TAKAFUL IN TANZANIA:WHERE WE COME FROM AND WHERE WE ARE-FINAL

Current Global Takaful Landscape.

E & Y recently published report titled "Global Takaful Insights 2014: market updates" observes that the global takaful market is estimated to continue its double-digit growth momentum of about 14% in 2014. By 2017, the global takaful industry may reach over US$20 billion. Overall, global gross takaful contribution is estimated to reach US$14 billion in 2014 from an estimated US$12.3 billion in 2013. Compared to 2006 contribution estimates were around $2.6 billion and 2009 contributions reached US$ 7 billion. This is a remarkable growth. Definitely, this positive growth momentums is mainly driven by the key markets of Saudi Arabia, UAE, Malaysia and other GCC countries.

As it has been in previous years, many of the multinational insurers that are expanding into this sector have established subsidiaries in either Bahrain or Malaysia, or thorough M & A. For example in 2013, E & Y reports that Malaysia’s insurance industry attracted new players from Canada and the US who were keen to acquire local operators and grow their regional business further. Among the M & A are: Khazanah Nasional Bhd’s partnership with Sun Life Financial Inc. in their 98% acquisition of CIMB Aviva Assurance Bhd for US$560 million (RM1.8 billion) and American International Assurance Bhd’s1 acquisition of ING’s 60% stake in ING Public Takaful Ehsan Berhad.

Way back in 2006 and 2007, a significant number of takaful and retakaful operations were established by major conventional re/insurance players e.g. Munich Re, HSBC, Hannover Re, Prudential, AIG, Tokio Marine and Swiss Re in 2006; Aviva and Allianz in 2007 and many more joined since then. Andrew Murray note that "these players see takaful as a way to protect market share in growing
Islamic markets as well as to leverage their existing expertise to reach a new client base."

There are also key developments on regulatory fronts led by Indonesia, Oman, Bahrain KSA UAE and Malasyia. E & Y reports " Indonesia’s takaful sector is advancing into a fully capitalized environment with window operations being phased out." Oman has moved quickly to develop regulations for takaful. The draft insurance law only permits the formation of fully fledged Islamic insurers, distinct from the provision made for Islamic banking windows. As per the this regulation, takaful operators must be publicly listed and have a minimum capital of OMR10 million (US$26 million). In late 2013, Oman launched two takaful IPOs, i.e., Al Madina Takaful and Takaful Oman Insurance, catalyzing the growth of the takaful market in Oman. In Bahrain, The Central Bank of Bahrain (CBB) is in the pr ocess of drafting a new and enhanced framework for the takaful and retakaful sectors. It is aimed to strengthening the solvency position of the firms, enhancing operational efficiency of the business and safeguarding the interest of all stakeholders. Finally, In late 2013, Bank Negara Malaysia issued a concept paper, the Life Insurance and Family Takaful for Everyone (LIFE) framework. The proposals cover a wide range of areas including operating flexibility, product disclosure, delivery channels and market practices.

So far the share of global gross takaful contribution is dominated by KSA (48%) of share of global gross takaful contributions.ASEAN countries, namely Malaysia and Indonesia, account for nearly one-third (30%) of total gross takaful contributions, followed by other GCC7 countries at 15%. Africa, South Asia and Levant account for 7% of global takaful contributions. Africa alone account for 3%.

Takaful in Tanzania-Where we come from and where we are?

Since 2008/2009, there were discussions in the inner cycles followed by board resolutions of some insurance companies to offer takaful products under takaful window. One such company was Zanzibar Insurance Corporations which went ahead to form a steering committee to study and report on how best and what needs to be done to enable the company offer takaful products. This author remembers to have provide a one day training to the steering committee members on the basics of takaful to enable them accomplish their work. This team must have positively found the way forward for ZIC to start offering Takaful products however the regulator (TIRA) may have not been ready by then to grant approval for such undertaking citing the presence of regulatory framework for Takaful is paramount before permitting Takaful to kick off.

Time passed without substantial progress until 2011, TIRA formed a three member team to undertake a study on the subject followed with a report in 2012 titled TIRA Study Report and Recommendations: viability of introduction of takaful products and its associated regulatory framework in Tanzania. The report finds that in a country where a large proportion of the population is Muslim, there is likely to be significant and growing demand for Takaful. To ensure a level playing field and given the likely sensitivities where financial products structured around religious beliefs are concerned, it is essential that the right regulatory framework be put in place for Takaful before it is allowed to be practiced in the market. The proposal is to develop a separate Takaful Act and Regulations in 2013, with formal introduction of Takaful operations expected by 2014.

For some reasons that time frame is far from reach. However, progress have been made to prepare the regulation. This author participated in one of such deliberations towards preparations of a robust regulation for Takaful industry. Meantime, it is believed that the draft regulations must be in a shape just waiting relevant approval authority to bless it. I, therefore, expect that by early 2015 they may be gazetted and operational. I wait and pray for this historic moment.

With this positive development, those interested must start or finalize preparing themselves for undertaking Takaful business. ZIC is leading the front and expected to enter first, however, there are other investors though might not be know but are also waiting for license while others are organizing themselves. I pray for them to succeed in their efforts to provide Tanzanians alternative insurance products for betterment of their lives.