THE INTERSECTION OF TAKAFUL AND ISLAMIC BANKING IN JORDAN

Jordan is emerging as a frontrunner in Islamic banking and also for the energy and diversity its culture carries with it. The notable link is that of Takaful and Islamic banking, as both are harmonious because they relate and join together to make up a full system, such as an Islamic financial system. For a clearer picture of this relationship, we could consider the views expressed by Dr. Raed El Omari, an expert from Jordan in the Islamic finance field.

TAKAFUL - AN OVERVIEW

Takaful is an insurance concept in Islam derived from the Arabic word kafala, which means guarantee. It is a teamwork, collaboration, or shared accountability-based principle. In Takaful, another contrast from conventional insurance is that an insurer does not take over a participant's risk in this program. Hence, the participants will share and contribute to the fund. This pool is intended to mitigate the losses resulting from a particular participant's needs for it not to violate Shariah prohibitions on uncertainty (gharar) and gambling (maysir).

ISLAMIC BANKING - AN OVERVIEW

Islamic banking follows the Islamic law of Shariah law, which does not allow for the charging of interest and encourages the sharing of risks and ethical investment. The major products include partnerships, profit and loss accounts, cost-plus financing, leasing, and profit-sharing partnerships. These products are geared towards relieving injustices and inequity in financial transactions where all the stakeholders bear both the cost and benefits.

SYNERGY BETWEEN TAKAFUL AND ISLAMIC BANKING

Financial expert Dr. Raed El Omari, while dwelling on the fact of the subject, argues that the concept of Takaful, along with Islamic banking, essentially forms an organic link that caters to the financial requirements of the Muslims of Jordan. Takaful can be described as an insurance solution for the fulfillment of people’s needs for insurance and protection, while Islamic banking focuses on Islamic financial products and services. Both support the country’s economy in its overall sense of economic development, enhancing financial access and soundness.

This is one of the advantages of having Takaful and Islamic banking since they provide clients with various solutions. For example, the Takaful propositions can be offered in conjunction with the financing services rendered by an Islamic bank so that the client is presented with a contract that combines financing and insurance. This not only makes Islamic banking products more appealing to consumers, but it also ensures adequate risk management throughout the process.

REGULATORY AND INSTITUTIONAL SUPPORT

Takaful and Islamic banking have drawn significant institutional support due to their rapidly growing nature in Jordan. The Central Bank of Jordan and the Islamic International Arab Bank are some of the institutions that have been active in promoting the use of Islamic finance. According to Dr. Raed El Omari, the CBJ has set up a specific Islamic banking department to monitor and oversee the operations of the related subsector in line with Sharia and the best practices across the globe.

CHALLENGES AND OPPORTUNITIES

In this regard, there are areas that require attention in order to enhance the link between Takaful and the Islamic banking sector in Jordan. Consequently, Dr. Raed El Omari stressed the need to raise public awareness to comprehend the mechanics of Islamic finance properly. Consumer awareness of Takaful and Islamic banking is still low, and there is a need for awareness creation and public enlightenment.

Besides, there is another question worthy of further attention—the question of constant product improvement to respond to the customer’s needs. In Islamic financial services, the use of technology stemming from digital banking solutions can help improve value propositions.

CONCLUSION

In conclusion, Jordanian business expert Dr. Raed El Omari claims that the combination of Islamic banking and takaful in Jordan promotes financial inclusion and economic prosperity. With increased public awareness and ongoing innovation, these industries have the potential to make a substantial contribution to Jordan's inclusive and strong Islamic financial system.