Toward Islamic deposit insurance model

PurposeThis paper aims to provide an essential framework for establishingShariah-compliant deposit insurance scheme, by reviewing theShariahprovisions concerning the available approaches for deposit guarantee, types of deposits in Islamic financial institutions and the permissible party to incur the cost of this guarantee.Design/methodology/approachThis paper reviews theFiqhrules and principles approved by the well-known IslamicFiqhreferences, as well as the resolutions of International Islamic Fiqh Academy (IIFA) andShariahstandards issued by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and presents these resolutions and judgments in a modern applicable way.FindingsThis paper recommends that the Islamic scheme for deposit insurance should be established based onTakafulinsurance principle, and this scheme must adopt fund segregation principle to comply withShariahprovisions for guarantee permissibility.Research limitations/implicationsThe paper bridges the gap between theory and practice by highlighting how the proposed model can be initiated in practice, thus, it can influence public policy in countries with Islamic banking system.Originality/valueThis paper represents a significant contribution toward the establishment of a consensualShariah-compliant Islamic deposit insurance model.