Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia

Chapter 1

Introduction

RATIONALE FOR RESEARCHING INVESTMENT PORTFOLIO COMPOSITION OF TAKAFUL COMPANIES

Islamic finance has been one of the fastest-growing industries over the past decade, with an average annual double-digit growth rate. The total Shari’ah-compliant assets worldwide were estimated at US$700 billion in 2007 compared with US$150 billion in the mid-1990s (Grewal, 2008), and are expected to reach US$1.2 trillion in 2012 (The Banker, 2011). The Islamic banking sector dominated the Islamic finance industry, with assets representing 78.6 percent of total worldwide Shari’ah-compliant assets in the mid-2000s (Grewal, 2008). Moreover, the Gulf Cooperation Council (GCC) countries account for two-thirds of global Islamic assets (The Banker, 2009), where Islamic banking and finance is expected to become the major banking alternative by 2025. Some believe that the industry would be able to serve 40–50 percent of the total 2.5 billion Muslims worldwide in the next eight to ten years (Grewal, 2008). According to Moody’s Report (2008), the growth of the Islamic finance industry has been driven by the increase in oil prices, which signals that there will be no slowdown in the growth of this industry in the future. Furthermore, all other parts of the Islamic finance industry are also expected to register substantial growth, such as the Islamic bonds (sukuk) market, Islamic funds, and Islamic insurance (takaful), despite the impact of the global financial crisis.

The research presented ...