Diversification of Islamic Financial Instruments
128
which participants are entitled to the entire surplus with no deduction made prior to
distribution. This model is applicable to life family takaful in Bangladesh has the fund is
entirely distributed to the participants.
Problems of Takaful Companies in Bangladesh
Islamic insurance in Bangladesh has been facing numerous problems. The nature of the
problems is lack of separate Takaful regulation, Shariah-based Islamic capital market
for Islamic insurance etc. The present socio-economic scenario of the Bangladesh Takaful
market appears to be not very conducive and supportive for its growth and development. The
framework of Takaful regulations and guidelines in Bangladesh is almost absent. It takes a long
time to formulate policies and guidelines. The government’s bureaucracy and lack of
understanding about the Takaful industry has made it extremely difficult for the operators and
the regulator to prove dynamism. However, government has recently make provisions in the
Insurance Act 2010 and may form committee to provide guidelines for Takaful industry. Due to
present policy of the government, insurance companies are required for 30% compulsory
investment in government securities and bonds. While the government securities (interest
based) provide interest from 8% to 10% depending on the period, the Government Islamic
Investment Bond (BGIIB) issued by the Central Bank provide profit to Islami Insurance
Companies in between 2% to 3% only. Investment return of Islami insurance companies thus
became too less than their competitors in the conventional insurance from compulsory
investment portfolio.
There is no Islamic re-insurance (re-Takaful) company in Bangladesh. Takaful operators are
forced to re-insure their money through conventional re-insurance. From the premium
derived from these re-insurance companies at the end of the year, the conventional insurance
companies distribute one part of this profit to the policy holders of the different companies as
an original profit, while Islamic insurance companies cannot accept interest-based profit.
Insurance companies in Bangladesh lack training institutions for their employees. There are
eleven full-fledged Islamic insurance companies in Bangladesh. But they did not establish an
apex training institute for imparting specialized training to their employees and there is no
coordinated research for new product developments. General Islamic insurance companies
(general Takaful companies) do not have any training institutions, although the Bangladesh
Insurance Academy trains how to conduct Islamic insurance without interest but there is no
opportunities for one-to-one teach training or to research the Islamic insurance system.
Prospect of Islamic Insurance in Bangladesh
Bangladesh is the third largest Muslim country in the world on count of population. It can be
hoped that there are ample opportunities for Islamic insurance companies and grow in
Bangladesh. Unfortunately, there is little published research on Islamic insurance in
Bangladesh. If more articles and books would be published with media campaigns relating to
Islamic insurance, these would generate greater awareness about Islamic insurance in
Bangladesh. Bangladeshis are generally religious minded and tend to avoid things that
contravene with Islam including in trade and commerce. If Islamic insurance is fair and
transparent in their transactions, people might avoid conventional insurance. The Fareast Life
Insurance Company is a good example of the revolution of the Islamic insurance sector in
Bangladesh and is a fast growing insurance company.