By Mohammad Bitar, Chief Commercial Officer at National Bonds
Championing Takaful
Islam has long associated insurance with gambling. In the Muslim faith, insurance is seen to generate profits for insurance companies through betting on the damages or losses that customers may incur in the future.
It is for this reason, a large portion of Muslims living in the Middle East do not take out, or opt into, insurance products or plans. The element of uncertainty (gharar), gambling (maysir), and interest (riba) make conventional insurance products prohibited risk-sharing instruments for Muslims.
Islamic takaful, a concept based on solidary cooperation and mutuality, was created to compliment the teachings of Islam. With takaful insurance, collaboration and solidarity are an integral aspect of its operational philosophy and define a corporation’s relationship with its customers. There is far greater synergy and partnership between individuals and the corporation in deflecting potential harm that can adversely impact any individual.
Takaful transactions does not take advantage of people’s anxiety about the future. Takaful products are available to all, not just financially stable customers, while all financial investments made by takaful customers must be carefully allocated within sharia-compliant projects or services.
It is encouraging to note that investments in the takaful sector are symbiotic by their very nature as the shareholder’s money is only invested in real and ethical economic projects that will generate benefits for him/her and for society as a whole. This also means that the shareholder’s money is retained within a framework of public ownership for the purpose of ensuring the best possible returns on investment. The corporation for its part, will manage the money and ensure the above stipulations are implemented.
This was our vision when we introduced through a local Takaful Operator ‘Sanadi’, a takaful-based savings program that provides sharia compliant insurance cover to customers. Sanadi, in collaboration with a leading insurer, is created with our customers in mind; providing them with the best of both worlds.
Sanadi, our integrated saving and insurance program, is based on Sharia principles. We wanted to bring to market a product that effectively combined all of the above prerequisites. Create a product that is accessible to everyone, does not give priority to returns and helps us achieve a stable and secure society through investing the shareholders’ money in projects that enhance social development.
This was the primary driver, our raison d’etre, for launching the National Bonds savings certificates. A product that has become an established benchmark for sharia-compliant savings instruments. Islamic takaful has grown significantly in recent years and is now not only the preferred choice for Muslims, but anyone looking for a stable economic future; however, the takaful industry still faces some important challenges. Its biggest challenge is undoubtedly the poor communication that exists between corporations and their audience. This impacts the corporations’ ability to reach out to skeptics who question the legitimacy of takaful and its importance to the economy and social development.
While it is true that the takaful industry is still new, the fact remains that it is expected to reach US$20 trillion by 2017. According to reports released at the Abu Dhabi Islamic Insurance Conference in 2015, The Gulf Co-operation Council (GCC) countries and Association of Southeast Asian Nations (ASEAN) markets are likely to maintain their current growth path in the next five years, subject to their economic growth. In addition, the cultural challenges impacting the uptake of takaful are also significant and need to be addressed with more effective awareness campaigns, among other things.
In order to best overcome the challenges facing the takaful industry, we need a simple rhetoric that meets the needs of the customers. We also need to engage economists, sociologists, scholars and development experts on takaful and the Islamic economy more generally to help raise awareness of the wider benefits to economic development.
If we truly want to boost the takaful industry, we need to instill a culture of takaful in our community so it becomes a form of social consciousness, permeating all segments.
Most importantly, we need to understand people’s fears, perceptions and aspirations to be able to answer their questions through adopting two approaches - first through driving home the legitimacy of takaful that existed for the last 1438 years and its importance, and second through showcasing the practices of takaful corporations so that theory evolves hand-in-hand with practice.
