For takaful operators, staying competitive in a digital world will require far more than just direct sales channel or automated processes. It requires a rethinking of the fundamentals and principles of takaful, for which digital technology can be a catalyst. Takaful operators must rethink their sources of revenue, operational efficiency and talent strategy to reap the opportunities of digital disruptions. It is also important to rethink the business model and the role that takaful operators can play in a digital ecosystem that has transcended geographical boundaries. Digital disruptors such as virtual or peer-to-peer takaful provider that is tech-enabled might be able to overcome many pain points experienced by the industry in more efficient ways. The buzz right now in the financial industry is around digital banks. Nonetheless, this can swiftly turn to digital insurers or takaful operators. Such development could be the next phase that could further enhance the 3/5  BIS central bankers' speeches  quality and pricing of services delivered, while also penetrating new areas for the industry to achieve our protection goals. This development could provide the impetus for exponential growth in insurance and takaful penetration in the country. Thirdly, the industry must take greater responsibility to educate consumers and inculcate understanding about the importance of financial protection. Almost half of respondents in the 2018 Financial Capability and Inclusion Demand Side Survey cited lack of product understanding to be the key reason for not purchasing life insurance and family takaful.

Currency mismatches have been at the origin of many banking crises in emerging economies. Nonetheless, their financial systems’ resilience to exchange rate fluctuations toward late 2008 and early 2009 showed that lessons were learned, and effects on banks’ balance-sheets, that would have translated an external recession into a far-reaching financial crisis, were avoided. Of course there were exceptions, particularly in emerging Europe, where fragilities arose precisely because of the rigidity of their exchange rate systems and currency mismatches of their banks. Another reason of the importance of having a well-functioning financial market is the distortions caused by exchange rate volatility on resource allocation. In order to minimize such effects it is prudent to develop an exchange rate hedging market allowing producers in the tradable sector to hedge against exchange rate fluctuations at least at one year’s term. In fact, evidence shows that hedging markets are more developed in economies with more flexible exchange rates, because it is that flexibility that creates incentives for these hedging mechanisms to develop (De Gregorio and Tokman, 2005; Kamil and Sutton, 2008). If, on the contrary, the monetary authority attempts to provide stability, the market will have no incentives to develop hedging instruments. However, a floating exchange rate and an inflation targeting regime may be insufficient for stabilizing large amounts of capital inflows. The appreciation that results from massive capital inflows and a credit boom cycle may require other instruments to stabilize the economy and ensure the smooth functioning of the financial system.