In a recent article for Middle East Insurance Review magazine Sabbir Patel, Senior Vice President and CFO, ICMIF, examines microtakaful as a form of insurance provision for the underserved Muslim populations of the world. The article shares a number of success stories from ICMIF members who have established or recently launched microtakaful schemes.
There has been a very clear recognition over the last decade that microinsurance, including microtakaful, is an important tool in supporting sustainable poverty alleviation in the poorer areas of the world. The growth of this sector has resulted in almost 500 million people now having some form of insurance cover today where previously they would not.
Microtakaful essentially has the same technical apparatus as Takaful insurance but it focusing on providing people at the base of the economic pyramid. Islamic microfinance and microtakaful exist to empower people to find a way out of poverty and give them a real hope of being financially self-sufficient.
The Potential for MicroTakaful – Levels of poverty in Muslim communities
On a global level, it should be noted that of the 41 lowest human development countries, 20 have a majority Muslim population and a further nine have a Muslim population over 20%. Of the one billion people living in the low developing countries, 54% are Muslims.
Microtakaful in practice
There are a few pioneering takaful operators that have entered into the low-income microtakaful market. Most notable are those providers in countries where almost all the population is Muslim, poverty is rife and the takaful sector is already established.
Prime Islamic Life of Bangladesh recently launched a group microtakaful product in addition to its existing three individual savings linked products. The product is unique in that it offers double the sum assured on death, contributes towards funeral costs and provides a monthly income to a nominee.
In Sudan, Shiekan Insurance and Reinsurance Co Ltd is working with the Central Bank of Sudan and the United Nations Development Plan (UNDP) to provide low-income farmers with affordable insurance coverage.
Amana Takaful of Sri Lanka has a partnership with Muslim Aid’s microfinance programme to provide affordable coverage for credit life, hospitalisation and medical charges. This is in addition to the companies’ death and disability cover for low-income earners with premiums as low as 0.20 USD per month.
Moving forward with microtakaful
In his article Sabbir looks at how the interest in microtakaful is increasing amongst takaful operators but says that experiences are still few and far between. Sabbir says “affordable takaful products with mutual principles at their core could certainly prove to be an important tool to increase access to insurance in many of the world’s least developed countries. Almost one third of ICMIF members are involved in the provision of some form of microinsurance and therefore, it makes sense to share the expertise of this existing network with the microtakaful movement”. Therefore, last year, ICMIF launched a Microtakaful Support Centre to enable microtakaful projects to be supported by leading takaful and mutual microinsurance providers.
Microtakaful provides a unique opportunity for organisations, including many ICMIF members, to make a real impact on people’s livelihoods and share the concepts of brotherhood and solidarity that are inherent in microtakaful with Muslims and non-Muslims alike.