SITIFARIHAMUHAMAD 1 NURAFIYA ABDULLAH 2icmrr.org/global/pdffiles/IJMRR/m201610007.pdf · SITIFARIHAMUHAMAD 1 NURAFIYA ABDULLAH 2 NURULASHYKINABD AZIZ 3 NURFARAHIAHAZMI 4 1, 2,

THE PERCEPTION AND AWARENESS ON TAKAFUL: A

DESCRIPTIVE ANALYSIS BETWEEN THE GENDER

SITIFARIHAMUHAMAD 1 NURAFIYA ABDULLAH

2

NURULASHYKINABD AZIZ 3 NURFARAHIAHAZMI

4

1, 2, 3 & 4

Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan.

ABSTRACT

The Takaful industry is growing tremendously fast as the conventional insurance. This paper

investigates the perception and awareness of Muslims in Kelantan towards the Takaful. A sample of

100 questionnaires distributed and analysis of the data was conducted using SPSS 20.0. The finding

shows the perception and awareness of Muslims in Kelantan is moderate and the female respondents

more aware and perceivesTakaful better.

1.0 INTRODUCTION

Islamic finance has become one of the most rapidly growing segments of the global financial system

and the development of Takaful is seen as one of the key componentscontributes to the development

of Islamic finance. The Takaful industry is a relatively new industry as compared to conventional

insurance. The first Takaful company was established in Sudan in 1979 (Maysami& Kwon, 1999) and

today Takaful companies are spreading around the world. In Malaysia, the first Takaful company in

Malaysia is Syarikat Takaful Malaysia Berhad (STMB), established under Takaful Act 1984.

Malaysia marks the second largest Takaful market in the world, showing the growth of 21% in 2012,

in which is more than double the growth of the broader insurance industry at 9% and the world’s

largest family Takaful market (Crawford &Ashar, 2013).

The definition the Takaful is derived from “takafala” which means “looking after one another”

(Hamid et al., 2009). The existence of Takaful system is in line with Islamic value concerning socio

economic principle for the benefit of individual and society as whole. Takaful is known as thepractice

of sharing the risks among as many people as possible as well as mutual guarantee among

participant.Takaful concerned to the strong ethics of the system of fairness, transparency, distribution

of wealth leading to social goodness and environmentally friendly focus for generating economic

activity. The distinctive features and peculiarities of Takaful system, as compared to insurance is it

operates in accordance with Shari’ah whichmeans gharar, riba and gambling are not allowed.

Muslims are obliged to choose Takaful as their first choice, moreover, the Fatwa Committee of the

National Council for Islamic Religious Affairs Malaysia has issued a decree that conventional

insurance is prohibited because it is against Shari’ah principles.

However, the Muslims participation is still low in Takaful (K.M Martuza Ali, 2010). It still lags

behind its conventional peers in terms of market penetration and share. According to Razaket al.

(2013) the penetration was low due to the several factors such as lack of appreciation for wealth

planning, lack of Shari’ah compliant insurance products and awareness. Past studies highlight the

Muslims unawareness of thetakafuland their lack of understanding on Takaful and its importance

(Kassim, 2005).

The understanding of people regarding Takaful product is influenced by many factors including

knowledge. Majority of people do not know and understand on what is Takaful, unless the reason for

INTERCONTINENTAL JOURNAL OF MARKETING RESEARCH REVIEWISSN:2321-0346 - ONLINE ISSN:2347-1670 - PRINT - IMPACT FACTOR:1.590VOLUME 4, ISSUE 10, OCTOBER 2016

www.icmrr.org 58 [email protected]

participating on Takaful products is its compliancy with Shari’ah principles and concerned to the need

for protection (Othman et al., 2009). Based on the past study (Othman et al., 2009) this study

investigated the differences of the awareness and perception towards Takaful among the male and

female Muslims people in the regional state is Kelantan, in which majority of the citizens embrace

strong Islamic belief and views.

2.0 LITERATURE REVIEW

2.1 Awareness

Public awareness is an important factor to increase market share for Islamic finance and Takaful. The

Islamic financial institutions play a significant role in developing and implementing Takaful concept

through the entire world. Raising Takaful awareness among individual consumers remains major

challenge (Swiss Re, 2014). To create awareness about the value of Takaful is time-consuming and

costly. It is about general knowledge of Takaful and specific familiarity with Takaful provider.The

level of public awareness can be found in regard to basic of concept, difference between Takaful and

insurance, terms and others. However, according to Sutan Emir (2013) the level of public as well as

Muslims awareness about Takaful concept and principles is relatively low (Sutan Emir, 2013

&Ridhwan Abbas, 2014).

One of the ways to nurture the awareness on Takaful is through the education. According to the study

of Sutan Emir (2013) the respondents with higher level of education significantly influences their

level of awareness on Takaful concepts and principles. In addition, Panjamorthy (2014) asserts that

many Malaysian do not aware of Takaful coverage and only 10 percent of Malaysian have Takaful

coverage compared to 42 % those who have insurance coverage.

2.2 Perception

Perception can be defined the process by which people select, organize, andinterpret information to

interpret meaningful picture of the world (Kotler&Amstrong, 2004). It will influence how the person

acts by his own perception of this situation. Everyone can receive, organize and interpret the

information in an individual way. For the first launch of Takaful, there was introduced as an Islamic

or halal product for Muslims to attract the Muslims rather than promote the beauty and the benefits of

the Takaful products vis-à-vis its conventional counterpart. It can create the perception of Muslims

that everyone have responsibility to choose Islamic product because relate to religion.According to

Hamid et al. (2009) stated Takaful and conventional insurance have the common objective of

reducing a financial burden arising from any disaster or accidental loss. Undeniable, Takaful and

conventional insurance have more or less the same characteristic, for example in terms of the nature

of their business, products andservices offered. For both, the difference is that Takaful based on the

Shari’ah law, but conventional insurance is not. Matsawali et al., (2012) found that 62.6% of the

respondents do not know the differences between Takaful and insurance. Takaful is alternative of

conventional insurance. However, they often had misconceptions on the differences between the

Islamic and the conventional insurance. Government and Takaful companies have important role to

ensure the presentation of Takaful about to consumers or Muslims in the right way to notify them

about the importance of Takaful and it features as well as ensure Takaful keeps identity in line with

Shari’ah. If the Muslims have inadequate and inaccurate knowledge, they will have misperception

that may pose significance barrier to the success of Takaful business (Zin et al. 2008).



3.0 METHODOLOGY

This study employs quantitative method in which the data was collected through the questionnaire of

five-point Likert scale (1 =strongly disagree to 5 = strongly agree). The number of the respondent is

100 (n=100). The data was analyzed by using 20.0 Statistical Package for Social Sciences (SPSS).

Descriptive analysis is used to describe the demographic of the respondents. Mean and T-test

areemployed to find the average and variation between the gender.

4.0 RESULTS AND DISCUSSIONS

Table 1: Demographic Profiles

Variables Frequency

(n=100)

Percentage

Gender

Male

Female

Age

Below 20 years old

20 - 30 years old

31 - 40 years old

Above 41 years

Education

Secondary school

Tertiary education

Others

Occupation

Student

Professional

Self-employed/business

Pensioner

Others/Private

Income

Less than RM 2,000

RM 2,000 – RM 4,000

RM 4,001 – RM 5,000

RM 5,001 and above

39

61

14

42

30

14

54

43

3

11

10

20

3

56

57

27

10

6

39%

61%

14%

42%

30%

14%

54%

43%

3%

11%

10%

20%

3%

56%

57%

27%

10%

6%

A summary of demographic profile of 100 samples of this study is shown in Table 1. Most of the

respondents in this study are female (61%) and are working in private (56%). More than half of the

respondents are having monthly income less than RM 2,000 (57%) and 43% of them have diploma

and degree.



Table 2: Awareness

Items Mean

Alternative to insurance

Protection mechanism

Typical uses

Free from riba’

Risk coverage

For Muslim and non Muslim

Approached by agent/company

Supervised by SSB

Interest in Shari’ah principles

Availability

4.27

3.87

3.70

3.70

3.50

3.77

3.43

3.33

3.53

3.97

Table 2 shows the mean scores of the 10 items measuring the awareness of the respondents towards

Takaful. The highest mean score in the item alternative to insurance (4.27) shows that most of the

respondents aware that Takaful is an alternative to insurance which is not Shariahcompliant . The

least mean score is reflected in the item ofsupervision of Takaful company by Shariah Supervisory

Body (SSB) (3.33)

Table 3: T-test value of the awareness (by gender)

Gender N Mean Std

Deviation

Sig (2

Tailed)

Male 39 3.8615 .91841 .978

Female 61 3.8656 .54799

Table 3 shows the t-test value of awareness towards Takaful by gender. The result shows that the mean

score of the awareness towards takaful; for both male and female is the same, which is 3.86.

However, the variation in the response of the male respondents is much larger (0.91841), indicating

the inconsistencies of the response among the male respondents. The p value of 0.978 indicates that

the hypothesis is not supported and there is no significant different in the awareness of male and

female towards Takaful.

Table 4: Perception

Items Mean

Prohibition of riba’, gharar&maysir

Saving & protection mechanism

Based on Shari’ah law

Elements differ from conventional

Benefits of takaful

Non permissibility of insurance

Shari’ah compliant investment

Similarity of contracts to insurance

Premium payment as donation

3.70

3.67

3.95

3.81

3.19

3.60

3.70

2.56

3.46



Table 4 shows the mean scores of the 9 items measuring the perception of the respondents towards

Takaful. The highest mean score of 3.95 in the item no 3 indicated that most of the respondents

perceive the operation of takaful is based on the Shari’ah law and the lowest mean sore in the item no

8 (2.56) shows that majority of the respondents agree that the contracts used in takaful are different

from the one used in insurance. Indirectly, the result reflects the respondents’ positive perception

towards takaful.

Table 5: T-test value of the perception (by gender)

Gender N Mean Std

Deviation

Sig (2

Tailed)

Male 39 3.3362 .37043 .046

Female 61 3.6302 .66905

Table 5 shows the t-test value of awareness towards Takaful by gender. The result shows that the

female respondents perceive Takaful better than the male respondents with the mean score of 3.63

compared to 3.33 of the male respondents. However, the variation in the response of the female’s

respondents is much larger (0.669). It can be concluded that there is a significant different in the

perception of male and female towards Takaful.

5.0 CONCLUSIONS

This study implies that majority of the Muslims aware that Takaful is Shariah compliant and free from

the elements of riba’, Gharar and Maysir (gambling) and their perception towards takaful is positive.

Nonetheless, all parties including Takaful company as well as education provider (school and

university) have to work aggressively to educate more people on the concept of Takaful. Besides that,

the Takaful companies have to consider the feedback from the customers improve their product and

services

REFERENCES

Crawford, S. &Ashar N. (2013). Global Takaful Insights 2013: Finding growth markets: Ernst

& Young Global Limited.

Hamid, M. A., Osman, J., &Nordin, B. (2009). Determinants of corporate demand for Islamic

Insurance in Malaysia. International Journal of Economics and Management, 3(2), 278-296.

K.M. Mortuza Ali. (2010). Critical Issues And Success Factors For Takaful. Retrieved from

ICMIF Takafulhttp://www.Takaful.coop

Kassim, Z. A. M. (2005). Takaful: The Islamic Way of Insurance. Contingencies, 33- 38.

Matsawali, M. S., Abdullah, M. F., Ping, Y. C., Abidin, S. Y., Zaini, M. M., Ali, H. M.,

&Yaacob, H. (2012). A Study on Takaful and Conventional Insurance Preferences: The Case

of Brunei.

Othman, M. S., & Abdul Hamid, M. (2009). A study on the level of knowledge and

understanding among Muslims towards the concepts, Arabic and Shari’ah terms in Islamic

insurance (Takaful). European Journal of social sciences, 10(3), 468- 478.

Panjamorthy, P. K. (2014). Malaysians Lack Awareness On Differences Between Takaful

And Conventional Insurance, BERNAMA Banking & Finance. Retrieved from

http://finance.bernama.com/news.php?id=686166



Razak, M. I. M., Idris, R., Yusof, M. M., Jaapar, W. E., & Ali, M. N. (2013). Acceptance

Determinants towards Takaful Products in Malaysia.

Rom, N. A. M., Rahman, Z. A., & Hassan, N. M. Financial Protection For Low Income And

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Salleh, M. C. M., Abdullah, N. I., &Razali, S. S. (2013). Measuring Takaful Agents’

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Zin, E. W., Mustafa, E. A., Ab Aziz, W., Asri, W., &Tawang, J. (2008). Government

Servant's Perception Toward Motor Islamic Insurance: A Case Study At Dungun



Documents

SITIFARIHAMUHAMAD 1 NURAFIYA ABDULLAH 2icmrr.org/global/pdffiles/IJMRR/m201610007.pdf · SITIFARIHAMUHAMAD 1 NURAFIYA ABDULLAH 2 NURULASHYKINABD AZIZ 3 NURFARAHIAHAZMI 4 1, 2,