The wheel of fortune turned for Dubai when Sheikh Rashid bin Saeed Al Maktoum took over the reins in 1958. Dubai took its fledgling steps towards success with the dredging of the Deira Creek, which had seen rapid silting-up during the early 1950s limiting the number of vessels it could harbour. Construction work was completed in 1960.
The rest, as they say, is history. Dubai set about creating for itself a prime position on the global map.
Today, the UAE in general and specifically Dubai, has firmly established itself as the trading and logistical hub of the Middle East, bridging trade routes between the East and the West with the expansion of its ports infrastructure. The emirate is an undisputed destination of choice as Middle East headquarters for multinational companies across diverse sectors including technology, food and beverages, consumer goods, and electronics. Dubai also hosts leading manufacturing and financial institutions and outsourcing services providers.
Somewhere along the line, these multinational companies in their race to gain from economies of scale have forgotten the smaller players who have been the real drivers of growth and catapulted Dubai and the UAE to great heights.
Interestingly enough, even in today’s technology-driven world, the small and medium enterprises (SMEs) remain the growth engines of the economy.
According to the UAE Ministry of Economy, SMEs currently account for 92 per cent of the country's total registered companies, 86 per cent of the workforce in the private sector and 40 per cent of the GDP.
Sadly, the insurance and takaful industries have proved least effective in terms of penetrating the SME sector with appropriate coverage leaving it vulnerable to loss and closure.
The situation is indeed ironic. A service industry that began as a practice which was started by small groups of traders is today offering them ill-suited coverage at disproportionate costs in the very region of its birth. We must perhaps pause to remember that Babylonian (Iraqi) traders were among the first to begin the culture of distributing risks as far back as the second millennium BC.
For takaful and insurance providers the push towards big-ticket corporates has been a natural choice – as they provide tastier fare in terms of marketing effort – preferring to clinch and service one big client rather than closing deals for and servicing a multitude of smaller clients.
However, choosing this easy way out has cost the insurance and takaful sector dearly — it has missed out on a core segment of clients.
There is a dire need to rectify the situation, and with some innovation and practical thinking, insurance operators could be opening up a new market while supporting the small businesses to manage their risks more effectively.
Such products could include tailored coverage options for each trade class, sensitive but relevant pricing, as well as flexible financial limits to ensure the provision of adequate cover right through the seasons. Ultimately sales and policy maintenance automation is central to value creation for both parties, so wordings will need to be clearly laid out and highly adaptable.
Takaful and insurance operators would also need to step away from the conventional methods for marketing their services to small traders. The campaign should prioritise ease of understanding of the decision-makers, while taking up as little of their time as possible.
Circumstances today demand that the takaful and insurance industries step up and stay true to their raison d’être – to protect the most crucial part of the economy. With the future vision placing significant emphasis on the establishment of a globally dominant Islamic financial services hub, takaful providers must strive harder to offer appropriate products to SME businesses.
Andrew Greenwood is the acting chief executive at Noor Takaful
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