For Critical Resources in the Wilderness, Takaful's the Gateway


Dec 25 , 2021
By Asseged G. Medhin ( Asseged G.Medhin, deputy CEO of Global Insurance Company. )


The spread of Takaful practices and dedicated companies will help potential customers be encouraged to invest and pool their resources into a sector after a long time of isolation, writes Asseged Gebremedhin, an insurance professional with over a decade of experience in finance.


Interest-free finance is experiencing a period of rapid growth in terms of its net contributions and profit worldwide. The alternative policy to typical insurance, Takaful, is becoming more prominent in the Middle East, Asia, Africa, Latin America and some European countries. There is a promising development in Ethiopia following a welcoming change in the sector.

Global Insurance has been the pioneer in breaking long-standing inabilities of providing the service for those customers who have stayed away from the Ethiopian financial industry based on personal principles and faith.

The exchange of goods and services is backed by finance in any economy. Money is a medium of exchange both in conventional finance and alternative ones. But for the objective of global acceptability, stability, growth, and sustainability, there is an increasing demand for interest-free finance and the need to reduce differences between models, and eliminate the barriers in the development of operations, cooperation and compatibility.

As the financial sector becomes ever more competitive, together with the ongoing difficulties in the global economic environment, more and more operators are concerned about how they can overcome the challenge of maintaining growth. As a result, the intervention of interest-free finance has reinvigorated the sector even if there remains a global shortage of acknowledged scholars in the field of insurance and a lack of consensus on Sharia-compliant products.

Global Islamic insurance contributions grew in 2018, reaching 27 billion dollars; 33.9 billion dollars the next year, and 44.03 billion dollars last year. It has continued to grow and is expected to reach 57 billion by 2021, according to the 2020 World Takaful Report.

The existing operation of Islamic insurance worldwide is fine-tuned to meet the demands of Sharia law. Many investors of the Islamic faith, multinational companies, and halal (Arabic for ‘permissible’) industries are using the alternative insurance policy of Takaful.

Interest-free finance aims at developing a fair and equitable justice in resource ownership and surplus distribution. The law promotes a pluralistic society on the basis of Sharia compliance in duties and rights. A fair allocation of economic resources and maintaining justifiable balance in risk-sharing and fund management is sought out while undertaking the underwriting management process, claims management process and carefully placing mega risks.

Much focus is given to risk mitigation to attain the above developmental objectives. Sharia boards and advisory roles are ultimately supervising and checking risk mitigation.

Takaful insurance and operating practice are mainly based on the principle of mutual cooperation, solidarity and brotherhood, which is operated based on the Mudharabah financing technique in which the parties of the contract share profits at the agreed proportion.

Ethiopia’s Takaful practical model is through independent windows or desks as the practice is young. Full-fledged interest-free banks such as ZamZam and Hijra will serve as a backward linkage for full-fledged Takaful companies under-establishment such as Amana Takaful. These will help potential customers be encouraged to invest and pool their resources into the sector after a long time of isolation.

These alternative financial products and services, unlike conventional ones, will not have to be restricted to one faith. They cross the fault lines of creed wherever they have been applied. The demand is already huge and existing, and the upcoming Takaful companies can build on the opportunity by implementing aggressive marketing strategies.

Takaful is an alternative product that is a tool to manage risks, either particular or mega (in the form of Re-Takaful). In its broader aspect, it is an investment and the way to grow the economy using short-term and long-term halal investments. The need to have alternative microfinance, “permitted” institutions and regulatory counsel for both interest-free banking and Takaful insurance will advance the service following the development of alternative insurance and banking service around the globe, in the continent and within Ethiopia.



PUBLISHED ON Dec 25,2021 [ VOL 22 , NO 1130]



Asseged G.Medhin, deputy CEO of Global Insurance Company.





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