Microinsurance and TakafulCooperative combinations 1st Asian Conference on Microinsurance July 2526

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Microinsurance and Takaful/Cooperative
combinations 1st Asian Conference on
Microinsurance July 25-26 2007
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Overview of presentation

• About ICMIF
• Overview of the cooperative and mutual sector
• Microinsurance through cooperatives
• Opportunities and need for microtakaful

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About ICMIF

• Established in 1922
• 180 members from 70 countries
• 22 Takaful members
• Not-for-profit, voluntary and member driven
• Regional offices in Brussels, Tokyo, Tunis
  Washington
• Represents 11 of total global premiums

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Cooperative definition

• A cooperative is an autonomous association of
  persons united voluntarily to meet their common
  economic, social, and cultural needs and
  aspirations through a jointly-owned and
  democratically controlled enterprise
• Source International Cooperative Alliance (ICA)

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Cooperative/mutual values

• Self-help, self-responsibility
• Democracy, equality, equity
• Solidarity
• Honesty, openness
• Social responsibility, caring for others

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Cooperative vs. Mutuals
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Why a cooperative/mutual?
Addressing a need
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Cooperatives and Mutuals the hidden giants of
the world economy

• The largest 300 cooperatives and mutuals have a
  turnover of
• 1 trillion USD

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Worldwide importance of mutual insurers,
2001Percent of total premiums
100 2416 bio USD
USA
EUR
CAN
JAP
KOR
Source Swiss Re for worldwide total premium
ICMIF
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Providing microinsuranceThe challenges

• Coverage
• Regulation
• Moral hazard and Fraud
• Adverse selection
• Education and trust
• Technical expertise
• Affordability
• Retention
• Sustainability
• Penetration

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Potential for cooperatives to provide
microinsurance

• History of organising the poor
• Operate for the interest of members by members
• Trust
• Ownership and loyalty
• Peer pressure
• Surplus reinvested or redistributed

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Cooperatives providing microinsurance

• CARD MBA The Philippines
• Sanasa Insurance Company Sri Lanka
• Centre DInnovation Financiere West Africa
• Columna - Guatemala
• Torreon - Mexico

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Challenges for microinsurance cooperatives

• Regulatory requirements
• Accessing reinsurance
• Technical and financial investment

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The way forward?

• Maintain informal operations
• Merge with other providers
• Enter into a partner-agent agreement
• Lobbying regulators

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Microtakaful Opportunities and need
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Principles of Takaful

• Solidarity and joint guarantee
• Self reliance and self sustaining for community
  well being
• Assist those that need assistance
• Community pooling system
• Shariah approved investments and products
• Bear ye one anothers burden

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The Global Takaful sector

• 1979 First Takaful Company established
• 1996 30 Institutions transacting Takaful
• 2002 50 Takaful operators and four Retakaful
  providers
• 2004 80 Takaful operators, 200 Takaful windows
  and 12 Retakaful providers
• Source IBB Solicitors, UK (2005)

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The need for microtakaful

• Social services inadequate or unavailable
• Large sectors of poverty in many Muslim countries
  
• Over half of worlds lowest developed countries
  have a majority Muslim population
• Increasing inequality in Middle East and Gulf
  countries
• Religious considerations are important in
  villages and small communities
• Established Takaful sector neglecting low income
  sector

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• A noticeable lack of microinsurance in North
  Africa and the Middle East. In no other region is
  the absence of microinsurance so evident
• Source The Landscape of Microinsurance
• (The Microinsurance Centre)

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Takaful is the second most important social
institution to counter poverty and
deprivation Omar Fischer 1999
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• A cooperative and mutual scheme providing
  Shariah approved products and investments is
  permissible under Islamic Law

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Possibilities for microtakaful

• Establish community based microtakaful schemes
• Involvement of NGOs, zakat funds, donor agencies
• Support from Takaful sector
• Technical expertise
• Financial assistance
• Partner-agent model

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Microtakaful in practice

• Agricultural Mutual Fund - Lebanon
• Amana Takaful Sri Lanka
• Takaful Ikhlas
• Takmin - Indonesia

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The case of a microtakaful policyholder

• Ibu Iwit, 50 years, farmworker, earning one
  dollar a day.
• Took out a 6 month loan of 55 USD from local
  Baitul mal Wat Tamwil
• Insurance premium was taken out with Takmin at
  0.16 USD
• Ibu Iwit passed away a couple months later
• Her husband, Amad, age 60 years, no income
• Outstanding loan paid off by Takmin

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Summary

• Cooperatives have for many years being providing
  insurance to the underserved population.
• There is a need to find avenues to facilitate the
  sustainable growth of the informal sector
  operators.
• The philosophy and principles of Takaful are
  similar to cooperatives.
• Takaful requires the needy to be given
  protection.
• There is a need for microtakaful in many Muslim
  and Non-Muslim countries to support poverty
  alleviation efforts.
• The Takaful sector is now firmly established and
  can start looking at providing access for the
  poorer communities.

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A Global reach for local strength

• Thank you
• www.takaful.coop