Takaful Demand

In a continuously changing and growing world of globalization, cultural constructions have provided
insight into influence on consumer behavior and financial decision making. Religion plays a vital role in
influencing individual and social attitudes, values, and behaviors, which in turn define the religiosity of any
individual as a social being. Robust development in the Takaful (Islamic insurance) sector with numerous
potential new market motivates the question regarding the relationship between religiosity and demand for
Takaful. Therefore, this paper explores the importance of religiosity in influencing the demand for this religiously
designed insurance through critical review of past studies to deepen the understanding of Muslims’ need for
Takaful, subsequently contribute to stakeholders’ decision and policy making to promote the development of
the Takaful sector.

Purpose
The concept of Takaful has a long history. It is linked with the era of Prophet Muhammad 1,400 years ago. The globalization and development of socio-economic systems have made business activities more complex in response to emerging human needs and requirements. Similarly, Takaful insurance has fully commercialized and become an important indicator of the international financial market. The purpose of this study is to understand the Takaful mechanism and progression of its procedures to date since its inception.
Design/methodology/approach
This study seeks to examine the origin, evolution and historical developments of Takaful mechanism, operations, models and governing framework with extant literature review from previous studies and current practices.
Findings
The modern Takaful insurance first began in Sudan back in 1979. The Takaful operations must abide by the Sharia laws and work under the supervision of the Sharia Supervisory Board. Since its evolution, Sharia scholars have introduced various Takaful models that are going to be explained in this study. Moreover, several Islamic organizations, including the “Islamic Financial Services Board” and the “Accounting and Auditing Organization for Islamic Financial Institutions,” have provided guidelines and supervision to develop and strengthen the Takaful industry further. The study acknowledges Takaful as a growing insurance industry with huge potential and promising future in both Pakistan and the international market.
Practical implications
During the analysis, various deficiencies and loopholes were identified, which are responsible for the unmatched growth of conventional insurance. They can be eliminated with the joint efforts of industrial players, Sharia scholars and Takaful insurance companies. Hence, Islamic scholars and academic researchers are encouraged to develop and modify the current practices of Takaful mechanism according to current market demands and consumer approach. The research efforts will help Takaful operators to develop more innovative Takaful products adhering Sharia compliance. Consequently, it will help to access more consumer market and further enhances the Takaful growth.
Originality/value
This study is an effort to provide a basic understanding of the mechanism of Takaful models. The study helps to comprehend how Takaful models have evolved and been modified over the course of time. Moreover, it provides a base for further development and improvement in current practices of Takaful models, which will result in increased progress for the Takaful industry.

Islamic financial system presents a novel approach to the modern financial system with its procedures and applications. The underpinnings of Islamic financial system sharply contrast with the traditional financial system because it is developed outside the current financial system and a strong emphasis on common mutual benefits. This paper explains literature references from a series of papers which examined the evolution and emergence of Takaful (Islamic insurance). The study explores Takaful concept as an Islamic perspective of risk coverage which is an alternative to conventional insurance. The study also discusses Takaful structure, mechanism and elaborates how it differentiates from conventional insurance. Further, Takaful categories and Takaful models are explained which are being applied in the current Takaful market. The study concludes by exploring current Takaful market globally with reporting future prospects of Takaful and suggesting directions for its further sustainable growth.