Beyond Rationality: Behavioral and Ethical Determinants of Takaful Subscription Decisions in Emerging Markets

HRMARS - Despite the rapid expansion of the takaful industry in emerging markets, consumer participation remains relatively low compared to conventional insurance, suggesting that takaful subscription decisions cannot be explained solely through rational economic evaluation. Existing studies have predominantly focused on functional and financial determinants while giving limited attention to behavioural and ethical dimensions that shape consumer decision-making in Islamic financial services. Therefore, this study examines the influence of service quality, perceived value and ethical perception on takaful subscription decisions, while also investigating the moderating role of financial literacy. This study adopts a quantitative research design using a structured questionnaire distributed to Malaysian consumers with basic awareness of takaful products. A total of 350 valid responses were analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) via SmartPLS 4. The analysis involved the assessment of the measurement and structural models, including reliability, validity and moderating effects. The findings reveal that service quality, perceived value and ethical perception significantly influence takaful subscription decisions. Among these factors, perceived value emerges as the strongest predictor, indicating that consumers prioritise the overall benefits and usefulness of takaful products in their decision making process. The results further demonstrate that financial literacy significantly moderates the relationships between the behavioural and ethical determinants and takaful subscription decisions, suggesting that individuals with higher financial literacy are better able to evaluate service quality, ethical attributes and perceived value when making financial decisions. This study contributes to the literature by integrating behavioural finance, consumer decision making and Islamic ethical finance within a unified framework of takaful subscription behaviour. By moving beyond traditional rational models, the study proposes a “beyond rationality” perspective that highlights the combined influence of cognitive capability, ethical evaluation and behavioural perception in shaping consumer participation in Islamic financial services.