A brief interview with Prof. Dr. Zuriah Bt Abdul Rahman, Microtakaful Expert and Consultant, GIZ RFPI Asia, Malaysia. Prof. Dr. Zuriah will be presenting on the 'The Road Map to Financial Inclusion: The Case of The Low Income Population of Indonesia' at the 3 rd Annual Future of Global Takaful Conference.
1) How does microtakaful work. Is it Takaful or Islamic Insurance on a smaller scale?
Microtakāful is defined as a mechanism to provide Sharīah-based protection to the blue collared, under-privileged individuals at an affordable cost. Microtakaful poducts are tailor-made in terms of policy size, (which are usually small), limited coverage, small contribution amounts, and flexible mode of payment to cater to the low income and poor who have some risk priorities but could not afford the mainstream takaful products offered in the market. The products are crafted to meet the special needs of the economically challenged members of society or market segment to enable financial inclusion and provide a risk management solution that fits their needs.
2) Has microtakaful really been successful in providing risk mitigation and a safety net for lower income people?
Being rather new in the market, Indonesia has informally introduced it to the market and international company like Allianz, a German based company has reported a 3 percent profit margin for the last 2-3 years, and comparing it to the performance of microinsurance which has been offered for a longer duration in various markets in the South Americas, Africa, South Asia and few South East Asian countries especially in the Philippines and has seen positive results. The Philippines experience has indicated microinsurance to be helpful in mitigating losses especially for personal accident cases, in Bangladesh and Lebanon has assisted in medical and hospitalization expenses of the low income group.
3) How do you promote it in a context where lower income people are more concerned with day-to-day subsistence?
Microinsurance has been promoted through informal channels and in South America, Chile, Peru and Brazil through partnership with financial institutions providing microcredit and microloans. In Africa, particularly Sudan, microtakaful thrive in the micro credit businesses, likewise in Indonesia, the same is true. Most microtakaful are offered through existing channels of distribution and Indonesia in particular is through the cooperatives. Most underprivileged Indonesians are members of their local cooperatives, which provide for financial assistance in times of need, hence microtakaful becomes automatically a need to protect their microcredit with the said institutions.
4) To date what has the main component been, life or general insurance?
To date as with the practice with most microtakaful offered in Africa and Asia, it is to protect their micro loans installments in case death occur before the loans are paid off, hence it is credit microtakaful which falls under general takaful, but others such as those in Lebanon, Bangladesh and Sri Lanka, it is medical and hospitalization hence more of family takaful business. So effectively it covers both general and family takaful.