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Tanzania: Plans Underway to Introduce Islamic Insurance Services

Tanzania: Plans Underway to Introduce Islamic Insurance Services

GOVERNMENT authorities are working on the possibility of introducing Islamic insurance, a move aimed at liberalising further the country's financial industry.

Sources in the Ministry of Finance and Economic Affairs and the Tanzania Insurance Regulatory Authority (TIRA) confirmed that relevant authorities were working on the planned new insurance scheme. "It is true that the government is working on the possibility of establishing Islamic insurance known as Takaful.

It is still on preliminary stages...but the process is going on well," an official close to TIRA told the Business Standard over the weekend. Islamic insurance or Takaful, makes up only one per cent of the global insurance market, but is growing as highly populated Muslim markets such as Indonesia and Malaysia turn to products compliant with Islamic law.

Introduction of Takaful will be another milestone in development of the country's financial industry following its liberalisation over 20 years ago, through the Banking and Financial Institutions Act of 1992. The enactment facilitated creation of privately owned banks and non-bank financial institutions. At present there are more than 50 banks operating in the country.

The insurance industry is regulated by the Insurance Act, 2009, which was preceded by the Insurance Act of 1996, following liberalisation of the sub-sector. The insurance business in Tanzania was nationalised in 1967, after the Arusha Declaration, which was then the country's blue-print of economic, social and political development, under which the commanding heights of the economy were placed under the hegemony of the state.

Between 1967 and 1996, the National Insurance Corporation (NIC) and Zanzibar Insurance Corporation (ZIC) dominated the scenario in the domestic insurance market. The latest TIRA market report shows that Tanzania insurance industry grew by 20.0 per cent to 344.7bn/- in 2011, from 287bn/- in 2010.

The growth reflects that the insurance industry has continued to attain a higher growth rate than the national and the finance intermediation sector over the last one year. The country's insurance penetration (premiums as a percentage of Gross Domestic Product (GDP) increased from 0.86 per cent in 2010 to 0.89 per cent in 2011.

Commenting on Takaful, Professor Haji Semboja, a senior economics lecturer with the University of Dar es Salaam (UDSM), said the scheme was a component of marketing strategy in the fast growing financial industry. "There is no much difference with other types of insurance products.

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