Islamic finance holds more potential for Nigeria beyond non-interest, Sukuks – Aminu Tukur

The low rate of insurance penetration in Nigeria is a source of concern for stakeholders. In this interview with OLUWAKEMI ABIMBOLA, the Vice Chairman of Noor Takaful, an insurance firm, Aminu Tukur, speaks on the impediments, among other issues

Due to the newness of Takaful in the insurance sector, several Nigerians who don’t know about it would like to know how it’s different from conventional insurance.

The difference is the contract that you enter into. In the conventional model, the contract you enter into is that of sales; under the contract of sales, there are some things that are not Sharia-compliant. Under the Takaful model, the number one thing is that it is Sharia compliant; therefore, you enter a contract of donation. Whereby everyone who signs that contract has agreed to donate their funds into a pool, and this basket is to assist others who have contributed to that pool of funds. It is people coming together. It is people sharing their risks in that pool. Anyone who has contributed to that pool can benefit when they face a disaster or a subject matter into which they have entered that contribution. That is why, under the Takaful model, the funds do not belong to the Takaful operator; they belong to the participants who have contributed. Under conventional insurance, the funds go into the assets of the company, but with the Takaful model, when benefits or claims are paid from that fund, and there is a balance, it belongs to the participants. This is why, at the end of the day, a surplus can be distributed to those people who have not benefited from the claims part of it. So, you can benefit in two ways, either through claims or through surplus, and that is why it is built on equity and fairness. This is not just about profit.

What are the biggest challenges of the Takaful industry in Nigeria?

The first challenge, and a big one, was acceptability. Initially, it wasn’t accepted. Typically, anything new is hardly accepted. Secondly, people were worried, especially non-Muslims; they just felt it was a Muslim policy, but Takaful is for all, and we’ve been able to jump that hurdle; we’ve been able to succeed in those challenges. You will find that today, a significant number of our clients are non-Muslims, and one of the things we’ve been able to sell or offer at Noor Takaful is the value. We’re not selling an Islamic product; we’re not selling a religious product. No, we’re selling a product that is based on Sharia principles, which encourages equity and fairness and ethical practice in it, and people have been able to see that. I think with that big challenge, or that big hurdle, we’ve achieved a lot, which is one of the reasons over the last seven, eight years, our business has grown significantly because we have shown that, both at the retail, corporate, and even at the public sector level. People have been able to accept the Takaful model, and we believe it’s here to stay. Since Noor Takaful started, I believe, and I strongly believe this, the success of Noor Takaful has led to the licensing of an additional four Takaful operators over the last few years. So, people have finally seen that there’s something that works, and there’s acceptability, and we want to be part of this. We have distributed surplus consistently for the last five years since we’ve operated, and this has encouraged people. People know that we’ve been able to keep your promises in timely payment of claims, and when you don’t have a claim, you’ve been able to enjoy the surplus. So, people have seen that the Takaful model works, and they can be trusted, or they can Noor Takaful.

How has the company fared being the first full-fledged Takaful company in Nigeria?

Before us, there was a company that had a window, unit, or department; however, Noor Takaful was the first full-fledged composite Takaful operator. Today, I can proudly say that, not just outside the Takaful sub-sector but even within the insurance space, Noor Takaful is one of the fastest insurance companies when it comes to payment of claims. With that, we’ve been able to grow the confidence in the market as a whole. The regulator is working very hard to increase confidence in the insurance space, and we believe we’ve been able to contribute positively to that confidence building in the industry. We also think that we will work with innovation to boost financial inclusion. As I stated, Takaful is based on Sharia principles, so there are a number of Muslims who, over time, have felt that the conventional insurance model does not meet their values in terms of religious values. So, we believe that because of Takaful and Noor Takaful leading that conversation, people are able, or Muslims who have strong objections to the conventional model can take on a Takaful model and ensure that it’s in line with their religious beliefs.

Before delving into the issue of financial inclusion, how well do you think the Takaful model can strengthen or boost the penetration of insurance in the country?

Number one, we’ve been able to offer the Muslims who have those strong religious beliefs that the conventional does not meet their values an alternative that works. In doing that, we’ve also been able to, over a period of time, connect with the younger generation. We found out that the younger generation doesn’t understand insurance; they feel insurance is complex. So, what we have been trying to do at Noor Takaful is to simplify insurance, simplify Takaful, make it accessible, and make it easy. We believe with the recent launch of Raha by Noor, a digital solution, we should be able to increase insurance penetration at various levels, in the urban areas to the young people or at the local level, at the villages, through our various micro Takaful plans. We recently got approval from our regulator, NAICOM, to offer micro Takaful, which is basically offering small solutions of Takaful products in a convenient and simple manner for them to be able to take on these plans. So, we believe with our digital solution and our micro Takaful, we should be able to do more in terms of market penetration. As an organisation, we recently got approval for a subsidiary for rural health as the first nationwide HMO that is Sharia-compliant. We believe, one way or the other, people should be able to take on reasonable insurance coverage to protect their health, to protect their homes, to protect their assets, and to protect their loved ones in case of an unforeseen happening.

When did you acquire the license for micro Takaful?

We got it; I think we got that around October or November 2024. We had already submitted our product to the regulator for approval. I believe in a few weeks, with the support of our regulator, we should be able to launch a product that with as little as N500, you’ll be able to get a Takaful cover.

Which products can get covered for that amount of money?

This is for the market men and women who have small stores in the market, that their goods are not more than N100,000 or N200,000 naira, but that is their life. If anything happens to that, they’re almost financially destroyed. With a cover of N500, you should be able to protect those goods that you have in the market against fire, destruction, and theft. Every day they leave their goods in the market, and they don’t know what’s going to happen when they come back the next day. Is there going to be a fire overnight? Or is there going to be theft of their assets or their goods? So, we believe with this N500, they should be able to get a cover on it. In addition, Nigeria’s GDP is built on the agricultural sector. If you look at it, it’s subsistence farming that makes up this agricultural sector. It’s that man that is doing less than one hectare. In 2024 alone, we’ve seen the floods that have happened. In 2023, we saw the floods that came from River Benue and River Niger; so many farms were destroyed. And these people, when you look at how many bags they’re going to do, on average, you’ll find that in a good year, a person who is growing rice is probably doing 20 or 30 bags of rice on one hectare. So if you look at that and you multiply it, everything is destroyed on that one hectare. With N500, you can protect your farm from destruction by fire or, most especially, flood. You should be able to do that and even get health care at the same time.

So, we’re going to see how we’re going to work with the various regulators to have joint products. So, with one product, they can get a micro Takaful product that covers their assets, protects them in case of death, and also covers them in terms of health care. Based on the product we have, it’s an actual amount. It is extremely sustainable, and like I said, it’s about making Takaful available and acceptable. But more importantly, making it very simple. If you’re able to get farmers in one location, if you’re able to get market women in one location, the source of distribution is much cheaper. So, it can even be one of them. The micro-Takaful model makes selling or offering Takaful products much easier. I don’t need to have a corporate marketer going to the market. The guidelines allow me to select one of the market women and profile them adequately, with little requirements, for them to be able to do the collection and sales of these micro Takaful products. Then we also have Raha by NOOR. So all we need to do is get one of them to upload the things onto Raha by NOOR. It’s simplified, and it’s easy. If they have a claim, they just do it through Raha by NOOR. Don’t get me wrong. A lot of thought went into this. A lot of time went into this, and let’s be honest, we have to do things better. We have to also take care of the smaller people. We always forget them. And that is why market penetration has remained where it is. We all keep on targeting the corporations. We all keep on targeting the high-net-worth individuals, and we keep on forgetting the smaller man on the street. The smaller man on the street needs that insurance cover more than you and I do. Because you and I actually have something we can easily fall back on. That smaller man, if he leaves those goods in the market and he comes back the next day, he doesn’t even know if anything happens to him, where he’s going to start from. You and I probably have an income at the end of the month, and we can say, ‘Okay, you know what? For the next two or three months, for my income, I’ll be able to build back my portfolio.’ These guys don’t have anything, and they need these things. They need insurance more than anybody else. So, we have to do it. Even if we’re not going to make money on it, we have to do it. Because you know what? We want them to ultimately be our best clients. If they’re able to retain, maintain, and build on their asset base, in five years, they should be able to move from the micro Takaful product to the normal product, where the margins for us as an organisation are much bigger. If we’re able to move people from lower income to middle income, Nigeria will be a much better country. We have to start in our own little ways. If Noor Takaful is going to lead that way, then so be it. Yes, we are playing the long-term game.

Financial inclusion and the $1tn economy targeted by the president are the commonest songs of regulators these days. In what ways is Noor Takaful adapting to these developments?

Personally, I don’t allow other people to do things for us. Let’s drive ourselves. Let’s forget what the government wants to do. We always go back to the government; let’s do this thing. The government doesn’t have to tell us they want to have a one-trillion economy. We should do it. So, we would define our own future as an organisation, and we’ll assist the government in achieving its own goals. At the same time, we also meet our own goals. As I’ve said, we have our objectives. It’s not just about money. But it’s about leaving everybody we interact with, from the regulator to our clients to our shareholders, everybody we meet and encounter along the way, in a better form. Especially our staff members, you know. If they decide to leave Noor Takaful, they should leave here better off. So, we would align with the government, but we’ll also lead the way in our own space.

How well do you think Nigeria is tapping into Islamic finance, which has been highlighted as a source of sustainable financing?

I think we have done relatively okay over the last 10 years in terms of Islamic finance. Why do I say that? If I’m not mistaken, we have successfully issued four or five FG Sukuks. One has been fully paid off. To a large extent, I think people are comfortable with the FG Sukuks cooks. Why? They’ve seen where the money has gone. The good thing about Islamic finance is that it is asset-backed, which means you’re not just taking money or borrowing money and just using it for things in the air. You’re mostly using it for infrastructure. So most, if not all, of the FG Sukuks have been used for infrastructure development across the six geopolitical zones. Jaiz Bank is about 11 years old. Recently, we’ve had about three or four more Islamic, full-fledged Islamic banks, or what they call non-interest banks. I’m hoping, I’m hoping very much, that we actually stop calling them non-interest banks and actually call them what they are: Islamic finance institutions or Islamic banks. Why? Because non-interest or interest is just a small portion of Islamic finance. Other things determine and ensure that something meets Islamic financial objectives. Interest is just one part of it. There are so many other fantastic things that Islamic finance is about. I’m very happy that NAICOM has called it what it is, Takaful, and has not coined the word differently. Now more than ever, we need more companies also listed on the Nigerian Stock Exchange to allow people to have more things to invest in. I know press people have also asked me over the years, when are you coming to the market? And I said to them, ‘We’re working towards that, but we need to build a track record.’ One of the things, if you’re investing in a company, is you want to see a track record. You also want to ensure that the company is liquid enough in terms of the number of shares available for people to buy and sell. Otherwise, you just have a few shares on the stock market, and the price doesn’t move up or down because there are very few shares that are available for sale. So, we would do our own part. One of the things we’ve been able to do at Noor Takaful is hold the African Takaful and Non-Interest Finance Conference. We successfully held the latter in 2024. It’s not just a Takaful conference. It allows us to bring people together, experts from around the world, to come and discuss Islamic finance, Takaful, and how we can improve on it. What we’re trying to do is to lead the conversations. We need to have people come and talk about it. We need to have people come and bring in new ideas from where it has worked or where it has not worked so well and find out what the issues and problems are so that we can improve our market. I want Nigeria to be the centre for Islamic finance in Africa. Let us be the hub of that. And with the conferences we’re having so far, I think we’re doing quite a good job. With the successful FGN Sukuks, there are several private Sukuks. Lagos State also issued a sub-national Sukuk in 2023. So, we’re getting there. We’re hoping the northern governors or northern states will also issue Sukuks that people can key into. But there’s a lot more work. There’s an association called NIFIAN, the Non-Interest Financial Association of Nigeria. I think they’re doing quite a good job as well in terms of getting all of us, those that play in this space—the banking space, the Takaful space, and the capital market space—to continue to have these conversations.

What is Noor Takaful’s vision for the next five years in the insurance sector?

Our vision is to remain, to be the beacon of an ethical financial institution in Africa. We’re calling it a financial institution and not Takaful because we’re looking beyond Takaful. As I mentioned earlier, we commenced operations recently in health. We believe we will look at other sectors as we go along. However, right now, we’re focusing on nurturing our new health product to ensure it’s stable enough. But at every point in time, we want to ensure that we remain the beacon of ethical financial services.