Origin of Takaful
Takaful as we know it today started in Sudan in 1979. As a need driven concept, it was necessitated by the growth of Islamic banking and the objective to provide Shariah compliant and comprehensive insurance services. From these humble beginnings Takaful has grown to become a phenomenon in the global economy with estimated premiums of US$1.5 billion in 2010 and about 170 Takaful companies, 200 Takaful windows (conventional players offering Takaful) and also 20 re-Takaful players.
Takaful trends in Africa
Despite being considered the birth place of Takaful, the development of Takaful in African countries has been slow. This is a factor mostly attributed to a lack of regulatory environments, low purchasing power and poor perception of insurance.
Takaful in Sudan
As the birth place of Takaful, Sudan has been a pioneer of both Takaful regulations and developments. In 1992, the government decided to apply Shariah principles to the country’s economy, in sectors including insurance, hence becoming the first country to enact such blanket legislation in appreciation of the tenets of Islamic finance. The Takaful system operated in Sudan was the basic model of co-operative Islamic insurance.
There are 15 local players in the market with Sheikhan Insurance and Reinsurance having an estimated 60% of the market share. National Reinsurance Company is the only reinsurer and is 55% government-owned. Additionally each insurance company has a Shariah advisory board.
Kenya is the biggest economy in the east African market. With a Muslim population estimated at 10-20% of the total 40 million, Kenya has strong potential for Islamic finance. So far two fully fledged Islamic banks operate with a considerable number of other conventional banks offering Islamic banking windows.The first Takaful operator was launched in March 2011. With a capitalization of close to US$8 million, Takaful of Africa has a stable outlook and is one of the best capitalized companies in Kenya.
Mauritania is a Muslim country with a population estimated at around four million. SMAI Islamique and Taamin Assurances Islamique are the main Takaful players with estimated gross contributions of US$2 million. Agricultural and livestock insurance products are also key insurance necessities in an economy that is currently supported by these sectors.
Senegal, another Muslim majority country, has an estimated population of 15 million. It has seen significant interest and growth in the Islamic finance framework through partnerships and close working relationship with countries in the Middle East.
Gambia is the smallest country in Africa with an estimated population of two million, of which 90% are Muslim. Its insurance market has grown from two to about 13 companies presently.
Algeria has a Muslim majority population estimated at 35 million. Although Algeria has not yet fully authorized Islamic finance, it has permitted two players in the country. Salama, with an estimated gross premium of US$24 million in 2010, is the only Takaful operator in the country.
Libya is also one of the few MENA countries that has not fully appreciated the principles of Islamic finance. With a population of seven million, Libya is a relatively small country. Prior to the current war and the ongoing revolution in the country, Libya enjoyed stable economic growth. Takaful Insurance Company is the only Takaful operator in the country.
In Egypt, the total premium together with life and general insurance was about US$900 million in 2006, and this figure is the third largest among MENA countries following Saudi Arabia and the UAE. However the insurance penetration rate is less than 1% of the almost 85 million population.
South Africa is a developing economy and a leading financial hub of the African continent. Its economy has grown significantly over the last decade and has become a major center for innovation and expansion by western companies. Thus, so far a number of Takaful operator have already established operations in South Africa including Takafol South Africa, and Al-Noor among other companies seeking licensing.
The potential of Takaful
The common denominator in the African economies is poor masses and need for community and society/welfare improvement. As seen recently, African economies have been growing significantly as shown by the interest from both eastern and western countries.
Abass Mohammed is the product development manager at Takaful Insurance of Africa and he can be contacted at