Monday, May 07, 2012

Takaful provider looks to microtakaful for growth

"Ghassan Marrouche, chief executive of Takaful Emarat in the United Arab Emirates, said his company was expecting double-digit growth rates in coming years, supported by the launch of several new products including a capital-protected instrument and a “microtakaful” product focused on low-income earners." 
The quote above is one of the most encouraging I have seen for the development of Islamic finance, if it is sincere.  It represents a relatively unique statement by an Islamic finance company that they can profitably move down the economic ladder as a way to expand their business.  It makes sense that this would occur with a takaful provider because there are fewer opportunities to grow their business quite as far as with Islamic banks or wealth management companies (you only need so much insurance, but you can be sold a much wider number of other financial products).  

In order to continue their rapid growth takaful providers should realize (and may be realizing) that they need to develop products to offer to lower-income people.  However, when these products are developed, they should be done in a way that offers a useful product, not just another high fee product to pad the income statement of the takaful provider.  

But the important point in the discussion is that Islamic financial institutions need to assist microfinance institutions (including those providing micro-takaful).  It will provide a much larger market to support decades of growth into the future. 

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