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WHY TAKAFUL

WHY TAKAFUL. Ezamshah Ismail INCEIF. WORLDWIDE TAKAFUL GROWTH. *GCC US$2 billion (Saudi Arabia US$900 million, UAE US$480 million and Egypt US$467 million). **Asia-Pacifi c US$3.1 billion (Malaysia/Indonesia US$1.4 billion). ***Europe, Turkey, China, India and the US US$2.3 billion.

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WHY TAKAFUL

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  1. WHY TAKAFUL Ezamshah Ismail INCEIF

  2. WORLDWIDE TAKAFUL GROWTH *GCC US$2 billion (Saudi Arabia US$900 million, UAE US$480 million and Egypt US$467 million). **Asia-Pacifi c US$3.1 billion (Malaysia/Indonesia US$1.4 billion). ***Europe, Turkey, China, India and the US US$2.3 billion. Source: Shuaa Capital

  3. WORLDWIDE TAKAFUL GROWTH • Number of Countries – > 30 • Strong growth trend in South East Asia - +30% p.a in Malaysia • New emerging markets – Indonesia, Philippines, Bangladesh, Pakistan, Sri Lanka etc

  4. TAKAFUL POTENTIAL IN MALAYSIA • South East Asia has one of the largest concentrations of Muslim population in the world. In all, Muslims constitute approximately 40 per cent of the total population of the region and naturally emerge as a vital element within it • Malaysia is seen as biggest Islamic banking and finance hub in South East Asia. Islamic banking industry constitutes about RM89 billion or 10 per cent, of the total assets of the overall banking system in Malaysia. • BNM Push for KL to be MIFC

  5. TAKAFUL POTENTIAL IN MALAYSIA Malaysian Population Composition

  6. SIZING UP THE POTENTIAL IN MALAY WORKING POPULATION Malay Working Population (‘000) • The breakdown of Malays Population by age group shown great potential • <15 years old – 33% • 15 – 54 years old – 57% • >55 years old – 10% • Potentially in 5 years, total bankable Malay population is ~14.8mil while potential working population is about 6.6mil for Malay (exclude other Bumiputra) • Another point to note is the growing pool of Young Malays flowing into working group in the next 5 years (impact on total workforce may be higher than estimated) • Total Value pool is estimated to grow to ~RM94bn from the Malay working group (estimate GDP growth rate at 5% y-o-y; age >25, income >3k) CAGR 1.8%* *CAGR calculated from 2001 – 05 data (Yearbook of statistics 2005, Stat dept Malaysia) *2007 -2011 numbers are estimated Source: Population and Housing census of Malaysia 2000, AC Nielson 2003 Income data. Numbers are cross inferred between the research

  7. ISLAMIC FINANCIAL PLANNING • Takaful Is A Component Of The Islamic Financial Planning/ Wealth Management 1- Wealth management 2- Wealth creation 3- Wealth accumulation 4- Wealth protection 5- Wealth redistribution 6- Wealth cleansing

  8. Concepts of Takaful • The contract of Takaful is founded on the following three fundamentals: • Mutual responsibility, • Mutual assistance and cooperation, • Mutual protection or guarantee.

  9. Principles of Takaful • Policyholders co-operate among themselves for their common good. • Every policyholder pays his subscription to help those that need assistance. • Losses are divided and liabilities spread according to the community pooling system. • Uncertainty is eliminated in respect of subscription and compensation. • It does not derive advantage at the cost of others.

  10. CHARACTERISTICS OF TAKAFUL • Takaful undertakes only Shariah compliant business • Takaful is transparent. Whatever may be the premium charged, the surplus may be paid back to the participants in proportion to their contributions • In Takaful agreement profits are redistributed in accordance with the pre-agreed ratios.  Participants share in any surplus from the pool collectively. • Takaful investment returns are based on the principle of Al –Mudarabah, through which the element of interest (riba) is replaced. • No uncertainty (gharar) in the Takaful contract, since the concept of tabarru (to donate, to contribute,) is incorporated in it.

  11. TAKAFUL TARGET • Takaful products is expected have a huge penetration in the Malaysian insurance market. Around 20% of insurance premiums are estimated to be generated under Takaful Schemes -BNM FSMP

  12. DISTRIBUTION • Bancatakaful • Agency • Independent Financial Advisors (IFA) • Institutional • Broker

  13. SUMMARY • Be a part of the Worldwide Evolution • Strong Gov’t support for Islamic Initiatives • Emerging Bumi Markets is good potential • Takaful ethical characteristics can meet consumer aspirations

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