Author(s): Ahmad Alrazni Alshammari, Basheer Hussein Motawe Altarturi, Othman Ibrahim Altwijry
Takaful in the Middle East represents the lion’s share of the global Takaful market. Past Takaful research have focused on the aspects of Shariah, financial performance, consumer behaviour, etc. However, there is a dearth in tracing and documenting the early beginnings of Takaful in each country from both the business and regulatory development perspectives. The Middle East consists of 16 countries – Bahrain, Egypt, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey, UAE, Yemen, as well as Cyprus & Northern Cyprus. This paper intends to achieve two objectives: 1) to identify the early beginnings of Takaful in all the Middle East countries; and 2) to find the key challenges faced by the Middle East Takaful markets. In the initial exploration, the researchers found several observations: such as 1) Takaful business currently exists in all Middle East countries, except Cyprus & Northern Cyprus where there are no Takaful companies nor any regulations pertinent to Takaful; 2) all the markets operate based on a dual-system that allow both Takaful and conventional insurance businesses, except the Saudi and Iranian insurance markets which only allow the Islamic insurance business; and 3) the UAE Takaful market witnessed two pioneer initiatives which are the establishment of first Takaful company in 1979 (the same year of Takaful establishment Sudan) and the issuance of the first dedicated Takaful regulation in 2010. The paper also found four key challenges generally faced by the Takaful industry in the region: 1) Takaful regulatory framework; 2) political and macro environment; 3) awareness, education and human capital; and 4) standardization and public disclosure.