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Book review of ‘Takaful Investment Portfolios: A study of the composition of takaful funds in the GCC and Malaysia’ by Mehmet Asutay Camille Paldi February 16,2015: Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia provides an explanation and analysis of the investments of takaful funds in the GCC and Malaysia between 2002 and 2005 and explores the...

Book review of ‘Takaful Investment Portfolios: A study of the composition of takaful funds in the GCC and Malaysia’ by Mehmet Asutay

Camille Paldi

February 16,2015: Takaful Investment Portfolios: A Study of the Composition of Takaful Funds in the GCC and Malaysia provides an explanation and analysis of the investments of takaful funds in the GCC and Malaysia between 2002 and 2005 and explores the rationale behind such decisions. In addition, the author discusses and analyses takaful investment trends and developments and depicts the findings through charts, figures, and tables.

This book contains some useful information and statistics regarding three classes of takaful fund investments in the GCC and Malaysia, including equities, sukuk, and real estate over a set period of several years in the early 21st century.  However, I had to sift through a thick maze of academic prose in a prose pajama party and suffer through pages of jargon in order to get to the heart of the useful information contained in the book. Although this information is slightly outdated for industry use, it provides an insightful guide to past trends, which may or may not be indicative of the performance of takaful investments at present or in the future. This book may be highly useful and relevant for university students and academics, and those wishing to get a glimpse of past industry trends.

I have to admit I enjoyed the academic and scholarly discussion of the takaful concept in Chapter Two: Insurance and Islamic Law: An Introduction to Takaful.  There are some interesting references to the Qu’ran and Sunnah as well as to scholars of the past.  However, in a book, I prefer to see more of the author’s original opinion rather than heavy reliance on other authors.  Furthermore, I want to see an explanation of the cited statement as the author is relying on another author to relay his point.

For example, in Chapter Two, the author writes: “Moreover, it is also claimed that commercial insurance leads to negligence (Moghaizel, 1991), murder (Al-Sayed, 1986; Hassan, 1979), and is exploitative of people’s needs (Mawlawi, 1996), and that the control of government may fall to powerful insurance companies (Abdu, 1987). I would like to see some kind of original and authentic explanation of this statement from the viewpoint of the author. For instance, how does commercial insurance lead to negligence, murder, and exploitation and provide some examples.

Camille Paldi is CEO of Franco-American Alliance for Islamic Finance 

Furthermore, why and how would control of government fall into the hands of powerful insurance companies and what then would these insurance companies do with the government under their reigns? In addition, it is always an interesting scenario to witness secular, trained academics incorporating religion into their work. The religious references are presented in quite a secular and neutral manner, which makes the book quite easy to understand and digest by religious, non-religious and atheist alike.

Chapter Three contains a comprehensive academic explanation of the various takaful models. In addition, in this chapter, the author explains the differences between takaful, commercial, and mutual insurance and trends and developments in the takaful industry. The entirety of Chapter 4 discusses research methodology, which is geared for academic institutions and academics rather than the industry and practitioners.

Chapter Five on Exploring Investment Behaviors and Investment Portfolios of Takaful Operating Companies in the GCC and Malaysia is where I finally found the hidden treasure. The chapter is full of interesting factoids and figures, analysis and comparisons regarding the investment of takaful funds in equities, sukuk and real estate in the years 2002-2005.  However, this information may or may not be indicative of present and/or future trends as we are now in 2015, 10 years past the period of this study. It is, however, interesting information and may be used in the realm of academics or to see the results of takaful investments in three asset classes in the years 2002-2005. This book may also provide a rough idea on how to perform a feasibility study at the inception of a takaful company in a particular jurisdiction or area of the world or serve as a guide in conducting another similar academic study regarding takaful fund investments.

Although Chapter Six: Locating the Differences Between Actual and Desired Investment Portfolios contains some interesting discussion about the actual and desired investment portfolios of the GCC and Malaysia, I found that much of this chapter could be skim read and probably should have been deleted from the book. In Chapter Seven: Contextualizing the Findings, the only pertinent information includes the discussion on how takaful funds manage their liquidity and the figures for return on investment for the GCC and Malaysian Takaful Funds for the period 2002-2005. I felt like I spotted an oasis after traversing for days through a wild desert sandstorm of verbiage when approaching Chapter Eight: Conclusions and Recommendations.

Chapter Eight: Conclusions and Recommendations provides recommendations for regulatory authorities, takaful operating companies, and Islamic banks/windows. Actually, I found the conclusions and recommendations quite interesting and highly useful especially in regards to whom should be making the investment decisions and the need for more legislation and regulation of the takaful industry in the UAE and globally. Aside from recommendations, the author also explains the research limitations in conducting this study.

The author states that focusing the research only on the initial period of the takaful industry during the years 2002-2005 could, perhaps, be considered a shortcoming.  Furthermore, the author explains that another limitation may lie in the sample size that was chosen.  The author says that the sample is so small – less than 30 companies – that the parametric statistical tests could not be used in this study.  Second, even for use of nonparametric statistical tests, the small number of takaful companies operating in Malaysia limited the author to performing a comparison between the GCC and Malaysia. This can be seen where the author tried to study the differences between levels of actual and desired investment portfolios between the GCC and Malaysia. The author was not able to adopt the Wilcoxon Signed-Rank Test for Malaysian companies.

Despite these and other limitations, overall, the book contains some valuable information. However, is it worth traversing through the pages of academic verbiage to find the hidden treasure? I felt like I was in the TV program Lost while reading this book, sailing on an ocean of words, which just kept taking me around in a circular whirlpool of lost time and space to the same place.

If you have a preference for the lengthy, verbose academic presentation style, are skilled in pinpointing a needle in a haystack, have a lot of time on your hands and are seeking the results of a study conducted from 2002-2005 examining the results of takaful fund investments in real estate, equities and sukuk in the GCC and Malaysia, I recommend this book for you.

The study may also reveal gaps in the asset classes for the takaful industry. After conducting a thorough analysis of the investments of takaful funds of the GCC and Malaysia from 2002-2005, the author concludes that the study shows that convergence is expected in the investment behaviors of takaful companies in the GCC and Malaysia once the primary and secondary markets for sukuk develop in the GCC and an international regulatory framework is practiced.  This book is quite useful for students and academics in the field of insurance, finance, Islamic finance and Islamic insurance or takaful, as it is a comprehensive, analytic, and comparative academic study of takaful investment portfolios in the GCC and Malaysia from 2002-2005 complete with a chapter on literature review and the questionnaire and interview used to conduct the study.

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