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decision to be revisited. The six experts caution that products for trade credit Takaful is
inadequate compared to the number of products available for trade financing. They also
opine that the marketing strategy for the present channel distribution is similar to that
of the conventional insurance where Takaful companies rely largely on intermediaries,
mostly banks to sell their products. Meanwhile one expert from Turkey views that in
addition to the customers’ demands and needs, the constant change in technology and
competition requires the Takaful companies to develop new products in order to
survive in the market and increase their competitiveness.
Two experts from Saudi Arabia said that SAMA is encouraging the Insurance Industry to
come up with innovative products to help grow the industry in the kingdom. They also
mentioned that the majority of the market share in Saudi Arabia is dominated by
compulsory products (Medical & Motor insurance), although there is a commitment for
growing other lines of businesses especially the Life insurance. The experts warn that
the size of Takaful companies is small, which does not allow them to grow and compete
on equal footing with their conventional counterparts. They therefore suggest that
regulators should not approve small companies, which are unlikely to do well in the
market.
4. How does Shari'ah framework play a crucial role in the Takaful?
The experts are unanimous that the Shari'ah framework is the backbone of the Takaful
industry. Four experts from Malaysia affirm that any Takaful operator in Malaysia that
does not comply with the Shari'ah would receive severe punishment from the authority
to the extent of revoking its license and closing down the company. Such measures instil
confidence in the customers and give them assurances. The four experts advise Takaful
companies to have Shari'ah secretariat to manage the Shari'ah committee. The
secretariat performs three key functions: Shari'ah, office management and compliance,
and R & D. Furthermore, the four experts stated the Shari'ah governance system
provided by IFSB standards have two different perspectives: the IFSB-8, which is
focused on the Takaful sector, and IFSB-10 that discusses Shari'ah governance system
holistically. IFSB-10 ensures issuance of relevant Shari’ah pronouncements
/resolutions; dissemination of information on such Shari'ah pronouncements /
resolutions; an internal Shari'ah compliance review / audit, and an annual external
Shari’ah compliance review. Meanwhile IFSB-8 provides best practices on approaches
to reinforce good governance. One of the experts from Turkey considers Shari'ah
framework necessary for providing check and balance to the operations and product of
the Takaful industry to ensure they comply with the Shari'ah. According to him, such
framework also provides disclosure and transparency and gives confidence to
customers. An expert from Saudi Arabia states that in the Kingdom the cooperative law
is applicable to all insurance business. He also affirms that the general Shari'ah
framework agreed upon such as AAOIFI Shari'ah standards should not be questioned,
especially when such standards are already being practised by several countries.