The Ageing Population Crisis from an Islamic Perspective

Abstract

The International Monetary Fund’s (IMF) Global Financial Stability Report (2012) warned against the ageing population crisis as a major concern for governments. The basis of this crisis is the associated financial burden created by the longevity risk. Longevity risk is the risk that individuals live longer than anticipated, with consequent shortfalls in incomes post-retirement. Due to the colossal amount involved in mitigating this risk, state intervention is important to mitigate the aggregate longevity risk at national levels. Although ageing is a well-articulated theme in Islam, not much has been written on the present day longevity risk crisis in Islamic finance, despite protection of human dignity being considered as a pillar of maqāṣid al-Sharīʿah (the higher objectives of Islamic law). This paper explores the concept of longevity risk and proposes a new line of products that can be adopted by Islamic banks and Islamic insurance (takāful) companies through Islamic pensions to mitigate longevity risk from an Islamic perspective by using longevity ṣukūk and awqāf.