Takaful is the first type of Islamic financial service provided in Maldives. In 2003, Amana Takaful Maldives began as an agency operation offering takaful services and later it began as an incorporated company established for the purpose by obtaining a conventional insurance license from Maldives Monetary Authority (MMA). Though it has been 18 years since then, still Amana Takaful Maldives is operating under the same conventional insurance license given to them and there is no separate framework applicable to them. Apart from Amana Takaful Maldives, Ayady Takaful which is the Islamic window of Allied Insurance Maldives offers takaful services since 2014. In terms of takaful products, Amana Takaful Maldives offers general takaful products while Ayady takaful provides both general and family takaful products.
What is Takaful?
Takaful is also known as Islamic insurance. The term takaful is derived from the Arabic word “Kafalah” which means responsibility or guarantee. Takaful is derived from the Muslim historic system of ‘aqilah where the blood money that needs to be paid by the murderer to the family of the deceased with be jointly paid by the family of the murderer. Researchers such as ISRA (2011) has divided the developments of takaful into four phases where: phase one is in 1979 when the first takaful model based on ta’awuni model (cooperative) was developed in Sudan; phase two is in 1984 when mudharabah model was developed in Malaysia; phase three is in the same year where wakalah model was developed in gulf for takaful; and the final phase is in 1996 when waqf model was developed in South Africa. In takaful, takaful operator is not the insurer insuring the participants and it is the persons participating in the scheme who are known as takaful participants that mutually insure one another by mutually guaranteeing each other. As such, the role of takaful operator is to act as administrator of the takaful fund whose responsibility includes managing and investing the fund according to the shariah principles. The main differences between takaful and conventional insurance are provided below.
Source: ISRA (2011)
Issues facing Takaful Institutions in Maldives
There are number of issues facing the growth of takaful industry in Maldives. Below explained are the most critical issues faced in this regard.
- Lack of separate legal framework to govern Takaful: At the moment in Maldives, the same rules applicable to conventional insurance is applied to takaful. There are no separate legal requirements for takaful making takaful service offering institutions to have no difference in this regard with the existing conventional insurance players in the market. It is stated in the official website of MMA that insurance industry is regulated by MMA under the powers provided in the MMA Act 1981 and it is the Insurance Industry Regulation (2004) and insurance guidelines that set out specific criteria for authorization and other regulatory requirements to undertake business as insurers and insurance intermediaries in the Maldives. Article 1 of the Insurance Industry Regulation (2004) also states that in accordance with the provisions of the Presidential Decree no 2002/6 dated 16th January 2002, MMA as the designated competent authority has sole responsibility for the regulation and supervision of the insurance industry in the Republic of the Maldives. Since takaful is different from conventional insurance, the modus operandi of takaful need to be regulated within the parameters of Shariah rules applicable to it and regulatory clear guidance in the operational aspects of takaful offering institutions are essential to ensure that there is no breach of Shariah rules in offering of the service while safeguarding the rights of the customers and other stakeholders.
- Lack of Shariah governance standards for Takaful: Adoption of Shariah governance standards are important to achieve shariah compliance. The Shariah internal control functions that ought to be implemented within a takaful service offering institution need to be crystalized and standardized uniformly by the regulatory authority as without these internal control functions, managing Shariah non-compliance risk within the takaful service offering institutions will be a challenge. Likewise, there is also need for the regulatory authority to establish adequate mechanisms to report and disclose Shariah non-compliance events happening within the takaful service offering institutions.
- Lack of Short-term Shariah compliant investment avenues: Unlike conventional insurance companies, takaful service offering institutions cannot participate in the interest-based investment activities. Since there are limited Shariah compliant investment opportunities in Maldives, there is need to find ways to provide diversified investment opportunities for the takaful offering institutions to invest their funds. In this regard, it is imperative to introduce a well-regulated Islamic money market in the country where short-term liquidity management opportunities could be made available to all Islamic financial institutions.
- Absence of opportunity for Amana Takaful Maldives to place mandatory deposit kept with MMA in a Shariah compliant way: At the moment, there is no mechanism to keep mandatory deposits of Amana Takaful Maldives in a shariah compliant manner which has resulted in the company being unable to use the return received as the return received in this regard is considered as “tainted income” that needs purification. According to Guideline on Prudential Requirements for Insurance Undertakings 2010, all authorized insurance undertaking, whether life or general insurance shall at all times maintain a deposit of MVR 2 million with MMA, for each type of insurance (life or general insurance) the undertaking is authorized to engage in and all deposits placed with MMA for this purpose will be remunerated. Therefore, it is important for MMA to ensure that there is a Shariah compliant mechanism to place this deposit for takaful offering institutions to ensure that the return from these deposits could be used by the takaful offering institutions. In the Annual Report of Amana Takaful Maldives of 2020, following statement is found in the report of the Shariah Advisory Council the company:
An amount of money credited to the Waqf fund from mandatory interest based placement with the MMA has been designated to be paid to charity. Management has been advised to continue to canvass the MMA to convert this placement to a Shariah Compliant placement
There is no doubt that takaful industry has seen exponential development over the years in Maldives. However, to take the local takaful industry to the next level, there is need to eliminate the issues facing the takaful institutions operating in the country. The most important action in this regard is to introduce a distinct takaful legal and governance framework to the country. By doing so, a favorable environment for the existing market players will be created while attracting new players to the industry.
Dr. Aishath Muneeza is an Associate Professor at the International Center for Education in Islamic Finance.
 International Shari’ah Research Academy for Islamic Finance (ISRA), (2011). ‘Islamic Financial System Principles & Operations’, (Kuala Lumpur, ISRA; Malaysia).
IASL is seeks A contractor to refurbish the Maafaru airport terminal
BY: FATHIMATH LAUZA.
Island Aviation Services Limited (IASL) is looking for a contractor to refurbish the Maafaru International Airport terminal. IASL has asked interested Maldivian enterprises to submit proposals by February 12.
According to General Manager Mumthaz Ali, the goal of the terminal upgrade is to expand the airport’s capacity, add additional Maldives Immigration counters, and develop commercial and VVIP lounges.
He stated that the terminal will be a two-story structure, with the first level housing the VVIP lounge and the second housing the commercial lounge and offices.
Furthermore, the Maldives Transport and Contracting Company (MTCC) is planning to rebuild and enlarge the runway at Maafaru International Airport. The Abu Dhabi Fund for Development has provided a USD27 million grant to the project (ADFD). The expansion of the runway and terminal is projected to greatly boost the airport’s capacity.
The renovation and extension are part of Maafaru International Airport’s second phase of development. MTCC is in charge of extending the runway by 650 meters, enlarging the strip, recovering land, and constructing coastline protection buildings. Other activities include improving the runway pavement, enlarging the taxiway, and modernizing the AGL and power systems.
State reserve at USD 827.7M by end of last year, a significant improvement
Statistics publicized Maldives Monetary Authority (MMA) show that the state reserve stood at USD 827.7 million at the end of last year.
The ‘Economic Update’ publicized by MMA on Thursday showed that the gross international reserve, or in other words, the foreign currency reserve of the central bank, increased to USD 827.7 million by the end of last December.
This marks a three percent increase compared to the previous year. At the end of 2021, the state reserve stood at USD 805.8 million.
The reserve significantly improved in December 2022 compared to November 2022 with an addition of USD 223.5 million – marking a 37 percent increase. At the end of November 2022, the reserve stood at USD 604.2 million.
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Economic experts cite the increased tourist arrivals to the Maldives and increased exports from the Maldives as a positive impact on the Maldivian economy.
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OPEC+ committee recommends staying course on oil output policy
VIENNA, Feb. 1 (Xinhua) — Leading oil officials on Wednesday recommended to maintain the current oil output policy of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, amid an uncertain global economic outlook.
The OPEC+ agreed in October 2022 to cut production by 2 million barrels per day from the following month until the end of 2023. The cut equals to about 2 percent of the annual global oil demand.
Members of the OPEC+ Joint Ministerial Monitoring Committee (JMMC) “reaffirmed their commitment” to the current output plan at a virtual meeting on Wednesday and “urged all participating countries to achieve full conformity and adhere to the compensation mechanism,” according to an OPEC statement.
The JMMC comprises oil ministers from the OPEC+ countries. It has no decision-making power but provides policy recommendations for the OPEC+ ministerial meeting, the group’s decision-making body. It has also the authority to request additional OPEC+ ministerial meetings “at any time to address market developments,” according to OPEC.
The JMMC has reviewed the oil production data for November and December last year and “noted the overall conformity” for the OPEC+ countries, OPEC added.
The next JMMC meeting is scheduled for April 3. The next OPEC+ ministerial meeting, where the group will formally decide its output policy, is set for June 4.
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