Socio and economic factors as the determinants on the demand for family takaful in Malaysia / Nurfarahin Mohd Ghazali

Family Takaful is known as life insurance by conventional insurance. Based on the studies by Berkem (2014) Islamic insurance known as Takaful and it is an alternative model to conventional insurance; which is forbidden in Islam. Takaful is established on the base of mutual assistance, responsibility, mutual protection and assurance, incorporated into the concept of tabarru (donation). According to Yazid, Arifin, Hussin, and Wan Daud (2012), countries that experienced further development of Takaful operation are concentrated in the Far East countries such as Malaysia, Indonesia, Singapore, and Brunei. Based on this scenario, it triggers doubtful question on why the demand of family Takaful is increased. The aim of this study is to examine the factor which can influence the demand of family Takaful in Malaysia. The values of total family contributions as the dependent variable. While used five socioeconomic factors for which data are available that could explain the demand for family Takaful in Malaysia has been identified. Income, inflation rate and real interest rate have been selected as the potential economic determinants whereby education level and total Muslim population have been chosen to explain the social factors. Annual data is gathered over the period 1986 to 2016. The data is gathered from various Central Bank of Malaysia Takaful annual reports and financial stability and payment systems reports and the department of statistics, Malaysia and World Bank data. The paper investigates the significance of the identified socio-demographic and economic factors in determining the consumption of family Takaful. Following Sherif and Azlina Shaairi, (2013) the paper using ordinary least square (OLS). The expected finding is income, education level, and Muslim population factors are positively related to Takaful demand. On the other hand, inflation and real interest rate appear to adversely influence the total family Takaful consumption. Sherif and Azlina Shaairi (2013).