Takaful's Role in Tanzania's Economic Development

The Role of Takaful in Economic Development of Tanzania By M. Hussein Mohsin Mohsin M. Hussein PhD Degree Student in Economic Development PhD Degree Student in Economic Development

Economic Growth or Economic Development has become norm of each and every Country in the World, therefore every Country is competing with others to improve its economy.

Every developed Country tries to maintain its economy, while developing Countries are struggling very hard to improve their economy, to reach the status of developed Countries.

The economy is the backbone of the Country, and that the Country should have a strong and developed economy, needs to have a proper structure and sustainable planning of building its economy.

Tanzania is the Country blessed with varieties of Resources including various Minerals, Arable land for Agriculture, Tourism Sector, Ocean, Rivers, Lakes and the population of over 50 Million people.

Economic growth and economic development are two completely different things while many people incorrectly assume that they are the same or at the least very similar and through this confusion, the two terms are often used together or interchangeably.

Economic growth refers to measure capacity of a real Gross Domestic Product (GDP) of the national income and expenditure, basically from the total volume of goods and services produced in an economy compared from one time of period to another.

Economics Development on other hand refers at a wider range of statistics than just GDP, to the process in improving country s economy, political and social well-being of its citizen.

Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living via real income per head GDP per capita, levels of literacy and education standards, levels of healthcare, availability of the quality housing, levels of environmental standards and Life expectancy.

Economic growth may only benefit a small percentage of the population, for example, if a country produces gas, it will see an increase in GDP but however it is possible that this gas is only owned by one firm, and therefore the average worker doesn t really benefit from the profit from the selling of the gas.

While in the economic development the general public is involved in participation of the economical processes, hence, resulting in earning to general public and in inclusion the spending / purchasing power of the people increases which also results earnings to the Government.

Economic Development is a normative concept, so the Country's economic development is an important and fundamental factor for each and every Country in order to develop, and promote better life for its people and generation to come.

Five Key and Fundamental points towards Economic Development process are:

1.To have a strong and swift economy, presence of reliable infrastructure such as roads, railway line, telecommunication, electric power supply, water supply, housing as well as hospitals and schools are vitally important for its economy to function.

2. Availability of latest technologies is vitally important to reduce productivity cost, to enhance fast and efficiency work as well as leading toward excessive revenue.

3. Good Governess is a key factor to prepare structure of supervising income through available resources and to manage expenses towards focused development strategic plans for short, mid and long terms projects in conjunction with fully involvement of the citizen in the Country s complete economic development process.

4. And at the same time it is very important for the Government to manage all expenditure, including reducing size of the Government by diminishing departments that are causing duplication of work and excessive of unnecessary staff departmentally as well as to cut down non-mandatory expenses and to control tax evasion.

5. Hence, access to availability of the Finance is very important to promote economic development and not to diminish the Country's economy, and for that presence of reliable financial institutions such as Banks, Capital Market, Money Market, Micro Financing, Saving and Credit Cooperative (SACCO s) and Insurance companies especially Takaful are very important.

Insurance Companies: There are two types of Insurance companies that are Conventional and Takaful. Conventional is based on risk transfer while Takaful is based on risk sharing.

Although Takaful is related to Islamic Sharia because of its prohibition on Interest (Riba), Uncertainty and Gambling, but it is an financial service product like any other financial services and is useable for All people regardless of their religion.

Takaful companies are not present only in Islamic countries but also in non-Islamic countries such as USA, UK, Switzerland, Germany, Luxembourg, Sweden, Australia, Zambia, Kenya, Uganda, Nigeria, Gabon, Liberia, South Africa, Thailand, Singapore, Sri Lanka, Trinidad & Tobago

Since the inception of the first Takaful company in Sudan in 1979, till today there are more than 200 Takaful companies worldwide. At the year-end 2016, the Takaful assets were estimated to be of around USD 33 billion and the gross Takaful contribution were estimated to be around USD 14 billion and expected to reach USD25 billion mark by 2020

How can Takaful contribute in economic development of Tanzania: The start of Takaful Insurance will expand the country s financial services in various spheres including:

1. Increase access to Insurance service from larger uncovered population. Many people are not using this sector because of ethical reason, except for the Government mandatory purpose of motor vehicle. Hence more Takaful policies will be issued, resulting more cash flow

2. Growth of Banking activities especially Islamic Banks. The bank will be able to work more comfortably and more wider due to risk coverage support from Takaful companies hence resulting increase of cash flow and development projects.

3. Issuance of Islamic Bonds (Sukuk). The subscribers who will contribute for Sukuk will be rest assured on their returns due to the availability of the Takaful coverage. Hence development project will be implemented. many economic

4. Enhance establishment of Industries through Takaful investments funds. Due to availability of adequate funds many economic development investments including industries will be started.

5. Increase in Foreign Investments. Many foreign financial and non-financial institutions will open up their businesses due to availability of Takaful market.

6. Employment opportunities. Obviously due to increase of economic development investments projects room for job vacancies will double.

7. Increase of Government revenues through various taxes (Corporate, Gain, and PAYE). Due to above mentioned economic development activities, the Government income will be bigger and ultimately reach the status of the developed country.

IT IS VIVID, TAKAFUL HAS VERY IMPORTANT ROLE TOWARDS ECONOMIC DEVELOPMENT OF TANZANIA. THANK YOU