100 GREAT BUSINESS IDEAS • 163In conventional insurance, Muslim jurists believe that the existence
of gharar (uncertainties) leads to maysir (gambling). The gamble is
that the insured may either lose all the premiums they have paid,
or be compensated for losses incurred should the insured event
occur. Gambling takes place whether the insured event occurs or
not. This is because, if the insured event occurs, policyholders will
gain for being compensated for the loss they incur; however, if the
insured event does not occur, the insurer will gain by keeping all
the premiums that have been paid by the policyholders.
Riba (interest) is most prevalent in the investments of insurance
funds. From the Shariah perspective, accumulation of wealth must
always be free of interest. Therefore, the investments of insurance
funds in interest-bearing securities such as bonds and stocks, which
do not comply with Shariah principles, pose a major problem for
Muslims purchasing conventional insurance.
SABB Takaful is an Islamic insurance business based in Saudi
Arabia that is partly owned by SABB (formery the Saudi British
Bank). Takaf ul means “guaranteeing each other” in Arabic. It is
an Islamic system of mutual insurance built around the concept of
tabarru (donation or gift). Tabar r u contributions are made with the
intention of helping other participants faced with diffi culties. This
eliminates the resemblance of takaful to gambling and exploitation.
Each participant contributes to a fund to cover expected claims,
while also benefi ting from a share of investment returns.
SABB Takaful manages its operations and invests contributions in
line with the principles of Shariah. Participants share in the profi ts
of the fund with the understanding that these may be forfeited to
cover losses. When there is surplus, it is jointly shared. With takaful,
contributions are pooled into one fund that will be used to pay for
any contingency should any of the scheme’s members suffer a
catastrophic loss. In other words, by guaranteeing compensation