Mid 1990's, global Islamic finance assets recorded a total amount of USD 150 billion worldwide in view of it's infancy stage in most markets. By end of 2012, the amount has reached approximately USD 1.6 trillion or an average of 15% CAGR. This is a very promising performance for the Islamic finance industry despite of numerous challenges globally including severe global financial crisis 2007-08 which is considered as the worst financial crisis since Great Depression 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world.
Out of USD 1.6 trillion, only approximately USD17.2 billion is contributed by Takaful industry worldwide or only 1%. Banking assets constituted 80.4%, whilst Sukuk outstanding and Islamic fund assets constitute 14.6% and 4.1%, respectively. It means that takaful is still insignificant in economic determinant in most markets. There shall be more initiatives by the industry players to increase their market penetration and subsequently become dominant contributors to the economy. Areas like retirement and pensions should be on top list of their strategic plan which can assure long term sustainability and profitability. In addition, takaful operators should explore on enhancing their strategic distribution channels to improve market penetration. Current strategy perhaps is to tap into the mass market instead of niche market as this will help to create market awareness on the takaful concept and advantages such as profit sharing and transparency.
It is expected that global Islamic finance assets to surpass USD 6.5 trillion or 16% CAGR by end of 2020. Takaful industry should strive harder to increase their market share of at least 5% overall. Governments should facilitate in setting up more takaful operators in high potential markets such as Indonesia, North Africa, Middle East, India, Bangladesh, Pakistan and China. Matured Islamic finance markets like Malaysia can play bigger role in supplying right talents to new markets and continuously working together to develop those markets to become major contributor to domestic economy respectively. Global takaful industry should capitalize on several talents development institutions such as IBFIM, INCEIF, ISRA, etc in Malaysia which have accumulated decades of industry experience and ready to contribute successfully. Finally, IDB (Islamic Development Bank) can also contribute the necessary capital, if need be.
