Evaluation of management soundness of Takaful industry in selected countries

Monsurat Ayojimi Salami · Harun Tanrıvermiş

10 citations0/0 files storedJournal of Islamic marketing

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Islamic Finance and Banking Studies Financial Analysis and Corporate Governance Insurance and Financial Risk Management

Abstract

Purpose Management soundness is essential for the effectiveness of any industry, most especially in any Islamic financial sector, whereby fairness and justice are the key factors to be observed. This paper aims to examine the management soundness of the takaful industry regarding their asset quality, re-takaful and actuarial and earning and profitability. Design/methodology/approach This study obtained quarterly data from 2019Q1 to 2021Q4 from the Islamic Financial Services Board across Malaysia, Brunei, Saudi Arabia, Jordan and the United Arab Emirates. The panel data modelling with random-effect and fixed-effect estimators were used for the analysis. Findings The finding revealed a strong relationship between re-takaful and earnings with management soundness and a weak relationship between asset quality and management soundness. In addition, the result established a significant and strong association between management soundness and earnings and profitability. Therefore, re-takaful and profitability contributed more to the management soundness of the takaful industry than asset quality during the study. An increase in earnings and profitability to enable the takaful industry to pay the claims, especially in calamity, and more focus on the quality of the asset they invested in could enable the smooth running of their day-to-day business affairs. Practical implications More attention is required on the quality of assets in their portfolio for the sustainability of the takaful industry to fulfil their underlying objectives. Management soundness in the takaful industry should address the challenges of managerial lathery, which some studies linked with operational inefficiency because of unskilled personnel in the takaful industry. This could benefit takaful clients, irrespective of religion, to attain their associated share of benefits from the Islamic insurance industry. Originality/value To the best of the authors’ knowledge, this is the first empirical study that examined the effectiveness of takaful management across Malaysia, Brunei, Saudi Arabia, Jordan, and the United Arab Emirates.

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References

2013Within and between Estimates in Random-Effects Models: Advantages and Drawbacks of Correlated Random Effects and Hybrid Models 2008Nonparametric estimation and testing of fixed effects panel data models 2019Consumer acceptance toward takaful in Pakistan 2014Femlogit—Implementation of the Multinomial Logit Model with Fixed Effects 2020Impact of key HR practices (human capital, training and rewards) on service recovery performance with mediating role of employee commitment of the Takaful industry of the Southeast Asian region 2018Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market 2011Macroeconomic Variables and Stock Market Returns: Full Information Maximum Likelihood Estimation 2017Utilisation of zakāh and waqf fund in micro-takāful models in Malaysia: an exploratory study

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