Assessing ‘Takaful’ Insurance Business Regulation in Ethiopia against Sharia Norms: A Comparative Analysis

Abstract

Muslim communities are not beneficiaries of conventional insurance schemes due to the perceived absence of Insurance scheme that complies with Islamic principles and Sharia laws. While insurance plays an important role in compensating and mitigating risks related to unpredictable loss of life and property, it needs to accommodate Islamic law to make Muslim communities on board. This article seeks to examine the reasons behind Muslim communities are left out of conventional insurance schemes. Then, the article asks whether or not the Islamic insurance scheme introduced by Ethiopian insurance business regulation complies with sharia standards. By employing doctrinal and comparative research methods, the article has found that conventional insurance is prohibited because it violates Islamic principles by involving elements of Riba (Usury), Gharar (peril), and Maysir (gambling). Moreover, while the Ethiopian insurance regulation introduces the Islamic insurance scheme, it falls short of assuring the fulfillment of Sharia standards provided by Islamic scholars and international non-profit organizations. Finally, the article suggests the insurance business regulation in Ethiopia should be overhauled by considering the Sharia standards.