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Friday, 19 September 2014

Insurance: Takaful is not just for Muslims -Hassan Bashir

Hassan Bashir, Founder of Takaful Insurance of Africa, says the Kenya-based company's products can bring possibilities to many and are not exclusively for people of the Muslim faith.
The Africa Report: Why did you launch Takaful Insurance of Africa in 2011?
What is the difference between conventional insurance and Takaful?There was a need for the service. I have been involved in the insurance industry since 1997, and it was something that I had become aware of. For my MBA I researched customer behaviour across the Kenyan insurance industry, and what came out was evidence of dissatisfaction and a need for honesty and ethics in the insurance products and services. I came across a lot of people who did not have insurance, or if they did they only had the basic statutory amount. They said that they did not feel comfortable with some aspects of insurance – that it did not accommodate their religious beliefs – and some people said they felt conventional insurance was a bit like gambling.
The big difference is that conventional insurance is a risk-transfer model, whereas takaful is a risk-sharing model. In the case of takaful, it's more like a joint fund, where the company and shareholders are paid a portion of the premiums. The risk remains partly shared and collectively based on all those taking part in the scheme. At the end of the insurance period there is a payout, not a 'no-claims bonus', more of a dividend.
Why did you choose Kenya, which has a relatively small Muslim population?
I started in Kenya because I am Kenyan. This is the market I know – and because I saw there was a gap in the market here. I agree there are bigger markets, like Nigeria or Ethiopia, but that means there is potential to grow. Six months ago we opened an office in Somalia. We have made expressions of interest in Uganda, Djibouti and Tanzania, so we have big plans.
Is takaful only for Muslims?
No, not at all. Our products are not exclusively for people of the Muslim faith. We can serve anyone, and we do. Initially, people thought it was only for Muslims, but now around 15% of our client base is non-Muslim and we are growing.
Are people put off Islamic finance solutions by negative connotations of Islamism? 
Some people in our community are ill-informed, it is true. I've been asked – directly to my face – "If someone defaults on payments, will their hands be chopped off?" People are only like this because they do not know all the information, so it is our job to educate them. There are sensitivities, which I can understand, but I believe economic development will help change minds. Extremism thrives in spaces where there is poverty and a lack of education, and where people are desperate and have nothing to do and no means of earning a livelihood. But I believe that Islamic finance can bring possibilities to many people by helping them get employment and access to finance. Look at what we are achieving with the index-based livestock takaful. We are continuously educating [pastoralists] so that they understand that the cover is in line with their religious sensitivities and this is to cushion them against the harsh weather so that they sustain their livelihoods despite the droughts that may occur from time to time. In the long run, this will answer the question you asked about the negative perceptions about Islamic finance.
Do you think Kenya will launch a sukuk this year?
I am not sure if it will be this year, but I have no doubt it will happen soon. Kenya wants to become an Islamic finance hub in the East and Central Africa region, and it is well placed to do so. ●
(The Africa Report / 18 September 2014)
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Indonesia preps Islamic pension rules as Islamic banking growth slows

Indonesia's capital market regulator is projecting a drop in the growth rate of Islamic banking assets and is developing an array of initiatives to boost the sector, including much-awaited rules governing Islamic pension funds.
Indonesia's financial services authority, Otoritas Jasa Keuangan (OJK), said in a report that it is preparing a five-year blueprint aimed at industry issues such as sector consolidation, a lack of scale and foreign ownership limits.
OJK said it was now preparing draft regulations for Islamic pension funds, after Indonesia's national sharia council issued a ruling approving the overall concept in November last year. It has been under study since 2009.
"There is demand from the public to participate. With this, it is hoped that the number of sharia products increase and the public's wish for a pension fund on the basis of sharia principles is fulfilled."
Countries such as Pakistan and Malaysia have made efforts to develop Islamic pension systems of their own, where fund managers screen their portfolios according to religious guidelines such as bans on tobacco, alcohol and gambling.
Under a "moderate" scenario, the OJK projects Islamic banking assets will grow by 14.4 percent in 2014, down from 24.2 percent in 2013 and 34 percent in 2012, although these figures would remain above those for conventional banks.
As of December, Indonesia's Islamic banking industry - which included full-fledged lenders, Islamic windows and Islamic rural banks - had a combined 248.1 trillion rupiah ($20.6 billion) in assets, or 4.9 percent of the country's total banking assets.
That means Indonesia, which has the world's biggest Muslim population, remains well below neighbouring Malaysia, where Islamic banks hold more than 20 percent of all banking assets.
The OJK said challenges faced by Islamic banks were mainly internal, rather than related to external pressures such as falling commodity prices or lower export demand, as the sector's foreign currency funding stood at about 5.9 percent.
In particular, competition for third-party funds is a factor affecting growth, given the small scale of Islamic banks which makes it difficult for them to compete with large-scale conventional banks in attracting liquidity, the OJK said.
Despite this, the sector welcomed its 12th full-fledged Islamic bank last year, Bank BTPN Syariah, which was spun-off from its parent Bank BTPN (BTPN.JK). The Islamic lender also absorbed conventional peer PT Bank Sahabat Purba Danarta.
The industry has also seen growth in other areas such as Islamic mutual funds: As of December, there were 65 Islamic mutual funds in the country which saw a 12.1 percent increase in assets in 2013.

In addition, there were 10 corporate Islamic bonds issued last year, worth a combined 2.2 trillion rupiah, with total sukuk outstanding representing 9.4 percent of total debt issuance.
(Reuters / 18 September 2014)
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