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Global: Takaful remains small proportion of Islamic financial market

Source: Middle East Insurance Review | Feb 2019

Takaful is still hovering at 2% of the Islamic financial industry with Islamic microfinance expected to catch up with it in terms of market share.
 
The global volume of the Islamic finance industry will reach about $2.5tn this year, a marginal growth from the $2.44tn reached in 2017 and after it lost some momentum in 2018 for which definite figures are not available yet, reported Gulf Times.
 
The forecast was made by Muhammad Zubair Mughal, CEO of the AlHuda Centre of Islamic Banking and Economics in Lahore, based upon latest industry figures.
 
Of the forecast figure, the total share of Islamic banking of the Islamic finance industry will be around 81%, while sukuk will contribute 11%, Islamic equities, including stocks, ijarah companies and real estate investment trusts, 5%; with Islamic microfinance already at 1% and growing.
 
Takaful is stagnant because it is quite vulnerable to a less supportive environment, which means if there are no regulatory incentives and no support for new product developments, there is no industry growth but rather consolidation by M&A and takaful operators going out of business. There are just over 320 takaful operators globally. 
 
In addition, insurance penetration in core Islamic finance markets is traditionally low, with premiums in the Gulf countries averaging 1% to 2% of GDP, compared with over 6% in more developed markets.
 
Measures to increase the low penetration of takaful depend on the region. In the Gulf, government support and regulatory action could include the introduction of mandatory health and/or employment insurance, life insurance and occupational pension insurance and other forms of compulsory coverage.
 
There is also fresh demand from new markets, for example from Africa. Nigeria’s first full-fledged takaful company, Jaiz Takaful, was launched in October 2017 after the government there issued takaful guidelines in an effort to deepen insurance penetration. Nigeria now has five takaful operators, including takaful windows. M 
 
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