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Elham Abubeker (left), takaful coordinator, and Ahmed Sherief, board chairperson at Global Insurance Company S.C., chat at Hyatt Regency hotel ahead of the new insurance product unveiling.


Global Insurance has started providing insurance policies in which members contribute funds into a pool to guarantee each other against losses or damages. The service, dubbed takaful, was launched as of this month across the firm's 23 branches in the country.

The new service makes Global the first insurance firm to provide an insurance policy that is in compliance with Islamic sharia law. The firm launched the service after getting approval from the National Bank of Ethiopia (NBE) in mid-July. Global will provide the service through a window-based approach called the wakalamodel, in which the takafuloperator works as an agent on behalf of the takafulparticipants.

The parliament legislated the proclamation that allows interest-free insurance services on January 9, 2020. Then the central bank issued a directive to activate the service on June 15, 2020. The service was not allowed in the country until Prime Minister Abiy Ahmed (PhD) came to power and opened doors for interest-free banking and insurance services.

Global has availed 16 takafulproducts that cover losses on both movable and immovable assets due to theft or robbery and different kinds of accidents including fire and traffic. Boiler and pressure vessel, burglary, commercial vehicle and contractor risk are all takafulpolicies provided by the company.



Global will provide the service at its 15 branches in the capital and more branches in Harar, Adama, Dire Dawa, Hawassa, Jigjiga, Bahir Dar, Meqelle and Dessie.

Before launching the product, the company hired Al-Huda Centre of Islamic Banking Economics to study the feasibility of the business in the country. Al-Huda Centre of Islamic Banking Economics, a Dubai-based Islamic banking and insurance service consultancy company, found out the possibility of the business and market opportunities.


The study suggested that there is a huge potential market for the product, according to Tibebe Tesfaye, CEO of Global.

The service is a relief for those who were obliged to use conventional insurance, which involves risk transfers with uncertainty, which is essentially gambling, according to Ahmed Sherief, board chairperson of Global, which netted 22.4 million Br during the 2018/19 fiscal year. Its capital during the just ended fiscal year was 151 million Br.




Takafuldiffers from conventional insurance since it makes participants shareholders and shares risk rather than transferring it, according to Ahmed.

“Unlike the conventional insurance policy, the policyholders share the profit,” said Ahmed.

There is no insured person in takaful, because the policyholder is rather a participant, according to Hikmet Abdella, vice-board chairperson at Global Insurance Company and director-general of the Accounting & Auditing Board of Ethiopia.

The funds collected from participants will be divided into two portions: the first portion for claims to compensate for risk and the other portion for investing in halal business areas, according to Hikmet.


Fikru Tsegaye, who has been lobbying for the launch of the service for the last eight years and has conducted six studies on takaful, says the company could be successful in launching the service since there is huge demand for it.

The company should equip itself with efficient service, products and market knowledge to penetrate the market as well as work on aggressive marketing to raise awareness about the service, according to Fikru. He advises that the company use bank branches to provide the service and reduce expenses.

“This would yield good results as banks have many more branches across the country,” he said. "Insurance companies spend half of their total cost to operate branches, and this incurs higher operational costs."

Fikru believes that the insurance business in the country is in its infant stage, is failing to meeting the demand, and suffers from a huge knowledge gap.

“Over 70pc of the population are farmers," he said. "But there is no vibrant agricultural insurance service."



PUBLISHED ON Sep 06,2020 [ VOL 21 , NO 1062]






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