It is a deep honour for me to be here alongside the visionaries, past and present, who have been instrumental in driving the takaful industry’s growth and development in Malaysia over the last four decades. Takaful is not only about financial protection, but at its core, it is rooted in the principles of cooperation, mutuality and shared responsibility. From a modest beginning, the takaful market has grown tremendously with the size of takaful contribution nearly tripling over the past decade, and now comprising 24.7% of market share of insurance and takaful^[1]. The industry has diversified, with players and solutions evolving to meet the varied needs of households and businesses. In 2023, the total net contributions grew to RM17.3 billion, increasing by 6% compared to the previous year.

While much has been accomplished, the takaful industry can do more, particularly in elevating their role in achieving sustainable economic growth and enhancing social justice. Despite global headwinds and uncertainties, Malaysia’s economy remains quite resilient, with an encouraging rise in economic momentum. Following a strong first half of 2024, full-year growth is anticipated to approach the upper end of the forecast range of 4% to 5% with continued performance in 2025. With these growth prospects and on-going government structural reforms, the subsidy rationalisation and enhancements in social protection, significant opportunities are there for the takaful industry to grow and deliver a meaningful change.

In light of these promising developments, I would like to commend the Malaysian Takaful Association (MTA) and its members for their continuous and concerted efforts in shaping and supporting takaful industry’s growth. The timely launch of Hijrah27, a three-year strategic plan, lays a cornerstone for charting a clear pathway forward, aligning with the vision to make takaful products a mainstream solution for meeting Malaysians’ protection needs.

Three key imperatives in guiding the industry’s efforts

Ladies and gentlemen,

Allow me to read out an extract from our Governor’s foreword in Hijrah27 – ‘There remain significant protection gaps in Malaysia, particularly among vulnerable segments as well as for climate risk protection solutions, among others. Effective adoption of Value-based Intermediation for Takaful (VBIT), guided by fundamental values of Shariah, will anchor industry’s efforts to catalyse growth while delivering impactful solutions to households and businesses.’ In bridging the gaps, I would like to highlight three imperatives that can guide industry’s efforts moving forward.

First, embodying Maqasid Shariah through effective implementation of VBIT. Maqasid Shariah lies at the heart of Islamic finance. It serves as our compass, ensuring that all aspects of the business adhere to the fundamental principles of fairness, transparency and inclusivity. However, in the midst of growth, expansion and competition, it can sometimes be challenging to ensure that these values remain central. The recent issuance of the Maqasid Shariah Scorecard (MSS) encourages takaful operators to align closely with these values. The MSS provides tools to the takaful operators to self-assess their journey in VBIT implementation, measuring aspects such as transparency, financial inclusion and contributions to society – all factors that help to reflect the true spirit of takaful. Takaful operators should embrace MSS as a commitment to the vision of Islamic finance system that places societal benefits at its core. This should be reflected through prioritising social takaful as a key focus for value-based innovation within the takaful sector.

Second, strengthening takaful and retakaful capacity. Takaful development presents significant opportunities for retakaful growth. Embedded in the risk-sharing concept, retakaful enhances takaful’s risk underwriting capacity by increasing scale and diversifying risks, allowing takaful operators to better address evolving risks. With strong domestic and global players, Malaysia stands ready to also facilitate cross-border businesses and serve as a retakaful hub for the region and beyond. Retakaful players, in collaboration with takaful operators, should explore offerings that serve untapped segments like long term care solutions, agriculture, climate, and social resilience, in line with MIFC aspirations. Optimising retakaful within Malaysia also supports capacity enhancement in dealing with emerging risks. This approach allows takaful industry to effectively respond to the unique needs of Malaysian market, while minimising reliance and fluctuation in the global reinsurance market.

Third, positioning Malaysia as the leading takaful and retakaful market, with the capability to expand its market presence and export expertise. Next year will be a significant year for Malaysia as it takes on the ASEAN chairmanship. It represents a significant opportunity for Malaysia to actively advance regional collaboration across Southeast Asia in critical sectors, including in takaful and retakaful. As a pioneer in takaful, Malaysia is well positioned to lead collaborative efforts and drive sustainable initiatives through deeper regional integration in takaful and retakaful that benefits communities across Southeast Asia and supports long-term development goals for the region. I implore the takaful industry to take this up and strategise to maximise the benefits of this unique opportunity.

Ladies and gentlemen,

A whole-of-nation approach is critical in facilitating the innovation process to unlock takaful’s full potential in achieving Maqasid Shariah. In a move to spur innovation, the Bank recently issued the Exposure Draft on Broader Application of Ta`awun in Takaful and the upcoming Discussion Paper on Shariah Contracts Framework to facilitate diverse application of Shariah contracts and exploration of new takaful operational model. Additionally, the roll-out of digital insurance and takaful operators in the near future will further accelerate the development of innovative solutions and expand takaful protection for the underserved and unserved segments. The recent Budget 2025 continues to support innovation in blended takaful solution by allocating grants to match contributions from insurers and takaful operators to scale up financial sector participation in iTEKAD programme and enhance its comprehensiveness with financial protection elements. Therefore, I call upon takaful operators to stand ready with effective strategies and work cohesively to reach the intended outcome and drive collective success.

Before I end, I would just like to share some thoughts on ‘Hijrah’. The symbolism, no doubt, is profound. In Hijrah27 document, it explains the choice of ‘Hijrah’. First, it reflects a symbol of perseverance and faith; second, as a chance to reset and reflect; and third, more specifically for takaful to drive that shift from uncertainty to stability. To this, I would like to add that ‘Hijrah’ is a game changer. Like the Prophet’s hijrah from Mekah to Madinah enables Islam to thrive and Muslims to live free and to prosper. Hijrah27 should aspire to be a game changer for the industry.

Once again, I would like to take this opportunity to express my gratitude to both past and present leaders who have played a crucial role in shaping this journey. As the saying goes, ‘old roots grow new branches. It’s their enduring dedication that has allowed us to reach new heights and continue growing. We are standing on the shoulders of giants. What has been built thus far has been through grit and determination, not to mention, intellectual, scholarly and legal discourses. Today’s generation of practitioners, while we continue to look to improve and evolve, should always remember to look to our past for the lessons and more importantly for the wisdom, and always seek prayer and guidance. May Allah grant barakah to the many who have contributed to the success of takaful industry in Malaysia. On that note, it is my honour to officiate the event and extend my heartfelt wishes to the takaful industry as it celebrates its 40^th anniversary.

Thank you and enjoy the evening.

Bank Negara Malaysia

8 November 2024

[1] As at end 2023.