Diversification of Islamic Financial Instruments
38
such as Car theft policy, and their car is not stolen in the period, the sum is not repaid to the
participant. If the event does occur, the Takaful operator inherently relies on the funds of other
participants to finance the payout. The main countries in which Takaful companies exist (at the
start of 2016) are given below. Of these, the countries included in this report are underlined.
 Malaysia-
 Saudi Arabia
 Iran
 Sudan-
 UAE
 Qatar
 Kuwait
 Bahrain
 Turkey
 Pakistan
 Indonesia
 United Kingdom
 Bangladesh
 Egypt -> Jordan
 Nigeria -> Oman (entered in 2016)
 Singapore -> South Africa
Finally, the Takaful industry across the globe faces some major challenges that contribute to
preventing the growth of this sector in the major Islamic finance jurisdictions. First and
foremost is that even in many of the Muslim countries which have presence of Islamic banking
and/or Islamic capital markets, there is a general lack of awareness of Takaful, of its needs, its
Shariah fundamentals, how it operates and differs from conventional insurance. By
comparison, Islamic banking and Islamic capital markets segments often see a demand-driven
growth in Muslim countries. Second, as mentioned above, operating Takaful operators (full-
fledged and windows) in both Life and General Takaful face a shortage of available Re-Takaful
companies. In Pakistan for example, prior to 2010, the Securities and Exchange Commission of
Pakistan (SECP), due to dire need, even allowed the Takaful operators to obtain Re-takaful
services from conventional re-issuers. Third is a general lack of well-developed legal
framework for Takaful, Takaful windows or Re-Takaful in several jurisdictions.
Summarizing, some of the key issues and challenges facing the Takaful industry are:
 Lack of consumer awareness: Despite Takaful industry being around for a few years
the increase in the level of penetration anticipated has yet to be realized. Many
consumers are still unaware of Takaful as an alternative, and some view Takaful as
commercialization of conventional insurance into the Islamic world and reject the
notion that it is a Shariah-compliant instrument. Moreover, in developing countries the
understanding by individuals of the importance of security and retirement planning is
low and thus lower interest in the Takaful industry. Most of the current education on
Takaful is among interested or related practitioners and investors, and very few
awareness campaigns are aimed at or designed for the target population.
 Scarcity of human resources with both insurance and Shariah expertise: Growth has
been hindered because of a very small pool of professionals with sufficient Takaful