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finance and Takaful networking and linkages to the global marketplace. MIFC was instrumental
in liberalizing the Takaful Industry in 2009 to pave way for the licensing of four new family
Takaful in 2010.
Stage IV (2011- 2019): This period saw further enhancement to the Takaful industry. In 2012
there was enforcement of Takaful Operational Framework and the revised Shari'ah Governance
Framework. In 2013, the Islamic Financial Services Act (IFSA) 2013 was passed. This was
followed in 2015 by the introduction of roadmap to reform the life insurance and Family Takaful
(LIFE) Framework by BNM. LIFE framework is tailored towards supporting the long-term
development of life insurance and Family Takaful.
All these developments have transformed Malaysia into becoming the leader of the Takaful
industry in South East Asia. The country’s penetration of the Takaful market remains at 4.7%
measured by the percentage of total gross premiums and contribution over GDP. The insurance
and Takaful sectors earn high total premiums and contributions, which increased by 4.9% (from
MYR 63.5 to MYR 66.6 billion) in 2017. Total assets for these sectors also increase by 3.2% (from
MYR 299.5 billion to MYR 309.1 billion) in the same year (BNM, 2018). However, by the end of
2018, the lower-income groups in the country still received low rate of Takaful coverage.
Furthermore, the percentage change of Malaysians with single minimum individual or group
Family Takaful certificate or life insurance policy also remain low at 41%mark (BNM, 2018).
6.1.2. Legal and Regulatory Framework
The regulatory authorities for Takaful consist of the public and private authorities. Public
authorities are the institutions that have the statutory powers to regulate the industry. In this
respect, non-compliance will result in legal sanctions. Meanwhile, the private authorities refer
to associations or institutions which issues the code or rules for the best practices of the Takaful
industry. On the other hand, the Minister of Finance is the authority that has been charged with
the responsibility of finance inMalaysia under the Federal Constitution of Malaysia. TheMinister
of Finance has the power to enact the law relating to financial matters, which include Islamic
finance, and in particular, Takaful. Concerning the implementation of Islamic finance in
Malaysia, the Minister of Finance has granted the powers and functions to the BNM to promote
financial stability and compliance with Shari'ah (Section 6 of the IFSA 2013). For instance, BNM
provides the recommendations for the Ministry of Finance on the businesses and activities of
TOs and their authorization under the provisions under IFSA.
The Islamic Financial Services Act 2013 (IFSA) is the main legislation governing the Takaful
industry in Malaysia. The introduction of the IFSA 2013 has strengthened the legal frameworks
for the Takaful industry inMalaysia. All the TOs were given a grace period of five years to comply
with the new law (IFSA, 2013). IFSA (2013) divided the Takaful business into two categories
which are the Family Takaful business and General Takaful business. The Takaful business
license is granted by the Minister of Finance pursuant to the recommendation by BNM. In
addition, another law that is applicable to the Takaful industry in Malaysia is the Companies Act