Karachi:
The Takaful industry in Pakistan has come a long way since its inception in 2006, when Securities and Exchange Commission of Pakistan (SECP) promulated Takaful rule. Azeem Iqbal Pirani, Chief Operation Officer and CEO of EFU LIFE, remembered Takaful History in the recent Pakinomist podcast held in collaboration with EFU Hemayah Takaful. He mentioned that EFU was the first company to be incorporated as a general Takaful company with the aim of extending the insurance services to the public in accordance with their faith.
Pirani mentioned that ordinary citizens at that time would not use any kind of insurance, be it in general, life or health insurance because people thought the insurance services were against Sharia. Those like him who came to serve the Takaful industry, aimed to extend the services to ordinary citizens in accordance with their faith so that they could use without any resistance or reluctance. This goal has reached some degree, not as much as desired, but still the proportion of Takaful services among general users has increased.
According to last year’s report from SECP, Takaful’s share was about 12 percent of the total sale of the insurance sector. The proportion is still modest due to two reasons, one, that people are still in doubt about its religious legitimacy, and secondly, people are not aware of these services yet. But SECP now has a special interest in expanding the user base for Takaful, with the aim of taking its share to 35 percent from 12 percent by 2028.
The host Adeel Azhar agreed that a lack of attention is the most important stumbling block. He quotes the example of insurance in the autofinance sector, where he said it is only high due to SBP, making it mandatory. He said it is actually a double challenge to convince people to take the funding of Islamic principles and then also add Islamic insurance, ie. Takaful.
Dr. Irum Saba, director of the Center for Excellence in Islamic Finance in IBA Karachi, explained the reasons behind the poor concentration of Islamic Finance in Pakistan. She noted that our country has a huge population of 250 million, but the government’s commitment and regulators are not that strong. She compared this to Malaysia, the country with a very large concentration of Islamic economy, maintaining that the government and regulators are very committed and the attention is much higher than in Pakistan.
She said that in Malaysia, students, entrepreneurs, businesses and any institution are protected by Takaful. Compared to Pakistan, she said that state institutions in Malaysia are led by people obliged to Islamic Finance, including their Ministry of Finance, Securities Commission and Central Bank. She advocates that such a commitment combined with awareness is the key to the expansion of the Takaful industry. In particular, she advocates that such attention is spread to level with schools, colleges and even villages.
Dr. Irum also cited the examples of other neighboring countries where she said that economic literacy is much more widespread than Pakistan. She quotes her experience of watching Street Hawkers have QR coders for payments, which she said reflects the good financial sharpness of otherwise less educated people. She emphasized on educating the younger generation through tools, techniques and AI.
When asked about the milestones, EFU Hemayah Takaful has achieved during his 10-year history and plan ahead, Pirani said EFU LIFE was the first company to achieve the window license for its services. He mentioned that EFU not only launched a Takaful product, it also gave it a brand identity. Currently, Takaful contributes to 35 percent of EFU Life’s business that reflects its growth over the year.
A strategy that worked in particular was to allow customers to convert the existing life insurance products to Shariah-compatible. This was an unmatched offer that not only increased the company’s business, but also helped expand Takaful Penetration in Pakistan. EFU then moved to inclusive and digital options, which also helped expand the customer base. Thanks to the growing business, the company has distributed a profit of 800 million RS among its customers, which now makes up 1.4 million.
In response to a question about the steps IBA has taken to connect the Academy with the industry, Dr. Irum, that her center regularly completes education, participates in research and has discussions and debates about Islamic Finance. She mentioned that specialized training programs to provide solid understanding of Takaful were managed by expert coach from both national and international institutions.
She also said the center is investigating the Wakala-Waqf model of Takaful, which is applicable in Pakistan. She said the training is also offered companies that seek services to their employees from Takaful operators. In another program, the Center offers training in Islamic Wealth Management and Planning, where students are trained on how they can save and invest, and when it comes to investment, Takaful is also highlighted.
