The missing link: takaful and its importance for Islamic finance

Takaful and retakaful are not understood or utilized as well as they should be. There is a great potential for growth in the takaful and retakaful industries -such growth is only achievable with proper planning, technical skills and hard work. There are a number of constraints on the growth of takaful including the restricted capacity of retakaful companies and staffing in the takaful industry, However, other growth spurts will drive the industry forward like the emergence of new takaful operators and the assumption of large institutional risks by takaful operators (GM, IBM, and Daewoo are using Islamic finance for their capital needs worldwide). There are several challenges for the growth of the takaful sector that can be addressed: sweeping changes and regulation in the (re)insurance sector, establishment of a global retakaful facility, issues of the scale of takaful operations, product innovation, and responding to advancing disintermediation. Insurance is a major mechanism for