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Literally, takaful means mutual guarante; joint guarantee and coperaton and these are the hallmarks of this scheme. This concept empbodies the principles of cooperation, mutual help and shared responsibility. The Takaful Act 1984 of Malaysia definens takaful as a scheme based on brotherhoood, solidarity and mutual assistence which provides for mutual financal aid and asssistence to the participants in case of need, whereby the participants mutually agree to contribute for that purpose.
Takaful is characterised by theree aspects of mutuallity, namely, mutual help, mutual responsibility and mutual protection form losses. The “insurance” that is provided is not dispensed by one party (the insurer) to another (the insured). The person seeking protection participates in a scheme of cooperation with another. The Syarikat Takaful (takaful Company) that runs the scheme is not the insurer but is merely and institution which provides the entrepreneurial and administrative skills required to bring the participants together, to collect and invest the contribution and to process the claims. Therefore, this scheme can be seen as a method of joint guarantee among a group of members, that is, participants in any scheme against loss or damage that may fall upon any of them. The member of the group agree to guarante jointly that should any of them suffer a catastrophe or disaster, he would receive a certain some of money to help hi meet the loss or damage. This means