Effective supervision of Islamic insurance according to Malaysian experience (1984-2012)

Abstract

Purpose – The purpose of this paper is to know the method adopted by the Malaysian supervisor to regulate the Takaful sector, and to propose a new approach related to the effective supervision. Design/methodology/approach – The key approach in this paper is a case study over a clear period of time, to discover a wide variety of economical, financial, social, and cultural factors potentially related to Malaysian Takaful system. In addition, both explanatory and descriptive approaches are used, to seek explanations of problems, make careful observations, and give detailed recommendations. The study collected relevant quantitative and qualitative data. Findings – The key findings are: the basis of Takaful’s operation is established on the principles of Islamic Laws, Takaful operations are regulated by the Central Bank, this supervisory body has adopted elements of the two methods: regulation and supervision, the Malaysian Takaful industry has experienced rapid growth and transformation, and the proposed approach includes four key elements. Research limitations/implications – This study provides a road map for the next studies in this new topic. Practical implications – The paper guides the policy makers to giving more independence and allocating more resources to the supervisory body, for the development of an important component of the financial system. Originality/value – The essay is distinguished from the previous researches by limiting and identifying a clear period of the study. Further, the authors have listed the most important elements of the leading programs. Finally, the approach is more concerned with new aspects of the ongoing supervision, strategic axis and the supervision stages.