70
instruments; and fair, responsible and professional business conducts. BNM is also responsible
for ensuring that the rights and interests of Islamic finance consumers are well protected.
In 1982, the Malaysian Government established a Special Task Force to explore the possibility
of setting up the Takaful sector. Based on the recommendations of the Task Force, the Takaful
Act was enacted by the Malaysian Parliament in 1984, and the first TO was established in
Malaysia in November 1984, one year after establishing the first pilot Islamic bank - Bank Islam
Malaysia Berhad in 1983 (Laldin, 2008). The establishments of the two Islamic financial
institutions were well received because of the dire need of the Muslim community at that time
for an Islamic alternative to the dominant conventional financial institutions. Islamic finance
and Takaful took advantage of the public sentiments and their acceptability to boost the
development of the two sectors. The Malaysian government relentless support has been
instrumental in transforming the Takaful industry and ensuring it continuous growth for more
than 35 years. Today, it has grown from a single-player with limited products to 15 TOs and four
RTOs; fully integrated into the conventional financial system. The complementary roles of BNM
and the TOs in developing a dynamic, resilient and efficient Takaful industry have been
commendable. In fact, BNM adopted the following four stages of gradual approaches to realize a
sustainable growth for the Takaful industry:
Stage I (1982-1992): Developing infrastructure to put in place the Takaful Act 1984, considered
as one of the statutes globally that is fully dedicated to Takaful operations. The Act regulates the
management of Takaful funds, facilitating the establishment of Shari'ah committees that
oversees and ensures the business operations of TOs conform to Islamic principles. The Act
enabled the establishment of the first TO - Syarikat Takaful Malaysia - in 1984 (BNM, 2004).
Stage II (1993-2000): Establishing the second TO–Takaful National Sdn. Bhd. as a competitor to
the first extant Takaful. This period witnessed greater cooperation and collaboration among TOs
in the region. For example, the ASEAN Takaful Group and the ASEAN Re-Takaful International
Ltd. were established during this time in 1995 and1997 respectively. The year 2000 witnessed
further cooperation between the Takaful Malaysia and Takaful National (nowadays known as
Etiqa Takaful) to develop a joint Code of Ethics.
Stage III (2001-2010): In the beginning of this period in 2001, the Financial Sector Master Plan
(FSMP) was introduced. The FSMP was a catalyst for rapid improvements to the legal, Shari'ah
and regulatory framework of the Takaful sector. FSMP represented an ambitious plan for
transforming the Islamic banking and Takaful industries into an international hub for Islamic
finance. This third stage also witnessed a wave of the birth of several Takaful operators such as
Ikhlas Takaful in 2002, and the establishments of other four Takaful businesses between 2005
and 2007. Furthermore, the Malaysian Takaful Association (MTA) was established during this
time in 2002 to promote the growth of the Takaful sector. The MTA was mandated to improve
industry’s self-regulation through standardizing market practices and further promoting the
level of cooperation among the industry players. Four years after MTA, the Malaysian
International Islamic Financial Centre (MIFC) was established in 2006 to enhance the Islamic