Takaful is an area in Islamic finance that has been growing significantly for the last decade. The World Takaful Report 2012 indicates that the compound annual growth rate of the industry stood at 29% from 2005-09. Despite the convincing figure, it is believed that there is still a lack of public awareness towards Takaful. Actually, in many Muslim countries the above case is not only applicable for Takaful but also for insurance in general. As a consequence, many Muslims around the world have misconceptions about Takaful.
According to literature, there are two general misconceptions about Takaful. First, Takaful has been considered unnecessary. Many Muslims believe that the true belief in Allah means there is no need for any such cover against death or losses to a man himself or his wealth. In other words, the Takaful mechanism is in contradiction with the principle of Tawakkul. This principle urges Muslim to only put his trust in Allah. Actually however, the Takaful concept is in line with this principle since Islam asks its followers to find ways to avoid catastrophe whenever possible, and to lighten one’s burden should an unexpected event occurs.
Secondly, despite Takaful being promoted as being free from Riba, Gharar and gambling, there are many who still believe that there is no difference between conventional insurance and Takaful in practice. This is because they don”t understand how a Takaful scheme works. In addition, it is also partially because many customer service officers in Takaful companies always use conventional terms when they explain Takaful products to their clients for simplicity reason.
Therefore, the issue of lack of public awareness must be addressed seriously by all industry stakeholders. Integrating Takaful courses into higher learning institutions should be encouraged and Takaful regulators must work on this by holding courses, conferences, studies and researches about how to create public awareness on Takaful.
Dr Sutan Emir Hidayat is a senior lecturer at University College of Bahrain. He can be contacted at
[email protected]
.