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Education and its Role in Awareness Enhancement of the Takaful Concept and Principles

Education and its Role in Awareness Enhancement of the Takaful Concept and Principles

Among the Islamic finance segments, Takaful is the one which has been growing significantly for the last decade. According to an EY report in 2014, the industry grew globally at a growth rate of 14%, which, however, is actually still far from reaching its maximum potential. This is because in general, the insurance penetration rate is still relatively low in most of the Muslim majority countries. In 2012, the insurance penetration rate in Muslim majority countries stood at an average of 2% compared to 4.5% in Europe during the same year. Literature reveals that one of the reasons for the low penetration rate is the low level of public awareness towards insurance in general and Takaful in particular. Therefore, in this article, Dr. Sutan Emir Hidayat attempts to highlight the results of some studies around the world that measured the level of public awareness on the Takaful concept and principles and the role of education in awareness enhancement. 
Awareness has been empirically proven as one of the important factors that influence market preference. There are many studies that empirically find the positive influence of awareness on market preference. In other words, as awareness increases, market preference also increases. Despite the importance of public awareness, there have been only limited studies worldwide that measured the level of public awareness on the Takaful concept and principles. Actually, in general, scientific studies on Takaful are much less than the studies on Islamic banking for instance.
A review of the literature reveals that most studies that measured public awareness on the Takaful concept and principles were conducted in Malaysia. In addition, there were also empirical studies on the same topic conducted in Bahrain, Bangladesh, Brunei Darussalam, Kuwait, Pakistan and other countries. In general, those studies found that the level of public awareness on Takaful concepts and principles is relatively low. Only a study done in Bahrain by Sutan Emir Hidayat and Ameena Rafeea (2014) found the level of public awareness on the Takaful concept and principles is moderately high especially with regards to the basic concept and principles. However, when it came to technical issues such as surplus distribution and Takaful business models, the study revealed a low level of public awareness. 
A review of previous studies also revealed that education plays a significant role in influencing the level of awareness on the Takaful concept and principles. Therefore, spreading the message of Takaful through the educational system has been scientifically proven as an effective way to increase public awareness on the Takaful concept and principles. Integrating Takaful courses into the academic curriculum of universities and training institutes across countries where Takaful is in existence is believed to be very important in enhancing public awareness, market preference and thus the market share of Takaful. 
In addition, integrating Takaful into the academic curriculum of institutions of higher learning is also important in ensuring the sustainable growth of the industry. This is due to the fact that Takaful growth sustainability depends on the availability of talents to meet the industry’s needs. In fact, one of the challenges in the Islamic finance industry in general (including Takaful) is the lack of adequately trained human resources. Obviously, the challenge can only be overcome by producing more qualified people through educational systems. 
However, in the process of integrating Takaful, it is important to ensure that the learning outcomes of the Takaful courses are in line with what the industry needs. This is because there are cases where there are graduates with Islamic finance qualifications (including Takaful) who face difficulties in getting jobs within the industry since they do not have the level of skills and specialization that their prospective employers need. Therefore, in order to move forward, it is important for the Islamic finance qualification providers to continuously revise their curriculum in order to meet the industry needs and to obtain accreditation not only from academic-based accreditation agencies but also industry-based accreditation agencies.
This article published on IFN Education, May 2015: Volume I, Issue I 
Tulisan: Sutan Emir Hidayat, Ph.D

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