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IFSB Initiatives on Microtakāful: Enhancing Financial Inclusion

Learn about the Islamic Financial Services Board's initiatives on microtakāful, focusing on the role of microtakāful in enhancing financial inclusion. This research paper explores the regulatory roles, challenges, and areas of concern in the microtakāful sector.

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IFSB Initiatives on Microtakāful: Enhancing Financial Inclusion

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  1. Agenda About the IFSB IFSB’s Road Map for Takāful IFSB Initiatives on Microtakāful

  2. 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 • principlesfor the industry, broadly defined to include banking, capital markets and insurance sectors • To this end, the work of the IFSB complementsthose of BCBS, IOSCO and IAIS BCBS (Banking) SPECIFICITIES OF ISLAMIC FINANCE IOSCO (Capital Markets) IAIS (Insurance) • Develop standards & recommend implementation • Provide guidance on effective supervision and regulation & develop risk management & disclosure criteria • Establish cooperation with international standard-setting bodies & member countries • Enhance and coordinate initiatives to develop instruments & procedures for efficient operations and risk management • Encourage cooperation among member countries • Facilitate capacity-building& development of human capital • Undertake research • Establish database OBJECTIVES

  3. August 2006, IFSB & IAIS established JWG and published “Issues in Regulation and Supervision of Takāful (Islamic Insurance). Takāfulissues were grouped into 4 major themes: Corporate Governance Financial and Prudential Regulation Transparency, Reporting and Market Conduct Supervisory Review Process IFSB’s Road Map for Takāful • To date, specific to Takāful, the IFSB has issued • IFSB – 8: Guiding Principles on Governance for Takāful (Islamic Reinsurance) Undertakings • IFSB – 11: Standard on Solvency Requirements for Takāful(Islamic Insurance) Undertakings • GN – 5: Guidance Note on the Recognition of Ratings by External Credit Assessment • Institutions (ECAIs) on Takāfuland RetakāfulUndertakings • IFSB – 14: Standard on Risk Management for Takāful(Islamic Insurance) Undertakings • New Project: Guiding Principles on Retakāful (Islamic Reinsurance) Undertakings • New Project: Research Paper on Microtakāful (joint initiative between IFSB & IAIS)

  4. 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

  5. Regulatory Roles on Microtakāful Characteristics of Microtakāful Stakeholders of Microtakāful Inclusivity The Poor Grouping for Efficiencies Simple Processes The Regulators The Existing Participants Customer Wariness Limited Data The Shariah Scholars The Government Contribution Collection Delivery Channels Definition of Microtakāful Standardized? Rural? Income Level?

  6. Regulatory Roles on Microtakāful Mandates of Joint Working Group Challenges of Microtakāful Joint IFSB-IAIS Research Paper Highlight Areas of Concerns Elaborate on Issues Review Current Framework Joint Working Group Members Regulators IFSB IAIS IDB ADB World Bank

  7. www.ifsb.org THANK YOU FOR YOUR ATTENTION Kartina Md Ariffin Member of the Secretariat, Technical and Research kartina@ifsb.org

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