The takaful sector is the only one in the Islamic financial industry to sustain double-digit growth, although this is due to the small base of takaful contributions, according to the ruler of Perak state in Malaysia, Sultan Nazrin Shah.
With 305 takaful and retakaful operators and windows globally, total takaful assets stand at US$25 billion or slightly more than 1% of the total assets of the global Islamic financial system, reported the Bernama News Agency.
However, the insurance penetration in most Organisation of Islamic Cooperation countries is still quite low.
“It is a huge untapped market and takaful companies should ramp up their efficiency and effectiveness in providing innovative products and services to their potential customers,” Sultan Nazrin said in his opening speech at the 14th Kuala Lumpur Islamic Finance Forum (KLIFF) 2017 in early October.
There is a tremendous need to grow Islamic capital products to reduce dependence on the banking system and have greater financial stability, he said. Islamic banking assets today account for about 80% of the global Islamic financial system, while Islamic capital products make up the balance 20%.
“This means that other asset classes, such as sukuk, mutual and venture capital funds, private equity, insurance and microfinance and crowd funding need to be developed at a much faster rate,” Sultan Nazrin said.
The mainstay of the Islamic capital market is sukuk and equity markets, he noted.
“Both have been experiencing positive growth with the global sukuk outstanding today valued at $320 billion. On average, in the past three years, about one fifth of issuances was corporate in nature, while four fifths have been sovereign or sovereign-related.
“The overall sukuk market is growing, but the corporate sukuk market in contrast has been on the downtrend for the past four years. This is something that needs to be addressed and reversed,” he added.
He also said that the number of Islamic funds and the size of Islamic funds’ assets have been decreasing. M