rationale and regulatory basis of microtakāful market development presented at: microtakāful...
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Rationale and Regulatory Basis of Microtakāful Market Development
PRESENTED AT:
Microtakāful Conference Indonesia
Borobudur Hotel, Jakarta | 24 April 2014
Kartina Md AriffinMember of the Secretariat, Technical and Research
AGENDA
About the IFSB
IFSB’s Road Map for Takāful
IFSB Initiatives on Microtakāful
About the IFSB• The Islamic Financial Services Board (IFSB) was officially inaugurated on November 2002, and started operations on 10 March 2003
• Serves as international standard-setting organisation for Islamic financial services industry that promotes and enhances its soundness and stability by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors
• To this end, the work of the IFSB complements those of BCBS, IOSCO and IAIS
o Develop standards & recommend implementationo Provide guidance on effective supervision and regulation & develop risk
management & disclosure criteriao Establish cooperation with international standard-setting bodies & member countrieso Enhance and coordinate initiatives to develop instruments & procedures for efficient
operations and risk managemento Encourage cooperation among member countrieso Facilitate capacity-building & development of human capitalo Undertake researcho Establish database
SPECIFICITIES OF ISLAMIC
FINANCE
BCBS (Banking)
IOSCO (Capital Markets)
IAIS (Insurance)
OBJECTIVES
August 2006, IFSB & IAIS established JWG and published “Issues in Regulation and Supervision of Takāful (Islamic Insurance). Takāful issues were grouped into 4 major themes:
o Corporate Governanceo Financial and Prudential Regulationo Transparency, Reporting and Market Conducto Supervisory Review Process
To date, specific to Takāful, the IFSB has issued
o IFSB – 8: Guiding Principles on Governance for Takāful (Islamic Reinsurance) Undertakings
o IFSB – 11: Standard on Solvency Requirements for Takāful (Islamic Insurance) Undertakings
o GN – 5: Guidance Note on the Recognition of Ratings by External Credit Assessment
Institutions (ECAIs) on Takāful and Retakāful Undertakings
o IFSB – 14: Standard on Risk Management for Takāful (Islamic Insurance) Undertakings
o New Project: Guiding Principles on Retakāful (Islamic Reinsurance) Undertakings
o New Project: Research Paper on Microtakāful (joint initiative between IFSB & IAIS)
IFSB’s Road Map for Takāful
IFSB Initiatives on Microtakāful
In July 2013, the IFSB was invited
to participate in the IAIS Financial
Inclusion Subcommittee (FISC)
meeting held in Manila, Philippines. It
was during this meeting that the IAIS
proposed for a second joint-initiative
to be conducted with the IFSB,
similar to the first Issues Paper in
2006. Following this, the IFSB
together with the IAIS have come to
an understanding to focus on issues
prevailing in the Microtakāful sector
and its role in enhancing the financial
inclusion.
The Technical Committee (TC) of the IFSB,
in its 32nd meeting in Basel, Switzerland
recommended to the IFSB Council to
approve preparation of a research paper in
this area. Consequently the Council of the
IFSB, in its 24th meeting in Brunei in March
2014 approved the development of a
research paper on Microtakāful to be part
of IFSB 2014 Workplan.
1st Joint Working Group Meeting
8 April 2014 Kuala Lumpur, Malaysia
Regulatory Roles on Microtakāful
Characteristics of Microtakāful
Inclusivity
Grouping for Efficiencies
Simple Processes
Customer Wariness
Limited Data
Contribution Collection
Delivery Channels
Stakeholders of Microtakāful
The Poor
The Regulators
The Shariah Scholars
The Government
The Existing Participants
Definition of Microtakāful
Rural? Income Level? Standardized?
Challenges of Microtakāful
Consumer Education & Awareness
Infrastructure
Consumer Protection
Information Asymmetry
Transaction Costs
Transparency and Disclosure
Product Coverage
Mandates of Joint Working Group
Joint IFSB-IAIS Research Paper
Elaborate on Issues
Joint Working Group Members
IFSB IAIS
IDB ADBWorld Bank
Regulators
Highlight Areas of Concerns
Review Current Framework
Regulatory Roles on Microtakāful
THANK YOU FOR YOUR ATTENTION
Kartina Md Ariffin
Member of the Secretariat, Technical and Research
www.ifsb.org