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Nigeria Muslims Unaware of Takaful

Published: 23/05/2013 08:18:06 PM GMT
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LAGOS - New government guidelines for takaful (Islamic insurance) are facing hurdles in Nigeria as most Muslims are not aware of its workings and concepts, dealing a blow to efforts to position the African country as a hub of (more)

LAGOS - New government guidelines for takaful (Islamic insurance) are facing hurdles in Nigeria as most Muslims are not aware of its workings and concepts, dealing a blow to efforts to position the African country as a hub of Islamic finance.

“To be candid, I have heard about Islamic banking and I am interested in it but I know very little things about it,” Oladoyin Adedo, 32, a chartered accountant, told

“As for takaful, I have heard nothing of the sort.”

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The Nigerian government has earlier issued new guidelines to oversee the operation of the takaful industry in Nigeria.

The new rules require each takaful firm to establish an advisory council of experts.

At least two of the experts must be Shari`ah scholars appointed to four-year terms, which are subject to renewal.

In turn, Nigeria's insurance commission will establish a takaful advisory council of its own to oversee industry products and practices.

The rules also stipulate that scholars can only be members of one advisory council at a time and must undergo a formal assessment to ensure appropriate training and experience.

Conventional insurers will also be allowed to offer services through takaful windows, as long as operations are ring-fenced to avoid leakage and comingling with funds that are not Shari`ah-compliant.

“To be honest, I don't know and I am not also aware of the concept,” Alhaji Razaq Bamidele, a senior journalist, told

“And if I don't know it is safe to conclude that several millions of our people also do not know.

“So I hope that both the government and operators will get down to the basics of the concept so people can buy into it.”

Takaful is based on mutual cooperation in the sharing of risk and addresses key features associated with conventional insurance that is incompatible with Islamic Shari`ah.

At present, the Takaful market makes up only 1 percent of the global insurance market.

Malaysia and the Middle East region are the hub of the booming Takaful industry.

“As much as millions of Muslims like me would like to bank and insure ourselves in manners compatible with our deen, it is important for operators and scholars to educate people on these products, especially the concepts, how they differ from the conventional system and their advantages,” Adedo said.

She believes that anything short of proper enlightenment and education of the public, especially the Muslims, could spell doom for the relatively new Islamic finance.

“We hope this will be done in time to generate better interest.”

Important Tool

Nnamdi Duru, a finance correspondent for the daily THISDAY, believes that takaful is of utmost important for both Muslims and non-Muslims.

“From this point of view, it is something people stand to benefit a lot irrespective of whether you are a Muslim or not,” Duru told

“But the challenge is that operators will need to educate people on this new concept because it is not known in this part of the world.

“From my interactions with people, including Muslims, I found out that very little is known and I personally will not invest in what I don't know.”

Imam Ismail Lawal, who heads a fairly large Muslim congregation in a Lagos suburb, agrees.

“Many of us have often called for Islamic finance, from Islamic banking to insurance, but the shocking truth is that the majority of our people are totally unaware of how these things work,” Lawal told

“The challenge therefore is for all us, scholars and those in the system, to enlighten the public on it.”

Lawal urged big Muslim congregations across Nigeria to invite experts to discuss the concept of takaful.

“It is not enough for us to demand for Islamic banking and insurance, it is important that we know how it works. That is the only way to appreciate the people who led the struggle for its introduction.”

Muslims make up 55 percent of Nigeria's 140 million population, while Christians account for 40 percent.

New Concept

Nigeria's regulatory body of the insurance sector said efforts are being made to publicize the new concept.

“We understand the challenges, such as the low penetration and awareness among the people, but we are doing everything to spread the message,” Fola Daniel, commissioner for insurance at the National Insurance Commission (NAICOM), told

“We are deploying the mass media and other means to educate the public about it. There is also the training program being conducted for the operators.”

Nigeria currently has a total of 58 insurance companies which posted gross premiums of 233 billion naira in 2011, a 16.6 percent increase from a year earlier.

A separate circular sets a relatively low minimum capital requirement for takaful firms, which need to place a deposit of 100 million naira with the central bank.

Regulators opted to allow three takaful operating models under the new guidelines: mudaraba, wakala and hybrid.

Under the mudaraba model, a takaful firm acts as a managing partner for a policyholder's money, working under a profit-sharing contract with any losses borne by participants.

In wakala, the firm operates under an agency agreement, managing funds on behalf of policyholders in exchange for a management fee, which can also include a performance fee.

The hybrid model uses the mudaraba format for investing and the wakala format for underwriting.

All takaful investments must be in Shari`ah-compliant assets but if these are limited, firms may engage with conventional instruments subject to approval by their advisory councils.

Daniel cautioned against the wrong impression that takaful is open only to Muslims.

“Takaful is not a product, it is a concept,” he said.

“It is not about religion really. It is about a way of sharing risks and not transferring risks.“Takaful is a kind of community risk sharing, it is fantastic, people will take it.  It does not matter whether they are Christians or Muslims.”

Reproduced with permission from