Musfirah Binti Mohamed Mokhtar¹ and Md. Habibur Rahman^2*

¹Department of Shariah, Kulliyyah of Shariah and Law, Universiti Al-Quran Al-Sultan Abdullah Ahmad Shah Pahang, Pahang, Malaysia
2*Department of Finance and Banking, Faculty of Business and Management, Universiti Sultan Zainal Abidin, Terengganu, Malaysia

ABSTRACT

A key feature of takaful operations is the generation of surplus, which represents the collective entitlement of participants and can potentially be leveraged to fund microtakaful, providing affordable, Shariah-compliant protection to low-income households while promoting financial inclusion and social welfare. However, the practical utilization of surplus for microtakaful remains limited due to unclear frameworks, divergent Shariah interpretations, regulatory constraints, and operational challenges. This study adopts an exploratory qualitative approach to examine the perspectives of Shariah scholars, regulators, and takaful operators on the feasibility, mechanisms, and processes for using surplus funds to finance microtakaful. The primary data were collected through semi-structured interviews and analyzed using thematic and content analysis. The study identifies the regulatory and Shariah-compliant mechanisms for surplus utilization, explores operational challenges, and proposes practical solutions for sustainable implementation. Findings highlight that effective surplus management requires balancing participant rights, operator incentives, Shariah compliance, and social objectives. Strategic allocation of surplus to microtakaful and corporate social responsibility initiatives can enhance fund sustainability, expand coverage for underserved populations, and strengthen social impact. This research contributes to academic understanding, provides practical guidance for operators and regulators, and supports the development of Shariah-compliant, socially responsible microtakaful solutions in Malaysia.

Keywords:
Takaful, Surplus, Microtakaful, Sustainability, Islamic finance