Rationale and Regulatory Basis of
Microtakāful Market Development
PRESENTED AT:
Microtakāful Conference Indonesia
Borobudur Hotel, Jakarta | 24 April 2014
Kartina Md Ariffin
Member of the Secretariat, Technical and Research
Agenda
About the IFSB
IFSB’s Road Map for Takāful
IFSB Initiatives on Microtakāful
About the IFSB
• The Islamic Financial Services Board (IFSB) was officially inaugurated on November 2002, and started
operations on 10 March 2003
• Serves as international standard-setting organisation for Islamic financial services industry that
promotes and enhances its soundness and stability by issuing global prudential standards and guiding
principles for the industry, broadly defined to include banking, capital markets and insurance sectors
• To this end, the work of the IFSB complements those of BCBS, IOSCO and IAIS
BCBS (Banking)
IOSCO (Capital Markets)
SPECIFICITIES
OF ISLAMIC
FINANCE
IAIS (Insurance)
OBJECTIVES
o Develop standards & recommend implementation
o Provide guidance on effective supervision and regulation & develop risk
management & disclosure criteria
o Establish cooperation with international standard-setting bodies & member countries
o Enhance and coordinate initiatives to develop instruments & procedures for efficient
operations and risk management
o Encourage cooperation among member countries
o Facilitate capacity-building & development of human capital
o Undertake research
o Establish database
IFSB’s Road Map for Takāful
•
August 2006, IFSB & IAIS established JWG and published “Issues in Regulation and
Supervision of Takāful (Islamic Insurance). Takāful issues were grouped into 4 major
themes:
o
Corporate Governance
o
Financial and Prudential Regulation
o
Transparency, Reporting and Market Conduct
o
Supervisory Review Process
To date, specific to Takāful, the IFSB has issued
o IFSB – 8: Guiding Principles on Governance for Takāful (Islamic Reinsurance) Undertakings
o IFSB – 11: Standard on Solvency Requirements for Takāful (Islamic Insurance) Undertakings
o GN – 5: Guidance Note on the Recognition of Ratings by External Credit Assessment
Institutions (ECAIs) on Takāful and Retakāful Undertakings
o IFSB – 14: Standard on Risk Management for Takāful (Islamic Insurance) Undertakings
o New Project: Guiding Principles on Retakāful (Islamic Reinsurance) Undertakings
o New Project: Research Paper on Microtakāful (joint initiative between IFSB & IAIS)
IFSB Initiatives on Microtakāful
In July 2013, the IFSB was invited
The Technical Committee (TC) of the IFSB,
to participate in the IAIS Financial
Inclusion
Subcommittee
(FISC)
meeting held in Manila, Philippines. It
in its 32nd meeting in Basel, Switzerland
recommended to the IFSB Council to
approve preparation of a research paper in
this area. Consequently the Council of the
was during this meeting that the IAIS
IFSB, in its 24th meeting in Brunei in March
proposed for a second joint-initiative
2014 approved the development of a
to be conducted with the IFSB, similar
research paper on Microtakāful to be part
of IFSB 2014 Workplan.
to the first Issues Paper in 2006.
Following this, the IFSB together with
the
IAIS
have
come
to
an
1st Joint Working Group Meeting
understanding to focus on issues
prevailing in the Microtakāful sector
and its role in enhancing the financial
inclusion.
8 April 2014
Kuala Lumpur, Malaysia
Regulatory Roles on Microtakāful
Characteristics of Microtakāful
Stakeholders of Microtakāful
Inclusivity
The Poor
Grouping for Efficiencies
Simple Processes
The
Regulators
Customer Wariness
Limited Data
The Shariah
Scholars
Contribution Collection
The Existing
Participants
The
Government
Delivery Channels
Definition of Microtakāful
Rural?
Income Level?
Standardized?
Regulatory Roles on Microtakāful
Challenges of Microtakāful
Mandates of
Joint Working Group
Joint IFSB-IAIS Research Paper
Highlight Areas of Concerns
Infrastructure
Elaborate on Issues
Consumer
Protection
Product
Coverage
Review Current Framework
Consumer
Education &
Awareness
Transparency
and Disclosure
Joint Working Group
Members
Information
Asymmetry
Regulators
Transaction
Costs
IFSB
IDB
IAIS
World
Bank
ADB
THANK YOU FOR
YOUR ATTENTION
Kartina Md Ariffin
Member of the Secretariat,
Technical and Research
[email protected]
www.ifsb.org