Takaful Insurance of Africa, which was founded in 2008 but formally licensed in 2011, is considered as the first insurance operator in the region which adheres to Islamic ethical principles in its dealings.
Key among them is the lack of awareness about the Takaful insurance model, which creates a hindrance in the number of companies and individuals who subscribe to it.
The Takaful model is different from conventional ones in that no interest is charged, while loss is shared between the insurance company and the policy holders.
“There is significant amount of interest in our products precisely because of its uniqueness and the difference between the Takaful and the conventional models,” said Mr Hassan Bashir, chief executive of Takaful Insurance of Africa, in an interview.
“However, the first three months of our operation was spent on creating awareness rather than selling the products. It takes time for people to understand the model,” he said.
Regulatory frameworks, government policies and lack of vibrant Islamic-based investment opportunities in the country have also conjured up to hold back the full realisation of the model’s potential.
For instance, in the case of taxation, the company is expected to pay 2 to 2.5 per cent of its income annually as part of Zakat, a pillar of Islam that requires companies and individuals to pay a set amount of their wealth to needy members of the society.
Besides that, the company has to pay tax just like any other corporate entity to the government, doubling the amount of expenditure it spends on tax.
“Something like that is not recognised in the local tax laws,” Mr Bashir said.
“So the Takaful model will have to pay the corporate tax that every company will pay and then it will have to pay the additional Zakat that is required to be paid. So this company will be taxed more compared to the conventional one.”
Besides, all the earnings generated from interest-based or non-acceptable income by Takaful Insurance is expected to go to charity rather than to shareholders or risk fund accounts.
But the biggest challenge of all has been with investment opportunities within the country.
This has limited the capability of the company to diverse its investment ventures across the country and the region.
This was exacerbated by the weakening shilling, besides rising operational costs and inflation rates.
“We do not have the permission or the leeway to take money out of the country and invest in the Sharia-compliant countries, such as the Gulf Cooperation Council and Malaysia,” said Mr Bashir.
source: Daily Nation