Presentation made by Hassan Bashir (CEO, Takaful Insurance of Africa, Kenya) at the 6th ICMIF Development Network Seminar (1-2 November 2012; Nairobi, Kenya)

1. TAKAFUL: An Opportunity to
Extend the Provision of
Microtakaful

2. Content
1. Takaful Insurance Africa (TIA)
2. The Insurance industry in Kenya
3. The Takaful Concept
4. The need for Takaful in Kenya
5. The Target Market
6. Wider Demand in Africa
7. Microtakaful,
8. Need, Products, Opport & Challenges
9. Partnership, Channels
10. Conclusion
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3. About TIA
• TIA was founded in Nov
2008
• TIA licensed by the
Insurance Regulatory
Authority of Kenya in
January 2011
• This is a License to offer
General Takaful products
• TIA is the first Takaful
Operator in the Region
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4. About TIA
• Over the last one year
TIA has gained market
acceptability and has
expanded to open 4
offices including the Head
Office
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5. The Insurance Industry in Kenya
• Population of 40 million people
• 45 insurers
• Kshs 92 billion (USD 1.1 b)
• 3% penetration level
• TIA share in 2011, 0.2% (USD
2.1m), 8 months of operation
• Expected share 2012 – 0.55%
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6. The Takaful Concept
• As a risk management scheme
• As a resource pooling model
• As an investment scheme
• As a self-guarantee mutual scheme
• As a source of solidarity & coop
• As a social welfare system
• As a means of wealth distribution
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7. The Need for Takaful in Kenya
• The uninsured Muslim population
• A desire for Shariah compliance
• The need for ethical process
• The impact of great value
proposition
• Improved service resulting from
ethical process
• The coop, mutual nature of the
Takaful model
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8. The Takaful Target Market
• Takaful as a model for all
consumers of risk management
products
• Satisfies the need for ethical
fundamentals
• Serves consumers of all faiths
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9. Wider Demand for Takaful in Africa
• Significant Muslim population in
Africa
• A fit between the Takaful model &
African culture
• Limited penetration of insurance
services in Africa, especially at the
micro level
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10. What is Micro-Takaful?
• An insurance systems that offer products to lower
end of the market at low costs.
• A risk-pooling mechnism designed for the low-
income market in relation to cost, terms,
coverage and delivery mechanisms.
• Micro Takaful: “A mechanism to provide Shariah-
based protection to the blue collared, under-
privileged individuals at an affordable cost”.
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11. Characteristics of Micro-Takaful
• Simple product design,
• Frequent & affordable premium payments,
• Packaged uniform benefits
• Based on principles of solidarity,
• Provide access to protection against risky
events that affect the economic well-being
of the poor.
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12. Need for Micro-Takaful
• Limited reach of the insurance sector
• The need of uninsured masses
• The missing Muslim community, both rural
and urban
• The success of recent attempts, such as
CIC insurance
• Emerging regional need within the
upcoming devolved system
• The development Shariah compliant coop
societies (CTS)
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13. Benefits of Microtakaful
Opens Results in
Helps people Creates feeling Ensures that
avenues for Cooperative migration of
sustain their of Society
joint efforts for approach and benefits at
financial well togetherness & benefits at
mutual outlook. individual
being security large.
benefits. level.
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14. To Succeed…
• At least 10,000 members (if life insurance is offered).
• Efficient and low-cost collection system.
• Well designed products that meet members’ needs but with
features that mitigate moral hazard and adverse selection.
• Compulsory participation of all insurable members.
• Low cost of administration and claims payment.
• Professional management and competent technical staff
adhering to business standards and insurance principles.
• Computer systems able to track and service members, to
accumulate data for experience analysis, MIS, etc.
• Professional investment management.
• Sound reinsurance program.
• Scientifically computed and fully funded actuarial reserves.
• High benefits to premium payout ratio while maintaining
sound financial health.
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15. Microtakaful Products
Most Complex
Least Complex
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16. Opportunities
 Provision of Microtakaful products to
nomadic communities in remote areas –
Livestock covers
 The informal sector (locally known as
jua kali) employs a big portion of our
population. This group still remains
unreached
 Tapping the large Muslim population in
Kenya
 Hawkers
 Rural communities
 Untapped distribution networks –
shopkeepers, transporters, community
leaders
 Devolved government
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17. TIA Microtakaful Approach
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18. TIA Microtakaful Approach
• Insert the Mpesa
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19. 19

20. 20

21. TIA Microtakaful Approach
• Takaful Bima Poa Cover – A Funeral
Expenses cover for the mass market
(under development)
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22. Challenges
• The Industry is currently unregulated
• Government and IRA to come up with
incentives to encourage investment in this
area
• Lack of distribution networks due to
stringent licensing requirements for
insurance agencies by IRA
• High cost of running Microtakaful
operations
• Poverty levels are too high for target
communities
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23. Challenges
• Technological challenges –
identifying the right platform
• Informal schemes: convincing the
thousands of informal schemes
(chamas) in the embrace Takaful
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24. Partnerships/Channels
• For TIA to succeed in this untapped area, there is need to
team up with a number of key players:
• Government, especially at County levels
• NGOs
• MFIs
• CBOs
• Mosques
• Islamic Institutions
• Business Community
• Foundations
• Mobile Phone Operators
• Banks
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25. Conclusion
• Microtakaful offers great
opportunities to change the lives of
communities.
• Given the low penetration levels of
insurance in Kenya (currently at 3%),
this is one area that offers TIA a
chance to make a difference in
society.
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26. A new dawn in Eastern Africa
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