Major opportunities with Islamic finance in Maldives

Islamic financing could open up doors for major opportunities in Maldives, said Maldives Central Bank, Maldives Monetary Authority (MMA) Governor Dr Azeema Adam.

Speaking at opening ceremony of Maldives Islamic Banking and Finance Industry (MIBFI) conference on Wednesday, Chief Guest of the ceremony, MMA Governor Dr Azeema Adam said that Islamic finance models were being successfully implemented all over the world and that the start of Islamic financing in Maldives looked promising for the future of Maldives finance industry.

“Islamic finance provides solutions to problems in conventional financing models. It is therefore something that needs to be developed in Maldives. There is room for development [with Islamic finance] in Maldives as well,” said Dr Azeema.

She said that discussions and new ideas were needed to develop Islamic financing and noted the need for future plans to do so.

The governor noted the geographical distribution of Maldives as the major obstacle to providing banking services to all citizens of the country. She said that they had not been able to cover all areas of the country as Maldives was distributed into hundreds of islands, and because it wasn’t feasible to establish a bank in each and every island.

She said that the solution to the problem was in applying modern innovative principles in providing banking services, and called out to financial industry to adopt such principles in providing banking services to the remaining islands.

“Banking services can be widened to the whole country through innovative thinking. Financial industry should, too, look to expand services through modern ideas and philosophy,” she said.

Organized by UTO EduConsult, the conference is being attended by both Maldivian and international financial institutions.

Discussions on expanding Islamic financing in Maldives and identifying the opportunities available in Maldives to do so, are to be held at Wednesday’s conference.

(Haveeru Online / 17 September 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Smaller i-BR1M gains for takaful players

Malaysian Takaful players expecting a boost from providing shariah-compliant coverage under the i-BR1M people’s takaful scheme may end up with a smaller windfall as they are likely to pass on 80% of the risk to re-takaful companies.

The i-BR1M scheme covers about two million Bantuan Rakyat 1 Malaysia (BR1M) recipients, generating about RM100 million in total contributions to be divided equally among the takaful companies, regardless of the size of the company.

This means that for the bigger takaful players, the amount to be realised from the i-BR1M scheme would be comparatively small in relation to their business, even though they represent 70% of the takaful industry’s total revenue.

“Because the scheme is new, there is no history with regards to the profitability of the portfolio, hence the re-takaful arrangement,” said an industry practitioner to The Malaysian Reserve (TMR) recently.

The scheme was announced by Prime Minister Datuk Seri Mohd Najib Razak at Budget 2014 and TMR had reported that would affect 7.9 million BR1M recipients but in the end affect only about two million, protected by the scheme at RM50 contribution per person.

This makes total contribution at more than RM100 million and according to sources, total claims so far for this scheme similar to personal accident policy is RM30 million.

A source said from an assumed profit of RM33 million for the scheme for the year, the 11 takaful companies would not be getting RM3 million profit each but only 20% or RM600,000 each.

Takaful Ikhlas Sdn Bhd, as the administer of the scheme, gets slightly more than the other takaful companies.

The biggest gainer would be the retakaful companies who took 80% of the risks and will share 80% of the profits too, totaling RM26.4 million, if the profit is RM33 million.

The source said that Hannover Re Takaful received the biggest chunk of the re-takaful.

So, as a result of the retakaful, many fledgling takaful operators would take longer time to break even before showing profit although AIA Public Takaful Bhd recently declared a total surplus of RM8.5 million for the financial year ended Nov 30, 2013.

This marks the first surplus distribution since the company’s inception three years ago.

Meanwhile, the general insurance industry also have equal share in the Malaysian Motor Pool where each general company, regardless of size would have to take an average loss of RM8 million to RM10 million loss annually.

(The Malaysian Reserve / 30 September 2014)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com