Turkey: New Takaful Guidelines is a Mixed Bag

New Takaful guidelines were gazetted 20 September in Turkey, they will come inforce 20 December. The guidelines are interesting in that Takaful is being named as participation insurance, which is good in that this makes it clear Takaful is for all, but also unfortunate in that the word participation is not quite a complete match for the word Takaful, which also implies solidarity and mutual assistance.

There is also an allowance for Takaful windows with the period for converting to full Takaful operations being extended in the draft regulations. In markets such as Indonesia, windows are common but are being phased out. However, in Pakistan, Takaful windows have been recently allowed.

In our opinion, windows distract from the unique selling proposition of Takaful as the look and feel will need to follow the conventional operations, but it does allow for success in new markets as there will be significant expense savings over pure Takaful operations.

Our comment is that perhaps this is too much time to ramp up operations and it might not be fair to the full takaful operators as window operations can save significantly on expenses such as the salaries of upper management as they can be shared between the conventional operation and the window.

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