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Poverty, Conventional Insurance and Takaful: A Journalistic Review

Author Affiliations

  • 1 Faculty of Management, University of Technology (UTM), MALAYSIA COMSATS
  • 2 Institute of Information Technology, Lahore, PAKISTAN

Res. J. Recent Sci., Volume 3, Issue (10), Pages 108-112, October,2 (2014)


Substantial income is always an issue for poor households. Insurance is an effective mechanism for reducing the vulnerability of the poor from the effects of diseases, theft, disability, and other hazards. Unexpected losses can be protected by conventional insurance. In Muslim world, Shariah scholars prohibit the conventional insurance system because of Gharar (Uncertainty), Maisir (Gambling), and Riba (Interest). Insurance covers risks and risk can be managed by avoiding, mitigation, transfer, combination, or loss prevention activities. Takaful is one of the substitutes of insurance system, which follows the rules and regulations of Islamic Shariah. In Takaful, insurance is like collective endeavor in which a group of people, following a particular scheme, financially support the catastrophic losses that are faced by an individual, who is policy holder of that particular scheme. In the past studies little evidence is found that counter Takaful System Poverty and deprivation among the Muslim societies. Unfortunately, less services available to poor Muslim population due to affordability, lack of knowledge, and insecurities of the products. Few scholars have proposed the solution of these issues in the Micro-Takaful products and in cooperative structure scheme. So, this study is investing whether Takaful has prospectives to lessen poverty or not. More importantly, this study will also attempt to find out the impact of Micro-Takaful products on poverty reduction.


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