Issues and Challenges in Introducing Islamic Insurance (Takaful) into the Algerian Financial Market: Lessons from Malays
The global takaful market is estimated by market analysts to reach a premium of US$ 12.5 billion by 2015. Malaysia is considered one of the largest takaful markets in the world with total assets of US$ 3.2 billion. The Islamic insurance sector or takaful
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Issues and Challenges in Introducing Islamic Insurance (Takaful) into the Algerian Financial Market: Lessons from Malaysia Kamaruzaman Noordin and Djafri Fares
Abstract The global takaful market is estimated by market analysts to reach a premium of US$ 12.5 billion by 2015. Malaysia is considered one of the largest takaful markets in the world with total assets of US$ 3.2 billion. The Islamic insurance sector or takaful has seen remarkably global growth in many major markets, especially in Muslim dominated countries. However, the development of Islamic finance, particularly takaful in Algeria appears to have lagged behind. Although there are two Islamic banks operating in Algeria, Islamic insurance or takaful has yet to be introduced into the Algerian financial market. Due to this fact, this research explores issues and challenges that potentially face the introduction of takaful into the Algerian financial market. An empirical study is endeavoured consisting of semi-structured interviews with Algerian experts in the area of Islamic finance and takaful to deduce the issues and challenges that might face the introduction of takaful in Algeria. This study found that there would be economic and spiritual benefits if takaful is introduced in Algeria. In addition, the respondents agreed that the most important challenge that might face the introduction of takaful is political will whereby genuine support from the government is needed for the effective introduction of Islamic insurance or takaful in Algeria. This support should be subsequently followed by broad publicity of the newly introduced industry, an amendment of the laws, and the development of the necessary infrastructures to facilitate an effective collaboration with international organizations. Keywords Algerian financial market
Islamic insurance Takaful
K. Noordin D. Fares (&) Department of Shariah and Management, Academy of Islamic Studies, University of Malaya, 50603 Kuala Lumpur, Malaysia e-mail: [email protected] K. Noordin e-mail: [email protected] © Springer Science+Business Media Singapore 2016 S.K. Ab. Manan et al. (eds.), Contemporary Issues and Development in the Global Halal Industry, DOI 10.1007/978-981-10-1452-9_33
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Introduction
Insurance is a mechanism whereby contributions (premiums) are paid by individuals or business enterprises to transfer some of the ambiguity of the risk to the insurer. Overall, the concept of insurance is an arrangement between the insurer and individuals or businesses to mutually help one another in the event of a contingent loss to any of the member(s) (Qureshi 2011). An alternative model of conventional insurance is takaful which constitutes an integral part of the Islamic financial system. The idea of Shariah-compliant insurance popularly known as takaful was first introduced in Sudan in 1979. This was motivated by the growing needs of Muslim consumers for an insurance protection that is compatible with Shariah principles (Qureshi 2011). Farooq et al. (2010) mentioned that the
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