In the interim, we can think of social finance as a vehicle to bridge this gap. The integration of social finance instrument in takaful solutions in a more structured and scalable manner can have transformative impact in making financial protection more affordable for society. Waqf, sadaqah and zakat are examples of social finance instruments which can be embedded in the design structure of takaful products. Mainstreaming the integration of social finance can unlock commercially viable financial protection to be extended to those who are most vulnerable in our society. This is definitely a unique value-added feature that can drive innovation in the area of inclusive protection. In designing solutions to cater for the lower income segment, the takaful industry can capitalise and leverage on the principles of Perlindungan Tenang initiative, which promote protection solutions that are affordable, accessible, easy to understand, easy to buy and claim, as well as offering good protection value. Admittedly, the uptake by the industry to date has not been satisfactory. Many players cited business viability and distribution model to be among the critical challenges in advancing this initiative beyond corporate social responsibility. This is something that takaful operators, as an industry, would need to overcome. We will need to apply unconventional thinking and take bold steps to create an ecosystem that is more enabling for microtakaful solutions to be implemented in a sustainable manner. On the Bank’s part, we have initiated a review of the relevant regulatory framework to spur the development of inclusive protection.

While there are attempts to publicise takaful offerings, these efforts remain fragmented and lack of focus on advocating greater appreciation and understanding about the value of protection. Households and businesses remain unaware and uninformed in making decisions relating to financial protection. Recognising this persistent challenge, the Bank and the Securities Commission recently spearheaded the establishment of the Financial Education Network and the launch of the National Strategy for Financial Literacy to increase the impact of financial education initiatives and to elevate financial literacy among Malaysians. Efforts to improve financial literacy will also require industry associations to drive the development of best practices for industry-wide adoption. In this regard, the Malaysian Takaful Association should be consistently proactive and agile in responding to emerging opportunities and resolving impeding industry issues. Takaful industry as a game-changer in empowering financial resilience As Malaysia advances towards the shared prosperity vision, it is crucial to ensure balanced and inclusive growth. The takaful industry has a critical role in enhancing the socio-economic wellbeing of Malaysians. This vision cannot be achieved without addressing the specific needs of the lower income group. According to a study by Khazanah Research Institute, people in the lower income category now have lesser residual income. The cost of living burden is the heaviest for lower income households, who spend 94.8% of their income on basic expenditure. Not much is left for savings or for financial protection in the event of misfortune. Overcoming the issue of affordability requires long-term and broader measures to grow people’s income.