Development Strategy of Microtakaful Institutions: Case Study Working Group Indonesia

Indonesia is becoming one of potential countries in microtakaful institutions development. One of the expert in microtakaful is Takmin Working Group. TWG is a group of initiators who have commitment to develop micro takaful in Indonesia. Its members consist ofexperts in Islamic insurance, micro finance and accounting. The research objectives of this study are to identify and analyze the problems faced by TWG in developing of microtakaful institutions and identify the solutions to solve those kinds of problems, by using AnalticHierarchy Process (AHP) method. The finding of this study shows the most priority solutions that can be undertake by Takmin Working Group to solve these both internal and external problem is information system development, and then followed by innovative product development. Communication & visitation to Islamic micro finance institutions and socialization about micro takaful product to society are being less priority on this matter.DOI: 10.15408/etk.v16i2.5267


INTRODUCTION
Indonesia is becoming one of potential countries in micro takaful institutions development. According to the 2013 Millenium development Goals report suggested that 60% of populations in the developing world live on less than $4 a day. In Indonesia, it was recorded from Indonesia's total populations (238.518.800 million people), there are approximately 144.111.280 people that live on less than $4 a day. In line with BPS data reported that a total of 28.553.930 Indonesians living under the poverty line. Another report said that the most priority Indonesians occupations are agriculture, informal worker, fishery, and small business owners. Unfortunately, their awareness of using micro takaful product is still low (Malagardis, et al, 2014). One of shocking information from the study undertaken by Obaidullah&Tariqullah (2008) that just five of its 56 Islamic Development Bank (IDB) member countries (involve: Indonesia, Bangladesh, Pakistan, Nigeria, and Egypt) account for over half a billion (528 million) of the world's poor with incomes below $2 a day or below their national poverty lines.
Microinsurance is insurance and more simply is a special category of insurance and not new category insurance. Microinsurance is actually aimed to protect the poor, because of there is an element of a social prottction system, similar to social insurances and national health insurance schemes (Hasim, 2014). Microinsurance intends to offer the poor protection against specific risks in return for payment of regular premiums proportionate to the likelihood and cost of the risk involved (FDC & Citigroup Foundation, 2006).
Takmin Working Group is a group of initiators who have commitment to develop micro takaful in Indonesia. Its members consist ofexperts in Islamic insurance, micro finance and accounting. Takmin Working Group (TWG) at first worked with PT. Syarikat Takaful Indonesia in developing and marketing the products. This approach, in the world's Microinsurance practice is known as institutional approach or "Partner Agent Model".
Takaful means a commitment to help each other through contribution in the form of tabarru' without any expected and quick return.In Islamic traditions, the format is to help needy children or orphans to school, to cure the sick, to celebrate family wedding, and to settle funeral of the death, etc.Takaful later on was absorbed as one financial instrument (called as TAKMIN or TADHAAMUN) that is organized in a modern way just like insurance with more number of participants who can give more contributions.Takaful transaction or insurance takaful that serves low income clients is presently known as microtakaful. Micro takaful has proven to provide "win-win-win" solutions to the followings: a) for the low income households; by providing them insurance protection that they never experienced before; b) Micro Finance Institutions (MFIs) as the Group's partner can offer better services to their clients with lower risks; and c) Insurance companies are able to tap new market niche (through MFIs) that was previously difficult to approach.

Figure 1: Partner Agency Model of TWG
TWG have five pillars of shariah based financing as stage of empowerment. The first pillar is to give charity or a form of contribution to the poor without expecting any return. The charity is delivered to those who are eligible with good manners and education.The second pillar is to give loan. It has better value than charity because when people are borrowing, it means they are in need. Besides, if the loan is well designed, there will be transaction which will create individual responsibility to repay; therefore there must be a commitment to repay on time and in full. The third pillar is to extend financing that is to educate society to develop their wealth through productive business.The fourth pillar is in form of saving intended to educate society to plan their future, by setting aside part of their income to anticipate future needs.The fifth pillar is risk sharing, especially financial risk that occurs due to death, sickness, property loss, house fire, retirement etc. The last pillar can be delivered by micro-takaful instrument.
In order to enhance the development of TWG in Indonesia, this research is aimed to explore the problems faced in TWG's operational system, and then finds the solutions to solve the problems. All problems and solutions were found through interview to some   product. TWG must have variety products in order to attract the society to insurance and invest their wealth. The variety of Islamic Micro insurance products will help society to have/buy insurance product based on their need; (4) Socialization to society. The knowledge of Islamic insurance and Micro insurance must be socialized to the society, not only to common society but also to low-income society. The benefit of doing the socialization to common and especially to low income society is it will increase their trust and understanding about Islamic insurance and hopefully in the near future they are attracting to use Micro insurance product. From the explanation, it can be formed on the hierarchy model of development strategy of micro-takaful institutionwith the Analytic Hierarchy Process approach. It can be seen in Figure 2.

METHOD
This research is using primary data, which is obtained by doing in-depth interview with experts from practitioners and academician. In order to synthesize the problems and make it in priority, second meeting (interview) with experts is needed to complete pair-wise questionnaires. In order to choose respondents in this research is by considering their understanding about micro-takaful development. The amount of respondent consists of five experts related to the topic discussed. There is no maximum or minimum quotes to choose respondent, the most important things to be considered are they must have good ability and good understanding about micro-takaful problem.
This study applies Analytic Hierarchy Process (AHP) methodology in two steps.
First, develop an appropriate AHP network and relevant questionnaires to glean the necessary data from experts and academician of microtakaful. Second, AHP analysis is applied to set priority of problem and solutions of TWG strategy on microtakaful product develepment.

RESULT AND DISCUSSION
The results obtained showed a statistical consensus of the experts and practitioners in relation to problems and solutions to develop micro takaful strategy in Takmin Working Group. In Figure 3, the main problem priority results showed that the problem is coming from external institutions (55.2%) and the second priority problem is coming from internal institutions (44.8). Actually, Takmin Working Group needs the highly support from the external parties, such as from regional government and central government, academia, and Islamic micro finance institutions. Moreover, they do need the support from society. The need of Islamic micro takaful product must be socialized to all society especially to low level income society in order to protect them selves from any kind of unpredictable situations related to their business/wealth. Unfortunately, some of them believe that they do not need the insurance to protect their business, and in another case they think that the insurance only could spend their money without high impact returns. Some respondents more preferred for conventional insurance due to the following reasons: (a) Past bad experience in Islamic banking; (b) Perception of "takaful" as only a change in name, but with still the same approach; (c) Lack of knowledge about takaful while abundant information about conventional insurance makes for comfortable decision-making; (d) Preference for a national product that everyone would feel comfortable using and would not exclude anyone (See Figure 3).
To prevent the averse of society to Islamic micro insurance, OJK had a program since 2015 in preparing 10 million insurance agency and 1,000 maritime financial friends (or called as "Sahabat Keuangan Maritim"). This program is aimed to increase the social accessibility to insurance service, micro insurance, and enlarge the service scope of financial practices (Hariyadi & Triyanto, 2017). Hasim (2014) also revealed that to enhance the role of Islamic microfinance towards poverty alleviation need the participation of the government. The government should play an important role in encouraging Islamic insurance operators to design microtakaful schemes to the needy. In addition, the government should also facilitate links to appropriate support organizations such as zakat and waqf institutions, as well as international donors and grant providers. The micro insurance schemes also should have a social protection element, in which the government need to provide the contribution (such as subsidies) to the needy or farmer who cannot afford to buy the policy. The government also needs to establish an intervention fund where it is directly funded from the government's annual budget. The government also needs to develop and implement a supportive regulatory and supervisory framework suitable for microtakaful market. In line with Hasim (2014), Ahuja and Khasnobis (2005) also stated that microtakaful product will become increasingly clear if supported and properly guidance by the regulator as well as the government.
Takmin Working Group actually has a great challenge on how to win society heart in order to move to Islamic takaful, especially know how importance of micro takaful product for their business protection. In addition, another challenge also appeared on how to change society mindset that Islamic takaful is totally different with conventional takaful.
Society do really need more socialization rely on this matter.

Micro Takaful Product in Takmin Working Group
The highest priority problem concerned with sub criteria of internal institutions is Institution scale is relatively small with the ratio result is 53.9%, and then followed by there are no agency sales (23.8%), the lack of human resource capability (13.9%), and the last priority is insufficient of promotion fund (8.4%). Islamic micro takaful in Indonesia is relatively new compared to macro takaful and conventional takaful. The existence of micro takaful in Indonesia is considered of the significant development of Islamic micro finance institutions in Indonesia, such as Baitul mal wat Tamwil (BMT), Islamic cooperation, etc.
The need of protection for micro business sector is also increasing at this time. So it is normal if the institution scale of Takmin Working Group is still small. The small institutions scale of TWG finally is affecting to their operational activities. Then TWG will grow slowly if they are not fully supported by other financial institutions such as Islamic bank, Islamic rural bank, and Islamic micro finance (See Figure 4).
The second priority is the lack of agency scale. Agency in Islamic Insurance has an important role in order to promote insurance product. Sumanto (2009) stated that insurance agency marketing has the function to keep the company image to the customer eyes. Insurance agency marketing has to avoid the mistake in promoting the insurance product, informing the product, and selling the product. Therefore, Islamic insurance agency marketing needs to work professionally, and has a good knowledge not only Islamic insurance knowledge but also economic knowledge. This knowledge is being the answer to the need of Islamic insurance market in Indonesia. (Firmansyah & Devi, 2017) stated in their research that the fact, Islamic insurance agency marketing don't have the interest to promote and sell Islamic micro finance product. Islamic micro finance products are considered less profitable than conventional one. Islamic micro finance product will be profitable if only the agency can sell the product collectively not individually. So, the agency argues that it would be difficult to sell micro insurance product without having a strong relationship with some parties (such as company, community, etc).

Islamic Micro Takaful Product in Takmin Working Group
The last priority of internal problem is insufficient of promotion fund. It means that, fund is not the main constraint to develop micro takaful product. Integrated cooperation among financial institutions will directly help micro takaful to enhance their operational activities involve promoting their product to society. The highest priority problem concerned with sub criteria of external institutions is society paradigm about insurance with the ratio result is 39.9%, and then followed by Islamic micro finance institutions routines activities (29.1%), the saturated of market (19.2%), and the last priority is market competition (11.7%). Society paradigm about insurance is being the highest priority of external problems. According to our pre-research of this study using observation to some of respondents from the low income society, they argue if they do not know more details about what Islamic Micro insurance is, and what the benefits from Islamic Micro insurance are. In addition, they have less interest to have protection for their business. Based on this observation result, we can assume that the society have not awareness yet rely on the importance of Islamic Micro insurance especially to protect their business. So, it would be a great agenda, not only for Islamic micro finance institutions but also for regional government to socialize and educate people on how the importance of Islamic Micro insurance in order to protect their business. Malagardis, et al (2014) state on their study that the lack of information and understanding of takaful and micro takaful poses a challenge for both the regulator and the industry. This challenge must be overcome in contributing the growth of Islamic micro takaful industry especially in Indonesia. The details can be seen in Figure 5.
The second priority of external institutions problem is Islamic micro finance institutions routines activities. As commonly known, that the main function of Islamic micro finance institutions is giving the financing to the un-bank-able people, or low income society. It is normal if Islamic micro finance institutions will make financing program as their main program and make financing program more prioritize than others, but if Islamic micro finance institutions can build good cooperation with Takmin Working Group, hence it is expected to enlarge their scale of business for low income segment consumers.

Micro Takaful Product in Takmin Working Group
In compliance with problem cluster, the priority results showed that the most priority solution coming from information system development (32.8%), and then followed by innovative product development (30.2%), communication and visitation to Islamic micro finance institutions (25.8%), and the last priority solution is doing the intensive socialization to society (11.3%). The priority solutions clusters are shown on Figure 6. The main priority of solutions cluster in relevant to develop Islamic micro takaful product in Takmin Working Group is information system development. Takmin Working Group might have cooperation with information technology (IT) provider to develop the information system for supporting operational activities of Takmin Working Group.
Information system technology is being the most considerable factors of business success today's era. All stakeholders expected are able to access all kind of information related to micro takaful operational activities. Unfortunately, micro institutions nowadays are lack supported of this system. The lack of information system support is not only being constraint for Islamic micro takaful institutions such as Takmin Working Group, but also being constraint for others Islamic micro finance institutions such as BMT (baitul mal wattamwil), Islamic cooperation, and others micro institutions. Takmin Working Group must cope with the importance of information system technology to enlarge the business capacity of TWG and also complement the need of consumers relies on Microinsurance product.

Takaful Product in Takmin Working Group
Yusuf (2012) also stated that the development of information system will affect to the effective and efficient of an Islamic micro insurance industry. The information system is being one of main factor to market the product in nowadays situations. Especially for the un-bankable prospective customer, rural customers officially need fast and accurate information regarding to the product, which their money invested inside them. Therefore, Islamic insurance especially in this case focuses on TWG has to increase their information system to achieve high market share of Islamic micro insurance product. Fadun (2013)  The second priority to enhance the Islamic micro takaful product development is innovative product development. Takmin Working Group must develop innovative product in relevant to consumers need. In order to accommodate this program, TWG might be able to hire employee which has expertise in business development and also expertise in fiqh muamalah / muamalah transaction. TWG also can develop some products by combining Islamic contract transaction or commonly known as 'hybrid contract', without eliminating sharia compliance of the product, such as Ahmed, et al (2005) already tried to develop on health microfinance product.
Innovative development product not only can be carried out trough innovative product but also can be carried out by the price. The main segment of Islamic microtakaful is low-income people and the needy. Therefore, the prices (premiums) collections are suggested to comply with their income. Ahuja and Khasnobis (2015) suggested to insurance company in having the flexibility in premium collection of their product (microinsurance product). The flexibility in premium collection officially will affect to the intention of customer to join or not join the insurance. The low-income people commonly don't have particular timing to get cash of money (seasonal). Therefore, insurance company has to be able to understand this condition and gives some flexibility to collect the premium from this kind of people.

CONCLUSION
Based on the research and discussion above concerning the development of micro takaful institutions in Takmin Working Group, it can be concluded that there are twomain problems faced by Takmin Working Group in micro takaful institutions development, consisting of internal problem and external problem. The most priority problem is coming from external problem. The most priority of external problem is society paradigm about insurance, whether the most priority of internal problem is institution scale is relatively small. The research result also show that the most priority solutions that can be undertake by Takmin Working Group to solve these both internal and external problem is information system development, and then followed by innovative product development. Communication & visitation to Islamic micro finance institutions and socialization about microtakaful product to society are being less priority on this matter. Some recommendations could be addressed. There should be a mutual agreement among micro takaful stakeholders in supporting and promoting the socializations of micro takaful product to some consumer segments. Takmin Working Group should have a mutual agreement to some Islamic micro takaful institutions, regional government, community societies, and Islamic bank in order to reach this objective. Takmin Working Group should enlarge the segmentation of micro takaful costumer. TWG might not only focus to micro business but also can reach another segment market. The future consumers also must be informed intensively by Takmin Working Gorup about its eligibility, distinction of features (if it is compared to conventional insurance) and also they must be informed about the price and payment style.