188th SAC Meeting (30 October 2018) : Financial Retakaful Model based on the Concept of Hibah Bithawab
The Shariah Advisory Council (SAC) of Bank Negara Malaysia at its 188th meeting on 30 October 2018 decided that the Financial Retakaful (FinRe) proposal based on the concept of hibah bithawab (gift with reward in return) between a retakaful operator (RTO) and a takaful operator (TO) is not permissible due to the following reasons:
- In principle, the application of hibah bithawab is a form of tabarru` and is an act of appreciation (mukaramah) and affection (widad). Therefore, it is unsuitable to be applied in the business context which is motivated by profit as it alters the concept of hibah bithawab from tabarru` to an exchange contract.
- In this regard, hibah bithawab with a business motive is not allowed. Nevertheless, the application of tabarru` contract in takaful (Participant Risk Fund) for the purpose of mutual indemnity and not for business or substantial profit generation is allowed.
- In addition, both the components of gift (hibah) and reward (thawab) take the form of cash/monetary, which may lead to a transaction with the element of riba.
- The concept of hibah bithawab shall not be applied on the basis of necessity (darurah) or need (hajah) as there are other alternative Shariah concepts which are more suitable to be applied in the proposed FinRe model.