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5.2.4. Limited Investment Options
Shari'ah-compliant investment options are scarce. Even in the jurisdictions where the Takaful
sector’s regulatory framework is well established, there exist the challenge of limited
investment options. Since TOs do not cover risks like their insurance counterparts, they only
manage funds and receive management fees in most cases. So, Takaful participants contribute
to the pool of funds, and in the event of any loss suffered by a member, such loss is indemnified
from the pool. It makes it imperative to invest the funds in a Shari'ah-compliant business to
sustain the funds. A Takaful scheme would not be sustainable if there were no such investment
options, and this remains a major challenge in some countries, particularly in most non-OIC
member states.
5.2.5. Skilled Human Resources
Inadequate skilled human resources for Takaful operations have hindered the growth of the
industry. Most professionals who now dominate the Takaful sector, including TOs, are from the
conventional insurance market. They rely on lawyers and finance experts who do the
structuring of products and get such products certified by the Shari'ah scholars (Oseni, Ahmad,
&Hassan, 2016). When it gets to executing such approved products, there are usually challenges.
Most products are fraught with Shari'ah non-compliance risks during the execution phase due
to lack of expertise in Takaful and its unique modus operandi.
5.2.6. Weak Regulatory Support
Regulatory challenges have not allowed Takaful to proliferate, like other sectors of the Islamic
financial services industry. In addition to political will, regulators should endeavour to go
beyond giving similar treatment granted to conventional insurance to the Takaful sector. There
should be a unique regulatory treatment for Takaful business considering its nature and its
potential in deepening financial inclusion. This includes relevant tax considerations and may
include lowering the entry bar to allow more market players to enter into the Takaful business.
Also, the adoption and/or adaptation of international standards on Takaful would allow for
consistency and clarity in regulatory practices in a particular jurisdiction.
5.2.7. Inadequate Distribution Capacity
Despite the innovative products introduced so far in the Takaful sector, there are still inadequate
distribution capacity and channels. There is a need to broaden the distribution channel beyond
the agency model, including BancaTakaful (Coolen-Maturi, 2013). It may involve incentivising
the Takaful agents and participants to boost the customer base of TOs. Alternative distribution
channels may include targeting large companies such as multinationals that have offices across
the world or good network channel in a particular jurisdiction.