Who Checks That Motor Takaful Is Shariah-Compliant?
Bank Negara Malaysia's Shariah Advisory Council sets the Shariah rulings, and each takaful operator's own Shariah committee applies them to its products. Inside the operator, Shariah review and Shariah audit teams check the day-to-day work. BJAK compares takaful products but does not certify them.
- Last reviewed:
- Reviewed by:
- Compliance
- National authority. BNM's Shariah Advisory Council (SAC) is the highest Shariah authority for Islamic finance in Malaysia.
- Operator level. Every licensed takaful operator must have its own Shariah committee.
- Ongoing checks. Shariah risk, review and audit functions watch the business all year.
- Board stays accountable. The operator's board answers for Shariah governance.
The layers of Shariah oversight
| Who | Set up under | What they do |
|---|---|---|
| BNM Shariah Advisory Council | Central Bank of Malaysia Act 2009 | Decides Islamic law rulings for Islamic finance, including takaful |
| Operator's Shariah committee | Islamic Financial Services Act 2013 and BNM's Shariah Governance Policy Document | Advises the operator, applies SAC rulings, confirms Shariah non-compliance and endorses rectification plans |
| Operator's board | BNM's Shariah Governance Policy Document | Sets up the Shariah governance framework and stays fully accountable |
| Shariah risk, review and audit | BNM's Shariah Governance Policy Document | Find, monitor and independently assess Shariah compliance |
BNM's Shariah Advisory Council
The SAC was set up in May 1997. The Central Bank of Malaysia Act 2009 makes it the authority on Islamic law for the Islamic financial business BNM regulates. Its rulings are the main reference for takaful operators.
Its rulings carry legal weight
If a Shariah question comes up in court or arbitration, the court or arbitrator must consider existing published SAC rulings or refer the question to the SAC for a ruling. In 2019, the Federal Court upheld the constitutionality of this law, confirming that an SAC ruling is binding on the court or arbitrator that requested it.
The operator's Shariah committee
Under BNM's rules, a takaful operator's Shariah committee needs at least five members. Most of them, including the chairman, must be Shariah-qualified, and every member must be Muslim and meet fit and proper criteria.
How compliance is checked day to day
Shariah risk management
Spots and measures where the business could break Shariah rules.
Shariah review
Checks operations against Shariah and reports issues to the board, Shariah committee and management.
Shariah audit
Gives an independent view of controls and compliance. It is run by internal audit.
If something goes wrong
The operator must tell BNM and its Shariah committee and submit a plan to put it right, under the Islamic Financial Services Act 2013.
Good to know
A Shariah committee can apply stricter conditions than an SAC ruling, so details can differ between operators.
What you can check yourself
The operator is licensed
Look up the operator's full registered name on BNM's list of takaful operators. The takaful certificate you receive should name that operator.
The Shariah contracts in the PDS
The Product Disclosure Sheet (PDS) names the contracts used, such as tabarru', wakalah and qard. See how to read a PDS.
The Shariah committee's opinion
BNM requires operators to disclose their Shariah governance in the annual report. This includes the Shariah committee's opinion on compliance, signed by at least two members.
Where BJAK fits in
BJAK is a BNM Approved Financial Adviser and Approved Islamic Financial Adviser. That approval covers how BJAK advises and distributes. It is not a Shariah certification.
- BJAK does show takaful quotes from licensed operators and tag them as takaful.
- BJAK does not sit on any Shariah committee or decide whether a product is Shariah-compliant.
Read more in are takaful products on BJAK Shariah-compliant and is BJAK Shariah-compliant.
Frequently asked questions
The SAC sets rulings for the whole industry. The operator's Shariah committee advises on its own products and applies those rulings.
The operator must report it to BNM and its Shariah committee and fix it under an agreed plan. Your cover terms stay set by your certificate, so ask the operator if you are affected.
Yes. Takaful Malaysia, Takaful IKHLAS and Zurich Takaful are all licensed under the same law and rules. See takaful operators on BJAK.
Start with how motor takaful works.
Compare takaful with confidence
Shariah checks happen at BNM and inside every operator. Your job is simply to compare cover and price.