Takaful Industry In Malaysia Case Study

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2. Takaful Industry in Malaysia
2.1. Introduction in a part of Malaysian history

Malaysia has declared its independence from the British in 1957. Since then, the constitution of Malaysia states that 'Islam is the religion of the Federation' (hence it is not secular state), thanks to the efforts of the First Malaysian Prime minister Mr. Tunku Abdul Rahman together with United Malay National Organization (UMNO) and despite the opposition of the Reid Commission. Also, the person must be a Muslim if he/she wants to be Malay and Malay has been declared the national language of the State (according to article 152).⁹ Lembaga Tabung Haji (LTH) was the first Islamic institution established in Malaysian financial system in 1969. The establishment and
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In practice, profit sharing contract need to be signed between participants (sahibul mal) who provide the capital and entrepreneur (mudarib) who
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¹¹ Sherif, Shaairi (2013), 'Determinants of demand on Family Takaful in Malaysia', Journal of Islamic Accounting and Business Research, Vol. 4 No. 1, pp.26-50, available online at http://emeraldinsight.com/1759-0817.htm
¹² Kadir (2013), 'The Factors That Affect the Demands of Family Takaful Schemes in Malaysia', Social Science Research Network, Twinkle College, Malaysia is set up to manage and administer the Takaful business (not allowed to charge any fee from the participant paid contributions). Signing the contract both parties specify the ratio of profit distribution. Earnings are divided after cover all costs and current expenditures. In the case of a loss occurrence or some unexpected deficit in Takaful fund, participants bear the entire loss. Shareholders fund covers all operational costs. There is some special feature, sometimes used in practice, when there is a need to overcome a deficit in the participants special account (PSA). In that case, shareholders provide a free-interest loan (Qard

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