In the spirit of Takaful of bearing one anothers burden, we need to remember the poor; the people with the greatest burden of them all.
The UNDP 2002 Arab Human Development Report covers 22 countries from the Magreb to the Gulf. It states that there are over 65 million adults who are illiterate and 10 million children out of school (which is envisaged to increase by 40% by 2015). High population growth is adding 6 million labour force entrants every year but with average unemployment across Arab countries at 15%, job creation is not matching the growth of the work force. While Arab countries do not have lowest levels of dire poverty it is estimated that one in every five person is still living on less than USD 2 per day. Real GDP per capita of the average Arab citizen fell to 13.9% in 1998, one seventh of the average OECD citizen. As well as a certain level of income poverty, the less well off in Arab countries have poor or unavailable healthcare, low quality education, poor living conditions and weak social safety nets with per capita healthcare ranging from USD 11 to USD 1,105 between countries.
Historically, income inequality in Arab countries has been on average one of the lowest in the world due to a strong cohesive sytem of social responsibility and the practices of zakat and sadqua. More recently, with growing populations and high unemployment, the gap between the rich and poor is expanding. Formal credit is often available to the wealthy but the less well off remain asset deprived and cannot offer the collateral required. There is a lack of local capacity to deliver microfinance services efficiently to the low income sector and a need for a focused approach to expand outreach beyond the less than 2% of poor households that currently have access to financial services. It is therefore important that some risk protection mechanism is available to lower the vulnerability of the Muslim population.
The enclosed paper Takaful and Poverty Alleviation (also available in Arabic) looks at the need for “microtakaful” schemes and how the experiences and expertise of ICMIF could be utilised. In particular the study proposes the use of the partner-agent model and encourages the transfer of expertise and resources from the established takaful movement. The cooperative model has been successful in delivering products and services to the poor for many decades, and it is therefore appropriate that microtakaful schemes should be based on a “not-for-profit” basis. Establishing cooperative based ‘microtakaful’ schemes enables insurance to become much more acceptable and accessible to the poor whilst stil maintaining the benefits and principles of a cooperative.
Some of the worlds least developing nations have a majority Muslim population and very little access to affordable insurance. At its meeting in June 2007 the ICMIF Development Committee approved the establishment of the ICMIF Microtakaful Support Centre (MSC) with the objective to develop Shariah compliant takaful products that are within the means of the low-income sector. The MSC aims to raise funds internally from the Takaful sector and externally from aid organizations to facilitate the transfer of technical assistance required to set up sound microtakaful schemes. The expertise on Takaful and microinsurance available within ICMIF members is a unique combination which can be put to good use through this platform