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Sudan: Pushing takaful forward

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Source: Middle East Insurance Review | Jan 2015

Despite the tough economic conditions and the challenging socio-political environment, the takaful experience in Sudan continues to achieve success. Major changes are planned for 2015 with expectations of a new insurance law, says Mr Salah El Din Musa Mohamed, Managing Director, Shiekan Insurance and Reinsurance Co.
 By Osama Noor
 
Takaful is strengthening its foundations in Sudan and has accomplished much over the past few years, especially in the size of contributions. The market has grown by over 30% in 2013 to SDG1.7 billion (US$294 million) compared to SDG1.3 billion in the previous year. The life business continues to account for a modest proportion of the market at less than 5% - only four of the market’s 13 direct providers write family takaful in Sudan. 
 
Statistics for 2014 are not available yet, but the trend is expected to be similar to the previous year, noted Mr Musa. “Players are increasingly targeting new areas and segments to expand the pie.”
 
Profitability is also growing, recording gross surpluses of SDG214 million from SDG132 million, an increase of over 60%.
 
Growth drivers
Medical, agriculture and microtakaful are increasingly attracting operators and leading the growth in the market, noted Mr Musa. “This is a promising sign because companies are addressing untapped areas and new segments. Besides, by targeting these lines, operators are serving genuine needs which are relevant to people’s day-to-day lives and activities.” 
 
He added that microtakaful is one of fastest-growing lines of business and the government is paying a lot of attention to microfinance and micro insurance through the Central Bank of Sudan.
 
Shiekan has been a pioneer in microfinance in Sudan, having launched microtakaful seven years ago and playing a major role in large-scale initiatives by the country’s Central Bank and the World Food Programme. One of Shiekan’s projects provided covers for over 66,000 low-income farmers in 2011 against various risks associated with banking loans. The sum insured from microtakaful has increased to SDG45 million from SDG800,000 since its launch in 2007.   
 
New insurance law in the way
The present insurance law in Sudan was introduced in 2001 and is probably the only law which stresses on the authenticity of the takaful principles, giving a stronger say to contributors, for example. In addition, the law has placed strict measures on the investment returns, surplus distribution and commission paid for the operator. 
 
However, after more than a decade, the experience needs to be revised and evaluated. Mr Musa said a new law is in the making and is expected to be passed by parliament in 2015, although  there have been few reports  about the major changes the new law will bring.
 
That said, some analysts expect the developments will concentrate on amending surplus distribution in a manner which would give operators more benefits and, consequently, boost the industry by making the sector more attractive for investors. However, Mr Musa rules out the possibility of the Higher Shariah Supervisory Board (HSSB) approving any changes concerning the surplus distribution. “I believe this is unique to the Sudanese experience and will continue to be so.” 
 
Another area in the new law which is expected to attract interest is microfinance. Microtakaful is of great importance, with around half of the population living below the poverty line. The Central Bank of Sudan recently increased the maximum amount of finance under microfinance allowed to a single person, from SDG10,000 to SDG20,000.
 
Growing despite challenges
There is vast potential and great opportunities for operators in Sudan despite the country’s various difficulties, especially the sanctions imposed by the US, “which have had a very negative impact on the Sudanese economy,” observed Mr Musa. 
 
He also lamented the tough competition in the market where professionalism is compromised in order to obtain business.
“Nonetheless, the market is heading in the right direction as contributions and surpluses continue to improve,” he concluded.
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