Learning from the Malaysian Experience: Overcoming the Regulatory Challenges in the Nascent Takaful Practice Innigeria

Abstract

The Islamic insurance (Takaful) introduced in March, 2013, was specifically meant to bridge the endemic insurance gap in Nigeria by engendering deepening insurance penetration and financial inclusion of the hitherto underserved and uninsured huge Muslim clientele. However, the Takaful Operational Guidelines and a host of other enabling insurance instruments are caught up in a web of regulatory conflict and ambiguity. The legal effect of this is a huge regulatory vacuum that is bound to impact negatively on capital investment climate, breed mistrust and uncertainty and discourage participation in the nascent Takaful industry. Nigeria would need to draw from the vast experiences of Malaysia in order to overcome these challenges. Nigeria and Malaysia are both former British colonies with diverse ethnic and socio-cultural backgrounds. They both practice divergent legal systems in a secular setting. Both have sizeable numbers of Muslim population. While Malaysia is considered the hub of Takaful practice in the world, Nigeria is just an emerging market in the now trending Islamic financial revolution. This paper examines the enormous general and regulatory challenges the nascent Nigerian Takaful practice will encounter in its quest to attain sustainability and vibrancy. The methodology of the study is both doctrinal and qualitative whilst employing non-random sampling technique. The study employs both primary and secondary sources of information and interviews where appropriate. The study finds the need for a review and harmonization of all the enabling insurance instruments in Nigeria, transforming the current business models and improving practices in the insurance sector to enhance the application of Takaful. The study recommends the enactment of a Takaful Act like that of Malaysia.

Patronage Factors of Motor Vehicle Takaful in Kano State, Nigeria

“…Their study adopted the existing model of DTPB from the family Takaful perspective. Saleh, Balan, and Ruslan (2016) examined the attributes of learning from the Malaysian experience: Overcoming the regulatory challenges in the nascent Takaful practice in Nigeria. The authors revealed that Islamic insurance (Takaful), introduced in March 2013, was specifically meant to bridge the endemic insurance gap in Nigeria by engendering deepening insurance penetration and financial inclusion of the hitherto underserved and uninsured huge Muslim client.…”

“…This study empirically examined the proposed research model containing three latent variables (i.e., patronage determinants), whereas awareness, perception, and religiosity were the independent variables, and patronage was the only dependent variable. All scales and measures used in this research were adapted from the studies (Aziz, Husin and Husin, 2017;Saleh, Balan and Ruslan, 2016;Maiyaki & Ayuba, 2015;Yaqub and Dandago, 2015).…”

A Comparative Review of Takaful Frameworks in Nigeria, Malaysia and Pakistan

“…Previous studies, (already highlighted in the introduction to this research) have either provided insight on the workings of the frameworks within the jurisdictions of the various Takaful industries, or have made some attempt to compare the efficacy of one system against the other without necessarily focusing on Takaful. Without a doubt Saleh et al (2016) provide extensive research on the regulatory lacunae evident in the Nigerian framework by comparing it to that available in Malaysia. The study however only highlights the ambiguities and irregularities within all laws regulating Takaful in Nigeria.…”

“…Khan and Shah (2015) comparatively analyze the regulatory and supervisory structures for the Islamic financial sector in Malaysia, Pakistan, Bahrain and the UK but the scope was limited to the Islamic banking sector. Saleh et al (2016) recognize the similarities between the Nigerian and Malaysian Takaful regulatory frameworks and the possibilities of Nigeria learning from that of Malaysia. However, they did not conduct an in-depth analysis of both systems.…”

“…The study also placed some focus on the emerging Takaful markets of Nigeria, Kenya and Tanzania. However, Saleh, Balan & Ruslan (2016) did conduct a research on a comparative analysis of the Nigerian regulatory framework for Takaful against the backdrop of the Malaysian framework with a view to highlighting the discrepancies in and proffering possible solutions to that of Nigeria. Khan and Shah (2015) comparatively analyze the regulatory and supervisory structures for the Islamic financial sector in Malaysia, Pakistan, Bahrain and the UK but the scope was limited to the Islamic banking sector.…”