Turkey is set to introduce takaful legislation to promote the development of an Islamic insurance system, as the country strives to introduce more interest-free financial instruments.
To expand the range of interest-free instruments, Turkey is preparing to introduce Islamic insurance into the financial system where members contribute money into a pool to guarantee each other against loss or damage, reports Daily Sabah.
Deputy Prime Minister Mehmet Simsek, said that the Treasury had reached the last stage of legislative work to introduce takaful for citizens who are not inclined towards conventional insurance due to interest sensitivity.
The proposed legislation regulates Islamic insurance activities and protects the development of this system, proper control and the rights and interests of the insured.
He said that the system allows diversification in the insurance market.
Saying that eight insurers are currently offering participation products in Turkey, where Islamic insurance practices have recently gained momentum, Mr Simsek added that the appetite of many domestic and foreign investors in Islamic insurance ventures is being monitored at the moment.
Prospects
He pointed out that the largest share in the Turkish financial sector belongs to the banking sector, and that the asset size of participation banks corresponds to about 5% of the total size of the banking sector.
Recalling that the goal of participation banking is to reach 15% market share by 2025, Mr Simsek said: “In parallel with this target, we expect Islamic insurance to increase its market share in the upcoming period. We target the share of Islamic insurance to be 10% by 2023.”
He added that takaful, including Islamic pensions, would account for approximately TRY30 billion (US$8.5 billion) of premiums in 2023.
“Closer cooperation between participation bankers and Islamic insurers will provide significant benefits for Turkey’s development along with all elements of the interest-free finance sector in this respect, he added.” M
TRY1 = US$0.28