Management of takaful surplus funds to support microtakaful schemes: an exploratory study in Malaysia

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 adopted 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 identified the regulatory and Shariah-compliant mechanisms for surplus utilization, explored operational challenges, and proposed practical solutions for sustainable implementation. Findings highlighted 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.