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Advances in Social Sciences Research Journal – Vol. 11, No. 2.2
Publication Date: February 25, 2024
DOI:10.14738/assrj.112.2.16414.
Senawi, A. R., Kamarudin, M. F., Ariffin, A. M., Mokhtar, M. Z., & Putriani, D. (2024). Practitioners’ Perspectives on B40 Takaful
Protection. Advances in Social Sciences Research Journal, 11(2.2). 279-288.
Services for Science and Education – United Kingdom
Practitioners’ Perspectives on B40 Takaful Protection
Azhan Rashid Senawi
azhanrashid@uitm.edu.my
Department of Economics and Financial Studies,
Faculty of Business and Management, Universiti Teknologi MARA, Malaysia
Mohd Faizal Kamarudin
*Corresponding author: mfk@uitm.edu.my
Department of Economics and Financial Studies,
Faculty of Business and Management, Universiti Teknologi MARA, Malaysia
Azitadoly Mohd Ariffin
doly@uitm.edu.my
Department of Economics and Financial Studies,
Faculty of Business and Management, Universiti Teknologi MARA, Malaysia
Mohammad Zulfakhairi Mokhtar
zulfakhairi@uitm.edu.my
Department of Economics and Financial Studies,
Faculty of Business and Management, Universiti Teknologi MARA, Malaysia
Diyah Putriani
diyah.putriani@ugm.ac.id
Department of Economics, Faculty of Economics
and Business, Universitas Gadjah Mada, Indonesia
ABSTRACT
Takaful is a form of insurance that adheres to shariah principles and has been
established in Malaysia since 1984. With takaful, Muslims are protected from any
ambiguous activities or transactions that are not aligned with shariah. However,
participation in takaful reveals that only affluent individuals have the means to
protect themselves against risks, whereas the impoverished, particularly the B40,
cannot do so. The B40 refers to a specific socio-economic group in a given
population in the lower-income category with an annual income below RM 4,850.
No other takaful and insurance business has demonstrated a willingness to provide
a system specifically designed to safeguard the B40, as observed. They have been
excluded from any form of protection. Consequently, the question arose: do they
possess a favorable outlook for Takaful? Hence, the SWOT analysis was employed
to assess the competitiveness of the B40 market. Eleven takaful operator agency
participants were randomly selected for semi-structured interviews. All the
answers will be tabulated from these interviews according to the SWOT categories.
This study aims to analyze the B40 market for takaful goods, identify the obstacles
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Advances in Social Sciences Research Journal (ASSRJ) Vol. 11, Issue 2.2, February-2024
Services for Science and Education – United Kingdom
takaful operators face, and propose ways to increase the takaful penetration rate,
focusing on the family takaful product.
Keywords: Takaful, B40 group, Insurance, SWOT analysis, Malaysia.
INTRODUCTION
The takaful sector in Malaysia experienced significant expansion throughout the early 1980s.
Takaful has become a crucial element of Islamic finance since its establishment in November
1984 ([4]; [21]). Thus, conventional insurance is replaced by an alternative life protection
system for Muslims [9].
The participants in this industry include affluent individuals, or at the very least, those
belonging to the M40 demographic. These families belong to the middle-class category and have
salaries ranging from RM 4,850 to RM 10,959 [11]. They are the best prospects for takaful. They
can accomplish this since they possess a share of the funds to be allocated for their unforeseen
demise. Nevertheless, could the B40 group, who are in need, be regarded as a potential market
for Takaful? Generally, it is commonly observed that only affluent individuals have the means
to protect themselves against potential risks. In contrast, the less fortunate, particularly those
in the B40 category, do not have this ability. According to the Department of Statistics Malaysia
(DOSM) report, the B40 group accounted for 2.91 million out of the total population of 32.7
million in 2019 [6]. This amount represents approximately 10 percent of the total population.
Hence, this study aims to examine the competitiveness of B40 engagement in the takaful
product market from the perspective of takaful operators' assessment of the SWOT (strengths,
weaknesses, opportunities, and threats) of takaful practitioners. This endeavor can potentially
increase the takaful penetration rate within the B40 segment. This paper examines the
questions arising from the issues presented above.
➢ Q1: What are the advantages and disadvantages of B40 in the takaful market?
➢ Q2: What are the prospects and challenges confronting the B40 segment in the takaful
industry?
➢ Q3: How do industry practitioners perceive B40, and what problems do they experience
deploying takaful protection?
The second section provides a concise overview of the introduction of Takaful and the
interconnection between the Takaful industry and the B40 segment. The methodology is
elucidated in the third section. Subsequently, the subsequent portion entails a presentation of
the findings and a comprehensive discussion of the results. The paper's conclusion is outlined
in the sixth part.
REVIEW OF LITERATURE
Takaful
Takaful includes both the mudharabah and wakalah models of profit sharing and authorization
and a hybrid of the two [8]. The welfare of society is a primary concern for takaful. The shariah- compliant nature of takaful products and operations is further ensured by the takaful
mechanism's emphasis on tabarru' (gift) and ta'awun (mutual cooperation). If no claim is made,
participants contribute to the mutual fund through the tabarru' principle, and members in need
are compensated through the ta'awun principle [7]. In addition, the insured party (participant)
always gives something (contribution) to the insurer (operator) in every takaful arrangement.
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Senawi, A. R., Kamarudin, M. F., Ariffin, A. M., Mokhtar, M. Z., & Putriani, D. (2024). Practitioners’ Perspectives on B40 Takaful Protection. Advances
in Social Sciences Research Journal, 11(2.2). 279-288.
URL: http://dx.doi.org/10.14738/assrj.112.2.16414
If there is a loss, the operator will provide the beneficiary with a second gift based on the lost
amount [18]. According to Maqasid al-Shari'ah [1], the fundamental principle of Takaful is that
all parties involved should bear some of the risk and some of the loss.
Takaful and B40
According to the statistics, there were 2.91 million households in Malaysia that were classified
as B40, and their average monthly income was RM2,537 ([6]; [16]). According to the 11th
Malaysia Plan (RMK 11), the monthly income of households in the B40 category was less than
RM3,860. It was anticipated that it would rise to RM5,270 in the year 2020 [19]. Several
programs are running to enhance the standard of living for homes in the B40. To improve the
living conditions of those with low incomes, the government of Malaysia has established several
programs and strategies centered on increasing the options for earning income by individuals
[14]. An example is the mySalam initiative; the mySalam B40 Takaful Protection policy is a
complimentary takaful protection policy the government offers to the B40 population in
Malaysia. The management of this program falls under the purview of the Malaysian Ministry
of Finance (MOF) through the mySalam Trust Fund. The B40 mySalam Takaful Protection
Scheme was instituted in 2019 and will be in effect until 2023, spanning five years.
Nevertheless, in 2023, the government decided to extend this program until 2025 due to the
positive feedback received from the B40 community in Malaysia [12]. MySalam is the initiative
that is now being designed by the government of Malaysia in partnership with Great Eastern
Takaful to preserve the well-being of the B40 ([12];[13]).
This framework considers taking takaful coverage advantageous, particularly for individuals
already possessing a family. For the B40 households, this means that there must be at least one
member of the family who is covered by an insurance or takaful policy. The need for family
takaful or life insurance becomes increasingly apparent as the B40 faces increased dangers,
such as the higher cost of living, fewer savings, and high indebtedness, which exposes this group
to the risk of economic insecurity. Consequently, the B40 becomes more vulnerable to the risk
of economic insecurity. Because they do not have sufficient savings or other forms of financial
security, the B40 group is considered susceptible, particularly during economic slowdowns or
depression [21]. The policyholder receives savings and security for the future through takaful,
which is especially beneficial if something unforeseen occurs to the policyholder (typically the
principal income earner or the breadwinner) and the family needs financial assistance. Thus,
takaful coverage has the potential to alleviate the strain placed on families and assist
households in better managing their money. A financial middleman, a promoter of investment
activities, and a mobilizer of savings are all functions that can keep the activity alive ([3]; [20]).
As a result, this study aims to generalize the findings obtained from the takaful practitioner
regarding the B40 concerns.
METHODOLOGY
Through in-depth interviews with eleven registered practitioners in Selangor, Malaysia, this
article delves into the practitioners' perspectives on the industry's trajectory toward the B40
Takaful marketplace. A random registered practitioner in Malaysia's takaful business was used
to draw the sample. Fifteen takaful operators are registered in Malaysia, as stated in [5].
Although many takaful operators were registered, only a few were agreed upon and available
to answer the interview. To obtain authorization to conduct interviews, some practitioners
were randomly approached by telephone calls. Few practitioners consented to be interviewed;