Malaysia’s central bank, Bank Negara Malaysia, has approved licences for four foreign-led joint-venture companies to issue family takaful, or Islamic life insurance policies. Though it had originally intended to issue only two licences, the bank was so impressed by the strength of the candidates and confident in the sector’s potential growth that it doubled the number.

The successful applications were all 70:30 and 60:40 joint ventures led by American, British and European banks (details here). Bank Negara Malaysia said it hoped the new operations would enhance the development of the family takaful industry and help reinforce Malaysia’s position as an international Islamic finance hub.

Takaful functions as an Islamic alternative to conventional insurance by classifying the arrangement as a ‘voluntary contribution’ rather than a sales contract. There are several different arrangements, but essentially risk is shared by a cooperative of the plan’s contributors, while the operator charges a fee for management and investment of the funds.

source & article: Bloomberg BusinessWeek