The challenges and opportunities of having a Maltese licensed takaful insurance

Abstract

Whilst serving the same purpose as conventional insurance in Europe, takaful insurance performs in line with the shariah law. It is a co-operative insurance scheme, founded on the idea of guaranteeing each other, where participants contribute funds into a pool of money. Its remarkable growth over the past few years, certainly encouraged its introduction in Europe. Despite recent interest in Islamic Finance Malta, the introduction of takaful is still a niche area, and such a process would take a considerable amount of time. Thus, the author in this study, will be bringing to the fore the challenges and opportunities that Malta might face in order to proceed with its introduction. This study is being conducted by means of a comparative analysis with other European countries to examine what challenges and opportunities they faced, when they introduced Islamic Finance products. In order to analyse this objective, a combination of case studies from other EU countries and semi-structured interviews with local experts were carried out. Based on the results obtained, Malta can highly benefit from introducing Islamic Finance. However, although takaful can be set up under the current legislation, it was suggested that Malta should start introducing Islamic Finance services incrementally like funds, until eventually the Maltese market will maximise the benefit of takaful. Additionally, it was examined that since the local Muslim market is quite small, the demand lays in the foreign Muslim investors. This would be possible by if a joint effort is made by the government and the regulator, in repairing the damages, rebuilding a good reputation, and providing credibility. Doing so, Malta could be compared with other EU countries. As a concluding remark, even though the introduction of takaful in Malta would be possible, this will not be happening any time soon. Recommendations on the way forward in this regard will be given.