In the Islamic finance landscape, Takaful, based on mutual help principles, stands as a promising global insurance alternative. Yet, in Pakistan, despite a significant Islamic finance sector and a mainly Muslim populace, its potential remains largely unexploited.
Regulatory complexity, varying Shariah interpretations, and low public awareness pose major hurdles. Pakistan’s insurance sector overall lags, with Takaful’s 2024 contribution to the market meager at 2 – 3 percent and a 1 percent penetration rate, far behind regional peers. Family Takaful has a 12 percent share in life insurance, and General Takaful, 11 percent in non – life.
Globally, the Takaful market is set for a leap, growing from $30 billion in 2024 to an estimated $34 billion in 2025, a 12.3 percent CAGR. Driven by Islamic finance growth, rising awareness, and govt policies, it spans diverse nations. Saudi Arabia, Iran, and Malaysia lead, with 83 percent of global premiums.
The SECP in Pakistan has been proactive. Its recent Karachi roundtable, part of the “Insured Pakistan” plan, aimed to boost Takaful. It’s partnering with the ADB and lobbying the govt for reforms. Takaful operators must address governance and risk management challenges.
Looking ahead, Pakistan can learn from Takaful frontrunners. A state – owned insurer could spearhead change by launching an Islamic arm, leveraging its strengths. The public sector, by adhering to Islamic principles, can build trust, develop tailored products, and transform challenges into opportunities, fueling growth in the Islamic finance ecosystem.
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