Theory and Instruments of

Social Safety Nets and Social

Insurance in Islamic Finance :
Takaful and Ta’min
Meember :
Muhammad Zaky Maulana 22/503337/SV/21496

Putri Agustina 22/503073/SV/21472

Rachel Gracia Widianto 22/498739/SV/21250

Melati Ambar Sari 22/506161/SV/22092

 Introduction
Poverty is one of the oldest enemies of mankind (Iqbal 2002). It
has topped the agenda in world economic conferences and gatherings held
by the various United Nations (UN) agencies and other related parties like
the World Bank and the International Monetary Fund (IMF).
Islam views poverty not only as a social disgrace but also as an
avenue to apostasy, against which the poor need protection (Sahl 2009). In
Islam, despite the fact that all Muslims are to believe in Qadha-o-Qadr (the
Divine Decree and the Will of God), they must look for ways and means to
mitigate risk and to avoid misfortunes and sufferings wherever possible, and
to minimize their financial losses should such disasters occur. This is in line
with the verse (Surah Ar-Rad 13:11)
 Islamic Social Safety Nets
Islam provides for the needs and security of mankind. The Qur'an affirms that Allah
will provide sustenance for all and forbids the killing of children for fear of poverty. Islam also
respects human dignity and gives Muslims the duty to utilize God-given resources to improve
the welfare of their fellow human beings. The relationship between social security and justice
is very important in Islam, and state leaders have a responsibility to look after their citizens.
Islam also emphasizes the importance of a fair distribution system and redistributing wealth to
the needy. Islam allows private ownership but prohibits excessive consumption and
exploitation.
In Islam, members of society are expected to ensure their own well-being through
self-effort. However, those who are not self-reliant such as the disabled, orphans, widows, or
unemployed need to be looked after collectively by Muslims. Sharia also stipulates that private
property has social obligations, including paying zakat to help the poor and meet public needs
that must be addressed by the state. Islam encourages Muslims to work and respects the value
of labor, while prohibiting idleness and unfair profit-making such as usury, speculation, and
gambling.
 The Institutional Framework of Social Safety Nets in Islam
In order for humans to bring about social safety and achieve its objectives, Islam has
established a set of institutional frameworks to redistribute income to the poorest and most
vulnerable, with an immediate impact on poverty and inequality :
The Duty of Necessary Expenditures on the Family, according to the Shari'ah (Islamic
law), it is a moral and religious duty for individuals to financially support and take care of their
family members.

The Rules of Inheritance, Islamic rules of inheritance aim to ensure social security and
fairness within the family and society.

Care of Orphans, Islam places great importance on caring for orphans the prophet
Muhammad emphasized the rewards and honor associated with looking after orphans, comparing
it to being in Paradise.
The Neighborhood, the Qur'an emphasizes the importance of treating neighbors well,
also generosity towards neighbors is linked to faith and establishing strong social relations.
 The Institutional Framework of Social Safety Nets in Islam

Charitable Activities, the act of giving food to the needy, orphan, and captive is done
solely for the sake of Allah without expecting any reward or gratitude.

Al-Waqf, Waqf has a broader impact beyond charity and voluntary activities, making it
an important aspect of social security in the Muslim world.

Al-Zakat, the Qur'an emphasizes that spending in the way of Allah is multiplied and
does not decrease one's wealth.

Bait al-Mal (House of Wealth), When individuals in society lack resources and existing
safety frameworks have reached their limits, Bait al-Mal is initiated to provide security for citizens.
The Concept of Social Security in Islam
In general, social security refers to the protection that a society provides to individuals
and households facing illness, poverty, or unemployment. it is the government responsibility to
providing the social security system.

Similarly, in Islam, social security is an essential part of community's well-being. Islam

believes that everyone has a right to social security, regardless of their religion, gender, color,
race, and etc. The principles of fairness and justice placing a strong emphasis on the equitable
distribution of resources, and support to prevent anyone in the community from lacking life’s
basic necessities.

The concept of social security was put into practice by Umar bin Khattab when he
helped non-Muslim who were in need. He provided for their necessities from the Bait al-Mal
(public treasury) and didn't make them pay taxes.
The Concept of Social Security in Islam
Over time, in contemporary society, the government social security has
imposed strict requirements, excluding many individuals from receiving social protection.
As a result, the government's responsibility towards those in need has declined, allowing
commercial insurance to play a bigger role in providing social security. However, the
Muslim community has not embraced commercial insurance.

In the latter half of the 20th century, legislation introduced a modern social
security system with mandatory insurance involving beneficiaries, employers, and the
state. Its coverage remained limited, mainly for civil servants, military personnel, and state
project workers. This system offered benefits like retirement compensation, health
insurance, accident coverage, death benefits, maternity leave, and family aid. It reflects
the principle of state to realize al-Masalih al-Mursalah (the public interest).
 The Concept of Social Security in Islam
To fulfill the well-being of the community. The following are the public programs
that must be provided:

Education
Islam emphasizes that the acquisition of knowledge is an obligation for every Muslim.
Therefore, schools, libraries, laboratories, and the like are entitled to receive support. Al-Fuqha
(Muslim jurists) have affirmed that zakat can be given to students to cover educational expenses.
Such payments encourage families to enroll their children and adults to pursue higher education.

Health Care
The Qur’an says, “And whoever saves one—it is as if he had saved mankind entirely”
(5:32). Therefore, many hospitals, medical centers, and clinics have been set up by Muslim as waqf,
together with the state, to protect members of the society.

Training
Training is a tool for members of the community to acquire practical skills and encourages
them to be competent in their careers. The Prophet taught us that Allah loves those who can perform
their jobs skillfully. With the skills we've acquired, we can produce more products and services to
improve our lives and reduce poverty.
 The Concept of Social Security in Islam
Security, Protection, and Jurisdiction
By applying Islamic principles to maintain peace, the institution of Hisbah is established and
appoints state officials to safeguard society from deviance, protect the faith, and ensure the well-being
of the people. Additionally, the government must be prepared to defend the Islamic state against
various forms of invasion and aggression (economic, cultural, political, and so on) with full
determination.

Infrastructure
Infrastructure, such as roads, water supply, electrical grids, and telecommunications, is
needed by society to provide essential services to improve living conditions. The state should
consistently fund community infrastructure development projects. Classical Islamic jurisprudence, which
elaborates the allocation of revenues from Bait al-Mal, has emphasized that Bait al-Mal should also
allocate revenues for building bridges, repairing roads, digging wells, improving irrigation-drainage
systems, widening river canals, and the like.
Ta’min
Ta’min is derived from the Arabic verb "amman," which means "pray or supplication.“

The root letters "A-M-N" have multiple related meanings, including "security," "peace,"
"safety," "loyalty," "honesty," "fidelity," and "certification.“

Ta’min refers to someone paying a sum of money in installments to acquire an agreed

amount of money or compensation for something they have lost, similar to the
conventional concept of insurance.

Ta’min is seen as a cooperative system based on "ta‘awun" (cooperation) among a group of

people to indemnify for damages or losses when contingent events occur.

Social cooperation and mutual assistance are the main purposes of ta’min.
 Takaful
Takaful is another Arabic term referring to social security and is derived from the verb "kaffal,"
meaning "to provide, support, sponsor, spend, and guarantee."

Takaful reflects the idea of interdependence, love for one another, and solidarity in society, as
encouraged by Islamic teachings.

The Qur'an emphasizes cooperation in righteousness and piety, and the Hadith (teachings of the
Prophet) stress mutual support among Muslims.

Takaful is a system of joint liability among individuals, groups, or organizations to meet the needs of
the needy and protect common benefits.

The Takaful system is based on faith, ethical principles, and the consciousness of individuals'
responsibility toward others in society.

Takaful encompasses various dimensions of social, economic, political, judicial, cultural, and
educational cooperation, fostering the spirit of solidarity.

Unlike commercial insurance, Takaful is based on donation and cooperation, and beneficiaries may
not even know who provided assistance..
 Differences between social insurance and Takaful
Social insurance is a legal system governed by specific laws, while Takaful is a faith-based and ethical
system rooted in individual consciousness.

Social insurance is often compulsory, while Takaful is optional and based on interdependence among
society members.

Takaful has a broader scope, covering all members of society, while social insurance is restricted to
those who meet specific conditions.

Social insurance is usually administered by government organizations, while Takaful is more

widespread in society.

The returns of social insurance are available only to participants, whereas Takaful is based on
donation and cooperation, with donors remaining anonymous.
Takaful in Practice
Modern Takaful began in Sudan in 1979. By 2011, the Takaful industry was
operating through more than 200 entities around the world and was worth an
estimated US$12 billion
Increase in regional growths rates in takaful. 2010-11
 Takaful in Practice

In the past three decades, the development and growth has been greater on the commercial side
of Takaful—that is, Takaful al-tijari—where the focus is mainly on personal benefits or interests of Takaful
participants, rather than the poor and the vulnerable in society at large. e. However, Muslims should not
overlook the spirit that underlies these operational efforts. This spirit comes under the form of Takaful al-
ijtimai (mutual social responsibility), which includes all material and moral aspects of life that are implicit in
the Maqasid al-Shari’ah (the objectives of Shari’ah). Ulwan (2001) states in his book Al-Takaful al-ijtimai fi al-
Islam that Takaful al-ijtimai is the act of guarantee and supports each member in the society, whether
individually or in a group. While Islam acknowledges the business aspect of Takaful as developed through
Takaful al-tijari, it also emphasizes inculcating the facet of Takaful al-ijtimai. Therefore, rebalancing both
aspects of Takaful should complement the roles and functions played by the Takaful operators
 Takaful in Practice
Operationalizing the concept of Takaful al-ijtimai takes two forms: namely, through the
promulgation of cash waqf, and through introduction of microTakaful programs. Funds accumulated
through the cash waqf programs, especially in developing countries, can be allocated to socially related
development areas, including agriculture, education, and health, as well as urban poverty alleviation
programs. Such a focus would eventually reduce poverty levels and uplift the spirit of helping one another
among the Ummah.
Islam, being egalitarian in nature, emphasizes the importance of fulfilling the basic needs of
the poor and the vulnerable. Together with a good economic growth, a controlled population growth rate,
and an efficient distribution scheme, they “could form the dynamics of poverty reduction,” as Iqbal (2002,
9) puts it.
Dynamic of Poverty Reduction

Another operational approach to activate

Takaful al-ijtimai is through microfinance, or more
specifically, through microTakaful programs. According to
Bhatty (2010), while Takaful deals with manageable risks for
those who can afford them, microTakaful targets the type of
risks that are excluded on normal yardsticks. The risk in the
microTakaful proposition is a function of low income,
poverty, and vulnerability, which relates to loss of property
due to theft or fire, loss from natural and man-made
disasters, agricultural losses, accidental death, disability, or
illnesses.
 Conclussion
Over the past 30 or so years, the emergence of a number of economic crises, coupled with waves of
natural disasters, have disproportionately hurt the poor and the vulnerable, and have thrust many into the quagmire
of poverty. The effects on the poor of cuts in public spending and other related measures have become more intense,
and this has eroded the social capital within communities. Poverty has topped the agenda in many global gatherings
assembled by the United Nations, the World Bank, and the IMF. These crises have also prompted many countries to
reassess the adequacy of their safety nets to help the poor and the vulnerable.
This study proposes the implementation of Islamic social safety nets through the application of the
Takaful and ta’min concepts. Under a Takaful contract, participants agree to contribute to a Takaful fund, which can be
used in an act of mutual help in the event of a misfortune
Each member of society should help those in need so that they can at least lead a decent life and meet
their basic needs. This involves all members of society, regardless of their religion or nationality.
Thanks You
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