Financial protection for the poor in Malaysia : role of zakah and micro-takaful

Abstract EN

Numerous researches have shown that most of low income and poor do not have financial protection in mitigating their financial losses.

The purpose of this paper is to investigate firstly, whether there is any means of financial protection among the poor, and secondly, to determine their financial capacity and perseverance in making monthly contribution for a micro-takaful policy.

The study was conducted on respondents who fall into the poverty level category in the rural area of Perak, Malaysia.

It was found that 97 % of the respondents are without financial protection and unable to contribute any amount of money to get the protection.

The authors recommend that intervention and support from government is vital in providing the financial capacity for the poor to have the needed protection that principally cover death, medical and savings benefits.

The Malaysian government should enforce a policy in providing aid to the poor via micro-takaful by providing subsidy and zakah forming part of their monthly contribution.

With zakah fund, these low income and poor could have their own micro-takaful schemes which should be able to provide sufficient benefits, preventing them to be trapped into the poverty cycle permanently.