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1. Introduction
The journey of takāful is started from Sudan dated back in 1979 with an objective to provide insurance services by ensuing guidelines of Islam. The religious scholars of Islam from all over the world declared that the practices of traditional insurance are against the Islamic Sharīʿah (i.e. Islamic Laws) due to the involvement of interest, uncertainty and gambling. Thus, the concept of takāful is derived from the principles of donation, charity, shared responsibility, mutual assistance and solidarity (Husin and Ab Rahman, 2016; Jamil and Akhter, 2016) prescribed by Islam to ensure the social, economic and political stability. Today, takāful institutions are providng services in approximately 33 countries of the world with a network of 353 takāful operators including window takāful facilities (IFSB, 2020).
However, the past few years were crucial for the takāful industry to preserve its momentum in business growth and market share. The contribution of the takāful sector in the whole Islamic financial service industry is decreased from 1.3% to 1.1% by the end of 2018. The pace of business growth also indicates a declining trend of −1.1% from 4.3% to 3.2% in the same financial year (IFSB, 2020). However, the total volume of the takāful industry is reached at US$27.07bn that is much smaller than the business volume of the insurance industry that is US$5.2tn (IFSB, 2020). Moreover, the five major markets including Saudi Arabia, Iran, Indonesia, Malaysia and the United Arab Emirates are contributing 91% of the total takāful business that is also an indicator of uneven growth of the takāful industry.
Recently, a joint publication of Islamic Financial Services Board (IFSB) and The World Bank (2017) highlighted some major obstacles or barriers that are challenging for takāful operators including the lack of consensus among religious scholars on the identical business model of takāful, the subject of takāful becomes controversial among different school of thoughts, the lack of knowledge creates confusion for stakeholders including practitioners and the general public to differentiate takāful from conventional insurance.
The main motivation behind this study is to bring some useful insights for takāful operators that can contribute in the business growth and market penetration of the takāful industry. The research on takāful industry is imperative because it promotes the concept of...