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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.
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;
"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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