Development of Takaful Industry in Malaysia

By Mohamed Redouane Riad, Rusni Hassan, Syed Ahmed Salman & Adnan Yusoff

Abstract

The inception and rapid growth of the Takaful industry in Malaysia during the 1980s was driven by Muslim communities’ dire need to have a Shariah-compliant alternate for existing conventional insurance. It was also to assist the operations of the Islamic Banks established in 1983. The need for Takaful was heightened when the Malaysian National Fatwa Committee ruled that conventional life insurance is against Shariah principles as it entails elements of uncertainty, interest, and gambling. The government in 1982 set up a Special Task Force to study the feasibility of establishing Islamic insurance in Malaysia. Based on the results, a Takaful Act was passed in 1984. And in November 1984, Malaysia incorporated its first takaful operator. Using the library research method, the study looks into the Malaysian takaful industry to examine its overall development. The results show that the industry has been rapidly growing. The number of players multiplied significantly. And an industry that once had only one operator has

become an integral part of the financial system. Bank Negara Malaysia’s continuous efforts and the takaful operators in developing a dynamic, resilient, and efficient takaful industry have successfully brought the industry to where it stands today.