Takaful - What Is a Subsidy?

A subsidy is financial support given by another party to help reduce the cost of a product or service.

In Takaful, a subsidy may come from:

• Government
• NGO
• Charity
• Development organisation
• Other supporting institution

Example

Suppose the real cost of Crop Takaful is:

RM100 per month

But a low-income farmer can only afford:

RM40 per month

The government may pay the remaining:

RM60

So:

Farmer pays RM40 + Government subsidy RM60 = RM100 total cost

Why Subsidies Are Used

• Make Takaful more affordable
• Help lower-income people obtain protection
• Support farmers and vulnerable communities
• Encourage more people to participate

Main Problem

• If the scheme depends too much on subsidies, it may become difficult to continue if the government or NGO stops providing the money.

Simple Idea

Subsidy = Someone else helps pay part of the cost so the customer pays less.