Takaful of Opportunity
by Azim Mithani
An insurance and takaful business leader with more than 30 years of experience including 6 years as CEO of a major takaful operator in Malaysia. He currently provides advisory services and is a non-Executive Board member of a takaful operator. Azim is a UK qualified Chartered Actuary (FIA C.Act). His profile can be found at www.linkedin.com/in/azimmithani.
I have had the privilege to work in the takaful industry over many years. My journey has given me the opportunity to contribute to the industry’s development, innovating services, business models, customer propositions and more. This experience has given me a certain vantage point and in this short article I offer my personal views on the industry’s development, challenges, and opportunities.
First and foremost, this is an industry with limitless potential and relevance. No question.
What should amaze us all is how much has been achieved in such a short space of time. The takaful industry is, in many respects, still in its infancy despite its Quranic origins. It didn’t really exist anywhere in the world until the 1970s (Sudan) and didn’t become what can be described as an industry until the 2000s. Soon its assets will exceed US$100bn . If you think also of the economic and societal impact – the livelihoods and more that the industry supports with hundreds of thousands employed directly and indirectly, then you truly understand how much has been accomplished. As this expansion has gained traction it has attracted human and financial capital spurring new thinking and entrepreneurship. The net result is that, today, alongside the broader Islamic Finance industry, we are witnessing a steady evolution in the number and type of takaful offerings within and outside Muslim majority markets. Can all of this mutually reinforce and lead to a broad based and large scale industry? Only time will tell.
Of course the industry has not achieved all it could and it has its challenges with the main criticisms generally falling into a few categories – not Islamic enough and just aping insurance, needing to be different by addressing societal disadvantages, and a lack of standardization. Maybe these are valid criticisms but let me offer a perhaps contrarian view on each of these in turn.
When it comes to not being Islamic enough, it reminds me of the scene from the movie “A Few Good Men” when Tom Cruise’s Navy lawyer Kaffee questions Jack Nicholson’s Col Jessep in the witness stand when Jessep says one of his soldiers was in danger. Cruise asks Nicholson whether he was in “Grave danger?” to which Nicholson responds “Is there another kind?” Is there another kind of takaful that we are missing? If there is, what fundamental change to products and services is wanted to address this? Aren’t products developed in conformity with Islamic principles, reviewed by Shariah committees and managed according to regulatory requirements? Fundamentally, the risks that takaful products are designed to cover aren’t any different as those covered by insurance. And it’s not as if insurance offerings are inherently weak or wrong – they are just not Islamic.
When it comes to addressing societal disadvantage, we need to acknowledge that Takaful Operators conduct business in relatively large scale markets (by which I mean populations upwards of a few million) and these are highly regulated environments often with complex risk and capital requirements. It is really only institutional investors, with their financial capital, that can satisfy these standards and requirements. And if they are to invest they will want a return. With this in mind how can the industry be purely about providing products and services for lower socio-economic groups with no prospect of return. On top of this, we should absolutely want the best minds and thinkers to work in the industry to propel it forward – this just won’t
https://www.thecityuk.com/media/1tbbofqr/islamic-finance-global-trends-and-the-uk-market.pdf
happen if the sole aim is to develop mutual, collective based offerings. For both these reasons I just don’t see this formulation of takaful as feasible. Better in my view to have, as in some markets, a requirement to develop and offer such products alongside more commercial offerings or even a levy – the cost of doing business in a market if you will. More fundamentally, the industry alone cannot solve many of these societal issues; it is multi-stakeholder approach that goes to the heart of broader political trends we are seeing across the globe in terms of haves and have-nots.
And there is standardization. To me this is anathema to innovation and competition. Have standards – as distinct from standardization – for sure, have consistent capital approaches and prudential requirements to foster trust and confidence, but to require every country to be the same, to require the identically same takaful models and surplus sharing rules, the same everything across markets doesn’t make sense to me. And whilst I am no Islamic scholar surely such an approach would go against the very essence of human enquiry and interpretation. Moreover what purpose would it serve? Someone buying a product in Pakistan won’t be bothered whether what she or he buys is the same as what somebody buys in Indonesia. Pricing, risk profiles and experience, demographics, customer preferences, and more would quickly result in divergence in any event. I much prefer that businesses freely compete by innovating new solutions that respond to and generate customer demand – ultimately that is the only way the industry can evolve and progress.
For sure I only scratch the surface of these issues and counter arguments. So before I am inundated with objections let me say I recognize that they are complex, multi-dimensional and nuanced. Their solutions are not easy but this is to state the obvious and if anything, reinforces the need for creativity in approach and for all of us to actively participate in generating solutions. But what is probably clear running through this brief commentary is the need for innovation. Innovation and by implication risk-taking is what will see the industry succeed.
What might be the ingredients for continued success? What are the gaps that need addressing? Hopefully I will explore these topics in future articles.
The industry has done fantastically well in just a few decades but there is no room for complacency. This is an inter-generational undertaking and the journey has really only just begun.
“Well said, Mr. Azim. Takaful is indeed closely rooted in the concept of tabarru’. Innovation in Takaful products can begin with rethinking the tabarru’ mechanism itself. By doing so, we can also help customers better understand how and why Takaful enables broader protection — especially for those in the lower socio-economic segments. This reinforces the spirit of mutual assistance and inclusivity that lies at the heart of Takaful.”
Azim Mithani’s article is indeed thought-provoking, offering a valuable insider’s view of the Takaful industry’s evolution. Since views are invited, I would like to respectfully offer mine.
My core contention is this: growth without purpose risks reducing Takaful from a values-based social protection model to just another commercial insurance business. This brings us to the author’s rhetorical question — “Is there truly another kind of Takaful?” — to which I would firmly say: Yes, there is. And there must be.
Takaful was never conceived merely as a Shariah-compliant version of insurance. Its legitimacy, as recognised by the OIC Fiqh Academy and scholars like Sheikh Yusuf al-Qaradawi, lies in its cooperative nature, rooted in ta’awun (mutual assistance), not in shareholder-centric capital models. Yet, the prevailing reality in many jurisdictions reflects a structure where shareholders dominate governance, and participants have little say in surplus treatment or product co-design. While Shariah compliance is essential, it is insufficient. The true test is whether the operating model embodies the ethical and mutual spirit that makes Takaful distinctively Islamic.
A fundamental shortcoming is the exclusion of the underserved. Commercial viability is a legitimate concern, but it cannot be used to justify the industry’s hesitation to serve lower-income communities. If market forces alone do not prioritise the vulnerable, then the onus is on us to innovate solutions that do, whether through waqf-linked funds, zakat-subsidised protection, mandatory inclusion schemes, or hybrid cross-subsidisation models. Such approaches are not theoretical; we have seen practical pilots in Malaysia and Indonesia that blend social finance with commercial logic. These prove that ethical protection for the poor is not only feasible, but entirely in line with Takaful’s original purpose.
Structurally, another gap persists: who champions the rights of the participant-consumer with real accountability? Beyond disclosure, what institutional mechanisms ensure that participant interests are protected and prioritised? The real debate is not about whether the products are Islamic enough on paper, they often are, but whether the model reflects the mutuality envisioned in its foundational fatwas.
This brings us to standardisation. Contrary to the view that it stifles innovation, I would argue that principled harmonisation is vital to protect Takaful’s identity. It is not about enforcing one-size-fits-all products, but about establishing baseline standards for surplus treatment, transparency, and Shariah governance, essential elements to build trust and coherence across jurisdictions. When surplus is treated as a participant right in one country and a shareholder-controlled pool in another, the credibility of the entire model is called into question. Clear standards are not constraints, they are the framework within which ethical innovation can flourish.
Finally, on talent: the best minds today are not merely chasing profit, they are seeking purpose. Takaful, if anchored to its original values, has a powerful value proposition that can attract future-ready, impact-driven professionals. But only if it remains true to its mission.
In the end, the real challenge is not feasibility; it is intent. We have the tools and creativity to reconcile commercial sustainability with social responsibility. We need only the will to do so. Takaful must consciously preserve its moral clarity, balancing innovation with purpose, market competition with mutual care, and flexibility with foundational values.
Compliance is the floor. But mutuality, solidarity, and shared protection remain the ceiling, and the soul, of Takaful. Let us not forget to protect it.