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institutions is to uphold Shari'ah principles and values in their business practices. The
IFSA 2013 and Guidelines on Shari'ah Governance Framework of Islamic Financial
Institutions (SGF) 2010 emphasise the importance of Shari'ah governance structure as
a mechanism to ensure Shari'ah compliance business operations and activities of
Takaful institutions. Malaysia practices a two-tier governance structure that operates at
the central regulatory and institutional levels. The Shari'ah Advisory Council of BNM is
the apex Shari'ah governance authority in the country that has the authority to ascertain
the Shari'ah principles for Islamic financial business. On the other hand, the Shari'ah
committee appointed at the Takaful institution is the reference body to advise the Board
and management on Shari'ah matters pertaining to the specific institution. The Shari'ah
governance framework assures the integration of Shari'ah principles in the overall
business, operations and activities of the respective Takaful institutions.
2. Takaful and Financial Inclusion: Malaysia’s strategy in developing Islamic finance and
Takaful include the strategy for financial inclusion. There is a natural affinity of Muslims,
being the majority population in the country, to subscribe to Takaful products and
services instead of conventional insurance due to religious concerns. The Takaful
industry acknowledges the enormous challenge to reach the community beyond the
urban areas, particularly the Muslims among the B40 income category. As a result, the
B40 group has been inadvertently excluded from enjoying the benefit that Takaful
offers. Accordingly, the government has initiated a special insurance and Takaful
scheme for the B40 population to increase their resilience to financial shocks. The
initiative, which is known as mySalam, aims to complement the government’s ongoing
initiatives to increase the insurance and Takaful coverage for the underserved group.
Pursuant to this, BNM launched Perlindungan Tenang initiative in December 2017, with
participation of 10 insurance and Takaful players to provide simple and affordable
insurance and Takaful products. The government also encouraged the Takaful operators
to incorporate technology in their product innovation such as digitalising distribution
channels and claims submissions, to become more responsive to the needs of this
segment. Digitally-enabled Takaful products and services provide greater access,
quality and benefit to bigger customer base, particularly the B40. With the help of
technology, Takaful is playing a greater role in expanding outreach of financial services
and increasing financial inclusion.
3. Embracing Technology: The Malaysian Takaful industry aims to achieve the
penetration rate of 75% of the Malaysian population. For this to happen, it is critical that
the industry closely interacts with, and fully embrace, technology. Takaful customers,
particularly the young professionals in Malaysia are digitally active. In fact, 40-50% of
the Malaysian workforce is made up of technology-savvy millennials. For sustainability
of the Takaful industry, the TOs need to seriously master the integration of technology
within their operating models beyond just setting up websites or establishing social
media presence. Takaful players need to explore and embrace FinTech and InsurTech,