Micro-takaful (insurance) is a tool intended to fulfil the future needs of people having low incomes by offering affordable protection (Swartz and Coetzer, 2010). It comprises a contract where the operator (insurer) is assumed as an agent of the participants (insured / policyholders) and who pays the participants (insured) a given amount against the contribution/premium paid by them in case of the occurrence of the insured risk. Micro-takaful fills the gap in microfinance since poor people have no collateral needed for obtaining finance. Micro-level insurance helps in eradicating poverty by encouraging financial institutions to finance poor people who face many risks such as illness, natural disaster, fire, loss of job etc. Accordingly, life insurance, medical insurance, agriculture insurance, and property insurance can be provided to the poor segment of the population . Takaful operators, in spite of increased growth in family takaful (USD 1.35 billion in 2010) and general takaful products (USD 48 million), still have the ignored area called micro-takaful (Nu, et al., 2015). In Pakistan, very few micro-takaful products are offered through 60% of the population of the country lives below the poverty line (Ayaz et al., 2019).

A number of attempts were made to set up Shari'ah complaint microinsurance in Pakistan, but they remained unsuccessful (Kazim and Haider, 2012). Currently, only health-related micro-takaful products are offered by takaful operators in Pakistan to the employees of corporate clients, while the most significant segment of the poor population is ignored. Therefore, a study is needed to probe the root causes behind the limited offering of micro-takaful products, followed by solutions for enhancing their penetration level in the country.

Many studies have been conducted to find out the issues faced by takaful operators all over the world (Nu et al., 2015; Puad, 2017; Chaudhry and Nabeel, 2013; Rom and Rahman, 2012). However, peculiar problems from the perspective of the Pakistani takaful operators have not been investigated so far, to the best of the researchers' knowledge. Practitioners' insight is necessary to explore the underlying reasons behind the limited penetration and further enhancement of the industry (Ayaz et al., 2019).

Insurance started in the Roman era (1635) where people paid premiums for covering the loss of property (Haron and Wan-Azmi, 2009). Chinese merchants mitigated the risk of loss with the help of the risk transfer technique. Using this technique, they transported their goods while distributing them in different ships (Vaughan, 1992). Insurance as a concept originated from marine insurance issued by individuals, which started in the 13^th century in Italy and other European countries (Vaughan, 1992). The concept of fire insurance came from London after the 'Great Fire of London' in the 17^th century (Haron and Wan-Azmi, 2009). Takaful is an alternative to conventional insurance, where protection is provided against disaster (Haron and Wan-Azmi, 2009). In a pre-Islamic era, tribes in Arabia paid blood money (diyat), which was paid by the murderer to the family of the murdered person. This practice continued during the era of the Prophet (PBUH). Takaful is based on the concept of tabarru' (donation), where participants agree to donate a certain amount of money into a fund for providing monetary assistance to any member of the group who suffers loss. It is free from riba (usury), uncertainty, and gambling. In Malaysia, takaful is based on the wakalah (agency) business model, while tabarru' and wakalah both are utilized for governing takaful companies. Family and general takaful are the two types of takaful in Malaysia (Ismail, 2008). Many countries offer microinsurance using the partner-agent model, where the microinsurance provider becomes an agent for a recognized insurance company in order to obtain technical knowledge. Microfinance institutions play the role of agent and sell policies to their clients on behalf of the insurer in exchange for a commission. Moreover, microfinance institutions are also responsible for product examining, verifying claims, and submitting claim requests. Microinsurance can be provided by microfinance institutions, Non-Government Organizations (NGOs), healthcare providers, zakat institutions, and other private institutions. Life insurance has a high demand among microinsurance products, especially in developing countries, and health insurance is mostly demanded by lower-income people (Zenklusen and McCord, 2009). Microinsurance is provided for sickness, death, and property loss, and it can also be used for poverty alleviation (Cohen and Sebstad, 2005). The takaful industry is still lagged far behind in offering micro-takaful products as compared to mainstream insurance. Although many low-income groups are found in Muslim countries, the efforts in Islamic finance to provide micro-takaful solutions for their problems are very rare (Bhatty, 2010). According to ICMIF Takaful (2012), the countries offering micro-takaful products include Bangladesh (funeral costs), Sudan (material damage, livestock, fire and burglary, agriculture), Indonesia (credit insurance product, death insurance), and Malaysia (accidents, children's education, family protection). According to Hamid et al. (2011), micro health insurance is provided in countries such as Bangladesh (Grameen Bank offered a micro health insurance scheme in the late 1990s to protect its clients from health risks (Micro-care, 2008)), Uganda (NGO provided micro-care coverage for malaria and HIV treatments (Patel, 2004), Lebanon (Agricultural Mutual Fund as a micro-takaful product for health insurance), and Sri Lanka (Amana Takaful Insurance provided for death and disability via NGOs, MFIs).

In Pakistan, 60% of the population lives below the global poverty rate, and Islamic micro-takaful has the ability to play a dynamic role in alleviating poverty. Regrettably, takaful operators in Pakistan are reluctant to contribute to Islamic micro-takaful. The global takaful industry has witnessed impressive growth, particularly during the last five years. However, the performance of the takaful industry and especially micro-takaful still lags far behind in terms of total insurance, market penetration and share. In these circumstances, the takaful industry can incorporate Islamic insurance products at the micro level for catering for the target market. There is a large untapped potential market in Pakistan for the takaful industry. Therefore, it is significant to highlight the underlying reasons behind low takaful penetration especially at the micro level and to enhance the offering of and the demand for micro-takaful products in Pakistan by suggesting improvements in the performance of the five takaful operators in the country.

Q1: What are the underlying reasons behind the less offering of micro-takaful products by takaful operators in Pakistan?

By investigating answers to these questions, the underlying reasons behind such limited penetration of Islamic micro-takaful products are highlighted for practitioners, regulators and poor citizens. Different solutions are suggested to the State Bank of Pakistan, as well as takaful and insurance operators, to further enhance the offering of and the demand for micro-takaful products in the country.

According to Ahmed (2016), micro-takaful is a vital tool available for the protection of poor people having low income and for investing their savings in a manner to support their social security network. Takaful operators actually fulfil their social responsibility towards society by offering micro-takaful. There are many successful examples in the field of microinsurance in different countries of the world, such as the Philippines, Lebanon, Indonesia, Malaysia, Pakistan, Jordan, Morocco, India, China, South Africa, Malawi, Trinidad and Tobago, Sri Lanka, Bangladesh, Sudan, Ethiopia, and Haiti (Table 1)

Based on the review of the available literature, the following are the known challenges in the growth of micro-takaful products all over the world.

The study is qualitative in nature. The researcher conducted a total of twenty (20) semi-structured interviews of relevant takaful practitioners (5 sales heads, 5 business heads, 5 product development heads, and 5 sales agents) working at the five takaful operators (Dawood Family Takaful Ltd., Pak-Qatar General Takaful, Pak-Qatar Family Takaful, Pak Kuwait Takaful, Takaful Pakistan Limited) in Pakistan. The focus of the discussion remained on the underlying reasons behind the low penetration of micro-takaful products in the takaful industry of Pakistan and their solutions. NVIVO 12 software was applied to the data gathered through interviews for generating items, codes, word clouds and text search queries (Figure 3, 4, 5, 6).

The respondents shared their opinions about the underlying reasons behind the low penetration of micro-takaful products of takaful operators in the country and also discussed their solutions. They admitted that micro-takaful is important for poverty alleviation. However, proper attention is not given by takaful operators in this regard due to less profit in offering micro-takaful products to the poor and to micro-level enterprises for the protection of their assets, families, health, and against any adverse incident. Most repeated responses were about the unaffordability of the premium amount by the poor, which ought to be paid by the government and zakat institutions.

Secondary data about micro-takaful products were collected from the websites (verified by personal visits) of takaful operators, NGOs, microfinance banks, rural support programs, and microfinance institutions. It was found that very few products relevant to health and life are offered by these institutions in Pakistan. In health, the general treatment is covered but not those diseases which are very costly, such as cardiac / heart diseases and cancer. However, the poor are vulnerable to many losses which should be covered, such as SMEs, women health/family health, education, transport, property.

Except for Pakistan Takaful, no other takaful operator offers any micro-takaful products in the country. Pakistan Takaful showed the willingness to offer more micro-takaful products such as motorcycle, personal accident, fire, burglary, health, cottage, readymade garment industries and family takaful at the micro level to poor clients.

Behind such limited and non-offering of micro-takaful products by the takaful operators, the following underlying reasons were highlighted by the interviewees, for which they also suggested solutions accordingly.

There is an important role of micro-takaful in poverty alleviation as it helps in job creation. However, insurance companies are not providing Islamic insurance. In the global context, micro-level insurance helps in eradicating poverty by encouraging financial institutions to finance the poor. Micro-takaful fills the gap in microfinance in those situations where poor people have no collateral necessary for obtaining finance (Ahmed, 2016).

When the practitioners were asked about the role of micro-takaful in poverty alleviation, they said that more than 60% of the population in Pakistan is poor, and people are unable to facilitate their families even against the basic necessities. Insurance companies and Islamic insurance can only cover losses and is unable to eradicate poverty. They argued that only microfinance institutions and/or small and medium enterprises could play their role in the alleviation of poverty and not micro-takaful. This finding contradicts the findings of Cohen and Sebstad (2005), who proposed in the context of Kenya, Tanzania, and Uganda that in addition to sickness, death, and property loss, microinsurance services can also be used for poverty alleviation.

Further, they proposed that poor people can be divided into groups for receiving the benefits of micro-takaful products. This solution was proposed by Dunford (2001) in the context of Bolivia and Uganda, and it implicates that mutual support and harmony in the group provides an atmosphere of collective self-interest.

According to the interviewees, micro-takaful can play a vital role in society, but it is subject to the purchasing power of micro customers. The same was identified by Mohd Rom and Abdul Rahman (2012) in the context of Malaysia that the poor are unable to pay the amount of the protection policy in Malaysia.

Furthermore, the practitioners pointed out that there are five takaful operators working in Pakistan, but they have limited resources available for micro-takaful, which cannot satisfy the needs of all Islamic micro customers. Kazim and Haider (2012) also found that lack of funds is a hurdle in the growth of micro-takaful schemes in Pakistan. However, the practitioners admitted that time is needed by takaful operators to reach the point where they can afford to offer micro-takaful products to the poor at a large scale. They suggested that the government should support these institutions financially by decreasing the sales tax of takaful operators. In the Malaysian context, Mohd Rom and Abdul Rahman (2012) proposed that the government should help the poor by paying the amount of protection policy of micro-takaful schemes through subsidy and zakat fund. Moreover, public organizations such as zakat institutions can also play their role in the payment of the premium amount for the sake of providing the benefit of micro-takaful products to the poor. A similar conclusion was reached by Zenklusen and McCord (2009) in the global context that microinsurance can be provided through the donated amount of microfinance institutions, non-government organizations (NGOs), healthcare providers, zakat institutions and other private institutions. Nu et al. (2015) proposed that the database of the government, zakat and charitable organizations can be utilized to facilitate the poor people in Malaysia.

The practitioners also suggested that big insurance companies such as State Life Insurance and Jubilee Insurance should take the initiative for conducive micro-takaful. Local communities, ulama (religious scholars) and the coordination between them can play a role in raising awareness and promotion of micro-takaful products. Zuliani and Ab Rahman (2018) proposed in the context of Indonesia that village head cooperation for providing micro-takaful products is helpful for this scheme.

The practitioners identified that takaful operators in Pakistan have their own individual mindset, so they cannot get together and agree with each other. Every takaful operator is doing business according to its own policies. They offer different micro-takaful products according to their financial position. The practitioners suggested that takaful operators should get together for the noble cause, that is, micro-takaful as corporate social responsibility. By joining hands, the issue of funds availability can be resolved. Also, they can offer different standardized products. They can collectively sponsor this micro-takaful project by merging their strategies or through joint ventures.

Due to the common social evil of moral hazard in Pakistan, people take financial assistance but do not pay it back. Resultantly, Islamic financial institutions do not properly attend the poor customers. The practitioners suggested that the institutions should follow a quality selection criterion, so that suspicious customers are identified and ignored in offering financial assistance. The problem of moral hazard is faced by takaful companies in Indonesia as well, for which Zuliani and Ab Rahman (2018) proposed that government can incorporate the national identification system for minimizing moral hazards in Indonesia. Moreover, many other solutions to reduce moral hazards were presented in the literature, such as BNM (2016) proposed that reliable and efficient IT and data systems can be incorporated for tracking transactions in Malaysia. IFSB (2015) proposed that claim administration procedures should be simplified to provide ease in transactions to participants in the Middle East and the Gulf countries.

Micro-takaful products are not attractive for insurance companies due to a small profit margin. This is especially true for Islamic insurance companies, which are at the infantry stage in the insurance industry. Takaful operators are more inclined towards profitable clients/enterprises. Due to the risk-averse and profit-oriented mindset of takaful operators, they do not provide funds for micro-takaful projects. A large number of participants need micro-takaful schemes, but the low premium paid by them is not feasible for takaful operators.

In order to convince takaful operators to introduce micro-takaful schemes, they can be educated about the concept of takaful that is based on cooperation, so they may not expect a great deal of profit in micro-takaful schemes. They should initiate micro-takaful projects as corporate social responsibility. The practitioners also emphasized government support in this regard.

The practitioners identified that customers have no interest in micro-takaful products even with a small premium amount due to their faith that any incident or mishap is divine. They lack awareness about and show distrust of takaful operators. The poor do not perceive insurance as a need and consider it expensive.

The experts also suggested that the interest of the poor can be built by educating them about the solutions to their problems. They should be educated about the true concept of takaful. Takaful operators should campaign through conferences, public programs and guest lectures for raising customer awareness. Patel (2004) also suggested the same solution. Ulama and imams of mosques can play a role in educating the poor about the true concept of takaful and its benefits for them. Further, local government representatives should also be involved in the awareness programs about micro-takaful products. Takaful companies should coordinate and cooperate with them to educate more people. Mosques and zakat institutions, accessible to the poor, can play a significant role in public awareness programs (IFSB, 2015).

Highlighting the vital role of 'Marketing Agent' in advertising micro-takaful products, the practitioners admitted that low commission paid to these agents always discourages them and consequently, they are unable to attract customers. Agents can be microfinance banks, conventional banks and other institutions. In this regard, the practitioners suggested that as long as the micro-takaful industry is in its niche stage, the agents should be convinced (educated) that the Islamic financial system is totally different from the conventional one where the motive is to earn profit. On the contrary, in the Islamic financial system, priority is given to human welfare and afterwards to profit earning through Shariah-compliant businesses. Hence, the agents' mindset should be different from that of profit maximization. Mohd Salleh et al. (2012) also suggested that takaful agents should not undermine the noble objectives of takaful by following their personal interests. In takaful, the purpose of the micro-takaful scheme is to benefit human beings, including Muslims and non-Muslims. This message must be echoed by all takaful agents. From an Islamic perspective, the role of takaful agents goes beyond selling takaful products. They must communicate the objectives of takaful to the public.

Due to the poor financial condition of customers as well as the lack of interest and the lack of awareness among them, the number of takaful clients is very small in Pakistan. The number of customers can be increased by clearing misconceptions and confusions, spreading awareness using media and social networks, seminars, presentations and discussions by micro-takaful experts with the public. The contribution of a sufficient number of participants is required for creating a mass fund (Nu et al., 2015) which can ultimately be utilized for offering takaful facilities to a number of participants in addition to the timely processing of their claims.

One of the reasons behind the limited offering of micro-takaful products is the non-availability of products suitable to the needs of the customers. The practitioners identified that this is mainly because of the lack of research on micro-takaful product development. Significant research is not available in the field of micro-takaful in Pakistan. Although the field has great potential for economic development, unfortunately, very few micro-takaful products have been developed to cater for the diverse needs of the poor.

In this regard, the practitioners suggested that the researchers should develop micro-takaful products keeping in view the customers' needs. Market-based research can be conducted in this regard on the basis of different localities and business types. The academia and practitioners should jointly do research and develop diversified micro-takaful products. The researchers should do research on many products other than health at the initial level, such as education, property and injury. Health insurance is expensive, but other insurance products in terms of losses can be predicted using the existing staff of actuary, and accordingly, the premium amount can be determined for the poor.

Pakistan's economic condition also affects takaful operators' financial position adversely; therefore, they are not able to earn a reasonable profit on their investments. As a result, they give less profit to the existing clients. In these circumstances, takaful operators cannot offer micro-takaful products. Sukmana and Hidayat (2014) proposed in the Indonesian context that the growth of the takaful sector is relatively high due to the conducive investment climate and optimism of businesses. Investors seek to invest in a country if it has the potential for economic growth.

The practitioners argued that the insurance industry has a positive impact on the GDP of any country. GDP shows the overall economic development, which leads to greater financial inclusion. Moreover, insurance helps to improve the overall efficiency of the financial sector. A number of takaful operators or takaful windows should be opened in Pakistan. The government can give relaxation in terms of taxes and should create a conducive environment by regulating the insurance and takaful industry. Furthermore, the registration process of takaful companies can be made easier so that more takaful companies are registered.

The most important reason highlighted by some practitioners is the lack of practice and culture among the people of Pakistan to avail of takaful products. Due to poor economic conditions, the purchasing of takaful products on a micro-level has not been the priority of the poor people. Hence, micro-takaful has not attained a good space in the culture and practice of the people.

Micro-takaful should be internalized in the practices and culture of the society, which is possible only in the long term. A long term strategy by the government and the regulator is very much needed to enhance financial inclusion in a systemic manner. It is suggested here that the government should make the policy to encourage parents to buy micro-takaful policies/products for their children after their birth. The startup premium should be deposited by the government until the kids reach the school-going age, after which the same shall be submitted by the parents as an amount added to their school fee. In this way, the kids can have a secure future.

From this study, we conclude that very few products relevant to health and life are offered currently by takaful operators in Pakistan. Except for Pakistan Takaful, no other micro-takaful products are offered currently by any takaful operator in Pakistan. In health, the general treatment is covered and not those diseases which are very costly, that is, cardiac/heart diseases and cancer. However, the poor are vulnerable to many losses which should be covered, like women health/family health, education, transport, property, and other uncovered areas. Pakistan Takaful showed a willingness to offer more micro-takaful products such as motorcycle, personal accident, fire, burglary, health, cottage, readymade garment industries and family takaful at the micro level to poor clients.

A number of reasons were found behind the limited / non-offering of micro takaful products, including the risk avert and profit-oriented mindset of the takaful operators, non-availability of funds with the operators, less support from the government, lack of awareness among the general public, the poor financial conditions of the public who can hardly fulfil their basic needs and do not have savings, the lack of practice and culture of the society to avail takaful products, less availability of products as well as the lake of research and product development in the area of micro-takaful, which can cater the needs of the poor.

The government should facilitate and support takaful operators to offer more micro-takaful products to the poor segment of society. The government should also support and facilitate the researchers and practitioners to do surveys and develop suitable products according to the needs of the poor.

Due to the very limited practice and culture of takaful generally and micro-takaful particularly, it is very difficult for takaful sales agents to convince the public to purchase micro-takaful products, especially in the circumstances where 60% of the population lives on less than one dollar per day with which they can hardly fulfil their basic needs.

In this scenario, the responsibility lies with the government to take necessary steps for taking out the poor from their dependent conditions to independence. The current practice of the Benazir Income Support Program can be made more active to provide training to the poor and to develop their skills free of cost. Islamic microfinance institutions such as Akhuwat, Niamat and Kashf foundation are giving interest-free loans to the poor, but these institutions do not have sufficient funds to finance their large numbers. In this regard, the government should provide and increase funds for these institutions so that more poor people are transformed from inactive condition to active conditions by developing their skills, which ought to be followed by the provision of finance for starting new businesses or to expand the existing ones. In this way, the poor would be able to save and can use their savings to purchase micro-takaful products. Zakat institution (Pakistan Bait ul Mal) can also play a better role by giving premiums to the operators in lieu of those poor people who are unable to pay their premiums. The customers should be informed utilizing many awareness tools, especially through the proper utilization of the imams of mosques to persuade people towards purchasing micro-takaful products.

The practitioners can provide trainings to their staff to enhance their skills and polish their expertise. SECP can support and facilitate these trainings. The researchers can do research to develop micro-takaful products. The public can be educated to increase financial inclusion. The regulator, that is, SECP can require takaful operators to allocate a certain percentage of their capital to offer micro-takaful products.

A similar study can be conducted by increasing the number of respondents while including

respondents from conventional insurance companies as well as academicians. Further studies can be conducted on the development of micro-takaful products keeping in view the needs of the customers.

Q1. Do think insurance companies in Pakistan, especially Islamic insurance/takaful operators can play a significant role in poverty alleviation through Islamic micro-takaful?

Q2. What type of micro-takful products does your company offer?

Q3. Don't you think the current products' offering level by your organization is very less?

Q4. What are the hindering reasons behind less or non-offering of micro-takaful products by your organization?

Q5. What solution(s) do you suggest to overcome these problems so that more penetration of micro-takaful products is ensured?