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Indonesia's microtakaful: Where are we now?
The penetration rate of the takaful industry in Indonesia was only 0.08 percent in 2015, an indication that there is much room for the sector to grow.
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A teller in Bank Panin Syariah Tbk serves a customer in Jakarta. (Kontan/Fransiskus Simbolon)
I
ndonesia is one of the most attractive Islamic financial markets in Asia, as it is home to the world’s largest Muslim population and Southeast Asia’s biggest economy. The country has huge potential for market growth in the Islamic finance sector, including Islamic microinsurance (microtakaful).
Microtakaful is an important, yet untapped, segment of Islamic finance. This is particularly true considering that approximately 115 million Indonesians fall into the lower-income category.
The fact that micro, small and medium enterprises (MSMEs) accounted for 99.99 percent of the country’s business enterprises and 97.16 percent of employment in 2013 further highlights the undisputable potential of this segment.
The penetration rate of the takaful industry in Indonesia was only 0.08 percent in 2015, an indication that there is much room for the sector to grow. Indonesia’s positive economic outlook bodes well for the development of microtakaful. Amid the global economic slump, it recorded an impressive real GDP per-capita growth of 5.02 percent in 2016, one of the world’s highest economic growth rates after China and India.
In addition, microtakaful has evolved as an indispensable step in the natural evolution of Indonesia’s Islamic banking and finance industry. Early development of its Islamic finance concentrated on Islamic banking, takaful schemes and shariahcompliant stocks.
However, the last decade has witnessed considerable attention, particularly from regulators, on various microfinancing initiatives, including microtakaful services. The Financial Services Authority (OJK) listed microtakaful in its financial inclusion agenda as an important segment for broadening financial access to unbankable and underserved clients.
At present, Indonesian microtakaful products are offered via two main channels: Full-fledged takaful operators and takaful windows. Fourteen microtakaful products are available in the market, ranging from credit life to personal accident, motor, disability, education, hospitalization and dengue fever policies.
