Issues and Challenges in Introducing Islamic Insurance (Takaful) into the Algerian Financial Market: Lessons from Malaysia

Abstract

The global takaful market is estimated by market analysts to reach a premium of US$ 12.5 billion by 2015. Malaysia is considered one of the largest takaful markets in the world with total assets of US$ 3.2 billion. The Islamic insurance sector or takaful has seen remarkably global growth in many major markets, especially in Muslim dominated countries. However, the development of Islamic finance, particularly takaful in Algeria appears to have lagged behind. Although there are two Islamic banks operating in Algeria, Islamic insurance or takaful has yet to be introduced into the Algerian financial market. Due to this fact, this research explores issues and challenges that potentially face the introduction of takaful into the Algerian financial market. An empirical study is endeavoured consisting of semi-structured interviews with Algerian experts in the area of Islamic finance and takaful to deduce the issues and challenges that might face the introduction of takaful in Algeria. This study found that there would be economic and spiritual benefits if takaful is introduced in Algeria. In addition, the respondents agreed that the most important challenge that might face the introduction of takaful is political will whereby genuine support from the government is needed for the effective introduction of Islamic insurance or takaful in Algeria. This support should be subsequently followed by broad publicity of the newly introduced industry, an amendment of the laws, and the development of the necessary infrastructures to facilitate an effective collaboration with international organizations.