Kenya’s first Islamic insurance firm looking to overcome challenges

Kenya’s insurance industry is crowded with more than 40 firms in operation. Ironically, due to negative perceptions, the collapse of several operators and lack of education, only 2.8% of the population is insured. A month ago, Takaful Insurance of Africa (TIA) – the first fully Shariah-compliant insurance company to be registered in Kenya – began operations riding on the fundamentals of integrity, honesty and fairness outlined in the Shariah laws. Around 10% of Kenya’s population of 40 million is Muslim and TIA is hoping to capture a sizeable portion of the market. How we made it in Africa’s Regina Ekiru spoke to TIA chief executive officer Hassan Bashir.

Hassan Bashir

Hassan Bashir

Tell us more about TIA?

TIA was founded in 2008 and formally licensed in January this year. Unlike conventional insurance products, under the Takaful (an Islamic insurance concept) model no interest is charged and losses and surpluses are shared between policy holders and the company. Premiums paid by clients are channeled to a risk fund managed by TIA. These funds will pay for losses suffered by the contributors to the pool. Once the risk fund surpasses a certain threshold amount, the surplus is given back to the members.

TIA will act as an agent in managing the Takaful operations on behalf of the clients, administering the participation process, managing collection of the Takaful contributions and processing the claims according to the contract agreed with the clients. In return, TIA is entitled to a fee which is deducted upfront as a percentage of the contributions paid by the participants.

We will unveil our first branch in Nairobi’s Eastleigh, an estate that has a large Muslim population. We are going to Eastleigh because it is outside the periphery of insurance at the moment. In the pipeline also are two other branches in Mombasa and Nairobi’s central business district. Our ambition is to also register subsidiaries in Tanzania and Uganda in the coming years.

Do you think there is demand for Takaful in the African market?

As an insurance practitioner, I can say there are certain elements of conventional insurance products that one cannot sell to Muslims. TIA is here to fill that gap.

Are your products available to non-Muslims?

We will be opening our doors to all Kenyans. The model is designed to serve people of all faiths and backgrounds, despite the reference to Shariah laws. We are simply providing an ethical product line. Anyone willing to be managed under the fundamentals of fairness, justice and responsibility is welcome. We believe these are the fundamentals that underline all religions.

What challenges do you foresee in the market?

The concept of Islamic finance is new in the country and regulatory measures have not been evened out to fully accommodate the Islamic finance sector. A lot has to be done in terms of regulation, considering that our model is non-interest-based operations that might present difficulties in fund placement. A significant part of insurance profits come from investments not premiums. We will have to find compliant instruments within the regulatory environment that currently exists. This will be a challenge since it automatically reduces the windows of opportunity.

How do you plan to get around these challenges?

We are looking at compliant investments like infrastructure bonds in the future. We are also engaging players in the Islamic banking sector to create investment opportunities that are Shariah complaint.

What is your financial targets for the year?

Our target is to make premium collections of Ksh.1 billion (US$12 million) in the first twelve months of operation.

Where do you want to take TIA?

I would like to spearhead TIA to the league of the top ten best-performing companies in East Africa. It seems like a tall order, but it is not. Our target is to expand the boundaries of the insurance industry and improve the penetration in the country, and this we will achieve.