Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia

Preface

Islamic finance emerged as an alternative financing method in the post-colonial period with the objective of developing an Islamic moral economy system in accordance with the norms, values, and principles of Islam. This constructivist strategy produced its first institution in the form of an Islamic social bank (Mith Ghamr Bank) in the early 1960s in Egypt. However, the development trajectory of Islamic finance is marked with the establishment of the first Islamic commercial bank in 1975, which defined the model to be followed in the future of Islamic banking and finance (IBF). Since then, IBF has made important inroads in mainstream banking and the global financial centres. Once considered a “voodoo economy” by BBC, it is now an everyday news subject. With over 500 IBF institutions, the asset base of the industry has passed the trillion-dollar threshold to US$1.2 as reported by The Banker (2011). While IBF has compromised on its value proposition due to the observed convergence between IBF and conventional finance, it has managed to get the attention of bankers, financiers, and business people all over the world. The product development and diversity provide a great opportunity for IBF to sustain its growth, as evidenced with the modest yet positive performance it has shown during the global financial crisis.

An important aspect of Islamic finance is the insurance, for which takaful as an Islamic alternative has been functioning in civil society on the peripheries of the ...