Islamic Insurance in Bangladesh: Performance, Problems and Prospects

Abstract

Islamic insurance companies can provide efficient takaful services to the nation if they had the opportunity to work as a sole system in an economy. But in Bangladesh, Insurance companies are operating their activities under the dual framework both of conventional and Islamic framework monitored by the Insurance Development and Regulatory Authority (IDRA). This paper focuses key issues, technical issues and Challenges facing the Takaful industry in Bangladesh. Key Issues and Challenges are Scarcity of human resources with both insurance and Shariah expertise, Lack of standardization in the industry that is due to Shariah interpretations, diverging regulatory approaches and the lack of centralized regulations and shortage of suitable assets. In addition, there are various technical issues within the takaful industry, which may be relevant in the valuation and risk management of takaful business. Some of the technical issues are riba, issues around retakaful, too much stress on profit distribution and lengthy procedure in claim’s settlement. Some main benefits of Islamic insurance practices in Bangladesh are mobilization of savings, islamically approved (Halal) investment opportunity, opportunity to perform good deeds and to do charitable works, and distribution of Zakat.