to preserve the practical utility of insurance while avoiding its juristic defects.
Juristic tension in conventional insurance and the proposal of Islamic takaful
The foundation of this proposed alternative was the establishment of a waqf fund. In contemporary Islamic takaful models, it is suggested that the takaful operator create a cash waqf using its initial capital. Over time, this waqf assumes the role of the takaful fund. The waqf fund is presented as an independent and autonomous financial entity. It is described as neither the private property of the company nor the collective property of the policyholders. Through this framing, it is claimed that the fund is neither commercial capital nor a personal asset. Instead, it is a dedicated waqf, permanently assigned for the purpose of collective protection.
Through the concept of the waqf fund, contemporary Islamic takaful seeks to provide a legal and juristic basis for mutual cooperation among participants. The payments made by policyholders are not described as price or investment. Instead, they are labeled as donations (tabarru‘). The purpose of this terminology is to emphasize that participants are not purchasing a guaranteed benefit. Rather, they are contributing to a collective support mechanism. Under this framework, when a participant suffers a loss, compensation is paid from the waqf fund, effectively making all participants guarantors for one another.
The juristic status of the waqf fund and its institutional claim
At this stage, the status of the waqf fund becomes decisive. Since, in Islamic jurisprudence, waqf property exits human ownership, contemporary takaful models argue that neither the operator nor the participants own the funds contained within it. On this basis, it is claimed that the relationships of sale or loan, which raise juristic objections in conventional insurance, do not arise here. Instead, a relationship of pure cooperation and mutual assistance is said to exist.
By placing the waqf fund at the center, contemporary Islamic takaful attempts to render the entire system juristically acceptable. For this reason, waqf is not treated as a mere administrative arrangement. Rather, it is presented as the ethical and juristic foundation of the takaful structure. Without this foundation, the contemporary takaful model would struggle to establish a distinct identity separate from conventional insurance.
At this stage, however, no criticism or judgment is being offered. The purpose here is only to clarify how contemporary Islamic takaful came into existence, and why the waqf fund was chosen as its foundation. This is a descriptive stage, in which the claims and structure of the model are presented as they are articulated by its proponents. The practical outcomes, internal tensions, and juristic questions arising from this model will be examined in subsequent sections.
Juristic Structure of the Waqf Fund and the Role of the Takaful Operator
In contemporary Islamic takaful, the central role of the waqf fund can only be understood by examining the juristic reality of waqf itself. In Islamic jurisprudence, once an asset is dedicated as waqf, it exits human ownership and becomes devoted to Allah. Neither the founder nor any other individual remains its owner. Instead, the asset is permanently assigned for a specified purpose, while its benefits are directed toward defined uses. This juristic structure transforms waqf into sadaqah jariyah and distinguishes it from ordinary donations or charity.
This conception forms the backbone of the contemporary takaful model. Because the takaful fund is structured as a waqf, it is claimed that the contributions collected do not belong to the company, nor to the participants. On this basis, neither a contract of sale nor a loan relationship is said to arise. Instead, a cooperative arrangement is established that is presented as free from classical juristic objections. The waqf fund is thus framed as a non-personal and non-commercial financial entity, operating solely for collective protection.
Within this framework, the role of the takaful operator is defined in a specific manner. The operator is not regarded as the owner of the fund, but as its mutawalli (trustee). The function of the mutawalli is to manage the waqf, supervise its accounts, and ensure that its assets are used strictly for their dedicated purpose. Accordingly, the operator presents itself as a custodian and administrator rather than a trader or investor.
In practice, the operator collects contributions, manages claims, and oversees the investment of the waqf fund in Shariah-compliant activities. Its income is justified through juristic mechanisms such as wakalah bil-ujrah or mudarabah, either as a fixed management fee or a share of investment profits. It is argued that these earnings arise from services and management, not ownership of the waqf fund.
Taken together, these elements form an internally coherent juristic framework. At this stage, the purpose is descriptive rather than critical. The operational implications and juristic tensions arising from this structure will be examined in the following section.
Operational Structure and Internal Logic of the Contemporary Takaful Fund
After outlining the juristic concept of the waqf fund and the role of the takaful operator, the functioning of contemporary Islamic takaful can be examined at an operational level. At this stage, the purpose remains descriptive rather than critical, focusing on how the system is structured and how it operates in practice.
Participants in contemporary Islamic takaful are commonly referred to as policyholders, while their payments are described as contributions (tabarru‘). This terminology is intended to emphasize that the payment is not the price of a guaranteed benefit. Instead, it represents participation in a collective cooperation mechanism. Once paid, the contribution enters the waqf fund and exits the individual’s ownership, becoming part of the waqf structure. This framing underpins the claim that neither a sale nor a loan relationship is created.
Allocation of Contributions and Investment Mechanism
Operationally, these contributions are allocated across defined categories. A portion covers administrative expenses, including the operator’s services and operational costs. Another portion is reserved for claims, ensuring that compensation can be provided when a participant suffers loss. In addition, technical and contingency reserves are maintained to support the long-term sustainability of the waqf fund.
The accumulated funds are not left idle. Instead, they are invested in Shariah-compliant activities, commonly under a mudarabah arrangement. In this structure, the waqf fund provides capital, while the takaful operator manages investments. Any profits generated are returned to the waqf fund, strengthening its capacity to meet claims and future obligations.
A defining feature of this structure is how claims are framed. Compensation is not presented as the enforcement of an individual contractual right. Rather, it is described as the fulfillment of collective responsibility, based on mutual cooperation rather than guaranteed exchange. Through this framing, contemporary takaful seeks to distinguish itself from conventional insurance.
Taken as a whole, contributions, claims, investments, and administration revolve around the waqf fund as the central pillar. At this stage, contemporary Islamic takaful presents itself as a complete institutional system. The next stage of analysis will examine whether this structure genuinely preserves the original Islamic concept of takaful and waqf fund or whether tensions emerge between stated principles and practical realities.
(An Urdu version of this article is available at: https://economiclens.org/islami-tasawwur-e-takaful-aur-waqf-fund-fiqhi-wa-samaji-bunyaad/)
Concluding Remarks
Up to this point, contemporary Islamic takaful has been presented according to its own claims, structure, and internal narrative. The purpose of this exposition was to explain how the Qur’anic and juristic foundations of the Islamic concept of takaful and waqf fund were extended into a formal institutional system in the modern era, and why the waqf fund was positioned as the cornerstone of that system. At this stage, neither intentions have been questioned nor outcomes judged.
What emerges from this discussion is that contemporary Islamic takaful is not a simple charitable arrangement. Rather, it is a complex institutional framework in which juristic terminology, legal structures, and modern financial management are closely interwoven. It seeks to reconcile classical Islamic principles with the operational demands of modern economies. This complexity is significant because it shapes how risk, responsibility, and financial relationships are understood and implemented in practice.
The discussion also makes clear that contemporary takaful is built upon a series of carefully constructed assumptions. These include the juristic status of the waqf fund, the framing of contributions as tabarru‘, and the positioning of the takaful operator as a trustee rather than an owner. Together, these assumptions form the basis upon which contemporary takaful claims distinction from conventional insurance systems.
At this point, a central question naturally arises. Does contemporary Islamic takaful, despite its juristic architecture, truly preserve the original Islamic vision of pure collective support, equitable sharing of responsibility, and the inseparable link between risk and moral accountability? Or does its institutional and financial structure introduce tensions that gradually distance it from that foundational spirit?
Transition to the Critical Examination in a Separate Article
This question marks the transition to the next stage of analysis, which will be addressed in a separate article. The present discussion concludes at the level of descriptive exposition. A detailed critical examination of contemporary Islamic takaful will follow independently, focusing on structure, incentives, and practical outcomes, in order to assess where alignment exists with the Islamic concept of takaful and waqf fund and where divergence begins to emerge in its contemporary institutional expression.
