In the aftermath of the global financial crisis, one of the major criticisms has been the disconnect between the financial sector and the real economy. Islamic finance, just like any other industry, must create a distinctive value proposition that can meet not only the needs of its customers but of society as a whole.
To all intents and purposes, Islamic finance has managed to transcend religious, political and geographical boundaries and today serves not only the needs of the many Muslims, previously removed from the financial system, but is now gaining interest and acceptance across the globe.
In the Islamic worldview, finance is not an end in itself. It is a means to uplift the welfare of mankind. It requires funds to be invested only in worthy businesses, based on risk-sharing and on real assets.
The prohibitions against riba, gharar and exploitation ensure that not only should Islamic financial products do no harm; they should also protect and serve the greater public interest.
According to Azleena Idris, the deputy director of Bank Negara Malaysia, the “catastrophes and calamities that the world is currently facing are placing more pressure on the insurance and Takaful industries to pursue efforts to remain sustainable and resilient in their ability to withstand possible losses.
“Takaful companies have to ensure that they remain capitalized and capable of meeting the demands of the industry, particularly in meeting the demands to reduce financial hardship.”
Risk management strategies must also remain robust to counter such unpredictable global changes. This will require global Takaful operators to build their capacity, capabilities and expertise to face such large and complex risk.
Idris continues by saying that: “The occurrence of climate change and global warming are leading to a rise in weather-related catastrophes,” while the “recent social and political upheavals in certain countries have also taken their toll on human lives, given that the future remains fraught with challenges”.
Alhabshi ends by saying that Takaful, and in particular Family Takaful, lends itself to this greater social good. “When you are referring to Family Takaful, the meaning comes from ‘kafalah’, meaning guarantee, so you are guaranteeing for others rather that looking out for your own interests.