The Takaful or the Islamic insurance industry has just begun its journey on the path of proliferating growth as it still hasn't tapped the full potential of the investors across the world. According to the recent estimates of Ernst & Young, the total assets under the management of Islamic funds amount to a sum of $52 billion. This is very meagre as compared to the estimated wealth of the Muslim population which is worth $300 billion. These figures show that there is a huge scope of further work in getting more Muslims to invest in Takaful funds and take up Takaful policies.

The main concern in this field is the small size of the Takaful industry. Due to the small size of the Islamic insurance industry, there are only eight Islamic exchange traded funds (ETF) all over the globe. The Ernst & Young research reports that 70 percent of Islamic fund managers have less assets under management than the $80-100 million estimated break even size and 29 new funds have been launched all over the world. These exclude the 27 fund liquidations that took place in 2009.

As a solution to this issue, many Takaful AMCs are looking at mergers and acquisitions with hope.

According to the latest report on Islamic insurance industry by Ernst & Young, a majority of the Takaful firms are small in size and struggle to stay in the competitive insurance market which has thriving conventional players. This has led them to consider the path of mergers and acquisitions which would enable them to maintain their identity in comparison to the large sized conventional insurance players. The total premiums gathered by the Takaful industry is expected to cross $8.8 billion in 2010.

In addition to the consolidation of firms, many other factors must be considered in order to boost the performance of the Takaful industry. New efforts must be made towards aggressive marketing of the insurance products complying to the Takaful format. In order to tap the Non-Muslim investors in the Takaful market, the fund managers must learn a lesson or two from the South-East Asian financial markets like Malaysia where Islamic finance dominates people's lives irrespective of their religious beliefs. They need to understand that they are not only competing against the other Takaful funds but also the regular insurance companies. This would take the Islamic insurance to new and higher levels which is the need of the hour.

Also, more sophistication is needed in the asset management strategies. Many Takaful companies deal with the investors directly and do not include the strategy of marketing their financial products through the commercial bank channels. These firms fail in providing diverse options to the customers as they do not deal in third-party financial products. The Takaful funds must tap this channel of distribution in order to reach a position where they would compete with the conventional and non-Islamic insurance products. The conventional asset management companies provide the investors with various other investment options like money market financial instruments. On the other hand, the options available to the investors opting for Shariah-compliant financial products have very limited choices when it comes to additional or complimentary investment schemes.

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