The first fully sharia-compliant insurance company has been licensed and is due to open on Tuesday , a move expected to deepen penetration of such financial institutions in the East Africa region.
Takaful Insurance of Africa will be launched in Nairobi on Tuesday, joining a market currently served by more than 45 conventional insurance companies.
The company, the first such operator in East Africa, was registered by Kenya's industry regulator, the Insurance Regulator Authority, this month.
"The reasons behind Takaful lie in the need to provide risk management and financial security services founded on Islamic principles and values," the company said in a press release.
Sharia-compliant financial institutions and products started taking root in Kenya in 2007 after the government provided operating licences to two banks — Gulf African Bank and First Community Bank.
Other conventional banks have also introduced sharia-compliant products, alongside other products, to tap into the large population of Muslims who had been kept out of the financial system due to matters of faith.
The financial services offered by sharia-compliant banks are, however, open to customers who do not subscribe to the Islam.
The new company's entry is expected to heighten competition in the crowded insurance business with the other companies operating in the country. However, it is also expected to broaden the customer base.
Kenya's population is estimated at 39 million out of which over 10% is Muslim. With about 4 million Muslims, it is estimated that at least a million of them can take insurance. Up to now, due to lack of a licensed Takaful operator, most Muslims are forced to take conventional insurance. Many others opt not to take insurance at all. With the emergence of Islamic Banks in the country, it is expected that Takaful Insurance of Africa will provide insurance for assets purchased with financing from these banks.
How Takaful works:
Takaful is an Arabic word that loosely translates to "guarantee".
It means shared responsibility, guarantee, collective assurance and mutual undertakings.
Unlike conventional insurance products, no interest is charged and losses and surpluses are shared between policy holders and the company.
Each member contributes a given premium to a Takaful fund managed by the company, which pays for losses suffered by the contributors to the pool and meets their needs from these resources.
Any surplus left from the contribution after payment of claims and other expenses is distributed among participants.
This is referred to as surplus refund.
This gives pool members ownership of the fund as they share the surplus.
source : http://www.abna.ir
