THE PERCEPTION AND AWARENESS ON TAKAFUL: A DESCRIPTIVE ANALYSIS BETWEEN THE GENDER

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1 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 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 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 58 icmrrjournal@gmail.com

2 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) icmrrjournal@gmail.com

3 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) Gender Male 39 Female 61 Age Below 20 years old years old years old 30 Above 41 years 14 Education Secondary school 54 Tertiary education 43 Others 3 Occupation Student 11 Professional 10 Self-employed/business 20 Pensioner 3 Others/Private 56 Income Less than RM 2, RM 2,000 RM 4, RM 4,001 RM 5, RM 5,001 and above 6 Percentage 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 icmrrjournal@gmail.com

4 Table 2: Awareness Items 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 Mean 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 Sig (2 Deviation Tailed) Male Female 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 However, the variation in the response of the male respondents is much larger ( ), indicating the inconsistencies of the response among the male respondents. The p value of 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 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 Mean icmrrjournal@gmail.com

5 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 Sig (2 Deviation Tailed) Male Female 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), K.M. Mortuza Ali. (2010). Critical Issues And Success Factors For Takaful. Retrieved from ICMIF Takafulhttp:// Kassim, Z. A. M. (2005). Takaful: The Islamic Way of Insurance. Contingencies, 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), Panjamorthy, P. K. (2014). Malaysians Lack Awareness On Differences Between Takaful And Conventional Insurance, BERNAMA Banking & Finance. Retrieved from icmrrjournal@gmail.com

6 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 Poor. Salleh, M. C. M., Abdullah, N. I., &Razali, S. S. (2013). Measuring Takaful Agents Understanding Towards The Objectives and Concepts of Takaful. Journal of Islamic Finance, 2(1). Hidayat, S. E., &Rafeea, A. M. (2014). Public Awareness Towards Takaful Concept and Principles: A Survey in Bahrain. International Journal of Excellence in Islamic Banking and Finance, 4(2), 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 63 icmrrjournal@gmail.com