This research provides insights into the factors influencing Takaful penetration rate of the Malaysian Takaful industry for the period 1985-2008. Its objective is to identify the factors that influence the market penetration from the perspective of Takaful participants. Data was collected through a survey and was analyzed using SPSS software. Employed techniques was Cross Tabulation & Chi-Square tests. It was found that the factors influencing Takaful penetration were age, gender, religion, marital status, education, income, awareness, product varieties, and knowledge of staff and agents of Takaful. The research findings suggest the need to increase product varieties, training of staff and agents to enhance their product knowledge, technical and Shariah knowledge as well as to intensify the level of awareness.

The first takaful company was established in Sudan in 1979. It was no until six years laters that the first takaful company was established in Malaysia, which is Syarikat Takaful Malaysia after the promulgation of the Takaful Act in 1984. Malaysia has emerged as the largest Takaful market in South East Asia and the second largest after Saudi Arabia with a contribution of US$ 0.9 billion in 2008. (Ernst and Young World Takaful Report, 2010).

The Malaysian Takaful industry has experienced encouraging growth since its inception in 1985. Annual growth rate of the industry has been estimated to be around 20%. Despite such impressive rate of growth, it is believed that the market penetration of Takaful is still low. This paper seeks to find the factors influencing Takaful market penetration based on the experience of managers of Takaful operators. Twenty (20) Takaful managers were randomly selected and interviewed. The interviewees pointed out the factors that deter the public from participating in Takaful could be listed as follows: the lack of public awareness in the advantages of Takaful over insurance products, the limited range of product varieties, the shortage of relevant expertise to explain Takaful products, the need to improve the distribution channels and marketing strategies. The paper also suggested several ways of improving Takaful market penetration, namely: the need to develop tailor-made products to suit customer needs according to the different segments of the society, expanding the range of product varieties, extensive training of staff and agents to enhance their products and services, technical and Shari’ah knowledge as well as to intensify promotion for higher level of awareness.

This paper sought to find the factors influencing Takaful market penetration based on the experience of managers of Takaful operators. Twenty (20) Takaful managers were randomly selected and interviewed. The method of analysis employed is The Thematic Analysis. The interviewees pointed out the factors that deter the public from participating in Takaful could be listed as follows: the lack of public awareness in the advantages of Takaful over insurance products, the limited range of product varieties, the shortage of relevant expertise to explain Takaful products, the need to improve the distribution channels and marketing strategies. The paper also suggested several ways of improving Takaful market penetration, namely: the need to develop tailor-made products to suit customer needs according to the different segments of society, expanding the range of product varieties, extensive training of staff and agents in order to enhance their products and services, technical and Shariah knowledge as well as to intensify promotion for higher level of awareness. The paper is a rare attempted to investigate the factors influencing Takaful market penetration in Malaysia context.