October 22, 2025

What is Value‑Based Intermediation for Takaful (VBIT)?

What is VBIT? VBIT is a relatively new term in the world of Takaful. In this article, we try to explore the concepts of VBIT in a more in depth…

What is VBIT?

VBIT is a relatively new term in the world of Takaful. In this article, we try to explore the concepts of VBIT in a more in depth manner.

What is Takaful?

Before we start discussing about VBIT, we first need a quick refresher on Takaful. Takaful is an Islamic-insurance model based on the concepts of mutual assistance and donation, where participants pool contributions to mutually guarantee each other against defined risks. To learn more about takaful, visit Wikipedia. Unlike conventional insurance, takaful avoids riba (usury), excessive uncertainty (gharar) and gambling (maysir), aligning with Shariah principles. This makes takaful insurance products very appealing to the muslim consumers.

In many markets — particularly Malaysia — takaful has grown significantly. But despite this growth, the sector faces challenges including limited penetration, perception issues, operational inefficiencies, and the need to better align with broader social and ethical goals. Source: Bank for International Settlements

Defining VBIT: Value-Based Intermediation for Takaful

Value-Based Intermediation (VBI) was originally introduced in the Islamic banking/finance context as a framework to ensure that financial intermediation not only generates profit, but also delivers sustainable benefits to society, the economy and environment, all consistent with Shariah-objectives (maqāṣid al-Shariah). gabv.org

VBIT specifically tailors this concept for the takaful industry. According to the Malaysian Takaful Association (MTA) and regulators, VBIT is “an intermediation function that aims to deliver the intended outcomes of Shariah through the conduct, offerings and practices of takaful, generating positive and sustainable impact for the economy, society and environment while ensuring sustainable returns for stakeholders.”

In short, VBIT is not just about offering Shariah-compliant products, but about embedding ethical, value-based, socially responsible behaviour and outcomes throughout the takaful value chain.

Why is VBIT important for Takaful?

There are several key reasons why the takaful industry is focusing on VBIT:

Realising Maqāṣid al-Shariah
Takaful should not only comply with the letter of Shariah (no riba, no gharar) but also aim at achieving the higher objectives of Shariah — preservation of faith, life, intellect, lineage, and wealth (hifz al-din, hifz al-nafs, hifz al-ʿaql, hifz al-nasl, hifz al-māl). VBIT provides a mechanism through which takaful operators (TOs) can aim for those broader outcomes.
Addressing Protection Gaps & Social Needs
The takaful sector is still under-penetrated in many markets, particularly among lower income or underserved segments. VBIT emphasises inclusion, accessible products, empowerment of communities and meeting real protection needs rather than only selling standard products.
Enhancing Trust and Reputation
By adopting value-based practices (governance, transparency, ethical conduct), takaful operators can build trust, strengthen their brand and differentiate in the market. The key pillars of VBIT include Financial Resilience, Community Empowerment, Good Self Governance, Best Conduct, and Capacity Building. Sun Life Malaysia
Aligning with Broader Sustainability Trends
Globally financial services are increasingly judged by environmental, social and governance (ESG) criteria. While VBIT is not identical to ESG, it shares similar ambitions—embedding sustainability, ethics and impact into operations—however uniquely anchored in Shariah.
Business Opportunity & Innovation
The VBIT lens encourages takaful operators to re-think their value propositions, explore new markets, innovate products (micro-takaful, social blended takaful, green takāful), and operational models to support long-term sustainable business, not just short-term profits.

The VBIT Framework: Key Thrusts and Implementation

The MTA and regulators have defined underpinning thrusts and implementation guidelines for VBIT in the takaful industry. Key elements include:

Underpinning thrusts

According to one operator, the five underpinning thrusts are:

Financial Resilience
Community Empowerment
Good Self-Governance
Best Conduct
Capacity Building

Another summary from the banking side (similar concept) includes: Entrepreneurial Mindset, Community Empowerment, Good Self-Governance, Best Conduct.

Implementation Aspects

Operators are encouraged to consider three key aspects:

Value creation for stakeholders (participants, society)
Fair and transparent business conduct and protection of participants’ interests
Preventing negative externalities (e.g., environmental harm) via screening of activities, supporting sustainable operations.

Measurement and Reporting

A crucial part of VBIT is the ability to measure and disclose outcomes beyond traditional financial metrics:

Impact-based assessments: how products/services contribute to societal outcomes.
Performance metrics that include social/environmental dimensions.
Transparency and disclosure: enabling participants and stakeholders to see how their contributions are used and what outcomes are achieved.

Roadmap

In Malaysia, for example, the framework was launched in 2021 and the roadmap in 2022.

What VBIT Looks Like in Practice

To make concrete what VBIT means, here are examples of behaviours or initiatives that align with the framework:

Designing takaful products that target underserved segments (micro-takaful, low income households) thereby supporting financial inclusion and protection.
Launching takaful covers for green/renewable energy projects or climate resilience initiatives (thus addressing environmental as well as social objectives).
Implementing governance processes and agent-conduct standards that ensure intermediaries act in the best interest of participants (not purely commission-driven).
Integrating digital solutions to improve accessibility, reduce friction in claims, enhance transparency and participant experience.
Reporting outcomes in a meaningful way: for example number of underserved individuals reached, reduction in uncovered risks, contribution to national agendas.

Benefits of Adopting VBIT for Takaful Operators & Society

For Participants / Society

Better-tailored products, improved transparency, more ethical business conduct.
Increased access to protection for underserved or vulnerable communities.
Broader societal outcomes: financial resilience, community empowerment, environmental stewardship.

For Takaful Operators (TOs)

Opportunity to differentiate in a competitive market through value-based offerings.
Opening up new market segments (underserved, green finance, social finance) leads to growth potential.
Improved trust, brand reputation, stakeholder engagement, and operational efficiency from stronger governance and conduct.

For Regulators / Economy

Alignment of the takaful industry with national sustainable development and financial inclusion agendas.
Better oversight and disclosure can improve stability, reduce risks of mis-conduct, and strengthen industry integrity.

Challenges & Considerations

Implementing VBIT is not without hurdles. Some of the key challenges include:

Mind-set and culture change: Takaful operators historically may have focused more on product sales and financial metrics; shifting to value-based intermediation requires change at leadership, governance and operational levels.
Resource constraints: Financial, human, and technical resources may be needed to redesign products, train staff, implement new systems, and measure impact.
Measurement and data: Establishing meaningful metrics for outcomes (social, environmental) rather than just financial output is complex. Data might not be readily available or standardised.
Regulatory balance: Regulators must provide flexibility and incentives, without compromising oversight. If regulations are too rigid, innovation is stifled; if too lax, quality and conduct may deteriorate.
Market dynamics: Competitive pressures and short-term profit focus can conflict with longer-term value-based goals. Takaful operators may struggle to prioritise the latter if market rewards are aligned otherwise.
Awareness and literacy: On the participant side, low awareness of takaful, its differentiators and value-based models may limit uptake. Education is needed.

Future Outlook

The adoption of VBIT in takaful is still at an early to intermediate stage, but the momentum is growing. As one regulator noted: the framework and roadmap open pathways for the sector to better contribute to societal needs, national agendas and sustainability goals.

Trends to watch:

Greater use of digital technologies to improve access, streamline operations and enable new product models (e.g., peer-to-peer takaful, community-based models)
Integration of environmental/green takaful models aligned with climate resilience and sustainability
Increased disclosures and standardisation of impact reporting for takaful operators
Expansion of takaful into new geographies and segments (e.g., micro-entrepreneurs, gig economy, ageing populations) with value-based propositions
Deeper collaboration between takaful operators, regulators, fintechs/insurtechs and community organisations to deliver holistic value-based solutions

Summary

In summary, Value-Based Intermediation for Takaful (VBIT) represents a meaningful evolution of the takaful industry. It seeks to go beyond mere Shariah compliance and technical product offering, towards embedding ethical conduct, societal value, financial inclusion, environmental sustainability and robust governance into the heart of how takaful business is done. While the journey involves challenges—culture change, resource needs, measurement, regulatory alignment—the potential benefits for participants, operators and society are significant.

For the takaful industry to fulfil its promise of mutual assistance, solidarity and community protection in the modern context, frameworks like VBIT are an important step forward.