The impact of Takaful insurance on economic growth: empirical evidence for selected countries

Purpose The purpose of this study is to examine the impact of Takaful on economic growth for a sample of Middle East and North Africa (MENA) Islamic countries. Takaful insurance companies are based on cooperation and are expected to play an important role in economic growth, especially as a savings vehicle and fundraising for investment paths. Design/methodology/approach This paper aims to inspect the impact of the Takaful industry on economic growth for six MENA Islamic countries over the period 2005–2021, using the random effect model. Findings The findings indicate that Takaful contributes to the country’s growth. Indeed, as Takaful funds increase the savings for future investments and offer protection and risk mitigation, they stimulate economic growth. Furthermore, the authors find a strong and significant relationship between population growth, money supply and economic growth. Practical implications The Takaful industry plays a crucial role in economic growth. Therefore, regulatory authorities have to carefully consider the Takaful sector and take appropriate measures to support its development. Specifically, it is recommended to increase the Takaful insurance culture, develop digital Takaful models allowing robo-advisor platforms sharia-compatible insurance and smart contracts to deepen the Takaful support for financial and economic development. Social implications By focusing on the Takaful economic growth-driven role, this research offers valuable insights that contribute to the ongoing development and expansion of the Takaful industry. Originality/value Based on Islamic principles of cooperation and risk-sharing, Takaful offers a distinct perspective on how insurance can contribute to economic development. Only a few studies have empirically investigated the contribution of Takaful insurance to economic growth, relying particularly on panel data. This research, therefore, adds valuable knowledge to the existing body of literature. It contributes to exploring an important aspect of Takaful role. Furthermore, it holds particular relevance for regional policymakers by providing critical insights necessary to enhance the role of Takaful in fostering economic growth.