PERCEPI10N ON TAKAFUL BUSINESS: A CASE OF SEKOLAH MENENGAH KEBANGSAAN LUNDU

Transcription

1 PERCEPI10N ON TAKAFUL BUSINESS: A CASE OF SEKOLAH MENENGAH KEBANGSAAN LUNDU.. Siti Srikuntanti Bt. Mohamad Askar Corporate Master in Business Administration 2013

2 Pusat Khidmat Maklumat Akademik UNlVERSm MALAYSIA SARAWAK ~.KHIOMAT MAKLUMAT AKAOEMIK III II' 1111 rllii~ PERCEPTION ON TAKAFUL BUSINESS: A CASE OF SEKOLAH MENENGAH KEBANGSAAN LUNDU Siti Srikuntanti Bt.Mohd. Askar A thesis submitted In fulfillment of the requirements for the degree of Corporate Master in Business Administration Faculty of Economics and Business UNIVERSITI MALAYSIA SARA WAK 2013

3 APPROVAL PAGE I certify that I have supervised and read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a research paper for the degree of Corporate Master in Business Administration. Prof. Dr. Shazali Abu Mansor Supervisor This research paper was submitted to the Faculty of Economics and Business, UNlMAS and is accepted as partial fulfillment of the requirements for the degree of Corporate Master in Business Administration. Dr. Mohamad Affendy Arif Dean, FEB.. UNlMAS ii

4 DECLARATION AND COPYRIGHT Name : Siti Srikuntanti Bt. Mohamad Askar Matric Number : I hereby declare that this research is the result of my own investigations, except where otherwise stated. Other sources are acknowledged by footnotes giving explicit references and a bibliography is appended. Signature Date.' iii

5 pusat Khidmat Maklumat Akademik UNlVERSlTI l\waysla SARAWAK TABLE OF CONTENTS,~ Title Page Title Page 1 Approval Page 11 Declaration and Copyright Page Table of Contents Acknowledgements List of Tables List of Figures Abstract Abstrak III IV viii IX Xl Xll Xlll CHAPTER 1 - INTRODUCTION 1.0 Introduction 1.1 Research Background 1.2 Problem Statement 1.3 Research Questions Research Objectives Significance ofthe Research Limitation ofstudy 7 iv

6 1.7 Definition of Key Concept Takaful Perception Awareness Shariah Interest (Riba) Gambling (Maisir) Uncertainty (Gharar) CHAPTER 2 - LITERATURE REVIEW 2.0 Introduction 2.1 Concept of Takaful 2.2 Growth of takaful 2.3 Awareness of takaful 2.4 Diffeences between conventional insurance and takaful 2.5 Summary CHAPTER 3 - DATA AND METHODOLOGY 3.0 Introduction 3.1 Research Conceptual Framework 3.2 Hypothesis v

7 3.3 Research Design Research Site Samples and Sampling Instrumentation - Type of Questionnaire Data Collection Procedures Data Analysis Statistical Design Descriptive Statistics - Percentage Pearson Correlation Exploratory Factor Analysis Summary 29 CHAPTER 4 - FINDING (ANALYSIS AMD EVALUATIONS) Introduction Respondent's Demographic Characteristics. (Section A) Know ledge on Takaful (Section B) Awareness of Needs and Interest of Takaful (Section C) Requirements for Saving and Protection Awareness (Section D).' Takaful Information Resources (Section E) Perception of Services Satisfaction (Section F) Overview ofprice Perception (Section G) Exploratory Factor Analysis (EFA) 53 vi

8 4.9 Pearson Correlation Analysis Summary 56 CHAPTER 5 - CONCLUSIONS AND RECOMMENDATIONS 5.0 Conclusions Recommendations Distribution Strategy Product Positioning 60 BIBLIOGRAPHY 61 APPENDIX ~' vii

9 ACKNOWLEDGEMENTS First of all, Thank You Allah s.w.t and I would like to express my deepest appreciate and a special thank to Prof. Dr. Shazali Abu Mansor, my supervisor, who worked well beyond the call of duty discussing this project with me from its outset, helping me develop many of the basic features and reading and commenting in detail on all related chapters. Without his pel'sistent help and guideline this Corporate Business Project would not have been possible. I would also like to express my special thank to Dr.Muhammad Khalique, who greatly enriched my knowledge giving invaluable advice, sincere help and cooperation. The endeavor of creating a research project involves the creative collaboration of many inc4viduals. Although the extent of my debts cannot be fully acknowledged here, it is nevertheless a joy to record my gratitude to many people who have helped, some without realizing just how helpful they were. I also want to delivered my thankful to my husband (Abang Musa B. Abg Abai ), my mother (Hjh.Pon bt.deris) and all my children (Abang Muhammad Arsyad, Dayang Siti Aisyah, and Dayang Siti Aqilah) as they have sacrificed a lot of their time together in giving space for me to complete this research project. And last but not least, I want to thank those of my lecturers and colleagues of Corporate Master in Business Administration program, Faculty of Economics and Business for their direct and indirect support and contribution in mak~ng this research project a reality. I pray to Allah for a success in any of their future endeavors. Amin. SITI SRIKUNTANTI BT. MOHAMAD ASKAR Faculty of Economics and Business University Malaysia Sarawak June 2013 viii

10 LIST OF TABLES Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Personal Information Respondents' Knowledge on Takaful- takaful definition Respondents' Knowledge on Takaful- principle oftakaful Respondents' Knowledge on Takaful- takaful Arabic word means Respondents' Knowledge on Takaful- aspect assessed on takaful application Respondents' Knowledge on Takaful- roles oftakaful Respondents' Knowledge on Takaful- takaful principle basic Respondents' Knowledge on Takaful- advantages contribute in takaful Respondents' Knowledge on Takaful- differences between takaful and conventional insurance. Table 10 Table 11 Table 12 Table 13 Table 14 Table 15 Table 16 Table 17 Table 18 Respondents' Knowledge on Takaful meaning oftabarru' concept Respondents' Knowledge on Takaful- privilege oftakaful Awareness of Needs and Interest of Takaful Statistics Awareness of Needs and Interest of Takaful Takaful Information Resources Perception of Services Satisfaction Statistics - Perception of Services Satisfaction Overview of Price Perception Statistics - Overview ofprice Perception ix

11 Table 19 Overview of Price Perception - What is the contribution that is convenient to respondents if they saving :in takaful Table 20 Table 21 Table 22 KMO and Bartlett's Test Rotated Component Matrix a Correlation between Awareness of Needs and Interests of Takaful, and Perception ofservices Satisfaction. Table 23 Correlation. between Awareness of Needs and Interests of Takaful, and Overview of Price Perception. x

12 LIST OF FIGURES Figure 1 Figure 2 Figure 3 Saving Type Saving Purpose Overview of Price Perception xi

13 ABSTRACT ( This research is done to study the perception on takaful business. This paper aims to provide the experience and latest progress perception on takaful (Islamic insurance) industries. Research sample is done at SMK Lundu. The main objective of this research is to study the teachers, students and non-academic staffs on their understanding of takaful elements and their awareness on the need and the importance of takaful Quantitative method is used whereby 100 sets of questionnaire had been distributed. Analysis is done in descriptive mode, Pearson Correlation and Analysis Factor. The result of this research found that people awareness is related to knowledge on takaful business. The hypothesis both can accept with 0.99% significant level.the dependent variable of perception of takaful business is influenced by two independent variables that is the level of people knowledge and the people awareness. The two independent variables are also interrelated. In this research, after factor analysis, there are three variable were extractive. Question item were valid and reliable on the basis. The instrument is good and acceptable. xii

14 ABSTRAK Kajian ini bertujuan mengkaji perkembangan semasa perseps~ terhadap perniagaan takaful. Sampel kajian dibuat di SMK Lundu. Objektif utama kajian ini adalah untuk mengkaji tahap pengetahuan warga sekolah yang terdiri daripada guru, pelajar di tingkatan 6 dan staf bukan akademik terhadap pengetahuan elemen takaful dan kesedaran mereka terhadap keperluan dan kepentingan takaful. Kaedah kuantitatif digunakan di mana 100 set soalan diedarkan. Analisis dibuat dalam bentuk diskriptif, Korelasi Pearson dan Faktor Analisis. Hasil kajian ini mendapati kesedaran indiuidu berkaitan dengan pengetahuan terhadap perniagaan takaful. Analisis dibuat menunjukakn hipotesis diterima dengan tahap signifikan 0.99%. Pembolehubah persepsi bersandar dipengaruhi oleh dua pembolehubah tidak bersandar iaitu tahap pengetahuan dan kesedaran. Kedua-dua pembolehubah tidak bersandar juga saling berkaitan. Tiga komponen dalam faktor analisis juga sah dan boleh dipercayai. Instrument juga baik dan diterima. xiii

15 CHAPTERl INTRODUCTION 1.0 Introduction Takaful or Islamic insurance is part of well-growth Islamic finance industry today. This research is aimed at getting feedback from the people on perception of takaful business within Lundu town. This research wants to find out how far the respondents awareness is and understand about takaful and what their perceptions about it are. Furthermore, this research also discussed about the takaful history, its basic concepts, principles which applied and the differences with conventional insurance. This paper also aims to provide the experience and latest progress of the takaful (Islamic insurance) industries. The industry has become challenging and evolving thus inducing the business operators to keep themselves abreast with people needs and wants. Takaful, which is meant to foster Islamic brotherhood, stresses the importance of solidarity among those participants who have agreed to bear each other's specified loss, such as death or disasters that befall a member, especially by donating part of the contributions made. Takaful is different from conventional insurance in that the premium (contribution) paid by each participant should be made with intention of giving a donation, gift, or.contribution (tabarru ') and not an exchange of goods, because if tabarru' is involved, the Shariah considers the transaction to be permissible. 1

16 1.1 Research Background This research focuses mainly on how the people in general perceive the concept of.. takaful, especially in modern days where there are lots of insurance offered. Takaful has been established in its modern form for more than 25 years and firms that offer Shariahcompliant insurance protection have grown significantly in both number and scale. Obviously, there are many choices of insurance provided by conventional insurance company to cover their health or losses in accidents. But when it comes to the need of the religion, for example, Islam, the Muslim customers need to find an alternative to meet the need. In Islam, takaful is seen as a form of financial protection, similar to insurance, which is designed to be compliant with Islamic principles and is based on the principles of solidarity and mutual guarantee. In order to be acceptable to Islam, insurance must avoid the payment or receipt of interest (riba) amongst other requirements. For instance, gambling (maisir) or uncertainty and unclear terms (gharar) are not permitted. It cannot be denied that promoting takaful to non-muslims is a big challenge to all the takaful operators especially in a multi-racial country like Malaysia. The takaful company has to have good strategy in order to ensure the non-muslims to buy their product and at the same time increase the sales of takaful among Muslims. Not only good strategy but also good agents!hat can persuade potential customers to buy their takaful product, buy it for themselves or their family. Most of the companies use agents to market their product (Mohamad Abdul Hamid, 2011).Having said that, it is obvious that takaful agents are important players in making sure that the people, Muslims or non-muslims, will buy takaful for their own benefits. The role of takaful agent is crucial in attracting the non 2

17 Muslims to take up takaful. They must possess excellent persuasive skills and able to explain what is takaful in language that the customers can understand. Mohamad Abdul Hamid also said that the weakness of takaful among potential buyers depends on the agent itself whether they are full time agent or part-time. He goes on saying that "The obvious weakness ofpart time agents is less skill to attract and maintain their customer. They also do not know how to communicate, give a brief explanation and convince the customer about Takaful products. These problems will lead to low sale productivity, decrease agents motivation to give full commitment as a good agent and it is not impossible they tend to leave this industry" (2011). 1.2 Problem Statement We often hear that Islam is not merely a religion, but it is also a way of life. This notion somehow proved accurate when it comes to takaful business. Takaful business now, especially in Malaysia is not something new anymore. Many banks, including insurance companies have adopted takaful, which originally means Islamic insurance business, to cope with the latest trends in insurance business. Up till now, there are many people out there from all walks of life still not sure what takaful is. Is it a brand? Or is it a name of an insurance company? Thus. this gives good opportunity for the researcher to investigate the people's knowledge on takaful. Of course, the gist' of this research is to study the people's perception towards their awareness on the need and importance of takaful business in Lundu. First and foremost, we can ask people, what takaful means to them. Do the people 3

18 know what the real purpose of takaful compare to other conventional insurance companies? Questions like these are important for us to answer as business nowadays merely not depend on business solely but also catering the needs of sharing the burden faced by unfortunates policy holders. 1.3 Research Questions l. How deep is the people's knowledge on takaful business To know how takaful is really accepted here in Malaysia, we have to know the kind of problems that we faced. And it is wise enough to start with questions regarding the matter. For example, how deep is the people's knowledge on takaful business. Before a takaful agent ready to embark on his mission to get potential buyers for their takaful product, that is the question that he or sh~ need to answer. Despite all these efforts of Islamic financial markets, many consumers are still unaware of the concept of Takaful. orne of them do not even know that there is takaful. Many consumers are still stick to conventional insurance, and they adopt more than takaful which is Islamic insurance (Abdirahman Sh. Mohamed Orner, 2011). Hence, the purpose of this research is to find the answer for the research question mentioned above. 2. What is the level of awareness among teachers, students, and non-academical staffs on the need and importance of takaful business. Another question remains to be answered is, what is the level of awareness among people on the needs and importance of takaful business? Do people need takaful? Do they think 4

19 Pusat Kllidmat i\laklumat Akademik UNIVERSm MALAYSIA SARAWAK that having takaful is important? It is a yes if they do know that takaful is also a type of insurance. But because of the word itself sounds like an Arabic word, the non-muslims tend to choose the other conventional insurance product which they familiar with. Of course, all of us need insurance for protection, not only for ourselves but also for our famijy. And this insurance comes in various types, such as health insurance, car insurance, life insurance and many more. All of these insurances are all covered through takaful. The only problem that lies is whether the non-muslims willing to take up takaful or not. Abdul Aziz Abdullah, Rokiah Sidek and Ahmad Azrin Adnan (2012) stresses that actually Islamic banking services and products are apparently popular among non- Muslims in Kuala Lumpur. This is evidence in their study that also mentioned "Non- Muslim respondents with higher education level strongly thought that Islamic banking will dominate the banking scenario in Malaysia. This is due to their easy access to information on Islamic banking. " 1.4 Research Objectives The purposes ofthe study are: 1. To know the level of people's knowledge on insurance elements and saving in takaful business. 11. To measure people's awareness on the need and importance oftakaful. 5

20 Significance of the Research The development of the takaful industry in Malaysia in the early 1980's was inspired by the needs of the Muslim in Malaysia for shariah-compliant alternative to conventional insurance due to some prohibitions in Islam regarding the conventional insurance. The Malaysian National fatwa committee issued that conventional insurance is haram due to the presence of the elements of Gharar (uncertainty), Riba (interest), and Maisir (gambling). This takaful industry is having significant expansion during the past two decades, specifically in Islamic countries and countries with large Muslim community. In the Middle East, takaful operations have developed in Saudi Arabia, Bahrain, Iran, and Qatar as well as with new operation opening up in Egypt, United Arab Emirates and Kuwait in recent year. In Southeast Asia region, Malaysia has been at the forefront of takaful development with Bank Negara taking the lead with the introduction of separate takaful regulations allowing the takaful business to flourish in that country (Taylor, 2005). Indonesi~ Brunei, Singapore have all followed with the development of takaful operations. Since it has gained so much popularity nowadays, takaful is not seen as something that only belongs to the Muslim society but as a product where anybody regardless of their faith and beliefs can use. Hence, it is important to know what is the people real perception of the masses now regarding takaful. People tend to think that takaful only caters to Muslim. It is important now to change that perception as the world now also acknowledges the importance oftakaful as one of the most important products in today' s banking landscape. 6

21 1.6 Limitation of Study The research conducted was not short of limitations. The following were those governing the research. First and foremost, is regarding the respondents for the research. The participants of the research were the teachers of SMK Lundu, non-academical staffs and also the Upper 6 students of SMK Lundu who resides in Lundu area of Sarawak. Due to time and work constraints, the research could not be conducted throughout the nation to provide a bigger picture of the real scenario of takaful perception. According to Brown and Peterson (1993), individual-related factors include both demographic and dispositional variables related to individual salespeople. Hence, the researcher only focused on the population in Lundu town to make sure the research could be done within the time given and without interfering the researcher's primary job. Secondly, the researcher has to take into account that all the respondents involved in the research were mainly those who are coming from middle class, who are not too rich, nor to poor to get takaful for themselves or their family. For family that comes from a middle class category, they might think that having insurance for themselves and also members of their family is important. But this all boils down to their monthly income. Those who afford to have higher income will surely buy the insurance they need but for those who have average income with big size family to cater to, they might having a second thought of buying insurance. Surely, when it comes to safety, everyone knows that they have to prepare for any unforeseen circumstances that might occur. With that notion, it will motivate them to buy insurance for the one they care about. For example, the major 7

22 function of life insurance is to protect against financial loss from loss of human life, as mentioned by Hofstede (1995). Researcher also aware that the respondents' acknowledge on insurance is divided into two parts. One is for the individual itself and the second one is for family. According to Juliana Arifin, Ahmad Syukri Yazid, Zunaidah Sulong (2012) there are two types of takaful; general takaful and family takaful. Normally, we are aware that the products offered by takaful company are referring to personal takaful and also family-oriented takaful. Malaysian Takaful Association defines general takaful as "a means of protecting financial losses arising out or caused by events that give rise to damage to physical property, legal liability, and/or to cause death or bodily injury by accident". This means that the insurance covers health and life insurance that emphasizes only to the individual itself. Meanwhile, family takaful shares the same functions but focuses more on family members. To buy family takaful, one must consider various factors before opting to buy the product. For instance, according to Redzuan, Rahman and Aidid, before buying any takaful product, one must consider his or her income, interest rates of the product, inflation, savings and stocks to examine the demand of family takaful (2009). As for the researcher it is a big task to identify among the respondents who really know about takaful, how much do they know about takaful and which takaful is better for them. 8

23 7 Definition of Key Concepts 1.7J. Takaful The origin of takaful is derived from several practices from ancient Arab tribal custom and the companions of the Prophet. For example, under the custom of "alaqilah", it is mutually agreed among the tribes that if a person is killed unintentionally by a person of a different tribe, the accuser's paternal relatives will take the responsibility to make a mutual contribution for the purpose of paying the blood money to the victim's relatives. (Enguku Rabiah Adawiah Engku Ali, Hassan p.odierno, 2008) Perception According to Dowler, E, Green, J, Bauer, M, Gasperoni, G (2006), perception involves understanding (or misunderstanding) and discernment, and includes an element of volition and action: people choose to "see" things in certain ways, and the social and cultural determinants of those choices differ with time and place. Perception is different from one person to another person even if they are to discuss the same topic. Perception mainly is a subjective matter. The way we view a cer,tain topic may differ from the others. This for sure will creates different ideas thus resulted in variety of ideas and thoughts. In case of takaful, for Muslim, they may know basically what is takaful but for non-muslim, they may have different perception or no idea at all what takaful is all about. 9

24 1.7.3 Awareness Awareness is state or ability to perceive, to feel, or to be conscious of events, or " sensory patterns. In this level of consciousness, sense data can be confirmed by an observer without necessarily implying understanding Shariah According to Rahman (1979), Shariah is the way that directs man's life to the right path which means 'law' (Denny, 1985). This means that those who practice Shariah could help them to make the correct choice in life as a guide. It is correlated with the 'din', which means 'submission' or 'following'. The proper subject as Shariah is God where as man is the subject of 'din'. It is related to one another in such a way that shariah is the ordination of the way and din is the following of that way Interest (Riba) Riba is an Arabic word which literally means 'increase' and 'growth'. Riba and interest are the same thing and can used interchangeably. Sudin Haron and Bala Shanmugam (2001) have stated that, Muslims are totally prohibited from dealing with riba. Islam condemns those who associate themselves with the practice of riba. The Qur' an an explicitly states that the charging of interest will draw a, declaration of war from Allah and His Messenger and promises total destruction of an economy which allows interest-based transactions. An insurance contract wherein the policyholder expects to obtain a fix amount of profit that is greater 10