Ethiopian Reinsurance S.C., aka Ethio-Re, has partnered with the AlHuda Centre of Islamic Banking & Economics, a UAE-based consultancy, to develop a Takafulreinsurance service, a scheme that covers risk through a risk-sharing procedure approved by Sharia law.
Risk is shared among participants who contribute to a pool of funds drawn from in times of crisis. Simultaneously, some of the amount can be invested in Sharia-compliant investments or distributed among participants, depending on the mode. The reinsurer collects a certain amount from the pool as a service charge. There are different subtypes of Takaful, such as the Wakala,Mudarabaand combined models.
Takafulreinsurance offers insurance to companies who are themselves providing Takafulinsurance services.
A memorandum of understanding signed between the two last week will initiate a Takafulreinsurance service. The duo will also collaborate in product development and through workshops.
Ethio-Re, established in 2016, is a pioneer in the reinsurance business. The company got off to a rocky start but has recorded positive growth for the last two years in a row, amassing 164 million Br in profit over the last fiscal year. With the commencement of this project, Ethio-Re will be the first Takafulreinsurance provider in Ethiopia.
AlHuda, which has previously partnered with Global Insurance to conduct a feasibility study for the establishment of Takafulinsurance, has 15 years of experience in consulting on interest-free banking. The firm has been operating in Europe, America and Africa. It provides research, product development and policy consulting for the banking sector.
AlHuda's former client, Global Insurance, became the first Ethiopian insurance company to launch a Takafulinsurance service last year. The company was granted a permit from the central bank in compliance with a directive that greenlit interest-free insurance in July 2020.
Fikru Tsegaye, an acting CEO of Ethio-Re, explains that interest-free insurance is gaining momentum, citing the establishment of the first Takafulinsurance company and hinting that three more are on the way. However, he was hesitant to name them.
Etho-Re and AlHuda are set to kick off their collaboration by hosting a conference on March 18, 2021, to provide an experience-sharing platform between foreign Takafulprofessionals and Ethiopians.
"We plan to organise frequent conferences on Takafulinsurance," commented Fikru, relating that the aim is to make Ethio-Re a regional hub for this sector of the insurance market.
AlHuda will proceed with a market study beginning in March, stated Zubair Mughal, CEO of AlHuda.
According to Fikru, the agreement between the two entities entails that Ethio-Re covers all costs incurred in setting up conferences and workshops.
Zubair believes that the expansion of interest-free banks and window services demonstrates the demand for interest-free banking and insurance services. He also asserted that Takafulcould be of benefit for non-Muslims as well. The CEO also says that TakafulInsurance can play a critical role in developing the overall insurance industry.
"Takafulis an ideal tool for insurance inclusion," stressed Zubair.
AlHuda has previously set up Takafulinsurance in African countries such as Nigeria, Gambia, Tanzania and Kenya.
Takafulinsurance emerged in the late 1970s and has been growing significantly ever since. There are currently 400 Takafulinsurance companies in the world, 60 of which are located in Africa.
Ebsa Mohammed, an insurance consultant certified in Islamic banking for a decade, raised his concern on how Takafulinsurance will work in a country with no human capital in the industry.
"The main challenge isn't starting the services, rather it's the knowledge gap," he stated. "Ethio-Re and all newcomers should engage in capacity building of employees."
PUBLISHED ON
Feb 13,2021 [ VOL
21 , NO
1085]
February 13 , 2021 . By TADESSE TSEGAYE
In Arada, I stopped over by a hotel in front of Cinema Empire. I sat alone inside wit...
January 30 , 2021 . By FASIKA TADESSE
The Council of Ministers approved a regulation that will establish the Liability &...
January 16 , 2021
It was a sunny day on September 12, 1974. A machine gun mounted on top of a tank was...
January 3 , 2021 . By ABDUREZAK LESMAN
Women wearing netela, a white cotton garment with woven coloured borders, and men in...
March 6 , 2021
It was somewhat of a surprise when officials at the electoral board came out to annou...
February 27 , 2021
That Ethio telecom would remain in the hands of the state was never a sure deal. A ra...
February 20 , 2021
The late Prime Minister Meles Zenawi was in parliament in 2010, taking questions on h...
February 13 , 2021
What most spooked buyers owning a billion dollars of Ethiopia’s Eurobonds was not a...
Put your comments here