PRESENT SCENARIO AND FUTURE POTENTIALS

OF TAKAFUL
Author KAZI MOHAMMAD MORTUZA ALI
B.Com (Hons), M.Com, ACII
Full Name KAZI MOHAMMAD MORTUZA ALI
Title and ailiation Managing Director
Prime Islami Life Insurance Ltd.
Title o the !a!er Present Scenario and Future Potentials
of
"Pro!o#al$ A%%e!ted a!aful.
Full Po#tal Addre## "a# B$a%an (&
t$
Floor)
In%ludin& Po#tal '(, Dil!us$a C)A
Code and Countr' D$a!a*+,,,
Banglades$.
Phone Num(er (-.,.'(, (--/-01, .+&,,./ (2ff.)
10-0--' ("es)
Mo%ile 3 ,+.+0*,0-+,(
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E*mail Addre## 4licl5%donline.com
Website www.primeislamilifebd.com
Present Scenario And Future Potentials of a!aful
A(#tra%t
1
$e idea of $a6ing S$aria$ %ased insurance s7stem (a!aful) stems from t$e earnest desire of t$e
follo8ers of Islam to conduct t$eir affairs in da7 to da7 life according to t$e teac$ings of Islam and 8it$in
t$e frame8or! of Islamic La8. a!aful is %ased on t$e conce4t of coo4eration, %rot$er$ood and solidarit7
of t$e mem%ers of t$e societ7 8$o 6oluntaril7 agree to contri%ute mone7 to su44ort a common goal of
4ro6iding mutual financial aid to t$e mem%ers of t$e grou4 under certain terms and conditions.
a!aful $as emerged as a com4lementar7 and su44orti6e s7stem of Islamic Ban!ing mo6ement
t$roug$out t$e 8orld. Islamic Insurance (a!aful) li!e Islamic Ban!ing $as %ecome a 6ia%le realit7. Due to
in$erent S$aria 4rinci4les 8$ic$ are uni6ersal in c$aracter, t$e a!aful %usiness 8ould %e more a44ealing
in t$e coming 7ears %ot$ for t$e Muslim and non Muslim communities. Most of t$e Muslim countries $a6ing
Islamic Ban!s $a6e esta%lis$ed Islamic Insurance com4anies as necessar7 com4lements to Islamic
Ban!ing. $e gro8t$ of Islamic Insurance com4anies 8ould ser6e as t$e 6e$icle of ris! 4ooling. It 8ill also
4ro6ide means of in6estment.
It $as %een estimated t$at total a!aful contri%ution (4remium) is a44ro9imatel7 ,.,-: of total 8orld
insurance 4remium. Ho8e6er, t$e gro8t$ of a!aful industr7 during last decade %ad %een 6er7 im4ressi6e.
$e consumers demand for S$aria$ com4liant 4roducts is increasing and a $ig$ le6el of demand for
a!aful is %eing 4redicted %7 mar!et o%ser6ers. $e a!aful industr7 is fast e6ol6ing and entering a
sta%le de6elo4ment 4$ase. It is no8 rig$t time for t$e national regulators to 4ro6ide su44orti6e a!aful
la8s, rules ; guidelines.
Introdu%tion
a!aful is an alternati6e form of con6entional insurance %ased on t$e conce4t of trustees$i4 and
coo4eration ins4ired %7 t$e %eliefs of t$e follo8ers of Islamic teac$ing. Muslim societies in different 4arts of
t$e 8orld are no8 4ractising a!aul sc$eme as t$eir o8n 8a7 of s$aring financial res4onsi%ilities to assist
eac$ ot$er. $e7 $a6e in6ented an Islamic 8a7 of mutual assistance to deal 8it$ uncertainties of life.
a!aful is a social sc$eme %ased on t$e 4rinci4les of %rot$er$ood, solidarit7 and mutual assistance. It
4ro6ides mutual financial aids and assistance to t$ose 8$o are mem%ers of t$e ta!aful sc$eme and
6oluntaril7 agree to contri%ute a certain amount of mone7 for t$at 4ur4ose. It is a mutual agreement among
t$e 4artici4ants of t$e sc$eme. $is $as its origin from t$e conce4t of collecti6e s$aring of indi6idual<s loss.
a!aful, is %eing 4ractised no8 as an alternate of con6entional insurance s7stem and is %ounded %7
Islamic 4rinci4les, rules and t$e la8 of Islam (S$aria$).
a!aful is an Ara%ic 8ord stemming from t$e 6er% =!afal> 8$ic$ means to ta!e care of ones needs. ?nder
t$is sc$eme, t$e mem%ers or t$e 4artici4ants in a grou4 agree to #ointl7 guarantee t$emsel6es against loss
or damage caused %7 s4ecified 4erils. $e entire grou4 8ould assist t$e incum%ent 4erson from t$e fund
t$e7 $a6e created to alle6iate (indemnif7) $is loss and or to 4ro6ide $im 8it$ financial $el4. a!aful is a
legall7 %inding agreement %et8een all t$e 4artici4ants of t$e sc$eme to 4a7 an7 of t$e mem%ers 8$o
suffer a loss as s4ecified in t$e ta!aful certificate (4olic7). a!aful sc$eme $as %een e6ol6ed from t$e
teac$ings of Islam i.e. on t$e %asis of t$e @uaran and t$e Sunna$ (raditions of Pro4$et Mu$ammad). $e
@uran sa7s3
=Help ye one another in righteousness and piety, but help ye not one another in sin and rancour. ($e
@uran -3')
$e Pro4$et Mu$ammad (P.B.?.H) said3
2
The believers, in their affection, mercy and sympathy to each other, are like the body, if one of its organs
suffer and complains, the entire body responds with insomnia and fever (Muslim)
a!aful, generall7 means #oint guarantee. It is an understanding among a grou4 of 4eo4le (called t$e
4artici4ants) 8$o agree to reci4rocall7 guarantee eac$ ot$er financiall7 s$ould an7 e6ent (as defined in t$e
contract) occur. $e %asic o%#ecti6e of a a!aful contract is to 4a7 from a common fund, 8$ic$ is set u4 %7
t$e 4artici4ants of t$e sc$eme. $e fund t$us created ma7 %e managed %7 t$e 4artici4ants t$emsel6es or
t$roug$ 4rofessionals or %7 a registered a!aful 24erator. $e fund is created %7 t$e eAuita%le
contri%utions of t$e 4artici4ants. $e a!aful o4erators can %e registered under t$e rele6ant Com4anies
Act or Coo4erati6e Societies Act, Societies "egistration Act or %7 a!aful Act. In order to ensure t$at a
a!aful sc$eme o4erates 8it$in t$e 4rinci4les of Islamic teac$ings, t$e transactional as4ects of t$e s7stem
is su%#ected to Islamic contractual la8s. Hence, a!aful contracts are %ased on t$e 4rinci4les of
Mudara%a$, (limited 4artners$i4s) 8$ic$ means 4rofit and loss s$aring.
$e fundamental %asis of a!aful sc$eme is t$at its o4erations do not in6ol6e an7 element 8$ic$ is not
a44ro6ed %7 t$e S$aria$ (La8s of Islam). $erefore, it is necessar7 t$at t$e a!aful o4erators s$ould
esta%lis$ and maintain a!aful fund for t$e class or eac$ of t$e a!aful sc$emes carried on %7 t$e
o4erators. $e assets com4rised in t$e fund s$all %e a44lica%le onl7 to meet suc$ 4art of t$e o4erators
lia%ilities and e94enses as is 4ro4erl7 so attri%uta%le. $e assets of t$e a!aful fund s$all %e !e4t se4arate
from all ot$er assets of t$e o4erator. $is means t$at t$e fund of t$e entre4reneurs of a a!aful com4an7
s$ould not %e amalgamated 8it$ t$e a!aful fund created %7 t$e 4artici4ants of a a!aful sc$eme.
B$en a a!aful sc$eme is o4erated on t$e %asis of mutual or on t$e %asis of coo4erati6e 4rinci4les, an7
sur4lus or deficit of t$e a!aful o4eration $as to %e s$ared %7 t$e 4artici4ants, or t$e mem%ers
t$emsel6es. But 8$en a a!aful sc$eme is %eing o4erated on commercial %asis, t$e sur4lus of a!aful
o4eration $as to %e s$ared %et8een t$e o4erator and t$e 4artici4ants in accordance 8it$ t$e 4rinci4les of
Mudara%a$. $e s$aring of suc$ sur4lus ma7 %e in a ratio as agreed %et8een t$e contracting 4arties. $e
4artici4ants are entitled to a s$are of sur4lus as t$e 4ro6iders of t$e fund and t$e o4erators are su44osed
to $a6e a s$are of t$e sur4lus as t$e entre4reneur and managers of t$e fund.
B$en a contract is made %et8een t$e o4erator of a a!aful life sc$eme and t$e 4artici4ants of t$at
sc$eme, t$e conce4t of a%arru (donation) is incor4orated in it. $is means a 4artici4ant 8ill agree to
relinAuis$ a certain amount of a!aful contri%utions to fulfil $is o%ligation of mutual $el4 and #oint
guarantee s$ould an7 of t$e fello8 4artici4ants under t$e sc$eme suffer a loss caused %7 s4ecified 4erils
and or $aCards of life.
$e s$aring of sur4lus %et8een t$e o4erator and t$e 4artici4ants $as to %e made as 4er ratio fi9ed in t$e
agreement. $e o4erators are to stri6e 4rudentl7 in order to ensure t$at t$e funds 8$ic$ are %eing
managed %7 t$em are 4rotected against undue o6ere94osure and creates some sur4lus for distri%ution,
since t$e o4erators are entitled to a s$are of sur4lus out of a!aful o4erations.
$e o4eration of a!aful 4ractices is su4er6ised %7 an inde4endent %od7 called t$e S$aria$ Su4er6isor7
Board or Council. $e Board ad6ises t$e a!aful o4erators on t$e da7 to da7 o4erational matters in order
to ensure t$at t$e 24erator does not in6ol6e in its o4eration an7 element, 8$ic$ is not a44ro6ed %7 t$e
S$aria$ 4rinci4les. $e esta%lis$ment of a S$aria$ Su4er6isor7 Board is a 4rereAuisite %efore t$e
commencement of t$e a!aful o4eration. $e Board 4rescri%es t$e necessar7 reAuirements for
3
acce4ta%ilit7 of different modes of transactions of t$e al!aful o4erators from t$e S$aria$ 4oint of 6ie8 and
4ro6ide t$e o4erators a clear 4erce4tion of t$e rele6ant rules and 4rinci4les of S$aria$.
In ma#orit7 of t$e Muslim countries, a!aful $as emerged as a 4rofit s$aring %usiness 6enture %et8een
t$e 24erator and t$e indi6idual mem%ers of a grou4 of 4artici4ants 8$o desire to reci4rocall7 guarantee
eac$ ot$er against certain loss or damage t$at ma7 %e inflicted u4on an7 one of t$em. Ho8e6er t$e aims
and o4erations of a a!aful %usiness 6enture s$ould not in6ol6e an7 element 8$ic$ is contrar7 to Islamic
4rinci4les and la8 of financial transactions.
S%o!e
In t$is 4a4er I $a6e descri%ed in %rief t$e %ac!ground of a!aful Insurance as 4art of Islamic Ban!ing
Mo6ement. In t$e second 4art t$e "ole of a!aful $as %een anal7sed ; focused in order to asses $o8
a!aful $el4s to de6elo4 t$e econom7 to8ards %alanced gro8t$ ; 4ros4erit7. B$ile assessing t$e
4otentialit7 ; 4ros4ect of a!aful it $as %een o%ser6ed t$at t$e ma#or increase in consum4tion of a!aful
8ill result from t$e increase in su44l7 of a!aful. B$ile descri%ing t$e 4resent scenario of a!aful mar!et,
t$e role of Islamic De6elo4ment Ban! (IDB) ; 2rganiCation of Islamic Countr7 (2IC) $a6e %een identified.
$e role of go6ernment and need for coo4eration %et8een a!aful o4erators ; Islamic Ban!s $a6e %een
6i6idl7 descri%ed. It $as %een suggested t$at t$e Do6ernment of Islamic countries s$ould $a6e strategic
4olicies to 4romote ; foster t$e gro8t$ of a!aful, for t$e de6elo4ment of S$aria$ %ased #ust ; fair
Financial S7stem for t$e ?mma$ (Muslim Communit7).
+a%,&round
Bit$ t$e esta%lis$ment of t$e Du%ai Islamic Ban! and t$e Islamic De6elo4ment Ban!, as t$e
starting 4oint of Islamic Ban!ing Mo6ement, H.E. Prince Mo$ammed*El*Faisal*Al*Saud of Saudi
Ara%ia too! initiati6e for t$e esta%lis$ment of a num%er of Islamic Ban!s. In one of suc$ initiati6es
in Fe%ruar7, +(.& $e $eld discussions 8it$ H.E. Dafar Fimeir7 (t$e t$en President of t$e
Democratic "e4u%lic of Sudan) and as!ed for 4ermission to esta%lis$ an Islamic Ban! to %e
o4erated in Sudan. E9ecuti6e and Legislati6e aut$orities in t$e Sudaness Do6ernment at all le6els
ga6e e6er7 encouragement and acceded to t$e 4ro4osal.
B$en Faisal Islamic Ban! 8as esta%lis$ed, t$e Ban! aut$orities initiated studies on t$e
esta%lis$ment of a co*o4erati6e insurance com4an7. In t$is res4ect t$e o4inion of t$e Ban!<s
S$aria$ Su4er6isor7 Board (S.S.B) 8as soug$t. $e S.S.B. studied t$e sc$eme at t$e first
meeting. Studies continued and se6eral ste4s follo8ed. $e Memorandum of Association and
Articles of Association 8ere 4re4ared %7 t$e Faisal Islamic Ban! aut$orities. $e S.S.B. 4ro4osed
some amendments 8$ic$ 8ere im4lemented. $e S.S.B. ensured t$at t$e sc$eme 8as sound from
S$aria$ 4oint of 6ie8 as 8ell as feasi%le from 4ractical 4oint of 6ie8. $erefore, t$e Islamic
Insurance Com4an7 Ltd. Sudan 8as incor4orated as a Sudanese Pu%lic Com4an7 (under t$e
Com4anies Act +('-) in Ganuar7 +(.(.
$is is t$e first e6er insurance com4an7 esta%lis$ed in t$e 8orld to transact %usiness according
to t$e Islamic S$aria$. $e entire aut$orised ca4ital of t$is com4an7 8as su%scri%ed to %7 t$e
Faisal Islamic Ban!. $e com4an7 8as allo8ed numerous concessions and e9em4tions. All its
assets and 4rofits 8ere e9em4t from all t74es of ta9es. Furt$er, t$e assets of t$e com4an7 are
not su%#ect to confiscation, nationalisation etc. $e com4an7 is also e9em4t from t$e a44lication
of $e Acts regulating insurance in Sudan.
4
In Mala7sia, t$e Islamic Insurance Com4an7 8as esta%lis$ed as a 4ri6ate limited com4an7 (in
accordance 8it$ Com4anies Act +(&-) in Fo6em%er +(1/ and started its o4eration from August
+(1- as a com4osite Islamic insurance com4an7. $is 8as made 4ossi%le %7 t$e Mala7sian
Do6ernment 8$o in +(1', too! a 4ositi6e ste4 %7 forming a s4ecial %od7 !no8n as t$e Has!
Force< on t$e stud7 of t$e esta%lis$ment of Islamic Insurance in Mala7sia. $is tas! force 8as
formed on t$e %asis of t$e recommendation of t$e Fational Steering Committee on Islamic Ban!,
8$ic$ $ig$lig$ted in its re4ort to t$e Mala7sian Do6ernment of t$e need for on Islamic Insurance.
$e Committee felt t$at it 8as necessar7 in order to cater t$e insurance reAuirement of t$e
Islamic Ban! 8$ic$ 8as a%out to %e launc$ed t$en.
Mem%ers of t$e tas! force 8ere dra8n from 4ersonalities and grou4s re4resenting religious
sc$olars, legal e94erts, economic and insurance 4ractitioners. $e mem%ers of t$e tas!force 6isited
a num%er of Islamic countries and also discussed 8it$ t$ree Islamic Insurance com4anies
alread7 esta%lis$ed or a%out to t$e esta%lis$ed. Finall7, in its re4ort to t$e Do6ernment, t$e tas!
force suggested t$at an Islamic Insurance com4an7 s$ould %e esta%lis$ed in Mala7sia as soon as
4ossi%le. $e Mala7sian Do6ernment t$en 4romulgated legislation entitled as t$e a!aful Act +(1/,
8$ic$ regulates t$e Islamic Insurance (a!aful) of Mala7sia. It ma7 %e of interest to note t$at in
Mala7sia t$e Islamic Insurance Com4an7 (!no8n as t$e S7ari!at a!aful Mala7sia) is 4racticall7 a
su%sidiar7 of Ban! Islami Mala7sia Ber$ad, 8$ic$ o8ns -+: of t$e 4aid u4 ca4ital of t$e a!aful
com4an7. $e %alance of /(: of t$e s$ares are o8ned %7 t$e 6arious State "eligious Councils
and State "eligious Foundations 8it$in Mala7sia.
Role o Ta,aul in I#lami% E%onomi% #'#tem-
In t$e recent 4ast, t$e Muslim 8orld is %eing stirred 8it$ an endless ent$usiasm and im4etus to
occu47 its real 4lace among t$e communit7 of nations and contri%ute its due s$are and to its
duties to $umanit7. a!aful is a ser6ice to Muslim ?mma$ (communit7) as a 8elfare sc$eme.
Introduction of a!ful is an e9am4le as to $o8 t$e 4rinci4les of Islamic S$aria$ can $el4 to
create ne8 socio*economic mec$anism %ased on eAuit7, #ustice and fair 4la7.
$e o%#ecti6e of Islamic Econom7 is to create an e94loitation free societ7 and u4liftment of t$e
entire societ7 as a 8$ole. $e a!aful s7stem, 8$ic$ $as %een 8or!ing for t$e 8elfare of t$e
man!ind is not in contradiction 8it$ Islam. $e o%#ecti6e of Islamic Economic s7stem is t$e
4romotion of 8elfare of 4eo4le 8$ic$ lies in safeguarding t$eir fait$, t$eir life, t$eir 4osterit7 and
t$eir 4ro4ert7. B7 ensuring and safeguarding t$ese elements of t$e 4eo4le, a!aful ser6es 4u%lic
interest and, t$erefore, can 4la7 t$e most im4ortant role.
An e94loitation free societ7 as Islam en6isaged $a6e 4ro6isions for adeAuate ca4ital formation.
$e Pro4$et of Islam disa44ro6ed %egging and encouraged ca4ital formation. He ad6ised a 4oor
com4anion to sell all $is %elongings for 4urc$asing an a9e for collecting fire8ood and sell t$ose in
t$e mar!et. $e a!aful s7stem 8ill facilitate ca4ital formation of indi6idual $ouse$olds. $is 8ill
moti6ate e6er7 indi6idual for sa6ings under Famil7 a!aful (Islamic Life Insurance) and t$e collecti6e
sur4lus funds 8ill %e in6ested in t$e ca4ital mar!et. $is 8ill facilitate furt$er utiliCation of
resource and greater em4lo7ments.
Islam is t$e second largest religion in t$e 8orld 8it$ one and Auarter %illion follo8ers. In all,
Muslims form a ma#orit7 of t$e 4o4ulation in o6er fort7 countries. Muslims li6e in +1/ countries
com4rising a%out ',: of 8orld 4o4ulation. Islamic countries and ot$er countries 8it$ a significant
5
Muslims in t$e recent 4ast $a6e encouraged t$e 4ro6ision of financial ser6ices, including
insurance, under Islamic 4rinci4les. As a result more t$an se6ent7 a!aful)Islamic Insurance
com4anies $a6e %een esta%lis$ed for 4ro6iding insurance co6erage %ot$ in t$e life and non*life
sectors. $ese insurers generall7 !no8n as a!aful o4erators are found not onl7 in Islamic
countries %ut also in Euro4e, Fort$ America and Australia. $is t74e of modified insurance
mec$anism is e94ected to furt$er influence t$e su44l7 of and demand for insurance in t$e
Muslim communit7.
a!aful $as gro8n not onl7 as an inno6ati6e financial instrument, %ut also on religious 4rinci4les.
$e 4ur4ose of religion is t$e 8ell %eing of man!ind. Islam as a religion see!s to order $uman
life so as to ma!e it actualise t$e 4attern intended for it %7 its Creator. Islam is not onl7 a
religion %ut an ideolog7 in t$e sense t$at t$e S$aria$, its la8 $as gi6en t$e Muslims a 4attern of
life 8it$ 8$ic$ to order t$eir li6es.
$e S$aria$ is com4re$ensi6e, em%racing all $uman acti6ities, defining man<s relations 8it$ Dod
and 8it$ $is fello8 men. $e S$aria$ gre8 out of t$e attem4ts made %7 earl7 Muslims as t$e7
confronted immediate social and 4olitical 4ro%lems to de6ise a legal s7stem in !ee4ing 8it$ t$e
code of %e$a6iour called for %7 t$e @uran and t$e Hadit$. $e 4ur4ose of Islam is al8a7s to
in#ect moralit7 into t$e fa%ric of $uman relations. Ho8 t$e Muslims earn its li6e$ood, $o8 $e
s4ends $is 8ealt$ and $o8 $is 8ealt$ is to %e dis4osed of after $is deat$ all t$ese are t$e
stuff of Islam. In Islam, t$e $uman as4ect is more im4ortant t$an t$e material one. It relies more
on moral, et$ical and $uman as4ects t$an on t$e material as4ects. $is is somet$ing uniAue in
t$e Islamic Economic s7stem.
Pro4$et Mo$ammad (P.B.?.H) said,
One who eats to his hearts contents, while his neighbor starves, is not a Mumin faithful!
Hel4ing neig$%ours, 4oor relations and t$e distressed contri%ute to an e94loitation free societ7
%ased on t$e 4rinci4le of %rot$er$ood .
?nderstanding fundamental 4rinci4les of Islamic Economic S7stem is necessar7 in order to $a6e a
%etter understanding of t$e role of a!aful and its suita%ilit7 in t$e Islamic Econom7. For
e9am4le, rig$t of 4ri6ate o8ners$i4 accorded %7 Islam is not a%solute and unconditional. $e
o8ners$i4 is a !ind of trust onl7. An indi6idual ma7 4ri6atel7 o8n and manage an7 !ind of
8ealt$, %ut $e can not do 8it$ t$em 8$ate6er $e li!es. He is to regulate t$e uses of 8ealt$ as
4er t$e S$aria$ La8. An indi6idual can ma!e #oint in6estment to earn 4rofit from $is in6estment.
a!aful is a means 8$ere%7 in6estments of sur4lus funds are made %7 t$e 24erators and 4rofits
are distri%uted to t$e Partici4ants i.e. to t$e o8ners of t$e ca4ital.
Anot$er fundamental 4rinci4le of t$e economic s7stem of Islam is t$at it stands for eAuita%le
distri%ution of 8ealt$. Islam encourage 4eo4le to %e selfless $el4ers for one anot$er %7 arousing
in t$em feelings of s7m4at$7. a!aful is a s7stem 8$ere 4eo4le are encouraged to contri%ute
mone7 for mutual $el4 in times of need. $us a!aful comes in for $el4 of distressed fello8 %7
means of mutual coo4eration and #oint guarantee.
$e Islamic Economic s7stem com%ats t$e accumulation of 8ealt$ and its concentration in t$e
$ands of a small minorit7. $e Islamic La8 of in$eritance 4ro6ide for t$e s$ifting and distri%ution
of 8ealt$ in a manner un!no8n in ot$er legal and economic s7stems. It di6ides t$e estate of t$e
deceased o6er a 8ide range of %eneficiaries and not on a single $eir to t$e e9clusion of ot$er.
6
$e nominee in a famil7 ta!aful sc$eme is onl7 a trustee and t$e 4olic7 mone7 need to %e
distri%uted to all t$e $eirs.
$e Islamic s7stem reAuires t$at 8ealt$ s$ould %e utilised as an instrument to ser6e t$e interest
of t$e communit7 at large. In t$e Islamic 8a7 of life, some s4ecial !ind of le6ies are im4osed.
$e o%#ecti6e %e$ind t$em is to 4ro6ide financial assistance to t$e 4eo4le of lo8er income
%rac!et from t$e mone7 of t$e relati6el7 %etter off 4eo4le. In Islam, t$ere are a 6arious !inds of
com4ulsor7 le6ies ranging from 6er7 $ig$ rate of ',: of t$e income to t$e minimum of '.-: of
income. $ese are to %e collected from t$e 4oor and need7. $is is an automatic mec$anism of
%alancing income in t$e societ7. Islam ma!es it o%ligator7 on e6er7 Muslim 8$o 4ossesses a
certain limit of income u4to one 7ear to 4a7 a certain 4ercentage of it for t$e destitute and
need7. $is is called Ia!a$. It is so im4ortant 4art of Islam t$at t$e instruction of t$e 4a7ment
of Ia!a$ al8a7s comes ne9t to Salat (4ra7er). $e 4ro4$et descri%ed Ia!a$ to %e one of t$e fi6e
4illars of Islam.
Ia!a$ is of course not a su%stitute of income ta9. It is im4osed on ca4ital. Ia!at $as to %e
le6ied annuall7 8$et$er it is in6ested or not. $erefore, it is 4rudent for t$e o8ners and
managers of t$e Ja!aful fund to in6est it in 4roduction 4ur4oses. As a result, it induces t$at all
t$e resources and 8ealt$ of t$e econom7 are em4lo7ed continuousl7 in t$e 4roducti6e acti6ities.
B7 im4lementing Ia!a$ s7stem 8it$in t$e mec$anism of a!aful, it $el4s to de6elo4 t$e econom7
to8ards %alanced gro8t$ and 4ros4erit7.
Potentialit' and Pro#!e%t o Ta,aul Indu#tr'
In t$e contem4orar7 Islamic countries, role and im4ortance of a!aful $as not %een dul7
recogniCed %7 t$e 4olic7 ma!ers. E6en t$e gro8t$ of con6entional insurance is not 6er7
satisfactor7. If 8e loo! into t$e 4resent scenario of t$e insurance sector of t$e De6elo4ing*1 (D*1)
mem%er countries, 8e find a disma7ing 4icture. $e follo8ing ta%les s$o8 insurance densit7 of D*
1 mem%er countries and middle east oil ric$ countries.
TA+LE*A
IFS?"AFCE DEFSIJ 2F D*1 ISLAMIC C2?F"IES
Countr7 Po4ulation
(million)
Per ca4ita
DDP
Per ca4ita Premium otal
Fon*Life Life
Banglades$ +0- K +,'&, K,.& K,.. K+.0
Eg74t &- K ',(,, K ( K ' K ++.,
Indonesia '+, K 0..., K 1 K & K +/.,
Iran &1 K -,',, K '0 K 0 K '&.,,
Mala7sia '0 K +,..-, K &' K .1 K +/,
Figeria +,. K +,01, K . K + K 1
Pa!istan +0' K ',0,, K ' K + K 0
ur!e7 &/ K &,+,, K '+ K / K '-
TA+LE*+
IFS?"AFCE DEFSIJ 2F MIDDLE EAS ISLAMIC C2?F"IES
7
Countr7 Po4ulation
(million)
Per ca4ita Premium otal
Life Fon*Life
?AE '.& K -1 K '-' K 0+,
@atar ,.& *** K '&, K '&,
Le%anon /.0 K +( K (0 K ++'
Lu8ait '.+ K +& K .. K (0
2man '.- K +/ K -' K &&
Saudi Ara%ia ',.- K ,.& K 0..- K 01.+
S7ria +-.1 K ,.+ K +&.- K +&.&
If 8e com4are insurance densit7 of t$e Islamic countries 8it$ t$at of ot$er countries of t$e 8orld,
8e can understand 8$ere do 8e reall7 stand. For e9am4le, in Sout$ Africa s$are of insurance
4remium to DDP is more t$an ',: in com4arison to 0.-: in Figeria. In Banglades$ insurance
4enetration is less t$an +:. In Ga4an 4remium 4er ca4ita is a44ro9 ?S K 0(,, and in Mala7sia it
is a44ro9 ?S K +/, and in Banglades$ it is less t$an K '.,, (t8o) onl7. $is means, t$ere are
am4le sco4es of gro8t$ of Insurance 6is*M*6is a!aful in Islamic countries.
a!aful mar!et is %ound to gro8 8it$ t$e 4ace of t$e econom7. $e gro8t$ of t$e a!aful
industr7 and economic de6elo4ment of t$ese countries are interde4endent. Alt$oug$ t$e demand for
a!aful is a reflection of income and 8ealt$, it is to %e noted 8ell t$at ris! consciousness is
6er7 lo8 in t$e Islamic countries. $ere is an urgent need to create a dee4er understanding and
a8areness among t$e 4olic7 ma!ers, 8$at role a!aful can 4la7 to im4ro6e t$e 8ell %eing and
Aualit7 of life of t$e ?mma$.
a!aful $as %een designed to $el4 and sta%iliCe t$e financial situation of indi6iduals, families and
organiCations. At t$e same time a!afu!l o4erators can meet t$e financing needs of large
4ro#ects, t$ere%7 $el4ing t$e national economies %7 enlarging t$e set of feasi%le in6estment
4ro#ects and encouraging economic efficienc7. a!aful 8ill definitel7 $el4 to foster a more efficient
allocation of ca4ital and resources of Islamic countries, %7 8a7 of 4romoting trade, commerce
and entre4reneurial acti6ities. A gro8ing a!aful and "eta!aful mar!et is an instrument for
economic gro8t$ of t$e Islamic countries. In fact, t$e de6elo4ment of a!aful as an alternati6e of
con6entional insurance 8ill contri%ute to economic 4ros4erit7 of t$e Islamic countries. 2n t$e ot$er
$and, 8it$ t$e gro8t$ and de6elo4ment of t$e econom7, t$e a!aful Industr7 8ill gro8.
It is o%6ious t$at a!aful is a suita%le alternati6e of con6entional insurance for t$e Muslims. But, t$e
4ertinent Auestion is $o8 %est it can ser6e t$e needs of t$e communit7 N
$ere is no dou%t t$at a!aful $as a 6ast 4otentional for gro8t$ and t$is 4otentionalit7 8ill
definitel7 increase in t$e coming 7ears. Ho8e6er, t$e future of a!aful 8ill largel7 de4end on $o8
t$e increasing 4otentials are %eing e94loited %7 a!aful o4erating s7stem, !ee4ing in 6ie8 t$e
need of t$e Islamic econom7 and state of affairs in Islamic countries.
"eligion and culture of t$e Muslims are 4lus 4oints for a!aful 24erators. But, t$at is not all.
Political and economic sta%ilit7 of t$e Islamic States, 4rofessional maturit7 of t$e a!aful 24erators,
a%ilit7 of designing a44ro4riate 4roducts and reducing management e94enses including distri%ution
cost are some of t$e im4ortant factors for influencing t$e demand of Famil7 a!aful. $e factors
8$ic$ 8ill influence t$e demand of Deneral (non*life) a!aful are gro8t$ of trade, commerce ;
8
industr7 as 8ell as ris! 4otentials and t$eir se6erit7 and freAuenc7. 2f course, ris! a8areness is
anot$er im4ortant factor.
$e gro8t$ of %ot$ Famil7 a!aful ; Deneral a!aful 8ill de4end on t$e mar!eting strategies,
distri%ution net 8or! and ado4tion of im4ro6ed information tec$nolog7. Last, %ut not t$e least, t$e
su44l7 of a!aful in t$e Islamic countries 8ill de4end mostl7 u4on t$e su44ort and s7m4at$7 of t$e
4olic7 ma!ers. If t$e conce4t of a!aful is not 4ro4erl7 understood, t$e legislators ma7 not
su%scri%e t$e idea of 4romoting a!aful and for t$at matter floating of Islamic com4anies under
t$e Con6entional Insurance Act 8ill sim4l7 mislead t$e consumers. Since an effecti6e regulator7
s7stem 4la7 a great role in t$e d7namics of su44l7, it %ecomes t$e res4onsi%ilit7 of t$e "egulator7
Aut$orit7 of Islamic Countries to frame a44ro4riate la8s ; rules for facilitating t$e gro8t$ of
a!aful for t$e %enefit of t$e communit7 and of course for t$e gro8t$ of t$e econom7 as a
8$ole.
It is o%6ious t$at interaction of demand and su44l7 8ill determine t$e consum4tion of a!aful. $e
s$ift in demand for a!aful 8ill occur as it is an inno6ati6e 4roduct and suits to socio*economic
; religious teac$ings of Islam. Moreo6er, t$e Islamic countries are li!el7 to $a6e economic gro8t$
%ot$ in t$e micro and macro le6el. Ho8e6er, t$e ma#or increase in t$e consum4tion of a!aful 8ill
result from t$e increase in t$e su44l7 of a!aful. $e demand alread7 e9its. $e e9tent to 8$ic$
it is ta44ed 8ould de4end on t$e e9tent to 8$ic$ t$e su44l7 cur6e mo6es to t$e rig$t.
Pre#ent S%enario-
Currentl7, t$ere are a%out se6ent7 =ta!aful> o4erators 8orld*8ide. During last t8ent7 se6en 7ears Islamic
Insurance (ta!aful) $as de6elo4ed mainl7 in Sudan, Eg74t, Saudi Ara%ia, Iran, Lu8ait, Le%anon,
Mala7sia, Brunei, Indonesia, Singa4ore, ?.A.E., Ba$rain, Banglades$, Figeria, unisia, Ba$amas,
Belgium, Sout$ Africa, S8itCerland, Australia and in t$e ?SA. Interestingl7 ta!aful is seen in t$e non*
Muslim 8orld as 8ell. For e9am4le, in Singa4ore t$ere are less t$an $alf a million (+-: of total
4o4ulation) Muslims %ut at least t8o o4erators are no8 4ro6iding ta!aful sc$eme in Singa4ore. In
non*Muslim countries, t$e sc$eme is also li!el7 to gro8 if t$e o4erators can 4ro6e t$eir 8ort$ in
com4arison to con6entional insurance 4roducts. In Muslim countries, Mala7sia seems to %e t$e
single most successful countr7 in terms of ta!aful. In Singa4ore, a%out '': of t$e 4resent ta!aful
4olic7 $olders are non*Muslims.
Most of t$e Islamic countries suffer from t$e common attitude t$at insurance is undesira%le. $ere
are mass non*a8areness among t$e Muslims a%out ris! management and insurance not to s4ea!
a%out ta!aful. In most of t$e Muslim dominated countries of t$e 8orld insurance still accounts for less
t$an onl7 one 4ercent of t$e countr7<s D.D.P. Ho8e6er 6arious sur6e7s $a6e s$o8n t$at t$e life
and general insurance mar!et $as large 4otential to %e e94loited in Muslim countries, and in
countries 8$ere Muslim are at*least +,: to +-: of total 4o4ulation . a!aful is li!el7 to gro8
along 8it$ t$e con6entional insurance sc$emes. But t$is is onl7 8$en t$is ne8 form of insurance
s$ould 4ro6ide at*least eAual, and %etter 6alue, as com4ared to t$e e9isting con6entional insurance
4olicies.
B7 no8 a!aful li!e Islamic Ban!ing $as %ecome a 6ia%le realit7. Due to in$erent S$aria$
4rinci4les 8$ic$ are uni6ersal in c$aracter, t$e a!aful %usiness 8ould %e more a44ealing in t$e
coming 7ears for %ot$ t$e Muslim and non*Muslim communities.
9
a!aful (Islamic Insurance) $as %rig$t 4ros4ects and 4otentialities as a financiall7 6ia%le and
com4etiti6e alternati6e insurance for t$e Muslim Countries, %ecause most of t$e Muslim Countries
$a6ing Islamic Ban!s $a6e also 8elcomed ta!aful as a necessar7 com4lementar7 to Islamic
Ban!ing. Islamic Ban!ing can not %e full7 S$aria$ %ased unless t$ere is a!aful to ta!e t$eir
insurance %usiness. $erefore, a!aful li!e Islamic Ban!s $a6e 4ro6ed its 6ia%le realit7 and
$a6ing its strides of e94ansion in almost all t$e Muslim Countries.
$e confidence and fait$ of Muslim Countries in Islamic economic s7stem is gaining solid ground.
"ecentl7 t$e Heads of States and Do6ernments of Banglades$, Eg74t, Indonesia, Iran, Mala7sia, Figeria,
Pa!istan and ur!e7 met in D$a!a on +*' Marc$, +((( for t$e Second De6elo4ing*1 (D*1)
Summit 8it$ t$e o%#ecti6es of im4lementing 4ro#ects and 4rogrammes of co*o4eration t$at are of
6ital interest to t$eir 4eo4les. Among ot$er issues, t$e $eads of t$e State endorsed t$e 4ro4osal
to en$ance t$e ca4acit7 of e9isting reta!aful com4an7 of Mala7sia to meet t$e needs of mem%er
countries of De6elo4ing*1 (D*1). It 8as furt$er agreed t$at t$e e94erts of t$ese countries 8ill
meet to dra8*u4 t$e modus*o4erandi and formulate t$e a44ro4riate strategies to 4romote ta!aful
and reta!aful. It is $eartening to note t$at ta!aful o4erators are organising seminars and
conferences on a regular %asis and e9c$anging ideas and information<s to ma!e ta!aful 6ia%le.
In Gul7 ',,/, t$e regulators of De6elo4ing*1 (D*1) countries met in Mala7sia and mec$anism for
coo4eration among t$e a!aful regulator7 aut$orities 8as e6ol6ed and it 8as decided t$at t8o 8or!ing
grou4s on t$e areas of education and training as 8ell as financial infrastructure de6elo4ment to %e framed
and to %e led %7 Mala7sia and Eg74t res4ecti6el7. In Gune ',,/ a memorandum of understanding 8as
signed %7 t$e Islamic De6elo4ment Ban! 8it$ Ban! Fegara, Mala7sia, 8$ic$ among ot$ers soug$t to
4romote and e94and a!aful and reta!aful %usiness among 2rganiCation of Islamic Conference mem%er
countries. In Gune ',,-, a t8el6e mem%er Committee 8as esta%lis$ed com4rising regulators and a!aful
4ractitioners of t$e 2rganiCation Islamic Countries (2IC) mem%er countries. "ecentl7 t$e committee $as
identified and 4ro4osed action 4lans to address t$e ga4s in t$e de6elo4ment of a!aful and "eta!aful. $e
action 4lans $a6e %een di6ided in to follo8ing eig$t main areas3
+. o 4ro6ide customiCed su44ort for esta%lis$ing a!aful com4anies in targeted #urisdictions.
'. o faster de6elo4ment of sound legal, "egulator7 and S$aria$ frame8or! for a!aful com4anies
t$roug$out t$e 8orld.
0. o 4ro6ide de6elo4ment of e9isting a!aful mar!ets and in6estment o6erseas.
/. o 4romote de6elo4ment of %asic and full range of a!aful 4roducts to meet 8ider e94ectations of
customers.
-. o 4romote $uman ca4ital su44ort %7 8a7 of education, training and researc$ in t$e field of
a!aful o4eration.
&. o create a8areness among t$e Muslim ?mma$ regarding %enefits of a!aful in socio*economic
de6elo4ment.
.. o increase ca4acit7 and su44ort for "eta!aful arrangements in 2IC countries.
1. o o4timiCe e9isting frame8or! of dis4ute resolution, in res4ect of S$aria$ and tec$nical as4ects
of a!aful Industr7.
Role o .o/ernment-
Do6ernment is to 4erform an acti6e role in IslamiCation of insurance in t$e countr7. IslamiCation
ma7 ta!e 4lace in t8o 8a7s. $e first 8a7 is to restructure t$e 8$ole insurance sector on Islamic
10
foundations and t$e second is to allo8 some Islamic insurance com4anies or some old firms to
transform t$eir %usiness on Islamic lines !ee4ing t$e e9isting set*u4 as it is. $ese t8o
a44roac$es reAuire different strategies on 4art of t$e go6ernment.
In t$e former case, t$e go6ernment ma7 4romulgate a regular detailed and codified la8 to
reorganise t$e insurance industr7 in line 8it$ S$ari<a$ 4rinci4les. $is la8 s$ould reflect t$e true
s4irit of mutual $el4 and co*o4eration. All t$e elements ma!ing t$e 4resent insurance 4ractices un*
Islamic (e.g. interest, gam%ling, g$arar) s$ould not %e allo8ed in an7 circumstances. Some Islamic
countries suc$ as Mala7sia, Ba$rain and Sudan, $a6e alread7 enacted suc$ la8s 8$ic$ can %e
used as guiding e9am4les.
Ho8e6er if t$e go6ernment o4ts t$e later a44roac$, t$en it must ma!e suita%le c$anges in t$e
e9isting Insurance Act to create fa6oura%le en6ironment to ne8 com4anies to %e esta%lis$ed on
Islamic 4rinci4les. Some la8s are $urdle for running t$e %usiness according to Islamic 4rinci4les.
Moreo6er t$e go6ernment must facilitate and encourage t$ese com4anies 4ro6iding t$em incenti6es
suc$ as ta9 e9em4tions in earl7 4eriod of esta%lis$ment. $is ma7 $el4 t$e e9isting con6entional
insurance com4anies to restructure t$eir %usiness on Islamic lines. A time frame ma7 also %e
decided %7 t$e go6ernment for com4lete transformation of con6entional Insurance %usiness into
Islamic Insurance.
Anot$er function 8$ic$ t$e go6ernment s$ould 4erform is reinsurance arrangement. Presentl7
insurance com4anies, are $a6ing t8o !inds of re*insurance arrangement, (I) 8it$ t$e Fational "e*
insurance Cor4oration, (ii) 8it$ foreign insurance com4anies. In %ot$ of t$ese arrangement, t$e
insurance com4an7 enters into a similar t74e of contract 8it$ t$e re*insurer, as one %et8een an
indi6idual and t$e insurance com4an7, including all un*Islamic element of insurance. For e9tending
re*insurance ser6ice to t$e Islamic insurance com4anies go6ernment ma7 esta%lis$ a Fund, and all
Islamic insurance com4anies s$ould contri%ute a 4ro4ortion of t$eir 8ritten 4remium in t$is Fund.
$is 4ro4ortion ma7 %e different for different 4olicies. $e o%#ecti6e of t$is fund s$ould %e to $el4
t$e insurance com4anies in 4a7ing t$e claims. A 4ro4ortion of t$is fund ma7 %e in6ested in
4rofita%le 6entures according to Islamic 4rinci4les and 4rofit can %e s$ared %et8een t$e fund and
t$e insurance com4anies.
Need or %oo!eration (et0een Ta,aul O!erator# and I#lami% +an,#-
Ban!ing and Insurance are t$e t8o fundamentals of modern trade ; commerce. Ban!ing 4ro6ides
safeties to t$e de4ositors and 4la7s a 6ital role for de6elo4ment %7 financing t$e sur4lus fund to
t$e deficit grou4s. 2n t$e ot$er $and, Insurance 4ro6ides safeties for t$e 4eo4le as securit7
against accident, calamities and 4at$etic situation. Modern trade and commerce can not %e
concei6ed 8it$out in6ol6ement of Ban!ing and Insurance. But, t$e con6entional s7stem of Ban!ing
and Insurance, 8$ic$ are %ased and lin!ed u4 8it$ interest, can not %e ado4ted %7 t$e Muslims
as a S$aria$ com4ati%le s7stem. But, trading and eAuit7 financing as 8ell as t$e 4rinci4le of
com4ensation and grou4 res4onsi%ilit7 are 8idel7 acce4ted in Islam.
Furt$er, t$ere is an intrinsic and in$erent relation %et8een Islamic Ban! and Islamic Insurance. It
is a 4recondition for t$e success of Islamic Ban! to co6er its ris! %7 a s7stem acce4ted in
Islam. $is is 4ossi%le %7 ado4ting t$e s7stem of Islamic Insurance. 2n t$e ot$er side, 4rogress
of Islamic Insurance de4ends on a $ealt$7 gro8t$ of Islamic Ban!ing.
11
Due to in$erent S$aria$ 4rinci4les 8$ic$ are uni6ersal in c$aracter, t$e Islamic Ban!ing and
a!aful %usiness 8ould %e more a44ealing in t$e coming 7ears for %ot$ t$e Muslim and non*
Muslim communities. $ere is tremendous 4ossi%ilit7 for t$e gro8t$ of Islamic Ban!ing and Islamic
Insurance. But, t$ere is still lot of 4ro%lems and $indrances to run t$e Islamic Ban! and Islamic
Insurance, some of 8$ic$ are as under3
+. A%sence of a44ro4riate legal frame8or! for carr7ing out Islamic Ban!ing and Insurance
o4erations in most of t$e Islamic countries.
'. S$ortage of trained man4o8er to conduct %usiness com4l7ing 8it$ S$aria$ "ules.
0. A%sence of S$aria$ %ased securities.
/. S$ortage of su44ort institutions.
-. A%sence of good relations$i4 among t$e Management, entre4reneur and t$e Controlling ;
Legislati6e Aut$orit7.
&. Lac! of 4u%lic a8areness.
.. Ignorance of t$e mass 4eo4le a%out S$aria$ 4rinci4les and 4ractices in %usiness ;
commerce.
1. Predominance of Secular Bestern Ca4italistic Economic S7stem.
(. Lac! of su44ort from Do6ernment mec$anism.
Islamic Ban!s $a6e alread7 attained considera%le success in t$e Ban!ing sector. It is #ust %eginning
of a!aful %usiness and it is li!el7 to flouris$ in t$e Insurance sector in coming da7s. o attain t$e
desired le6el %7 %ot$ t$e Islamic Ban! and t$e Islamic Insurance, a strong relations$i4 need to
%e %uilt u4 %et8een t$e Islamic Ban! and t$e Islamic Insurance t$roug$out t$e 8orld. The
ollo0in& a%tion# ma' (e ta,en 1ointl' (' the I#lami% +an,# and I#lami% In#uran%e
Com!anie# or their mutual &ro0th and e)!an#ion and to a%e the %hallen&e# 2
+. Efforts s$ould %e made to c$ange t$e legal frame8or! for conducting %an!ing and
insurance o4erations according to Islamic S$aria$.
'. Sufficient training and researc$ institute $a6ing logistics of modern tec$nolog7 ma7 %e
esta%lis$ed to train u4 t$e man4o8er.
0. o create 4u%lic a8arenessO seminar, s7m4osium etc. %ot$ national and international le6el
ma7 %e organised.
/. Islamic Mone7 ; Ca4ital Mar!et s$ould %e de6elo4ed.
-. Central S$aria$ Council s$ould %e set u4 %ot$ for Islamic Ban!s and Islamic Insurances.
&. Li!e Mala7sia, %ot$ t$e Islamic Ban!s and Islamic Insurance Com4anies s$ould %e
regulated %7 t$e same "egulator7 Aut$orit7.
.. Cordial and $armonious relations$i4 %et8een Islamic Ban!s and Islamic Insurance
Com4anies s$ould %e de6elo4ed.
1. Efforts s$ould %e made to esta%lis$ more Islamic Insurance Com4anies and Islamic Ban!s.
Islamic Ban!ing and Islamic Insurance s7stem $a6e tremendous 4otentialit7 and 4ros4ect. $e
successful launc$ing and o4eration of Islamic %an!s and insurance $as esta%lis$ed t$e fact t$at
%an!ing and insurance 8it$out interest is feasi%le, 6ia%le, com4etiti6e and sustaina%le on t$e face
of com4etition from t$e con6entional interest %ased s7stem. $e gradual and successful
glo%alisation of Islamic Ban!ing and Islamic Insurance cou4led 8it$ gro8ing a8areness of t$e
4eo4le a%out its financial and social %enefits ma!es it clear t$at t$e current centur7 is going to
12
%e t$e centur7 of Islamic %an!ing and insurance 6is*a*6is com4lementation of Islamic ideals for t$e
%etterment of t$e 4eo4le at large and esta%lis$ing eAuit7 ; #ustice for all.
B7 no8 a!aful li!e Islamic Ban!ing $as %ecome a 6ia%le realit7. Due to in$erent S$aria$
4rinci4les 8$ic$ are uni6ersal in c$aracter, t$e a!aful %usiness 8ould %e more a44ealing in t$e
coming 7ears for %ot$ t$e Muslim and non*Muslim communities.
It is no den7ing of t$e fact t$at a!aful (Islamic Insurance) $as %rig$t 4ros4ects and 4otentialities
as a financiall7 6ia%le and com4etiti6e alternati6e insurance for t$e Muslim countries. Most of t$e
Muslim countries $a6ing Islamic Ban!s $a6e also $el4ed to create ta!aful as a necessar7
com4lementar7 to Islamic Ban!ing %ecause Islamic %an!ing can not %e full7 S$aria$ %ased unless
t$ere are a!afuls to ta!e t$eir insurance %usiness. a!aful li!e Islamic Ban!s $a6e 4ro6ed its
6ia%le realit7 and $a6ing its strides of e94ansion in almost all t$e Muslim countries. $e
Do6ernments of t$ese countries oug$t to $a6e strategic 4olicies to 4romote and foster t$e gro8t$
of a!aful.
Su&&e#ted mea#ure#-
a!aful or Islamic Insurance is onl7 a su%set of t$e glo%al insurance industr7 of K '.- trillionO 8$ere t$e
glo%al a!aful %usiness is a44ro9imatel7 K 0 %illion onl7. Ho8e6er, a!aful is t$e fastest gro8ing areas of
8orld insurance mar!et. At 4resent, a!aful is gro8ing 5 ',: to '-: 4er annum com4ared to 8orld
a6erage gro8t$ of con6entional insurance 5 -: to &: 4er annum. $e im4etus to t$is gro8t$ 8ould not
$a6e %een t$ere, if t$ere 8as lac! of demand, and if t$ere 8as no 4ros4ects of 4otential re8ards %ot$ for
t$e customers and entre4reneurs of Islamic Insurance. $e o44ortunities and 4otentials of a!aful are
glaring at us. B$at is needed is %etter a8areness a%out t$e goodness of a!aful s7stem. For t$is, t$e
a!aful Industr7 needs to $a6e strong mar!eting and tec$nical e94ertise in %ot$ insurance matters and
S$aria$ matters. It needs to $ig$lig$t goodness of t$e Islamic financial S7stem and its a44lication 8it$in
a!aful 4ractices.
It is an e9cellent o44ortunit7 to e94and t$e siCe of a!aful mar!et %7 addressing t$e need of t$e customers
8$o $a6e 4reference for t$is 4roduct. In a mar!et 4lace, t$e attraction of a!aful %usiness %e 4ercei6ed
not #ust for t$e fact t$at it is %ased on Islamic S$aria$ %ut %ecause it is %etter and fair s7stem. $is as4ect
s$ould %e attracti6e to e6er7one, irres4ect of an7 religious %asis u4on 8$ic$ t$e s7stem stands initiall7.
Considering t$ese as4ects, a!aful 4la7ers in t$e mar!et s$ould ta!e a44ro4riate measures on urgent
%asis, in order t$at t$e o44ortunities are not missed %7 one or ot$er reasons. Some of t$e suggested
measures are narrated as follo8s3
+. In 6ie8 of t$e im4ortance of customer a8areness, a com4re$ensi6e customer education
4rogramme need to %e de6elo4ed, 8$ic$ 8ill 4romote 4roduct trans4arenc7, ensure accounta%ilit7
and t$e a6aila%ilit7 of a6enues for customers to see! redress.
'. o8ards 4romoting t$e sound a!aful Industr7, formation of national and international a!aful
Association aimed at 4ro6iding a common 4latform for t$e a!aful o4erators to address t$e issues
and interests of t$e a!aful industr7 is an urgent necessit7.
0. $e c$allenge confronting t$e a!aful industr7 in t$e 4ursuit to8ards intensif7ing mar!et
4enetration to furt$er entrenc$ its de6elo4ment underscore t$e im4ortance of en$ancing t$e
4roducti6it7 and efficienc7 of distri%ution ca4a%ilities, to %etter com4lement and su44ort sound
%usiness e94ansion. $e a!aful o4erators need to strengt$en t$e necessar7 institutional
ca4a%ilities 6ia in6estment in information and communication tec$nolog7.
13
/. In t$e ra4idl7 e6ol6ing financial en6ironment, t$e a!aful industr7 needs to $a6e t$e a%ilit7 to s$ift
to ne8 areas of com4arati6e ad6antage in res4onse to c$anging conditions and t$ere%7 s8iftl7
ca4italiCe on t$e ne8 c$anging o44ortunities. Em%racing smart colla%oration or strategic alliance
8it$ Islamic Ban!s and financial institutions and %uilding stronger customer allegiance and
retention 8ould reinforce t$e efforts to ac$ie6e t$is o%#ecti6e.
-. Polic7 initiati6es of t$e "egulator7 Aut$orit7 oug$t to %e essentiall7 de6oted to8ards en$ancing t$e
effecti6eness of t$e internal control structure 8it$in t$e a!aful 24erators, s4ecificall7 in t$e areas
of cor4orate go6ernance and ris! management 4ractices. $e "egulator7 Aut$orit7 s$ould also
ta!e measures to im4ro6e t$e o4erational efficiencies of t$e a!aful o4erators to en$ance t$e
4otential 4erformance of t$e industr7.
Alt$oug$ t$e a!aful industr7 continues to demonstrate resilience and ro%ust 4erformance, in t$e recent
7ears com4etiti6e elements confronting t$e industr7 arising from mar!et li%eraliCation, tec$nological
ad6ancement and greater customer e94ectations are t$e catal7sts to8ards furt$er de6elo4ment of
inno6ati6e 4roducts, effecti6e ser6ices and im4ro6ed efficiencies in o4erational 4rocess.
$e effecti6e use of distri%ution c$annels, d7namic in6estment strateg7 and increased 4u%lic a8areness on
a!aful 8ill definitel7 4ro6ide an im4utes for furt$er gro8t$ of t$e a!aful industr7. $e endea6our to
de6elo4 t$e a!aful industr7 t$at is com4etiti6e, d7namic and more resilient 8ill %e t$e result of t$e
com%ined commitment and colla%orati6e effort of t$e regulators, industr7 and mar!et 4artners i.e. Islamic
Ban!s and non*%an!ing financial institutions. $e aim s$all %e to create 4rogressi6e 8orld class a!aful
24erators for 4romoting t$e de6elo4ment of S$aria$ %ased #ust and fare financial s7stem for t$e ?mma$.
Con%ludin& Remar,#-
A dramatic rise in t$e demand for a!aful Insurance is %eing 4redicted %7 mar!et o%ser6ers, as t$e
4o4ulation of Islamic countries %ecomes more financiall7 so4$isticated and more determined to in6est in
S$aria$ com4liant 4roducts. Moreo6er, due to t$e et$ical nature of t$e 4roducts a!aful oug$t to %e
attracti6e to %ot$ muslim and non*muslims. It is o%6ious t$at t$e 4otential demand for a!aful 4roducts is
6er7 large and t$e a!aful Industr7 is no8 4oised for a Dlo%al ta!e off.
$e Dlo%al a!aful Industr7 is small in com4arison to Con6entional Insurance counter4art. $erefore, t$e
mar!et needs to gain 8orld8ide %rand recognition and e9ceed 4erformance standard set %7 t$e
Con6entional Insurance Industr7. It is nice to note t$at ta!aful o4erators are increasingl7 starting to realiCe
t$at t$e et$ical guidelines and trans4arenc7 of t$eir 4roducts under4in t$eir offering a44eal to %ot$ t$e
muslims and more im4ortantl7 t$e larger non*muslims communities.
$e a!aful Industr7 is fast e6ol6ing and entering a sta%le de6elo4ment 4$ase. Ho8e6er, onl7 a fe8
Fational "egulators $a6e enacted a a!aful frame8or! for t$e industr7. Mala7sia ; Ba$rain are leading
e9am4les of $a6ing 4rogressi6e a!aful "egulation. "ecentl7, Saudi Ara%ia ; Pa!istan $a6e also
esta%lis$ed "egulator7 Frame8or! for a!aful %usiness. It is $eartening to note t$at t$e Do6t. of
Banglades$ is acti6el7 considering to enact a se4arate a!aful Act. $is 8ill certainl7 $el4 to gro8 nascent
a!aful Industr7 of Banglades$.
+i(lio&ra!h'
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Gournal of Insurance "egulation. Qol*+1, Fo*+, Fall +(((.
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Finance "e6ie8, ',,&),. Euro mone7 7ear %oo!, ?.L.
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Islamic Culture, Qol. /0, Ganuar7, +(&(.
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+.. "a$man, AfCalur, =Ban!ing ; Insurance> (Doctrines of Islam) Qol*+/ (London +(.().
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15