Takaful industry in Pakistan: challenges and opportunities

Express Tribune

25-05-2025

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The Takaful industry in Pakistan has come a long way since its inception in 2006, when the Securities and Exchange Commission of Pakistan (SECP) promulgated Takaful Rules. Azeem Iqbal Pirani, Chief Operation Officer and Executive Director at EFU Life, recalled the history of Takaful in the recent Tribune Podcast held in collaboration with EFU Hemayah Takaful. He mentioned that EFU was the first company incorporated as a General Takaful Company with the aim of expanding insurance services to the general public in accordance with their beliefs.
Pirani mentioned that at the time, ordinary citizens would not avail any kind of insurance, be it general, life, or health insurance, because people believed that the insurance services were against Shariah. Those like him who joined to serve the Takaful industry aimed to expand the services for common citizens in line with their beliefs, so that they could avail themselves without any resistance or reluctance. This objective has been achieved to some extent, not as much as desired, but still, the share of Takaful services among general users has increased.
As per last year's report by SECP, Takaful's share was around 12 percent of the total sales of the insurance sector. The share is still modest because of two reasons, one, that people still have doubts about its religious legitimacy, and second, people are not aware of these services as yet. But SECP now has a particular interest in expanding the user base of Takaful, aiming to take its share to 35 percent from 12 percent by 2028.
Host Adeel Azhar agreed that a lack of awareness is the main stumbling block. He cites the example of insurance in the auto-finance sector, where he said that it is high only due to the SBP making it mandatory. He said that it is indeed a double challenge to convince people to take finance on Islamic principles and then also add to Islamic Insurance, i.e., Takaful.
Dr Irum Saba, Director of the Center for Excellence in Islamic Finance at IBA Karachi, explained the reasons behind the poor concentration of Islamic finance in Pakistan. She noted that our country has a huge population of 250 million, but the commitment of the government and the regulators is not as strong. She compared this to Malaysia, the country with a very large concentration of Islamic finance, maintaining that the government and regulators there are very much committed, and awareness is accordingly much higher than in Pakistan.
She said that in Malaysia, students, entrepreneurs, businesses, and every institution is protected by Takaful. Compared to Pakistan, she said state institutions in Malaysia are headed by people who are committed to Islamic finance, including their ministry of finance, securities commission, and central bank. She advocates that such commitment, coupled with awareness, is the key to expansion of the Takaful industry. In particular, she advocates that such awareness be spread at the level of schools, colleges, and even villages.
Dr Irum also cited the examples of other neighboring countries, where she said the financial literacy is much more prevalent than Pakistan. She quotes her experience of seeing street hawkers having QR Code Machines for payments, which she said reflects the good financial acumen of otherwise less educated people. She stressed on educating the younger generation through tools, techniques, and AI.
When asked about the milestones EFU Hemayah Takaful has achieved over its 10-year history and its plan forward, Pirani said that EFU Life was the first company which obtained the Window License for its services. He mentioned that EFU not only launched a Takaful product, it also gave it a brand identity. Currently, Takaful contributes to 35 percent of EFU Life's business, which reflects its growth over the decade.
One strategy that particularly worked was providing customers the option to convert the existing life insurance products into Shariah-compliant ones. This was an unparalleled offer that not only boosted the company's business but also helped in expanding Takaful penetration in Pakistan. EFU then moved to inclusive and digital options, which also helped expand the customer base. Thanks to the growing business, the company has distributed a surplus of Rs 800 million among its customers, which now stands at 1.4 million.
Responding to a question on the steps taken by IBA for connecting the academia with the industry, Dr. Irum elaborated that her center regularly conducts training, engages in research, and holds discussions and debates on Islamic finance. She mentioned that specialized training programs to impart solid understanding of Takaful were administered by expert trainers from both national and international institutions.
She also stated that the center is doing research on the Wakala-Waqf model of Takaful, which is applicable in Pakistan. She said that the training is also offered to companies that are seeking services for their employees from Takaful operators. In another program, the center offers training on Islamic wealth management and planning, where students are educated about how to save and invest, and when it comes to investment, the role of Takaful is also highlighted.