Charging Fee for Guarantee (Al-Kafalah bi Ajr) and its Application by Deposit Insurance Cooporation Malaysia

Takaful and Insurance benefits protection scheme is a new innovative product introduced by PIDM to provide takaful certificate and insurance policy owners with an explicit protection against the loss of part or all of their benefits in the event of an insurer member failure. The main objective of takaful and insurance benefits protection is to promote public confidence in Malaysia’s financial system by protecting takaful certificate and insurance policy owners against the loss of their benefits. This initial study will investigate the validity of an applied Shariah instrument of al-kafalah bi al-ajr i.e. charging fee for a guarantee and explore other possible viable alternative instrument in compliance to Shariah principles. Any criticisms and suggestions in this paper are part of academic exercises for the positive and constructive improvement of Islamic finance industry, with the hope that the paper will indulge the respected participants to express their scholarly opinions and delib