FUTURE CHALLENGE IN ISLAMIC INSURANCE (TAKAFUL) IN BANGLADESH · PDF fileFUTURE CHALLENGE IN...
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Australian Journal of Sustainable Business and Society, Vol. 2, No. 1, March 2016
69
FUTURE CHALLENGE IN ISLAMIC INSURANCE
(TAKAFUL) IN BANGLADESH
Mohammed Jabed Sarwar
Research and Product Development Unit, Al Zara Consulting Ltd., Chittagong, Bangladesh
ABSTRACT
In the last few decades Takaful (Islamic Insurance) has become very popular in Bangladesh as well as other
Muslim countries. But the business of takaful did not flourish up to the mark in Bangladesh. The takaful
industry was started its journey in Bangladesh in 1999. Now there are six full-fledged takaful operators and
thirteen window operation of conventional operators. The takaful industry refers to carry out financial
transactions that are compliant with the creed of Islamic principles or laws, by and large called as Sharia. These
paper aims to examine the experience, challenges and key drives for the growth of the latest progress of Takaful
industry in Bangladesh. The main focal point of this paper will be human capital development. The Islamic
insurance services industry has become an even more important agenda to ensure that its growth and
development is supported by the necessary skills and capabilities. This is particularly important for Islamic
insurance given that it has become the most rapidly growing segment in world financial system. To make broad
discussion, we examine six biggest takaful operators in Bangladesh. Currently there is a lack of Islamic finance
knowledge among the financial and non-financial industries that still needs to be improved.
Keywords: Training and Development, Islamic insurance, Human Capital Development, Bangladesh
Corresponding author’s e-mail: [email protected]
INTRODUCTION
Islamic insurance would be successful in Bangladesh, thanks to the local phenomenon of the
flourishing Islamic banks as well as the success of Islamic economy globally. "Islamic economy is gaining
momentum. Takaful has already been successful in different Muslim countries like Sudan and Malaysia, even in
non-Islamic countries like the USA. This has been an incentive for us. Now, in Bangladesh 39 insurance
companies are engaged in insurance businesses of various types. Among them 18companies are life insurance
companies including the state owned Jiban Bima Corporation. In 2000, Sarah based life insurance business was
introduced in the country by Fareast Islami Life Insurance Co. Ltd. They incepted their business on 29th May
2000. After that another two companies- Prime Islami Life Insurance Ltd and Padma Islami Life Insurance Co.
Ltd began their business operation. At present most of the life insurance companies of the country have
introduced an Islamic life insurance wing to fulfill customers demand. So, the application of Islamic
management is essential in these organizations for the proper operation of the Islamic insurance system. The
present paper highlights the above matters and tries to point out the aspects for proper implementation of Islamic
management system development in the life insurance companies.
Compared to the conventional insurance sector in Bangladesh, Islamic insurance is like how David was
to Goliath. While conventional insurance has been doing business in this South-Asian country for over 50 years,
Islamic insurance only made its appearance as late as December 1999. There are about 43 conventional
insurance companies operating in the country with a large network of branches and yet more are applying for
license each year. Islamic insurance, on the other hand, operates through seven companies. However, the good
news is that Islamic insurance can explore a hitherto untapped market to do swinging business. While the future
may look bleak for conventional insurance companies, given the socio-economic conditions in Bangladesh,
Islamic insurance is set to sweep the market.
Islami Bank Bangladesh Limited (IBBL), the first Islamic bank in the country, for establishing the
concept of Islamic finance. This, they say, has gone a long way in helping other Islamic banks and Islamic
insurance companies gain a foothold. IBBL is one of the leading banks in the country, inspiring four other
Islamic banks to come up as well as encouraging conventional banks to start Islamic branches and another to
open Islamic counter. The success of Islamic banking made people start thinking about Islamic insurance as
well. 43 general insurance companies already operating in Bangladesh, the market is somewhat saturated. Their
business volume is also not increasing that much yearly, with the amount of premiums coming in every year
standing more or less static at Taka 400-500 crore."
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Against this bleak backdrop, the religious sentiments of Bangladesh nationals have become the trump card of
Islamic insurance companies. "Nearly 85percent of our population is Muslim," of this, at least 30-40 percent
does not go in for any kind of insurance at all, fearing it will be tainted with riba. If you consider life insurance,
more specifically, we would say only three to five percent of the populations covered by this type of insurance.
So here is this virtually virgin market waiting to be tapped. Not only will be able to capture a large segment that
has gone uninsured so far, we would also be able to wean away Islamic-minded people from conventional
insurance firms to which they have gone to in the absence of takaful companies in the country."
In Bangladesh, insurance is a must for any kind of export-import business. Companies who take loans
from banks have to be insured. We expect the bulk of our business, therefore, to come from Islamic banks. With
this, both takaful companies as well as Islamic banks will help one another generate income. Islamic insurance
companies will come across the problem of riba. As it is, the takaful companies are forced to invest some of
their money in interest-bearing bonds. Also, in the absence of any re-takaful organizations in the country, and
due to existing legal requirements, all insurance companies have to reinsure at least 50 percent of their business
with the state-owned Sadharan Bima Corporation, a conventional insurance company.
The government has been trying to help Islamic finance further by floating a Mudharaba bonds that
would enable Islamic banks to keep their statutory liquid reserves invested in it and avoid riba. It is therefore
expected that the government would do the same for Islamic insurance as well. The only thing is, it will take
some time. Islami Bank Bangladesh Limited was founded with the major objective of establishing Islamic
economy or balanced economic growth by ensuring reduction of rural-urban disparity and equitable distribution
of income. Islami Bank Bangladesh Limited (IBBL), the largest private bank in the country is the only
commercial bank that offers Grameen styled retail microcredit to a large number of borrowers. The microcredit
program known as ‘Rural Development Scheme’ was launched in 1995 as pilot program styled after the
Grameen Bank model except that the scheme used Islamic modes of investment.
Finally, it may be mentioned that if the Islamic financial system, is to become truly liquid and efficient
it must develop more standardized and universally (or at least widely) tradable financial instruments. The
development of a secondary financial market for Islamic financial products is crucial if the industry is to achieve
true comparison with the conventional system. It must also work hard to develop more transparency in
financial reporting and accounting and ideally - a form of Islamic GAAP. Development if the whole sale and
especially inter-bank and money markets, will be the key to Islamic finance growing outside its current little
sphere of influence, and becoming a truly national invigorating force.
METHODOLOGY
The information of this paper is mainly based on primary and secondary data. Primary data has been collected
through questionnaires. Other than the information from the questionnaires, rest of the data has been collected
from secondary sources. All the required information of questionnaire has been collected by direct interviews
and discussion with executives of various life and non-life Islamic insurance and expert personnel’s of Islamic
and Takaful insurance. Some of the policy holders of Islamic insurance provided some insight into the problems
and issues of the study. All the secondary information is collected from various books, financial papers,
documents, articles and annual report related with Islamic finance, Islamic Insurance and banking and provision
of Sharia. The collected data and information have been tabulated, processed and analyzed carefully. During our
research period, we tried our best to get acquainted with all the rules and regulations, policy and Sharia
compliance. Annual reports of Islamic Life and non-life Insurance in Bangladesh provided us with valuable
information about growth and portability i.e. Return on Net profit after tax as the percentage of total assets and
net revenue as the percentage of total assets. The data acquired by questionnaire helped us to make a test named
X2 (Chi Square test). It helped us to find out, whether the education on Islamic Finance is significantly needed
to keep the present growth in Islamic Insurance (both life and non-life) or not? To prepare this report I also
followed some guidelines provided by some key personals of Islamic Insurance and Finance in Bangladesh.
LITERATURE REVIEW
Insurance is a risk-sharing arrangement between two parties. In this arrangement, one party (the insurer) agrees
to indemnify another party (the insured) against certain losses specified by a contract (the policy). Insurance is
an economic device by which individuals and organizations can transfer pure risks (that is, uncertainty about
financial losses) to others. (Obaidullah, 2005). In other words, insurance is basically a mutual-help where people
intend to help each other. However, we have to underline, that insurance here is to transfer a risk from one party
to another party, which risk itself is pure risk and not speculative risk. Pure risk is different with speculative
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risk, where the outcome for the pure risk is only loss not gain. On the other hand, speculative risk is where there
is probability to gain.
One may say that insurance is not really needed due to people can be self-insured. In contrast, it can be
accepted since people must be having an emergency fund for the loss which can be suddenly occurred. How
about if the loss is too great? Or else the emergency fund is less than the loss, and we have to borrow some
money and have to pay it back. As the result, people come out with the idea of insurance which they can
mutually-insured. Technically, insurance reduces risk, when individuals transfer risk to insurer they exchange a
risk to the premium. After risk is transferred to the premium, there is no need to set up an emergency-fund
anymore. In the insurer side, after receiving a risk as an exchange of the premium, risk will be summed up in
one pool in which other people have transferred similar loss exposures to the insurer. If any loss occurs and the
insured make a claim, then that claim will be taken from the pool in which with an assumption that not everyone
who has joined into the pool not make a claim. How about if everyone makes a claim? Insurer has thought
about it, insurer will invest the money which has been collected from the pool into another tools of investment
so that loss could be covered plus make some profit in which according to Islam is prohibited and will be
explained further.
LEGAL RULING OF ISLAMIC INSURANCE IN BANGLADESH
In Bangladesh, Takaful (Islamic insurance) has been defined in the Insurance Act, but no rules/regulations have
been made so far. Sharia scholars have to come forward with their suggestions so as to decide finally as to what
Sharia compliant is and what is not. A risk based approach along with well thought out rules based regulations
may be appropriate. An important decision for the Sharia people and the regulators is whether to allow Takaful
windows. There are several other issues where consensus is required and need regulatory support. Regulatory
support is a key factor for the continued development and growth of Takaful. A good example is Malaysia
which has become the biggest Takaful market worldwide. This is due to the comprehensive Takaful regulations
and continuous support by the Regulator Bank Negara Malaysia. In Indonesia, the regulator allows conventional
insurers to set up Takaful windows. Recently, Pakistan's regulator SECP issued new Takaful rules allowing
conventional insurers to set up Takaful windows. In Bangladesh, Insurance Act 2010 allows conventional life
insurance companies to open Takaful windows but non-life conventional companies are barred from opening
Takaful windows.
In Takaful, the shareholders are expected to provide the initial capital, but ultimately the participants
(policyholders) are expected to build up the necessary solvency capital. The challenge of setting solvency
standard for Takaful operators needs to be handled very carefully by the Regulator. The International Financial
Services Board (IFSB) has set a standard with regard to solvency requirements for Takaful. The standard
envisages separate ring fenced shareholders' and policyholders' funds, where each fund would need to have
sufficient assets to meet the solvency obligations. It has been assumed that the shareholders would be obliged to
extend interest-free loan to the policyholders' fund when it is needed. The standard is silent on how Takaful
products will be priced and what happens to the contributing policyholders, if the fund created by them is used
to finance future policyholders. The regulators need to introduce creative solutions to these issues. Besides the
legal and regulatory issues, there are a number of practical challenges that also need to be addressed in order to
ensure the success of this nascent industry. For example there is a great need to educate the general public about
insurance and Takaful.
Although the Takaful industry has seen double digit growth since 2010, it still suffers from a lack of
penetration in supposedly vibrant markets, and is still performing at what is considered to be lackluster levels.
Many within the industry have admitted to a gamut of issues which need to be addressed urgently and
effectively in order to allow the industry to perform at its best; particularly in the investment space, where
Takaful companies are suffering from a dearth of long term investment opportunities to suit their risk and
investment profiles. Another issue stems from the lack of risk based capital, where there is a mismatch between
the companies' assets and liabilities, and the universal issue of lack of talent and understanding of Sharia-based
insurance products.
We take a closer look at the fundamentals of the Takaful industry, its issues from a macro and micro
perspective, and what needs to be done to mitigate these problems in order to prevent a stagnation of growth
within a sector which is ultimately brimming with potential. Strong competition, evolving regulations and
shortage of Takaful expertise are identified as key risks in both the GCC and Southeast Asia. While most
operators agree that the new regulations are a positive development, they are concerned over increased variances
in regulatory regimes across jurisdictions. Such variances make it difficult for Takaful operators to function
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across regions and also lead to confusion for customers and multinational insurers. Ultimately, industry
consolidation would allow Takaful operators to compete effectively with larger, more established conventional
insurers and also reduce unhealthy price wars.
THE PROBITION OF CONVENTIONAL INSURANCE UNDER ISLAMIC LAW
Initially, conventional insurance contains three elements that contradict the sharia (Islamic law).
Uncertainty (Gharar)
Any transaction entered into should be free from excessive uncertainty. The purpose of this prohibition is to
avoid fraud, injustice and exploitation. In a conventional insurance, uncertainty arises when insured pays a
premium but does not know whether he is going to make a clam in the future. And the amount of financial
benefit to be received is not known as well. Similarly, the insurer does not know whether he is going to be called
upon to pay claims under the policy, nor the amount to be paid to the insured.
Gambling (Maisir)
Gambling is obviously not permissible under Islamic law. In a game of gambling, one party is always hoping for
a gain as a cost of losing for another party. In the context of insurance, the policyholder hopes (bet) to gain a
large sum from his small amount of contribution. What the policyholder actually hopes is that the claim will
exceed his contribution. In this case, the company would probably be in deficit. However, the policyholder
would loss the money paid for premium if the insured event does not occur. Here, the gambling is playing its
role. When the policyholder does not make any claim during the period, the insurance operator may obtain all
the profit while the policyholder may not obtain any profit at all. The loss of premiums on abolition of contract
by the policyholder will only be burden to the policyholder. Furthermore, only a proportional refund would be
made if any termination of contract done by the insurance company.
Interest (Riba)
An insurance contract wherein the policyholder expects to obtain a fix amount of profit that is greater than what
he has contributed is considered as riba. Hence, the conventional insurance is prohibited under Islamic law.
Furthermore, the investment of premiums usually involves prohibited elements such as riba and maisir.
THE DISTINCTION BETWEEN CONVENTIONAL AND ISLAMIC INSURANCE
Different views have been expressed about the conventional insurance from the point of view of Islam (Ali
Khan, 2004). It is said that conventional insurance is prohibited due to the elements of Riba (interest), Gharar
(uncertainty) and Maisir (gambling). However, insurance is permissible in Islam when undertaken in the
framework of takaful or mutual guarantee and ta’awun or mutual cooperation. It is not like conventional
insurance where a party offers and sells protection and the other party accepts and buys the service at a certain
cost or price. Rather, it is an agreement by a group of people with common interests to protect of guarantee each
other from a certain misfortune. It is based on sincerity and willingness of the group to help anyone among
them. Essentially, the concept of takaful is based on solidarity, responsibility and brotherhood among
participants (Obaidullah, 2005). These are the main points of different between takaful and conventional
insurance:
Conventional insurance is a buy-sell contract in which the insurance company offers and sells
protection and the participants (policyholders) accepts and buys the premium at a certain price. In case of
Islamic insurance, the participants give up individual rights to attain collective rights over contribution and
benefits along with the takaful operator as the one who manage the fund. The contract under Islamic insurance is
usually involves the concepts of tabarru, mudaraba and wakala.
In case of conventional insurance, insurer’s profits include underwriting surplus, which is the
difference between total premiums received from and total claims and benefits paid to policyholders.
Essentially, profit comprises underwriting surplus plus investment income. The distribution of profits or surplus
is a managerial decision taken by the management of the insurer. As a result there is a conflict of interest
between shareholders of the insurer company and the policyholders. In case of Islamic insurance, on the other
hand, the operator has no claims in underwriting surplus. Further, it is the takaful contract, not the management
of the operator company that specifies in advance how and when profit will be distributed. There is little room
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for conflict between interests of shareholders of the operator company and the policyholders. This point is
further elaborated in the subsequent chapter dealing with alternative models of Islamic insurance (Obaidullah,
2005).
Conventional insurance is based on profit-motive and its goal is to maximize revenue to shareholder.
The business of insurance is owned by shareholder. Islamic insurance, in contrast, is based on the motive of
community welfare and protection. The nature of business is non-profit oriented. The one who manage the
operation is called takaful operator. At this point, the takaful operator only received a fair compensation as being
an agent for the policyholder and through a share in returns on investment of funds. In case of conventional
insurance, when there is no claim during the period agreed, the policyholder will lose his premium that has been
paid to the insurer. In Islamic insurance, however, when there is no claim being made during the period agreed,
the underwriting surplus is given back to the policyholder, or donated to charity.
In a life insurance policy, where the risk occurs, the beneficiary(s) shall have the right to claim whole
amount named in policy. But, if in case the risk does not occur, the insured shall have the right to claim the
policy value at maturity together with the interest if any. In a life takaful policy, on the other hand, if the risk
occurs the beneficiary(s) shall have the right to claim the policy value from the PSA (Participant’s Special
Account) besides the accumulated entire amount from the PA (Participant’s Account). But, if in this category of
policy, the participant survives at the maturity of the policy, his/her claim shall be confined within the amount
available in the PA (Ma’sum Billah & Patel, 2003). In conventional insurance the investment of premiums is
completely at the judgment of the insurer with no involvement by policyholder. As such investment usually
involves prohibited elements of riba and maisir. In contrast, the takaful contract specifies how and where the
premiums would be invested. Usually, the takaful operator will invest the premiums in shari’ah compliant areas.
The Islamic insurance company has an additional obligation to pay annual zakat while in conventional
insurance, there is no such obligation.
FINDINGS
Findings from Secondary Data
Islamic insurance (Takaful) means the act of group of people reciprocally granting each commercial profit
sharing contract between the providers of funds for a business venture and the entrepreneurs who actually
conduct the business. In other words, the Takaful business conducted by the company and the individual
members of a group of participants who desire to reciprocally guarantee certain loss or damage that may be
inflicted upon any one of them. An overview of the growth in the Islamic Insurance practice, in Bangladesh, is
discussed below.
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FIGURE 3. MARKET SHARE OF ISLAMIC INSURANCE COMPANIES
The Market share of Islamic Insurance
companies was less than 15% over the
preceding 5 years. And among that market
share the average market share of Islamic Life
Insurance was far more than Islamic Non-Life
Insurance. The average Market share of Islamic
Life Insurance was almost 75% and the average
Market share of Islamic Non-Life Insurance
was almost 25%.
TABLE 1. COMPARISON BETWEEN THE ISLAMIC AND CONVENTIONAL NON LIFE
INSURANCE
Non life Islamic insurance
Islamic insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 237.83 371.70 408.80 505.11 593.15
Assets ($ in mn) 2.97 4.65 5.24 6.31 7.41
Growth (%) ------- 56.57 12.69 20.42 17.43
Takaful insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 334.3 371.5 460.8 521.3 637.6
Assets ($ in mn) 4.18 4.64 5.76 6.52 7.97
Growth (%) ------- 11 24.14 13.19 22.24
Conventional Non-Life insurance:
Northern Non-Life Conventional insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 457.7 488.1 742.0 806.9 874.5
Assets ($ in mn) 5.72 6.10 9.28 10.09 10.93
Growth (%) -------- 6.64 52.13 8.73 8.33
Republic Non-Life Conventional insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 323.4 349.5 423.2 484.5 562.9
Assets ($ in mn) 4.04 4.37 5.29 6.06 7.04
Growth (%) ------- 8.17 21.05 14.56 16.17
TABLE 2. COMPARISON BETWEEN THE ISLAMIC AND CONVENTIONAL LIFE INSURANCE
Fareast Islamic life insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 6451.3 10116.0 14611.7 21923.7 23197.2
Assets ($ in mn) 80.64 126.45 182.65 274.05 289.97
Growth (%) ------- 56.81 44.44 50.04 5.81
Prime Islamic life insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 1568.3 2504 3739.4 4965.1 6067.4
Assets ($ in mn) 19.60 31.3 46.74 62.06 75.84
Growth (%) ------- 59.96 49.33 32.78 22.20
Padma Islamic life insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 868.2 1647.1 2383.6 2841.5 3160.6
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Assets ($ in mn) 1.85 20.59 29.80 35.52 39.51
Growth (%) ------- 89.77 44.73 19.19 11.23
Conventional Life insurance:
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 1253.6 1737.6 2587 2840.5 3181.3
Assets ($ in mn) 15.67 21.72 32.34 35.51 9.80
Growth (%) -------- 38.61 48.90 39.77 12
National Life insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 13141.0 16286.0 20422.5 23823.8 27919.9
Assets ($ in mn) 164.26 203.58 253.28 297.81 349
Growth (%) -------- 13.94 25.40 16.66 17.19
Popular Life insurance
Year 2008 2009 2010 2011 2012
Assets (TK. in mn) 6300.8 9479.6 13216.9 16722.8 21235.9
Assets ($ in mn) 78.76 118.50 165.21 209.04 265.45
Growth (%) -------- 50.46 39.42 26.53 26.99
The average growth rate of both the Islamic Life insurance & Conventional Life insurance had been
following an increasing trend. But from the chart, it can be identified that the average growth rate of the Islamic
life insurance is much higher than the Conventional Life insurance. At the same time it can be noticed that,
though the growth rate of Islamic life insurance is higher, but the amount of increase in the assets is much less
compared to the Conventional Life insurance.
This scenario indicates that the
confidence of the people, in Bangladesh, is
increasing on the policies of Islamic life
insurance. But at the same time majority of
the people still rely more on the practice of
Conventional Life insurance. But with
such an impressive growth rate the Islamic
Life insurance might dominate the market
in the near future.
GROWTH RATE OF ISLAMIC LIFE
INSURANCE ON THE BASIS OF
ASSETS
Average Growth rate of Islamic Life Insurance
According to the chart, the average growth rate of Islamic Life Insurance companies from 2009 to 2012 had
been quite impressive. It brings forward the fact that the general people have got aware and attracted to the
policies and practice of Islamic Life Insurance. From this a conclusion can be drawn that in 2012, more people
rely on the Islamic Life Insurance, compared to 2009.
Average growth rate of Islamic Non-Life Insurance:
The average growth rate of Islamic Non-Life Insurance has increased since 2009. People of Bangladesh have
got acquainted with and has also adopted the policies of Islamic Insurance. Now they rely on this practice to
secure their important belongings with much encouragement, than they used to do till 2009.
Comparison of growth rate between Islamic Life and Non-Life Insurance
Though the growth rate of both the Islamic Life Insurance and Islamic Non-Life Insurance has increased, but the
increase rate of Islamic Life Insurance is much higher than the Islamic Non-Life Insurance. It suggests that the
people of Bangladesh rely on Islamic Insurance for their lives compared to their belongings.
Probability of Islamic Life Insurance
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To calculate profitability we have considered ROTA (Return on Total Assets). Increase of Islamic non-life
insurance return means Net profit after tax and in case of Islamic life insurance return means balance of revenue
showed in balance sheet.
Return on total assets indicates that
how much return or revenue an organization
is generating by utilizing its assets. A higher
rate indicates better utilization of the
organization’s assets.
According to the chart, the current
position of the organizations of Islamic Life
Insurance indicates an impressive scenario.
It brings forward the fact that an average of
84.83% revenue is generated by utilizing the
total assets of the organization.
The data of Islamic Non-Life
Insurance indicates that by utilizing the
assets, the organizations are generating an
average of 7.29% Net profit after tax. It
indicates that the organizations are quite
efficient in utilizing its assets.
FINDINGS FROM QUESTIONNAIRE SURVEY
The total number of respondents in our
questionnaire survey was 30 employees from
the field of Islamic Insurance. Among them 12
are high level executives, 14 are mid-level
Executives and the rest 4 are Sharia expertise.
All the respondents are post graduated and
among them 20 of the respondents are male and
the rest 10 are females. Among the respondents
9 are fresh new comers in the industry through
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their current job and the rest 21 respondents came
into this industry from other work fields.
We have collected a lot of information
from the employees of different Islamic Insurance
Organizations, regarding their viewpoints towards
the existing image of Islamic Insurance sector in
Bangladesh. They have pointed out several factors
that influence the growth, development and present
condition of the Islamic Insurance sector in our
economy.
Difference
According to the 60% respondents of our survey
business operations of Islamic Insurance is
different from Conventional Insurance in various
aspects. According to them the information system
of Islamic Insurance, in terms of interest, premium
and policies, are quite transparent and clear
compared to the Conventional Insurance.
Another very significant difference
between Islamic and Conventional Insurance is that
when someone buy a Conventional Insurance
policy they cannot claim their premium after
maturity if they do not face the mentioned
difficulties in the policy. But in case of Islamic
Insurance the premiums are being distributed to the
clients on maturity, even if the mentioned occurrence does not take place.
Employees enter the Conventional Insurance sector by having some basic knowledge about it since a
part of it is present in our education system. But the employees who enter the Islamic Insurance sector, enters as
a clean slate. So it takes a lot of time for the new entrants of this industry to get acknowledged with their job.
Satisfaction Level
In our survey it came forward that 80% of the
employees are satisfied with their working
condition in the Islamic Insurance organizations.
According to them they are proud to work for
their organization and its causes. However, the
rest 20% respondents do not consider their
working condition very impressive. According
to tem, the working condition of an organization
is formed by the employees and technologies
with which they complete their work. And both
the factors of working condition in these
organizations are not enough efficient.
According to them the employees are untrained
and the technologies used are not enough up to
dated. And until measures are not being taken to
improve these factors the working condition will
remain unsatisfactory for them.
Training
In terms of training a huge lacking is being brought forward by the respondents. According to them, they do not
get the opportunity to acquire adequate training regarding their job before or after they take entrance in this
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particular job field. This drawback does not
only hold back the performance of the
employees but also become an obstacle for
the growth of the organization as well as for
the growth of the industry.
According to the survey, 90% of the
respondents believe that a mandatory
training program should be introduced for
the new comers in this industry. They
believe that different seminars should be
organized in order to inform the existing
employees, regarding the correct form of
performing their tasks. This will help to
boost up the efficiency of the employees and
result in a further development of this
industry as a whole.
The survey suggests that 80% of the respondents think that expatriates from other countries should be invited in
the organizations to train the existing employees. They believe that the ideas and work strategies shared by the
expatriates will help them to acquire an international view point regarding this field. Those ideas can be taken as
guidelines and followed accordingly to achieve the desired success in the long run.
Investment Restrictions
Another factor that restrains the expansion of Islamic Finance is the lack in investment in this sector. One of the
reasons for this might be the limited number of products available for making a potential investment. Since
Islamic Insurance sector is quite new in Bangladesh,
only a small number of products are available in the
market in the present period.
Unawareness of the people regarding the
practice and policies of this sector can also be a reason
for the inadequate amount of investment in this sector.
According to the survey, 90% of the respondents
consider that the Islamic Insurance organizations should
take necessary and cautious measures in order to
aware the people of Bangladesh about their
existence and policies. They should come forward
and try to attract the general population towards
buying their policies. With this the organizations
can even encourage the investors to step forward
and make investments in this sector.
Challenges
The growth and development of the Islamic Insurance sector is being held back by a number of factors. First of
all, there is a very minimum amount of Regulatory framework towards the sector of Islamic Insurance. An
increased number of government policies and government intervention in this sector can be proved as very
beneficial for its growth and development. A lack of education concerning this sector also proves to be a very
vital drawback for the Islamic Insurance sector. According to the respondents of our survey subjects regarding
Islamic Finance should be introduced in our education system in the graduation and post-graduation level. It
could have been proved as a very good suggestion if put to practice.
90%
10%
FIGURE 8. RESPONDENTS' VIEW TOWARDS
TAKING MEASURES FOR ATTRACTING PEOPLE
Measures
required to
attract people
No measures
required to
attract people
Australian Journal of Sustainable Business and Society, Vol. 2, No. 1, March 2016
79
There is also a lack of training and knowledge regarding this sector in our economy. As a result the
employees working in this sector faces ignorance in various stages of their work field. Some training must be
provided to the new entrants of this sector so that they can get well identified with their future duties and
responsibilities while performing their job. A very small amount of technologies are being introduced by the
practitioners of the Islamic Insurance. New technologies are very much required for the development of every
sector and especially for a developing sector such as Islamic Insurance. But before putting the technologies to
practice, the employees should be trained by the expert technicians so that the employees do not find any
difficulties while coping with the changes.
Future prospects
The growth rate and development of Islamic Insurance sector in Bangladesh is currently following an increasing
trend. But it is also inevitable that without proper training and knowledge the growth will not be able to be
sustained. The scenario might even get reversed. To sustain this growth rate and for further development it is
necessary to arrange different training and education programs. The government and Islamic Insurance
organizations should come together and provide such opportunities to the existing and upcoming employees of
this sector. The organizations of Islamic Insurance should take policies and measures to aware and attract
common people towards their products. They should make attempt to build a strong marketing department for
the Islamic Insurance sector, and make innovations in their existing products to encourage people to come
towards this sector.
According to my survey 80% of the respondents believe that Islamic Insurance sector has high
potential in Bangladesh. But this potential needs proper nourishment from both the organizations and regulatory
body. The government should take some major steps for the betterment of this sector. The government itself can
establish an Islamic Insurance organization to improve the faith of people in this sector. This will also encourage
people to get more aware of the products and scopes of Islamic Insurance sector. This will drastically improve
the condition of Islamic Insurance sector in Bangladesh. More regulatory framework should also be developed,
by the government, in favor of this sector.
CONCLUSION
In the field of the Islamic insurance, the impact of global acceptability may reflect in the day to day
enhancement in the field of financial industry of Bangladesh due to its enormous growth rapidly around the
globe. Helping industry in terms of development of more mature Islamic insurance products and better controls
and risk mechanisms is by having the appropriate education and knowledge of the field is un-discretionary
allows the career to progress eventually. The fact is that based on the level of knowledge and understanding of
Islamic finance that every individual holds is the foundation of Islamic insurances.
The growth rate of Islamic Banking and Finance itself have not augmented with the demands for
learning centres, education providers and training module which creates the gap of practical and theoretical
aspects of Islamic insurance. The level of Sharia compliance will be questioned and resultants can be
significantly drastic if no solutions found. The Islamic insurance industries have to take initiative to launch a
professional Certification of Islamic insurance with the support of skilled working people and with the market
needs. In Bangladesh, there's is no such institutions/universities which offer professional certificate courses in
insurance that enable seeker to be recognized. More challenging approach and experience of external club that
lead towards in acquiring divergent viewpoint is significant to increase the knowledge base through external
courses for professional growth.
In Islamic insurance and finance, we must explore the opportunities which are detrimental to the
economy and to be able to safeguard the future of our children from an unfavourable interest based system. To
motivate current market players and to attract prospective investors, the government needs to develop a sound
regulatory and legal framework for the Islamic financial industry in which a dedicated research and steps are
required to all stakeholders. To increase the growth of this sector in Bangladesh all stakeholders should play a
role to develop an economic system truly reflective of the true sacred principles.
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