MUTUAL INSURANCE AND TAKAFUL IN A CHANGING WORLD
MUTUAL INSURANCE & TAKAFUL:
TOOLS OF FINANCIAL INCLUSION
November 12-13, 2012
Ceylan Intercontinental Hotel
Istanbul, Turkey
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2012.
TAKAFUL PRESENT STATUS
 Currently there are more than 250 takaful operators globally;
 According to the Ernst & Young World Takaful Report 2011: the
takaful market was worth US$ 12 billion in 2011, an increase of 31%
from US$ 9.15 billion posted in 2010;
 According to Milliman Global Family Takaful Report 2010: the global
family takaful gross contributions in 2010 were estimated to be US$
1.7 billion, 29% higher than in 2009;
 Most of the takaful business activities are al-tijari centric;
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2012.
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 Over the last 33 years, what we see in essence is the development
and growth accentuated on the commercial side of takaful, i.e.
takaful al-tijari;
 The focus of the takaful industry is concentrated mainly on personal
benefits or interests of an “exclusive club” namely the takaful
participants rather than the society at large, namely the poor and the
vulnerables;
 Muslims however, should not overlook the spirit that underlies the
takaful operations that comes under the form of takaful al-ijtimai
(mutual social responsibility) which includes all material and moral
aspects of life that are implicit in the Maqasid al-Shariah;
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2012.
 Operationalizing the concept takaful al-ijtimai can take two forms
namely:
 Through the promulgation of cash waqf;
 Through the introduction of microtakaful programs.
 As a tool of financial inclusion, a framework of a microtakaful entity is
proposed. This framework is comprised of the participation of three
parties namely:
 Participation of the government together with the cooperation
from international bodies;
 Participation of existing takaful operators in the given country;
 Participation by the members of the scheme themselves.
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2012.
PROPOSED FRAMEWORK OF A MICROTAKAFUL ENTITY
Funds provided by
Takaful Operators
through the mechanism
of Cash Waqf and surplus
distribution
Funds provided by the
Government together with
grants from International Funds
Microtakaful
Entity
Benefits to be paid to the
participants
Subsidized Contributions made
by participants of the scheme.
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2012.
From the proposed framework, the fund providers are:
a) Government & International Assistance:
 Funds can be provided by the government through
 An annual budget;
 An outright endowment;
 Funds can be elicited through international grants provided by
the World Bank, Islamic Development Bank and other related
international bodies.
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2012.
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b) Takaful Operators:
 Takaful participants from the various takaful companies can
make their contribution into the microtakaful fund through the
mechanism of:
 Cash waqf;
 Surplus distribution;
 To encourage the takaful participants to be involved in this
scheme, the government should provide tax incentives;
c) Microtakaful Scheme Participants:
 Since the participants are from the poor and the vulnerable
group only a nominal contribution would be required.
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2012.
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SUSTAINABILITY OF THE PROPOSED FRAMEWORK
 For the proposed framework to be sustainable we need to be mindful of
the following factors:
a) The need to create and enhance a national strategy and regulatory
framework so as:
 To avoid vague government policy direction;
 Not to be confronted with unclear guidelines on the implementation
of the scheme;
b) The need to create appropriate products which are:
 Tailor-fitted to the needs of participants;
 Affordable;
 Simple;
 Do not require cumbersome requirements.
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2012.
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c) The need to propagate the scheme so as increase the
awareness among the potential participants;
d) To be aware of the idiosyncratic risk that might appear and
caused catastrophic losses;
e) The number of participants in the scheme as well as the benefits
offered so that the cost of administering the program can be
monitored and controlled.
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2012.
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• Apart from the above factors we need also to address the (i) the
participants’ issues (demand-side issues) and (ii) the operators’
issues (supply-side issues);
i.
Among the participants’ issues are:
• Usability of services such as claims settlement; it need to be:
•
•
•
Flexible
Convenient
Reliable
•
The product is designed as such so as to allow participants to
make frequent, low-value transactions
•
Through the use of technology, will enable the operators to keep
transaction-size barriers to be low as possible; this could reduce
cost of service delivery.
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2012.
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ii.
Operators’ issues (Supply-side issues):
• From the provider’s perspective, the key concern in
managing product risks will lead to the problems of:
• Information asymmetry
• Adverse selection
• Moral hazard
• Providers is responsible to convey product features to clients in a
simplistic manner, while managing the design complexities at the
back-end
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2012.
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Thank You
Prof. Dr. Kamaruddin Sharif
Tel:
+603 2781 4000
kamaruddin@inceif.org
Email:
Website: www.inceif.org
© INCEIF
2012.