'Takaful Insurance: Tool To Poverty Alleviation’

By WILSON ASEKOMHE

The concept of Takaful insurance is not very popular in Nigeria even though it is the same with conventional insurance but with some restrictions.  Takaful insurance is a form of insurance which is deemed permissible for Muslims under the Sharia Law.  The major difference between it and the conventional insurance are the restrictions it places on investments and more flexibility on capital formation.
While conventional insurance operates in Islamic countries, their services are limited to commercial needs and that of elite part of the society.
According to a paper presented on the issue at a recent Educational Conference of insurance stakeholders, insurance penetration is still very low in many Islamic countries.  The reasons for this low penetration have to do with Muslim belief that “conventional insurance policies contain elements that are contradictory to Islamic principles, namely uncertainty (Gharar) gambling (Maisir) and interest (Riba) (Sigma 2001)”.
However, insurance is not entirely new to Islamic.  Historical records has it that it existed “since the early secured century of the Islamic era when Muslim Arabs expanding trade into Asia mutually agreed to contribute to a fund to cover mishaps or robberies along the numerous sea voyages”.
According to works done by fisher 1999, Yusof 1999 and Shakir 1999, insurance in Islam is allowed but it has to be based on the “principles of mutuality and cooperation and encompasses the elements of shared responsibility, joint indemnity, common interest and solidarity.”
Experts agree that Islamic insurance is also one credible form of alleviating poverty.
The Muslim population was put at 1,433.71 as at 2001.  This represents 23percent of the total world population, out of which 1,385.45 million are based in Asia and Africa.  In Africa, Muslims account for about 47percent of the population.
In Asia, Muslim population is put at 27percent, 7percent in Europe and 2 percent in North America (Fejlahi 2001)
Unfortunately, the work of Sabbir Patel in 2002 revealed that Muslims around the world are faced with low-income levels.  
They are said to also lack access to social security systems, health care, education, sanitation and employment opportunities.
According to the report, there is “growing inadequate infrastructures in Islamic countries even in the rich Arab nations, due to the increasing population and wave of cheap immigrant labour.
This situation calls for some risk protection mechanism in these countries in order to lower the vulnerability of the Muslim population.
The history of Takaful insurance could be traced to Sudan where the first Tafaful insurer, the Islamic Insurance Company of Sudan was established in 1979.
Presently, there are over 100 Takaful Insurance companies scattered around the world.  Also, there are a number of conventional insurance companies who have created reasonable grounds for Islamic insurance.  In Nigeria, for instance, one of such insurers is Unitykapital Insurance which has strengthened its service-delivery in Islamic insurance alongside its conventional insurance business.
Since Takaful may be useful in cushioning the effect of the middle and working class and assisting in the event of a large loss, micro-takaful' is therefore desirable to bring service-delivery to the grassroots.
“Insurance can assist in achieving greater equality and empowerment of the poor by protecting them against unforeseen losses and giving them the courage to improve their productivity and livelihood through access to education, health care and employment”.