Diversification of Islamic Financial Instruments
198
 An extension of the Takaful sector is the micro-Takaful which can be focused on by the
policy makers to protect the people from unexpected shocks to income and enhance
productivity through better health for the poor and the vulnerable segment of the
society
 Supportive institutions need to be established in order to promote NBFIs which can
provide governance and leadership; promotion of risk sharing and entrepreneurship;
and a sound regulatory and supervisory framework.
 The supply side issue of NBFIs can be addressed by the policymakers focusing on
increasing the number and diversity of Islamic NBFIs, together with increasing the
range of products offered to various segments.
 On the demand side, low levels of financial literacy about the products and services
offered by Islamic NBFIs; cultural, social, and physical barriers; insufficient consumer
protection practices; and reputation- and credibility-related challenges are the biggest
obstacles hindering further improvement of Islamic NBFIs. A balanced and enabling
regulatory and taxation framework that also fosters cross-border investments in the
Islamic NBFI sector is also needed.
These policy recommendations are further broken down to specific steps and who should be
responsible for it in the following table.
Table 82. Policy Recommendations for Development of Islamic Insurance-Takaful
Recommendation Specific Step Implementing Agency
Development of
Takaful Sector
Develop laws that allow for establishments of
Takaful Companies.
Provide incentives to expand Takaful business.
Provide tax advantage for Takaful investors.
Ease cross-border takaful expansion.
Central Banks of OIC
member countries
International Islamic
Financial Bodies
Development of
Micro-Takaful
Develop laws that allow for establishments of
micro-Takaful Companies.
Provide incentives to expand micro-Takaful
business.
Provide tax advantage for micro-Takaful
investors.
Ease cross-border micro-takaful expansion.
Central Banks of OIC
member countries
International Islamic
Financial Bodies
Increase Number of
NBFIs
Incentivize expansion and creation of NBFI’s.
Develop infrastructural support for NBFI’s in
forms of NBFI parks and preferable laws.
Assist in developing Shariah standards
harmonized across jurisdiction for NBFI’s.
Central Banks of OIC
member countries
International Islamic
Financial Bodies
Enhance Islamic
financial literacy
Develop trained Islamic banking professionals
More Shariah scholars with sound financial
knowhow
More financial experts with sound Shariah
knowledge
Islamic finance
educational institutions.
Central Banks of OIC
member countries
Source: Created by Author