Mudarabah, Wakala and Hybrid, Key Insurance Models For Driving Takaful in Nigeria - Raji Adekunle


Sunday, January 26, 2020  / 6.40PM / Bukola Akinyele  for WebTV / Header Image Credit: WebTV

The Mudabarah, Wakala and Hybrid are key models driving Takaful Insurance, a segment of Islamic Finance in Africa.


Mr. Raji Adekunle, the Branch Manager of Jaiz Takaful Insurance Plc, disclosed this in a recent interview on the Islamic Finance Weekly Program.


He said that there are currently 150 Takaful Insurance Companies on the globe, with Sudan as the first country in Africa to establish one in 1979.


It then moved to Bahrain before spreading from the Middle-East to other parts of the world.


Giving insight, Adekunle said the conventional insurance system had experienced levels of uncertainty.

Uncertainty, according to him, is not an acceptable means of doing business in Islam and the development of the Takaful addresses these concerns.


He said the most widely used Takaful models in Africa include Mudarabah, Wakala and Hybrid.


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Mudarabah means to share profit, and the profit must be pre-agreed that whatever profit emerges in business, the participant will have his/her percentage, and the takaful which is the operator, will also take its percentage. According to Raji, participants take a higher percentage than the operators in the Mudarabah model.


Wakalah model rests on agent fees; the members will pay money to the operator because the operator in charge will be the one to take up all the activities which shows another way takaful companies make their money.  Two accounts will be open, one for the member and the other account for the management in which the member will drop the agreed percentage.


The Hybrid model, which is the third model, is the model Jaiz takaful adopts, a combination of both Wakalah and Mudarabah. Adekunle notes that for every thousand donated by the policyholder in the common pool, Jaiz takaful insurance plc has a pre-agreed amount to deduct from the pool.


Speaking further Mr. Adekunle stressed that the Takaful insurance makes profits from the pool, while from the general business 30% will be deducted which will serve as management expenses and in the case of a family Takaful business, the deduction will be  2.5% to 10%, which varies according to the type of products. 


The Branch Manager Jaiz Takaful Insurance Company was of the view that the Mudarabah model can also make investments in Halal businesses, being that the operator will be the one to invest the money for the individual while the profit becomes shared on an 80% -20% ratio basis.


According to him, 80% goes to the participants while 20% goes to the operator.  Both models show how Takaful companies make money and also how the shareholders make their profit from it.


Adekunle believed the issue behind the low insurance penetration in Nigeria is the lack of public trust. The lack of trust he noted was a result of the public finding it difficult to believe that insurance will come to their aid at the required time judging by past experiences.

Secondly, lack of awareness and enforcement from the government for some of the compulsory insurance schemes is also part of the reason for the low penetration level in the country.


Jaiz's manager was happy to highlight the renewed interests of Muslims who felt that Insurance was 'Haram' and now feel inclusion in the system through the Takaful. He, however, noted that it was for Muslims and non-Muslims.


He emphasized Transparency, Trust and Accountability as key elements to deepening the Takaful business and the overall insurance industry.

According to him, the current global size of the Takaful Insurance market is more than $25bn worth of contribution received so far since 1985.

He said 15 Takaful companies  in Africa are doing very well, while the current growth rate of Takaful yearly is up to 40% globally and 20% in Africa. 


The insurer was optimistic that by 2050, Takaful companies would take over conventional insurance due to their current performance and the way people are participating in the Nigerian market.


"Within 2 to 3 years of the development of the Takaful company in Nigeria, we now have four companies and the recapitalization process in the Insurance sector will not affect Takaful".


He cited Malaysia as an example of a country with a Takaful market that has taken over the conventional insurance industry.


The insurance executive also emphasized the need for Nigeria to address the challenges facing the Takaful market, which include;


  • Capacity Size-In terms of infrastructure and information technology (IT).  The government, private sector and individuals need to come to the aid of Takaful to see the increasing incapacity. Takaful needs to penetrate areas with poor people and reach the common man on the street. The feat is possible with good infrastructure and IT.

  • Local Law - There needs to be an amendment(Legislation) on how Takaful can grow, as currently in Nigeria Health insurance is not part of Takaful. There is need to review the health insurance scheme to deepen participation for every Takaful participant to have preferred ethical insurance or Islamic insurance they can use for their health needs. No nation can develop without giving its citizens adequate health care. Takaful does not have a license to healthcare but only the Nigeria Health Insurance Scheme (NHIS) does.


  • Lack of Awareness- There is a need for more awareness to deepen penetration among citizens. Awareness is not only the operator's responsibility but also that of the Muslim elites and private organizations.

"We all need to come together and show that we have ethical insurance that can be relied on and trusted for Takaful Insurance to go far," Raji Adekunle said.


He was optimistic that in 2020 the Takaful Insurance business would experience remarkable growth and projected a 400% increment in the year.

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