An Assignment on

Differences between Microinsurance and Micro Takaful

Submitted To
Md. Tanvir Hamim
Lecturer
Department of Banking and Insurance
University of Dhaka

Submitted By
Md. Siful Islam
MBA Batch-16th
ID: 211
Department of Banking and Insurance
University of Dhaka

Date of Submission: April 29, 2015

Definition of Microinsurance
Microinsurance is a division of microfinance which looks to aid poor families by offering
insurance plans tailored to their needs. Microinsurance is often found in developing countries,
where the current insurance markets are inefficient or non-existent. Because the coverage
value is lower than a usual insurance plan, the insured people pay considerably smaller
premiums.
there are some Microinsurance schemes which may cover various risks (health, life, etc.); the
most frequent microinsurance products are:

Life microinsurance (and retirement savings plans)

Health microinsurance (hospitalization, primary health care, maternity, etc.)

Disability microinsurance

Property microinsurance assets, livestock, housing

Crop microinsurance

Profile of a micro policyholder

The potential micro policyholder is unlikely to have a stable source of income and, given
the low average level of income, this means that he will have minimal savings.
He will also probably have a below average education standard. This would also
imply a particularly low appreciation of the use of insurance as a risk management
tool, in particular what to insure and what can be self-insured.
Other characteristics of a typical micro policyholder are:
He is unlikely to have a bank account. Premiums will likely then have to be made on a
cash basis, potentially increasing the cost of collecting installment premiums.
He is unlikely to own much in the form of assets. This would mean any one loss event
can be financially ruinous to the family.

 He probably has limited access to healthcare, proper sewage and clean water and thus
can be susceptible to poor health, leading to questions on insurability.
For the hard core poor they will most probably be dependent on loans and government
handouts to make ends meet from day to day. The ability to pay regular premiums is
therefore in doubt. For others the level of disposable income may fluctuate greatly
from month to month again affecting the ability to maintain a regular contribution
towards insurance.

Micro Takaful Definition

Micro Takaful is a mechanism to provide Shariah-based protection to the under-privileged
individuals at an affordable cost.

Micro Takaful benefits

Micro Takaful can help people improve.

Micro Takaful will help them sustain their financial wellbeing.
Feeling of togetherness & security.
Opens avenues for joint efforts for mutual benefits.
Cooperative approach and outlook.
Result migration of individual level.
Society benefits at large

Fig: Micro Takaful Products

Differences between Microinsurance and Micro Takaful

There are some differences between Microinsurance and Micro Takaful. These are given
below:
Points
Shariah Compliance

Microinsurance
Micro Takaful
Microinsurance schemes are Micro Takaful schemes are
not

Target Clients

designed

based

Islamic Shariah
Shariah
Poor and Ultra Poor section People
from the society

Profit and loss sharing

on designed based on Islamic

Microinsurance

economies

from
and

informal
under

privileged people
mechanism Micro Takaful is all about

is not established on profit profit sharing where profit

and loss sharing principle

and loss shared based on

percentage of contribution

Delivery channels

Microinsurance

delivery Micro Takaful is provided by

channels are partner agent Takaful operators

model,

provider

model,

community based model etc

Legal Transparency

Microinsurance is not good Micro Takaful is good as per

in terms of legal transparency legal transparency concern.