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EXECUTIVE SUMMARY
Modern insurance had attracted the attention of Muslim scholars and economists, since the 19th
century, when many Muslim countries were subjected to colonisation and therefore to illiteracy,
ignorance, suppression and division by western colonisers resulting in the loss of their
civilizational lead. In the early Islamic societies, every member of the community was naturally
insured by his relatives, neighbours and by the Islamic state against any misfortune that may
happen to him. That is why some of the contemporaryMuslim scholars, like Abdullah Al-Qalqeeli
(1961), Shawkat Al-Ulayyan (1981), Suleyman Al-Thenayan (1993) and others think that there
is no need for commercial or even Takaful insurance companies to exist. However, given the
complexity of life and the need for organised insurance, contemporary Muslim scholars agree
that solidarity and cooperation among the people are not only recognised but encouraged in any
form possible, including organised insurance (Chachi, 2017).
In this continuation, the demand for Takaful has been augmenting along with the demand for
Islamic finance. Verily, the rapid development of Islamic finance has necessitated the need for
Takaful or Islamic Insurance. Takaful operates in line with Shari'ah principles and, at the same
time, offers the benefits and services comparable to its conventional counterpart. Therefore, it
has evolved in response to the ever-increasing call for an insurance system that is Islamic and
provides risk coverage for individuals and Islamic financial institutions (IFIs). For this reason,
the study focuses, in particular, on the Takaful industry.
The main objective of this study is to provide an analysis on the (i) theoretical and legal natures
of Takaful, including the interpretation of various schools of thought on the comparison of
conventional and Islamic insurance; (ii) detailed analysis on the current size and trends,
structures, modes, and instruments of Takaful; (iii) operational aspects of Takaful business, a
comprehensive and detailed analysis on types of Takaful structures, as well as structural,
regulatory and technical challenges facing Takaful sector; (iv) country analysis for the selected
countries on Takaful market. Based on the analysis of Takaful, the study also provides policy
recommendations on Improving the Takaful Sector in the Islamic Countries, members of the
Organization of Islamic Cooperation (OIC) and related issues by taking into consideration case
studies of three selected OIC member countries and one non-OIC country.
The study applies various approaches to collect data and analyse the Takaful industry in the four
case study countries. This includes literature review, surveys with semi-structured face-to-face
interviews and structured online questionnaires. The literature review is used to set up a
framework for Takaful industry analysis for deriving the best practices. The survey questions
include the following sections: background information, challenges facing the Takaful industry,
and company-level SWOT analysis.
Four countries have been selected as sample to analyse the improvement of the Takaful sector.
The selected three OIC countries are: 1) Saudi Arabia as 100 per cent Takaful -based economy,