The concept of Takaful insurance is not new, but as a business entity it is still a relatively new market. The basic premise of ethical co-operative risk protection through Takaful has been developing as a business over the last two decades. Tremendous progress has been seen in the development of Takaful as a business but there remains huge potential for the future with a vast Islamic market to tap into. There are many challenges ahead in adopting Islamic insurance systems both locally and internationally.
Takaful insurance has experienced growth particularly in the Gulf Co-Operation countries, Asia, Europe, and North Africa. Campaigns have been launched to raise public awareness about Takaful and to introduce the benefits to Muslim populations who are naturally averse to risk. Emphasis has been placed on the scholarly acceptance of Takaful as being compliant with Shariah, and how it benefits individuals through communal participation.
In order for Takaful insurance systems to progress further there needs to be more regularity standards introduced. Currently regulation can vary particularly as there has been no international consensus over the differing models of Mudharabah and Wakalah. There is a lack of skilled providers and a fear of breaching Shariah, which makes training skilled staff a priority.
In 2008 the Bahrain Institute of Banking and Finance introduced the first “Takaful certification program accredited by the Chartered Insurance Institute”. Many Takaful companies are now reporting under International Financial Reporting Standards despite the complications this involves. Standards have been established under the Accounting and Auditing Organization for Islamic Financial Institutions. Overall there needs to be more training through Islamic financial centers and more regulation both nationally and internationally to ensure that there is compliance to an International standard of practice.
General insurance has been a foreign concept to Muslims as it breaches Islamic law, thus there are many challenges in introducing Takaful on a wide scale. It fills the gap for Muslims who are required to have insurance but in many countries it is a difficult concept to sell as insurance has never been an issue. It requires a broader acceptance and understanding of the benefits which must still keep pace with the training required to adequately oversee the successful introduction of an Islamic insurance system. Under capitalization is also an obstacle which saw Takaful fail in the U.K. when it was introduced.
The potential for growth within the Islamic insurance system is recognized as huge and much work is underway to deal with the challenges ahead. Acceptance of Takaful on a wide scale, International regulation and standards, and training to ensure it is provided in compliance with Shariah, each need to be developed further in the coming years.
Sources: ifresource.com
Islamic World net
Perfspot.