The establishment of the Takaful and Insurance Benefits Protection System (TIPS) in Malaysia is a statutory requirement. TIPS aims to ensure financial stability, soundness and public confidence. Perbadanan Insurans Deposit Malaysia (PIDM), known internationally as the Malaysia Deposit Insurance Corporation, is the sole regulatory body entrusted with the mandate to regulate deposit insurance across the country. At the outset, its mandate was confined to banking institutions. Since 2010, however, PIDM’s role has been extended to include takaful and conventional insurance institutions. With regard to takaful, the operation of the Takaful Benefits Protection System (TBPS) and the relationship between PIDM and its takaful members pose major concerns that have been raised by the industry in Malaysia. The concerns are related to contractual relationships, sources of premiums, the subject matter of the contract, and the services and guarantee that PIDM provides for takaful participants. This research aims to provide critical Shari'ah analysis and evaluation of the current model of Takaful benefits protection system. It examines the existing model to ascertain to what extent it accomplishes the statury mandate and to what extent it meets Shari'ah requirements. Adherence to regulatory requirements is a must. The takaful industry faces some major challenges in trying to realise the interests of the takaful participants and its shareholders while satisfying the regulators. Thus, it is imperative to conduct an investigation that resolves these thorny issues in a win-win manner.

This paper aims to investigate the utilisation of both zakah and waqf fund as external resources to ensure micro-takaful services are delivered to underserved communities in an effective and sustainable manner. It also addresses Shari'ah issues related to the zakah- and waqf-based model. The study is a qualitative-based research. It uses both focus group and content analysis approach to gather primary data and identify and interpret relevant secondary data and Shari'ah concepts in developing the zakah- and waqf-based micro-takaful model. It is discovered throughout the investigation of attributes of beneficiaries of zakah and waqf institutions as well as micro-takaful scheme that all share commonalities in terms of social securities and socio-economic support to low-income households in societies. The study also finds that the disintegration of zakah and waqf which form part of the Islamic ecosystem from the micro-takaful model makes it less effective and sustainable.