Takaful system to catalyze global growth of Islamic finance and reinforce Dubai’s rise as ‘Islamic Economy Capital’ - report

PRESS RELEASE

HBMSU’s Dubai Center for Islamic Banking and Finance launches extensive Takaful report at 3rd Global Islamic Economic Summit in Dubai

Takaful system to catalyze global growth of Islamic finance and reinforce Dubai’s rise as an ‘Islamic Economy Capital’

UAE, October 5, 2015 - The Dubai Center for Islamic Banking and Finance (DCIBF), a joint initiative of Hamdan Bin Mohammed Smart University (HBMSU) and ‘Dubai the Capital of Islamic Economy’, released an extensive report entitled ‘Takaful: Global Challenges to Growth Performance and Governance’ during the 2015 Global Islamic Economic Summit in Dubai. The event, which has held under the patronage of H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, ran from October 5 to 6, 2015 at the Madinat Jumeirah.

Takaful is a cooperative system of Islamic insurance, which allows risk sharing rather than risk transfer. The comprehensive publication was developed in close collaboration with the Dubai Islamic Economy Development Centre (DIEDC), and Aafaq Center for Research in Islamic Economy (ACRIE), a subsidiary company of aafaq Islamic Finance. Although the rapidly growing global Takaful industry is poised to become a massive USD 20 billion market by 2017, there are still critical gaps that need to be addressed by industry practitioners and experts in cooperation with government. The rigorous scientific research conducted by DCIBF, ACRIE and DIEDC clearly outlines the current industry landscape and key trends to help policy makers and market players forge a viable future for the Takaful sector.

The report reveals that the GCC region currently dominates the Takaful business, with Southeast Asia and Africa as the next biggest markets. There were a total of 224 global Takaful operators as of 2012, with 101 new companies formed between 2006 and 2012 alone. The total manpower supporting the Primary Takaful sector stood at 70,010 as of 2013. Based on its recent growth rates, the global Takaful volume of contributions could reach USD 52.5 billion by 2020. The report notes that the future rate of growth of Takaful sales is being inhibited by the relative under-development of insurance distribution channels in several emerging markets into which Takaful is being launched.

H.E. Essa Kazim, Governor of the Dubai International Financial Centre (DIFC) and Secretary General of the Dubai Islamic Economy Development Centre, said: “The Takaful sector is an important component of global Islamic finance that requires more attention and research in order to address major issues and achieve long-term growth. We commend DCIBF for its thorough and precise study on prevailing trends, opportunities and threats in the Takaful domain. Based on our work with the Center in preparing its detailed report we are confident that the participants of the 2015 Global Islamic Economic Summit will appreciate the importance of the results especially in terms of policy making, goal-setting, and industry benchmarking.”

Dr. Mansoor Al Awar, Chancellor, Hamdan Bin Mohammed Smart University, said: “Over the last 10 years the number of Takaful companies has climbed nearly four-fold, reflecting the growing global popularity of the sector and its increasing importance to the development of Islamic finance. Despite its gains, though, the industry is still undermanned and faces several issues in vital areas such as innovation, distribution, and legal structures, among others. DCIBF’s report exhaustively investigates the key factors affecting the performance and governance of Takaful and what actions government and industry need to take to ensure sustained and profitable growth.”

“Given its international prominence and relevance to the future of the Islamic economy, the 2015 Global Islamic Economic Summit is the perfect avenue for sharing and discussing the results of DCIBF’s meticulous research. It provides an excellent audience for articulating Dubai’s vision of emerging as the global capital of the Islamic economy and championing efforts to accelerate the worldwide development of Islamic finance,” added Al Awar. 

H.E. Dr. Abduljaleel Alblouki, Deputy Chairman of aafaq Islamic Finance, added: “ACRIE and DCIBF and DIEDC have prepared an outstanding account of the current Takaful landscape and key areas for improvement that can further increase the sector’s impact on the global Islamic economy. It was a very enlightening experience for us to join the Center in exploring the Takaful industry’s mechanisms, strengths, and gaps. Our report gives Takaful players and stakeholders a clearer picture of what to expect, what to address and what to aim for as the sector gains a firmer foothold on the international markets. In line with this, I would like to extend our thanks for the strong support and assistance that we have received from H.H. Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE and H.H. Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, and H.H. Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces—their continued patronage and support has been felt across all scientific research sectors.”

Recognizing Takaful’s growing importance as an Islamic alternative to insurance, HBMSU and Dubai Center for Islamic Banking and Finance (DCIBF) tapped Dr. Omar Clark Fisher to prepare the report. Dr. Fisher, who earned his PhD in Takaful in 2005, is a founder of three Takaful companies located in three countries. He said: “The Takaful Report, a groundbreaking efforts by DCIBF, looks into the global trends and major challenges facing this risk management sector by covering 219 Takaful operators across 39 countries. The publication of such comprehensive report further reinforces knowledge sharing in the industry and anchors Dubai as the Capital of Global Islamic Economy.”

Produced in Arabic and English to reach a broad international audience, the scientific report examines the efficiency and financial stability of the Takaful sector in countries with dual financial and economic systems. It identifies and discusses various Islamic insurance challenges and issues, quantifies investment trends, and analyzes the impacts of demand and industry structure on market movements. It also explores the governance mechanisms of the Takaful industry, delves into diverse Takaful operational models, and provides key recommendations to policy makers and stakeholders.

The key insights provided by ‘Takaful: Global Challenges to Growth Performance and Governance’ reflect the growing role DCIBF is playing in investigating and studying major technical and socio-economic issues affecting Islamic banking and finance. The Center is the result of HBMSU’s efforts to become the first learning institute to launch a dedicated platform for enhancing both academic knowledge and human capital development in Islamic banking and finance at the regional and international levels. DCIBF embodies HBMSU’s outstanding commitment to the provision of quality education, training, research and community service and the promotion of best practices in the field of Islamic banking and finance.

ACRIE, as a research subsidiary of aafaq Islamic Finance, is dedicated to support the initiative of his Highness to promote the global network of information and education on the Islamic Economy through conducting thematic, multidisciplinary research addressing strategic and practical research questions in Islamic Economy.