Wakalah-concept and its application in Takaful

By: Wan Jemizan Wan Deraman
Islamic Transaction System is a dynamic system and in line with current needs of the ummah (people). Although the concept and basic principles outlined by Islam in its Transaction (Muamalat) system seemed more 'traditional', it can be processed in a very practical and able means to meet the financial needs of modern and complex community. In fact, the mechanism of the Islamic financial system today is seen as one of the best alternatives to the conventional financial system, which in current condition is equivalent to the Malay proverb “like a crack waiting to happen." This is the best part of Islam which holds no boundaries not only in time but also geography.
The Wakalah contract is among the treasures of Islamic Transaction system that has been popularized and its application tailored in various facilities in the contemporary Islamic financial system.
The word Wakalah is taken from the Arabic word which means representative. Literally it means to preserve, to protect, to guarantee, to submit and to replace. Whereas in terms of syara‘ (law based on Islamic teaching), understanding it refers to "a party may submit any matter that may be represented in accordance to syara' to the other party when the first is still alive".
The fuqaha (jurists' representatives Islamic scholars) have agreed that the deed must be in accordance with syara' and must be based on is permissible according to syara’ and has been proved by the Holy Quran, Sunnah (deeds, sayings and approval of Prophet Muhammad PBUH) and Ijma' (consensus of opinion). According to Ibn Qudamah, Ijma’ of the 'scholars' accepted the representations received as a declaration because the declaration of Wakalah is needed by all walks of life in various forms of activities. The Wakalah contract is made into Islamic laws shows evidence that human behavior is weak, cannot live alone and require one another to manage the affairs of life. Islam promotes the use of Wakalah principles in various fields of activities as long as they do not conflict with Islamic laws. Among the resource proposition that is a principle of representation which is required to conform that the principle of representation is permissible:
1. Based on the event of Ashabul Kahfi as told in the al-Quran: "…So send one of you with this silver coin of yours to the town, and let him find out which is the good lawful food, and bring some of that to you. (Al-Kahf: 19)
Let one of you go to the city with this silver coin and find food that is purest and lawful (that is sold there). Let him bring you provision from it. (JAKIM translation)
2. In the Sunnah it is narrated that Prophet Muhammad PBUH has delegated ‘Urwah al-Bariqi to buy a goat for sacrifice. (Narrated by al-Bukhari, Ahmad, Abu Dawood, at-Tarmizi, Ibn Majah and al-Daruqutni which is from Urwah’s own)
To ensure that the contract is a binding one, it must meet certain terms and conditions. They are the Represented/Principal (al-muwakkil), the Representative (Al-wakil), the affairs which being represented (al-Muwakkal fihi) and Sighah (Ijab and qabul). A representative The principal must be a person who has the right to operate the properties represented. The appointment of a representative would be invalid if it is made by children who have not reached a certain age when they are unable to differentiate between the good and the bad (mumayyiz) or by people who are mentally disturbed. A representative must also have the ability to make certain decisions in choosing between right and wrong, as well choosing profits over losses. According to the Hanafi School of Islamic law, a representative must also be wholehearted in the whole affair and fully understands the contract represented. The appointed representative must also be appointed determined. If A calls upon 2 persons without determining the actual representative, the appointment is invalid. In addition, representatives must also know about the task or the specified time period given.
The affairs that are delegated must meet certain conditions and if the conditions are not met the representation becomes invalid. Among the conditions of affairs that can be represented is that it must be required permissible by Syara' (law based on the teaching of Islam) and owned by the owner because the goods that does not belong to the owner cannot be delegated to others to manage. The whole affair must be clear so that ambiguity and deception can be avoided. Not every affair can be delegated though; as this only involves the dealings and operational matters in relation to properties or material goods. Whereas the physical worships such as observing prayers, fasting and ablution cannot be delegated except for representing someone for the hajj pilgrimage.
The declaration of contract or referred as Sighah is also a very important aspect of a valid contract. The declaration of ijab (offer) from the owner shall be made bright and clear. For example: "I entrust you to sell this house" or "I submit this land sale transaction to you" or "You are my representative in the business of selling this land". Whilst the declaration of qabul (acceptance) from the representative should not be as necessarily bright and clear. It is adequately accepted if the representative does not show any rejection towards the affair submitted to him.
Wakalah contract is divided into General Wakalah, Special Wakalah, Paid Wakalah and Unpaid Wakalah. The General Wakalah is a Wakalah in matters that are not specified such as a representative in all business transactions, or being a representative without any prescribed goods to be sold or purchased. Under the General Wakalah the wakil has a power to do any business as long as no harm is done to the owner.
Whereas a Special Wakalah is a representative devoted to matters such as sale and purchase of homes or cars, or rental properties such as land, houses and buildings. Special Wakalah is bound by the matter or affair devoted to him.
Paid Wakalah is required permissible by Syara'. The Prophet PBUH had sent officers (employees) to accept collect charity tithe, and they were paid for it. Representative of this type must perform those tasks well and not to neglect them. In the context of takaful, the practice is based on this type of wakalah.
Unpaid Wakalah is a representative who works voluntarily without any form of payment. Representation of this type does not necessitate a representative to continue the work and he can release himself from the task at any time.
The Wakalah concept is practiced by most of the takaful operators in Malaysia and this is a necessary tool to market the takaful products to the society. This task is very much needed by the Takaful operators to accelerate the distribution of products based on Islamic principles.
Takaful Ikhlas Sdn. Bhd. (IKHLAS) for example, is using a model named Wakalah as the basis of its operating business. Using the Wakalah principles, IKHLAS operates by representing its participants in managing all their established funds with trust, transparency and professionalism. For this purpose, IKHLAS has charged management and performance charges to participants based on the principle of Paid Wakalah (al-Wakalah bi al-ujrah).
IKHLAS also employs representatives as intermediaries to market the company products with paid wages. Aqad (declaration contract) between the representatives and IKHLAS is based on Aqad Wakalah. This concept is consistent with the principles of Islam as the practice of Prophet Muhammad PBUH who had sent officers (employees) to accept collect charity tithe, and the Prophet gave wages to them (al-Talkhis al-habir, Vol. 1, pg. 176, 251, 271). In the Islamic principles, when a contract Wakalah contract with wage payment is implemented, then the contract is firm and binding, and this means that all parties are responsible for implementing all the matters agreed in the Aqad.
Under the Wakalah system, the representative is necessarily associated with four characteristics, Siddiq (Honesty), Amanah (Trust), Tabligh (Passing Preaching) and Fatanah (Wise Wisdom). The four characteristics must be implanted, comprehended and implemented by the representatives in each business representation in order to achieve a valuable life in this world and hereafter.
A Takaful representative is a DAKWAH who works to develop the products of Islamic Transactions. Takaful is an alternative to the conventional insurance system as concluded by the Task Force to Study on the Establishment of Islamic Insurance Company in Malaysia 1983. A Takaful representative also performs JIHAD against the Jahiliyyah system (conventional insurance). This is because conventional insurance is considered Haram (unlawful) according to the Fatwa issued by the National Fatwa Council in 1972. Besides, a representative of Takaful also IBADAH through his works because it is a manifestation of dedications, faith and devotion to Allah who ordered to act upon the ma’ruf (good deeds) and leave the munkar (evil deeds): Al Baqarah-25
A Takaful representative must have the moral restraint creditable behavior to achieve the mission and vision as the standard bearer of Islam.
In conclusion, the concept of representation as practiced by most of Takaful operators create employment opportunities and one of the sources of income. The representatives also have the opportunity to perform responsibilities as da'ie who encourage people to help each other, do tabarru' and develop Islamic Muamalat system which is a religious responsibility of every Muslim. As a result, in this world it may serve as their source of income and in the Hereafter it may serve as a reward to be presented before Allah.