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Banca takaful and its distribution

Banca takaful makes Family Takaful Plans readily available and accessible
to one and all, to sell varied financial products through one window
-making local bank branch a one-stop-financial-shop. Banca Takaful Plan is
a Sharia compliant alternative to conventional insurance, offering a unique combination of
saving, investment and protection. Banca Takaful Plan offers peace of mind and takes care of
the future of loved ones by offering a savings plan and providing Takaful coverage in the
event of death to beneficiaries.

As an individual we have many dreams...

A college education for our child from a prestigious university

A dream wedding for our beloved daughter

Our spiritual journey to perform Hajj

A comfortable retired life with enough savings to take care of us and our loved ones

Any other financial objectives we may want to achieve

Banca takaful helps to get these in one institution. Some Banca takaful product offering by
banks..

Regular premium savings and investments

Single premium savings and investments

Protection

Retirement

Marriage

Education

Pension etc.

To develop more efficient distribution channels continues to be a


prominent issue for Takaful operators who are constantly looking out the
ways to achieve enhanced economies of scale while ensuring reach to
more consumers. Banca takaful has been increasing its share of Takaful
distribution significantly thanks to the compelling economics of its
business model. Banks and Takaful operators maximise the opportunities
through Banca takaful arrangements to reach out to segments that are
not captured by the traditional agency forces.Banks are distributing
takaful providers products through banks branches or channels (ATM,
online, mobile) using banks client base.

Banca takaful in emerging markets

As more takaful companies offer a range of retail family-oriented products


into the market, they tend to find banks to be the best distribution
channel. Banca takaful provides an attractive, cost effective, and
increasingly prevalent way of selling takaful products. With emerging of
Islamic finance Banca takaful emerges around the world. The growth rates
for Banca takaful compare favourably with those for Banc assurance
generally in emerging markets. A recent working paper by Serap O
Gonulal, Nick Goulder and Rodney Lester for The World Bank reveals
Banca takaful has received mixed reviews, with some products highly
successful and others more problematic. 1 Lack of success is usually
attributable to factors such as lack of interest on the part of branch
management, poorly designed promotions, lack of database integration
and marketing and negative attitudes toward change and insurance
generally.
Banca takaful has boosted annual global growth of takaful above 20 per
cent, exceed the 2.5 per cent annual growth achieved by conventional
insurance.
Banca takaful is no longer just a simple additional source of funding for
the banks; a more integrated model emerged when banks had to join
efforts with insurance companies in formulating well planned products and
marketing strategies in order to keep up with the emerging new breed of
customers. According to Bank Negara Malaysia, new business
contributions from investment-linked products increased to US$125.3
million in 2010 from $113 million in 2009. Some non -Muslims country
who are using Islamic fianc they are trying to introduce their market
about Banca takaful like Japan, Poland, Brazil etc.

Banca takaful in Asian market

In Asia, some countries are trying very hard to introduce Banca takaful
and they became success to settle it. In Malaysia Strategic alliances in the
Banca takaful market are becoming an important delivery channel for
Shariah compliant insurance products by major industry players such as
ING and Public Bank or CIMB and Aviva. A recent example is AIG/AIA, the
American insurance giant that entered the Malaysian Banca takaful
market by setting up a 70%-30% joint venture, AIA AFG Takaful Bhd, with
Alliance Bank Malaysia Bhd, in January 2011. Some banks have also
decided to create new brands to differentiate their insurance franchise
from their banking operations. Mayban Fortis has streamlined its
insurance and Takaful business under the Etiqa name, with the
conventional and Sharia compliant arms operating under the names of
Etiqa Insurance Bhd and Etiqa Takaful Bhd, respectively.2

In Malaysia, Bank Negara Malaysia, the countrys central bank and


insurance regulator, expects this channel will continue to reinforce
Malaysias position as the second-largest Takaful market in the world. The
successful business model developed in Malaysia will enable the country

1
http://www.worldcommercereview.com/publications/article_pdf/804,November,20
12

2 http://www.europeanfinancialreview.com/?p=73,sahel Jafor,2013
to play a leadership role in Banca takaful growth in neighbouring countries
which will benefit from its expertise, especially as some Malaysian Takaful
operators have already set footprint in many Asian countries, including
Singapore, Indonesia, Pakistan and Sri Lanka.

In Indonesia, Banca assurance was introduced in the1990s, and evolved


into a successful channel, driven by growing number of people buying
insurance products in banks rather than from agents for a number of
reasons, such as convenience, competitive pricing and banks reputation.
BNI Sharia unit also cooperates with BNI Life Syariah in offering Banca
takaful in 21 outlets. A glowing example of Banca takaful success in
Indonesia is provided by PT Bank Mandiri, who joined forces with AXA, the
French insurance giant, in 2003. 3Together, through their combined
distribution channels, they reach a larger number of customers who are
interested to their unit-linked Takaful products (Mandiri Investasi Sejahtera
and Mandiri Rencana Sejahtera).

In Pakistan, the rapidly expanding Islamic banking network across the


country is encouraging Banca takaful to play an essential role in building
the required volumes and achieving economies of scale in the Islamic
insurance segment. Pakistans regulator, the Securities and Exchange
Commission of Pakistan (SECP), has recently released new guidelines for
Banca takaful. Those were implemented in June 2010 and aim to regulate
the relationship between Takaful operators and banks in terms of
distribution of products. The biggest players in the Banca takaful space in
Pakistan are Standard Chartered Bank, Muslim Commercial Bank, Bank Al
Falah, and Faysal Bank on the distribution side, and Pak-Qatar Family
Takaful, on the product.

3 http://www.europeanfinancialreview.com/?p=73,sahel Jafor,2013