PROSPECT OF TAKAFUL

(IN ASIA)
Introduction of Takful is an example as to
how the principles of Islamic Shariah can help
to create new socio-economic mechanism
based on equity, justice and fair play.
• The objective of Islamic Economy is to
create an exploitation free society and
upliftment of the entire society as a
whole.
• Islam is the second largest religion in the world with one and
quarter billion followers. In all, Muslims form a majority of the
population in over forty countries. Muslims live in 184
countries comprising about 20% of world population. Islamic
countries and other countries with a significant Muslims in the
recent past have encouraged the provision of financial services,
including insurance, under Islamic principles. As a result more
than seventy Takaful/Islamic Insurance companies have been
established for providing insurance coverage both in the life
and non-life sectors. These insurers generally known as Takaful
operators are found not only in Islamic countries but also in
Europe, North America and Australia. This type of modified
insurance mechanism is expected to further influence the
supply of and demand for insurance in the Muslim
community.
• Takaful has grown not only as an innovative
financial instrument, but also on religious
principles. The purpose of religion is the well
being of mankind. Islam as a religion seeks to
order human life so as to make it actualise
the pattern intended for it by its Creator.
Islam is not only a religion but an ideology in
the sense that the Shariah, its law has given
the Muslims a pattern of life with which to
order their lives.
• Understanding fundamental principles of Islamic
Economic System is necessary in order to have a
better understanding of the role of Takaful and its
suitability in the Islamic Economy. For example, right
of private ownership accorded by Islam is not absolute
and unconditional. The ownership is a kind of trust
only. An individual may privately own and manage any
kind of wealth, but he can not do with them whatever
he likes. He is to regulate the uses of wealth as per
the Shariah Law. An individual can make joint
investment to earn profit from his investment. Takaful
is a means whereby investments of surplus funds are
made by the Operators and profits are distributed to
the Participants i.e to the owners of the capital.
• The growth of both Family Takaful & General Takaful will
depend on the marketing strategies, distribution net work and
adoption of improved information technology. Last, but not the
least, the supply of Takaful in the Islamic countries will depend
mostly upon the support and sympathy of the policy makers. If
the concept of Takaful is not properly understood, the
legislators may not subscribe the idea of promoting Takaful and
for that matter floating of Islamic companies under the
Conventional Insurance Act will simply mislead the consumers.
Since an effective regulatory system play a great role in the
dynamics of supply, it becomes the responsibility of the
Regulatory Authority of Islamic Countries to frame appropriate
laws & rules for facilitating the growth of Takaful for the
benefit of the community and of course for the growth of the
economy as a whole.
 Role of Government.

• Government is to perform an active role in

Islamization of insurance in the country.
Islamization may take place in two ways. The
first way is to restructure the whole insurance
sector on Islamic foundations and the second
is to allow some Islamic insurance companies
or some old firms to transform their business
on Islamic lines keeping the existing set-up as
it is. These two approaches require different
strategies on part of the government.
 Need for cooperation between
Takaful Operators and Islamic Banks.
• Banking and Insurance are the two fundamentals of
modern trade & commerce. Banking provides safeties to
the depositors and plays a vital role for development
by financing the surplus fund to the deficit groups. On
the other hand, Insurance provides safeties for the
people as security against accident, calamities and
pathetic situation. Modern trade and commerce can not
be conceived without involvement of Banking and
Insurance. But, the conventional system of Banking and
Insurance, which are based and linked up with interest,
can not be adopted by the Muslims as a Shariah
compatible system. But, trading and equity financing as
well as the principle of compensation and group
responsibility are widely accepted in Islam.
• References:
Past, Present & Future of Takaful (Islamic
Insurance) Industry
www.rmi.nccu.edu.tw/.../