Factors influencing takaful adoption at SMEs' manufacturing industry in Malaysia

Small and medium-sized enterprises (SMEs) are minimally aware of the importance of insurance policies to protect business continuity. Despite the growing interest in Takaful, there are limited empirical studies on the adoption of Takaful in the manufacturing industry of SMEs. This study examines the relationship between awareness, perception, company size and degree of centralization on the adoption of Takaful in the manufacturing industry of SMEs in Malaysia. A quantitative approach was used for the study. A total of 179 usable questionnaires from SME owners and managers across Malaysia were analyzed using binary logistic regression and cross tabulation via Statistical Package for the Social Sciences (SPSS) version 23. The results show that awareness has a significant impact on the adoption of Takaful in the manufacturing industry of SMEs in Malaysia. Consumers who are aware of Takaful are more likely to purchase insurance plans or schemes than less informed customers. The perception and degree of centralization also influence the adoption of Takaful in the manufacturing industry of SMEs in Malaysia. Centralized decisions (at the top management level) facilitate the adoption of takaful compared to decentralized decisions (at multiple management levels) that involve different stakeholders. Decentralized decisions may not lead to favorable outcomes. Organizational policymakers should use effective information communication strategies to create a positive perception and increase the acceptance of Takaful. In terms of theoretical contribution, this study applies Theory of Reasoned Action and Organizational Buying as underlying theories and found significant relationships between awareness, perception, degree of centralization and adoption of Takaful in the manufacturing industry of SMEs in Malaysia