(MENAFN) According to the Arab Monetary Fund, the Takaful sector remains relatively modest within the broader landscape of the Islamic financial industry, accounting for less than 2 percent of the market. However, the global Takaful market surpassed USD30 billion in 2023, showcasing potential for growth. In a report released on Monday, the Fund projected continued annual growth rates ranging between 5 and 8 percent in the years ahead, a significant achievement considering the typical dynamics of insurance markets.
The anticipated growth of the Takaful sector is attributed to several factors, including heightened consumer awareness of Islamic finance, the implementation of supportive government policies across many nations, and ongoing technological advancements. These factors are expected to bolster the sector's expansion and solidify its position within the broader financial landscape.
However, despite the positive outlook, the Takaful industry faces a myriad of challenges, both internal and external. Internally, challenges include the complexity of risk pricing, risks associated with adverse selection stemming from information disparities, and the necessity for a comprehensive governance and risk management framework. Externally, challenges arise from economic conditions marked by slowing growth due to monetary tightening policies, among other factors. These conditions exert pressure on the insurance sector as a whole, with Takaful insurance particularly affected by increased claims resulting from significant losses incurred by businesses, a subdued return on investment, and limited investment avenues that adhere to Sharia principles.
Navigating these challenges while sustaining growth momentum presents a considerable task for the Takaful industry. Addressing internal constraints and adapting to external economic dynamics will be pivotal in ensuring the sector's resilience and continued expansion in the evolving global financial landscape.
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