Uganda has licensed its first Takaful insurance operator, introducing insurance practices based on Islamic principles in a move expected to improve financial inclusion.
In 2018, the Government passed the Financial Institutions (Islamic Banking) Regulations to regulate the conduct of Islamic financial business by financial institutions, creating a supportive environment for the emergence of other Shari’ah-compliant business models, including takaful.
Kaddunabbi Lubega Chief Executive Officer of Insurance Regulatory Authority anticipates more deepening of insurance as well as increase the available resources for financing long-term projects.
“Islamic insurance will enhance market confidence since the insurer is assured that they collectively own the Takaful Fund, and that they are assured of not entirely losing their money if the risk insured does not materialise,”:Kaddunabi stressed.
He said that in developing the Takaful Insurance regulations, uganda bench marked onSudan, Egypt, Kenya, Nigeria, and Senegal African countries that already have it in practice,
He explained that Takaful insurance licensing framework provides for two types of licensing, with one providing for an insurance company established to provide Islamic insurance, and the other providing a window for a conventional insurance company to have a Takaful insurance section.
“the main difference is that while the conventional insurance companies are all about interest, Takaful insurance prohibits it and cannot earn the company or the policyholder any interest,”Kaddunabbi stated.
“Instead, it is a shared risk and mutual guarantee between the policyholders and the company operator,”he added.
Insurance Regulatory Authority Head Legal Francesca Nakaggwa Kakooza said the licensing of Tamini General Insurance Ltd builds on Uganda’s steady embrace of Shari’ah-compliant products following the introduction of Islamic banking in 2018.
Takaful, often described as Islamic insurance, prohibits practices that violate Islamic values, such as interest, gambling and impermissible investments. It is structured around risk-sharing rather than the traditional model of risk transfer from the insured to the insurer.
Under this type of insurance, parties or policyholders agree to guarantee each other and make contributions to a takaful fund or mutual fund (Takaful fund) instead of paying premiums.
Each participant’s contribution is based on the type of coverage they require and their personal circumstances.
A takaful contract is signed specifying the nature of the risk and the length of the coverage, similar to that of a conventional insurance policy.
Dr Abdulhafiz Walusimbi, Head of the Department of Shariah at the Islamic University in Uganda and Board Chairman at the Insurance Training College, explains that the main principle distinguishing Takaful from conventional insurance is the avoidance of interest in the operations. He says it does not entertain practices that are prohibited by Islamic Law, that is, Interest-based dealings, uncertainty, and gambling; rather, it is based on ethical values like transparency (disclosure, trust, and truthfulness), and approved haram investments.
In Uganda, Takaful was legislated for under the Financial Institutions (Amendment) Act of 2016, which allowed for Islamic Banking and Islamic Insurance, among others.
Uganda’s insurance sector shows robust growth, with premiums rising (around 10-12% in 2024) driven by digital adoption, financial inclusion efforts, and strong performance in life, non-life, and micro-insurance, despite low overall penetration (1%). Key trends include increased digital uptake, growing life & micro-insurance segments, concentration of market share among a few large players, and regulatory calls for consolidation, capital strengthening, and innovation to deepen market reach and enhance efficiency
