Takaful – Foundations and Standardization of Islamic Insurance
The Islamic Finance industry grew from a socio-economic movement to a global industry. The enabling mechanism was a rather legalistic interpretative approach towards Islamic prohibitions such as riba, maysir and gharar. The emergence of an Islamic kind of insurance, i.e. takaful, demonstrates shows how this process was driven by socio-economic and political factors. Today, one of the central claims often raised in discussions around Islamic Finance in general and takaful in particular is that of standardization. In order to grow and further develop, the claim goes, Islamic Finance requires standardized legal frameworks and products. Although such standardization appears to be difficult given the diverse and pluralistic nature of Islamic law and its interpretation, it also appears to make sense, at least with a view to insurance, an industry particularly dependent on scale. Examining this claim ultimately requires an economic analysis. Assuming standardization would indeed further the growth of the takaful industry, the (legal and political) question arises, how, i.e. through which mechanisms, such standardization is supported. In conventional finance, standardization is often achieved through soft law norms produced by (private or public) international regulatory bodies. To examine whether similar processes can be found in Islamic finance, this article applies a framework by Charles Brummer’s, which looks at the central actors and main coercive forces of soft law norms, to the the takaful industry.