The effects of financial factors on Takaful demand in Malaysia

This paper offers a theoretical framework for studying the effects of financial factors, i.e.
leverage, growth, bankruptcy, tax, and other variables on Takaful (Islamic insurance) demand. Data
were collected from three Takaful operators and the financial reports from the Companies
Commission of Malaysia (SSM), including 278 small and medium-sized enterprises (SMEs) for this
study. AMOS version 20, a variance-based Structural Equation Modelling (SEM), was used to analyse
the data as well as to test the research hypotheses. The outcomes show that financial factors could be a
major predictor of Takaful demand at least from the SMEs’ perspective. Financial factors were found
to be positively affected by leverage, growth, bankruptcy, and taxes. The implications of these
findings are discussed and recommendations for future research are provided