Challenges & Opportunities of Islamic Insurance (Takaful) in Nigeria
Aminu Abdullahi
Department of Accounting
Usmanu Danfodiyo University
Sokoto, Nigeria
ameenkaura@yahoo.com, aminkaura.aa@gmail.com
&
Malami Muhammad Maishanu
Department of Business Administration
Usmanu Danfodiyo University
mmmaishanu@yahoo.com, mmmaishanu@gmail.com
Abstract
This paper was enthused due to the fact that, despite wide coverage and opportunities provided by
Takaful business, there are yet only few companies established in Nigeria coupled with low level
of awareness of the concept not only among non-Muslims but even among Muslims. The paper
exposes the concept of Takaful including distinction between conventional insurance and Takaful
as well as challenges and opportunities that Nigeria and Nigerians stand to derive therefrom. It
applies a conceptual approach where articles and studies on opportunities as well as challenges
confronting Takaful industries around the world were reviewed and related to Nigerian context.
Considering the similarity in socio-political, economic, and demographic settings between Nigeria
and some of the countries that are presently operating Takaful business, the system is not only
feasible but possible to operate in Nigeria. The paper concludes that, establishing of Takaful
business in Nigeria would positively impact the Nigerian economy, in terms of provision of
employment, increase in income and wealth especially as the country is striding to come out of the
current economic recession. However, to reap the benefits and opportunities associated with
Takaful business, necessary steps need to be taken to address the challenges that may face the
business in Nigeria. Such steps should include increased publicity and awareness campaign to
sensitize the public and supplementing the educational curriculum in order to provide Nigerian
with requisite knowledge and skill to manage such businesses.
1. Introduction
Taking precautionary measures against risks (ikhtiar) has been encouraged in Islam. The holy
Quran vividly narrated the story of Prophet Yusuf (AS) where he stored surplus of food stocks
obtained from seven good harvest years in order to improvise against forecasted seven bad years
of drought. This demonstrates the legality of striving hard to evade being inflicted by any form of
unfortunate situation, and making adequate provision against such. This is clearly in pari passu
with the main objective of insurance of upholding risks among the parties involved, sharedresponsibilities on the basis of mutual co-operation in protecting an individual against unexpected
risks (Matsawal, Abdullahi and Ping, 2012).
Takaful has wide coverage and provided opportunities to many economies in both developing and
developed worlds. It is based on achieving the universal objective of financial inclusion in terms
of facilitating, establishing and delivering of suitable and affordable financial services for the
disadvantaged and underserved segments of the human population regardless of race or religion
(Kollere, 2014). Recently, Nigeria leap into the opportunity by releasing guidelines for prospective
operators of the business. However, Nigeria is lagging behind in this largely due to low level of
awareness of the concept not only among non-Muslims but even among Muslims in the country.
This paper examines the concept of Takaful including distinction between conventional insurance
and Takaful. It also examined the implementation challenges as well as potential opportunities
that will accrue to Nigeria. The paper is divided in to eight sections with this introduction as
section one. In sections two and three, the paper x-rayed the meaning and history of Takaful.
Section four examines the different models of Takaful while section five discuss the classifications
of Takaful. Section six makes a distinction between conventional insurance and Takaful. In the
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remaining two sections, the paper examines the Challenges and opportunities of Takaful in section
seven while section eight concludes the study.
2. Meaning of Takaful
According to Islamic Financial Services Board (IFSB, 2009), Takaful is the Islamic substitute to
conventional insurance. The word Takaful is obtained from an Arabic expression Kafalah which
means joint guarantee, where participants agree among themselves to contribute and support one
another jointly in the event of the occurrence of an agreed loss or risk. Under Takaful, members
are obliged to contribute a sum of money called Tabarru (donation or contribution) that is
committed to a particular fund that will be mutually used to assist those who sustained specified
loss or damage. The underwriting in a Takaful is, thus, undertaken on a mutual basis, similar in
some respects to conventional mutual insurance. A typical Takaful undertaking consists of a twotier structure that is a hybrid of a mutual and a commercial form of company – which is the Takaful
operator (TO), although in principle it could be a pure mutual structure.
In a more explicit way, Bhatty (2010) explains that Takaful is an Islamic alternative to
conventional insurance. It is an insurance co-operative based on the principles of participation and
risk sharing, rather than risk transfer to third party in conventional insurance. Under Takaful the
company is operating for and on behalf of its customers, employees and shareholders who
participate in technical and investment decisions as well as sharing of surplus arising from
insurance and reinsurance activities of the company. Takaful operations are strictly Islamic Sharia
compliant based on the principles of social goodness for individual members and society at large
irrespective of religious beliefs.
From Islamic point of view, insurance practice is not completely prohibited but Islam is against
conventional insurance due to the presence of Riba (interest), Maisir (gambling) and Gharar
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(uncertainty). The Islamic alternative to Insurance was advanced based on the principles of social
solidarity, cooperation and mutual indemnification of losses of members.
3. History of Takaful
Historically Islamic insurance (Takaful) or arrangements similar to Takaful had existed even
before the advent of Islam and Prophet Holy Muhammad (SWA). Wan-Aris (2012) argues that, at
that time, there was a common practice in the ancient Arab called Aqilah. Under this system, if a
member of a particular tribe kills a member of another tribe, the heir of the victim may demand a
ransom “diyat” (blood money) from the killer’s tribe, which was a regular financial contribution
to settle the victim’s tribe. This regular compulsory payment or contribution to the tribe is akin to
the premiums payment under the conventional insurance system, while the payment of the ransom
to the victim tribe by the killer’s tribe is like indemnity.
Pirani (2007) traces the history of the establishment of Takaful through series of conferences and
conventions on the legality of Takaful which include Malaysia National Religious Council (1972),
Makkah International Conference on Islamic Economics (1976) and Fatwa by Saudi Arabia higher
Fatwa Council in support of Islamic insurance (1977). Following the latter, the first Islamic
insurance company (Takaful) was inaugurated in Sudan in 1979 and Saudi Arabia in 1980. By
1981 the Takaful activities extend beyond the borders of Muslim dominated countries with the
establishment of Dar Al Mal Al Islamic Trust Takaful in Switzerland and Islamic Takaful company
of Luxembourg in 1983. The enactment of Malaysian Takaful Act gave rise to establishment of
first Takaful company in the country by 1984. In the same development, the Syarikat Takaful was
inaugurated in Singapore in 1995, Amana Takaful Sri Lanka and Friendly Society Takaful all
incorporated in 1999, Al Amana Takaful Lebanon in 2000 and Pak-Kuwait Takaful incorporated
in 2003 as Takaful company in Pakistan.
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In Nigeria and in line with the provisions of the 1997 Insurance Act, and the need to complement
the current drive for Financial Inclusion to increase insurance penetration in Nigeria, the National
Insurance Commission (NAICOM) released Takaful-Insurance Guidelines and Registration
Requirements to the Insurance Industry and other stakeholders. The guidelines clearly show that
all intending applicants seeking license from the Commission to transact takaful-insurance
business in Nigeria must possess the followings:

Certificate of Registration as a full-fledge takaful-insurance Company in accordance with
International best practice

Such a Company must have, as part of its name, words or terminologies that connote
takaful operations

The company must maintain a minimum deposit in a non-interest financial institution at all
times

Provision for the establishment of an Advisory Council of Experts (ACE) must be made in
the articles of the Company

Establishment of Investment Policy for the participants’ Risk Fund
According to Ya’u (2012), the pioneer takaful company in Nigeria is Halal Takaful Nigeria, a
division of Cornerstone Insurance Plc and is registered with the National Insurance Commission
(NAICOM).
The establishment of Takaful business in many countries and across continents of the world made
it a global phenomenon and not only a Muslim related issue. Bahtty (2010) documents that,
Islamic finance and Takaful have immensely contributed to the global economy. For example, in
2003 its assess based was $1 trillion which represents over 5% of global financial industry financial
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asset and by 2009 the amount increased to $2 trillion. In addition to this, recent statistics show
that Takaful industry worldwide has a market size of between $2.5 and 3.5 billion.
4. Models of Takaful
Takaful has been grouped in several ways, but in a more general way it can be grouped into 4
models: Tabarru; Mudaraba; Wakala; and combination of Wakalah and Waqf.
To Lim, Idris & Carissa (2010), Tabarru is the ideal form of Takaful among other models. In
Tabarru, each participant is willing to make donation to the Takaful fund with sincere intention to
extend financial assistant to other participants faced with difficulties. It provides no return for both
the Takaful operator and the participants or policyholder because it does not involve any further
business undertaking. Therefore, such model prevents large-scale expansion of Takaful business.
It is a non-profit making undertaking based on the principles of solidarity, responsibility and
brotherhood among the participants. Usmani (2007) further argues that Tabarru was developed
with the sole objective of abolishing problem of gambling and interest which are prohibited in
Islam, in which the participants agree to surrender their contributions as donation to the Takaful
instead of investment in the Takaful.
Mudaraba model as explained by Jaffer, Ismail, Noor and Unwin (2010) is a form partnership
scheme where the operators (managers) provide skills and leadership to organize and coordinate
the activities of the Takaful and the participants (capital providers) provide funds for the running
up of the Takaful. Under this scheme, the participants share with the operators the proceeds and
underwriting surplus based on predetermined ratio agreed mutually. Lim, Idris & Carissa (2010)
add that, it represents a complete business enterprise with al mudarib the entrepreneur, operator or
the manager who managed the business of the Takaful on behalf of the capital provider (rab ul
mal) or participant. This profit-sharing contract initially specifies how profit from investment
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activities and other surpluses are to be shared between the operators and participants, but losses
are to be borne by the participants alone provided the operator is proved free of any negligence or
misconduct that led to such losses.
In the third model called Wakala the operator performs the function of an agent who managed the
Takaful business on behalf of his principal (shareholders) and paid a fee for the service provided
(Lim, Idris & Carissa, 2010). As an agent of the shareholders, the Takaful Operator Company
donates to a shareholders’ fund which is maintained separately from the policyholders’ fund. The
Takaful operator invests the policyholders’ fund in sharia compliant instruments in its capacity as
wakil or agent. All operational, general and administrative expenses are charged to the
policyholders’ fund. The Takaful operator received an agency fee from the percentage of the gross
premium received. As valid claims arise, the benefits are paid to the beneficiaries depending upon
occurrence of actual losses and damages. Any underwriting surplus is given back to the
policyholders and they are required to make additional payment of deficit if any. Usmani (2007)
sees Wakala as a corporative type of business organization where the participants are considered
as the shareholders who contribute to the funds and bear the risk of the business, while the
operators are the mangers who oversee the Takaful on behalf of participant for agreed fee, but do
not take part in the sharing of the unwitting surplus and proceeds from the Takaful operations.
The fourth model of Takaful as explained by Ayub (2003) is a mixed model that combines wakala
and mudaraba contracts. In this model, the wakala contract is adopted for underwriting activities,
while the mudaraba contract is employed for the investment activities of the Takaful fund. In a
more explicit form, Hassan (2012) argues that, it is a combination of Wakalah and Waqf, under
which a special fund called Waqf is set up where the contributions made by the participants are
kept and invested under the control of an appointed board of trustee, who received their pay from
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the proceeds of the fund (Waqf) investment activities, Moreover, neither the participants nor the
trustee have title to ownership of the funds.
5. Classification of Takaful
According to Islamic Financial Services Board (IFSB, 2009) and Abd-Hamid (2012), Takaful has
been classified in to family and general Takaful. The general Takaful covers everything else except
the family and health benefit (Abd-Hamid, 2012). It is a short term policy, usually not more than
a year. Some of the examples of general Takaful products are: Fire Takaful; Car Policy; House
Coverage; House Content Coverage; Group Coverage; and Travel Policy. While family Takaful is
basically a life insurance’s counterpart. It covers family, health and education benefits. It is usually
a long term policy and has maturity of up to 30 years. Some of the products include: Family
Takaful; Health Benefit Takaful; Critical Illness Coverage; Education Benefit and Saving Benefit.
IFSB (2009), further argues that, in more precise form general Takaful schemes are basically
contracts of joint guarantee on a short-term basis (normally one year), providing mutual
compensation in the event of a specified type of loss. The schemes are designed to meet the needs
for protection of individuals and corporate bodies in relation to material loss or damage resulting
from a catastrophe or disaster inflicted upon real estate, assets or belongings of participants. The
Takaful contribution paid is pooled into the Participants Risk Fund (PRF) under the principle of
Tabarru to match the risk elements of the business that are inherent in its underwriting activities.
Although investment activities in the general Takaful pool or fund are secondary to the
underwriting activities, they may be important for the solvency of the fund, especially in the case
of longer-tailed risks.
On the other hand, family Takaful deals with the provision of financial relief to the participants
and/or their family in the event of misfortunes that relate to the death or disability of the
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participants (IFSB, 2009). This category of Takaful normally requires the operator to engage in a
longer-term relationship over a defined number of years with the participants, throughout which
the participant is required to make regular installment payments in consideration for his or her
participation in the Takaful scheme. In Family Takaful, the paid Takaful contribution of a
participant will usually be segregated into two accounts which feed two different funds. The first
is the Participants’ Investment Fund (PIF), and the aggregate PIFs constitute an investment fund
for the purpose of capital formation. The second is the Participants’ Risk Fund (PRF), which is a
risk fund – that is, an element of the business that is inherent in the underwriting activities, and the
contributions to which are made on the basis of Tabarru commitment.
6. Distinction between Conventional Insurance and Takaful
Differences between conventional insurance and Takaful abound and have been well documented
in the literature (Ayub 2003, IFSB 2010, Hussain and Pasha 2011, Matsawal, Abdullahi and Ping
2012, Wong-Fupuy, Mistry & Lee 2012 and Nisar 2010).
According to Nisar (2010), in conventional insurance the contribution made by policy holders in
the form of premium is owned by the insurer (insurance company) who in turn offers protection
or guarantee to the policy holders whereas under Takaful the insurance company is just a trustee
managing the funds on behalf of the policy holders, the policy holders are the owners of the funds
and the business. Conventional insurance also involved buying and selling of risks, the insurer to
shoulder the risk of the policy holder at an installment price called premium, while Takaful is
based on the principles of mutual risk sharing among the participants (Nisar, 2010). Under
conventional insurance the insurer is a guarantor who is legally bound to shoulder the risks of the
policy holder but in Takaful the insurer is just a manager or agent who looks after the business of
his principal on his behalf.
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Ayub (2003) argues that, the major distinction between the conventional insurance and Takaful
co-operation can be seen more in the areas of investment funds. Takaful companies can only invest
their funds in halal (legitimate) business i.e. Sharia compliant business, in addition profit and loss
from insurance investment and reinsurance are shared in accordance with pre-agreed ratios, while
conventional insurance can invest its funds wherever profit can be made irrespective of any ethical
consideration or whether the business is halal or haram (prohibited or non- Sharia compliant).
Hussain and Pasha (2011) and Matsawali et al (2012) add that, Takaful and conventional insurance
also differs in other respects: Gharar( unceriainty element) , Maisir (gambling element) and Riba
(interest element).

Gharar, refers to uncertainty or unknown element that is in conventional insurance system.
The premium payment and insurance claim are based on the occurrence of certain
unknown event in the future. Islam prohibits transactions or contracts that parties have no
clear information about the outcome in the future, also policyholders are not informed of
nature of investment and how profits are made or distributed. While Takaful is a
combination of tabarru contract (donation) and agency and/or profit sharing contract
between the individual insured and the pool of insured, which clearly satisfy the Islamic
principle of transparency and disclosure of full information (Matsawali, et al, 2012).

Maisir or gambling or the uncertainty element inherent in the conventional insurance led
to the presence of gambling element because profit or loss on the part of the insurance
policyholder depends on the occurrence of certain event. Policyholders stand to lose all the
subscriptions when there is no any loss or damage; they also stand to get more or less than
what they contributed when risk or loss occurred. Under Takaful, even if the risk does not
occur, the participant is entitled to get back the contributions that he has paid. Should the
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risk occur, he will be paid from his premium fund plus the pool of funds from the 'donation'
of other participants. According to Lim, Idris and Carissa (2010) gambling has clearly been
prohibited in Islamic law. In gambling, just like in insurance one party is always hoping
for a gain as a result of loss arising from the other party. The policyholder hopes to get a
huge sum from his little amount of subscription in event of occurrence of particular agreed
misfortune and always hope to claim something greater than his accumulated contribution.
On the other hand, the policyholder stands to lose all the subscriptions made for the Policy
in the absence of any damages.

Riba or interest as succinctly said by Jaffer et al (2010) is a major component in
conventional insurance. It is the income earned by capital alone without the contribution
of other factors of production. In Islam, payment and collection of interest is strictly
prohibited, while conventional insurance companies make a lot of investment and receive
returns largely in interest (riba) bearing instruments such as bond, debentures and
preference share (Hussain and Pasha, 2011). Takaful insurance companies are not allowed
in any way to receive interest or pay interest. Evidences from Quran and Sunnah are quite
clear on the prohibition of riba. It is strongly condemned by the Quran and Sunnah, because
reward of money (not as result of an activity) is prohibited in Islamic economy and profits
earned from business undertaken must accompany risk from that business. In surat AlBaqarah, (Verse 275 & 276), Allah (SWA) said
“Those who deal with riba will not stand (on the day of Resurrection) except
like the standing of a person beaten by Shaitan (Satan) leading him to
insanity. That is because they say: "Trading is only like riba," whereas Allah
has permitted trading and forbidden riba. So whosoever receives an
admonition from his Lord and stops dealing with riba shall not be punished
for the past: his case if for Allah (to judge); but whoever returns to dealing
with riba, such are the dweller of the Fire-they will abide therein. Allah
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destroys riba and will give increase for Sadaqat (deeds of charity, alms, etc.)
and Allah does not like the disbelievers, sinners”.
Imam Muslim reported that the prophet (S.A.W.) said: "The messenger of Allah
cursed the eater of riba, (usury/interest) and the one who feeds it." Imam At-Tirmithi
and other scholars of hadith added to this hadith from another narration: "and its
witness and its writer."

Term of policy: Wong-Fupuy, Mistry, Prince, Nowacki, Lee & Easop (2012) hold that,
based on Islamic provisions of disclosure, transparency and certainty, the terms of every
contract must be clear to parties including duration of such contracts, the duration or period
of maturity of every Takaful arrangement must to be clearly stated in order to avoid
uncertainty. In contrast, the term of the policy will depend on the nature of the policy under
conventional insurance,
7. Challenges and Opportunities of Takaful Industry
Considering the fact that up to the year 2010 there was no single Takaful company established in
Nigeria, establishing empirical evidence on the challenges as well as opportunities of Takaful in
Nigeria is almost practically impossible. However, using findings from other studies conducted in
different countries of the world especially developing nations with similar economic, sociopolitical, demographic, religious and environmental characteristics with Nigeria could be a
possible, reliable and valid attempt.
The challenges have been examined and documented in different countries. Lim, Idris & Carissa
(2010) for example, examined the history, progress and future challenges of Islamic Insurance in
Malaysia. A major challenge facing the business as identified in the study is lack of qualified
personnel with Islamic and management knowledge and who have the capacity to manage the
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industry, notwithstanding the fact that education system in the Malaysia encourages the
development of Islamic financial education. Lack of wide coverage of the industry as majority of
the participants are elites and middle income earners mostly from the urban areas leaving the rural
dwellers unaware of such opportunities. Another challenge is the absence of re-takaful operators
in Malaysia.
AliKhan (2010) summarized the challenges of Takaful business in Africa as: Absence of enough
Sharia Scholars trained in the field of Islamic Finance & Economics; difficulty in the
establishment of training centers and universities for Islamic Finance to beep-up human resource
capacity building in the short-run; and non-existence of a Facilitative Regulatory Framework.
Jaffer, Ismail & Unwin (2010) add that lack of consumer awareness, scarcity of human resources
with both insurance and Sharia expertise, the shortage of Sharia scholars with appropriate
experience, lack of standardization in the industry due to different opinions on Sharia
interpretations, diverging regulatory approaches and the lack of centralized regulations, solvency
and capital requirements,
poor corporate governance and shortage of suitable assets are
complementary as well as additional challenges.
According to Bhatty (2010), a serious challenge to the development of Takaful business is lack of
authentic database that will provide basic information and statistic about the Takaful business.
This led to other challenges such as lack of awareness and understanding of Takaful as a business
like banking in financial sector and lack of support at the regulatory level. In addition, it was
reported that the shareholders of Takaful companies have guarded their pastures resulting in lack
of disclosure of sufficient financial information.
Wan-Aris (2011) argues that, the future prospects of the Takaful business will heavily depend on
its ability to convert challenges in to opportunities. To him, few of these challenges are lack of
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uniform terminology, different Sharia interpretations, inadequate human resource development,
and product innovation, non-existent re-takaful, and poor promotional and marketing strategies. In
a related development, Omer (2011) documents lack of skilled and trained human resource, low
level of awareness, lack of regulatory framework, solvency and capital requirements, corporate
governance, shortage of sharia compliant assets, distribution channels, standardization and lack of
re-Takaful as the major challenges hindering Takaful development.
Considering all these, Takaful industry in Nigeria could face a number of challenges that include:

Low level of awareness among people not only the non – Muslims but even among the
Muslims communities. This has been justified by the work of Omer (2011), that even in
Malaysia with over 80% of its population as Muslim there were large portion of people
who either had no any knowledge of Takaful or knew little about it. According to Kollere
(2014), a large number of the Muslim population misconstrue the role of insurance in Islam
by arguing that it is forbidden and contrary to the belief in the will of Allah while the World
Fiqhi bodies have collectively issued a favourable ruling for practicing “Takaful” as the
Islamic substitute for conventional insurance.

Lack of qualified personnel with requisite expertise in both insurance and Islamic
knowledge to manage the Takaful business. It has been observed that there is absence of
Takaful courses in the tertiary institutions including universities. Consequently, this
affected capacity building in this respect.

Lack of comprehensive standards and regulations to govern the Takaful business
operations. The drive towards non-interest finance can never be comprehensive without
establishing the necessary regulatory framework for non-interest mechanism of risk
mitigation like the Takaful insurance (Kollere, 2014). The regulatory authorities such as
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National Insurance Commission (NAICOM) had relatively done well starting with the
implementation of the Takaful Insurance framework launched in November 2013, after the
unveiling of the Takaful Insurance Guideline ceremony. However, these guidelines, which
took effect from March 2013, have not prompted the operators to embrace the initiative.
Again, in 2014 the Federal Ministry of Finance inaugurated the National Insurance
Commission’s (NAICOM) Takaful Advisory Council (TAC) in Abuja. The role of the
advisory council is to serve as an additional layer for addressing issues that may arise from
Takaful operators’ ACE regarding Shariah compliance in Takaful undertakings (ToluKusimo, 2015).

Lack of training centers and facilities for capacity building.
However, notwithstanding these challenges, Takaful business globaly, recorded remarkable
performance and provided opportunities as documented by Ernst & Young (2012) in a report titled:
“World Takaful Report’’. The report indicates the total contributions of global Takaful business
stance at US$1.4b in 2004, US$ 2.6b in 2006, US$ 3.4b in 2007, US$ 4.3b in 2010 and it reached
US$9.1b by 2011. Current growth trends suggest US$12b in gross contributions by 2012. In the
same vein, Ernst & Young (2012) argue that, conventional insurance have only penetrated a small
percentage of the 1.6b Muslims market globally, which could be as a result of religious
inclinations, inadequate insurance distribution or lack of education around insurance products, and
therefore, the untapped segment provides huge potential for Takaful.
The Sharia compliant insurance or Takaful offers an advantage over conventional insurance by
targeting the Sharia inclined Muslim segment. However, no significant disadvantage hinders
Takaful from targeting non-Muslims, since 60% of Takaful customers in Malaysia it was reported
are non-Muslims. In theory, Takaful has a larger potential market than conventional insurance, as
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Takaful is able to tap the additional Sharia inclined market segment. The value driven, Sharia
neutral market holds significant potential, especially in under penetrated markets.
Alikhan (2010) reports that there are about 134 Takaful operators, 36 window operators and 15
Irani operators and more than 18 Re- takaful operators worldwide by 2009 and 60% of the Takaful
customers in Malaysia are non-Muslims. Again, Takaful is growing by 35% faster than the
conventional insurance worldwide. This is because Takaful advocates for a strong ethical
consideration, fairness, transparency and wealth distribution that lead to social goodness and
environmental friendship that focus on generating economic activities. Bhatty (2010) also affirmed
that Takaful discourages creating money from money and hence prohibit interest, and it links
deposits and investments to real underlying assets.
From the above, it can be discerned that, The Takaful business can be established in all continents
of the world and in different countries including non-Muslims majority nations and so the
possibility of its establishment in Nigeria is not far-fetched.
8. Conclusions and Way forward
Conclusions
It is obvious that Nigeria as a developing nation, like most of the countries that operate Takaful
stands to benefit from journeying into the Takaful business as many opportunities abound.
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i.
That Takaful insurance is the fastest growing form of insurance business with 35% greater
than conventional insurance. There is no doubt that Nigeria is a good potential market for
Takaful business considering its population and other resources.
i.
Establishment of Takaful in Nigeria will increase wealth of the participants, through
increase in income and profit as returns from investment and trading activities, which in
the long run will improve living standards.
ii.
Takaful business, will among other things improve the wealth of the government through
increase in taxes to be levied on the income and profit of the participants as well as
remuneration of their employees.
iii.
One of the greatest social problems facing Nigeria as a nation is the problem of
unemployment, more especially among its teaming youths. Establishment of Takaful
business will among other things provide employment opportunities through the insurance
(Takaful) and re-insurance (re-Takaful) by employment of personnel who will manage the
Takaful business. It will also lead to increased drive for capacity building in the area of
Islamic finance.
iv.
Establishment of Takaful business in Nigeria can be used as means of attracting Foreign
Direct Investment to the country, more especially from Muslim wealthy nations and
organizations. This is even more timely considering the current economic recession in the
country and the drive to diversify the ailing economy.
Way forward
However, for Nigeria to gain the benefits and opportunities associated with Takaful business, it
has to take necessary steps to address the challenges that may face the business in the country
which may include the following:
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i.
The country needs to design and embark on campaign programmes through adverts
on radio, television and social media, that will underscore the need to increase the
people’s awareness of the insurance scheme so as to ensure that it does not generate
unnecessary controversies and sensitizing them on Takaful business. The message
should be able to address several peoples’ concern regarding its lawfulness in Islam
on one hand and on the other hand, the citizens, irrespective of their religious
background, to embrace the Takaful system because of its glaring advantages.
ii.
Nigeria also needs to complement its educational system and facilities by providing
indigenous citizens with requisite knowledge and skills to manage Takaful
business. This can be done through reviewing its school curriculum to include
Takaful and establishment of special training centers for capacity building on
Takaful.
iii.
Though NAICOM had already issued regulatory guidelines for Takaful operation
in Nigeria, there should be a continuous fine-tuning of such in order to align such
guidelines in line with the dictates of the Sharia. In that light, there should be
harmonious working relationship between the NAICOM, Takaful Advisory
Council (TAC), and Nigerian Council of Ulama (NCU).
iv.
To ensure that the Takaful insurance becomes well entrenched in Nigeria, two
marketing systems should be encouraged simultaneously: Through a window
system whereby existing insurance companies could engage in Takaful side-byside with conventional insurance or through a full-fledged platform, where specific
companies are licensed to practice only Takaful insurance.
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Finally, there is the need for Nigerian government to work with stakeholders in Islamic
community, financial institutions, regulators and research institutes in the country to design
modalities for successful operations of the Takaful industry by organizing seminars, workshops
and sponsor researches on the operation, structure, benefits as well as challenges of establishing
Takaful in Nigeria.
Reference
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