Abstract:
Human life is filled with uncertainty. The quest for certainty led to emergence of insurance.
Historically, there have been mutual and commercial insurance models. However, certain
Islamically prohibited elements entrenched therein have caused huge number of Muslims to shy
away from using it. As a result, Islamic insurance emerged as a third model to provide
alternative products to those who have reservations to conventional insurance. Nowadays,
Islamic insurance is one of the world’s fastest growing segments in insurance. Countries that
have introduced it to their financial system achieved remarkable success in their insurance
sector’s density and contribution to national GDP. Despite strong public demand, this insurance
scheme is not officially introduced to Ethiopia yet. Recently however, the country is taking some
initiatives to introduce diverse and innovative financial products as part of its financial inclusion
strategy. This study, thus recommends the need to introduce Islamic insurance scheme to help
the country attain its target of boosting financial inclusion. For the successful operation of
Islamic insurance, enabling regulatory and supervisory frameworks that accommodate manner
of conducting the business are needed. This study is therefore a modest contribution to
appreciate the operation and regulation of Islamic insurance in Ethiopia. In so doing, the study
applied qualitative research method and data collection tool. After analyzing the international
best practices and experiences of some jurisdictions, the study recommends the operational
models and regulatory frameworks that fit for Ethiopia. Regarding regulatory framework, the
study suggests the enactment of directive/guideline to provide for matters peculiar to the practice
of Islamic insurance without the need to enact independent proclamation for the existing laws
and rules governing conventional insurance can mutatis mutandis apply to Islamic insurance.
Regarding the level of adoption, owing to scanty level of awareness and inexperience about the
sector from the customers, practitioners and supervisor’s perspective, it is proper to start from
window service and gradually move towards full-fledged Islamic insurance.
