NEW PROPOSED INSURANCE PRODUCTS WELCOMED IN THE MARKET

INSURANCE experts have welcomed Tanzania Insurance Regulatory Authority’s (TIRA) plan to extend insurance service scope in the country, saying the move will augment industrialisation drive.

In an interview in Dar es Salaam yesterday, professional insurers nodded to the plan, which was reported by the media recently. The envisaged two new insurance products, bank and takaful insurances, are expected to hit the market soon and the government is currently in the process to effect regulations that will guide the operations of the two products.

The interviewees talked on the importance of the envisioned Takaful, saying if introduced, it will mainly focus on economic growth in support of the government backed industrialisation agenda. Finance and Economic Expert Mohsin Hussein argued that the plan has come at the right time, taking into account the strategic development plan by the government.

“The expansion of insurance services will consequently expand the country’s financial services in various spheres,” Dr Hussein argued. Takaful investment funds will also facilitate establishment of industries, create more job opportunities and increase government revenues.

Banking and Finance Senior Lecturer at the Institute of Finance Management (IFM) Dr Bill Kiwia concurred that insurance sector will be transformed because Takaful operates under the system of risk sharing by customers through cooperative principleinstead of risk transfer to the third party. Furthermore, the capital market will also be transformed as Takaful fund management functions will focus on investing in shariah compliant assets.

“This will not only bring together diversity in capital market but also increase sources of financing of long term projects in Tanzania,” he explained. Availability of diversified sources of financing is crucial for Tanzania, which is at a transformative stage and growth, with mega projects like Standard Gauge Railway and Stiegler Gorge underway.

The neighbouring Kenya officially introduced Takaful insurance in 2011 and, as a result, increased competition to the market, offered alternative insurance products and promoted innovation to the industry.

Another expert, Omar Sharif, elaborated that the introduction of Takaful will widen the banks’ ability to issue loans as the shariah compliant cover against risk from the loans will be reduced.

Islamic banks are strictly prohibited from using conventional cover because of shariah related issues. The Takaful in the financial industry paves way for alternative risk cover and at the same time opens up investment indirectly for policy holders. “Premiums are always channeled to investments activities in the local economy, increasing the domestic production,” he said.

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